Video:60 Minutes - Those Who Are 401(k) Screwed & Even Unemployed; Wall Street Racket

[CaptainObvious]

Quote from ByLoSellHi:

Personal responsibility is a great tag line, and sounds fantastic.

The problem with it is that it only represents one side of the coin, and doesn't delve into the massive fraud, lack of disclosure and rigged racket that is the retirement and pension system that's been set up in the exact manner to provide a one-sided, fee-based system of continuous benefits for Wall Street institutions, providing a lucrative income stream to them, in good times and bad, with the individual investor who has played by all the 'rules of the game' bearing the sole risk of market downturns.

In other words, the house can't lose, and prospers from fees, commissions, etc., even during the most tumultuous times, no matter how horrid the advice they dispensed for how long, in an area they are supposed to have a degree of competence and expertise and professionalism in.

The congressman in the 60 Minutes piece can't even get a frickin' bill on the house floor that would simply mandate that ALL fees charged to investor accounts be disclosed, because of the incredible strength of the Wall Street lobby!!!!!!!! WTF!!! Is that too much to ask for?

This is not a reciprocally fair system of exchange. The game is rigged badly, and the deck is stack terribly against the average investor.

Exactly! When I go sit at a blackjack table I understand there is risk of losing money. I also have a reasonable expectation that the house is dealing with a legitimate deck of cards.

 

[Roman Candle]

The law makers in Washington have assisted Wall Street in this grand scheme. Lets make a ton of money off the backs of the average hard working Joe.

So when’s the Revolution?

 

[ByLoSellHi]

Quote from CaptainObvious:

Exactly! When I go sit at a blackjack table I understand there is risk of losing money. I also have a reasonable expectation that the house is dealing with a legitimate deck of cards.

Thank you.

At least when I'm getting screwed in Vegas, they at least pretend to have a diligent and active gaming enforcement unit to ensure the casino isn't cheating.

 

[short&naked]

Quote from ByLoSellHi:

Personal responsibility is a great tag line, and sounds fantastic.

The problem with it is that it only represents one side of the coin, and doesn't delve into the massive fraud, lack of disclosure and rigged racket that is the retirement and pension system that's been set up in the exact manner to provide a one-sided, fee-based system of continuous benefits for Wall Street institutions, providing a lucrative income stream to them, in good times and bad, with the individual investor who has played by all the 'rules of the game' bearing the sole risk of market downturns.

In other words, the house can't lose, and prospers from fees, commissions, etc., even during the most tumultuous times, no matter how horrid the advice they dispensed for how long, in an area they are supposed to have a degree of competence and expertise and professionalism in.

The congressman in the 60 Minutes piece can't even get a frickin' bill on the house floor that would simply mandate that ALL fees charged to investor accounts be disclosed, because of the incredible strength of the Wall Street lobby!!!!!!!! WTF!!! Is that too much to ask for?

This is not a reciprocally fair system of exchange. The game is rigged badly, and the deck is stack terribly against the average investor.

You'd be a terrific poster boy for the nanny state.

 

[Cutten]

Quote from Pa(b)st Prime:

You can't eat knowlege.

Sure society becomes more technologically advanced and vis a vis living standards increase. But the distribution or as us capitalists like to say-the allocation of wealth- is still predicated upon the inherent competition for financial resources. In a market economy your profit as a seller is my loss as a buyer. That's why net-net China and Wallmart abetted the short term upward mobility of the service sector American middle class. What's better-spend a days wage for a coat or an hours pay?

So while a poor person lives better than yesterday and presumably will live better yet tomorrow there's little evidence that disparity itself has been alleviated. Don't get me wrong-I don't think income equality is needed or important-but whether the pool is stagnant or expanding the mean remains rather constant

If GDP triples, almost everyone in each decile of wealth is better off than if GDP had stayed flat.

Yes, the top 10% will still be richer than the bottom, quite possibly by even more. But the other 90% are still much better off.

 

[Cutten]

Quote from ByLoSellHi:

Thank you.

At least when I'm getting screwed in Vegas, they at least pretend to have a diligent and active gaming enforcement unit to ensure the casino isn't cheating.

Most of the people in the video and elsewhere did not lose 50% in 18 months because they were being overcharged by 1% per annum. The vast majority of the losses are their own fault.

