Curried Wealth Building
Finding an Edge

If you want help with your finances, give me a call at 703-791-3243.

November 2, 2008
Issue 18  -  Retirement Realities
 

I have been telling people that I am not putting any additional money into any "retirement" accounts as I am convinced that the government will find these huge pots of money too tempting to not target, i.e. take. (The one exception to this are the 529 and Coverdell education accounts which I think will be spared for obvious reasons) Well it is closer than even I thought as Argentina is now trying a little "nationalization". From the Wall Street Journal:

"Argentina's leftist government pressed forward with its controversial plan to nationalize private pension funds, laying out investment guidelines for the funds it wants to seize and lobbying Congress to approve the proposal."

These guys just can't help themselves. A big honey pot of free cash is just too tempting. In case you are now thinking that it's only Argentina, OUR congress has recently heard testimony from a leftist wacko.  From MSNBC:

"At that hearing, one of the witnesses, Teresa Ghilarducci, an economics professor at The New School for Social Research, made an interesting observation. By her calculations, the government spends as much as $80 billion a year in tax breaks to subsidize 401(k) savings plans. In her opinion, that money could be better spent offering a tax credit for a revised retirement plan that would guarantee a minimum income stream to people who saved for retirement. You’d give up some of your tax savings in return for a guaranteed return for life."

Her plan would FORCE you to contribute a set amount to a government run "pension" fund that would "guarantee" a whopping 3% return. Now this is not legislation or even a bill, but that's not how radical leftist ideas are sprung on the public. Remember the Social Insecurity plan was started to help only those beyond the average life expectancy while now it covers EVERYBODY. Now that's Socialist creep if I ever saw it.

The idea that we are even listening to a socialist, sorry "economics professor", is what should make you run to stop those automatic contributions to your 401k or Roth. If your retirement programs are matching a good portion then I'm OK with keeping that outflow.  But no more after the match stops.  Take that money and invest it yourself. 

Now back to this government guaranteed pension plan.  This is beyond a bad idea. Government control of these things will NOT, in a million years, make your retirement safer or guaranteed. This would virtually assure that your pension would be a failure. Do you really want to depend on the government for anything? They can't balance a budget and are technically bankrupt, but, hey, give them another big chunk of cash they can spend, er....protect, yeah that's it, protect.  Don't you love how these words are chosen to sway.  Look how the language in the media describing the recent Wall Street bailout is now being increasingly called a "rescue".  Much more soothing to the populace.

I am trying to get more and more of my assets outside the direct control of the feds. But wait, you say, it's my IRA! I own it.  Well, technically that's right, but when a law rewards a certain behavior with tax benefits, that can EASILY be changed for "the good of the country". I'm not risking it, except with my kids' college funds.  (They can always get a job if necessary :)

Investing for the Long Haul

Over and over again the mantra of investing for the long haul, riding out the pull backs and a myriad of other colorful sayings impinges on the average investor until they think it's true. It's not. Never has been and never will be. How can EVERYONE do the same thing and become rich? It just doesn't make any sense. Everyone can't be rich or nobody, comparatively would be. It's just math. The hold for the long haul and buy more on the dips are just more clever Wall Street marketing. Unfortunately for the followers, it's a dead end street. Let's review the returns.

Dow 30 10,900 in 1998 to 9,325 as of Friday. Ten year return -14%.

S&P 500 1,229 in 1998 to 969 as of Friday. Ten year return -22%.

NASDAQ 1,771 in 1998 to 1,720 as of Friday. Ten year return -3%.

Ten years! Think about that. Money that was in any of these common index type funds is down after 10 years! Also remember these numbers don't account for losses in buying power due to inflation. Buying and holding doesn't work except in theoretical terms or in highly specialized cases. Like the guy who sold out in 2000 and retired rich. It is much more likely that you are the person who has held on since then and is carrying huge losses. Ten years is a LONG time to make nothing on an investment.

Part of the reason this scam works is the automatic contributions that everyone makes, automatically increases their account balances. These additions mask your real losses as there is a constant plus up to your account. Very clever way to hide what is really happening.  If the financial community was really on your side they would segregate your contributions by years and show the total return per year.  Can't have that as it would disturb the sheeple.  They might start thinking for themselves, can't have that, can we?

I am fully confident in the gold and silver investment classes. The current de-leveraging in the hedge fund world will wind its way down and then gold and silver (and the shares) will take off like rockets. Please get yours today. Their prices are very undervalued. Protect yourself.