Private Equity Is Coming for America's $12T in Retirement Savings(bloomberg.com)
bloomberg.com
Private Equity Is Coming for America's $12T in Retirement Savings
https://www.bloomberg.com/news/articles/2025-03-25/retirement-saving-private-equity-comes-for-america-s-401-k
113 comments
https://archive.ph/smkN4
Fewer than one in 10 plans offer any kind of alternative investment, according to an American Retirement Association survey. Only 2.4% make private equity available.
Just what retirees need. PE and VC vultures don't have access to dumb institutional money anymore, so they're lining up to suck the blood out of tens of millions of little people.
They know that there are many who are either ignorant or desperate enough to go all in on crypto, AI, NFTs, inflated "unicorns" or whatever other hot scam that rises up in the future.
Bagholders will be retirees who have no recourse when 99% of these schemes fail, while the hyenas laugh all the way to the bank.
Just what retirees need. PE and VC vultures don't have access to dumb institutional money anymore, so they're lining up to suck the blood out of tens of millions of little people.
They know that there are many who are either ignorant or desperate enough to go all in on crypto, AI, NFTs, inflated "unicorns" or whatever other hot scam that rises up in the future.
Bagholders will be retirees who have no recourse when 99% of these schemes fail, while the hyenas laugh all the way to the bank.
> Bagholders will be retirees who have no recourse when 99% of these schemes fail, while the hyenas laugh all the way to the bank.
And this is why I'm glad enough Germany has a public pension scheme that actually works and not some 401k crap. The last attempt to introduce something stock based here ("Riesterrente") ended up being an utter scam that made people distrust in the stock market ever since - and that's how things should be.
Stock markets should be for investors looking to raise investment capital to further the growth of their companies from other professionals, derivatives/futures markets should be heavily restricted (e.g. agricultural futures for a long time used to be reserved in trade for farmers and wholesale-scale buyers - nowadays the majority of trade is being made by speculative free-loaders), and pensions should be backed by the government because chances are higher there is still a government in 40 years than whatever hot tech startup is the utter hots these days.
And this is why I'm glad enough Germany has a public pension scheme that actually works and not some 401k crap. The last attempt to introduce something stock based here ("Riesterrente") ended up being an utter scam that made people distrust in the stock market ever since - and that's how things should be.
Stock markets should be for investors looking to raise investment capital to further the growth of their companies from other professionals, derivatives/futures markets should be heavily restricted (e.g. agricultural futures for a long time used to be reserved in trade for farmers and wholesale-scale buyers - nowadays the majority of trade is being made by speculative free-loaders), and pensions should be backed by the government because chances are higher there is still a government in 40 years than whatever hot tech startup is the utter hots these days.
Wow German has actual money saved in the pension system. Most public pension systems (whether in the EU or US) immediately pay out what is paid in, and are on track for bankruptcy.
Which is the flaw in most public systems. There is no way the pension system of the Netherlands will work for people currently younger than about 50. It seems pretty unlikely it will even work until death for people currently entering the system.
The actual problem is deeper. You don't care about money in old age. You care about living expenses, housing, and medical care. Most of that is effectively labor. Labor you get to use after you can't work anymore yourself. The money is a means to an end. And that's where just about every pension system fails, public or private. And that labor will definitely not be available in 20 years at the level it is today. Pensions being public or private simply change the method of failure: currency devaluation, raising costs or bankruptcy of the pension system, take your pick. It does not change whether they fail.
Which is the flaw in most public systems. There is no way the pension system of the Netherlands will work for people currently younger than about 50. It seems pretty unlikely it will even work until death for people currently entering the system.
The actual problem is deeper. You don't care about money in old age. You care about living expenses, housing, and medical care. Most of that is effectively labor. Labor you get to use after you can't work anymore yourself. The money is a means to an end. And that's where just about every pension system fails, public or private. And that labor will definitely not be available in 20 years at the level it is today. Pensions being public or private simply change the method of failure: currency devaluation, raising costs or bankruptcy of the pension system, take your pick. It does not change whether they fail.
New York’s public system is fully funded. It’s pretty easy… you just fund it.
Social Security is a pretty amazing system. Inflation and a fixed cap for taxation has led to a relatively minor revenue shortfall, 90s welfare reform pushing welfare recipients to SS Disabilty, and a few other factors driving the spend side higher. We also tax those benefits for many, and fund Medicare through premium payments.
You need to raise taxes and push out the the cash flow issue a decade. Then demographic trends fix it. Instead, we’re exploring this cruel & destructive approach, which will trigger a depression in the end. Between housing defaults, implosion of medical facilities as Medicare funding gets slashed, and god knows what else, we’re damaging the country.
Social Security is a pretty amazing system. Inflation and a fixed cap for taxation has led to a relatively minor revenue shortfall, 90s welfare reform pushing welfare recipients to SS Disabilty, and a few other factors driving the spend side higher. We also tax those benefits for many, and fund Medicare through premium payments.
You need to raise taxes and push out the the cash flow issue a decade. Then demographic trends fix it. Instead, we’re exploring this cruel & destructive approach, which will trigger a depression in the end. Between housing defaults, implosion of medical facilities as Medicare funding gets slashed, and god knows what else, we’re damaging the country.
> Then demographic trends fix it.
Demographics is the core thing that dooms all current forms of pensions, no matter if government, stonks or people just hoarding cash or other assets - in the end it's all fundamentally "IOUs" assuming that in 30, 40 years someone will be willing to trade that IOU from decades past into care. The one sole exception is real estate because a roof over the head doesn't need to be traded to be worth something for survival.
Up until now, this expectation has largely worked out over the millennia. People had ample children (by necessity), so there was always a healthy supply of working power to back the value of IOUs with work or consumables, old people plainly didn't live long (up until the 1800s, average life expectancy was barely 40!), and the young generation used to get at least some scraps of inheritance.
But at the moment, this is all broken across Western societies. People barely have children due to a number of factors (the pill, demands of employers, working too long hours, housing shortages, exploding costs of living, the economic and social poly-crises ever since 2001 9/11 ...) which will throw wrenches into the core promise of someone being there to trade the IOUs, old people live way too long (we're at about 80-ish years now) for any system to be sustainable because you can only get about 45 to 50 years worth of full-time working out of a human but they'll be living double that on the dime of society, and by the time my generation can hope to get some assistance in starting our families in form of inheritance we'll be long past the time where we could actually have used it.
Long term we're fucked, and I'd hope our governments show to be more deserving of our trust than tech and finance bros.
Demographics is the core thing that dooms all current forms of pensions, no matter if government, stonks or people just hoarding cash or other assets - in the end it's all fundamentally "IOUs" assuming that in 30, 40 years someone will be willing to trade that IOU from decades past into care. The one sole exception is real estate because a roof over the head doesn't need to be traded to be worth something for survival.
Up until now, this expectation has largely worked out over the millennia. People had ample children (by necessity), so there was always a healthy supply of working power to back the value of IOUs with work or consumables, old people plainly didn't live long (up until the 1800s, average life expectancy was barely 40!), and the young generation used to get at least some scraps of inheritance.
But at the moment, this is all broken across Western societies. People barely have children due to a number of factors (the pill, demands of employers, working too long hours, housing shortages, exploding costs of living, the economic and social poly-crises ever since 2001 9/11 ...) which will throw wrenches into the core promise of someone being there to trade the IOUs, old people live way too long (we're at about 80-ish years now) for any system to be sustainable because you can only get about 45 to 50 years worth of full-time working out of a human but they'll be living double that on the dime of society, and by the time my generation can hope to get some assistance in starting our families in form of inheritance we'll be long past the time where we could actually have used it.
