Savings Experiment: Snow Removal
Why Your 2012 Tax Bill May Jump By $8,000The Journal said the New York State Teachers' Retirement System, the New York State Common Retirement Fund, the Teacher Retirement System of Texas and the Florida Retirement System Pension Plan are all funds that are reducing stakes in U.S. companies. Collectively, these funds control more than $500 billion in assets.
Further, and equally significant, the nation's largest fund, the $250-billion California Public Employees' Retirement System (Calpers) is considering shedding its home-country bias, the Sacramento Bee reported.
One plan calls for Calpers to reduce U.S. equities exposure to 28.4% from 40% and increase international equities exposure to 28.4% from 20%. The Calpers Board of Directors is expected to vote on the measure next month.
Market Analysis: First, while it's probably best to await quarterly data before forming a conclusion on the aforementioned pension fund sales, the sales, if system-wide, cannot be a positive for U.S. stock prices in the immediate period ahead (six months).
As emerging markets develop, an increase in a fund's international stock allocation can be expected; as a nation's economy develops, it should generate companies that can compete on the global stage.
Second, a minor increase in a fund's international component could also reflect an increase in confidence in new markets' transparency, liquidity, capital safety provisions/compliance, favorable tax rates and, equally important, the rule of law.
However, if forthcoming data indicates that the shift to foreign equities reflects a pension sector-wide belief that U.S. economic growth and stock performance will markedly underperform overseas stocks during the next year or so, that would be sentiment the typical investor would need to weigh carefully, due to its impact on the U.S. market. Stay tuned...
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Reader Comments (Page 1 of 1)
11-27-2007 @ 3:28PM
michael schneider said...
While a move away from US equities by pension funds is nothing to sneeze at, there is still a huge amount of money on the sidelines now, in T-bills and CDs so liquidity should still be a positive force in the market.
Dr. Michael Schneider runs several investment oriented Web sites including http://www.Barrelomoney.com.
11-27-2007 @ 3:44PM
JOhn said...
There always has been money on the sidelines in T-bills, CD's and money markets......and about that percentage always stays there. Those funds are there mostly to maintain some liquidity for the investor whose money it is. It is quite different when money that is in stocks in the stock market moves from one market to another foreign market and still a different thing if that money moves from US companies in the US stock market to ADRs of foreign corporations in the US stock market. Needless to say, journalism lacks details and most commentators tend to be biased. There is also at issue here the US dollar and what is its value in the world economy.
11-28-2007 @ 4:19PM
michael schneider said...
You are correct that there is always a lot of money on the sidelines but my point was that has ballooned far beyond what is typical and it means that there is plenty of money available for stock purchases. Indeed, what we saw the past 2 days is partly due to that extra liquidity. In the latest newsletter I sent out from http://www.Barrelomoney.com two weeks ago I noted this and said the conditions were there for stocks to rally. With a little favorable news, the rally finally started and could continue if the Fed news remains okay. Liquidity remember is necessary but not sufficient for stocks to move higher.