14 Mar 2016

Part 3 of Our Series on Why “Buy Term and Invest the Difference” Leaves Out a Lot

Lara-Murphy Show 1 Comment


One Response to “Part 3 of Our Series on Why “Buy Term and Invest the Difference” Leaves Out a Lot”

  1. Adrian Gabriel says:

    The numbers are quite startling in regards to how much 401ks and IRAs lost during 2008. It was on average about 25% or even more. This hurts those close to retirement. Not to mention the supposed “low” or “no” inflation mainstream economists tend to keep shrugging off, has created a vast amount of retirees returning to the job force. Inflation hurts most those on fixed incomes. Mainstream economists and financial advisors don’t understand that that’s more than 1/2 of the American population who receive fixed streams of income for the rest of one’s life. Almost all Americans tend to rely on 401k’s, IRAs and Annuities to retire on.

    Many traders get on highs speaking about the price spreads they are capturing in this inflated market, which is fueled by Fed monetary stimulus. What hurts is the large losses most traders suffer during the downturn nobody sees coming. Yes perhaps some will get out before the whole thing comes crashing down, and some will only suffer small losses through hedging instruments, but not all hedged positions will work. Furthermore, and most importantly, it is those middle class savers that get hurt the most as their money is tied up in financial portfolios that do not have access to those complex hedging strategies other Traders do have access to. All the while the price distortions and misallocation of resources that occurs within the Capital Structure also benefits those receiving the new money first at the detriment of those selling factors when their buying prices have already risen. This is how some benefit while others lose, it is indeed a transfer of wealth created through inflation.

    Everything Dr Murphy and the Austrians point out is accurate. Rothbard was right.

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