News item: Wall St. Suffers Worst Day in Two Years
I'm sure many readers remember their tears as they opened their 401K statements in the months after the "bubble burst" back in the late 1990's. What had seemed like a free ride to an excellent retirement was suddenly exposed for the risk that it was - a crapshoot.
Any investment is a gamble. And one of the cardinal rules of gambling is: the odds are always in favor of the house, no matter what the game. A working knowledge of any game of chance can reduce the odds (and the risk), but never so much as to remove the house advantage.
In the past few days, a lot of Wall Street gamblers have seen their portfolios shrink substantially. The markets have been treading water for months, but this week may indeed signal a significant turn to a bad bear market. I know, I know...investment advice always tells you to invest your money for the long haul, but still...
How long is "long haul"? How many out there still haven't seen their 401K's recover from the drubbing they took 5, 6, or 7 years ago? Is that long enough? Driving home tonight, I heard a very interesting analogy between 401K's and Bush's privatization Ponzi scheme - in the '90s, people were willing to risk dumping their own cash into 401K's for two reasons:
1. The return was excellent at the time AND
2. They knew that if worse came to worse, there was always the Social Security safety net.
When all is said and done, risk perception will sink George Bush's grandiose plans for his legacy (privatizing Social Security). History isn't on his side.
