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  • How Wall Street Wrecked Your Retirement

    I am saddened to hear of some of my older friends who are faced with economic hardship in their senior years. Who'd have thought the American economy would come to this?

    -------------------------------------------------------------


    How Wall Street Wrecked Your Retirementl
    By Nicholas von Hoffman

    July 23, 2008

    Our disfunctional financial system hit a new low last week when Citigroup, the hopeless wreck of Wall Street, announced it had lost $2.5 billion in the past three months--a cheer went up, and so did the Dow. Only $2.5 billion; people were afraid the losses would be much higher. Happy days are here again.

    There are no happy days for the millions of Americans who have been trying to put away some money for their retirement in tax-sheltered entities like IRAs, Roth Accounts and 401(k)s. For them, the market's downward slope has been harrowing and frightening. When will the steady erosion of their savings end? And when it does, what will be left of their future financial security?

    Many of the millions suffering through these worrisome months didn't buy a house they could not afford, didn't speculate on their homes, didn't let greedy impulses lead them to the edge of foreclosure or bankruptcy. Nevertheless, the excesses of their neighbors and the criminal folly of American finance is destroying their plans for retirement. It is dragging down much of the value of their homes, on which they have never missed a payment, homes on which they were counting on selling at retirement to help finance their last years in comfort.

    For years, the privatization propagandists have been telling people that when the time comes, Social Security will not be there for them. Now many are learning that it's their private savings that may not be there. They are discovering they have been forced into a system in which other people have, in effect, been allowed to gamble with their retirement savings and have lost it.

    The way the private, you're-on-your-own retirement system was supposed to work had individuals, during their younger, working years, investing in stock through tax-sheltered accounts. Almost nobody who is not breaking the law can choose among individual stocks and make money, so future retirees have been encouraged to buy mutual funds run by professional managers, who are supposed to be able to pick the winners.

    Most of them aren't much better at doing that than are their customers, but in a rising market, a chicken pecking at stock tables can pick winners. In boom times, it doesn't matter that the future retiree must choose among thousands of mutual funds, many of which carry ruinously high fees. The damage to people's savings goes unnoticed until the market begins to go down.

    Even as the market falls, future retirees are told not to panic, to keep their money where it is, because in the long run the value of their accounts will go up and they will have many a happy sunset year traveling the globe and showering their grandchildren with presents.

    As the retirement date comes near, they are advised to begin selling stocks and buying fixed-income securities--as bonds are sometimes called--because these pay the interest they earn on a fixed schedule, providing a regular income.

    For this to work, stock prices must be high when the holdings are sold and the bonds purchased must pay high rates of interest. But what happens when the stock market is in a nosedive and interest rates are half of the inflation rate, as is the case right now? Panic and worry, no golden years of travel, no presents for the grandchildren. The energy that was to be expended on leisure activities is spent instead trying to figure out how to make ends meet.

    The bright spot is Social Security. That check does come with the regularity of the calendar, whether the market is up or down, whether interest rates be high or low and if, as is the case now, the Greenspan-Bush inflation is destroying family budgets. Social Security adjusts for the rising prices.

    But Social Security is too narrow a ledge to stand on through the years between retirement and death. It was designed as the base on which other retirement savings were to be built.

    Those savings--the house and the tax-sheltered retirement accounts--are shriveling up and blowing away. The persons for whom Americans' savings have been a reliable source of income are the brokers, the lawyers, the account administrators, the whole tribe of Wall Street fee farmers. They get other people's retirement money regardless of the direction the market may be moving in.

    You can't call it a broken system because it was a bad one from the start. It is failing, just as its critics said it would. And what lies ahead for those whose retirement savings are gone may be a very unpleasant old age.

    http://www.thenation.com/doc/20080804/vonhoffman

  • #2
    Hmm.. Okay...

    Well what do we do? Stop investing?

    It may well be a vaild complaint, but what do we do about such things?
    They will all look up to me and shout, "Save us!", and I will whisper back... "No."

