If we had allowed partial privatization of Social Security years ago when it was first proposed, how would the privatization have been affected by the plummet of the DOW a year ago, and subsequent slow recovery since then?
I confess there are some things I just don't know much about, and the financial market is one of them. I've been very wary of the idea of partial privatization though, because it was my belief that if the stock market crashes as it has done in the past, it could be devastating to retirees.
Was I right? Am I wrong? I'd like to hear from some of the experts on the board about privatization, whether it is a good idea, and how a market meltdown like last year could/would affect things.
...cost Wall Street 7 trillion dollars in value, I'm guessing the answer would have been "not very good".
I am certainly not a expert but from what I remember only ten percent of SS was proposed to be used by privatization..
Anyone who invested years ago would have seen their investments rise and fall and rise again unless they bought GM or similar..
Anyone buying BOA last year would be up 400% on their 10%..
I would not agree with total privatization of SS, however allowing someone to gamble with 10% of their money seems reasonable to me..
Impossible to say because it all depends on how the SS funds were invested... some stocks actually have done well but most have tanked... Sort of like seeing a provider... lol .... you do you research and think you've got a winner, but you really can never be certain... just lucky... lol
but for those who actually want this is a retirement plan, The return is still much better than what the currect system returns.
which is pretty much the answer to every question about the stock and bond markets.
As I recall, there were various plans as to the amount each worker could invest but the one that Mr. Bush seemed to endorse in 2005 was 4% of taxable wages up to a maximum of $1000. So the most we are talking aboutt over a 5 year period would be $5000.
If beginning in 2005 you had put $1000 in an S & P 500 Index Fund every year, a reasonable choice to be sure, your return would essentially have been flat. If you had put it in Pimco Total Bond Return, run by Bill Gross who probably knows more about bonds that anyone in the world, the five year return is about 6.5%. These two funds are where the bulk of my retireement money has been placed and that is about what I did.
If you had waited till January 1, 2008 and contributed to virtually any stock fund, you would probably still be down 20%, or so notwithstanding the rebound we had this year. If you had waited till the March 2009 low to make your investment, youd be up about 40% even in most conservative stock funds.
But for someone as young as you are, the market is the only place to be. Set up a balanced portfolio, don't try to time the market, wake up each morning and say "buy and hold," don't listen to my trendy friend St. Croix, and you'll do fine.
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If the average person out there does not have the time, inclination, or required knowledge, then your approach is OK. Just be diversified in more than just the S&P. Add a few index funds to the mix that addresses large cap, mid cap, small cap, a little international, and definitely bond funds. I too own the PIMCO Total Return. Just go to Vanguard and keep your fees low. I guess I'm trendy because I am more of an active investor. I do use index funds but I rotate from sector to sector. You own XLE. I own OIH. Both are good.
But back to the topic at hand. Privatization, albeit a small percentage is a tough call for me. The libertarian in me says yes, but the pragmatist in me says no frigging way. 95% of the population would have no clue on what to do. I might opt for a few conservative options as mentioned by Marikod, i.e. a diversified bond fund, or a few index funds. Other than that, you are putting fire into the hands of some very stupid people. And that last sentence is what the Democrats really believe, and if they actually said what they mean, I would applaud them.
P.S. How is that buy and hold working for you on BAC? Sorry, just had to poke my finger in your eye a bit.
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of diversification. For example; in my IRA I can only invest 50 percent of money directly in stocks for my 401K -25%. ...and that's another problem; one or another, I am limited to investing in stocks or bonds. What about the other two asset classes such as commodities or real estate? Oh sure you can invest in ETF's, but sometimes I like the real thing.
In 2003 I invested in a Roger's Commodity Index Fund and rode that wave to 2008. I wish I could have invested a part of my IRA. Closed my account when oil hit $140.00 a barrel. Right now I do like agricultural commodities.
