Time to Bail From 401(k)s

Looking at the stock market and economy, I don't see any reason anyone with a 401(k) plan should stay invested with it for the foreseeable future. Most of the choices in these plans are either mutual funds, money market accounts and/or annuities. Neither of which are very appealing, when Ben Bernanke has unleashed monetary hell with Quantitative Easing, Part II.

Here are the reasons why I'm not a fan of any of these investments:

1) Mutual funds only go up in value, when the stocks they're invested in go up in value. The fundamentals underlying the American economy and stock market are pretty lousy: High unemployment, plus large amounts of debt at all levels of business and government. Having said that, stocks could go up if QE2 takes hold - however, I doubt that the increase in stock values will outpace inflation. My guess is that at best stocks will keep up with the higher (and soon to be hyper) inflation rate.

2) Money Market funds don't pay a lot of interest, and aren't safe - especially when the Fed is debasing the currency. After taxes and inflation, savers will be net losers in money market funds, bank savings and CD accounts.

3) Annuities are future promises to pay a sum of money over a period of time. We know that Wall Street firms and the government can keep promises... and also break them. If you're retiring in 10 years or more, and believe that you'll see every penny of Social Security you have coming to you - I've got oceanfront property in Wyoming for sale. In theory, annuities are supposed to be invested in certain assets that will make a given rate of return over time. However, I don't have much faith that the financial assets annuity companies invest in will provide a great rate of return.

4) The longer-term trend of Baby Boomers retiring, will have more sellers than buyers of stocks, mutual funds and other financial investments. Boomers investing in Wall Street from 1982 until 2000 helped fuel the secular bull market in stocks. Conversely, retiring (and stock-selling) Boomers will contribute to the secular bear market through at least the late 2010s.

My advice to anyone who has a stock-based IRA or 401(k) plan? Take the tax hit and SELL - immediately. The more money and assets that you have in your possession, instead of a bank or Wall Street firm, the better.

If you have money with any garden-variety financial planner or stock broker who says "stocks will always work out in the long term," you should fire them on the spot. Anyone who knows what's really going on with the markets and the economy understands we're in uncharted financial waters. This isn't your father's - or even your older brother's - economy or stock market.

Karl Denninger says it best: "Lots of money to be made (in the stock market) if you're quick and good, but an absolute minefield if you're a long-term investor."

Invest some of your money in physical gold and silver as dollar and inflation hedges; and if you don't have the trading "chops" to get short-term profits from the stock market, find a stock, options and/or FOREX trader who can do it for you. Single-digit returns in a savings, CD or money market account won't keep you ahead of the not-so-hidden tax of inflation.

That's why you must find ways to get consistent double (or even triple)-digit returns on your investments, to stay ahead of increasing taxes and inflation.