U.S. Retirement Market Ponzi Fueled By Record Concentration In Stocks By Young Americans

For the U.S. Retirement Market Ponzi Scheme to continue, there must be a new group of suckers to pay for the individuals who are receiving benefits.  Without a new flow of funds, the Ponzi Scheme comes crashing down.  Such was the case for the individuals who invested in the $65 billion Bernie Madoff Ponzi Scheme that came crashing down in 2008.

Interestingly, the U.S. Securities & Exchange Commission (SEC) that investigated Madoff Securities in 1999, 2000, 2004, 2005, and 2006, found no evidence of fraud or the need for legal action by the commission.  The failure of the SEC to find any wrong-doing by Bernie Madoff should provide Americans with plenty of reassurance and confidence that their 401k’s are the highest quality sound investments in the market.

Regardless, the concentration in equities by young Americans reached a record high since the 2008 financial crisis.  According to the most recent data put out by the Investment Company Insititute (ICI), Americans in their twenties who participated in 401k plans, 75% of the group invested more than 80% of their funds into equities in 2015 versus 48% of the group in 2007:

In just eight years, Americans in the 20’s age group invested in 401k’s, increased their equity exposure (80+%) from less than a half to three-quarters.  Furthermore, those in the 30’s age group increased their equity concentration from 55% to 70% in the same period.

All this means is that younger Americans participating in the 401k Retirement Market have considerably increased their exposure to stocks while net benefits paid out have now gone into the red.  I wrote about this in my article, Something Big, Bad and Ugly Is Taking Place In The U.S. Retirement Market:

As we can see in the chart, the Private Defined Contribution (DC) Plans paid out $28.7 billion more than they took in in 2014…. the last year the Investment Company Institute provided data. Simply, Private DC Plans are mostly 401K’s.

Unfortunately, the ICI only has data on 401k net benefit withdrawals up until 2014.  However, young Americans invested in the 401k Market have no idea that their funds are being used to pay off those who are retired.  Moreover, the record concentration of 20-30’s age group into equities hasn’t been enough to support the 401k Retirement Market as more money is going out than is coming in.  That is extremely bad news.

Regrettably, nowhere in the ICI’s new report on the U.S. 401k Market do they include the data showing the net benefit withdrawals in 2014 were more than benefits paid.  Instead, they included the following information in the “Key Findings” area at the beginning of the report:

This is an alarming trend.  More 4o1k plan participants held equities at the end of 2015 than they did before the financial crisis in 2007.  What is even more troubling is the percentage of young Americans who have “ZERO” exposure to equities in the 401k Market.

According to the ICI data, Americans in their 20’s participating in the 401k Market with zero exposure to equities fell from 19% in 2007 to 7% in 2015:

What this chart is telling us is that young American 401k plan participants with no exposure to equities (stocks) before the 2008 financial crisis were much higher than it was in 2015.  While the 30’s age group change shown in the chart above change is much less, we can still see that younger Americans are putting more of their 401k funds into stocks than ever before.

This next chart from the ICI report shows the different age groups and their equity concentration in the 401k Market:

While Americans in their 50’s-60’s have decreased their (80+% in BLUE) exposure to equities since 2007, the overall trend, shown as “All” on the right-hand side of the chart, has increased from 43.5% to 47.5%.  Furthermore, the 50’s-60’s age group with “zero percentage” exposure to equities (in DARK BLUE at the bottom) has decreased since 2007.  Thus, older Americans participating in the 401k Market have increased their exposure to stocks when they should be more conservative.

I look at what is taking place in the U.S. Retirement Market as the final stage of the Greatest Ponzi Scheme in history.  Unfortunately, Americans invested in the 401k Market have no idea they are apart of just another Bernie Madoff Ponzi Scheme, but 100 times larger.  If the SEC couldn’t find any fraud in the Madoff Securities Investments via ongoing investigations between 1999-2007, what kind of reassurance does that say about protecting Americans in the U.S. Retirement Market?

The Federal Reserve and Wall Street have done an excellent job steering Americans away from sound physical investments like precious metals and into the largest Paper Retirement Market Ponzi Scheme in history.  Even though Americans in the 401k Market have increased their exposure to equities, it hasn’t been enough to offset the net deficit as more money is now being paid out than is coming in.

What happens when the stock market finally cracks?  Falling stock prices will motivate 401k plan participants to either cut back funds they invest or reduce their equity exposure.  Thus, the collapse of the U.S. Retirement Market will be swift as Americans finally get Precious Metals Religion.


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26 Comments on "U.S. Retirement Market Ponzi Fueled By Record Concentration In Stocks By Young Americans"

  1. Sometimes I really wonder if the sheepish majority isn’t right? “The experts will find a way to keep things going” – “You’re just making excuses” – “You’re such a pessimist”.

