Craig Karmin’s “Say goodbye and good riddance to 2008…” in the WSJ summarizes it well, that 2008 was “a year when the most dire financial predictions finally came true”. He then enumerates the sorry list: U.S. stock market off about 40% (worst in 77 years), emerging market down 50% or more, “worst economic downturn since the depression” (job losses in the millions), venerable financial firms pushed to the edge or over the brink, oil predicted to go $200 instead collapsed from $147 to under $50, and “worst housing markets in generations”. (How true, some Florida properties are selling very slowly at prices as much as 50% off their 2005-2006 peaks.)

Jason Zweig’s “Pay attention to that window behind the curtain” in the WSJ tells you how fund managers use “cosmetology” to attract new buyers and prevent current ones from fleeing, by applying lipstick to their funds (including money market funds) just before the year-end report is due. This is done in one of three ways: (1) scrubbing funds of riskier assets used to try to jazz up returns and replacing them with quality assets to make investors more comfortable, (2) “running up the price of what they already own”, and (3) look for a benchmark that puts their fund in the most favourable light (it is your job to make sure that you compare the fund to the most appropriate benchmark, by studying the fund composition; you may also want to read my Benchmarks  blog)

Victoria Knight in WSJ’s “How to fund retirement living” reports on the that challenges faced by retirees who were banking on their portfolios and their appreciating house prices to pay for financing their stay in assisted living facilities and retirement communities. They are now also in a bind on how to pay for long-term care. The annual price tags are typically $76,500 for private room in a nursing home, $36,000 in an assisted living facility and $18,000 for regular home health assistant in the U.S. (Last I checked Canadian/Ontario nursing home was about $25,000 and assisted living facilities were about $30,000 and up.) She suggests: (1) shopping around (broaden geographic search), (2) reverse mortgages (handle with care and read my Reverse Mortgages blog.) and (3) non-premium rooms or doubling up with another person for additional savings. (I plan to do a blog on Long-Term Care Insurance in one of my upcoming blogs in January in response to a question from an American reader; as I started reading up on he subject, I realized that this is a much more complex subject than Life Insurance or annuities previously discussed.)

WSJ’s Brett Arendt in “A real auto bailout” Escape your car” figures that most individuals spend at least $4,000 a year on a car but the more representative number he says is the AAA’s typical $7,800. Brett thinks this is a great opportunity to look for savings. He even suggests that some may find it advantageous to move into the core of the city where you may be able to do without even one car. (No doubt unthinkable/impractical for most, however there are also many who manage very well without a car especially in places like Manhattan. Spending $10,000-15,000 a year for two cars should at least make many of us, including me, consider the value we derive from this.)

The Financial Post’s Ray Turchansky comments on the state of Canada’s defined benefit pension plans in “Canada’s penchant for underfunded pensions” . Unfortunately, a number of quotes in the article may be potentially misunderstood by many. Examples are: “everybody’s got the same problem” (not really: public pensions are “effectively” guaranteed to deliver their promises, and not all private pensions are underfunded or not to the same extent, and not all sponsors of underfunded pension plans are on the verge of bankruptcy), “the result (of adverse outcomes for companies/sponsors on the ownership of pension fund surpluses) has been a reluctance to build up surpluses for bad times (not really, while this may be a minor contributor, it is mostly an lame excuse; the contractual responsibility of single employer pension plan sponsors is to pay pensions, i.e. deferred wages, committed to plan members and it is a combination of mismanagement, incompetence, conflict of interest by administrators, company executives, boards of directors, actuaries investment managers and regulators that lead to the inadequate funding of pension plans. Read other pension plan blogs elaborating on this subject in the Pension box of the Home page of this website.)

And speaking of underfunded pension plans whose sponsors are considering bankruptcy, Simon Avery in Globe and Mail’s “Bidders on hold as Nortel weighs options” discusses options considered by Nortel management to raise cash by selling part or all of the company (possibly to Huawei, Nokia Siemens, Ericsson or Cisco System), or getting government assistance in some form. (In the meantime the pension plan members are being stonewalled by the company as to the extent of underfunding of the pension plan and the company’s plans to secure the benefits in case of bankruptcy.)

William Hanley in the Financial Post’s “Market was not established to manage savings” looks at the wreckage left by the latest stock market drop and suggests that investors feel betrayed. The Street has not delivered “good, solid stewardship of assets”, “investors are at the bottom of the investment industry food chain…that’s the way it has always been and always will be” (“witness the billions in bonuses still being paid this Christmas despite the fact that trillions of paper assets have been vaporized”). He concludes that it will be little comfort for investors to look back on 2008 and conclude that they “learned more about the markets and their own risk tolerance.” (Hopefully, they will have also learned to stop paying 2-3% annual management fees for their mutual funds and assorted structured products… really is as Charles Ellis called it, a “loser’s game”. How can you argue with Bill’s assessment of much of the financial industry?)

And finally, Doug Saunders’ “Trickledown meltdown”in the Globe and Mail shows not only that Asia’s markets did not decouple from the U.S. and European financial crisis, but he traces the ravages of the Wall Street meltdown all the way to a “poor corner of Bangladesh”.