Long term we're fucked, and I'd hope our governments show to be more deserving of our trust than tech and finance bros.
> (up until the 1800s, average life expectancy was barely 40!),
This is mostly tangential to your point, but life expectancy for those that survived the first five years of life has never been 40. The averages for older populations are massively dragged down by the deaths of babies and small children either in childbirth or due to infectious diseases.
This is mostly tangential to your point, but life expectancy for those that survived the first five years of life has never been 40. The averages for older populations are massively dragged down by the deaths of babies and small children either in childbirth or due to infectious diseases.
There’s alot of things that just aren’t correct in your analysis. Most obviously, you don’t understand what life expectancy is.
The US doesn’t have a fertility problem, we have interest in immigration and do a great job at keeping people poor and ignorant.
Lack of inheritance as far as that goes is mostly because for regular people, the estate tax is a casino. If you’re lucky to die quickly, your kids let stuff. If not, you’ll end up expending your assets on long term care as we don’t have a rational healthcare system, and rich people can use trusts to avoid that landmine.
The US doesn’t have a fertility problem, we have interest in immigration and do a great job at keeping people poor and ignorant.
Lack of inheritance as far as that goes is mostly because for regular people, the estate tax is a casino. If you’re lucky to die quickly, your kids let stuff. If not, you’ll end up expending your assets on long term care as we don’t have a rational healthcare system, and rich people can use trusts to avoid that landmine.
> And that labor will definitely not be available in 20 years at the level it is today. Pensions being public or private simply change the method of failure: currency devaluation, raising costs or bankruptcy of the pension system, take your pick. It does not change whether they fail.
Indeed but a government at least has some sort of accountability and long term thinking built in. The forces of the market are by nature short-term dominated and are accountable to effectively no one (but a few select billionaires).
Indeed but a government at least has some sort of accountability and long term thinking built in. The forces of the market are by nature short-term dominated and are accountable to effectively no one (but a few select billionaires).
A government's policies are dominated by the need to think about getting re-elected (democracies) or the need to get people to fight and commit violence on others (everything else).
Neither of which seem a particularly strong incentive to think long term.
Neither of which seem a particularly strong incentive to think long term.
Are you talking about the german Rentensystem or something else? All I've ever heard about it living in Germany was that it won't cover your expenses anymore by the time you retire which is why they tried Riester Rente (and yes that failed). "Privatvorsorge" is a must, so I don't know why you'd say it's working.
Also 401ks don't invest in single stocks, but mostly index funds...
Also 401ks don't invest in single stocks, but mostly index funds...
Sarcasm is inappropriate for online conversation even when it's obvious to you because it leaves great room for misinterpretation when you least expect it. As an engineer, one must value precise and clear communication.
I agree with you. People type out the complete opposite of what they mean, leaving it up to the readers to make sense out of it. This is extremely prevalent on Reddit and has started to bleed into hn a lot more lately (along with politics but its obvious the mods are stamping that out).
> leaving it up to the readers to make sense out of it
You should always be doing it.
You should always be doing it.
Yea but the wealthy elite need more bagholders to continue transferring the world's wealth to themselves. And the wealthy elite are now in complete and full control of the US government.
This is going to happen guaranteed now.
This is going to happen guaranteed now.
It's funny because the elite will be accumulating a currency that will keep losing real value very fast to inflation.
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Isn't crypto much sketchier than private equity?
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As a concept? No. In practice? Also no.
Crypto scammers take millions, private equity takes hundreds of billions. It hollows out entire industries; kills hundreds and hundreds of thousands of jobs. In PE funded nursing homes the mortality rate is 10% higher. PE owned hospitals raise prices by 20-30% while cutting staff.
PE firms pay lower tax rates (carried interest loophole), ie, they steal from everyone. A 2022 ProPublica investigation estimated that tax loopholes exploited by PE cost the U.S. government $180 billion annually in lost tax revenue.
'Dividend recapitalizations' have extracted hundreds of billions from businesses, often leading to their failure.
The estimated economic damage from PE is well over a trillion dollars; and I'd say that's extremely lowballed.
Crypto might be riddled with scammers from top to bottom, but there is real potential there; and even if there wasn't, it still wouldn't have a patch on private equity as far as "sketchiness".
Crypto scammers take millions, private equity takes hundreds of billions. It hollows out entire industries; kills hundreds and hundreds of thousands of jobs. In PE funded nursing homes the mortality rate is 10% higher. PE owned hospitals raise prices by 20-30% while cutting staff.
PE firms pay lower tax rates (carried interest loophole), ie, they steal from everyone. A 2022 ProPublica investigation estimated that tax loopholes exploited by PE cost the U.S. government $180 billion annually in lost tax revenue.
'Dividend recapitalizations' have extracted hundreds of billions from businesses, often leading to their failure.
The estimated economic damage from PE is well over a trillion dollars; and I'd say that's extremely lowballed.
Crypto might be riddled with scammers from top to bottom, but there is real potential there; and even if there wasn't, it still wouldn't have a patch on private equity as far as "sketchiness".
Good points. Would you say this is all PE, or only some?
I can't speak for all PE. However, even their lauded 'success stories' - Hilton Hotels, AirBnb, Tesla etc - seem to generally turn out pretty evil.
How can they not... The whole goal of PE is to extract value from workers and the Earth, and funnel it into the pockets of the .01%. This, in a world where inequality is stifling our potential as a species, and as a planet, on a truly unimaginable scale?
Beyond the hype and the rationalizations, fundamentally, the investors always win and society always loses. They've turned our industries into a casino, and they're the house. Sometimes good people win in a casino, and sometimes they even get paid out, but it's a fucking mugs game that preys on our blind spots and is leading us into some very dark places.
How can they not... The whole goal of PE is to extract value from workers and the Earth, and funnel it into the pockets of the .01%. This, in a world where inequality is stifling our potential as a species, and as a planet, on a truly unimaginable scale?
Beyond the hype and the rationalizations, fundamentally, the investors always win and society always loses. They've turned our industries into a casino, and they're the house. Sometimes good people win in a casino, and sometimes they even get paid out, but it's a fucking mugs game that preys on our blind spots and is leading us into some very dark places.
but sarcasm is fun. like:
This will solve the problem with boomers holding all the wealth. yay!
This will solve the problem with boomers holding all the wealth. yay!
So it’s happening.
I was talking about something similar with a family friend (in the high finance space) a few years back.
When will passive investments and indexes be manipulated and carved out for “wealth extraction”?
With the funds locked away for years by law/policy preventing a move to safer territory, without any FDIC guarantees to keep retirees solvent; the plans were a tempting pool of money.
With social security being pushed for insolvency; I think my generation is well-and-truly in trouble.
I was talking about something similar with a family friend (in the high finance space) a few years back.
When will passive investments and indexes be manipulated and carved out for “wealth extraction”?
With the funds locked away for years by law/policy preventing a move to safer territory, without any FDIC guarantees to keep retirees solvent; the plans were a tempting pool of money.
With social security being pushed for insolvency; I think my generation is well-and-truly in trouble.
Yeah, I really hate the rise of private equity.
