401K Plans Responsible For Stock Market Bubbles

Without a doubt the stock market has been behaving erratically. Many people have lost much if not all of their 401K retirements. After, doing some research on the 401K plans, I discovered that there was a certain parallel between the market increases and the advent of 401K plans. If you have any doubt about this correlation, then I encourage you to compare stock charts to the inception of 401K plans in 1980.



401K plans tend to take a blind shotgun approach, though some will actually invest directly into the employees company. The blind shotgun approach, basically means that you invest in a particular market through a mutual fund. The fund invests your money in a broad spectrum of stocks in a particular sector. Most people don't have the time to investigate the fundamentals of all the individual stocks. This approach has some advantages, in that you do not lose all of your money if just the one stock you are investing in tanks. The disadvantage of not knowing much about your investment can weigh heavy not only on your own situation, but on the market itself. The markets need wise input from investors in order to prosper. Making matters worst is the inability of investors to pull their money out of the market.

All of this leads to a large amount of poorly invested funds, which ultimately leads to the bubble scenario.

A few government reforms can be made to curtail the impact on the markets.

1- Reduce the maximum amount an employee can invest in 401K plans from 14% down to 7%

2- Reduce the maximum employer matching contribution to 4%.

3- Allow individuals to earn interest on up to $50,000 tax free. This would be as an alternative way of saving to the 401K plans.

Government does not establish a lot of specifics on how 401K plans are organized. Companies devise much their own plans. Companies could take a split approach to the 401K, requiring employees to invest 50% of their money in mutual funds and the other 50% in no less than 2 and no more than 4 specific stocks. Employees could educate themselves on the specific stocks, while maintaining a broad spectrum approach with the other half.

Top Ten News Stories of 2008

This is my list of the Top Ten News Stories for 2008. Now I need your help placing these stories in order. Choose your top three picks in the poll to the right. Unfortunately you cannot place them in order. You can choose more than three, but I basically discourage that. This process will work best if everyone chooses three.

Here is my list, if you would like to make additions place a comment and I will consider it.


Top Ten News Stories of 2008



Dick Cheney Approves Torture

Barack Obama Elected President

Financial Markets Collapse on heels of Housing Crisis

Barack Obama beats out Hillary Clinton in cliffhanger Prmary Battle

Recession Official

John McCain picks Palin as first woman on Republican ticket

Afghanistan war intensifies

Big Three Automakers go to Washington to ask for Bailout

Treasury Secretary Paullson receives TARP funding for Financial Sector

Federal Reserve Board lowers key discount rate to near zero

When will the Recession End?

Well, the recession has been going on for over a year now, the housing crisis which started it nearly 3 years. The housing crisis of course began a monetary contraction, which essentially means that money is disappearing from the economy. The Federal Reserve which controls the money supply, has been acting to expand the supply of money, with loans to banks at near zero percent.

So, I keep hearing people talk about severe times coming, and I myself was in that crowd until recently. I can recall telling people 2 years ago, that the economy would fall into a recession it could not recover from until the Fed cut it's rate to zero percent. That time has come, but with mortgages known as Alt-a and others gearing up for a crunch later this year, many are concerned that the worst is not behind us. My own opinion on this matter is that money is being so thrown at this economy, that these Alt-A mortgages will be no more than a bumb in the road.

So here is your chance to have a say. Today's thought challenge:

When will the recession officially end?

Will GMAC Bank Fix Auto Industry Woes?

If you've been following my blog, then you may know that essentially I've already wrote off General Motors. My reasoning being that the real fix for the auto industry would be a sales stimulus. So, today I read on Bloomberg that GMAC financing is becoming a bank, and will receive some TARP funding. GMAC is primarily owned by Cerberus, which owns Chrysler.

This news may be closer to a solution than any other solution so far. How far it will take us another question altogether. It really makes me wonder, why this took so long to happen.

Today's thought challenge:

Will GMAC bank status significantly help the auto industry?

How will Cheney Pardon for Torture Affect view of U.S. and Democracy around the World?

Well, if you have been following the news, then you might know by now that Vice President Dick Cheney has been doing some confessing. In an ABC interview with Jonathan Karl he let it be known that he in fact approved of torture tactics.

These confessions are likely being made in order to lay the groundwork for a presidential pardon. Admitting guilt is an important step in creating a presidential pardon. There may be other roadblocks to such a pardon, such as the need for a court action to take place prior. I'm not an expert on this stuff so I will spare you.

One of the best glimpses of torture were the Abu Grahib photos. I recommend that all adult Americans review the practices of their government at Abu Grahib. Now that brings us to today's thought challenge:

How will a Cheney pardon for Torture affect the world view of the U.S. and Democracy?


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