NY Alternative investments

NY’s Alternative Investments

In the current world we live in where the price of gas is sky-rocketing, a real estate market in turmoil, and competition for jobs at an all-time high; it is a smart thing to be a wise investor. There are many investment possibilities including stocks and bonds, but with the market like it is perhaps it is time to turn to alternative investment possibilities.
I believe that alternative investments are the smart way to go in the world we live in today. Alternative investments are investments in assets outside of traditional stock and bond markets. The greatest thing about alternative investments is their ability to provide potentially higher returns while lowering overall portfolio risk. In addition, they provide a great amount of diversification and supplementation of one’s portfolio with smaller funds. There are many alternative investment possibilities, however I believe the best of these possibilities is what is known as a Hedge Fund.
A hedge fund is based upon the idea that money managers can hedge their bets to ensure a profit, regardless of whether the market goes up or down. The money managers of a hedge fund balance their exposure by holding long positions while simultaneously short-selling. What truly sets a hedge fund apart from traditional mutual funds is their ability to push the boundaries of normal investment techniques to attain unusually high returns. In addition, the traditional mutual fund must register with the Investment Company Act of 1940 and the U.S. Securities Act of 1933. Therefore, they are subject to strict oversight by the Securities and Exchange Commission. However, by limiting their investors to institutions like pension funds, and endowments hedge funds are often exempt from such strict scrutiny. However, hedge funds are not without risk. Hedge funds use borrowed money to pump up returns. They borrow this money from banks and after the huge losses from home mortgage lending, the banks began applying much tougher credit standards to their borrowers. Therefore, there is certainly some risk involved with alternative investing, but then there is always risk in anything involving money.
Traditional investing in the world we live in is extremely risky, at best, and looks to be so for quite some time to come. I believe that by turning to alternative investing, and putting money into hedge funds and private equity funds, we will still be able to support our economy while reducing the risk on ourselves.

-David Meachem

Calpers

CalPERS and CalSTRS lost Billions

The idea of ethics and ideals in big business/big money is one that would bring, at least, a small chuckle to anyone who has spent any time in the business world, seeing as most big money machines care about one thing: money. However, as I read more and more on this story, I began to see that some people dealing with big money actually do try to uphold some sort of idealism. Unfortunately, these particular individuals’ ideals were developed by financially incompetent men, who put their trust in an even more incompetent man.
The California Public Employees’ Retirement System (CalPERS) is the nation’s largest public pension fund with 1.5 million publicly employed workers, retirees, and their families. The California State Teachers’ Retirement System (CalSTRS) is the nation’s second-largest public pension fund with 813,000 current and retired educators and their families. Eight years ago, these two huge entities in the financial marketplace teamed up with then-state treasurer Philip Angelides who launched his “Double Bottom Line” initiative, which promoted a philosophy of profits and social reform. The plan was enacted to take money away from foreign governments who lacked free press, labor unions, and other democratic hallmarks. As a part of the plan, CalPERS and CalSTRS dropped investments in countries deemed “unfit”. CalPERS and CalSTRS also dropped tobacco stocks, seeing as tobacco was detrimental to their ideal world. They did this all at the leadership of Philip Angelides who, of course, was a financial genious… Not. As a result of their idealistic and virtuous behavior, CalPERS lost 400 million dollars by not investing in foreign countries, CalSTRS lost 1 billion dollars in lost gains due to its cigarette ban; and with the real estate market taking hits all over the country, both funds are speculated to lose much more before this is all over and done with.
It is easy to see the information that I have provided as just a gamble that lost, or perhaps a miscalculated accident; and in many cases that would be ok, but not when you are dealing with money that doesn’t in any way belong to you. That money belonged to over 2 million people that put their trust in the leadership of those funds. It is true that we need more ethics from our big business/big money firms, but that doesn’t mean that they should get so far into their ideals that they forget the people that they are truly serving, and those are the employees, retirees, and families that put their trust in these people. These people who put their trust in a man that took campaign donations from people who are now profiting from the ordeal.

-David Meachem

The "other" election issues

Here's the election results on pension and welfare issues:

Residents ub Louisiana voted against investing medical plan assets in the stock market.

So did South Carolina residentes.

In South Dakota, voters defeated a measure to ban short selling.

Utah adopted a ban on venture capital investments by school funds. Montana also prohibited investment in private equity.

For more info, see here.

Unions are Ruining Pension Funds?????????

OK, I am troubled about something.

