Armchair Pundits

I Blog Again

I know, I know. I haven’t written much lately. But let’s face it. It has been a slow news month. No, the Michael Jackson case does not constitute news under my definition. Plus, weeks of sunlight deprivation are starting to take their toll. I have been generally uninspired to write for some time.

But, once again I must say thank you to liberal talk radio. Just a mere five minutes has me talking back to the radio and saying “I shall blog again.”

Several idiotic comments where made yesterday. The first stupid thing that was said was this, “Did you see that the stock market went down yesterday? And, that’s where President Bush wants to invest our Social Security money.” That has to be the most moronic argument against privatization that I have ever heard. Let me see if I understand. Because the stock market went down yesterday, we shouldn’t privatize Social Security. What if the market went up yesterday? Then would it be acceptable? I hate to drop a rock in their pond of serenity, but the stock market goes up and it goes down. And looking back over many years, the market goes up more than it goes down. Once again liberals show just how short sighted they are.

The other thing that irked me yesterday was once again they brought up Enron and WorldCom. “Oh the poor employees who lost all their retirement money when those companies went under.” Now I’m not a totally heartless conservative. Yes, it is sad that these people lost everything. Yes, the corporate executives acted improperly. Bad things were done. But, I believe in personal responsibility. (A gasp from the left … how dare he say that.) Some of those poor employees who lost everything do need to share some of the blame.

Let’s take WorldCom. (There are some particulars about Enron that put a slightly different spin on things … blackout dates and all.) I don’t know for certain, but I suspect, based on almost ten years of working with retirement plans, that the WorldCom retirement plan worked in the following way. First, the plan was probably a 401(k) plan and, as such, allowed employees to defer some of their compensation into a variety of investment options. These options probably included a range of different mutual funds and an option to invest deferrals in WorldCom stock. Secondly, the plan probably had some type of matching contribution or employer contribution that was made entirely in company stock.

The reason that so many employees lost so much is that they made a fatal error. Despite the fact that they were already receiving an employer contribution that was made totally in WorldCom stock, they invested a portion of their salary deferrals in WorldCom stock too. Some employees invested all their deferrals in WorldCom stock.

There are three important words to remember when investing for your retirement: DIVERSIFY, DIVERSIFY, DIVERSIFY.

These employees where blinded by greed and forgot the most basic investment concepts. They were too risky in their investments. It is simply too risky to put too many of your retirement eggs in one basket. In my humble opinion, if you are investing in company stock by means of an employer contribution, you should not be investing salary deferrals in company stock too.

The employees say, “but Bernie Ebbers told me that the stock was safe and that it would continue to go up and that I should purchase more.” I say, “If Bernie Ebbers told you to jump off a bridge, would you?”

As I said above, I am not saying companies and their executives did inappropriate things. I am saying that individuals need to take some degree of personal responsibility for their actions. Unfortunately, the left is anti personal responsibility and only interested in bashing “evil corporations.”

posted by Squirrel @ 9:19 PM