Sushi Money

It’s tough watching various stocks and portfolio holdings go negative over the course of several months. I seem to have lost my you-know-what the last few months, and I’m still trying to find it. The Dow closed at the lowest point last week since 2006, about 16% down from the high last October, 2007.

Technically we’re still in a stock market correction and not a bear market. Are we reaching a stock market bottom yet? I’d like to think so, but many folks think otherwise. But we’re starting to see more opinions that now is the time to Buy, Buy, Buy the heck out of the market. I’m re-allocating some IRA funds to a more aggressive long-term strategy. Slowly, but I think now is the time to think about it. If we are nearing a bottom, we may stay there bottom feeding for quite a while.

Also have a ways to go before a lot of negative news is out, and the Fed will probably drop rates again on the 18th of March. I agree that We’re Nowhere Near a Real Estate Bottom, but real estate markets vary widely across the nation. If you’re in the market to buy a home- this could be a wonderful time. Just be prepared to be there a while. We may also be paying more for gas at the pump for a while. I’ve got a summer trip planned that keeps getting more expensive. Hey, but that tax rebate will come in handy right?

Nothing like a down market to teach us about diversification. For those with money on the sidelines there’s some strategic opportunities out there for long-term asset allocation. Here’s an article that talks about how the PBGC (Pension Benefit Guarantee Corporation) is now making a huge move into equities:

“The federal corporation used to invest just 15 to 25 percent of its assets in stocks, with the rest in bonds and other fixed-income instruments. Now, it’s earmarking 45 percent into stocks, 45 percent into bonds, and the remaining 10 percent into “alternative” investments such as real estate and private equity.”

So why is the PBGC doing this? Simply to earn a greater return over time than a large fixed income portfolio can generate. And that’s because the PBGC doesn’t have enough assets to fund all the pension requirements currently on the books.

“The Pension Benefit Guaranty Corporation has adopted a new diversified investment policy to help ensure the federal insurance program can meet its long-term obligations to America’s retirees, PBGC Director Charles E.F. Millard announced today”

“One lesson is that stocks, even amid recent setbacks, remain one of the best ways to beat inflation over the long haul - something PBGC officers and most other pension experts recognize.”

The PBGC may have missed some opportunties over the years (as I have), but the timing is interesting. Maybe there’s a few other folks looking for that market bottom.

“The PBGC is responsible for the pensions of 1.3 million Americans, but we don’t currently have the resources to keep all of our future commitments,” Millard said. “The new investment policy adopted by the PBGC Board of Directors will better manage our invested assets. Although it should generate higher returns, it also offers lower risk through broader diversification.”

PBGC analysts figure the organization now has a 57 percent likelihood of fully funding its obligations within 10 years, up from just 19 percent before. Which sounds a little better considering the number of people that are counting on them:

“PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in 30,330 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.”

Has the market reached a bottom yet? Next month? Are we in a recession? One thing is sure, bottom or not the stock market’s fortunes are tied to that of the U.S. economy. Many see the U.S. in a recession now and challenging times ahead of us.  Which means a turn-around for the economy may be several quarters or more away. No one really knows, but the doom and gloom prophets are certainly reaching a chorus.  So if you’re stepping back in the market with new money, know that it may be a patient wait with a lot of volatility before the indices head back up.

Perhaps I’m the eternal optimist, but I think the later half of this year could see very strong markets and the economy turning around. Unless the Democrats keep talking about raising taxes. Then all bets are off for a few years. But there’s lots of media driven fear out there. While out shopping this weekend I couldn’t help but notice how all the restaurants were packed as well as the grocery and big-box stores. Maybe we’re still spending money we don’t have?

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