Why your 401K is now just a 41K: Someone needs to put the fear of God into Wall Street...

[ddeclue]

:rant:

<rant>

Some are now saying that you should "Buy! Buy! Buy!" on Wall Street because prices are so low..

But before you pick up that phone and call your broker....

Shakespeare famously wrote that we should kill all the lawyers.

IMHO I think it should be the MBA's.

The TRUTH is that NOBODY REALLY knows any more what constitutes a good measure of productivity or profitability and what constitutes a "good deal" on Wall Street and what does not.

Are today's companies REALLY that much "productive" or "profitable" than they used to be 20 years ago or have the CEO's just gamed the numbers for the last 20 years so that they could go home with a bigger bonus at the end of each quarter?

I really don't think things are so much better - the "productivity" gains have been "accomplished" through gaming the system and through offshoring all the good jobs to places that pay slave labor rates and don't obey any of our environmental, labor, worker and safety laws and praying to God that it would never ever catch up to us and bite us in the ass.

The hard economic truth though is that aggregate demand is driven by a combination of all those "pesky" workers' salaries and if you cut all their jobs and then replace them with people in a foreign country whom you will NOT pay enough to buy your product - Eventually it WILL catch up with you and demand for your (and everyone else's) products will collapse when the credit runs out.

The truth is that these "rock star" CEO's are overpaid, over-rated and often sociopathic in their obsessive focus on making these quarterly numbers every quarter to the exclusion of all else - EVEN to the exclusion of the long term profitability of the very companies they profess to be "leading".

This is due to the interlocking nature of these companies boards of directors and the quarterly bonuses and executive pay contracts that they all get (some while they are taking tax payer "TARP" money).

What EXACTLY makes you worth $5,000, $10,000, $20,0000 or more PER HOUR Mr. CEO?

The pay structure for these CEO's boggles the mind especially when you consider that often times this is the pay they receive to run their companies into the ground.

And there's very obviously a two-tiered version of market information and transparency where the fat cats have been trading on insider info for about 15-20 years and 99.9% of the time not getting caught while the ordinary Joe has been putting his retirement money into what has turned out to be a bunch of crap based on a bunch of hype told to him in the media.

Anyone who has watched the fantasyland market predictions being offered by the talking heads at CNBC in the last two years would have been fooled into believing that the market was going up up up and never going down ever.

Of course I hope they were smart enough to take stock tips from Jon Stewart and the Daily Show instead.

I for one have NOT invested in the market and other than some shares of Wachovia given to me many years ago by my mother (which by the way have lost 95% of their value in under 2 years) have not had anything invested there over which I've had to take a 401K bath.

All things considered in the last eight years or so, the average Joe would have been better off spending his retirement income on the Celebrity Shopping Channel than in the stock market.

Given that the market is at 12 year lows it's actually worse than that. If factored for inflation during the last 12 years the market is actually nearer to where it was in the late 1980's or early 1990's - not 1996 or 1997.

In any event the average Joe's investment has lost on all measures over the last 15 years or so and is worth LESS than when he put money into it. And please don't bother to talk to be about mutual funds and other "risk spreading" techniques because none of that really matters when the whole market has been built on a house of cards in the first place.

Let's be honest about the stock market:

I won't call it "investing" because it's NOT. That implies putting some money into a productive enterprise that somehow makes life better for all of us and receiving something in return for that up front use of your capital at a later time.

I won't call it "gambling" either because when you go to Vegas or Atlantic City, there are strictly enforced rules, everything is documented carefully, and the House doesn't have the kind of edge they've got over you on Wall Street.

Until things dramatically change, it's just wasting your money - unless you are an insider and THEN it becomes a license to kill, cheat and steal.

We should take accounting and performance measurements used to gauge corporate performance out of the CEO's and the boards hands and make it a Federal government job. We need to be able to REALLY compare apples to apples and we need REAL transparency when making these decisions and I think the whole system is about as believeable as buying something off the home shopping network right now.

Finally these CEO's paychecks need to be tied to the paychecks of their workers or in some other manner linked to a more healthy measure of MAIN Street's economy than to WALL Street's "quarterly profit".


Doug D.
Orlando, FL

P.S.: and for the record...Gordon Gekko was an asshole!

</rant>

[defendandprotect]

1. "Scam" ... you're right --- not investing, it's speculation . . . with insider info . . .

[AllentownJake]

2. The 401(k) was the most disastrous thing ever invented for the middle class

The Gordon Geckos got our Pension funds....he just found a nice legal way to do it using the Tax Code.

[MercutioATC]

3. If your 401k is now a 41k, YOU bear responsibility.

Money needs to be managed. I have friends and family who have lost hundreds of thousands of dollars in the past year. Without exception, they either got greedy, they insisted on using dubitable "investment strategies", or they just failed to pay attention.