So much financial protection comes from public companies trading. But that's also means it's somewhat harder to gamble on the system and manipulate the market.
With companies going private and private equity being more commercialized, we are going to see some nasty stuff. Finance has always had nasty parts, however, no good comes from less transparency.
We need new financial regulations around private equity ASAP. Up to and including making the trade of private equity illegal. Having a private black market for equity is bad for everyone other than insiders.
So much financial protection comes from public companies trading. But that's also means it's somewhat harder to gamble on the system and manipulate the market.
With companies going private and private equity being more commercialized, we are going to see some nasty stuff. Finance has always had nasty parts, however, no good comes from less transparency.
We need new financial regulations around private equity ASAP. Up to and including making the trade of private equity illegal. Having a private black market for equity is bad for everyone other than insiders.
> Up to and including making the trade of private equity illegal.
How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash? Should a startup be forced to go public just to raise their series A? Even outside silicon valley or wall st, even something as benign as a neighborhood coffee shop is technically "private equity". Should such business owners be barred from selling their businesses to anyone?
>Having a private black market for equity is bad for everyone other than insiders.
I understand the justification for banning private equity for individual investors on the basis that they can't be expected to discern scams from non-scams (hence the concept of "accredited investors"), but it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade.
How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash? Should a startup be forced to go public just to raise their series A? Even outside silicon valley or wall st, even something as benign as a neighborhood coffee shop is technically "private equity". Should such business owners be barred from selling their businesses to anyone?
>Having a private black market for equity is bad for everyone other than insiders.
I understand the justification for banning private equity for individual investors on the basis that they can't be expected to discern scams from non-scams (hence the concept of "accredited investors"), but it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade.
> How would this even work? "Private equity" just means shares in non-public companies. How would private companies raise capital, which are often are done in the form of trading equity for cash?
I think we could start by eliminating the carried interest loophole. This would eliminate an artificial incentive to engage in PE “work” that really shouldn’t exist in the first place.
Of course, in the current environment with fraudsters being pardoned, that’s a fantasy.
I think we could start by eliminating the carried interest loophole. This would eliminate an artificial incentive to engage in PE “work” that really shouldn’t exist in the first place.
Of course, in the current environment with fraudsters being pardoned, that’s a fantasy.
> How would this even work?
A good question that I don't have a good answer for.
I don't have anything really against individual investors taking a risk on a private business. However, I have big issues with there being a large market for these risks to be traded, swapped, and financialized.
That's where I see most of the danger, it isn't the first hand selling of equity but rather having a literal market for such equity. I shouldn't be able to short kim's coffee shop.
> it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade.
Because they, frankly, aren't trustworthy. How much money by VC firms has been dumped into obvious ponzi schemes such as FTX?
The issue I have with institutions is they aren't concerned with due diligence, they are concerned with turning a profit. That means they are more than happy to turn a blind eye to obvious company problems if they think they can get in and out before a meltdown (IE, pump and dump).
A good question that I don't have a good answer for.
I don't have anything really against individual investors taking a risk on a private business. However, I have big issues with there being a large market for these risks to be traded, swapped, and financialized.
That's where I see most of the danger, it isn't the first hand selling of equity but rather having a literal market for such equity. I shouldn't be able to short kim's coffee shop.
> it's far less clear why institutions can't be trusted to do their own due diligence before engaging in a trade.
Because they, frankly, aren't trustworthy. How much money by VC firms has been dumped into obvious ponzi schemes such as FTX?
The issue I have with institutions is they aren't concerned with due diligence, they are concerned with turning a profit. That means they are more than happy to turn a blind eye to obvious company problems if they think they can get in and out before a meltdown (IE, pump and dump).
The whole rewarding model for these institutions reads like pure scam if you apply any cynicism. Make money win or lose. Make even more money when "win" even if all that win is purely on paper. And if you lose just roll the stuff under some new name that happened to win. Record looks good. Even if other records were losers...
At least with publicly traded stocks you can have substantial market depth so valuations can be "real". But move to private equity and well even that little goes away...
At least with publicly traded stocks you can have substantial market depth so valuations can be "real". But move to private equity and well even that little goes away...
> Should a startup be forced to go public just to raise their series A?
Maybe? Going public just means that you have to report certain information about your financials to the SEC. I get why companies don't want to do that, but if VC investments are going to start being traded as part of 401k plans I'm not sure why the public shouldn't get to see that information. It seems feasible and reasonable to maintain an exception for what you might call "true" private equity, where specific people buy and sell specific companies rather than trading them in liquid markets.
Maybe? Going public just means that you have to report certain information about your financials to the SEC. I get why companies don't want to do that, but if VC investments are going to start being traded as part of 401k plans I'm not sure why the public shouldn't get to see that information. It seems feasible and reasonable to maintain an exception for what you might call "true" private equity, where specific people buy and sell specific companies rather than trading them in liquid markets.
I absolutely detest it too, but private equity is the result of institutional clients and very-wealthy individuals; but also a degree from 401k retirement plans
401k plans aren't primarily to blame, but the (real) investment class will try and pin the blame to the rank-and-file investors and retirees.
All this because there's pressure to find source of short-term-growth, hell or high-water.
401k plans aren't primarily to blame, but the (real) investment class will try and pin the blame to the rank-and-file investors and retirees.
All this because there's pressure to find source of short-term-growth, hell or high-water.
“When widows and orphans begin investing, it’s time to get out”. Except that in this case there’s nowhere else to go for the average person.
I absolutely do not want to be involved in a VC scheme because I would lose my shirt.
However, the stock market shrunk over the years as a second tier for the investor class, because VCs are where the real risk taking and wealth generation happens.
I absolutely do not want to be involved in a VC scheme because I would lose my shirt.
However, the stock market shrunk over the years as a second tier for the investor class, because VCs are where the real risk taking and wealth generation happens.
The business model of VCs works, in part, because you can offload your radioactive equity to shmucks buying equities.
The sales pitch with passive investing is that it is an anti-decision...there are no anti-decisions. The only way to produce a savings system that works is to recognise that people are shmucks, people who index funds are also shmucks, and that you need a professional to manage those funds cost-effectively.
Almost no individual investor should ever be making a decision about VC investing (why do you think so many VC firms have listed publicly now? You have to fish where the fish are). But this is the job of plan sponsors, there is no why reason why DB funds should be doing all this stuff (and it going pretty well...people think they are smart investing in passive funds, they aren't aware that DB funds are doing segregated account deals with active managers for LOWER fees than passive funds, most passive funds are high-fee in institutional terms) but no-one else can do it? Makes no sense (as long as individual investors are not making these decisions).
The sales pitch with passive investing is that it is an anti-decision...there are no anti-decisions. The only way to produce a savings system that works is to recognise that people are shmucks, people who index funds are also shmucks, and that you need a professional to manage those funds cost-effectively.
Almost no individual investor should ever be making a decision about VC investing (why do you think so many VC firms have listed publicly now? You have to fish where the fish are). But this is the job of plan sponsors, there is no why reason why DB funds should be doing all this stuff (and it going pretty well...people think they are smart investing in passive funds, they aren't aware that DB funds are doing segregated account deals with active managers for LOWER fees than passive funds, most passive funds are high-fee in institutional terms) but no-one else can do it? Makes no sense (as long as individual investors are not making these decisions).
It’s happening already. Indexing propelled the Tesla scam, by shoveling lots of dumb money into it.
