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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (15176)	11/8/2004 9:28:33 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

This won't make sense to some, but America has very little experience with investing huge sums for the nation's retirement. The market system so far relies on fairly risky stock and bond investments, then falls back to government funded Social Security payments when those investments fail. Australia has far more experience and not surprisingly uses a different approach. While a small portion can be invested in stocks and bonds, the major portion must globally diversified and invested in real and infrastructure with very, very, conservative leverage or no leverage at all. This is money which will be available for Australian retirement, regardless of when the next economic depression occurs. Of course, the larger problem for the U.S. is that there is no money to pay for an investment scheme replacement for Social Security. Almost every dollar of Social Security tax diverted to an investment scheme, rather than paying for current Social Security payments needs to be funded with debt or a new tax. Once someone decides what new tax will pay for the investment scheme, or who will buy the trillions of dollars in new government debt - only then can America face it's inexperience with investing where failure isn't an option. .

To: KyrosL who wrote (15176)	11/8/2004 11:02:43 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Although I am no Bush supporter, his program does not scare me. Privatization of SS, if done right, is a great idea. There is no need for individually managed accounts and lots of wall street fees. The money can be invested by autopilot in a broad market index. And taking the SS contributions out of the government's grasp is a great way to save SS for our children and grandchildren. You assume that markets go up over time. Someone tell that to japan in the 18th year of deflation. The second problem is the huge massive influx of money into the stock markets by such a program when stock valuations are already extreme to say the least. Imagine what a giant influx of money would do. Ultimately would it make any company more worthwhile to own on a cash flow basis? Down the road a bit, what happens to stock prices when fewer and fewer people are contributing and supporting lofty valuations? Does not the next generation get F*d just the same? What happens to all the people that select badly and choose the next enron? There are plenty of problems with the proposal. Mish