I think pretty much everyone agrees that negligent or deceptive "advice" and marketing is wrong, but that wasn't the main focus of the video, and that isn't what has wrecked the savings of so many people in this slump.

Furthermore, it is the individual "investors"/gamblers who went out looking for these funds. So many professionals have recommended indexing and diversification there is no way anyone who isn't extremely lazy would not find it within 10-20 hours of starting their research about investment.

 

[gymratnyc]

People invested in mutual funds with their 401k. The market has fallen from 14000k to 8000 k almost 50%. Unless the mutual fund they're invested in is super in investment return, then more then likely the common man has lost money in their 401k accts. Mutual funds act like the market, when the market falls in a deep recession, it falls too no matter what.

What people should complain about is the lack of variety in investment choices presented by their 401k plan.

Quote from Mvic:

I feel very sorry for the people who have sustained big 401K losses due to the recent down turn and also for those who have been robbed by fees in their funds, but how much time did these people put in to understanding how they were planning to fund their retirements?

You don't take huge losses in your 401K unless you are taking big risks.

Certainly we need more transparency, and at least half of the financial services industry are a bunch of slimey crooks, white collar criminals aided and abetted by various regulator agencies that have been in thier pockets for decades, but I get the feeling that stories like these are designed to lay the ground work for even less flexibility and more government control when it comes to investment choices.

The solutions are transparency and fiscal and financial education.

 

[IanMacQuaide]

Quote from CaptainObvious:

Exactly! When I go sit at a blackjack table I understand there is risk of losing money. I also have a reasonable expectation that the house is dealing with a legitimate deck of cards.

uh..make that 8 decks of cards.
(some casinos have gone to a 12 deck shoe in BJ)

 

[Cutten]

Quote from Mvic:

Boy, you are cold Cutten but I agree, anyone who took big losses was gambling or just not paying any attention to their retirement.

On the other hand I don't agree that financial advisors are like doctors. 90% of financial advisors I have met really have just been salesmen and didn't know what they were talking about, of the other 10% maybe half are were competent but act in thier own best interest rather than that of their clients. My experience in medicine has been the reverse, 80-90% are compentent and act in their patient's best interest, 20-10% don't care and give the rest a bad name. Medical School is a good filter for the something for nothing get rich quick con man crowd.

Is that true? I don't have a statistically significant sample, but I've used the services of 3 financial professionals and they were all extremely high calibre. I have used about half a dozen doctors and one was very good, the rest mediocre and lazy.

Anyway, I can't comment on the general professions as I haven't surveyed it. If the quality really is crap, then they need to either start suing the hell out of people, or increase the qualification standards necessary - I would agree with you on that if it's true.

 

[Cutten]

Quote from Pa(b)st Prime:

Here's the difference between being a financial adviser and a doctor:Markets are zero sum.

It is statistically impossible for more than half the money invested or not invested in a market to "out perform" the other.

If you are 100% long and the market skyrockets your purchases were met by a seller who is now under invested. If you're 100% long and the market breaks you lose and the seller is whole.

The stock market is positive sum to investors, so long as corporations make money. It is positive sum to the extent of the annual retained earnings of the corporations listed on it. If the stock market component companies are annually making a return on capital of 8% per annum (for example), then the long-term return will converge to 8% compound per annum.

The bond market is positive sum to investors, to the amount of the interest paid to them.

Even futures are positive sum if the risk-reduction benefits to hedgers outweigh the transactions costs - and clearly that is the case, otherwise there would be no demand for hedging.

In a free market, people do not engage in economic transactions unless they perceive some benefit to them.

Furthermore, investment decisions need to be made by anyone with any capital. The optimal decision is a function of their risk preference, financial needs, and the long-term risk/return prospects of each asset class. Any advice which can make investors decisions closer to the optimal allocation for their given preferences & situation, is by definition value-additive. This is true regardless of whether the stockmarket soars or collapses for the next 10, 20, 30 years. It is true regardless of whether markets are perfectly efficient or very inefficient. With a given market situation, it is still a necessary and very important task to match your investment profile with your risk tolerance and your estimated financial situation(s) now and in future.

Poor advice, or no advice, has cost hundreds of millions of people between 30% and 100% of their life savings. It is a particularly strange time here in 2009 to claim that good advice would have made no difference to these people.