(Is this) The right time and reason to pull the cord on your investment fund?

The time is now and the reason is trust, or more precisely the lack of trust.

So you have a 401k and both you and your company contribute a pre-tax amount into it. Everything is streamlined so it flows in easily. But do you really know where this gets invested, other than some risk label? Do you know the transaction fees you pay? Most people mistakingly think it’s free for they never see those numbers. Are you certain you are not invested in some assault rifle company like the California Teachers Pension fund is? Would you still enjoy the “growth” if your investment funded big pharma’s side effects or BP’s settlements in the Gulf? Would you be surprised to find an individual gambled your money placing a multi-billion dollar unauthorized trade based on a gut feeling?

We’ve all been burned by the overexposure to the (real) merits of retirement savings. Yet, markets go up while we cheer, then markets crash while the Wall Street cats mock us, “the idiots”, for trusting their quarterly reports and not pulling out quickly enough. We keep placing our faith in the expertise and ethical balance of investment wizards we don’t actually know, hoping that lessons are learned and we’re not going through the same motions again. Meanwhile, “the experts” are perfectly comfortable with “fluctuations” and they profit from it. Their synchronized lemming movement generates faux rallies that can only result in crashes, mostly due to reality checks. To no one’s surprise, they’re aware of the “risks” as they bet on these crashes and double dip by insuring the improperly presented (aka formerly recommended) assets. It’s what Goldman Sachs is famous for doing in 2008, although to be fair it is a widespread practice (http://online.wsj.com/article/SB10001424052748704201404574590453176996032.html).

Current events show us that these investment banks and fund managers are involved in very unsavory business. The recent school massacre shows Cerberus Capital Management owning 95% of Freedom Group, a consortium of gun manufacturers that also make assault rifles. In a cruel twist of fate, Cerberus happens to manage California teachers’ pension fund (CALSTRS). (see link on the Wall Street Journal blog – http://blogs.wsj.com/deals/2012/12/18/calstrs-reviewing-all-gun-related-investments/)
Also, just recently, UBS agreed to pay US and UK a record $1.5Bn to settle rate rigging charges (http://www.forbes.com/sites/steveschaefer/2012/12/19/ubs-will-pay-record-1-5b-to-settle-rate-rigging-charges/). They follow Barclay’s, who agreed to pay $450M in June 2012. It simply shows that the game is as dirty as ever, and it is more of a clique thing than we like to admit.

There are many cases of major US and European banks doing money laundering for the drug cartels, fixing IPOs, improperly presenting mortgage loan term and credit card offerings, lacking proper procedures to stop unauthorized trades, just name it. Take a look at these links, also do a lot more research of your own and you’ll be surprised how widespread this disease this is:
Morgan Stanley slapped with fine over Facebook IPO – http://usmarketbuzz.com/morgan-stanley-slapped-with-massachusetts-fine-over-facebook-i-p-o-635
JPMorgan trading loss tops $5.8 Billion; Profit for quarter down 9% – http://dealbook.nytimes.com/2012/07/13/jpmorgan-reports-second3-quarter-profit-of-5-billion-down-9/
U.S. agency sues bank over mortgage securities – http://articles.chicagotribune.com/2012-12-17/business/sns-rt-us-jpmorgan-lawsuitbre8bg0tj-20121217_1_ncua-failure-of-five-institutions-credit-unions
Outrageous HSBC settlement proves the Drug War is a Joke – http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213
How a big US bank laundered billions from Mexico’s murderous drug gangs — http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

A less known issue is that players on the US stock markets do not have to pay a transaction fee to the government, a practice common on European markets. This is relevant, because many of them do charge their customers for these transactions, thus generating a profit regardless of gain or loss on the transaction, aka the quality of their service. That is just business as usual, I guess. However, when the conversation started in the political circles of adding these fees to increase budget revenue, the CEO Fiscal Leadership spearheaded an aggressive campaign that has fat cats explaining how messing with Social Security, Medicare and Medicaid is the real answer, rather than slightly reducing their profits. It reminds me of the old parable in which the rich man took the poor neighbor’s only lamb to cook it for a feast. — http://www.huffingtonpost.com/2012/11/25/deficit-reduction-council-fiscal-cliff_n_2185585.html?ir=Politics

In spite of the record fines and settlements, this year has been a stellar year for the financial sector with profits surging across the board to levels unseen since 2003 (http://www.businessweek.com/news/2012-12-18/banks-see-biggest-returns-since-03-as-employees-suffer). The financial system is sucking everyone dry, including the very companies whose stock they invest in. You may choose to continue to be married to this abusive, selfish partner in profit or loss, validating their past, present & future sins. Or you may choose one (or more) of the following options:

Option A: Study investment funds and move to one that is very transparent as to who they invest in and who they don’t. If you approve of their principles and you can trust them, then it is the smallest change you can make to regain your peace of mind. Don’t believe the marketing though, study their record.

Option B: Move your money into a self directed IRA. For a small yearly fee, you can decide where to invest and own your investments. Whether is a local business, an angel investment or collaboration with folks you know, you can manage it and not have to pay the middle man. Of course, you will need to consider the risks yourself, but at least you will take a gamble on things you know.

Option C: Move your money into stocks that you manage with various electronic trade tools available. Again, there is a small fee, but you can choose companies you trust, not a heartless fund that will invest in anything. This will also empower good companies to be true to their product and less influenced by big players from the financial world.

Option D: Pull out the money into your bank savings account. You pay 10% federal fee if you’re not retirement age which would sure be helpful to the budget right now – in JFK’s words, what can you do for the country? You will also have to pay federal, state and local taxes, as with any income, so make sure you check the tax brackets for how much you’re comfortable to pull out. It might be a good idea to split it between this year and next year to make the most of it. Once the money is in your savings, you could either keep it for a rainy day, get closer to being debt-free, contribute to meaningful charity, micro-investments etc. whatever your calling might be.

We’ve given Wall Street our trust and they made a mockery of it. It is high time now that they work hard to win back this trust. A new world is dawning, one in which the information spreads too quickly for anyone to contain it. If one is built on value, one will stand. The rest are sand castles fearing a hard rain’s a-gonna fall, relics of a mighty empire that once was.


One Response

pretty good insights. I’ll be sure to stop by and read more from you. thanks.

let it find you

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