401k's use pretax money and some employers match contributions. They're fantastic retirement saving vehicles.

The unhappy fact that many choose to act greedily or remain uninformed doesn't change that.

[mod mom]

4. Don't blame the victims for Wall Street'sand those who pushed banking de-regulation's misconduct.

They were suppose to serve the public trust but instead were interested in their own self enrichment.

Luckily I listened to Paul Krugman and moved the majority of our 401K funds into ready assets last fall, but have still lost about 9% from our high in our 401 K. A rollover account didn't fair as well and we lost a whopping 48%. Banking stocks we inherited from my father-in-law are worth less than 10% of what we inherited them at in 2001. Is this our fault? Mismanagement, deregulation, and corporate greed have broken the public trust.

[MercutioATC]

5. Why didn't they (or you) switch to non-equity funds before the crash?

Yes, there is a small percentage of people who didn't have that option, but the overwhelming majority did.

The signs have been there for years for anybody who chose to see them.

They aren't "victims". They chose to gamble in return for thepossibility of higher yields...and they lost.

[uponit7771]

8. 401k accounts are set up for active management?! We can do limits and trailing stops?!

Come on, this is blaming the victim

[mod mom]

14. absolutely. Many people put trust in the system and are busy with their daily lives.

Next we'll hear it was the investor's fault that Madoff made the ponzi scheme. :eyes: What about regulation? Oops, that was signed away with Bill Clinton's repeal of Glass Steagall and lack of regulation since then.

[uponit7771]

21. A company isn't required to allowed SDBA's where you can protect yours assest in down markets...

...and the ones that do most likely don't pay the fee's associated with them.

Even if they did, you are only allowed to have half of your account go towards SDBA's and are restricted on the types of tickers you can buy.

[MercutioATC]

22. That's just silly.

You're saying that people shouldn't have to pay attention? They should be able to just "trust the system"?

Americans have been spending over 100% of their income for years. The stock market has been based on an unsustainable model. Sooner or later, it was all going to come crashing down.

...and now, people who remained willfully ignorant and trusted that the circus was going to go on forever aren't at fault because they were too busy with their daily lives to THINK?

Ponzi schemes and the lack of regulation aside, this crash was inevitable and the signs have been there for years.

[Dreamer Tatum]

6. The fear of God has been in Wall Street for more than a year now

and is why the market is down.

The market thrives on calm, order, and predictability. We've had none of that for a long while now. That is why cash is being hoarded by way of stocks being sold.

[uponit7771]

7. Trailing stops will do JUST THAT, will prevent 100$ mut fund accounts from trading like 5 dollar...

...stock and will let Wall street know if their anaylysis isn't right then no one is going to cut them a break

There should be alerts at the LEAST placed on these accounts with the ability to do trailing stop.

[joeglow3]

9. Be fearful when others are greedy and greedy when others are fearful

- Warren Buffett

[uponit7771]

10. Yeap, there needs to be more education one WHEN people get greedy

[Jennicut]

11. I guess 401Ks were a bad idea, we need something safer to put our money in

[uponit7771]

12. Not a bad idea if we can ACTIVELY manage them, trailing stops would protect massive downs but we're

...not able to do such

[Jennicut]

13. True. They are currently not able to be protected by the ups and downs of the market

My parents, both 61, have lost tons of money in their 401K and they want to retire soon.

[MercutioATC]

15. Why not just manage your investments?

You don't need trailing stops to move your money into safer investments.

The only reason for a trailing stop is people who don't educate themselves. Imagine the market volatility if a bunch of people didn't know how to manage their money suddenly had their accounts set to random sell points.

At best, it's unnecessary. At worst, it would cause extreme market volatility.

[slipslidingaway]

16. Agree...

"Why not just manage your investments?"

A person's home and their retirement accounts are probably the largest assets for most people, they both to be maintained.


:thumbsup:

[uponit7771]

18. Random? There should be 10% volitily (up or down) in a 100 dollar mutual fund?

Come on, this is silly...people should be more involved in their future no?

[uponit7771]

19. Because companies are NOT required to allow self directed brokarage accounts and by law...

...you can only direct half of you account value towards SDBA's and still pay brokerage fees.

Those are the laws.

[renate]

17. on the other hand, there are fund managers who are paid to manage funds

Blaming people who aren't financially savvy for the tanking of their 401(k)s is like blaming patients for not diagnosing their own illnesses. If you pay a fund manager to manage a fund, you think you've paid a professional to do a job you can't do, just like if you pay a doctor to diagnose and treat your medical condition.

If the professional fund managers didn't see (or didn't want to see) all of this coming, why should investors whose day jobs are completely unrelated to the stock market have been expected to do any better?

[uponit7771]

20. BINGO!!! You pay a fund manager to dump vollatile stocks and they do nothing but sit there and watch

...stocks tank with you.