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The US market as a whole has lost nearly 20%, nearly straight down, with four straight weeks of losses. The entirety of the "gains" since QE2 was announced are now gone - a year of market advance destroyed in less than four weeks.
Why is your 401k and IRA being ravaged - again?
Simply put, we have not stopped financial institution lies.
This is not (just) a United States problem, but the banks over in Europe that are in trouble have, in many cases, branches here in the US and trade in United States markets. Some - such as Barclays, Credit Suisse, Deutsche Bank and HSBC, are even "primary dealers" and thus participants in US Treasury auctions. Why is not US law applied to those firms that are considered "essential" to US financial stability?
Our government has turned balance-sheet games and lies into a legitimate business model. This in turn has left the markets worldwide subject to rumor and innuendo, along with fact. This is not acceptable in a financial system that is claimed to "need" these big institutions to remain stable.
I guess my point was that the growth that allowed the middle class to buy houses, cars, have great 401ks, etc. over the last several decades was largely due to the work those people did. A mistake was made and suddenly decades of unprecedented prosperity are forgotten...
Your decades of growth was nothing more than a bubble funded by government debt and cheap credit for all who wished it. That "unprecedented prosperity" was a false construction that led the world to where it is today.
Correct! Those days the govt might be printing monies from a printing factory backed by gold. Now they just gotta cut and paste from the computer backed by finger tabs. Newton laws applied here - The accelerationa of a body is parallel and directly proportional to the net forceF and inversely proportional to the massm, i.e., F = ma..
The fed has been printing money to keep the dollar value of the Dow above 12k. The value of the Dow (real value) has been falling from 1999 on when the dot com bubble popped. Now with the popping real estate bubble we wont see the value of the Dow go up in inflation adjusted dollars until the value of houses starts going up in dollar amounts it can still be dropping in real value but it just has to be appreciating in dollar value.
401k, 403b and other supplemental retirement accounts provided too much cash to chase too few solid opportunities. Fund managers drive up and down the same basket of stocks and find new ways to leverage the up and down movements to squeeze out a better looking short-term return than their buddies running a competing fund. At the end of the day they get paid no matter what while the plan participant sees the results of their portfolios after the fact on their quarterly statements.
Add the Fed with the free money they gave to banks and there is little incentive to provide any real return to the small investor with plenty of cash sitting around. Many corporations are loaded with cash and apparently can't think of anything to do with it since there is no end demand by consumers who have lost their jobs and/or are unwilling to spend.
In the meantime Wall Street will just keep churning and recycling what has already been created.
Your decades of growth was nothing more than a bubble funded by government debt and cheap credit for all who wished it. That "unprecedented prosperity" was a false construction that led the world to where it is today.
The 401k looks more like a pyramid scheme as time goes on. In the 80s there were few participants and funds. Those involved received healthy returns of over 10%.
Now the supplemental pension plan has become THE pension plan for many Americans and with a greater supply the return has diminished while at the same time the risk and volatility has increased.
When most corporations managed pension plans in-house they tended to be more conservative with investments.
Your decades of growth was nothing more than a bubble funded by government debt and cheap credit for all who wished it. That "unprecedented prosperity" was a false construction that led the world to where it is today.
Not necessarily...
All things considered, the crashes in the last few years are relatively minor. We will bounce back.
401k, 403b and other supplemental retirement accounts provided too much cash to chase too few solid opportunities. Fund managers drive up and down the same basket of stocks and find new ways to leverage the up and down movements to squeeze out a better looking short-term return than their buddies running a competing fund. At the end of the day they get paid no matter what while the plan participant sees the results of their portfolios after the fact on their quarterly statements.
Add the Fed with the free money they gave to banks and there is little incentive to provide any real return to the small investor with plenty of cash sitting around. Many corporations are loaded with cash and apparently can't think of anything to do with it since there is no end demand by consumers who have lost their jobs and/or are unwilling to spend.
In the meantime Wall Street will just keep churning and recycling what has already been created.
Very well said. I'd add that a contributing factor on corporations not spending now is that they know the cost of labor will be lower in the future than it is now and in deflation cash gets you a really good return. We need true inflation. Not stagflation as that is what we have now.
All things considered, the crashes in the last few years are relatively minor. We will bounce back.
I wish the bottom graph was price in gold rather than dollars. But nice graph anyway. The problem is the drop in GDP per-capita unless things change we are going to spend a long time below the long term trend line.
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