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
http://www.mutualfundmagic.com; 1-888-345-7870
Oswego taxi to Midway ..The bulls and bears of the stock market are both... Read More
I cringe every time I hear a novice investor tell... Read More
Caught in a whirlpool and being sucked under. No life... Read More
Every day I hear from the "experts" on CNBC-TV and... Read More
This is a guide to the different types of mutual... Read More
Are you attracted to the idea of being in control... Read More
For some "long term" would mean holding a stock position... Read More
Jack and Jill went up the hill to fetch a... Read More
Three little pigs went to the market to stock up... Read More
I feel that an investment strategy in the stock market... Read More
To begin, you might look at playing the stock market... Read More
I made my very first investment in the stock market... Read More
Congress recently passed another new law that is supposed to... Read More
It has often been said that there is only two... Read More
The stock market has been going up for more than... Read More
According to Investopedia Inc. the penny stock market has seen... Read More
Economists know more about how the fragments of society work... Read More
A common problem I often see when working with living... Read More
A colleague of mine just returned from a scuba diving... Read More
Do you own any mutual funds? In an IRA or... Read More
I often play a little game with myself when I... Read More
Success in small cap & micro cap stock trading like... Read More
Humpty Dumpty had a great fall and all the King's... Read More
What! Me worry?Many of you remember the cover of MAD... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
shuttle from Midway Morris ..Quick, look out the window. It's raining. No, the sun's... Read More
"If you don't know where you are going, any road... Read More
Stocks breakout from properly formed bases everyday but many investors... Read More
I was recently interviewed for a press release through a... Read More
Let's go into the details of why non-indexed mutual funds... Read More
What can I expect to make my first year of... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
Most stock traders know that momentum trading can be a... Read More
AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More
So you're started trading, you bought some positions with your... Read More
The greatest stock market myth is the idea that investing... Read More
On Friday or Saturday evening my wife gets a movie... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
You'd have had to be living on a desert island... Read More
Just about now everyone is confused as to which way... Read More
Question: How does it get better when it gets worse?Last... Read More
Ever have one of those sample boxes of candy? Each... Read More
If you've ever flipped on the television to CNN Financial... Read More
∙ Make every investment in the stock market a long-term... Read More
If there is one term over-used when talking about making... Read More
Dollar cost averaging is one of the most popular ideas... Read More
Do you own any mutual funds? In an IRA or... Read More
The bulls and bears of the stock market are both... Read More
We have two candidates for president that have really different... Read More
Stocks & Mutual Fund |