What the experts say
Employers open their wallets; No recovery necessary; Banking on the grim reaper
Employers open their walletsThe 401(k) match is back, said Chavon Sutton in CNNmoney.com. Consulting firm Hewitt Associates estimates that among companies that have scaled back employee-retirement plans, 80 percent expect to restore matching programs in 2010. That’s good news for employees, who suffered a double whammy in 2008 when employers “slashed” matching programs at the same time that 401(k) balances were in a free-fall. “When companies start to restore the match, it gives employees more confidence,” said Brigitte Madrian, a public-policy professor at Harvard University. The resurgence of the match may also suggest that some companies will be ready to start hiring again—which would be good news for all of us.
No recovery necessaryWith the U.S. economy expected to grow at a so-so pace of 3 percent this year, some money managers have their eye on stocks that don’t need a “big tailwind from the economy” to thrive, said Lawrence Strauss in Barron’s. That means “lightening up” on cyclicals and financials and loading up on stocks with business models that “can weather tough times.” Standouts for a lukewarm economy include Western Union, which will benefit from immigration trends; Medco Health Solutions, whose generic-drug business will profit from expiring patents on brand-name pharmaceuticals; and Henry Schein, which deals in dental supplies and equipment. “These companies aren’t flashy, and that’s just the point.”
Banking on the grim reaperSome hedge funds have discovered a somewhat “ghoulish” trade: buying the rights to old folks’ life insurance, said Leslie Scism and Larry Light in The Wall Street Journal. The sellers get an up-front payment and the promise that remaining premiums will be paid. The buyers get the proceeds from the policy when the insured party passes on. Such policies are frequently packaged together by specialized firms and sold on to high-net-worth investors. But a portion of a policy can be bought for as little as $50,000 from Life Partners Holdings. “The appeal to investors is that betting on mortality doesn’t seem to be correlated to stocks, bonds, or anything else.” The ghoulish part? The shorter the policyholder’s lifespan, the higher the returns.