If you’re a boglehead with your money in VTI, you have 1.5% of your money in a meme stock. Big scammy companies like Tesla drag the whole market down when they pop.
If you’re a boglehead with your money in VTI, you have 1.5% of your money in a meme stock. Big scammy companies like Tesla drag the whole market down when they pop.
Most of my generation doesn't even consider "passive investments" because the previous generations have ruined any chance of owning a home let alone building wealth outside of a few very lucky individuals showered with VC money. Not sure you're going to find sympathy nobody
I can’t speak for most of my generation because I always lived beneath my means; my first and only home was right after the Great Recession, because home prices just grew to insane levels. I would still be renting otherwise.
The problem of housing is real, and this should be solvable because it’s first and foremost a policy problem which causes a supply problem.
For example I live in an area that encourages the rebuilding of single family homes into townhouses.
It’s a nice compromise and more cities should be adopting this; yet it’s certain states like California that represent a bi-partisan problem with outdated policies grandfathered in.
Certain segments of the population won’t vote against their self-interest; but these individuals will be the least impacted by destroying 401k, ironically enough.
The problem of housing is real, and this should be solvable because it’s first and foremost a policy problem which causes a supply problem.
For example I live in an area that encourages the rebuilding of single family homes into townhouses.
It’s a nice compromise and more cities should be adopting this; yet it’s certain states like California that represent a bi-partisan problem with outdated policies grandfathered in.
Certain segments of the population won’t vote against their self-interest; but these individuals will be the least impacted by destroying 401k, ironically enough.
> it’s first and foremost a policy problem
It's not though, at least at the scale that it matters, it's an economic problem brought on by a decrease in individual's relative capex. If in 1970 a person (let's say carpenter because I like biblical analogues) could purchase a truck for $2,600, even if their entire yearly salary was $10K, they had a 2/3 left over after a major life changing purchase. If in 2025, someone makes $50K, they may be in a higher income bracket in their relative area, but the truck costs 50k and must be financed over ~"time(indebt)", that's happening across all sectors and is the issue
It's not though, at least at the scale that it matters, it's an economic problem brought on by a decrease in individual's relative capex. If in 1970 a person (let's say carpenter because I like biblical analogues) could purchase a truck for $2,600, even if their entire yearly salary was $10K, they had a 2/3 left over after a major life changing purchase. If in 2025, someone makes $50K, they may be in a higher income bracket in their relative area, but the truck costs 50k and must be financed over ~"time(indebt)", that's happening across all sectors and is the issue
It is. Housing prices doubled or tripled between 2000 and 2007, and your generation (and mine) are still dealing with the aftermath.
If you're willing take a journey with me: Near the end of Bill Clinton's second term, a bi-partisan bill was passed in 1999: https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
For Republicans, this represented a long-term desire by the WSJ crowd, to free-up money and assets locked in commercial banks; and make it available into the Investment Banking side.
For Democrats and the DEI crowd of then, relaxing the lending rules was considered a win for minorities who had a hard time buying property--mostly because of strict but impartial lending requirements, which was still pegged as "racist".
Around that time, China joined the WTO and by the early to mid 2000s the US was flush lenders wanting to get in on the mortgage-backed security action. This is when home prices doubled or tripled in value, in the span of 6 to 8 years, and was a nation-wide phenomena. It's only risk adverseness and a quip from a mortgage lender, when my family was denied many years earlier because we were quite poor, that saved me from a major financial mistake.
After the bust--which hit minorities the hardest, by the way--there should have been a price correction and this peaked in 2009: For a brief time in the early 2010s there was, with a supply of distressed properties, but strangely enough prices never corrected nationwide to the levels they should have and this is because of the long influx of cash from tech, which delayed things for another 10-12 years and kept the prices growing in areas that had jobs.
Your generation was responsible for the last 4-6 years of prices not getting corrected; when I pushed for unions and trade guilds at the cost of spiky income--proudly been doing so since the late 1990s, thank you--you can absolutely bet that I was shouted down recently as back in the 1990s and 2000s, whenever the topic steered near that direction.
Today, what we're left with are: Homes continuing to be built for those flush with money or nearing the highs of their career; and overpriced homes purchased during the early 2000s that at best are losing value through inflation.
If you're willing take a journey with me: Near the end of Bill Clinton's second term, a bi-partisan bill was passed in 1999: https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
For Republicans, this represented a long-term desire by the WSJ crowd, to free-up money and assets locked in commercial banks; and make it available into the Investment Banking side.
For Democrats and the DEI crowd of then, relaxing the lending rules was considered a win for minorities who had a hard time buying property--mostly because of strict but impartial lending requirements, which was still pegged as "racist".
Around that time, China joined the WTO and by the early to mid 2000s the US was flush lenders wanting to get in on the mortgage-backed security action. This is when home prices doubled or tripled in value, in the span of 6 to 8 years, and was a nation-wide phenomena. It's only risk adverseness and a quip from a mortgage lender, when my family was denied many years earlier because we were quite poor, that saved me from a major financial mistake.
After the bust--which hit minorities the hardest, by the way--there should have been a price correction and this peaked in 2009: For a brief time in the early 2010s there was, with a supply of distressed properties, but strangely enough prices never corrected nationwide to the levels they should have and this is because of the long influx of cash from tech, which delayed things for another 10-12 years and kept the prices growing in areas that had jobs.
Your generation was responsible for the last 4-6 years of prices not getting corrected; when I pushed for unions and trade guilds at the cost of spiky income--proudly been doing so since the late 1990s, thank you--you can absolutely bet that I was shouted down recently as back in the 1990s and 2000s, whenever the topic steered near that direction.
Today, what we're left with are: Homes continuing to be built for those flush with money or nearing the highs of their career; and overpriced homes purchased during the early 2000s that at best are losing value through inflation.
Edit:
> Your generation was responsible for the last 4-6 years of prices not getting corrected
Pushing back here, what kind of idiot thinks integrated economics over dissociative political topology works, this problem was festering when I was in diapers courtesy ya'll
> Your generation was responsible for the last 4-6 years of prices not getting corrected
Pushing back here, what kind of idiot thinks integrated economics over dissociative political topology works, this problem was festering when I was in diapers courtesy ya'll
People hake been saying variations of that since long before you were born. The generation and other details change but the root is the same. Ignore the fud and make small investmets when young and you too can have a nice nest egg.
i can't get you Gates level rich but you can do well strating young when it looks impossible.
i can't get you Gates level rich but you can do well strating young when it looks impossible.
Perhaps because I'm a parent, I worry about the younger generation. For the Gen-Z and younger, how would they build a nest egg?
Social security? Not a nest egg, always under attack, and always under pressure to move the age higher. Pensions? Long out of fashion. Real estate? Out of reach, except in distressed areas. 401ks? Was only ever for the upper-half of the middle class, and even this is under attack.
Social security? Not a nest egg, always under attack, and always under pressure to move the age higher. Pensions? Long out of fashion. Real estate? Out of reach, except in distressed areas. 401ks? Was only ever for the upper-half of the middle class, and even this is under attack.
401k covers more people than pensions ever did. For your kids invest in a 529 and make sure they get on the college path in school. the general poorer class has never had good retirement options. a good degree (there are many bed degrees) goes a long way.
You’re pretty cooked if you’re under 40. The new alignment seems to be devaluing the dollar and you need to be worried about things like US treasury default.