I'm sorry St Croix, but currently I do not trust the stock market. I hear you talk about the banks making money and the bonuses that are being issued seemed to indicate the stock market is looking up. But how I ask, what sector of the economy besides government is growing?
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and I don't want to give the impression that I'm a die hard bull. Trust me, my finger is always close to the sell button. Granted, our economy still has a lot of problems, but our economy alone no longer totally controls the performance of the companies in the S&P. Think about it, massive budget deficits, double digit unemployment for the foreseeable future, populist rhetoric against banks, energy, pharma, insurance, and the market is up over 60% from its lows. Many of the companies in the S&P 500 get close to 50% of their revenues from overseas. So when you invest in something like an IBM, you are not investing in a U.S. centric stock. I look at the shit Obama is throwing at the U.S. economy, and I am amazed at the resiliency of U.S. companies, and how they adapted quickly to the worst recession in 25 years. If Obama would just STFU for a couple of months and stop vilifying U.S. companies, the market would go up more. I realize "the street" looks at what Washington says and does, but it seems more so than ever. Just look at the upcoming election in Mass this Tuesday and the implication. But that what makes investing fun.
Hey, at the end of the day what is my choice? A CD paying 1.5% or a Money market account paying half that is not very appealing, so keeping a percentage of assets in the market is the only option, at least for me.
P.S. What kind of IRA do you have? Move it to Fidelity, or Schwab, or Ameritrade, something where you have total control.
if it still has those types of limitations. Most IRA's today allow a much more diversified portfolio of holdings. WTF, many of them even allow working interests in oil wells. lol
I agree with you on commodities, and I share your aprehension about equities. When the GP thinks everything is rosy, it is time to head for the exits. I think that Wall street has recovered to a greater extent than has Main St. and I believe as I did a few days ago that the major indices have a bit more air yet to be let out of them.
There is nothing wrong with keeping your powder dry in anticipation of a better buying opportunity. If I were limited to traditional investment instruments, that's what I would be doing right now, or I would be outright short the market.
As a group, stocks and bonds are negatively correlated with inflation that is, as inflation increases, stocks and bonds tend to move in the opposite direction. When inflation rises, by contrast, commodity futures tend to rise as well.
Although I always thought commodities are more volatile than stocks, studies have show that the opposite is true over long periods of time. Over short periods, however, commodities are much more volatile. An unexpected freeze and orange juice features skyrocket overnight.
But commodities can be hard to trade. Retail investors do not want to buy actual commodities. And a lot of the ETFs out there on natural gas, oil, and gasoline actually hold futures rather than the commodities and have to roll their contracts every 30 days. Sometimes the spot price of the commodity is less than they pay for the futures contract.
And if the proposed securities transaction tax applies to these roll overs, these ETFs will really be killed.
It is more expensive to protect yourself with commodity options than it is stock options. The high short term volatility means call option sellers charge a premium. Buying call options often contains less risk than buying a futures contract, but you will often need the market to continue making big moves in order to profit.
So, even though inflation is bound to increase given Mr. Obama's past actions and current policies, I'm sticking with stocks.
conservative in my investment stratagem. I have no stocks in financials or high tech except Cisco which I bought at $50.00 a share in 2000 and Google.I have an IRA I set up years ago with TIAA-Cref and a 401K from my previous employer which I still keep because I retain company stock and I may return. I keep both because the fees are low, I like playing cheap. Tiaa-cref also has annuities which I bought during the late 90's when the stock market was going crazy. Cref also allows me to keep 50 percent of my allocated funds to be invested directly in stocks.
The ETF fund I have is called Central Fund of Canada. A couple of years ago I bought gold coins through a dealer in Arizona. No names.
The main reason I don't trust "much" of the stock market is because many governments such as USA, Germany and England etc. have resorted to taking debt burden off the private-sector's balance sheets and putting it on their own. Deficits in America and Britain now are at more than 10% of GDP. I see financial uneasiness throughout the world, Dubai had to turn Abu Dhabi for help. Greece is in trouble. Britain and the Netherlands had to help out Icelandic banks. Yes, asset prices are below their peaks but so what.
