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Book Summary: Pirates of Manhattan II – The Hijacking of America’s Savings – By Barry James Dyke
The concentration of power that banks have is at the levels of the great depression. When the balance of power swings too far in favor of the rich, that’s when bad things start to happen. This was demonstrated in 2008 with the mortgage meltdown. The bottom line is that Wall Street has a gambling problem and nothing has changed since that bubble burst.
Why is this important to me?
I am not making this review to waste your time. It is my vision to provide concise action steps you can adopt right now to improve your financial life. There is an old saying, put a frog in boiling water and it will jump, but heat the water gradually and it will stay in it and die. This is what is happening now to the wealth of the United States. The largest transfer of wealth in history is happening as we speak and has been since 2005. Wall Street just cares about bonuses and paychecks. Big companies and banks alike get huge payouts even if they screw up and do a bad job. GE was hailed as one of America’s great companies and the stock price is half of what it was 10 years ago, yet the executive management team has made big money.
Where I come from, you don’t get a trophy if you don’t win. Management today has no stake in the companies they run. The biggest problem we have now is that for every dollar the US government spends on wars, defense, rights and other projects, it borrows 43 cents on the dollar. If the average American did this, bankruptcy would occur in less than 2 months.
Pirates of Manhattan II focuses on target date mutual funds and the fact that banks want to start managing YOUR 401K plans. In this roundup, we’ll cover the what, why and how of target date mutual funds and review performance to make sure you know how to protect yourself.
1. What are target date mutual funds? – A mutual fund in the hybrid category that automatically resets the mix of assets (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame that is suitable for a particular investor. A target date fund is similar to a life cycle fund, except that a target date fund is structured to address a date in the future, such as retirement. These instruments are very complex and may include derivatives and other instruments. Disclosure documents and prospectuses are similar to a 1900 page health care bill – very complex.
2. Why is understanding TDMFs important? Mutual funds are generally positioned and advertised as great investments by people like Suze Orman and other financial gurus. When you dig down and see what the wealthy invest in, the last thing on their list is mutual funds and 401Ks. Suze Orman pushes these instruments like her life depended on it. Since her sponsors are large financial corporations, then perhaps her financial life depends on it. The question arises – Does she herself invest in these instruments? According to her, she has only 3% of her wealth tied up in the stock market because “I don’t care if I lose it.” How can she push these instruments if she doesn’t invest in them herself? What you will find is that big businesses, rich people and smart investors do not invest in mutual funds and 401K plans.
3. How does it work? The target date Mutual funds have not been proven, but there are three drivers that are fueling their growth. 1. TDMFs are now the default election in most 401K plans. 2) After employment, some employers do not pay the employee as an elector, so they enter the plan. 3.) Mutual funds and 401Ks are not guaranteed.
The media has done a great job of selling the general public on investments that are not guaranteed. Dave Ramsey pitches Mutual Funds also saying you can get 12% a year. This is misleading because according to Dalbar the average of actively managed mutual funds has averaged 3.8% per year over the past 20 years. You can invest in GUARANTEED Annuities and life insurances and beat these returns by 2-3% and your return is GUARANTEED. Mutual insurance companies are owned by policyholders and capitalization requirements are 1 to 1 and not 10 to 1 like banks. Some mutual funds use leverage as high as 60 to 1. If you remember that the cause of the mortgage crisis in 2008 was due to the use of derivatives higher than 40 to 1 and now the same banks want access to your money because of rates and monetization of electricity they provide.
This book is a must read and it will scare you. Most people I talk to have basically “learned helplessness”. I hear – “I get my 401K statements and I don’t even open them.” This is a travesty and must change. Account maintenance is as important as account accumulation. Will Rogers said, “It’s getting my money back that I worry about.” Your retirement account should be guaranteed and stable. You may have other speculative investments after that, but not your nest egg. Another area the book covers is the relationship between big business, the media, the financial press and retirement. The mutual fund business is a trillion dollar industry and the sharks know that they make money from fees and management whether you win or lose.
I hope you found this brief overview useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in just 21 days. One thing you can take away from this book is to create a guaranteed retirement plan. Do your research and research annuities and life insurance. I am not a financial planner, but I advocate financial education. I can tell you that I don’t own mutual funds and I don’t tie up my money in 401K plans. This is a road to nowhere in my opinion. I save money in guaranteed instruments like life insurance and annuities. Set a time on your calendar each week and educate yourself.
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