Monday, February 25, 2013

The 401k scam

When 401ks began to displace defined benefits plans, I just knew this could not end well.  But I mostly kept my doubts to myself because my yuppie friends and neighbors acted as if they had been invited to play in an exciting new game.  And they had.  It was fun.  I had a neighbor who not only religiously watched Louis Rukeyser (PBS' financial guru), he and his wife even went of a Rukeyser cruise.  One guy subscribed to both Barrons and The Economist.  Of course, being high achievers, they all thought their investments would gloriously outperform the market.

Now their homes are mostly under water and most of their 401k plans are a pathetic shadow of their expectations.  Turns out not everyone can be a millionaire in retirement—no matter what the financial planners were claiming.  Of course, the worst feature of turning everyone into a mini-investor is that millions of people now believed that their interests were the same as Wall Street's.  One of the reasons the bankster's crimes have gone unpunished is that large numbers of people want Wall Street to create some more magic—how it's done is utterly irrelevant.

A writer by the name of Helaine Olen has written a book about the delusions pitched by the world of financial planners called Pound Foolish.  I have not read it but I thoroughly enjoyed the description of the problem on the Daily Show.  John Stewart, the host, is from that world—his brother was once the president of the NYSE.

The interview ran long for the cable show but all three parts are available at the Daily Show site.  The following is Pt. 1.

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