I’d prepare for a rough decade. Focus on paying off the mortgage more than than the advice that you typically get in the past.
I’d prepare for a rough decade. Focus on paying off the mortgage more than than the advice that you typically get in the past.
I think the most impacted will be those between 30 to 55, because they have the most locked into 401k plans.
Otherwise, I agree it will be rough.
Otherwise, I agree it will be rough.
I agree — but I suspect juicing the market will probably help the older people, at least for awhile.
I would love to see a multi-decade model of 4 scenarios measuring quality of life, economic growth, and wealth distribution specifically around the re-allocation of this $12T.
1. Baseline Status quo - no changes.
2. Move all $12T into reducing the $36T of US debt. 1 time payment. All 401k’s are reduced to $0.
3. Allow for PE to productize into this $12T, siphoning off various amounts over time.
4. 401k holders can choose their own non-traditional investments.
I’m not advocating for any specific outcome because I know nothing on this topic but as a starting point, show me what happens with each, normalized and compared.
1. Baseline Status quo - no changes.
2. Move all $12T into reducing the $36T of US debt. 1 time payment. All 401k’s are reduced to $0.
3. Allow for PE to productize into this $12T, siphoning off various amounts over time.
4. 401k holders can choose their own non-traditional investments.
I’m not advocating for any specific outcome because I know nothing on this topic but as a starting point, show me what happens with each, normalized and compared.
Expecting anyone to model and quantify in a hacker news comment is borderline unrealistic.
But hot-takes are another matter:
4 is basically #1: Every "non-traditional" investment can be made into an ETF (and for that matter, mutual funds) provided it aligns with SEC and/or exchange rules. Still, PE funds probably won't get a lot of takers by individual company's fund admins even if they're allowed. They're quite conservative, and rightly so.
2 & 3 would both cause the equivalent of modern bank runs. American financial institutions would be in tatters.
And as an individual why not? I can withdraw from a 401k, with just a 10% penalty plus income tax. Rationally, this is still better; especially if the highest tax brackets are favorably cut-down thanks to our conservative madmen. Which means the safest course of action is to withdraw it in chunks; then place it into safer investment vehicles and nations.
Of course, what would really happen is something more catastrophic as this withdrawal dovetails from thousands to millions.
Finally, with so many nations and wealthy also invested into the US, this then turn into more than just a US problem as it becomes hard/impossible to offload US financial assets.
But hot-takes are another matter:
4 is basically #1: Every "non-traditional" investment can be made into an ETF (and for that matter, mutual funds) provided it aligns with SEC and/or exchange rules. Still, PE funds probably won't get a lot of takers by individual company's fund admins even if they're allowed. They're quite conservative, and rightly so.
2 & 3 would both cause the equivalent of modern bank runs. American financial institutions would be in tatters.
And as an individual why not? I can withdraw from a 401k, with just a 10% penalty plus income tax. Rationally, this is still better; especially if the highest tax brackets are favorably cut-down thanks to our conservative madmen. Which means the safest course of action is to withdraw it in chunks; then place it into safer investment vehicles and nations.
Of course, what would really happen is something more catastrophic as this withdrawal dovetails from thousands to millions.
Finally, with so many nations and wealthy also invested into the US, this then turn into more than just a US problem as it becomes hard/impossible to offload US financial assets.
You’re advocating that the household quality of life of the masses is worth considering. That precept is not held by private equity, and that taints the otherwise neutrality of the question. (I am strongly against neutral positions, but it weakens your argument as presented to have invalid neutrality, and I’m even more strongly against private equity, so.)
I’m not following this. Can you explain a bit more plainly?
> I would love to see a multi-decade model of 4 scenarios measuring quality of life, economic growth, and wealth distribution
“Spending money studying quality of life is a waste of good money that could be making us wealthier.” - Private Equity
“Wealth distribution doesn’t need to be studied. Distribute your wealth to us, obviously.” - Private Equity
Claiming that those deserve studies is to suggest contradiction of those two beliefs, which I’m representing here as quotes based on my best-faith summary of their industry’s actions to date. People tend to react with hostility when someone suggests that their beliefs might be mistaken, especially when peacefully allowing debate to occur might reduce their future earnings.
> I’m not advocating for any specific outcome
Your question itself advocates for a reevaluation of the validity of those two beliefs, an outcome that you value as higher importance than complying with Private Equity’s values, so this declaration of “not advocating” is false. And since simply posing your question alone is enough to antagonize Private Equity, some of which is here on HN participating, any attempt to avoid doing so is impossible if you want to question their beliefs. (I support this!).
It’s plainly apparent that you have an opinion, or else you wouldn’t be interested in these questions at all. Consider reworking your approach to more clearly state why this matters to you personally and what you’re advocating for. For example, ‘I think private equity is operating under the false assumption that they benefit quality of life, aka trickle down, and that we should disprove that’. (My example is not intended as a valid expression of your opinion, it’s just a stylistic sample.)
“Spending money studying quality of life is a waste of good money that could be making us wealthier.” - Private Equity
“Wealth distribution doesn’t need to be studied. Distribute your wealth to us, obviously.” - Private Equity
Claiming that those deserve studies is to suggest contradiction of those two beliefs, which I’m representing here as quotes based on my best-faith summary of their industry’s actions to date. People tend to react with hostility when someone suggests that their beliefs might be mistaken, especially when peacefully allowing debate to occur might reduce their future earnings.
> I’m not advocating for any specific outcome
Your question itself advocates for a reevaluation of the validity of those two beliefs, an outcome that you value as higher importance than complying with Private Equity’s values, so this declaration of “not advocating” is false. And since simply posing your question alone is enough to antagonize Private Equity, some of which is here on HN participating, any attempt to avoid doing so is impossible if you want to question their beliefs. (I support this!).
It’s plainly apparent that you have an opinion, or else you wouldn’t be interested in these questions at all. Consider reworking your approach to more clearly state why this matters to you personally and what you’re advocating for. For example, ‘I think private equity is operating under the false assumption that they benefit quality of life, aka trickle down, and that we should disprove that’. (My example is not intended as a valid expression of your opinion, it’s just a stylistic sample.)
I actually find the parent much clearer than your criticism of their lack of clarity!
You assume that they are secretly advocating for something, on the basis that quality of life isn't something private equity cares about (according to your own assumptions). Even if it isnt, so what?
I took would be interested in seeing the proposed model of the different scenarios and I am also not secretly advocating for any particular outcome.
You assume that they are secretly advocating for something, on the basis that quality of life isn't something private equity cares about (according to your own assumptions). Even if it isnt, so what?
I took would be interested in seeing the proposed model of the different scenarios and I am also not secretly advocating for any particular outcome.
Unknowingly, more likely; not ‘secretly’. I don’t think there’s any intent to withhold an opinion, but the willingness to question precepts at all is itself an opinion (and one that I agree with regardless of topic). Literal religious wars have been fought over that sort of willingness, so I tend to state it more plainly than is typically comfortable.
Got it, thanks. So stating "quality of life is also an important factor, this should be part of any analysis" would be a more up front way to motivate the request.
Yeah!
Interesting, steal everyone's 401k ... Great idea.
That appears in the cards already. In reality, it’s a question of when the money will end up with PE?
What I’m curious about is if you moved all of it to cutting the national debt by 1/3, what happens? Is there a new lifeline for the nation’s economy?
