You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. The Next Plot to Exploit Main Street Investors...Goldman Sachs and its rivals are going to raid the 401(k) market and suck as many fees as possible out of a $35 trillion pool of retirement capital.
Dear Fellow Traveler: Up front, apologies to my friends at T. Rowe Price. This has nothing to do with you… It has everything to do with where retirement planning is headed… Yesterday, Goldman Sachs announced plans to invest up to $1 billion into T. Rowe Price and issued a press release that gave us… zero information. Now, T. Rowe (a Baltimore-based asset manager just up the road) is a bedrock of active management in retirement accounts. However, it’s faced incredible pressure over the last decade as Vanguard continues to take market share with passive ETFs (which have much lower fees)… T. Rowe is one of the most conservative financial firms in the world… Founded during the Great Depression, the company has always played the long game by building its brand around actively managed mutual funds. These funds target long-term, diversified investing and don’t chase fads. However, yesterday’s news signals a shift in direction. From the announcement yesterday, you wouldn’t know that the earth is shifting under the feet of retail investors… Get a load of this… According to a press release, Goldman and T. Rowe are engaged in a "strategic collaboration aimed at delivering a range of diversified public and private market solutions designed for the unique needs of retirement and wealth investors." I've read fortune cookies with more specificity. Every paragraph of this press release is weaponized corporate, nothing-speak. Terms like: "Solutions orientations." "Unlock the potential." "Drive solutions." You know what it doesn't say over all these paragraphs? What the #$^@ they’re actually doing. So, let me translate all of this and tell you what’s going on here. Goldman Sachs wants to stuff private equity investments into everyone’s 401(k) and extract as much money in fees as possible. That’s it… Let that marinate. Wait, What’s Happening?Goldman Sachs has a ton of alternative investments on its books… and it needs new investors. It definitely wants to take the most illiquid, opaque, fee-laden products in finance and inject them into retirement accounts of teachers, firefighters, and that guy who still thinks his pension is safe. And if you think they’re going to magically offer all the firefighters the best companies and products possible… let me put this For Sale sign on a nearby bridge… Institutional investors receive priority for top-tier deals. ALWAYS. That won’t change… Retirement-plan participants are likely going to get the leftover or second-tier offerings. That suggests potentially lower returns that are heavily marketed as once in a lifetime offers… which they won’t be.... Oh… and there are serious legal risks for the sponsor plans… so, good luck there… We’ll get to the math… But let’s cut to what’s really on the verge of happening… Goldman is moving quickly to ensure… regulatory capture. They're betting retirement account rules will loosen enough to allow more alternative investments. They're positioning for when some lobbyist convinces Congress that private equity in 401(k)s will "democratize investing." [Ron Howard voice: It doesn’t democratize investing…] Instead, it liberates you from your money through fees and profit-shares… And Goldman is already miles down the road on this… The Trump Administration has already signed an executive order making it easier for private equity to sneak into retirement accounts. The timing of this deal isn't a coincidence. Private equity firms have been salivating over the $35 trillion in U.S. retirement assets. The American Investment Council, a Washington-based lobbying group representing private equity interests, has spent millions of dollars since its inception in 2007. Why are they turning to retirement funds so hard? Well, pension funds are tapped. Endowments got burned. Institutional money is asking uncomfortable questions, such as "where did our money go?" So they need new customers. That’s the $35 trillion retirement market… It’s Not Built for Retail… Full Stop…I have no problem with private equity - but I understand it. I’ve covered it as a journalist and economist for over 15 years… Even in my worldview - with all the CAIA reading and writing - it’s still opaque… The average school teacher? Not a shot in hell they have the time to study up here… The most important thing… Private equity locks up your money for 7 to 10 years. YEARS. So, imagine being 62, needing to retire, and Goldman saying, "Sorry, your money's tied up in a leveraged buyout of dental clinics. Check back in 2032." Now, of course, they’ll tell you that they want to structure the holdings to ensure that there are payouts as people aim to retire. However, there is a Sequence of Returns risk that could pummel an investor if a steep market downturn occurs as people retire and some of their assets are under pressure (think private credit) and it’s impossible to find a justifiable bid... Then there are the fees? Typical private equity fees consist of 2% management fees plus 20% of the profits. Typical index funds cost investors around 0.1%… You think they’re gonna cut their fees out of the goodness of their hearts? What about transparency? These funds are more opaque than a Chicago budget meeting. There’s a troubling lack of clarity around what goes into the portfolio… Private equity valuations also tend to rely on soft modeling rather than market pricing. You probably won't know what you own, what it's worth, or if it still exists until they decide to tell you. The Big ShiftThis is a big shift for American investors… For 50 years, the Employee Retirement Income Security Act of 1974 (ERISA) has protected retirement accounts by requiring "prudent" management. And that hasn’t gone away… but we’ll see those terms get chipped away with time. You know what's not prudent? Putting teachers' retirement into leveraged buyouts run by 28-year-olds from Wharton who've never operated anything beyond Excel files... Goldman sits on $500 billion in alternative investments that need deployment. T. Rowe manages $1.7 trillion, primarily in retirement accounts. Goldman is trying to access that retail retirement money. That’s why they made the announcement now… and they’ll launch products NEXT YEAR - likely when the laws have changed. T. Rowe would get to say they’re “innovating” as a way to compete with Vanguard index funds. And retirees get the privilege of paying private equity fees to lose money on investments you can't understand, can't value, and can't exit. Are you pumped yet? Cool! Products launch in "mid-2026." Mark your calendar… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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