Japanese stock market still trades at a quarter of the high it reached 20 years ago. My Cisco stock reminds me, the NASDAQ trades at half the level it reached during the DOT.com craze. I see prices of many assets including real estate being held up by unsustainable fiscal and monetary stimulus. Something has to give.
I was in almost exactly the same boat on Cisco- I bought at $47 in 1999. At first I looked like a genius as it went to $57 - but when the tech bust got started Cisco dropped like an elevator and took me with it.
So now I'm down in the teens with a stock that pays no dividends. Unwilling to have dead money for next decade, I simply bought almost an equal amount of Cisco at $17. This brought my cost per share way down and after one other defensive purchase I was able to escape when Cisco briefly hit $28 a few years ago.
So buy an equal amount now while Cisco is trading at 25-25 and you will cut your escape point in half.
I had to do the same thing with Bank of America but alas I'm still in prison on that one.
however keep in mind there is another old saying you can either "get even, or get even worse"
I agree when you are holding a stock in which you are severely underwater, you need to evaluate if the issue is still a loser, in which case you should dump it, or if it is now a "good value" in which case you should indeed "double or even triple up".
IMO the worst thing you can do is just sit on dead money, just because you have lost money and are unwilling to sell. You need to treat every dollar you have invested the same way, if you are unwilling to put new money into a stock, you should definitely reassess holding onto it at all.
The biggest problem for most people is admitting they made a mistake. Don't be stubborn, making a mistake or bad call doesn't have to mean financial ruin, but staying with losers out of pride can be a sure ticket to the poor house.
there is a really good chance that at least a half naked cocktail waitress with big tits is serving you free drinks. Seriously, you are 100% spot on. You have to take the emotion out of investing.
is holding onto losers, and refusing to just take the loss before it turns into a major loss.
The old adage among traders "a long term investment is nothing more than a short term trade gone bad" is a very accurate one.
at least get some tax benefit with it and with Bank of America I never had a gain big enough to offset.
I mean we are talking about a stock that I bought at 47 that plunged to under 4 at one time. I stopped watching the stock market for about six months bc it was too horrifying to think of how much I had lost.
Think what I could have done with the lost money - does the name Beefeater, Jr. ring a bell?
gives her weekly bearish view on bank stocks, including BAC, you want to reach through your TV and choke the shit out of her. She is kinda cute though. On the flip side you probably want to hug Dick Bove when he comes out with his bullish views.
For the novice investor that wants to buy individual stocks, one important tool is to use stop orders to protect both the upside and downside. I would never recommend options trading for the novice. Even I find the various methods a bit confusing.
Nevertheless, good luck with your investments
if I could.
Only problem is - she was right, calling the demise of the big banks and the investment banks at a time when Dick Bove told me they were a once in a lifetime investing opportunity, and when Cramer said the rumors about Bear Stearns were ridiculous.
In fact, she parlayed her success into starting her own firm.
But she left me in the dust.
of the Dot.com craze and how irrational I was in my investment. I stay away from high tech stocks and others I have no clue what they do. Yes, it means I have been left out of Apple.
Besides, at the same time I bought Cisco at $50.00 I bought Burlington Northern Santa Fe Railroad for around $19.00. Then when Bush won the white house I invested heavily in drug companies, oil stocks, KBR etc. and did pretty well.
I have also stayed away from financials such as Goldman Sachs etc. Yep, because I have no clue how they make their money. Right now I like water technology companies.
the privatization amount was .o4% of taxable wages. What most forget about that plan is that after the death of the plan owner, the invested .04% went to their heirs. The money was their's to keep. With social security, when you die, so do your SS benefits, unless you have minor children, and a widow caring for them. Not many 66 year olds have minor children. Thinking long term, I believe you would come out ahead of the game. I remember when the Dow/Jones was at 800. Starting back then, I would have had a nice bundle by now, even with the periodic reversals in the market. But, didn't happen. My bad.
