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I have read endless posts on how much you can safely draw from your nest egg without going broke before you die. Some are based on Monte Carlo calculations which are used in many scientific diciplines. Some are strictly based on Historical returns.

It seems that every financial bit of financial advice that I hear or read comes with the caveat "Past results do not guarantee future performance." or words to that effect.

I have also read that Historical returns will probably hold true unless there is some significant change in the "market system" as we know it.

What concerns me is that there HAS been a change which on the surface may not seem significant but which I think could have far reaching consequences. There are many instances of minor changes causing major differences over time. For instance a spacecraft following a course that is only a fraction of a degree off course can miss it's target by many thousands of miles depending on the duration, or our friend compound interest vs. simple interest over time can add up to real money. You get the idea.

What I am refering to is the lowly 401(k).

Starting in the early '80's regular people began contributing to 401(k)s and as a result the market. Prior to that I think Institutions and Investors were the predominant players. Over time more and more people contributed to the increasing number of plans so that today, if the nunbers I've heard are correct, there is currently a BILLION DOLLARS A DAY being invested, and the amount is increasing daily.

Charts of the DOW show the slope increasing at an increasing rate since the '80's (minus the last 3 years...we can talk about that later).
I't sure would be interesting to see if there is any correlation between the amount of 401(k) money invested and the DOW. Anybody know where to find those figures?

Another aspect that I've wondered about is that when investors and institutions bought stock they did it based on the value of the company behind the stock. Now that so many regular people are putting so much money into the market thru mutual funds, I fear that stocks are being priced on a supply and demand basis rather that a value basis. The mutual funds MUST invest the money, even if the stock prices do not reflect true value. At some point the price bubble breaks and the institutions and investors take the money and sheer the 401(k) sheep. The wool will grow back, Right? At a billion dollars+ a day.

Does any of this make sense?
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