A Forum for Grinches and Ho-Ho-Hoes

[sgtclub]

Originally posted by taxwonk
The problem with "wealth" created by a surp;us of dollars chasing a fixed amount of capital, is that it creates a bubble. The bubble is inevitably followed by a vacuum. Witness the tech bubble.

Why is that the case if, as Sidd says, we will have $30 billion of new capital just from private accounts coming in each month. In other words, doesn't this create a new equalibrium, albeit, one less tied to valuation than even today?

[sgtclub]

Originally posted by Greedy,Greedy,Greedy
Another analogy is the real estate bust of the late 80s. What's especially interesting about that one is that the run up in investment was caused, in part, by government policies (especially the availability of real-estate syndications that functioned as tax shelters) and the bust was triggered to a great extent by those policies being reversed (in the 1986 Tax Act).

What both you and Wonk are saying is that a reduction in demand caused the bust. But if $30 billion in new capital is coming in per month, that should mitigate any drop in demand, shouldn't it?

[taxwonk]

Originally posted by sgtclub
Why is that the case if, as Sidd says, we will have $30 billion of new capital just from private accounts coming in each month. In other words, doesn't this create a new equalibrium, albeit, one less tied to valuation than even today?

Because of the vast sucking sound created by the folks who sell out, taking their profits and investing in things like vacations in the Bahamas and Porsches.

Sooner or later, that sucking sound will reach a crescendo as the PRA investors realize that stock prices have stopped going up, and in fact are dropping. About that time, they will be switching their investments into the bonds that the rest of the SS funds have been invested in all along, in order to protect against further losses in their private accounts.

[Greedy,Greedy,Greedy]

Originally posted by sgtclub
What both you and Wonk are saying is that a reduction in demand caused the bust. But if $30 billion in new capital is coming in per month, that should mitigate any drop in demand, shouldn't it?

Weren't you there?

As to tech, there was no drop in demand; there were products being developed with the goal of creating a demand. The demand materialized more slowly than anticipated.

For the real estate game, it was a question of when the capital would run out. The tax code changes were in part resulting from a recognition by the Dems and Republicans (remember, they were pushed and signed by Reagan) that the incentives were dreadfully alligned for long term growth, and those changes just accelerated the inevitable.

More capital chasing bad capital won't change the situation. Smart capital will find the better markets, and the investment that are dependent on continuing capital influx instead of real economic return will eventually bust.

I've been steering a disproportionate portion of my portfolio overseas the last two to three years. As I think about it, if private accounts go through, not only will I increase my allocations to overseas investment, but maybe I'll also stick some fun money in exchange rate derivates, betting that an increase in money supply will result in a further deterioration of the dollar. Seems almost inevitable if a ton of capital is let lose, doesn't it?

[Tyrone Slothrop]

Originally posted by Adder
We have been over this before, but you know that I have never argued that SS should be privatized because of an impending crisis. If all we want to do is "fix" the current system, there are easier ways to do it.

But it is nice how you reliable bring back this straw man.

I didn't mean to attribute this sort of doublespeak to you. It just seemed relevant to the discussion of historical returns. Sorry if I implied otherwise.

[Tyrone Slothrop]

[sgtclub]

Originally posted by Greedy,Greedy,Greedy
Weren't you there?

As to tech, there was no drop in demand; there were products being developed with the goal of creating a demand. The demand materialized more slowly than anticipated.

I don't mean demand for products or general economic demand, I mean demand for stocks.

For the real estate game, it was a question of when the capital would run out. The tax code changes were in part resulting from a recognition by the Dems and Republicans (remember, they were pushed and signed by Reagan) that the incentives were dreadfully alligned for long term growth, and those changes just accelerated the inevitable.

But this is exactly my point. If an additional $30 billion is coming in each month, it should mitigate any drop in demand.

[Greedy,Greedy,Greedy]

Originally posted by sgtclub

But this is exactly my point. If an additional $30 billion is coming in each month, it should mitigate any drop in demand.

Only if the $30 billion doesn't care what its return is. Are you sure you never worked at a dot-com? Boy, it was fun to think there were no limits. Damn, it really sucked to discover them.