    LAW is not JUSTICE

    Comment


    • #3
      Originally posted by midnight_v View Post
      Well what do we do? Stop investing?

      It may well be a vaild complaint, but what do we do about such things?
      I don't have the answer, midnight. I just don't know.

      From all my readings on financials, there is nothing to invest in these days. The best we can do is try to keep our assets from losing value. Some analysts say to exchange your Federal Reserve dollars into precious metals, energy stocks, coal, etc. I've chosen precious metals.

      It's pot luck out there.

      Comment


      • #4
        If you are nearing retirement, every financial advisor(worth his salt) out there, would tell you to be in cash or government securities.

        You should do this at least 5 years prior to retirement.

        This is a very well known strategy.

        A little Knowledge goes a long way. People should really plan better.

        Oh, and now is a good time to go into stocks, because you can buy low.

        "Dollar cost averaging," if you do not know what that means, you should google it.

        Comment


        • #5
          Stormy, I decided not to buy into silver or gold... Mainly because I don't have the extra cash due to the big changes that are occurring in my life right now (engagement, starting career). But then I got to thinking of something...

          If times ever get hard enough that we, the prepared portion of society, fall back to exchanging precious medal as currency, it'll be pretty rough...

          I got to thinking..... if times got that bad, a loaf of bread might be worth 5 lbs of pure silver to someone. $100 in gold coin might get you 3 cups of rice. You just never know. I figure continuing to stock up on rice, flour, wheat, beans..... and ammo.... etc... is the best thing I can do right now with my limited income.
          1*

          Comment


          • #6
            Even the pros may be stuffing the mattresses

            Gail MarksJarvis

            July 29, 2008

            If you saw dark clouds drifting from St. Charles last week, they were probably coming from the dreary mood at the CFA Institute's annual investment seminar for professional investment managers.

            Every year, the respected chartered financial analyst investment education group brings money managers from around the world together in the Chicago area and exposes them to provocative thinkers on investment strategy and market conditions. And with most of the world's stock markets down 20 percent or more from their highs, economies slowing throughout the world, and a credit crisis toying with the flow of money, this year's speakers were gloomy.

            "I am officially scared," GMO investment manager Jeremy Grantham told professionals from as far away as Abu Dhabi and Malaysia. "In 2000, we had a technology bubble. But this is massive, a massive credit crisis and a bubble in global housing, global equity and global land."

            Grantham is sometimes referred to as a "perma-bear" because he's a stickler about avoiding overpriced stocks. Two years ago, he warned his audience that U.S. stocks were too expensive, even after recovering most of the ground lost from the 49 percent drop to correct the bubble in technology stock prices in 2000. But back then, Grantham was cautious; not fearful. While he was avoiding U.S. stocks, he thought fast-growing emerging markets still held promise.

            Now, after a tremendous surge of investor money into Asia, Latin America, Africa and the Middle East, he is concerned about the prices of those stocks, as the world works its way through what he called the "first truly global bubble."

            In the last few weeks, economies throughout the world have slowed sharply, and Grantham said corporate profit margins must decline as the trend continues. But he does not think investors have adjusted their expectations.

            For investors expecting 7 percent annual returns in the U.S. stock market, Grantham said the price-earnings ratio would either have to go to 35, or "profit margins would have to go off the chart." The price of Standard & Poor's 500 stocks is currently about 22 times earnings.

            When asked by a money manager what he would buy now, Grantham said, "long mattresses"—jesting about the stereotypical nervous behavior of hoarding cash. He seriously suggested: "Put money into something incredibly safe, like a high-quality hedge fund."

            Grantham said rather than buying stocks for the long run now, he would only "short" them, or bet that they will decline in price. He sees "nothing interesting in quality corporate bonds," and he has been shorting oil. "Commodities had a good run, but that's over," he said.

            Although downtrodden mortgage-related bonds might be a good deal now because some are selling for 59 cents on the dollar, he said he wonders if the price will seem compelling if home prices fall another 20 percent or 25 percent.

