Saturday, January 26, 2008
Big Casino
This has been a pretty rocky month for most of us who invest in the stock market. After about four years of pretty good returns, the chickens are coming home to roost. There doesn't seem to be any refuge in foreign markets. I'm pretty impressed with the low-level french flunkie who managed to squander $7.2 billion from Societe Generale, perhaps triggering a big selloff on European markets. In short, no matter how diversified one is, there has been pretty much no refuge from the market's wild gyrations of the past few weeks. It truly has been like a giant casino, where the house almost always wins. Apropos of that, the Boregonian has a story in this morning's paper about how PERS has done during the past week. According to the report, PERS has lost about $5 billion of asset value during this month's swoon. Not to worry. The PERS fund is well-funded and remarkably well-managed. If any group of investors is prepared to weather this, the Oregon Investment Council seems especially magical when it comes to earning money in nearly any market. This may not be the banner year we'd hoped for, but there isn't much risk out there that the OIC can't mitigate. They're playing at the big casino, but they have the skill of a card counter without doing anything that pisses off the casino management. Keep the faith. I only wish I had my personal portfolio collectively invested in the way of the PERS Fund. I might be losing less money that way.
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I should have pointed out that the Oregonian had this story under a gigantic headline on the front page of the business section. The article contains the Oregonian's usual mead of factual errors, including the fact that the earnings affect employer rates. Indeed they do, but employer rates aren't due for review for about 13 months; plenty of time for the market performance to change dramatically. No need for the employers to start racing for the exits demanding a fix to PERS again. Second, the Oregonian continues to assert that "retiree's" accounts are credited with 8% annually. This is flatly untrue; retirees don't have accounts and their benefits are fixed except for the annual COLA adjustments which are limited to a maximum of 2$%. Third, the Oregonian continues with its canard that the 8% guarantee applies to all PERS members. In fact, the guarantee only applies to Tier 1 members (hired before 1996), who continue to decline in numbers dramatically every year. Current statistics are that only about 1 in 3 PERS members belongs to Tier 1; the rest belong to Tiers that don't have a rate guarantee and earn "market rates." I wish the Oregonian could get a reporter who understand what were facts and what were made up facts. The Oregonian trades in made up facts, not true facts.
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