Stock exodus continues as investors yank $5.1 billion out

The stock market keeps going up, and investors keep cashing out. Mutual fund investors pulled $5.1 billion out of U.S. stock mutual funds for the week ended Sept. 26. The prior week, investors removed $4.8 billion from these funds, according to data from the Investment Company Institute.

The exodus from the stock market has picked up speed since the Federal Reserve announced another round of quantitative easing, or QE3. By buying more bonds, the Federal Reserve is hoping to push investors into riskier investments like stocks. This has succeeded on one front by boosting stock prices, but investors continue to flee the stock market.

All three major stock indexes have seen double-digit growth this year, and the S&P 500 (SPX) has gained 16%. The total 2012 outflow from U.S. mutual funds is roughly $93 billion. By comparison, those funds lost around $67 billion during the first nine months of 2010, and $83 billion during the first nine months of 2011. Read more >>

Investors pull another $2.7 billion out of stocks

The flight out of U.S. stocks continued last week, with investors yanking $2.7 billion of domestic stock mutual funds.

The retreat from the U.S. stock market continued last week, as investors refrained from making any big bets amid the market's summer doldrums.

Another $2.7 billion was pulled from U.S. stock market mutual funds during the week ended Aug. 15, according to the Investment Company Institute, bringing the 2012 outflow total to more than $69 billion.  By comparison, those funds lost in the neighborhood of $40 billion during the first seven months of 2010 and 2011.

While stock mutual funds have been bleeding money, investors have shown a voracious appetite for bonds, which are considered safe haven investments. In fact, bond funds raked in $7.2 billion last week, the most since early April, according to ICI data. Read more >>

Govt wants to protect you by making annuities mandatory for 401(k)s

Sara Hansard
Should annuities be mandatory for 401(k)s? Fund companies go on the offensive
Participants in 401(k) plans do not want the government to require them to convert a portion of their 401(k) assets to annuities, according to the results of a survey of about 3,000 households released today by the Investment Company Institute.

The results of the survey aren't surprising, given that the IC I represents mutual fund companies. Some $7.5 trillion is invested in 401(k) plans and individual retirement accounts, about half of which is invested in mutual funds.

The release of the research indicates that the mutual fund industry intends to resist proposals discussed in Washington to reduce tax breaks for 401(k)s and to impose more government controls on the plans, such as mandating investment options.

“Government should not be making those decisions for them,” ICI president and chief executive Paul Schott Stevens said in summarizing the ICI survey of 401(k) participants, which was conducted in November and December. “They really value the independent control that they have over the way they invest and manage those accounts. They don't like mandates. They don't like government micromanagement.”

Mr. Stevens, speaking at a press conference in Washington on Friday, also opposed a plan being considered by the Treasury and Labor departments to require that a portion of 401(k) balances be converted to annuities to guarantee lifetime income for retiring workers. About 96% of the respondents in the ICI survey said retirees should make their own decisions about managing retirement assets and income, while more than 70% disagreed that the government should require retirees to trade a portion of their retirement plan accounts for a contract that promises to pay them income for life.

“They want the maximum amount of choice, so if you want to take an annuity, great,” said Jack Brennan, chairman emeritus of The Vanguard Group Inc., who also spoke at the press conference. “But don't force it, because it's not for everyone.”

J. Mark Iwry, senior adviser to Treasury Secretary Timothy Geithner and deputy assistant secretary for retirement and health policy, co-authored a paper before joining the Obama administration that recommended having a portion of a retiring worker's 401(k) assets automatically invested in an annuity — unless the employee opts out of the program.

The Treasury and Labor departments are likely to issue regulations this year to make it easier for companies to offer “automatic annuities” in 401(k) plans, Mr. Iwry said last September. More...

The Coming Confiscation of 401(k)'s

expectedreturns.blogspot.com
Our government is in the middle of a funding crisis that will be resolved as it always has: through the confiscation of citizens' hard-earned wealth. Judging by the way Americans are being conditioned to accept criminal behavior at the highest levels of government, this confiscation will probably be pretty explicit. I'm guessing we'll eventually see a FDR-style confiscation of gold and retirement accounts (401(k)'s). From the following article in Businessweek, Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says, it seems that day is quickly approaching.

U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

7 out of 10 Americans against government control of 401(k)'s? This probably means legislation is going to be shoved down our throats anyway. I mean, isn't this the new trend in our new "government-knows-best" style of government?

Annuity Conversion, aka Theft

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

The coming theft of retirement accounts is one of the most obvious trends for the next 20 years. I mean seriously, the American public stood shell-shocked like 5 year olds while getting looted to the tune of trillions of dollars- what makes you think the government isn't going to steal your retirement accounts?

The government is going to try to sell the move into annuities as a "safe" way to protect the public from the vagaries of the stock market. The truth is, the government is damn broke, which means they will have their hand in every person's pocket. The confiscation will function like this. American citizens will be forced to buy a worthless asset (in this case U.S. Treasuries) and receive a paltry return on capital. Factoring in inflation, returns are likely to be negative.

That the government has to resort to such measures indicates the severity of the current funding crisis. First, the insane monetization of debt. Now, Americans will be compelled to prop up the Treasury market. 5 years ago you couldn't make this stuff up; today, it is a reality.

Stock Market Collapse + Retirement Hopes Destroyed

Ok. So the government is basically telling us they are going to confiscate 401(k)'s. Now think for a second what happens when massive forced inflows of capital into stocks turn into massive forced outflows. It doesn't take a genius to figure out stocks are going to crater, and with it, the retirement hopes of millions of Americans.

When a critical mass of the population realizes this, then you will really know what a panic is. 401(k)’s were always structurally deficient products. The standard line is that with tax benefits and company matches, nothing can possibly go wrong! 401(k)'s are for the "wise" investor who is in it for the mythical "long-term". Whenever I hear this ridiculous line from someone, I know the person hasn't looked at a single "long-term" chart in his life. Sorry to ruin the party, but in the "long-term" (at least for Baby Boomers) stocks are going to go down in real terms and taxes are going to rise. And oh yea, you're getting taxed on income, which means if your 401(k) is actually worth something, the only person who will be celebrating is Uncle Sam. This is a disaster in the making for the disappearing middle class in America.

2010-2020: Major Paradigm Shifts Coming

These are interesting times. I can tell you this much: a lot of paradigms are about to change in the next 10 years. Most people are already skeptical of our government, which is clearly evidenced by the plunging approval ratings of both Congress and President Obama. However, most people are ignorant about the lengths governments always go to in order to prevent insolvency.

The current forced bond purchase scheme by our government reminds me a lot of what happened in France during the French Revolution, when church property was confiscated in return for assignats- which functioned as bonds. It didn't take long for those assignats to be worthless in value. I expect the same thing to happen eventually with U.S. Treasuries.

There will be a crisis of sorts in the near future. This is just one of the many reasons I am extremely bullish on gold.

401k Confiscation Dead Ahead

Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says
Jeff Plungis
U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

“Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute, which represents the mutual-fund industry, said in the report.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today.

The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The Standard & Poor’s 500 Index tumbled 46 percent in that period. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded.

Senator Herb Kohl, chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds.

Representative George Miller, a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June.

The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent.