Planet Money Question of the Day: Would you invest your retirement savings in a fund managed by Goldman Sachs?

The short-answer: Not a chance.

A few more extended thoughts.

The mention some new “target-date funds that would provide guaranteed income in retirement.” I wonder if this is just an awkward phrasing for Goldman Sachs-branded target-date funds that are just like the others already out there (i.e. funds whose risk portfolio and asset mix changes automatically over time), or if these are some sort of new, annuity-type product with genuine future-income guarantees.

Goldman Sachs is also promoting funds that invest asset classes that the average 401(k) participant has no business dabbling in. The professionals might know enough about them; you and I don’t, so it’s best to just stay away. They might sound trendy and sophisticated, but if no other lesson is taken from recent Market Mischief, let us take this one:

Finally, they may draw book-keeping and marketing distinctions between their “market maker” function and their asset management business, but I don’t. Values matter; corporate culture is pervasive; and the ability of people  and institutions to compartmentalize is grossly overrated. A somewhat crass analogy, if I may: Would you marry a drug dealer? I hear he’ll take real good care of you when he’s not peddling crack on the playground.

For the record, I wouldn’t put my money with Fidelity, either, and so far I haven’t heard their name mentioned in any of the recent shenanigans. As I say above: Whether we win or lose, they win. That’s how they designed the system.

via Would You Trust Goldman Sachs With Your 401(k)? – Planet Money Blog : NPR.

If You Give a Bank a Bailout

If you Give a Bank a Bailout, it will probably ask you to leave it alone. It will remind you that it’s a Bank, and it knows what to do with money. So you’ll write a Check and turn your back. And the Bank will redecorate its room.

When you ask it why it refurnished its room, it will tell you that it had to in order to look nice for Investors. And then it will ask you to lower Rates. You’ll ask it why you have to lower Rates, and it will tell you that it’s necessary to restore the flow of Credit. If you mention that the Bailout was supposed to restore the flow of Credit, the Bank will stare awkwardly at its shoes, and mumble something about Toxic Assets.

You’ll ask what a Toxic Asset is. The Bank will start speaking very quickly about Mortgage Backed Securities, Collateralized Mortgage Obligations and Credit Default Swaps. You’ll scratch your head and look confused, so the Bank will try to reassure you. The Bank will tell you that although it’s very complicated, it’s really very safe and provides a very good Return.

You’ll ask how safe, and the Bank will start to blush. It’ll say that it depends.

You’ll ask what it depends on. The Bank will sigh for a moment, and then hem and haw while making vague comments about Over-the-Counter instruments Sub-Prime Borrowers. You’ll ask what THEY are, and the Bank will blush again.

Eventually the Bank will sort of fess up and tell you that those really safe investments might not be so safe, especially if no one is really paying attention to who is on the other end of those Mortgage Backed Securities and Credit Default Swaps. You’ll ask who is paying attention, and the Bank will tell you it is.

At this point you’ll put everything together and ask the Bank the Question its been avoiding: If these Mortgage Thingys and Credit Default Whats-its are safe – so long as someone is paying attention to whomever is on the other end, like the Bank says it has been doing – then why is the Bank in trouble and in need of a Bailout?

When you ask the Question, the bank will turn get angry and start huffing and puffing. It will tell you to stop asking so many questions. It will tell you not to worry about the Past and instead to think about the Present. It will tell you about all the People who aren’t getting car loans and student loans and mortgages. The Bank will tell you to think about all the businesses who aren’t getting loans to expand and grow… or even make Payroll!

The Bank’s argument will distract you and tug at your heartstrings just enough. And when that’s happened, the Bank will probably ask you for another Bailout. And a ride to the Interior Decorator’s on your way out of town to leave it alone.

This message a bit further down the page is funny.

No payment is due at this time. You have a zero or credit balance. For assistance, please call 1-800-DISCOVER.

A zero balance! Something must be wrong. Call for help!

The one hook both groups readily latched onto was the spiritual angle. There is a habit for Scripture to speak of spiritual matters through physical metaphors, and this is something we evangelicals seem to be good at catching onto. We read words like

He has demonstrated power with his arm; he has scattered those whose pride wells up from the sheer arrogance of their hearts.

He has brought down the mighty from their thrones, and has lifted up those of lowly position; he has filled the hungry with good things, and has sent the rich away empty.

He has helped his servant Israel, remembering his mercy, as he promised to our ancestors, to Abraham and to his descendants forever.

and we see the spiritual realm. We see the spiritually hunger being filled with Living Water and the Bread of Life. We see the spiritually proud being cast down in judgment, while the lowly are lifted up. This we can identify with. We get spiritual hunger and poverty; we understand spiritual pride. This is how we understand such passages of scripture. Such an understanding is right… but incomplete.

Yes, passages such as this express hope for a spiritual liberation from spiritual poverty and hunger, but they also express hope for a physical liberation from physical poverty and hunger. It is yet another “both-and” of which I am so fond. So, how to we live in light of this double-edged perspective?

My suggestions in the class centered on seeing, serving, and shopping.

Seeing the Poor

For many of us this is the first step. We live in the burbs, work in the burbs, shop in the burbs, etc. We can go weeks without seeing our next door neighbor much less someone who suffers. Our media is sanitized, ever turning our eyes upward – no, not to God, but rather to those higher up the social ladder, those whom we are told we must strive to emulate.