            He confessed to the group that "I bought my first gold last week, and I hate gold. It doesn't pay a dividend. I would only do it if I was desperate."

            Grantham said part of his angst comes from a lack of leadership. He criticized U.S. Treasury Secretary Henry Paulson for failing to force banks to raise capital when it was warranted two years ago. And he added: "Just imagine, we have chosen to borrow money from China so we can buy oil from the Middle East and use it to pollute the planet."

            Marc Faber of Marc Faber Ltd. blamed former Federal Reserve Chairman Alan Greenspan for failing to acknowledge the Fed's role in repeatedly inflating dangerous bubbles.

            By keeping interest rates low, "the Fed has created a bubble in everything—stocks in emerging market, real estate everywhere in the world, commodities, art," he said. "The only asset class that is down is the U.S. dollar."

            Generally, when bubbles burst, the asset prices stay down for lengthy periods. Grantham isn't expecting the stock market to hit its low until 2010.

            Farouki Majeed, the senior investment officer for asset allocation and risk management for the giant California Public Employees' Retirement System, noted that with the tech bubble bursting in 2000 and the current bear market, investors in stocks have seen virtually no return for the last 10 years. That's unusual, but typical of "boom and bust" cycles, he said.

            Calpers reduced its exposure to stocks from 60 percent of the pension fund to just 54 percent this year.

            Faber said, "It is quite likely that the current synchronized global economic boom and the universal, all-encompassing asset bubble will lead to a colossal bust." And with commodity prices so inflated, he expects an "increase in international tensions" over resources.

            [email protected]


            http://www.chicagotribune.com/busine...4,print.column

            Comment


            • #7
              Originally posted by Chit2001 View Post
              Stormy, I decided not to buy into silver or gold... Mainly because I don't have the extra cash due to the big changes that are occurring in my life right now (engagement, starting career). But then I got to thinking of something...

              If times ever get hard enough that we, the prepared portion of society, fall back to exchanging precious medal as currency, it'll be pretty rough...

              I got to thinking..... if times got that bad, a loaf of bread might be worth 5 lbs of pure silver to someone. $100 in gold coin might get you 3 cups of rice. You just never know. I figure continuing to stock up on rice, flour, wheat, beans..... and ammo.... etc... is the best thing I can do right now with my limited income.
              chit,

              You're 100% correct in your thinking. I've got about 1,000 lbs of various grain stored in my de-humidified basement, along with various sundry items like razor blades, ammonia to purify drinking water, water purification filtering pumps, vinegar, soap, toilet paper (don't laugh), the list is endless. Grain lasts a very long time. If I don't need it, I'll use it along the way, or sell it to someone else below market price.

              Gold and silver will maintain it's value against the fed reserve notes, when tshtf, but will not feed you, nor be in demand when food is in short supply.

              Consider yourself way ahead of the masses.

              ps. good luck in your engagement, and career

              Comment


              • #8
                Originally posted by Chit2001 View Post
                Stormy, I decided not to buy into silver or gold... Mainly because I don't have the extra cash due to the big changes that are occurring in my life right now (engagement, starting career). But then I got to thinking of something...

                If times ever get hard enough that we, the prepared portion of society, fall back to exchanging precious medal as currency, it'll be pretty rough...

                I got to thinking..... if times got that bad, a loaf of bread might be worth 5 lbs of pure silver to someone. $100 in gold coin might get you 3 cups of rice. You just never know. I figure continuing to stock up on rice, flour, wheat, beans..... and ammo.... etc... is the best thing I can do right now with my limited income.
                Oh, one other thing.

                Buy some silver eagles, as a present, for your soon-to-be bride. You won't be sorry you did. Silver is the play of the century.

                Comment


                • #9
                  Here comes ol' doom and gloom again. My stocks are kickin' it, pal - all one has to is leave it alone and let it work.

                  All the tanked values right now ar buy opportunities - even for those closer to retirement. Check with me in 2 years and I'll tell you of the thousands I made between noe and then.