The flaw with social security isn't wether it was privately or publicly controlled is not the issue. It's the fact that unfunded liabilities exist because the Govrnment "borrowed" from the SS pool to spend elsewhere and are now forced to tax or borrow to pay for benefits promised to those who had paid in.
If a bussiness ran that type of scam with a private pension fund, people would go to jail.
It's the scam that Greenspan ran. Cut the taxes on the rich by 50% and make up the difference by doubling FICA taxes and borrowing from SS to go towards general funds.
That's why we need to overturn the Reagan tax cuts and start taxing the rich at 70% like we used to instead of a measely 35%.
That's not the problem at all, and I'm not saying greenspan wasn't flawed. The problems where progressives where using SS to subsidize other entitlements which the government could not afford under the current tax plan.
People who claim the rich don't pay enough taxes can't add. Or more likely realize how easy it is to point the finger at the rich and force them to pay for services they themselves are unwilling to do so. THe top 1% already pays 40% of the taxes and the top 25% pay nearly all.
These claims the rich get breaks are neither supported by fact or reality.
Until people take responibilty for theirselves and their families then the issue won't be resolved.
Claiming that others to pay for something that you are not willing to pay for is not only blind hatred, but ignorance.
When Greenspan pushed for the SS Trust Fund in the early 80's, it was he who argued that no lockbox be placed on the SS's revenues.
It really was nothing more than a scam to give the rich a 50% tax cut, and pay for it by doubling FICA taxes, taxes that ONLY apply to the working class.
Actually, the top 25% aren't rich. The top 1% is only upper middle class. In parts of NYC, it's middle class.
When I talk about the rich, I'm talking about the top 0.3%.
There were no significant unfunded entitlements until the rich got a 50% tax cut. Just look at the history of the US debt. The SS trust fund came into place I believe in '83. And then Reagan dropped top marginal income tax rates on the wealthy from 70% to 50%, and then to 25%.
You can directly link this tax cut to skyrocketing income inequality, a ballooning of federal debt, and multiple economic bubbles. A progressive tax system is necessary to offset the natural wealth redistribution that's produced by the market. Otherwise you have a sluggish economy and a debt explosion.
Wealth is a relative measure and is certainly dependent on cost of living and location. My break down was an evaluation of tax liabilty as shown by the IRS. It clearly shows that there is already a aggressive tax policy against the wealthy.
Claiming the taxing the top .3% at excecessively high rates is really easy when you are not one of them. The belief is that, they can afford it so just take it is anti-american. So you basically can be sucsessful, but not much or the gov will take it?
Plus you could take 100% of their earnings and it wouldn't come close to meeting current spending.
Plus rich people are prtetty smart. Much like many are leaving high tax states, high Fed taxes will make them leave the country. And if you don't believe that, its similiar reasoning why jobs are moving over seas.
More taxes are never the answer, that is precisely what has happened for 80 years and the country is just getting worse.
Blaming economic woes on 8 years of Reagan just shows you political agenda rather than any conceptualization of what has occured over the past century
...but hear me out. If you find that anything I say here to be factually inaccurate, then let's discuss it.
Yes, you are correct that wealth is a relative measure. Cost of living and location factors into this greatly. But there is a level at which a certain degree of income translates into economic prosperity, and a lot of disposable income.
I realize that the IRS breakdown you were using is with the current tax code. That breakdown however, at least by historical standards, is not very aggressive. Here is a graph from the Heritage Insttitue, looking at the history of top marginal income tax rates.
http://www.heritage.org/Research/Taxes/images/figure2.gif
Notice that for most of the 20th century, these tax rates ranged from 50% to 94%. During this time, there were no economic bubbles. Currently, top marginal income tax rates in other industrialized countries average around 50%. If you like, I can provide data on this. The current top marginal income tax rate in the U.S. is 35% (Obama has talked about raising it to 39.5%, as it was under Clinton, and I don't know if this has been pushed through yet, or how the health care bill might affect this). For this reason, I can't characterize the current tax code as very aggressive against the wealthy. One of the ways that numbers can lie is if you look at percentages of who contributes the most to the IRS. This is the case, only because of the great degree of income inequality that's developed over the last several decades. To put it succinctly, the rich are getting richer.
