MOSERS Bonuses Inspire 'Common Sense' Investing

My friend Eddie showed up at the driving-range tee'd off.

He read about how the 14 members of the investment staff who manage the Missouri State Employees Retirement System investment portfolio were awarded nearly $300,000 in bonuses even though the plan lost $1.8 billion last year.

"Whatthehell! These guys lost almost two billion dollars. I wouldn't call that worthy of a bonus."

"But they did better than 'The Market,'" I reminded him. I had read the same article in last Sunday's St. Louis Post-Dispatch about MOSERS, as the plan is often called. "The board of directors who oversee this program say the bonus plan helps them keep talented investment managers from running off to the private sector."

"I say, let them run," Eddie grumbled as he loosened up by swinging his driver around his head. "Heck, the Post says they only directly manage 18% of the entire fund. They outsource the rest to specialists in various market niches, whatever the heck that is."

"I don't know. I'm certainly not an expert in finance and definitely not high finance. I guess they don't feel knowledgeable about some areas of investing so they hire experts."

"Experts, my butt. They're all just playing with Monopoly money" Eddie retorted as he took a mighty swing and whiffed the ball. "That was a warm-up. You know what my daddy always said about 'experts', dontcha?"

"X is the unknown factor and a spurt is an over-rated drip," we recited in unison.

I've heard Eddie quote this phrase from his father many times before.

"I wonder how much commission all these outside 'experts' got, losing MOSERS' money? They didn't mention that in the article," Eddie said. He then took another swing, this time slicing his ball hard and high to the right over the tree line. Screeching car tires were audible a couple seconds later.

"I'm practicing for that dog-leg on 10," Eddie explained. "Well, I think the state could save a bundle and get rid of this in-house investment staff and their bonuses and their outside 'experts' and hire me to do some basic common sense Missourian type of investing for MOSERS."

"Hire you? What kind of 'Missourian type of common sense' investing would you do?"

"Well let's see, the fund has six billion dollars, right? Course, I don't know if the fund used to have $8 billion and they lost almost $2 billion or if the fund was at $6 billion and is now down to $4 billion. The Post didn't explain that very well.

"Anyhow, let's just say I have $6 billion to invest in. First of all, I would invest a billion in Wal-Mart."

"Wal-Mart? Why them?"

"Because even when the economy is in the crapper, people still need their basics and Wal-Mart is good at basics and keeping an eye on their bottom-line."

Eddie hooked his next shot sharp to the left ricocheting off the helmet of a passing mountain biker cruising along the adjacent walking trail. The cyclist wobbled off into the neighboring drainage ditch while the ball made a graceful, looping landing into the stroller that a mother was pushing in the opposite direction, chatting obliviously on her cell phone. The baby dropped his pacifier, immediately fixated on the bright yellow ball that had just appeared in front of him.

"I'm practicing for that other dog-leg on 15."

"If you say so. Ok, so you would invest a billion with Wal-Mart. What next?"

"McDonald's. I would put another billion into McDonald's. They're doing great in this suckie economy and I don't see that changing. Besides, they represent one of our state's core values."

"Which is?"

"Obesity. Missouri didn't get to be one of the fattest states in the country without a whole lot of help from Mickie-Ds. I don't think anyone would complain if we invested a billion in their stock, especially if they gave everyone in the state a coupon for a free Big Mac. In fact, I bet it would inspire Missourian's to eat there even more as a part of their civic duty."

"You're logic is starting to scare me. Alright, so you have 4 billion left."

"Well, I would put 2 billion into passbook savings accounts. But only with banks based in Missouri."

"How much annual interest will you make on that investment? About $30?"

"Probably. But it will be stable and by investing the money with home state banks, they'll more than likely loan it out to other Missouri businesses which will hire more people and buy more equipment and make more products and pay more taxes some of which will go right back into MOSERS."

"Ok, that sort of makes sense, so what about the other two billion that's left?"

"Well, I'd invest a billion into publicly-traded hospitals with locations in Missouri. With our aging population, those businesses are just going to keep growing. And how can you lose with a business that can get away with charging $40 for a single aspirin that costs them a nickel? What is the mark-up on something like that, like nine jillion? And I bet with Missouri's obesity problem that our investment in McDonald's will dove-tail quite nicely with the hospitals."

"And the last billion?"

"Oh that's easy. I'd invest it in various lottery tickets. I found this sure-fire system on the Internet that we can use to play the Pick-3 and PowerBall lotteries. And we'd get a whole bunch of scratch-offs tickets. If they hire me as the entire investment staff for MOSERS, I've got to have something to do with my time since I won't be wasting it trying to out-guess all those knuckle-heads on Wall Street."

Eddie swung his driver and hit the sweet spot just right, making his club utter that sound that golfers like their drivers to make. His ball rocketed skyward, scattering a flock of starlings that was flying by as it soared down the middle of the driving range before dropping nearly 400 yards away. He grinned in a very self-satisfied kind of way.

"Now, that my friend, is what I call high fly-nance."