What I’m curious about is if you moved all of it to cutting the national debt by 1/3, what happens? Is there a new lifeline for the nation’s economy?
I put my hot takes here: https://news.ycombinator.com/edit?id=43528306
I love how you’ve decided that my property, because I chose to invest in a tax privileged account, is somehow in the scope for you appropriate/seize and hand off to some third party. Steal my meager savings to avoid currency devaluation and inconvenience some uber rich people.
I regret that I lack the vocabulary to express my position on this. “Go fuck off” doesn’t capture it.
I regret that I lack the vocabulary to express my position on this. “Go fuck off” doesn’t capture it.
Isnt #4 already possible? My understanding is that you can just move the 401(k) funds to an IRA, and invest as you like.
So with #2, steal everyone's money, even people contributing into 401k while making dogshit pay, and pay off the country's debt bill ran up by someone else?
I can tell you this scenario results in french revolutions
I can tell you this scenario results in french revolutions
Everybody loves to quote french revolution or 2nd amendment but all these revolutions are all centrally lead (by somebody/group performing a power grab).
Whose leading the revolution against 401k theft? Is Vanguard going to invite people with 401ks to a rally in DC?
Whose leading the revolution against 401k theft? Is Vanguard going to invite people with 401ks to a rally in DC?
The French revolution wasn't lead centrally, it was a higher classes which boiled over to grassroots explosion of public discontent that ran away from everyone, had a life of its own, and devoured its children.
Economically, little changed for the regular people. The church was ruined, and so were many high class families. Socially, a lot did (there was an expectation of humans having rights, the church was forever relegated to a secondary role and out of governance, etc).
Most social revolutions (changing the social order, so the US war of independence doesn't count) have a grassroots component that is often highjacked by educated professionals (lawyers are a bit overrepresented) for their own social and economic agenda (which, to be clear, is a net positive compared to the previous order)
Economically, little changed for the regular people. The church was ruined, and so were many high class families. Socially, a lot did (there was an expectation of humans having rights, the church was forever relegated to a secondary role and out of governance, etc).
Most social revolutions (changing the social order, so the US war of independence doesn't count) have a grassroots component that is often highjacked by educated professionals (lawyers are a bit overrepresented) for their own social and economic agenda (which, to be clear, is a net positive compared to the previous order)
when you put it like that, it might actually works. Specially now that the people stealing the 401k will be ones shadowbanning all the angry tweets.
also: see the preemptive strike on revolutions https://gking.harvard.edu/files/gking/files/censored.pdf?mod...
also: see the preemptive strike on revolutions https://gking.harvard.edu/files/gking/files/censored.pdf?mod...
Alternatively, raise taxes on billionaires to pay down the debt.
Discouraging the over-accumulation; or better yet, encouraging that the wealth--once you "make it"--is used for legacy (of the country) is the bargain in the US.
Taxes and institutions could help achieve this, but I also like how Bill Gates has been doing things; but the scale of effort like this and by the billionaire club is paltry and usually political to our collective detriment.
Taxes and institutions could help achieve this, but I also like how Bill Gates has been doing things; but the scale of effort like this and by the billionaire club is paltry and usually political to our collective detriment.
Passive equity investments have close to the worst risk/reward, largely because they are so accessible so effectively support the creation of vast amounts of worthless equity (the return on the average US stock is 0% and has been for many decades). Also, most equity indexes are nonsense, in most of the world the state is heavily involved in which companies list so they are and have always been historically and culturally contingent.
The reason why this is happening is because some institutions have been extremely successful doing this. I assume you are familiar with the ones like Ontario Teacher's (because they seem to own everything) or endowments but has also been true for Superannuation funds in Australia. In the latter case, they have (I believe) the highest levels of average wealth (higher than the US) but incomes that are lower, largely because of Super funds.
Speaking generally, one of the biggest drivers of wealth inequality is that the rich have access to financial products that go up in a straight line, and other people do not...despite "other people" in aggregate holding most of the wealth. Germany is one of the most famous examples of this, GDP per capita is very close to the top ten, median net financial wealth equal to Greece. Saving options are non-existent so everyone is funneled into deposits, and the banks take that money and give it at -2% to a billionaire (whose family got suspiciously and suddenly very wealthy in the 30s). China is effectively the same model but Germany is a bit more notorious...because people continue for vote it.
The alternative is Singapore, everyone knows this model cannot work with US politics (to keep it brief). So what is happening is the obvious thing to do.
Same thing is happening in the UK under a left-wing government btw. The US is already somewhat ahead of the curve in that their exists a deep pool of people who have decades of experience running funds for savers and institutions this way (again, people in the US miss this context...the UK is doing a similar thing, the issue is that there is almost no-one with this experience). It is right to say plan sponsors should do this, the statements by Biden and Trump quoted are both correct (and not contradictory). As the article points out, DB plans have used these for decades shrug
However, there is also stuff here that is also known bad: it sounds like they want to incorporate this into funds that offer daily liquidity...how did CEFs work for PE funds pre-08? Not good (the solace with this kind of thing is that PE funds lose out just as much doing this, it is a bad idea that has failed every time but they just can't resist).
The reason why this is happening is because some institutions have been extremely successful doing this. I assume you are familiar with the ones like Ontario Teacher's (because they seem to own everything) or endowments but has also been true for Superannuation funds in Australia. In the latter case, they have (I believe) the highest levels of average wealth (higher than the US) but incomes that are lower, largely because of Super funds.
Speaking generally, one of the biggest drivers of wealth inequality is that the rich have access to financial products that go up in a straight line, and other people do not...despite "other people" in aggregate holding most of the wealth. Germany is one of the most famous examples of this, GDP per capita is very close to the top ten, median net financial wealth equal to Greece. Saving options are non-existent so everyone is funneled into deposits, and the banks take that money and give it at -2% to a billionaire (whose family got suspiciously and suddenly very wealthy in the 30s). China is effectively the same model but Germany is a bit more notorious...because people continue for vote it.
The alternative is Singapore, everyone knows this model cannot work with US politics (to keep it brief). So what is happening is the obvious thing to do.
Same thing is happening in the UK under a left-wing government btw. The US is already somewhat ahead of the curve in that their exists a deep pool of people who have decades of experience running funds for savers and institutions this way (again, people in the US miss this context...the UK is doing a similar thing, the issue is that there is almost no-one with this experience). It is right to say plan sponsors should do this, the statements by Biden and Trump quoted are both correct (and not contradictory). As the article points out, DB plans have used these for decades shrug
However, there is also stuff here that is also known bad: it sounds like they want to incorporate this into funds that offer daily liquidity...how did CEFs work for PE funds pre-08? Not good (the solace with this kind of thing is that PE funds lose out just as much doing this, it is a bad idea that has failed every time but they just can't resist).
I just can't comprehend the level of greed rampant in today's world. I don't like to give into the reddit-style sensationalism but it really does feel like it's not enough that they have so much-- others need to have less.
If the economy grows by 2.5% a year but the wealthiest grows by 9% a year, where is the money coming from.
When does the realization set in that sensationalism is really just reality?
https://www.visualcapitalist.com/a-visual-breakdown-of-who-o...
https://www.oxfamamerica.org/press/press-releases/worlds-top...
https://www.visualcapitalist.com/a-visual-breakdown-of-who-o...
https://www.oxfamamerica.org/press/press-releases/worlds-top...
Huh, I guess my 401(k) has already been mistreated. I made most of the money I have for retirement when I worked at Intel, and seeing the lawsuit is really interesting/concerning.
