Fund managers advise investors to stay the course

He’s the top administrator for a foundation that helps some of Lawrence’s neediest folks, so of course slides in global financial markets, a sharp decline in U.S. stocks, an emergency injection of loan capital and, ultimately, an off day for Wall Street all catch Chip Blaser’s notice.

He’s executive director for the Douglas County Community Foundation, which has $10.5 million invested in money-market funds, stock funds and bonds, all with hopes for making a decent return to finance continued good works.

And after meeting with its money managers just last week, foundation leaders are sticking with their long-established plan: Keep a fairly conservative, balanced mixture of international and domestic funds designed to pay off in the years ahead, not provide hoped-for cover when the financial sky appears to be falling.

“It’s not a one- or a six-month ballgame,” Blaser said Tuesday. “We’re in for the long term. The foundation’s going to be around for a long time, and to that extent you can kind of ride out these financial storms. We take a long-term perspective and not a short-term outlook.

“I don’t foresee us doing anything different in the short term. We’re comfortable with the portfolio we have, for the long-term.”

The foundation’s funds have been up an average of 9 percent during the past two years, he said.

As for his personal investments – very much separate from the foundation’s – Blaser says he’s taking a similar approach: Don’t make any hasty moves, and just stay the course with a balanced portfolio.

“Right now, we’re just trying to be as balanced and forward-looking as possible – and try not to outspend our means during this current period,” Blaser said, of his family situation. “Personally, we’re basically staying the course and trying not to look (at our investments) too often.

“You think about it six times a day, and try not to look at it.”

KU, city portfolios

At the Kansas University Endowment Association, officials also have no plans for making major changes to their $1.1 billion investment portfolio in response to the most recent market turmoil.

“Our portfolio is very well diversified, and it’s designed to provide protection in both good times and bad,” said Jeff Davis, the association’s treasurer and senior vice president for finance. “And so, when times like these occur, we typically don’t make any dramatic changes to the portfolio.

“We stay the course and hopefully our diversification will protect us as it has in the past.”

The association’s investments were up 13 percent during the past year.

At Lawrence City Hall, officials are in the midst of watching about $1 million of potential investment income evaporate.

That’s the tentative forecast from Ed Mullins, the city’s finance director, who has watched rates on short-term Treasury bills and other so-called “safe-haven” investment vehicles decline during the past six months, and be unlikely to come back during the next six.

With a $100 million portfolio, both in cash and investments, the city will be like many Americans these days: looking for ways to make do with less.

“That’s money we’ll have to generate someplace else, or find some way to reduce our expenditures,” he said.

Cold, hard cash

When it comes to personal investments, Mullins figures to have made out perhaps better than most. He said he moved about half of his portfolio this past summer from equities to cash, in the form of certificates of deposit, money-market accounts and other vehicles.

While the stock market rallied in the ensuing months, he said, it gave back the gains by early December. Now he’s ahead.

But such market timing – he figured the housing bubble had burst, and he didn’t want to get burned like seemingly everyone did during the earlier dot-com bust – isn’t the norm, Mullins said.

Besides, as he continues to hold strong personal “cash” positions, he’s only halfway home.

“I’m coming out ahead right now,” Mullins said Tuesday, “but if I don’t get back into the market soon enough, I have the possibility of losing it on the back end.

“It still makes sense to stay the course. Over time, the equities market offers the best chance for returns. But it’s tough. Nobody has a crystal ball.”

Recession

What it all means

¢ Recession: That’s at least two consecutive quarters of negative economic growth – also known as a contraction – as measured by the nation’s Gross Domestic Product.

The GDP actually grew in the third quarter, and the numbers aren’t in for the last three months of 2007. That means if the U.S. is, in fact, entering a recession, it’s only the beginning.

“All I know is it means I don’t have as much money as I once had,” said Bob Moody, a North Lawrence resident who sells advertising and owns and manages rental properties.

¢ Inflation: “Most people define it as rising prices, but that’s not what it is,” said Donald Burman, an independent senior financial consultant in Lawrence. “It’s an expanding money supply, which debases or takes away the purchasing power of the money that’s already out there. Rising prices are the symptom of an expanding money supply, and that can occur if too many dollars are in the economy chasing too few goods and services.”

Retirees, on fixed incomes, are especially susceptible to being harmed by inflation.

¢ Rate cut: The Fed cut its benchmark lending rate by three-quarters of a percentage point to 3.5 percent, which was followed by commercial banks reducing the prime rate they charge their best customers to 6.5 percent. That means borrowing costs for businesses and consumers will decline, something the Fed hopes will spur economic activity.