This'n'That; December 13th[Co Stock;Education;a Book;Grocery]

The Hazards Of Having Company Stock In A 401[k]-[from http://www.fundadvice.com/] Here are a few interesting figures from Financial Engines, an online company that specializes in employee retirement plans: In 401(k) plans that offer company stock as an investment option, 36 percent of the participants have invested more than a fifth of their savings in shares of the companies they work for. Older workers, who should be taking less risk, seem to be taking more. One-quarter of 401(k) participants 60 and older have at least half their accounts invested in company stock. It should be obvious why that’s so risky. Workers don’t have much choice about relying on the same company for their income and their benefits. But when they rely on the same company for a big chunk of their retirement, they are placing extremely heavy bets. Many people also own company stock outside their retirement plans, an equally bad idea in my view.Most of those people are understandably confident. They know the company and the industry. Or do they? Hundreds if not thousands of Washington Mutual employees thought they knew the company they worked for. A year ago, Washington Mutual was a profitable company, the nation’s largest thrift institution, and had just moved its headquarters into shiny new digs in downtown Seattle. From those offices, executives presided over more than 2,000 retail branches spread from Washington state to Florida. The company had more than 40,000 employees, including 3,500 (many with relatively high pay) in downtown Seattle. Early this year, very few of the bank’s employees, even executives, would have given even a 10 percent probability to the following scenario: • The 100-year-old company, once widely known as “the friend of the family” in the Northwest, would be dragged down by its aggressive subprime mortgage loan portfolio. • Month after month the stock price would fall until, with the speed of late summer lightning, a liquidity crisis led to a multi-billion-dollar run on the bank. • With stunning swiftness the federal government would declare the bank a failure, making the stock worthless. Yet that’s what happened. The Puget Sound Business Journal reported that when the company collapsed, a total of 17.6 million shares were owned by the bank’s employees. What was that stock worth? At the approximately $44 price in June 2007, it would have been worth about $770 million. By October 2007, at $28 a share, it would have been worth about $490 million. Now the stock is de-listed and trading over the counter at 16 cents a share, making it worth about $2.8 million. Is "Buy-And-Hold" The Way To Go? There is no question that in the past, buy-and-hold has worked for patient, long-term investors who can stay the course during the bad times and hang on until the good times return. However, some investors who regard themselves as buyers-and-holders still bail out when the chips are down. In doing so, they usually gain some emotional relief. But here’s the problem: Investors who go to cash in bear markets may be converting temporary losses into permanent ones. The price of that comfort is the loss of the profits which have always been there for the taking when the stock market has rallied. While there’s no guarantee that a rally will ever take place, history tells us it is highly probable. What’s also highly probable is this: If you bail out when losses get too scary to tolerate, you at some point will want to get back in when things are moving upward. The problem is that when that day comes, you won’t have any objective way to know whether or not it’s the right time. If you wait until you feel comfortable getting back into stocks, you will probably have missed most if not all of the recovery. You will undoubtedly have “sold low” after a decline spooked you and “bought high” after a rally restored your confidence. This is an example of how our emotions and our herd instincts prompt us to do the exact opposite of Wall Street’s classic advice: Buy low and sell high. Buying and holding, while it can be very challenging, at least is a system to protect you from your emotions. Something else we have been preaching for many years is wide diversification. While no sector of the stock market is immune to a global financial crisis, diversification helps. Remember a few months ago when oil peaked at more than $145 a barrel and people were eagerly buying energy stocks and commodities? I wonder how happy they are now, with the price less than half of the summer peak. Time To Educate Yourself Now is the time to be working to further your financial education. Here are several indeces that are important indicators of the health [or the lack thereof] of the various segments of the economy. **Dow Jones Industrial Average (30 large stocks; popular indicator) **NYSE Composite Index (all companies on the NYSE) **Nasdaq Composite Index (all companies on the NASDAQ; technology-heavy) **NASDAQ-100 Index (100 large NASDAQ non-financial stocks) **S&P 500 Index (500 large companies; general market analysis) **Russell 2000 Index (2000 small-cap stocks) **Wilshire 5000 Index (total U.S. market) Big Russ And Me As I've mentioned many times in the past, I'm about as conservative as anyone can be. That being said, I thoroughly enjoyed reading "Big Russ and Me" by the late Tim Russert. Mr Russert the Younger, and I were polar opposites in our political thinking and philosophy. But this was such a powerful "read" that it was impossible for politics to get in the way of pure entertainment!! This is a story about a man who was severely burned in a military aircraft accident during WWII, returned home to marry his sweetheart, raised a family and for the most part, worked two full-time jobs during his adult life. This is a story of a kid growing up in a loving family in South Buffalo [NY] and later in West Seneca [NY], both suburbs of the City of Buffalo. It's about the lessons of life that Tim learned through his observation of, and his exposure to his Dad, Big Russ. I can't remember what I paid for the book, a large paperback but as I recall, I thought it was a fair deal at Sam's Club [The book has probably been around long enough to be found at the local thrift stores]. Buy It; Read It; Enjoy It!! Where To Go From The "Top Of The Heap" For the last many years, grocery shoppers have had one local chain to deal with. Early in the last century, when they were "coming up" the company was a boon to Rochester and Suburban residents. As companies grow, they sometimes get too-big-for-their-britches!! This appears to be the case with Wegman's Food Markets, Inc. Many times complaints about rising prices bring a reply like "Everything is going up." This leaves me with the feeling that Wegman's thinks they're invincible..... they'll be on top into forever....... Well................ there's a new kid on the block!! PriceRite Grocery is a Massachusetts company started in 1995. They have stores in Connnecticut, Rhode Island, New York and Pennsylvania as well as Massachusetts. In Rochester the company has two stores-one on University Ave., and one on Driving Park Ave. One is scheduled to open soon in Henrietta, a southern suburb of Rochester. Rumor has it PriceRite may be building a couple more in the Rochester/ Monroe County area. I've heard alot of good things from co-workers so in the next few days, I intend to check them out. After I do, I'll report back..... good or bad..... Til Nex'time........