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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (15215)	2/19/2002 1:45:36 PM
From: carranza2	Read Replies (1) \| Respond to of 74559

Many are precluded from converting holdings out of equities into money market funds I'm not sure this is correct. All of the 401(k) plans I've ever heard of have money market features. Shorting stocks is of course wisely prohibited. The vast bulk of investors, even those who consider themselves sophisticated, have no business shorting stocks. Since 401(k) funds are held by mostly unsophisticated investors for retirement purposes, it would be insanity to allow them to short stocks. If you want an aggressive income producing strategy--well, not that aggressive, but you've got to know what you are doing--you might write covered calls out of an IRA. And it's certainly not a one way street. The employee essentially gets a tax free raise which he can use for his retirement in plans in which the employer contributes. We contribute up to 75% of an employees contribution. ...artificially pushing too much money at too little real opportunity Please. Since when is a market supposed to guarantee opportunity? You pay your money, you take your chances. There's risk everywhere. Ideally, a 401(k)'s plans sponsor provides the appropriate (statutorily required) educational function so that an employee makes choices which are wise for his particular circumstance. Most plan sponsors who are aware of their statutory responsibilities hire others to provide this kind of financial advice. Employers do not typically provide fixed pensions anymore. Most 401(k) plans provide a vehicle for the employee to make his own choices. And it's not a blind choice as the plan sponsor has a fiduciary obligation to provide a modicum of financial education to employees who might otherwise make unwise choices. I know. I'm my firm's designated 401(k) point man.

To: Raymond Duray who wrote (15215)	2/20/2002 1:04:38 AM
From: Moominoid	Read Replies (1) \| Respond to of 74559

Same here and even more so.... It's still interesting to think about the impact of interest rates, as part of my scenario is that they will begin to rise again as the apparent economic recovery takes hold. Rising interest rates as in the 1987-1991 cycle would be part of the trigger for the second and more serious dip of the economy and markets. Same as in 1979-82.

To: Raymond Duray who wrote (15215)	2/20/2002 10:11:46 AM
From: AC Flyer	Read Replies (1) \| Respond to of 74559

Ray: There's an element of truth in what you say - 401(K) participants who don't take the time to educate themselves regarding the options in their plan and the relative risk are vulnerable. But how is that different to anyone else who invested any time, anywhere in something they didn't understand? Here's the glass half full viewpoint. 401(K)s have given workers the opportunity to invest pre-tax dollars, often with a company match, in (relatively) high return financial vehicles. Anyone who has been in a 401(K) since 1997 or earlier and made conservative choices has done better than they would have done in a money market fund. You can quibble with dates or whatever if you like, but 401(K)s have fundamentally been a good thing for the majority of participants. The media love disaster. Bad news sells. We only hear about the people whose 401(K) balances are down 50%, 70%, whatever - even then, we NEVER hear what their total 401(K) conributions were in comparison to their post-decline balances. We don't hear about the majority who have done just fine. 401(K) hysteria is just one more aspect of the bear market in expectations that many are experiencing.

To: Raymond Duray who wrote (15215)	2/20/2002 10:49:07 AM
From: AC Flyer	Respond to of 74559

Another heart-rending 401(k) story from today's USA Today. "More men just say no to working By Barbara Hagenbaugh, USA TODAY When Norm Payne was offered an early-retirement package from IBM more than two years ago, he jumped at the chance. Payne, now 56, says he was able to retire early from the company where he worked for 32 years because his wife, Linda, 52, worked as a nurse at an assisted living center. Although nearly unheard of 50 years ago, the Paynes' story is no longer that unusual. The male labor force participation rate — the percentage of men 16 years or older who are working or are looking for a job — fell to the lowest level on record in January at 73.6%. That was down more than 2 percentage points from 10 years ago and more than 13 percentage points from 1952. Women, however, have been increasing their presence in the workplace. Although the number of women 16 years or older in the workforce fell slightly to 59.6% in January, the rate was up nearly 2 percentage points from 10 years ago and up almost 25 percentage points from 50 years earlier, according to Labor Department data released earlier this month. With two incomes, the Paynes bought as much company stock as they could, contributed the maximum amount to their 401(k) plans and made additional investments — all while raising five kids. "We saved one-third, paid one-third in taxes and lived on one-third," Norm Payne of Louisville says. "Putting our two incomes together, we ended up with a very, very nice income," he says. "We wouldn't have been able to save as near as much as we saved if she hadn't been working." Economists attribute most of the drop in the number of male workers to gains by women. Families with two earners not only may be able to live off the woman's salary, but two-earner couples may have more money saved. That allows men to quit or to retire early whether they are offered a buyout deal, are laid off, become ill or just want to get out of the office. "The progress that has been made in the lessening of discrimination of women in the workplace means families have more choices," says Brookings Institution senior fellow William Dickens. The Paynes saved so much that when Norm retired, Linda was able to quit her job, too. They then sold their home, their furniture and all their possessions and bought a $180,000 motor home and have been touring the USA and Canada for the past 2 1/2 years. Their expenses add up to about $4,000 a month, and they figure they can continue to travel for the rest of their lives with the money they have saved, "unless the stock market keeps going down," Payne says, laughing from his cell phone while parked in Port St. Lucie, Fla."