                  No matter how many times you try to make it so, Stormy, life is not doom and gloom. It just takes faith in our sytem - in capitolism. It works.
                  The All New
                  2013
                  BBQ and Goldfish Pond Club
                  Sully - IAM Rand - JasperST - L1 - The Tick - EmmaPeel - Columbus - LA Dep - SgtSlaughter - OneAdam12 - Retired96 - Iowa #1603
                  - M1Garand

                  (any BBQ and Goldfish Pond member may nominate another user for membership but just remember ..... this ain't no weenie roast!)



                  Comment


                  • #10
                    What are the two things that Americans refuse to buy when they are on sale? stocks and bonds

                    Comment


                    • #11
                      Originally posted by 1042 Trooper View Post
                      Here comes ol' doom and gloom again. My stocks are kickin' it, pal - all one has to is leave it alone and let it work.

                      All the tanked values right now ar buy opportunities - even for those closer to retirement. Check with me in 2 years and I'll tell you of the thousands I made between noe and then.

                      No matter how many times you try to make it so, Stormy, life is not doom and gloom. It just takes faith in our sytem - in capitolism. It works.
                      I'm happy for your stocks, Trooper. Mind sharing with us which ones they are? I'd sure like to put a coupla' thou' on some sweet shares that may go 'to da moon' in two years. Although, I'd be kind of worried, with the way the USD iis acting these days, the dollar value of the thousands we make may only buy a pair of good shoes.

                      You're right about my doom 'n gloom, Trooper. I'm just a scaredy cat. But you know something, I can't help myself. When I read articles from prestigious newspapers like those below, and quotes from World Bank presidents, I quickly put on my steel pot, and jump into the foxhole.....INCOMING;

                      ----------------------------------------------------------------------

                      Are feds stockpiling survival food?
                      'These circumstances certainly raise red flags'

                      Posted: July 25, 2008
                      12:30 am Eastern

                      © 2008 WorldNetDaily

                      A Wall Street Journal columnist has advised people to "start stockpiling food" and an ABC News Report says "there are worrying signs appearing in the United States where some … locals are beginning to hoard supplies." Now there's concern that the U.S. government may be competing with consumers for stocks of storable food.

                      "We're told that the feds bought the entire container of canned butter when it hit the California docks. (Something's up!)," said officials at Best Prices Storable Foods in an advisory to customers.

                      Spokesman Bruce Hopkins told WND he also has had trouble obtaining No. 10 cans of various products from one of the world's larger suppliers of food stores, Oregon Freeze Dry....

                      http://www.worldnetdaily.com/index.p...w&pageId=70281

                      ---------------------------------------------------------


                      Editorial- NYTimes
                      The World Food Crisis

                      Published: April 10, 2008


                      Most Americans take food for granted. Even the poorest fifth of households in the United States spend only 16 percent of their budget on food. In many other countries, it is less of a given. Nigerian families spend 73 percent of their budgets to eat, Vietnamese 65 percent, Indonesians half. They are in trouble.

                      Last year, the food import bill of developing countries rose by 25 percent as food prices rose to levels not seen in a generation. Corn doubled in price over the last two years. Wheat reached its highest price in 28 years. The increases are already sparking unrest from Haiti to Egypt. Many countries have imposed price controls on food or taxes on agricultural exports.

                      Last week, the president of the World Bank, Robert Zoellick, warned that 33 nations are at risk of social unrest because of the rising prices of food. “For countries where food comprises from half to three-quarters of consumption, there is no margin for survival,” he said.

                      Prices are unlikely to drop soon. The United Nations Food and Agriculture Organization says world cereal stocks this year will be the lowest since 1982....

                      http://www.nytimes.com/2008/04/10/op...ml?ref=opinion

                      ----------------------------------------------------------

                      World faces food shortages
                      By Emma Graham-Harrison and Ben Blanchard
                      Tue Dec 4, 2007 2:10am EST

                      BEIJING (Reuters) - The world is eating more than it produces and food prices may climb for years because of expansion of farming for fuel and climate change, risking social unrest, an expert and a new report said on Tuesday.

