Van Meerten's picks

The general market is still in a range where all the major indexes appear to still be trading lower at the end of the month than they traded on the first day of the month. The downward spiral is still there but slowing at a very cautious pace. I'm not sure we are at the bottom but it may be close.

I'm not worried about calling the turn, I am willing to give up the top and bottom 10% of each bull and bear market if I can ride the bull up for 80% of the up market and short the bear down for 80% of the bear drop. If I could accomplish that I will be an extremely happy camper.

Now the bad news. I know you guys are tired of seeing the headlines that say " The next shoe to drop will be.....". How many more shoes can be dropped? How many feet does this market have. When will all this bad news end?

There is one more shoe to drop and it is a biggy! You all have seen your portfolios, IRAs and 401Ks take dives. The S&P 500 is down 35% since January first and most of your portfolios are too. There is one more very major component of this country's wealth that will not be reported till late February or early March and that is the Unfunded Liability on Defined Benefit Pension Plans.

According to the Pension Benefit Guaranty Corporation's web-site 44 million people are counting on collecting retirement payments from DBPPs. The maximum payment you can get from them if your corporation cannot meet its obligation to you is $51,744. If you are an airline pilot, engineer, Senior VP or CFO thinking you will get a $75k - $150k pension you may be in for a rude awakening.

The Market is down 35% year to date and there is no reason to think that your pension plan hasn't had the same losses. From the estimates I've been reading by year end there will be a $200 - $250 BILLION dollar unfunded pension benefit liability that will have to be made up. That will be $250 billion that will be sucked from net earnings of those companies that last and recover and smaller pensions for the employees that work for a company that won't make it through this recession (OOPS! I used the "R" word and you will hear more of that word in the coming months).

Do not look for the economy to recover till this $250 billion problem has been solved and you begin to see increases in GDP and corporate earnings. The worst may be over but I don't look for meaningful recovery till at least the end of the second quarter next year.

Last bit of advice I can give you is to do what I have done. I have used stop losses in my self directed IRAs and will probably stay in cash (as I have for some time) until I see the Value Line Index trading above its 100 day moving averages. I will then move into broad based leveraged ETFs. In my 401K since I have limited investment choices I have also been into the fixed investment options for some time and will plot the equity investment choices and not move from my fixed rate choice back into equities until I see those equity options trading again above their 100 day moving averages.


I can't predict the market reversals but I will follow it close enough to ride the bull up the middle 80% when it returns.


I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Saturday November 1, 2008