Author Unveils Americans 77.38% Exposure to Stocks in Their Retirement Accounts: Rampant Speculation with No Guarantees
Economic Warrior
(Hampton, NH August 15, 20212). Author Barry James Dyke, in his most recent book, The Pirates of Manhattan II: Highway to Serfdom www.thepiratesofmanhattan.com documents Main Street Americans horrendous exposure to the stock market in their defined contribution retirement accounts ( IRAs, 401(k) and 403(b) accounts).Using 2010 data from the Investment Company Institute 2011 Fact Book, he found of the $4.68 trillion invested in defined contribution retirement accounts that roughly 77.4% of Americans invested in volatile stock mutual funds. He found:
- $2.74 trillion or 44.2 % of the total was invested in domestic equity mutual funds.
- $675 billion or 14.4% was invested in foreign equity fund
- $878 billion or 18.7% was invested in hybrid securities (commonly known as target-date or life cycle mutual funds which invest in stock and bond funds).
- $710 billion or 15.2% of the total was invested in bond funds.
- $351 billion or 7.5% of the total. was invested in money market instruments
The author found that although most fund companies are seeing major outflows in stock mutual fund holdings, target-date mutual funds, now the premier default investment for 401(k) plans are still drawing in billions of new cash inflows due to lobbying interests of the mutual fund industry. Of the 8000 mutual funds Lipper tracks, 92% suffered losses in 2011. Morningstar, in tracking 8,000 mutual funds, found that the average mutual fund lost 2.9% [while the S&P 500 stock index gained 1.52% in 2011]. European stock managers did even worse, with an average loss of 13.9% in 2011.
The author commented, “Recent new issue go-go stocks sold by Wall Street into mutual fund investors—Facebook, Groupon and Zynga have been investment disasters. Facebook started trading at $38 a share in May, and two and a half months later—it is trading at $20.81, a 45% loss in value. Groupon came out at $20 a share in November 2011; in August 2012 it was trading at $6.15, a 69% loss. Zynga, another hot issue which was hyped to the heavens came out at $9.41 a share and in August trading at $2.95 a share, roughly a 70% loss. Some of largest owners of these stocks are mutual fund companies which get their money from peoples’ 401(k)s. It is another case of rampant speculation brought to you by Wall Street funded by Main Street America’s 401(k)s.”
The author maintains that Americans want guarantees instead of rampant speculation. Dyke has plenty of research to back up his claims.
* According to Chicago Booth/Kellogg School Financial Trust Index released in May 2012, found only 15% of the population trusts the stock market, a slight increase from 13% in 2009.
* A survey done in 2012 by The Hartford Financial Services Group, Inc. found that 95% of workers under age 30 want a guaranteed account. Of those between age 30 and 40, 90% want a guaranteed account. For those over age 60, 77% want guarantees.
* A survey done by Allianz Life in October 2011 found savers are shell-shocked. 51% of 1,000 surveyed are increasingly uncertain about the fate of their 401(k) and 403(b) plans. 27% thought the best to place to put their money was under a mattress.
* In 1999, technology stocks that populated the NASDAQ gave it a composite index of 5,048. Thirteen years later, the NASDAQ is only at 3,028.
Dyke’s research reveals this hypocrisy: certain sectors of society such as highly paid executives, bankers, the Federal Reserve System, and government employees have rich retirement plans anchored by guarantees from the taxpayer, company balance sheets and through frequent use of life insurance and annuity products with contractual guarantees. For additional information, contact the author, Barry James Dyke at castleassetmgmt@comcast.net or 603-929-7891. www.thepiratesofmanhattan.com
A recent interview of the author describing the severity of this rampant speculation problem is entitled “The House Always Wins”. He is interviewed Allen McLellan of The American College, to view, click here.
http://www.thewealthchannel.com/videos/the-house-always-wins