Some friends and family have asked me to advise them on their choice of investments because they are down – an obvious point – in their 401k plans. A bit late, and there’s not much you can do anyways. But …prior to the meltdown, so few people were really willing to understand and believe that there was a financial storm in their future.

The other day, someone sent me the login to their company 401k through Wachovia, and asked me to shift any investment monies as I deemed suitable. This individual, like most people, knows absolutely nothing about the investment options available to her. This is typical for most hard-working people with company-match 401k plans. She had put her money in a “stable value” fund, because the words “stable” and “lower-risk” gave the fund the appearance of being the most appropriate option for her. She makes $30k per year, and her 401k went from $38 to $25k in the last six months, in a “stable value” fund that is anything but stable (the underlying investments are wrap contract with financial services companies). This stable value fund was invested almost 20% in AIG wraps.

While snooping around, I immediately noticed something in this Wachovia plan that is epidemic nowadays. There is absolutely no option to invest in something that is low in risk. Typically, if you are predicting that the market will go South (as I have been for years), you’d look for a 100% US T-Bill option in your 401k, even if you only park it there in the short term. However, this person’s plan had absolutely no low-risk option whatsoever.I have a 401k through my employer, as well. It’s with Fidelity, and it sucks. The only reason I have this traditional 401k is because the company offers a top-flight match (free money), and so I do the best I can with the options I have. I’ve lost too, but not nearly as much as most people I know who are in these plans. My plan is with Fidelity, and I’m working for a Fortune 500 company that should have some good leverage in opening up options for their employees, but I also have no option to move my money to T-bills. No safe haven. Nothing but bull-market trash. I think this is criminal.

Several years ago, there was always an option – in nearly every 401k plan – to invest in a safe haven. That is quickly disappearing since the emergence of the perpetual bull market created by the Feds. They force our hands to play the riskiest moves, and the bias of Wall Street – which works to separate you from your money – is overwhelmingly working against regular folks who don’t want to ride the bull train to hell. So they manage to shut down your options and force you into roller-coaster funds.

As a like-minded friend and I agreed (he chairs his company’s 401k committee), this is due to a bias towards unacceptable risk-taking in the stock market. Bull this, bull that, and don’t you dare diss the bull rush. I told this individual she was screwed, and moving her investments was hardly going to matter. She has no conservative or bearish options. Every option she has is offering a -20% or worse year-to-date rate of return. It’s a trick and a monstrosity that these companies are selling the government’s agenda, which is to consistently push up the Dow and tell Americans that stock prices can go nowhere but “up” in the “long term.” I wonder, is this perhaps a breach of fiduciary duty? As to Wachovia, Fidelity, and others, don’t they owe their clients a low-return option that excludes them from putting their money in the line of fire when the market drops? Those options exist, but only some 401 plans offer them. My friend mentioned above said he had to *fight* to get the t-bill option included in his company’s plan.

The bias to bullishness has permeated the 401k plans of average folks who want nothing to do with Wall Street’s irrationally exuberant bullmania, and now it is bleeding them dry.