It is an intriguing and interesting incongruence right now that even as more and more recent college grads are jobless and join the Occupy Wall Street movement, the Wall Street establishment itself seeks to steer them into the stock market! In an article Saturday (WSJ, 'The Perils of Joining the Young and Riskless', p. B1) the young are castigated for being too conservative in their portfolio holdings, and not going big for equities in their 401ks. But one wonders which set of college grads the Journal was surveying.
While it is true that the unemployment rate is still lower for college grads v. high school grads, that gap is slowly but surely being erased as more and more companies grab for a specious "globalized efficiency" in not hiring or replacing workers with technology, or shipping good jobs overseas. For a wake up call, Indian technical schools and universities can barely meet the demand for outsourcing positions, even as GE has built a $1 billion resource temple in Bangalore. No wonder most college grads are now more worried with their loan balances than salting away money in equities.
Strangely, the downside risks of placing so much trust in the market are barely covered in the article. One reads just a few lines of those that have been burned, including (p. B10) a 34-year old financial services consultant for a large investment bank in Boston- who just recently lost half of all his money and has now moved the remaining assets into cash and lower risk money market funds. In his words: "I'm less willing to gamble!"
Duh! And yet these kids are held up as being balless for not assuming more stock risk. But why should they if it only portends more losses? And as I noted in many previous blogs, the data are just not there to justify stock investment, even by the young with "long time horizons". Look, kids, I don't give a damn if your horizon is fifty years, I do not see the markets getting out of their funk for at least two decades, maybe longer. The reasons are seen on multiple fronts, from the imposition of likely long term austerity budgets in the U.S. (especially if the Repukes win all three centers of power next year) to bitter cuts to social benefits (forcing people, especially seniors to save even more - like those in Japan during the 1990s who induced long term deflation) and the European debt crisis which may yet see Greece, Italy and Spain all collapsing with untold collateral damage in the U.S.
And yet the article's stock -grasping ninnies hector the young for their caution! (Well, of course! Without continued large stock investments these people are all out of work!) For example, one Chicago-based financial planner, Leisa Brown Aiken is quoted as saying:
"Just because you can't count on something doesn't mean you just stay away from stocks, and carry on the same in the rest of your life!"
Oh yeah? Why the hell not? The fact is that nearly all stocks are now toxic and many even "zombified" - meaning they have hidden losses and are buried into mutual funds (from 401ks) and people aren't even aware of their adverse effects, e.g.
http://brane-space.blogspot.com/2011/10/zombie-stocks-messing-up-mutual-funds.html
So, above all, if one is in a job scene which can't be called secure (and no job today is in that category, unless maybe a physician) one is well advised to stay far away from stocks, unless one wishes to add masssive losses to the already bloated liability of huge college loan debt! This stuff isn't rocket science. So no, missy, people - the young - can and should stay away from stocks, and yes - even for the rest of their lives! They don't need these hyped up returns, which in any case don't have the basis to even approach 7% per year, but more likely barely 1% after taxes and 401k adminsitration fees, mutual fund fees are removed!
You can do as well in laddering CDs, or in a decent money market account (not fund) many of which are now paying 1% a year, and even higher yields. But above all, spending LESS and saving more is the best counter answer to attempting to build a retirement solely with stock market gains. Gains are nice, but they only occur with 0.5% of investors and then only about 3 days of 365 in a year, for those lucky enough to cash out or redeem at the right time. In today's volatile stock environment, I warrant the days and odds are even lower.
But let's face facts, going on a saving foray is not what these Wall Street types want! They dread low "consumer" demand as much as they detest low participation of the young in the risky stock market. They know consumption represents 70% of GDP and if it goes down, say to 50%, then all stocks will be seriously compromised. So no, they want you to spend...on assorted useless, unecessary bullshit, and then you have no alternative than to risk your remaining money gambling on Maul Street to get higher returns.
The other cockeyed advice is aimed at teachers and police officers in "strong unions", if you can believe it - who are claimed to "be in relatively safe professions" so can afford to put 100% of their portfolios in stocks!
Are you kidding me? With state budget cuts looming, and many more to come, not to mention the continued ideological war on public unions, NO ONE is safe- no teacher, no cop! So advising these folks to put 100% in stocks, which could easily then lose 50% or more, is an invitation to financial suicide.
Besides, with sizeable loans to pay down on, I can think of few teachers in a position to take such risks of high loss.
