The concentration of power that the banks have is at the levels of the great depression. When the balance of power tips too far in favor of the rich, bad things start to happen. This was demonstrated in 2008 with the mortgage crisis. The bottom line is that Wall Street has a gambling problem and nothing has changed since the bubble burst.
Why is this important to me?
I am not doing this summary to waste your time. My vision is to provide concise action steps you can take right now to improve your financial life. There is an old saying, put a frog in boiling water and it will jump out, but gradually heat the water and it will stay in it and die. This is what is happening right now with the wealth of the United States. The largest wealth transfer in history is happening as we speak and has been since 2005. Wall Street simply cares about bonuses and payouts. Both big companies and banks get big payouts even if they make mistakes and do a bad job. GE was hailed as one of America’s great companies and the stock price is half what it was 10 years ago, but the executive management team has made a lot of money.
Where I come from, you don’t get a trophy unless you win. Today, management has no stake in the companies it runs. The biggest problem we have right now is that for every dollar the US government spends on wars, defense, rights, and other projects, they borrow $0.43 cents. If the average American did this, bankruptcy would happen in less than 2 months.
Pirates of Manhattan II focuses on target date mutual funds and the fact that banks want to start managing THEIR 401K plans. In this roundup, we’ll cover the what, why and how of target date mutual funds and review performance to make sure you know how to protect yourself.
1. What are target date mutual funds? – A mutual fund in the hybrid category that automatically resets the mix of assets (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame that is appropriate for a particular investor. A target date fund is similar to a lifecycle fund except that a target date fund is structured to address some date in the future, such as retirement. These instruments are very complex and may include derivatives and other instruments. Disclosure documents and inserts are similar to a 1,900-page health care bill: very complex.
2. Why is it important to understand MFDTs? Mutual funds in general are presented and advertised as great investments by the likes of Suze Orman and other financial gurus. When you do your research and see what the rich invest in, the last things on your list are mutual funds and 401Ks. Suze Orman pushes these instruments as if his life depended on it. Since your sponsors are big financial corporations, maybe your financial life depends on it. The question is: does she invest in these instruments herself? According to her, she only has 3% of her assets tied up in the stock market because “I don’t care if I lose it.” How can she promote these instruments if she does not invest in them herself? What she will find is that big companies, wealthy people, and smart investors don’t invest in mutual funds and 401K plans.
3. How does it work? Target date Mutual funds are unproven, but there are three drivers that drive their growth. 1. TDMFs are the default choice now in most 401K plans. 2) At the time of employment, multiple employers default to the employee as being elected into the plan. 3.) Mutual funds and 401Ks are not guaranteed.
The media has done a great job of selling investments that are not guaranteed to the general public. Dave Ramsey also launches mutual funds and says he can get 12% a year. This is misleading because, according to Dalbar, the average actively managed mutual fund has averaged 3.8% per year for the past 20 years. You can invest in GUARANTEED annuities and life insurance and exceed these returns by 2-3% and your return is GUARANTEED. Mutual Insurance Companies are owned by the insured and capitalization requirements are 1 to 1 and not 10 to 1 like banks. Some mutual funds use leverage as high as 60 to 1. If you recall the cause of the mortgage crisis in 2008 was because derivatives were leveraged over 40 to 1 and now these same banks want access to your cash due to the fees and money generation. current they offer.
This book is a must read and it will scare you. Most of the people I talk to have basically “learned helplessness.” I hear: “I get my 401K statements and I don’t even open them.” This is a transvestite and needs to change. Account preservation is just as important as account accumulation. Will Rogers said, “It’s the return of my money that worries me.” His retirement account must be guaranteed and solid as a rock. You can have other speculative investments after that, but not your main savings. Another area the book covers is the relationship between big business, the media, the financial press, and your retirement. The mutual fund business is a trillion dollar industry and the sharks know that they make money on fees and administration no matter if you win or lose.
I hope you have found this brief summary useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. One thing you can take away from this book is setting up a guaranteed retirement plan. Research and be part of that research on annuities and life insurance. I am not a financial planner, but I advocate financial education. I can tell you that I don’t own mutual funds and I don’t tie up my money in 401K plans. This is a road to nowhere in my opinion. I do save money on guaranteed instruments like life insurance and annuities. Set a time on your calendar each week and educate yourself.