                      Biofuel expansions alone could push maize prices up over two-thirds by 2020 and increase oilseed costs by nearly half, with subsidies for the industry effectively constituting a tax on the poor, the International Food Policy Research Institute said.

                      Global cereal stocks, a key buffer used to fight famines around the world, have sunk to their lowest level since the 1980s due to reduced plantings and poor weather, said the institute's director general, Joachim von Braun.

                      "The world eats more than it produces currently, and over the last five or six years that is reflected in the decline in stocks and storage levels. That cannot go on, and exhaustion of stocks will be reached soon," he told a conference in Beijing.

                      Countries such as Mexico have already experienced food riots over soaring prices, von Braun added in a report released at the same meeting, held by the Consultative Group on International Agricultural Research....

                      http://www.reuters.com/article/envir...29455620071204

                      Comment


                      • #12
                        Originally posted by cueball06 View Post
                        What are the two things that Americans refuse to buy when they are on sale? stocks and bonds
                        Some have advised investors to remove their money from banks and buy U.S. Treasuries as a safer investment. The rational goes as follows. “U.S. Treasuries are backed by the full faith and credit of the U.S. Government and they have never defaulted.”

                        The first point I'd like to make is this….there's always a first time. Prior to the present, the MBS market never blew up either. And it's obvious to any sophisticated investor that the credit risk for U.S. Treasuries continues to increase . While it could take some time, the fact is that the FDIC will cover all bank deposits that do not exceed the $100,000 limit. After all, the FDIC is a government agency. So can we not say that it too is backed by the full faith and credit of the U.S. government? Sure we can because it's a fact. So as far as safety of principal, the FDIC is equal to U.S. Treasury securities.

                        Now let's look at the disadvantages of buying U.S. Treasuries. First you are dealing with interest rate risk…a very big risk given the fact that coupons on U.S. Treasuries are very low and are almost certain to rise much higher in the coming years. When rates go up, those holding bonds will see the value go down. This will force them to hold the bonds longer, perhaps even until duration. Therefore, I would not consider U.S. Treasuries to be particularly liquid for individual investors.

                        The next point I want to make is that bonds get hammered during rising inflation due to purchasing power declines. Bond values also decline in value when rates rise as a result of rising inflation. So you get a double-whammy. While the dollar also gets hit with diminished buying power seen during rising inflation, you don't get the double-whammy seen in bonds.

                        Most important, your dollar deposits are liquid. If your bank fails, you will lose some temporary liquidity, but nowhere near what you could see from U.S. Treasuries. While waiting for rates to go back down, those in U.S. Treasuries might be stuck holding them for many years.

                        Finally, as the credit risk of the U.S. government continues to increase, U.S. Treasury bonds will decrease in price, causing investors to hold them longer – i.e. even less liquidity. So as far as my bank money, I'm sticking with my dollar deposits because I want liquidity. If liquidity is important to you, you should do the same.

                        The real problem is trying to save your money from the damaging effects of inflation. One solution to this would be to invest in foreign currencies like the Yen and Swiss Franc. Sure, you may not have the liquidity of a U.S. bank deposit (although you might depending, on how you invest in these currencies) but at least your buying power will be preserved and will most likely increase.

                        Always question the advice of those who write about investments for which they try to sell you, because most of the time the only interests being served are theirs.

                        By Mike Stathis
                        http://www.apexvc.com

                        Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted funds and corporations with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Recently, Mike has been particularly active helping clients navigate the real estate and banking crisis.

                        The accuracy of his predictions and insights detailed in the 2006 release of “America's Financial Apocalypse” and “Cashing in on the Real Estate Bubble” have positioned him as one of America 's most insightful and creative financial minds. These publications serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage.