Yesterday, I received a call from one of the political candidates. I don't know which one because I was so irritated by the call that I deleted it on my answering machine. But before I hit the delete button, I got the gist of the ad: Union and public pension funds are full of corruption and the next financial crisis will be pension funds.

I am not sure how unions came to be the culprit in the current financial crisis. It seems to me that the subprime mortgages are still to blame. But in a big election year, it's easy to blame the unions, once again.

So, I did a little research on the internet to see who is behind this. I found National Policy Analysis Sept. 2008 Report that came out a few weeks ago, just in time to hit the news before the election. The report concludes that state treasurers are jeopardizing pension assets by investing with climate change in mind.

That didn't seem to be enough to cause this "crisis." So I continued looking. I discovered that retirement funds (which, of course, include massive corporate funds) lost $2 trillion in the recent financial meltdown. According to a recent survey, more than half of Americans will have to work longer because of pension fund losses. The congressional report that calculated losses at $2 trillion, said that in the last 15 months public and union pension funds have lost 20% of their assets and private retirement funds have lost more. And Peter Orzsag, Congressional Budget Office, says that workers in 401(k) plans suffer even more because they are heavily invested in employer stock. Funny how that translates into unions being the problem.

But, on the other hand, there are still state treasurers like Richard Moore (NC) --the sole fiduciary of the NC retirement funds--who get plenty of air time by saying live on Squawk Box that he's willing to lend the retirement assets of NC workers like me to the federal government to help the bailout efforts--if the government guarantees a 7% rate of return. I hope he researched the effect of that offer before he made it. My retirement depends on his investment decisions.

This results in political ads the like one I deleted from my answering machine.

PS. I encourage you to use the links in this blog. They are to videos that are really good.

AL Extends Health Care

AL Extends Health Care Surcharge to Crack Down on Obesity, http://www.plansponsor.com/pi_type10/?RECORD_ID=42979, talks about the state of Alabama charging its employees a monthly fee for not being physically fit or at least trying to be physically fit. The program is extremely controversial but the idea is to reduce health care costs and encourage a healthy workforce. If people are not considered fit by the in-office wellness center they will be required to pay $25 or show proof of trying to lose weight and become more healthy. This is an extremely unfair program because some people can't help their health status. For many people chronic health disease runs in their family and there is no way to prevent these diseases from occurring. These people may be unfairly charged for a life-long condition that is not preventable ot treatable. Also there may be people who find ways to beat the system and not have to pay when their health my be in danger.

Worries about Retirement Losses

A few days ago, I sumoned the courage to check my retirement accounts to see how much I lost. It was A LOT.

Today, the stock exchange lost over 600 points (again). What do investment advisers recommend in light of the plummet of Wall Street?

Here's what CBS says:

Rescuing Retirement: Advice For All Ages
NEW YORK, Oct. 9, 2008


(CBS) As the stock market continues to plummet, it's draining Americans' retirement funds.

New numbers suggest that over the past 15 months, pensions and 401(k)s have lost a total of $2 trillion. So what do workers do now? Contributor Ray Martin offers some specific advice for workers in different generations, as well as suggestions for how their portfolios should be allocated.

For Workers 60+
· CASH: 10 percent
· BONDS: 40 percent
· STOCKS: 50 percent

Move money you'll use within 5 years out of stock:

If you're going to be relying on this money, you can't take any risks with it, says Martin. You should put it into bonds and cash. It's still OK to have some of your money in the stock market, even if you plan to retire soon. Hopefully, you're not going to use all of your 401(k) the first year you retire. If you're retired for 10 or 20 years, your money still has some time to recover and grow.

Figure out when you'll need to tap into your 401(k) savings. Just because you're retiring in a year or two doesn't necessarily mean you'll need the money from your 401(k) right away. Perhaps you also have a pension, maybe you'll be receiving social security, or maybe you plan to downsize your home and live on the sale proceeds for awhile.

Workers In Their 50s
· CASH: 5 percent
· BONDS: 30 percent
· STOCKS: 65 percent

Workers in this age group can afford to have a bit more money in the stock market, because their accounts have more time to bounce back from the current meltdown. But if you're in this age group, time alone is not going to heal your 401(k)'s wounds. It's going to require some work from you.

Increase contributions:

If you've lost money, you need to regain ground quickly. The good news is that you're allowed to contribute more to retirement accounts once you hit age 50. Take advantage of this. Once you stop working you can't save pre-tax money, and you certainly don't have anyone agreeing to match your savings as your employer does now.