    But we have the data, and all the theory fits. I really wonder if this isn’t all crazy sometimes. I’m sorry for my brothers living in the states, but I’m glad I’ll be getting a time buffer here in Europe.

  2. The process of collapse is very slow at first. In some areas it is methodical. In some cases it is chaotic. A global economic Ponzi scheme with different start points and different end points that is allowed to continue via central banks and bought and paid for politicians. Endless wars and any number of behind the scenes special forces hooliganism in foreign countries that never make the news. Huge numbers of pedophiles in America that continue unabated with a few prosecutions here and there as a tossed bone. Privileged politicians getting away with things that would get you thrown in jail. Open borders gaining traction. Erasure of American history gaining traction. Socialism and the nanny state getting traction within growing segments of the population.

    I saw a short, three minute video on Facebook that talked about how the mining and petroleum industry is negatively impacting wild America. How ever-growing human population and expanding urban areas are sucking resources dry. Yet, the same people who cry about population impact on America’s environment are the same ones who promote unfettered immigration.

    The societal “crash” will come as a major event. It will be similar to pushing against a heavy object like a refrigerator. You put your weight behind it. It doesn’t move. You apply more and more pressure and then finally it shifts a foot. But to an observer the pressure needed for that shift is not visible. It builds internally. There are red flags but those are lost on most people because of their normalcy bias. We are a few pounds from initiating that shift.

  3. Sorry !!! But finally when? There are big possibility that this bull continue for a long time yet. !!!!!!!

  4. One never knows when the market will crack. All you can do is scale out. If you are at a high level of equity exposure, then bring it down a bit. Buy some gold. No use being hoghish in an overpriced market.

    Remember as after a crash it might take decades to recover. It took 19 years after 1933. It took 12 years after 2000. It might take 30 years after this market crash.

  5. The elites have made investing in the stock market the only viable option for your long term money. Money in the bank earns less interest than the inflation rate and the same holds true for bonds and treasuries. So you can either invest in a manipulated market that is geared towards inflating the value of an asset…(such as stocks) which is controlled by the elites or invest in a manipulated market that is geared to suppress the value of an asset (such as precious metals) which is also controlled by the same elites.

    Fundamentally, stocks are way overvalued and should have a major correction while precious metals are way undervalued and should see a major upswing. However, that’s fundamentally and what is well known is that the markets are manipulated and fundamentals are not what drives the price. This manipulated market has been playing out for quite some time with no clear end is in sight. So, if you believe the elites, which have been running things for a very long time, will finally lose control…then buy precious metals. But if you believe the elites will continue to find a way to maintain their control on the global economy…then you should buy stocks.

    I know for a fact that the elites will be in control tomorrow. I would bet everything I own that they will be in control next week and next month for that matter…but one day fundamentals will matter again. How long are you willing to wait for the elites to lose control and how should you invest your money until that day arrives. That’s the big question and your guess is as good as anyones.

  6. Most of those contributing to 401ks were not making any money, so lost nothing in the last crash. When they finally find a job, their employer pushes them to 401ks with promises of matching payments so it sounds like free money. They are too busy just finding a place to live that’s not at Mom’s, living, working and starting families to pay any real attention to what is happening. Even if you try an tell them, most just don’t want to hear it. Why did they spend 4-6 years in post high school education if the whole thing is going to collapse ergo, it’s not going to happen.

    School of hard knocks is going to be brutal this time and, unfortunately, no one gets a do-over.

    If they are your kids or your nieces and nephews, you have to prepare for them. They will be thankful when the time comes.

    If you don’t hold it, you don’t own it. Buy for cash and stash.

  7. The following Youtube clip was brought to my attention this week 6m …. 2012

    Why America isn’t the greatest country in the world anymore.
    Published on Sep 18, 2012
    The opening scene of HBO’s “The Newsroom”.


  8. Ugh, I hear you, Eric & Pietro. I’ve heard the “All manipulations fail eventually” way too long. Will it fail in our lifetimes ? Investors are making a killing in FANGS, etc. Gold Thames 6 months to go up 60 points, then loses it in a week. Must be nice to be in control of the money printing machine, the law, press, military, and imbecilic populace. I’m beginning to think I’ll never see the (any) crash.

  9. I realize the majority of people don’t want to hear this and I will probably get criticized for even saying it. Should you want to know the future just read the Bible. I like other people, I cannot tell you the exact day when it will happen but I do know it is very soon. We are in the end times just as predicted in the Bible. Wars, rumors of wars, more earthquakes, brothers against brothers, financial failures, riots, more and more unrest. You have not seen anything yet. These troubles are nothing compared to whats coming. True believers in Christ that have studied the Bible know what I say and mean. Unbelievers criticize and mock because they want to be their own God. Will not happen.
    There is only one true God.

