Posted on 07/10/2014 9:29:58 AM PDT by Kaslin
The stock market reached a record high last week, closing over 17,000 for the first time. Good news, of course. As President John F. Kennedy famously said, "A rising tide lifts all boats." But it sure helps if you own a boat.
In this case, the "boat" would be the dynamic American stock market.
But investors in the stock market disproportionately come from the top 1 percent, and they hold about 35 percent of all stocks and mutual funds. The next-richest 9 percent control about 45 percent. The remaining 90 percent have less than 20 percent. While nearly half of Americans have either direct or indirect investments in the stock market, half of Americans do not. And even for those who do, their home equity is still, by far, their largest investment.
President Obama wants to focus his remaining years in office on fighting "income inequality." To do so, he has proposed things like "promise zones" where federal grants and tax incentives is supposed to spark development. He has promoted silly income-transferring schemes like "cash for clunkers" and "cash for caulkers," and HAMP to help homeowners fight off foreclosure.
But there is something we could do immediately to help to increase the net worth of the bottom 99 percent -- allow private accounts for Social Security.
Chile recently celebrated its 33rd year of private retirement accounts. Its then-secretary of labor and Chilean pension system, Jose Pinera, went on television day after day to explain to cabdrivers, housewives and construction workers the benefits of allowing private savings accounts.
Pinera successfully persuaded 93 percent of Chilean workers to invest their "social security" contributions in one of several types of managed portfolios. Those who feared the "risk" of the stock market could continue as they did before. While U.S. workers pay 12.4 percent of their wages into Social Security, Chileans put 10 percent (or up to 20 percent) of their earnings into a private fund, earning compound interest. On retirement, workers can choose a life annuity or make programmed withdrawals. Heirs inherit what's left.
The result? Chilean workers averaged a near double-digit annual return on their money -- 9.23 percent above inflation -- over the first 30 years. In the U.S., Social Security nets a theoretical 1 to 2 percent return -- less for newer workers. Not only do they allow private accounts for "social security" in Chile, but also in Australia and the United Kingdom.
Columnist John Tierney, writing in The New York Times in 2005, calculated what his retirement benefits would be if he'd paid into the Chilean system instead of Social Security. He found he'd have three options: "(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age. (2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66. (3) Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000."
Social Security is an especially bad deal for blacks.
CATO Institute's Michael Tanner writes: "The longer you live, the more money you get from Social Security. But African Americans have shorter life spans than whites. As a result, a black man or woman earning exactly the same lifetime wages, and paying exactly the same lifetime Social Security taxes as his or her white counterpart, will likely receive a far lower rate of return. A study by the nonpartisan RAND Corporation found that the rate of return for African-Americans was approximately one percent lower than that for whites. The result was a net lifetime transfer of wealth from blacks to whites averaging nearly $10,000 per person."
Worse, the Supreme Court ruled long ago that one does not have a proprietary interest in his Social Security contributions. In other words, when the recipient dies, the "contribution" goes "poof." With private accounts, the money can be bequeathed to a family member or to a charity.
So why not private Social Security accounts?
The late vice presidential candidate, Rep. Geraldine Ferraro, D-N.Y., opposed private accounts for Social Security. She said if one lacked the "knowledge and the wherewithal to manage your own private funds ... you're gonna be out of luck." Out of luck?
Legendary investor Warren Buffett quotes his mentor, Benjamin Graham, who said: "In the short run the stock market is a voting machine, but in the long run it is a weighing machine." For the long term, prices reflect actual value, and investors who prudently and patiently "invest" in the stock market will have a much greater net worth and therefore realize the resources to enhance their comfort in their retirement years.
Democrats think Americans too stupid, too irresponsible and too impatient to manage their own Social Security contributions. Chileans can. Australians do. Many European and Latin American citizens do. But Americans, at least the bottom 99 percent, well, they're just too stupid to join the party.
