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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Mark Adams who wrote (264962)	10/28/2003 9:31:56 PM
From: GraceZ	Read Replies (2) \| Respond to of 436258

Faber pointed out a natural underweight developing/emerging markets in the equities market, underweight where the most extensive growth is currently taking place. One demands to buy at a discount that which has higher risk. Maybe you'd like to make a case that investing in India or China doesn't carry higher risk. If you accept this assertion, then I think it follows that 401k money has no effective route to participate in that growth. There are numerous emerging market mutual funds. If your 401k doesn't offer one, then buy one in an IRA, if you don't have an IRA, buy them in a taxable fund. People don't have to have their retirement funds in a 401. I know numerous people who have left their jobs and rolled out their 401s into self directed IRAs which carry almost all the investment options that you can buy in any brokerage house except direct short selling and margin. This is the dangerous part about 401s, people think they are their only option AND they tend to treat money inside one differently than they would outside of one. If you are convinced that the greatest return will come from the emerging markets then by all means, invest there even if you have to make the investment in a taxable account. We have very few limitations here in the US as to what kind of investments we can make or where. This is not true in many other countries. Your reply suggests agreement that 45% per annum returns in something called 'private equity' would not be out of the ordinary. It is my understanding that the exit strategy for 'private equity' is the share market, or buyouts. Again, I see no effective route for 401k money to 'private equity'; rather 401k money funds the 'exit strategy' indirectly for 'private equity'. And for a good reason people can't own them directly in their retirement accounts. Private placements pay high returns because they carry extraordinary risk. They limit these types of investments to accredited investors because they aren't appropriate investments for 98% of the people out there. You won't find many high net worth people who would allocate much more than a small portion of their worth into this kind of investment. If we learned nothing from the political fall out from the public markets falling it is that the public only wants to participate in investments that cannot go to zero when it comes to their retirement funds, that they want the gains associated with high risk investments but they don't want the attendant risk that goes with those returns. Many hedge funds own private placements and many public companies own private placement shares. If you owned CSCO you've owned private company shares as well, indirectly. Venture capital firms provide a much needed service to the capital markets. We saw far too many companies that went public far too soon, they should have stayed private until they were viable enterprises. You could blame it on the venture guys, but it was the wild speculating public who was clamoring for the latest greatest unproven IPO. They demanded to be able to gamble with the big boys and then cried when the big boys took all their money! Are these cases of potential future investment returns not available to 401k investments? One can make 45% in the public markets but just not in all your investments. Just like the high net worth investor, you will have zero or negative return in some investments while a portion of your investments yield great returns. When I said I could make more money with the money I can borrow from the rich, it is because high net worth individuals actually get fairly low returns because they choose conservative investments for the majority of their assets or cash even if they roll the dice on those high yielding private placements (most fail). They still make a pile simply because a bigger pile makes a pile even at terrible yields. It's a hell of a lot easier to make 45% return with 10k than it is with 100 million even though you'd think the chances would be the same, they aren't. You think big money has an advantage, in actuality it has a liability! One only has to look at the returns from the big endowments or trusts, they are pitiful in comparison to what an individual who held Coca Cola for thirty years got even if the trusts or endowments or pension plans did allocate a portion to high yield investments in private companies. Large piles stay that way by not risking and not losing, while small piles turn into large ones by taking a lot of risk. The government set up these plans in a way that discourages the kind of risk taking that produces spectacular returns. No, I'm just suffering from the onslaught of negativity, which creates a not so pretty picture. Greider, 'The Soul of Capitalism', Maudlin's piece last week re the 'real' vs nominal historical returns, the ongoing revelations of 'leeching' wealth from MegaCorps by WallStreet & insiders... If you read these guys a year ago, would it have helped you make money this last year? Don't answer....not a one has changed their tune as long as I've been reading them and if I'd listened to them I'd be just as negative as they are. Meanwhile I've been selling for months and I'm mostly in cash because there isn't much to buy that isn't inflated, but I don't assign BS reasons to justify my position and I was buying with both fists last year when those guys were singing the same doom and gloom tune. Their view never seems to change. Meanwhile if it looks like it's time to jump back in to the market with both feet tomorrow, I'm there, I don't have to readjust my view or make excuses. If nothing else, you have to be flexible to operate in these markets and you have to be ready to be wrong without inventing a whole bunch of myths to justify your actions.