About That 401K…

The ETF for the S&P 50 index, SPY, closed the year 2001 at 113.70. This core index closed 2011 at 125.50 essentially flat with the 2010 ending price 125.75 and just about even with the 1998 high of 124.10.

There has been essentially no progress for 13 years yet the Bureau of Labor Statistics’ Consumer Price Index tells us that it takes $1.39 today to buy what $1 did in 1998. The gain over last 10 years from 113.70 to 125.50 of 11.8 points or 10.37% pales in comparison to the $1.28 needed today to buy what a buck bought in 2001.

Yet, from 1998 or 2001, the professionals in the investment community have managed to extract tens of billions of pensioners, 401k, IRA, mutual fund holders dollars in performance bonuses. The number is probably hundreds of billions..hundreds of billions…from the supplier of the basis who have lost substantial purchasing power over that time frame…

The Argentinian nationalization of pension funds is a warning, the MF Global theft of customer funds for a failed speculation and no criminal charges is a warning, no repercussion, the legality of Insider Trading by Congress people, the lack of performance and enforcement by the SEC all flashing neon signs and trumpets sounding that everything you have is at risk.  Added to the mendacity of our government “protectors” is the explosion of derivatives from $600 Trillion (600 thousand billion) to $703 trillion in 6 months at a time when the economy is slowing and should be declining not escalating at an annual 40%+ rate, all based on the premise that every party to the chain can and will meet their obligations when called upon even though they are levered 12-15-40-80 to one and small declines can wipe out their entire capital. Small potatoes MF Global couldn’t do it…but neither could the largest insurance company ever in existence AIG do it when the day of reckoning arrived and demanded to made whole. If you think there are no more weak sisters in the financial world please leave orbit and return to earth immediately.


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