YOUR 401(k)
The following is an excerpt from Rick Ackerman's daily commentary this morning and it bears reading for all those who have a 401(k) plan.

No Skin In The Game
Who could possibly believe that an economy in the throes of a debt deflation could be revived by precipitously borrowing more trillions of dollars against future output, then pumping nearly all of that money into goods and services that are economically questionable at best and purposeless at worst?


The strong impression one gets is that Wall Street believes it, since stocks have been in a relentless rise for months. It requires a healthy does of cycnicism, however, to see what has really been going on. For in fact, the public has abandoned the stock market, leaving the hedge funds and trading desks to run a shell game on the taxpayers’ dime that makes it relatively easy to hog-trade stocks higher and higher on almost no volume. This has been occurring nearly every day for months: index futures waft higher overnight on light short-covering, setting up a second wave of short-covering on the NYSE opening.


It is tempting to view this action as a wealth-creating, perpetual-motion machine, even if we know the game cannot continue forever. What is different and dangerous about this bull cycle is that those who have been causing stocks to rise – Goldman Sachs, J.P. Morgan and other Masters of the Universe – have no skin in the game. They have simply been trading amongst themselves, applying relatively small sums of cash to the leveraging of stocks against futures, options and ETFs. One senses that if the stock market were to collapse tomorrow, DaBoyz would be enjoying the show from the sidelines before the Dow had shed its first 1000 points. CALPERS and your 401K would ultimately take the hit, but for institutions whose trading desks have been racking up quarterly profits of $3 billion or more, where’s the risk? These guys are using computers that can trade many thousands of times per minute, and unless the markets freeze completely – dare we hope for so severe an emetic for the financial system? — there’s little chance the rats will go down with the ship.