I received a couple of smails last week from two pension plans I have. Seems there is a new method for calculating minimum funding requirements – called MAP-21. Instead of using the last two year rate of return (low return years) as the basis for determining funding requirements, companies now can use the last 25-year period (higher return years). Therefore, if you have a pension, the funding requirements are now much lower and thus the stability of the plans lower and bankruptcy risk much higher. One of the plans reported in the smail was 80% funded under the old requirements and under the new requirements is 102% funded. One of my tax clients was in a bankrupt pension plan which was taken over by the Pension Benefit Guarantee Corporation (US gov org) and now gets about 1/3 of his previous pension amount. The bottom line is that only you can provide for the stability and reliability of your own retirement funds.
Consuelo Mack’s Wealthtrack show of 02May14 featured Professor of Finance Andrew Lo of MIT’s Sloan School of Management and head of its Laboratory of Financial Engineering which is working on a program to protect investors from themselves. Their latest project, called artificial stupidity, is trying to simulate realistic investor behavior to see where the behavior produces investment mistakes so they can do the opposite. They have identified 11 behaviors which produce bad investment performance. The number one bad behavior is failure to get back invested in the market after having sold to avoid increasing losses.
It was a not good week in the market. Funds invested in overseas (except China), real estate, fixed income, and energy are still looking strong. Most of the growth related funds are doing worse. SBiotechnology which was on my top 20 list for months is now the 128 best fund out of the 131 I follow. On my web site, I publish a top 20 fund list based on deviation from a 78 week exponentially smoothed moving average (vs 39 in this email) and SBiotechnology was on that list for more than two years. The longer the number of weeks in the average, the lower the volatility.
IBD TBP’s Current Outlook is “Market in Correction” – not time to invest.
My current investments:
Nordic has a price of 47.60, a sell price 45.22, a relative rank of 01, and is a hold.
SAirTransportation has a price of 62.73, a sell price 59.14, a relative rank of 03, and is a hold.
My portfolio changes this weekend:
IRA #1 – None
IRA #2 – None
My portfolio market exposure after this weekend’s changes
IRA #1 – 00% invested
IRA #2 – 40% invested