Instead, we must be intentional in our efforts to see the poor. This means we must choose sources of information that will tell the stories of those who suffer. Newsletters from organizations such as World Vision or Compassion International, for example, open our eyes. On a smaller scale, but doing no less good, are charities like Tijuana Christian Mission, and the thousands of others who work quietly around the world lifting up the lowly and filling the hungry.

In the class I shared some stats from Global Rich List:

• The bottom 10% of the world’s population live on $400 a year
• The bottom 50% of the world’s population live on $850 a year
• In 2004, the US federal poverty level for a family of 5 was approx. $22K; that is in the top 11% of the world’s income
• My own income, approx. $45K, is in the top 1.5% of the world’s income

Seeing the poor and changing our perspective is the first step.

Serving the Poor

“The work we do may not save ourselves, but it might save another.”

The next step is action. It can be as simple as sponsoring one of those children you see at the aforementioned charity websites. Or, you can get local, and volunteer at one of your city’s soup kitchens of shelters. Next vacation, go on a mission trip instead of to Disney World. The impact of such an experience will last far longer than the souvenirs. To tease you into coming back (and to get me writing regularly again) I’ll tell you what I recently did in my neighborhood in another post.

[BONUS] Here’s one I didn’t share in the class, because I didn’t have my act together enough to put together handouts or slides. How about supporting the (Red)emption Campaign? I’ve mentioned it before, and it’s only $10… Canadian! Act now, and your donation will be matched dollar-for-Canadian-dollar.

A good friend of me has said something to this effect on more than one occasion: “The work we do may not save ourselves, but it might save another.” Words to live by there. In serving the poor we are allowing Christ to re-incarnate in our lives, and continue the work of ushering in the Kingdom of Heaven.

Shopping Differently

OK, this last one I threw out there on a whim. We had just watched the Walmart movie, and so I wanted to see what kind of reaction I’d get. My goal here was to get people thinking about how they live and how that lifestyle might unwittingly be oppressing others. For example, have we ever wondered how Walmart (or any other big box suburban retailer) can afford to sell their stuff so cheaply? The same question can be asked of our restaurant food. (I watched Supersize Me last night.) This is an area I’m just just starting to explore, so I didn’t have any answers; mostly I was sharing the questions in my own head.

That said, I LOVE Tuesday Morning Quarterback, the weekly Page 2 column by Gregg Easterbrook. The NFL is just one of the many topics he covers in a given week, and this week he nails it:

“The Progress Paradox” [written by Easterbrook] first argues that nearly every aspect of Western life is improving, then speculates about why “life gets better but people feel worse.” A recent study by researchers including Daniel Kahneman, a Nobel Prize winner, and Alan Kruger, one of the leading names in behavioral economics, adds new detail on that question. The study found that the well-off are no happier than others; that as income rises, so does tension and anger; that “people exaggerate the contribution of income to happiness.”

Kahneman, Krueger and their collaborators also offer a vital insight — that happiness comes from choosing time over money, but most Americans choose money over time. “Leisure is better for happiness than increased income,” they argue, supposing that time spent in travel, having new experiences, relaxing, hiking, reading, or simply looking up at the stars is more important to our sense of well-being than a new car or impressive house. Unless you are in a bad financial situation, Kahneman and Krueger recommend you spend less time working, accept somewhat lower income, and use your freed hours to experience life. Barbara Bush memorably said that no one on his or her deathbed has ever regretted not staying later at the office, while many regret failing to spend more time with family and friends.

I’ll add another suggestion on why time is more important to happiness than money: Because time is far more precious. Money that has been used up can be replaced; you can always get at least some additional money, and in principle can get huge amounts of additional money. Your time on Earth, on the other hand, is limited and irreplaceable. You might add somewhat to your time on Earth by taking care of your health — and that’s an excellent idea, but there are no guarantees you won’t be hit by a bus anyway. We all must surrender some of our time for work to acquire income. But those who obsessively chase maximum material possessions give up something precious and fleeting, namely time, in order to acquire something that cannot make them happy, namely money.

‘Nuff said.

Full details can be found over at Baldiness.com, one of my b5media blogs. Or, you can jump straight to my online donation page.

I’m offering to match $1 for every donor who contributes at least $5, up to $100 total out of my pocket. Here’s hoping you can tap me out before the week ends.

[UPDATE] For those of you who would like to participate, but don’t want to use you’re credit card, you can send me a donation via Paypal. My Paypal email is coryaldrich [at] gmail [dot] com. Be sure to put a note that this is for “Light the Night.”

Robert, stick to your Rich Dad parable and leave the Bible alone. For that matter, leave all religious texts alone.

(ht – Personal Finance Weblog)

Also, don’t expect any commentary on the Lectionary. If it happens, it will be a bonus. I’m just using the designation to mark off the calendar. Occasionally I get the itch to write something directly related to the readings, and when that happens they will have their own post.

So, what’s this week been like? In a word: Blue. I’ve been in a bit of a funk lately. The fact that Samantha and Jake have both had the chicken pox hasn’t helped. I should be on a World Cup high, but no. I’m blue.

Two minor personal epiphanies this week. First, I figured out why our cash flow goes to crap every Memorial Day but not every Groundhog Day. We’ve been no more able to keep to a budget, but we don’t have the windfalls, like tax returns, to hide our shortcomings. Doesn’t really provide a solution; just understanding.

Second, I am realizing more and more that I need order in both my space and my time. I’m not sure how to create that in the chaos of life… while still allowing for the chaos of creativity. But I’ve got to try.

So, that’s it for tonight. Here’s hoping my demeanor turns upward.