Forewarned is forearmed, and young professionals ...and any younger workers generally...are hereby warned to steer clear of stocks and find other options...unless they really want to end up in the proverbial poor house. And spend their senior years on the street begging and raiding dumpsters for used cans of cat food!
While it is true that the unemployment rate is still lower for college grads v. high school grads, that gap is slowly but surely being erased as more and more companies grab for a specious "globalized efficiency" in not hiring or replacing workers with technology, or shipping good jobs overseas. For a wake up call, Indian technical schools and universities can barely meet the demand for outsourcing positions, even as GE has built a $1 billion resource temple in Bangalore. No wonder most college grads are now more worried with their loan balances than salting away money in equities.
Strangely, the downside risks of placing so much trust in the market are barely covered in the article. One reads just a few lines of those that have been burned, including (p. B10) a 34-year old financial services consultant for a large investment bank in Boston- who just recently lost half of all his money and has now moved the remaining assets into cash and lower risk money market funds. In his words: "I'm less willing to gamble!"
Duh! And yet these kids are held up as being balless for not assuming more stock risk. But why should they if it only portends more losses? And as I noted in many previous blogs, the data are just not there to justify stock investment, even by the young with "long time horizons". Look, kids, I don't give a damn if your horizon is fifty years, I do not see the markets getting out of their funk for at least two decades, maybe longer. The reasons are seen on multiple fronts, from the imposition of likely long term austerity budgets in the U.S. (especially if the Repukes win all three centers of power next year) to bitter cuts to social benefits (forcing people, especially seniors to save even more - like those in Japan during the 1990s who induced long term deflation) and the European debt crisis which may yet see Greece, Italy and Spain all collapsing with untold collateral damage in the U.S.
And yet the article's stock -grasping ninnies hector the young for their caution! (Well, of course! Without continued large stock investments these people are all out of work!) For example, one Chicago-based financial planner, Leisa Brown Aiken is quoted as saying:
"Just because you can't count on something doesn't mean you just stay away from stocks, and carry on the same in the rest of your life!"
Oh yeah? Why the hell not? The fact is that nearly all stocks are now toxic and many even "zombified" - meaning they have hidden losses and are buried into mutual funds (from 401ks) and people aren't even aware of their adverse effects, e.g.
http://brane-space.blogspot.com/2011/10/zombie-stocks-messing-up-mutual-funds.html
So, above all, if one is in a job scene which can't be called secure (and no job today is in that category, unless maybe a physician) one is well advised to stay far away from stocks, unless one wishes to add masssive losses to the already bloated liability of huge college loan debt! This stuff isn't rocket science. So no, missy, people - the young - can and should stay away from stocks, and yes - even for the rest of their lives! They don't need these hyped up returns, which in any case don't have the basis to even approach 7% per year, but more likely barely 1% after taxes and 401k adminsitration fees, mutual fund fees are removed!
You can do as well in laddering CDs, or in a decent money market account (not fund) many of which are now paying 1% a year, and even higher yields. But above all, spending LESS and saving more is the best counter answer to attempting to build a retirement solely with stock market gains. Gains are nice, but they only occur with 0.5% of investors and then only about 3 days of 365 in a year, for those lucky enough to cash out or redeem at the right time. In today's volatile stock environment, I warrant the days and odds are even lower.
But let's face facts, going on a saving foray is not what these Wall Street types want! They dread low "consumer" demand as much as they detest low participation of the young in the risky stock market. They know consumption represents 70% of GDP and if it goes down, say to 50%, then all stocks will be seriously compromised. So no, they want you to spend...on assorted useless, unecessary bullshit, and then you have no alternative than to risk your remaining money gambling on Maul Street to get higher returns.
The other cockeyed advice is aimed at teachers and police officers in "strong unions", if you can believe it - who are claimed to "be in relatively safe professions" so can afford to put 100% of their portfolios in stocks!
Are you kidding me? With state budget cuts looming, and many more to come, not to mention the continued ideological war on public unions, NO ONE is safe- no teacher, no cop! So advising these folks to put 100% in stocks, which could easily then lose 50% or more, is an invitation to financial suicide.
Besides, with sizeable loans to pay down on, I can think of few teachers in a position to take such risks of high loss.
Forewarned is forearmed, and young professionals ...and any younger workers generally...are hereby warned to steer clear of stocks and find other options...unless they really want to end up in the proverbial poor house. And spend their senior years on the street begging and raiding dumpsters for used cans of cat food!
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