Guess it's time to roll over the 401(k) to my new job and take a more active role in managing it - I want it almost all explicitly in the market (and not in private equity) at this point in my life.
Thanks for posting this, my retirement funds are a big deal to me and I hate that people less informed will probably be screwed by moves like this.
Guess it's time to roll over the 401(k) to my new job and take a more active role in managing it - I want it almost all explicitly in the market (and not in private equity) at this point in my life.
Thanks for posting this, my retirement funds are a big deal to me and I hate that people less informed will probably be screwed by moves like this.
[deleted]
when the market is what it is today... potato, potahtoh?
I mean, you will still have x and xai and the upcoming openAi-for-profit-corp, tesla and meme coin exchanges on your portfolio.
I mean, you will still have x and xai and the upcoming openAi-for-profit-corp, tesla and meme coin exchanges on your portfolio.
Private equity firms have a strong tendency to make everything worse for anybody who isn't the private equity firm. I guess it's time to find a different place for my retirement funds.
It's not quite clear what exactly they want. From the article:
> As of now, there’s nothing to prevent 401(k) plans from adding private equity investments if they feel the benefits outweigh the risks.
401(k) plan administrators already can offer this crap, but nobody's asking for it, and most of them, so far, are not stupid enough to default retirement savers into them. And even if P.E. do manage to muscle/bribe their way into a 401(k) administrator's offerings, nothing stops me, as an investor, from allocating my assets into public-markets-only funds.
My employer's 401(k) administrator could choose to add all sorts of crazy funds to their menu--I'm not choosing any of them. If I had more money, maybe I would even try them. Something like <1% into a crazy private equity black hole might make sense if I was already set for retirement, and could afford to lose it.
> As of now, there’s nothing to prevent 401(k) plans from adding private equity investments if they feel the benefits outweigh the risks.
401(k) plan administrators already can offer this crap, but nobody's asking for it, and most of them, so far, are not stupid enough to default retirement savers into them. And even if P.E. do manage to muscle/bribe their way into a 401(k) administrator's offerings, nothing stops me, as an investor, from allocating my assets into public-markets-only funds.
My employer's 401(k) administrator could choose to add all sorts of crazy funds to their menu--I'm not choosing any of them. If I had more money, maybe I would even try them. Something like <1% into a crazy private equity black hole might make sense if I was already set for retirement, and could afford to lose it.
So long as you get a choice. I've been in 401k where the indexfund had a high expense ratio tripple the vanguard equivelent and the other options were worse. I've at least always had an index option - many don't even get that option.
I guess I've been lucky in that my employers have tended to have pretty decent 401(k) administrators. My current employer's 401(k) is through Vanguard, which as we all know offers index funds with absolutely trivial (0.01%) fees.
Isnt that when you would want to move your 401k funds into an self directed IRA?
As soon as I left I did. So law doesn't allow moving a 401k like that though and you can but far more into a 401k than ira so you are often stuck.
I cant quite parse what you said. My understanding is that the law does allow rollovers with no limit.
The bottleneck, as I understand it, is contribution limits for people who dont have a 401k to start with.
https://www.irs.gov/pub/irs-tege/rollover_chart.pdf
The bottleneck, as I understand it, is contribution limits for people who dont have a 401k to start with.
https://www.irs.gov/pub/irs-tege/rollover_chart.pdf
The law may have changed but at least then you could only do a rollover if you didn't work for the company.
they are talking about rules specifically set for some class retirement funds, which some 401k adopt. Those were set in place most to make sure syndicate run funds were playing nice.
nothing to do with your techie 401k were anything resembling even the word syndicate won't apply.
nothing to do with your techie 401k were anything resembling even the word syndicate won't apply.
The entire wealth management industry is extremely corrupt but no one really realizes this or cares.
Case in point: Sometimes you get extremely large fund managers like Fidelity buying into absolutely ridiculous investment rounds for pre-IPO companies. Why?
Because the hedge funds/VCs, etc will promise Fidelity first grabs at OTHER companies in their portfolio. Like, "if you invest in X now at this ridiculous valuation, we'll let you invest in Y, Z and W as well." I've seen so much of this type of mutual backscratching in hedge funds and PE, but no one seems to care.
I've seen some PE companies force one of their portfolio companies to take a very terrible loan that they didn't need at a rate that was terrible. Why? Because the bank would give better deals for their other portfolio companies now and in the future.
The people left holding the bag are the investors, and Fidelity and their ilk don't give a fuck, because their AUM is huge, so what if they waste $100M on a shitty investment? SEC turns a blind eye to all these shenanigans and investment bankers make their money and fund managers make money and the only ones left holding the bag are the retail investors.
Case in point: Sometimes you get extremely large fund managers like Fidelity buying into absolutely ridiculous investment rounds for pre-IPO companies. Why?
Because the hedge funds/VCs, etc will promise Fidelity first grabs at OTHER companies in their portfolio. Like, "if you invest in X now at this ridiculous valuation, we'll let you invest in Y, Z and W as well." I've seen so much of this type of mutual backscratching in hedge funds and PE, but no one seems to care.
I've seen some PE companies force one of their portfolio companies to take a very terrible loan that they didn't need at a rate that was terrible. Why? Because the bank would give better deals for their other portfolio companies now and in the future.
The people left holding the bag are the investors, and Fidelity and their ilk don't give a fuck, because their AUM is huge, so what if they waste $100M on a shitty investment? SEC turns a blind eye to all these shenanigans and investment bankers make their money and fund managers make money and the only ones left holding the bag are the retail investors.
It may be obvious to most people here, but I just want to point out that money is power, even when it's not yours. Fund managers have the power to collude with one another and make or break the markets. In recent times, many have done so to promote (or punish) political behaviors that had nothing to do with finance, and may not have been in the best interests of their clients.
I hope that electorally there's a huge swing in the other direction and we can do big things like tax carried interest properly.
I'd like to get a deeper take on this if anyone has any numbers to back it up.
To me it "feels" like the last 2 decades of easy money and lack of investment into building entrepreneurship as a whole has led to a place where theres a lot of good money chasing two few deals or bad investments. That is to say the growth machine is responding to bad inputs over the last 25 years. To make matters worse there are only 2 possible solutions to any problem now: Technology or Regulation.
These are hot takes/ observations though. I'd love to know what the average retirement is built out of, what its return has been. What has happened Entrepreneurship over the same time, and what has happened to VC/hedge fund returns in the last 10 years. If anyone has deeper expertise I would love to learn more.
To me it "feels" like the last 2 decades of easy money and lack of investment into building entrepreneurship as a whole has led to a place where theres a lot of good money chasing two few deals or bad investments. That is to say the growth machine is responding to bad inputs over the last 25 years. To make matters worse there are only 2 possible solutions to any problem now: Technology or Regulation.
These are hot takes/ observations though. I'd love to know what the average retirement is built out of, what its return has been. What has happened Entrepreneurship over the same time, and what has happened to VC/hedge fund returns in the last 10 years. If anyone has deeper expertise I would love to learn more.
AIUI, private equity is more illiquid and has less price discovery than public markets. Seems like like a bad combination to me.
Ben Felix, investment officer at a Canadian wealth management firm, did a video on the topic a few years ago and concludes that net-of-fee returns aren't much better index funds—and you have to deal with illiquidity:
* https://www.youtube.com/watch?v=Ik169Fd_G1E
He links to the published papers that he used in his analysis in the description.
