Book Summary: Pirates of Manhattan II – The Hijacking of America’s Savings – By Barry James Dyke

The concentration of power the banks hold are at the levels of the great depression. When the balance of power swings too much in favor of the rich then bad things start to happen. This was demonstrated in 2008 with Mortgage meltdown. Bottom line is that Wall Street has a gambling problem and nothing has changed since that bubble burst.

Why is this important to me?

I am not doing this summary to waste your time. It is my vision to provide concise action steps that you can adopt right now to enhance your financial life. There is an old saying, put a frog in boiling water and he will jump out but heat the water gradually and he will stay in it and die. This is what is happening right now with the wealth of the United States. The greatest wealth transfer in history is happening as we speak and has been since 2005. Wall Street simply cares about bonuses and payouts. Large companies and banks alike get big paydays even if they screw up and do a bad job. GE was hailed as one of the great American companies and the stock price is half of what it was 10 years ago yet the executive management team has made big money.

Where I come from, you do not get a trophy unless you win. Management today has no stake in the companies they run. The biggest problem we have right now is that for every dollar the U.S. Government spends on wars, defense, entitlements and other projects, they borrow $.43 cents. If the average American did this, bankruptcy would happen in less than 2 months.

Pirates of Manhattan II focuses on Target Date Mutual Funds and the fact that banks want to start managing YOUR 401K plans. In this summary, we will cover the what, why and how regarding Target Date Mutual funds and review performance to make sure you know how to protect yourself.

1. What are Target Date Mutual Funds? – A mutual fund in the hybrid category that automatically resets the asset mix (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame that is appropriate for a particular investor. A target-date fund is similar to a life-cycle fund except that a target-date fund is structured to address some date in the future, such as retirement. These instruments are very complex and can include derivatives and other instruments. The disclosure documents and prospectuses are similar to the 1,900 page health care bill – very complex.

2. Why is understanding TDMFs important? Mutual funds in general are pitched and advertised as great investments by the likes of Suze Orman and other financial gurus. When you dig in and see what the wealthy invest in, the last thing on their list is mutual funds and 401K’s. Suze Orman pushes these instruments as if her life depended on it. Since her sponsors are big financial corporations then maybe her financial life does depend on it. The question becomes – Does she invest in these instruments herself? According to her, she only has 3% of her wealth tied up in the stock market because “I don’t care if I lose it.” How can she push these instruments if she does not invest in them herself? What you will find is that major businesses, wealthy people and smart investors do not invest in mutual funds and 401K plans.

3. How does it work? Target Date Mutual funds are not proven but there are three drivers exploding their growth. 1. TDMF’s are the default election now on most 401K plans. 2) Upon employment, several employers default the employee as elected so they get in the plan. 3.) Mutual funds and 401K’s are not guaranteed.

The media has done a great job on selling the general public on investments that are not guaranteed. Dave Ramsey pitches Mutual Funds as well saying you can get 12% per year. This is misleading because according to Dalbar that the average actively managed mutual fund averages 3.8% per year over the last 20 years. You can invest in GUARANTEED Annuities and Life insurance and beat these returns by 2-3% and your return is GUARANTEED. Mutual Insurance companies are owned by the policy holders and the capitalization requirements are 1 to 1 and not 10 to 1 like banks. Some Mutual Funds use leverage up to 60 to 1. If you remember the cause of the Mortgage Crisis in 2008 was due to derivatives being leveraged higher than 40 to 1 and now these same banks want access to your cash because of the fees and money making stream they offer.

This book is a must read and will scare you. Most people I chat with basically have “learned helplessness.” I hear – “I get my 401K statements and don’t even open them.” This is a travesty and needs to change. Account preservation is just as important as account accumulation. Will Rogers said: “It is the return of my money that I worry about.” Your retirement account should be guaranteed and rock solid. You can have other speculative investments after that but not your core nest egg. Another area that the book covers is the relationship between big business, the media, financial press and your retirement. The mutual fund business is a trillion dollar industry and the sharks know they make money on the fees and administration regardless if you win or lose.

I hope you have found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days. One thing you can take away from this book is to setup a guaranteed retirement plan. Do your research and make part of that research annuities and life insurance. I am not a financial planner but I advocate financial education. I can tell you I do not own mutual funds and do not tie my money up in 401K plans. This is a road to nowhere in my opinion. I do save money in guaranteed instruments like life insurance and annuities. Set a time on your calendar each week and get educated.