I value success as much as anyone, but to me it seems more humane and just that the majority of taxes be paid by those with the most disposable income. If you were to adopt an income tax today, as we had until the early 80's, then that would mean we'd have a 70% tax on top marginal incomes. Adjusted for inflation, that 70% rate would kick in only on incomes above 2-3 million a year. All income earned below that is taxed at a lower rate.
If we did tax this group at that rate, then it could very well meet current spending, or at least get us most of the way there. One curious side note about this was that many medium sized business owners would not claim as much income, in order to pay a lower income tax rate. Instead, they put extra money into their businesses. By a weird set of circumstances, higher income tax rates increased business investment, which in turn produced greater economic growth. This extra economic activity produced a greater number of tax returns.
There's a lot of reasons why jobs are going overseas, but it's primarily has to do with the availability of cheap labor overseas, and a trade policy that does not offset this to protect the domestic job market. You're quite right that a higher income tax could very likely result in an exodus of entrepreneers. But as I said, with the world average at around 50%, we need not keep it at 35% to keep them here.
I think more taxes is a vital part of the solution. That's just what I believe. And I think the track record over those 80 years show that it allowed the U.S. to become the most powerful economic engine the world had ever seen. It may have even contributed to it. And I think the track record from the last 30 years, since these taxes have gone down, demonstrates that current tax policies aren't working.
I fully admit that I am opposed to what Reagan did, but I believe our current problem wasn't because of his policies back in the 80's, but rather the continuation of those policies for the last 3 decades.
Privatization is a bad idea. It would have lost billions the last few years. There are plenty of ways to invest your money if you want. But SS should be a sure thing and not subject to the ups and downs of the markets.
In my opinion the entire privatization was an attempt for corporations to raid the Social Security Funds. They have seen how much 401K's and IRA's have increased the market, and seen privatization as a way to put a big infusion of money into the market.
lose a couple trillion during the last 18 months or so? Being a recepient of SS, I can tell you it is most assuredly NOT a sure thing. I get a letter every few months from the SS Administration wanting to change my monthly benefits for one reason or another. Mostly for increases in Medicare Part B payments, which is deducted from SS monthly payments. Or, they have changed my benefits based on the IRS adjusted gross income from 3 years ago. Got no check at all in Dec, 2009, due to their fuck ups. It's actually a pain in the ass trying to keep them straight.
Don't know your age, but I can foresee when the eligible age for SS benefits will be raised to 70, there will be a means test to qualify for monthly payments, and the annual salary cap will be eliminated, same as Medicare. How much of a sure thing is that?
Also, please explain how privitization would allow corporations to raid the SS funds. Perhaps you misspoke.
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Not an expert on it ...
I think you were talking about the proposals few years ago regarding SS surplus fund investment being partially diverted into private company stocks.
That did not happened.
If it did, it would mean more "state owned" companies.
Guess what, it happened anyway -- when the financial crisis happened in 2008, the TARP (troubled assets rescue fund) went into GM, BOA, ... they became partially state owned. Then, they did well in 2009, and now they are paying back on that money they borrowed.
Things happened in a strange way.
Back to your original question, if they were "state owned", would they get into trouble anyway? I think they would -- because the crisis was caused by the mortgage market -- state owned wouldn't exempt them from being in trouble.
Thanks guys. Alot of good reading here. I am now starting to look at getting into investing. After the events of the last year, I am humbled to realize how very little I understand the financial market. So I've been doing lots of research before I put real money on the line. Sometimes it feels like I'm trying to read a foreign language LOL