The plunging stock market means this downturn is hitting the rich, too, and that has pushed Citi Investment Research's "Living Large" index...
The plunging stock market means this downturn is hitting the rich, too, and that has pushed Citi Investment Research’s “Living Large” index down more than 50 percent in 2008, through Oct. 16, more than the Standard & Poor’s 500 index’s 35.6 percent drop.
Citi’s index includes shares in luxury retailers and other companies that cater to the affluent. It provides a snapshot of purchases of $14,000 diamond bracelets from Tiffany & Co. (TIF), $6,000 mattresses from Tempur-Pedic (TPX) and $600 sets of clubs from Callaway Golf (ELY).
Handbag maker Coach (COH), another index component, recently reported its quarterly profit fell 6 percent and cut projections for annual sales growth to 10 percent from 13 percent. The company said it’s “a time when our customer is clearly more reluctant to spend.”
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Not only are Americans’ 401(k) accounts under pressure from the falling market, so are their pensions.
Companies in the Standard & Poor’s 500 look like they’re on the way to reporting the largest underfunding of their pension plans in history, according to S&P senior index analyst Howard Silverblatt.
Market losses have pummeled the value of the pension funds, as they keep most of their assets — an average of 61 percent — invested in stocks.
It’s a far cry from last year, when pension funds at S&P 500 companies were overfunded by $63.38 billion.
Investors yanked a net $49 billion out of mutual funds last month, the biggest outflow Morningstar has seen since it began tracking them in January 2000. And the firm estimates this month could be worse.
These redemptions by shellshocked fund investors could exacerbate the market sell-off. Many mutual-fund managers are forced to sell holdings, even stocks they’d prefer to keep to meet redemptions, says analyst Karen Dolan. That’s because funds have an average of just 5 percent of their portfolios in cash.
The Associated Press