I have made quite a bit of money in stocks over the years but I don’t pretend that it is a free or rational market absent manipulation by government and private entities.
Sorry, years ago I was inspired by one of my favorite Freepers...(ummm)...regnaD kciN
The part too many don’t understand is that if the stock market crashed today cash money would also be worthless.
The banks would close and inflation would go wild. If the market crashed today everything crashes with it.
You won’t be going to the store with a gold bar to buy anything either. What would people do with that gold bar, scrape off a loaf of breads worth?
Real property and the market is the only safe investment today.
Wrong. The money is earned by the worker and should not be confiscated upon an early death. The principal plus interest remaining should be part of the estate.
It will not end. They may change what they call it or use more proxy buyers. Or they may simply announce that they changed their mind and aren’t stopping.
Unless interest rates rise sufficiently to attract $1 trillion (new) dollars a year in T bill purchases by *someone*, they will have to continue.
Imagine the interest rates required to attract a new $1 Trillion EVERY year forever - because that is what must happen. Imagine what happens to the federal budget when the borrowing costs increase by a factor of 300-400%.
There is no way out of this. Only delay and obfuscation until some random, uncontrollable event causes the whole thing to unravel. When that happens, IMO it will accelerate as anything dependent on the herd mentality will do.
It’s just evolving (or devolving?) into a giant cluster f**k.
Ammo has come down in cost and increased in availability.
Canned good last indefinitely.
If you’re not an HFT trader, you’re not really in the game.
IIRC, the only way it becomes part of the estate is through survivor benefits.
You have to have a spouse for that to kick in (dependent children qualify, too).
Now THERE was an incentive to start corporate America hoarding hiring.
If you don’t live in moonbat dominated territory, Mainstreet can be pretty good.
In my area there is a return to new construction, not booming but good. A local industry has committed $1.2 billion to local expansion that is underway. Companies that export their specialized equipment are covered up with work.
People are moving up, selling their old houses and buying larger ones to take care of their increased family size.
In our local region we have three very large retail projects under development. One was idled sometime back but is now about through with the dirt work and ready to begin some construction.
Widescreen TV and 22-inch chrome wheel sales would jump tremendously.
Remember when George H W Bush’s policies carried over into a roaring stock market in which Bill Clinton took the credit? The National Debt was almost paid off as a result. Then in Clinton’s last year it went into free fall and Clinton did nothing to stop it.
It surged under G W Bush and then again went into free fall his last year.
Now I suppose Obama will grab the credit for this stock market surge, but just how close is the USA to getting out of the National Debt as a result, and will it go into free fall before the next election?
***Thanks to Fed Reserve QE to infinity,****
It is as if they took a sound dollar, ripped it into 100 pieces, and then declared each piece to be the equivalent of one dollar.
The yearly deficit was nearly gone but nobody has touched the national debt in my lifetime.
What about pension plans for both private and public employees? What about 401(k), 403(b), and other investment plans regular employees might hold? The people that benefit are NOT just the 1 percenters...
Once again, stocks automatically are adjusted for inflation. That's why stocks soar in a hyperinflation; plunge during deflation. It's not that hard to understand this. Takes more money to buy a share if the currency unit is worth less.
Most people don’t know how to manage their money.
In my plant, we have a good 401(K) system. Many people have nothing to retire on, because they pull that money out for trips, houses, boats, etc.
Now the 401K system is flawed (for instance, the Fedgov keeps rumbling about seizing those funds), but if you manage it well you can be ok. But most people just don’t have the self control to do so.
Well, yes it is.
You only get a little, but there are a lot more poor people than rich.
And if you can manipulate the system to feed into (EBT’s?) then they poor can be very good business indeed.
What they’re saying is that black people on average die younger. So they collect SocSec for fewer years.
It’s the same reason the Obamacare Death Panels will be a big plus for Soc Sec.
Every year you slice off the lifespan is HUGE for the financials.
The national debt continued to rise.
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