October 28, 2008

A Response from My TRS Letter and Research on the Markets

I last posted to this blog on Sunday, October 19, and since that time I have been busy researching various items on the stock market, responding to e-mails from educators, and when possible... actually working.

A Response from My TRS Letter

On Monday, October 27, I received the following e-mail from State Senator Bill Heath, Chairman of the Senate Committee on Retirement:

Thank you for your correspondence concerning the proposal dealing with COLAs before the Board of Trustees of the Teachers Retirement System of Georgia (TRS). Time does not permit me to write an individualized response to each of you. I do understand this is an important issue to you. I hope this will help you understand what is taking place. This matter is not before the General Assembly and therefore I do not have a vote in this matter.

The Board of Trustees consists of ten trustees whose responsibilities include administration of the fund and to manage the fund so as to ensure the continued fiscal soundness for the current retirees as well as for the current and future members. To date the fund has been well managed and I commend the board for their actions. They have an increasingly challenging job as the make up of the members, their expectations and financial universe evolve. I trust the Board to continue to make wise decisions as they fulfill their responsibilities.

The Board consists of the ten trustees. The law requires a majority (six) to be active or retired members of TRS. One trustee is selected by the other nine and shall be a citizen of Georgia who is not a member of TRS but with experience in the investment of moneys. The other three trustees include the State Auditor, the director of the Office of Treasury and Fiscal Services and one trustee appointed by the Governor without restrictions.

At the September 24, 2008 meeting of the Board of Trustees, a proposal was made to consider changing the administrative rule that deals with the method by which the Board grants and funds the semi-annual cost-of-living adjustments (COLAs). The current policy, which was adopted in 1969, states that the Board will grant a 1.5% COLA on July 1st and January 1st provided there is an increase in the Consumer Price Index. The proposed amendment states that the Board will determine at its annual meeting each year the amount of COLA up to a maximum of 1.5% that may be granted for the following July 1st and January 1st.

It is possible that the Board will take up this proposal at its November 19, 2008 meeting if the Trustees feel they have had the necessary time to evaluate the proposal. If you would like to voice your concerns or ideas to the Board of Trustees before this is taken up you may do so by sending an email to Executive.Director@TRSGA.com.

I thank you for you interest in this matter. As Chairman of the Senate Committee on Retirement, I spend a great deal of time and energy working to ensure that the pensions of our employees are safe. It is the intent of the legislature to provide an environment that will allow the experts in finance and pension management to maximize the benefits available to those who have served our citizens so faithfully.

Well, at least I have received one response. Nothing much said, but it is a response.

Research on the Markets

I find it interesting that in the "dire" predicament the stock market is in that few people actually do any research on past markets, trends, and outcomes. This market is quite a bit different than many previous problems we have had before due to the issues of credit and globalization.

I read an article about Anna Schwartz who co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression. She is obviously a brilliant woman that has looked throughout history, but many believe that she may be missing the globalization of the market.

She says the issue is confidence and not liquidity (The Great Depression was caused by liquidity). This is true, but she does not feel the U.S. Treasury and Federal Reserve are handling the confidence issue. I think history will eventually show that the Treasury and Federal Reserve are working to resolve every single issue both before and after something becomes an issue.

When liquidity was a problem... they injected it. When money market confidence was an issue... they guaranteed it. When we needed worldwide coordination... they orchestrated it.

I think looking 2, 3, 5, 10 years out, we will look back and be amazed from where we have been. The markets are powerful machines that are like a cruise ship to turn... they do not turn on a dime.

Finally, anyone that started to believe the U.S. was now not the center of the financial universe simply needs to see where everyone looked and returned to for guarantees and leadership. We may not all agree on politics or policies, but it cannot be said that the U.S. Treasury and Federal Reserve have not stepped in to help Americans and foreign companies and nations alike.

The trip ahead will be bumpy, but the end should be good for those along for the ride. Just remember - your TRS pension is guaranteed by law, and your 403(b) account is not used on any single day. It is a retirement fund.

As always, let me know if you have any questions.

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