                        Selected Publications-
                        America 's Financial Apocalypse: How to Profit from the Next Great Depression. Condensed Ed. Copyright © 2007. AVA Publishing.
                        Cashing in on the Real Estate Bubble. Copyright © 2006. AVA Publishing.
                        America 's Financial Apocalypse: How to Profit from the Next Great Depression. Copyright © 2006. AVA Publishing.

                        Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.


                        http://www.marketoracle.co.uk/Article5674.html

                        Comment


                        • #13
                          This mortgage bailout bill signed into law really p's me off. I bought a house I can afford, pay my bills on time and the damn government penalizes me because I got my s together by using my money to pay for others irresponsibility. Some people are just meant to be renters not owners. I have zero sympathy for the them.
                          Now, from what I hear, it'll be harder for people and businesses with good credit to get loans because money won't be as readily available, because we're bailing the bums out.
                          I guess people won't be satisfied until we all wind up living in a third world type nation with a ruined economic system.
                          I still don't know why people want to invest in gold because of fear of very bad economic times, what you gonna do, eat it if your hungry. The government would probably outlaw gold ownership if they wanted to anyway, to prevent it being used as a currency to circumvent theirs, didn't they do that in the past.
                          I'm not a conspiracy theorist like Stormy, but I do think that because of the demands our population to loot our economic system for short term gain, we have just about reached the peak and will start going down in the future because of our greedy, inconsiderate, whiney population don't give a damn about the future consequences.
                          The liberal politician has the only job where they go to the office to work for everyone but those who pay their salary.

                          Comment


                          • #14
                            Originally posted by tony.o View Post
                            This mortgage bailout bill signed into law really p's me off. I bought a house I can afford, pay my bills on time and the damn government penalizes me because I got my s together by using my money to pay for others irresponsibility. Some people are just meant to be renters not owners. I have zero sympathy for the them.
                            Now, from what I hear, it'll be harder for people and businesses with good credit to get loans because money won't be as readily available, because we're bailing the bums out.
                            I guess people won't be satisfied until we all wind up living in a third world type nation with a ruined economic system.
                            I still don't know why people want to invest in gold because of fear of very bad economic times, what you gonna do, eat it if your hungry. The government would probably outlaw gold ownership if they wanted to anyway, to prevent it being used as a currency to circumvent theirs, didn't they do that in the past.
                            I'm not a conspiracy theorist like Stormy, but I do think that because of the demands our population to loot our economic system for short term gain, we have just about reached the peak and will start going down in the future because of our greedy, inconsiderate, whiney population don't give a damn about the future consequences.
                            [bold highlite mine]

                            Hey, I was just going to agree with that, with a disclaimer '...I'm not a conspiracy theorist like tony, but.....'

                            Comment


                            • #15
                              Originally posted by farewelltonavy
                              Just curious, has it ever crossed your mind that you're not in this country alone, and as such you have other responsibilities as well as rights? That's why some peoples decisions affect you and everyone else...can't change that fact. So might as well accept it and try to help those who got screwed/made bad decisions because it will come back to you anyway in form of homelessness and increased crime.

                              Like the millions who didn't vote for Bush but have to suffer the consequences of his election anyway
                              We have a responsibilty to provide an environment where people are allowed the freedom to succeed or fail. We do way too much already for the irresponsible and I don't want to be punished any longer for the mistakes of others. The government has no authority to force me to feed, clothe or house others. If you want to volunteer your money for that, then thats fine, but don't force me.
                              My wife is even more hardcore than I am. She grew up very poor because her father couldn't get his crap together and squandered every opportunity he had, she realized that at a young age when most would not. We were dicussing this mortgage issue the other day and she reminded me that nobody cared what we were living in when we started out. Nobody worried how we were getting around when our POS car kept breaking down and we still didn't vote for democrats to get something for free. Trust me, you don't want her on your jury.
                              Of course, today we have a nation of whiners, that Phil Ghraham correctly pointe out, but guess what, the economy is so bad that I still have to wait an hour to get into the Outback Steakhouse on friday night.
                              The liberal politician has the only job where they go to the office to work for everyone but those who pay their salary.

                              Comment

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