Weathering The Downturn: In this economy, it's smart to save. CBS News shows you how.


Workers In Their 30s and 40s
· CASH: 5 percent
· BONDS: 15 percent
· STOCKS: 80 percent

Martin says this is the age where it's easy to stop saving for retirement, because you want to buy a home or put money toward your kids' college educations. Or, in the case of many workers now, you're just too scared to keep putting money into the market. He warns interrupting your savings is the worst mistake you can make.

Diversify your portfolio:

Since retirement is still a long time away, your retirement savings can be invested mostly in stock funds. But now that your balance is larger, diversification becomes more important.

If the stock market falls 10 percent, a $100,000 portfolio invested 100 percent in stocks will fall in value by $10,000. On the other hand, if your portfolio was invested 75 percent in stocks, it would only fall $7,500, which would be easier to recover from.

Also, make sure that you're invested in a wide variety of stocks - small companies, large companies, foreign companies, etc.

Workers in their 20s:
· CASH: 5 percent
· BONDS: 5 percent
· STOCKS: 90 percent

Martin says this age group can afford to be invested almost solely in stocks. The market is ugly right now, but retirement is far away and your portfolio will have plenty of time to grow. You can afford to take some risks at this point in your life, and it's almost guaranteed that these risks will pay off down the road. The most important thing of all is to get started now.

Begin saving 6-10% in 401(k):

Sign up for your company's retirement plan and start by saving at least 10 percent of your salary. The sooner you get started, the more money you'll have. Even if the markets are down now, the beauty of compound interest will still win out.

Most experts say that for the average worker, if you are working and saving for retirement over 30 years - and all you will have is your 401(k) and Social Security - you will need to contribute a total of 13 to 15 percent of your pay each and every year into your 401(k) plan account to have a reasonable chance of having enough money to pay for your retirement. So, if your employer contributes three percent, and you contribute 10 percent, the total contribution would be 13 percent.


© MMVIII, CBS Interactive Inc. All Rights Reserved.

The downfall of AIG

Everyone is blaming someone else about AIG's downfall. McCain is talking socialism. Biden is talking lack of corporate governance. Everyone is blaming the subprimes. Who is talking solutions?

The AFL-CIO suggests a stimulus plan that includes:

• A moratorium on home foreclosures to allow for a restructuring of subprime mortgages.

• Extended unemployment benefits for jobless workers.

• Fiscal relief to states and funding for food stamps to make sure all Americans can provide for their families.

• A jump-start for ready-to-go construction projects to repair schools, roads and bridges—construction that will help create good, family-supporting jobs in many communities where currently there are none.

The economy is in bad shape, and of course, so are our pension funds. I am in the NC State pension funds. Yesterday, I got an email from the state treasurer telling me that my pension fund is safe. (Fortunately, it's a defined benefit plan).

Here's what Richard Moore had to say:

A MESSAGE FROM TREASURER MOORE


With the stream of bad news about Wall Street and the financial sector, pension fund members have been concerned about our investments. I want you to know that I am carefully monitoring the unfolding situation in the market, as is our team of investment experts. While recent developments are serious for all investors, the pension fund is conservatively invested and diversified in order to protect members’ benefits over the long haul.

As of June 30th, the companies being watched most carefully made up about 0.3 percent of the pension fund. Many of our holdings in those companies have decreased, some dramatically, since that time. That shows that our managers have seen the problems coming and responded appropriately.

Our insistence on being diversified, within our stock portfolio and across different kinds of investments, is more important now than ever. While the stock market, and especially financial sector stocks, have been volatile, many of the fund’s other investments are doing well. The fund’s bonds, alternative investments and real estate holdings continue to perform well and provide support to the pension fund. In our stock and bond portfolios, we have remained committed to high quality investments, something that continues to pay off.

I want to reassure members of our pension fund that your fund is structured to weather market downturns and shifts. That is why we carefully invest the pension fund and responsibly manage the retirement systems.

Of course, .03% of billions is an awful lot of money. And I am afraid the plummet is only just beginning.

Are you as worried about the economy as I am?

Some Retirement Videos

There's a lot more video and audio files available these days on the internet, and some of it relates to retirement. Here's some recent mp3s and videos you might want to check out.


a. Can You Afford to Retire?
b. Death of the Pension Plan
c. Plans Around the World
d. Retail Health Clinics
e. Cash Balance Plans
f. America's Retirement Challenge Part I
g. Also check out APR’s Marketplace for more files