  10. As a data point…. in the last year, my company’s 401k provider, Fidelity, they have been really aggressive about getting people to invest in their retirement account, and to make sure they have a heavy enough allocation towards equities to ensure that everyone will have enough money saved for retirement. I have been putting my 401k contributions into a money market fund, and I kept getting emails and calls from Fidelity to increase my equity exposure until I specifically asked them to stop. Average guy/girl doesn’t have much financial education so I can’t blame them for listening to Fidelity and setting their 401ks into something like an 80-20 equity/bond portfolio.

  11. Eric, the EU will probably be the first to crash. All I can do is watch what China and Russia and their minions are doing. Their goal is destruction of the U$dollar. Hard to live day to day and plan long term. Commodities priced in yuan. How do I calculate that? Invest in skills, hold hard assets, learn to grow some food. Pray.

  12. Those in their 20s are investing just fine, as they can ride out the next recession and through it. We still don’t have negative interest rates, which will probably drive Dow to 30k, with all the loose money the next recession might even be more like a speed bump. It might be a fake economy, your dollars may not buy hardly anything anymore, the Fed might be short the dollar, but the dollars will still be churning and grinding away. Without equities we would have nothing and they can’t let that happen, borrowing and shorting holds it up just as well as the longs do. The gold to silver ratio may even be heading to 100 to 1 since most of the silver comes out of the ground along with copper, although it follows gold because it’s a commodity it has no choice but it’s a base metal now since it’s price is way closer to copper than gold, the past is the past. Still, on dips to 15, I will add at least 100 oz. and same for gold, what I can afford, I’m a buyer at 1100.

    • DisappearingCulture | September 26, 2017 at 12:22 pm |

      “Still, on dips to 15, I will add at least 100 oz. and same for gold, what I can afford, I’m a buyer at 1100.”

      You will probably need an alert in the middle of the night for a flash crash to be able to buy at those targets.

  13. »[…] SEC couldn’t find any fraud […]«

    If you are part of the game you couldn’t expose it w/o exposing yourself.

  14. I agree with the comments that say if everything is manipulated, in the short term you gain by siding with the manipulators, but in the long term you lose (and we all lose anyway, because we’re dead).

    Therefore you can’t win. Right now we are witnessing the beginning of the end, our system really is terminal. Interesting, isn’t it.

  15. Wow! How is the stock marketa Ponzi scheme? Most companies I own will do business when the
    stock market corrects. And I will buy more. If all crashes as is preached here then nothing
    will save the USA. Take Tom Cloud’s recent silver predictions and his predictions these past
    8 years. Every one a loser. Whose bullshitting who? I made double my investment these past few years in stocks and I can sell half of my positions getting all my money back and own stocks with no money of mine in them. In silver after 8 years I’m down 20%. So,wo is the Ponzi, silver hucksters or the stock market? I can buy silver anytime under $20 an ounce for at least the next 5 years.

    • Joe Lindell,

      You are the perfect example of what is seriously wrong with the INVESTMENT MENTALITY of Americans.

      Also, why don’t you stop wasting time in here BELLY ACHING and WHINING about your silver investment? Rather, you can sell all your silver and go ALL-IN the markets.


      • Thanks Steve. It is OK for you to preach “stock market crash”; EROI, peak oil,
        miner’s production cost that hasn’t had one bit of an affect on silver. But
        when I try stress that the past 7 years were a waste on anyone who bought silver because they have at least another 5 years or so to buy silver. YOU COST PEOPLE a lot who listen to your premature advice. It is no wonder you and Cloud get along so well. Both ofall your advice is premature in years.

        • Joe lindell,

          You are a silly shortsighted man. I have to laugh at your investing strategy. I have always stated that investing in precious metals is for the mid to long-term. While the Fed and Central Banks have propped up the markets with Trillions of Dollars of money printing and Asset purchases, you continue to BELLYACHE, WHINE and COMPLAIN that precious metals haven’t gone anywhere.

          The Buying of precious metals is supposed to take place every year until one retires. So, it shouldn’t be viewed as a GET RICH quick scheme. But again, you are more than welcome to continue WHINING as long as the Central Banks print money and purchase assets with that printed money.


  16. Yes, thank you for writing this. I came to the conclusion 401k was a scam in the last year when researching annual fees compared with employer matching that is not vested and then learning about peak oil & economic bubbles. I wanted to cash out right away, but they won’t let you unless you quit your job. I’m looking to buy a house and transfer the 401k money to the mortgage down payment. I feel like it’s a catch 22 since the housing prices are inflated. If I wait for the housing prices to crash, my 401k may be worthless.

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