This post is part of our feature on Money Losers of 2008. See all 20.
If there could be a more cruel joke played on the downtrodden American middle class this year, I don't know what it could be. Battered by high gas prices and a punishing mortgage climate in which millions lost their homes, at the end of the year, many were laid off. Desperate in a period of high unemployment, millions are turning to their 401(k) plan for emergency funds. And that's where the true emergency is.
My 401(k) lost about 40% of its value in only a few terrible months this summer and fall. I didn't have much to lose; I'm only a drop in a trillion-dollar bucket, with losses in the NYSE alone at $8.6 trillion for the year. In January 2008, the NYSE opened at 9,647 points, a value of $19.7 trillion. By mid-December, the NYSE was hovering around 5,500 points, a value of $11.1 trillion, an enormous 43.7% decline.
Taking an early distribution from my 401(k) due to a period of depressed income (I'm now a freelance writer and not an "employee," a title so imbued with special status in our society), I had to laugh at the automatic calculator that the Fidelity Net Benefits system makes you undergo in order to request a distribution, showing me how much I would be losing from my retirement income. If only someone could have made me go through this little exercise when I was responsibly socking away cash in stock index funds -- "this is how much retirement money you can lose if you trust in the American economy!" -- perhaps I'd have saved the time to log into Fidelity and just stuck the money in savings instead. I had to laugh -- so I didn't cry.
American investors, the joke's on you. You trusted in a system of inexorably expanding wealth and it turned out to be the most insidious Ponzi scheme of all -- but the new money's all gone now and we're starting to rub our eyes and peek at the man behind the curtain, who has to sell some of his art to afford his house in the Hamptons. Ha. Ha. Ha.
Be sure to check out more Money Losers of 2008.
Google's plan for netbook PCs moves higher into the clouds
Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD)
So long peak oil, here comes peak uranium
Reader Comments (Page 1 of 1)
12-23-2008 @ 1:36PM
BHarrison said...
As a self employed person (Subchater S corp), I figuratively kicked myself many times for not have the time to invest a lot of my income. Yeah, Ilost out on a lot of theoretical profits that I could have potentially earned.
In retorspect, I was fortunate. I wound up with maximim FDIC "insured" deposits in numerous banks (which keep getting consolidated) but at least it is "cash". The "ravages' of the forecasted wild inflation haven't occured yet; but hopefully i'll be in a position to handle that later.
Meanwhile, I'm weighing the consideration of cashing out the bank accounts and putting the money in safety deposit boxes, just in case there are problems with the FDIC as things worsen. Yes, I hate to do that, however, one certainly can't trust all of the propganada by the government, can they?
My wife and i have lost about $20K on 401 and other investments . . . enough to learn a lesson about "trusting others", including the government propaganda.
It's just time for individuals to do whatever is most prudent for themselves and their families.
Nothing is going to "bottom out" or improve UNTIL they instill integrity into the FIs, the corporations, and the markets/ funds. Personally, I can't afford to lose another 20% or 25% "playing through this downward spiral to the bottom.
No one knows when and how all of this are going to work out.
The "inmates" are in charge of the "asylums" . . . the CORRUPT CEOs of the FIs, the corporations, the market/ funds "insiders/ manipulators", and our government officials, especially Congressmen. Where is the INTEGRITY to restore the "faith and confidence" of the American people and investors???
It is a delima for everyone . . . consumers and businesses are holding back on doing anything, and the economy is spiraling downward. I can hold out for at least ten years unless rampant inflation occurs. I just am thankful for our luck so far, in spite of the losses to date.