Duck
Duck! No I don't mean a quack, quack. I meant get down, look out for a huge blob of brown stuff is heading your way.
This one is so large it is going to make Enron and Worldcom look like Boy Scouts stealing cookies at a picnic. As a result of these latest revelations we are going to have to find someone new to blame. So far the blame has been on the World Trade Center tragedy and dishonest executives at a few large corporations. These are a pittance when you see what is coming.
Does your company have a defined benefit pension plan? Did you know that 234 companies listed in the S&P500 index do? Did you also know that they owe their retirement plans $78 billion (yes, that's a B)? Wait a minute. I thought they were supposed to put funds into it every year. They are, but they haven't. How come these companies are showing big profits and not meeting their obligation to their employees?
It's all legal and has the blessing of the SEC (Securities and Exchange Commission).
This is how they do it. The company says they are going to make 10% return on retirement plans, but in 2002 they lose 5%. The SEC says they are allowed to project that profit over the next 10 years. If the company has a $100 million pension fund they put in their financial statement that they made $10 million in 2002, 10%. What happens to the $5 million loss? They deduct the $5 mil from the bottom line of the financial statement that now includes the $10mil phony profit and keep the $5mil as if it was actually there which it isn't. In reality the company now owes the pension plan $15mil which the SEC says they can amortize over the next 10 years. Talk about smoke and mirrors!
General Motors owes about $15.5 billion to its pension plan that is an amount equal to one half of the value of the entire company. Technically the employees own half the company, but my guess they will not see much, if any, of it. Do you think GM has the ability to make its current pension contribution plus another $1.5bil every year for the next 10 years? Quack, quack, quack. Not a chance. If the talking heads know about this they aren't quacking.
Once this becomes known not just about GM, but also the other 233 companies (and maybe yours) the stock market will be taking another dump. P/E ratios are now about 30 for the S&P500. When money is taken from their bottom lines it will result in pushing those ratios much higher which will further weaken the market.
Here are 3 questions for the owner, Treasurer or Controller of your company: What is the company's projected rate of return? Will there be funds paid into the plan this year? Does the company owe any money to the plan?
Don't let him give you a quack, quack.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
al@mutualfundstrategy.com; 1-888-345-7870
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
Stock Market Education; Day Trading for Beginnners; How to Pick Stocks
The trading method you employ to approach the stock market can make a big difference in your results.Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation.
Kick The Tires
Before you buy another car you walk around the lot, kick the tires, slam the doors and look at the mileage indicator. That's an odometer.
Stock and Fund Dividends
When is a dividend not a dividend?The latest thing "conservative" brokers are preaching these days is to buy stocks that pay dividends. Everyone likes dividends.
Valuation
Every day I hear from the "experts" on CNBC-TV and the radio gurus that the way to buy stocks is find value. One man's Rembrandt is another man's connect-the-dots and fill in the spaces.
I Love You, Warren Buffet
Sometime around 1980, can't remember exactly, there was a flight of money from many countries to Switzerland. The clock makers had so much money pouring in that the banks took interest rates to zero and even for a period of time were actually making you pay ½% interest to them to put your money in their banks.
Value Investing: Selecting From The Bargain Bin
Picking a beaten-down stock requires a different kind of selection process. Normally, most companies beaten down this far have no earnings to speak of.
Price Targets
Every day in any financial publication you will find the Wall Street mavens giving their predictions on many stocks. It was issued here and should go there.
Penny Stock Fraud Nets Millions
It was a fraud scheme involving penny stocks, but the scheme's mastermind ended up making millions of dollars from unsuspecting investors around the country.
VIX
No, this is not a symbol for some Latin number. The Wall Street mavens talk about this market timing device as if they knew how to use it to determine which way the stock market is going - up or down.
Momentum
One of the basic laws of physics states that a body in motion will continue in motion in the direction it is going until interrupted by another force.That basic physics law also applies to stocks and mutual funds.
What is a Trading Plan - and Why You Need One?
How do you make money without picking tops and bottoms?I am glad you asked..
Structured Settlement; Lawyers in NY and Mutual Funds
Minority Report the movie may not be far off if the Head of the SEC has anything to say about it. At a Senate Banking Committee hearing on CSPAN, William Donaldson said that the beloved SEC can no longer sit back and "mop-up" after scandals break.
10 Tips For Creating Wealth From the Stock Market
1. Do not spread your money too thin.
Mutual Fund Expense Lies
When purchasing mutual funds we are cautioned to read the prospectus, look at past performance, check out the fund manager's record and see what their expense ratios have been.We are also told that we should not buy funds with expenses exceeding 1% to 1.
How to Find Value in No Load Mutual Fund Investing
What are you thinking when it comes to your no load mutual fund selections? Are you saving pennies and sacrificing dollars?Are you spending your time looking at expense ratios, analyzing Morningstar ratings and searching for funds with low fees and no 12b1 charges? If you are like most people, you know these things in and out. You've spent hours evaluating them, and your chosen mutual funds cost little to purchase and maintain.
Trading Education: The Best of Both Worlds!
I made my very first investment in the stock market when I was ten years old. Ever since then I have been hooked! Now I check out hundreds of trades each year with the same excitement andenthusiasm, and each time try to find that one market at the right time that could dramatically create wealth.
Trading Stocks -Never Forget About A Past Trade
We all know that emotions control every decision that an investor makes in any type of money related vehicle. Whether is be the stock market, real estate, art work or antiques, emotions ultimately set the final price on both sides of the transaction.
"Fears Only Enemy Is Action"
What a great statement!I just heard someone use it in the context of personal and financial success and it struck me as a brilliant summary of an issue we raise in the SMG Tutorials.Fear is a huge issue with a lot of traders.
Long-Term Investment In Todays Market?
The stock market is very unstable at this time going up and down while interest rates are so low you want to be a borrower and not a lender. Would you like some suggestions on how can you get the most out of low interest rates while being assured your principal will not disappear while you are trying to make some money? Of course, there is always the danger of borrowing the money and then spending it just because it is there.
Robert Rodriguez Weathers the Stock Market
Robert Rodriguez likes to buy stocks at their lows. When there are not enough stocks hitting new lows, he closes his fund and piles up cash.