He also co-hosts the Rational Reminder podcast, and private equity has come up on a few episodes:
* https://rationalreminder.ca/podcast-directory
Ben Felix, investment officer at a Canadian wealth management firm, did a video on the topic a few years ago and concludes that net-of-fee returns aren't much better index funds—and you have to deal with illiquidity:
* https://www.youtube.com/watch?v=Ik169Fd_G1E
He links to the published papers that he used in his analysis in the description.
He also co-hosts the Rational Reminder podcast, and private equity has come up on a few episodes:
* https://rationalreminder.ca/podcast-directory
This is exactly the kind of quiet financial engineering that changes the game for average savers—without their input. Most people already don’t understand how their 401(k) works, and now we’re going to default them into opaque, illiquid private equity products?
Sure, PE firms want access to that $12T market, but let’s be real: this is about locking in long-term capital with limited transparency and even more fees. The risk/reward profile is completely different from stocks/bonds.
And it’s all being decided over a Zoom call between megafunds a week before Trump’s second inauguration. Not a great look. But unfortunately this is towards the bottom of the list of egregious shit that has happened in the last couple of months.
Sure, PE firms want access to that $12T market, but let’s be real: this is about locking in long-term capital with limited transparency and even more fees. The risk/reward profile is completely different from stocks/bonds.
And it’s all being decided over a Zoom call between megafunds a week before Trump’s second inauguration. Not a great look. But unfortunately this is towards the bottom of the list of egregious shit that has happened in the last couple of months.
It’s one of the long-game problems that will be a disaster a decade or more from now, and it’s the middle-income majority that will be left dealing with the problem.
But will it be the younger millennials, gen-Z, and younger generations cleaning up the mess? Or will it be Gen-X and older millennials out in the streets and homeless? Or something else?
The young generation asked how they were handed a bag of problems. This is their moment to help decide how to address the problems of tomorrow, because it’s a battle to do so and policy changes and consequences are by design invisible to the typical worker.
But will it be the younger millennials, gen-Z, and younger generations cleaning up the mess? Or will it be Gen-X and older millennials out in the streets and homeless? Or something else?
The young generation asked how they were handed a bag of problems. This is their moment to help decide how to address the problems of tomorrow, because it’s a battle to do so and policy changes and consequences are by design invisible to the typical worker.
It's sad to me that we pin so many expectations on the following generations when they're just starting their journey as adults. We're just kicking the can down the road, and they're arguably less equipped (in resourcing and current influence) to fix these problems than the generations before them.
You are hitting a real point here. Elders are supposed to create an environment for the future generations to thrive.
Here we are with elders (corporations and politicians really) creating many opportunities for themselves to suck the life out of younger people.
Here we are with elders (corporations and politicians really) creating many opportunities for themselves to suck the life out of younger people.
They’ll need to make do. As a gen-x, I got to live through the golden age of Pax Americana, led by the WW2 generation. Now we’re stuck with the loser boomers, and our kids will be facing the decline from the American century to the Asian.
We collectively fucked around and exported our assets and the our smarts. Now we find out.
We collectively fucked around and exported our assets and the our smarts. Now we find out.
ig we will find out if Mario has any long-lost brothers
Just saw this bit on NBC News about PE buying retirement communities and completely altering the terms of the deals the residents signed:
https://www.youtube.com/watch?v=xnWYh7N5goE
It scared me because my parents were looking into a buying into a retirement community where you have a "guaranteed" payout amount depending on how many years you stay; that payout amount slowly declines over time to something like 80%.
The deal is clear. Pay a bunch of money to buy in. Pay pretty high monthly maintenance fees. They handle everything else. Food, medical care, etc. If you need long term care, dementia, etc.
Then if/when you want to move out you get between 100% and 80% paid back out, depending on when you leave. (And, presumably, it works the same way for your heirs).
They make money on:
* The spread between what you pay as maintenance fees and what it actually costs to support you
* The (hopeful, for them) appreciation in the market value of the housing you 'buy' (which is an incentive to keep the community desirable).
* The decline in "ownership" % you have over time.
And of course ultimately they're gambling that you won't have an incredibly long, expensive decline, but will die relatively quickly once the costs mount.
This all makes sense, because it's a form of risk pooling.
But it was infuriating that someone could come along and buy out the place and just alter the terms. I still don't understand why/how it's legal, it seems like that should only be allowable under something like bankruptcy.
https://www.youtube.com/watch?v=xnWYh7N5goE
It scared me because my parents were looking into a buying into a retirement community where you have a "guaranteed" payout amount depending on how many years you stay; that payout amount slowly declines over time to something like 80%.
The deal is clear. Pay a bunch of money to buy in. Pay pretty high monthly maintenance fees. They handle everything else. Food, medical care, etc. If you need long term care, dementia, etc.
Then if/when you want to move out you get between 100% and 80% paid back out, depending on when you leave. (And, presumably, it works the same way for your heirs).
They make money on:
* The spread between what you pay as maintenance fees and what it actually costs to support you
* The (hopeful, for them) appreciation in the market value of the housing you 'buy' (which is an incentive to keep the community desirable).
* The decline in "ownership" % you have over time.
And of course ultimately they're gambling that you won't have an incredibly long, expensive decline, but will die relatively quickly once the costs mount.
This all makes sense, because it's a form of risk pooling.
But it was infuriating that someone could come along and buy out the place and just alter the terms. I still don't understand why/how it's legal, it seems like that should only be allowable under something like bankruptcy.
> I still don't understand why/how it's legal
Who’s richer?
This is the same at every level of society. Those millionaires buying a comfy retirement have never been worried about the bottom rungs of society and the lack of legal support, healthcare, the difficulties with police etc
Turns out that the forces that drain the working population are now after the comfortable ones. Won’t take long for exponential growth to eat through the 50-90%ile, and in 10-15 years it will be the 90-99% that are bled dry, and 5 years after that the 1% start cannibalising themselves.
It’s inevitable.
Who’s richer?
This is the same at every level of society. Those millionaires buying a comfy retirement have never been worried about the bottom rungs of society and the lack of legal support, healthcare, the difficulties with police etc
Turns out that the forces that drain the working population are now after the comfortable ones. Won’t take long for exponential growth to eat through the 50-90%ile, and in 10-15 years it will be the 90-99% that are bled dry, and 5 years after that the 1% start cannibalising themselves.
It’s inevitable.
Yep, any alteration of terms should require consent or full refund. That is only fair. But currently America is a crooked corrupt country so I am not holding my breath.
Invest in our S&P 500. It’s a win win for our country and citizens who retire. A great motivation to contribute as well.
A pyramid scheme.
If only there was some way for Private Equity to receive funds from the public.
Maybe some kind of offering they could do where the public gives them money in exchange for rights to portions of future profits?
Maybe some kind of offering they could do where the public gives them money in exchange for rights to portions of future profits?
So I'm genuinely curious. Are the people that work in PE just straight up sociopaths? Or is there some kind of charitable interpretation that let's them sleep at night. Like it blows my mind the kind of evil our society lets rich people get away with.
PE is just a fancy name for non-public investment. The charitable interpretation is that if your typical teachers and government worker pension can invest in PE to maximize return, why cant your corporate 401k do the same?
Why would someone have trouble sleeping at night?
Why would someone have trouble sleeping at night?