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Minyan Mailbag: Who's Managing Your Money?


Due to human nature, fiduciary responsibilty breaks down over time.


Prof. Succo and Toddo,

I really appreciate the kind of thinking that you guys provide in Minyanville. If not for such thoughts, we would be lost in the Wall St. jungle and frauds.

We learn our lessons the very hard way. My employer provides us with a 401K plan. I was naturally skeptical of stocks in the old days and I had all my 401 k money in a "New Century Stable Value Fund." I was told that it is almost equivalent to cash and I would receive something like savings account returns. It was also default option in case we did not choose to invest specifically in a stock/bond fund, meaning money would directly go into this fund without our permissions.

I had done my (lousy) research on stable value funds and was more or less satisfied thinking that I was safe. I mean, it was cash.

A blunder.

This morning I received an email saying that my Stable Value Fund is now "bankrupt." I have "substantial" savings in there which I cannot withdraw till the court decides.

My notice discloses some very informative nuggets:

1. This fund was investing in some "sub prime mortgage lender scheme" which fund now itself calls a "ponzi scheme"
2. Investment in some hedge fund named "Milestone"
and similar.

Very interesting. Given that fund's objective was to protect value of account and produce non volatile returns.

For now it is a nice monday morning surprise for me.

MInyan Shikhar,

P.S. I want you to share this on the ville' so that other people are more careful with their money.


I put this under the broad catagory of "Other People's Money" (OPM).

One reason why asset prices are so high is that people leave it up to others to manage their money. Due to human nature, fiduciary responsibilty breaks down over time.

Mutual funds, 401k plans, hedge funds, etc., have broad powers to do what they want with your money once you sign it over to them. 401k plans are particularly egregious in the fees they charge for the service they provide. If you look at 401k plans you will find large load fees in the first few years.

Minyanville is all about education, of taking back control of your life. Part of that is understanding how the system rips people off by keeping them in the dark. If people en mass really educated themselves and took charge of their own finances the DOW would be at 5000.

Prof. Succo

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