Monday, November 10, 2008

Silver Linings

As of the latest city budget pronouncement, our city pension fund contained $330 million at the mid-year instead of the necessary $890 million. The market has since plummeted. What's the silver lining here? Let's assume a standard 20% level of loss. That's $66 million. If we'd had the necessary amount, we would have lost $178 million instead.

As Warren Buffett has said: "Be fearful when others are greedy, and be greedy when others are fearful." The market is fearful right now.

I encourage the city to take Warren Buffet's advice and invest as much as possible in the pension fund right now. The market is most certainly not at its bottom, but it is at a relative bottom. If we can invest now, and the market recovers over the next year, we'll be in a better position than we've been in a decade. It hurts to lose money in the stock market. It hurts more to just continue to keep losing because of poor planning.

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