If the only way to support a stock is to keep the capital rolling in, you are in a tradition pyramid scheme/bubble world. They always crash.

[Secret_Agent_Man]

Originally posted by Tyrone Slothrop

"No, really! Republicans do like black people."

S_A_M

[Greedy,Greedy,Greedy]

Originally posted by Tyrone Slothrop

LB: You know, there is always a place in the army...

Boy (to self): Damn. She knows how mommy and daddy voted and wants to kill me.

[taxwonk]

Originally posted by Tyrone Slothrop

Some day soon, Lord willing, it will be legal to eat you.

[Bad_Rich_Chic]

Originally posted by Sidd Finch
Spoken like a true 25-year old. You'd be a lot less sanguine if you were 70 and lost 30% of the money you depended on to provide a bare minimum of support.

spoken like a true 25 year old, because most 25 year olds I know (most 30-somethings, too, myself included), don't think there will be any meaningful SS benefit for them at all when they retire, so they are already planning to depend entirely on market returns for their retirement. That's all water under the bridge for many X-ers and younger. The real concern is that, before we retire and get nothing, we will have the shit taxed out of us to provide for boomers, eliminating to some extent our ability to save enough to cover our own asses.

I think the Dems, incidentally, are making a mistake by focusing on the AARP-set to battle Bush's proposals. They risk really pissing off the younger voters (including some of the younger boomers) who are very aware that, whatever is done or isn't done w/r/t retirement benefits, they are probably going to be left holding the bag, not the current oldsters and probably not most of the boomers. Being seen to do something (anything), offering some (any) solution for consideration & debate, is far better than claiming nothing is wrong and slamming opposing party attempts to come up with something. Personally, though I think Bush II has been shockingly fiscally irresponsible, this admin's willingness to actually propose SS ideas is winning grudging appreciation from me. I'm not sold on PSRs, by any means, but then again, from my p.o.v., just about anything they try can't work out much worse than the status quo. Unless PSRs somehow fuck the market up for the rest of us (not an unreal possibility), since I don't feel I have anything to lose I'd just as soon see them tried as nothing - and nothing is pretty much what has been proposed by the Dems ('cause there's no problem, you see - decades of claiming that there was a looming SS crisis that Rs didn't care about because they hate the working poor, and all it took to magically solve the problem was an R proposal to fix it!). Anyhow, Dems should fight PSRs on the merits by all means, but they need to recognize that the people at risk are not current near retirees, it is the relatively young, who are fully aware that they are fucked, and are very willing to hear all arguments on how to get un-fucked, and are likely to feel some fondness for & possible loyalty to anyone actively trying to get them un-fucked.

And, for clarification's sake, I do only give a shit about what the effect of any plan will be on me. Current old people & near retirees can go fuck themselves. They are the richest quintile of the population, they voted for Regan (twice), and if they blew all their money on SUVs and monster houses expecting to be able to suck off the public teat when their income dried up, well they can just fuck off and die old, alone and eating cat food. Of course, we also know that I am the queen of the "fuck the oldsters" routine.

Cite, please. Most people in this country perform miserably in saving money,

2.

Although the low savings rates for americans are somewhat overstated - "savings" as defined in those international comparisons doesn't include money invested (for instance - your Schwab account or your 401(k)), or equity in one's house (speaking of bubbles), and those figures are much higher for Americans than just about anyone else. I believe the usual "savings" definition used even excludes the money market account that I consider to be my "savings" account which, in my case for instance, would mean that while I believe I have something north of $150K socked away in various kinds of "savings," I would register a big ol' 0 in terms of my official savings rate. Those investment-style savings Americans favor also have (historically) higher rates of return than traditional "savings," so Americans, arguably, don't need to save as much as, say, the Japanese or Europeans, who earn much lower returns on their savings.

Er, that was just an aside, relevant to nothing in particular.

[Mmmm, Burger (C.J.)]

Originally posted by Bad_Rich_Chic
spoken like a true 25 year old, because most 25 year olds I know (most 30-somethings, too, myself included), don't think there will be any meaningful SS benefit for them at all when they retire,

When they say this, what exactly do they mean? I think SS will be around in a form similar to what it is now, albeit different benefit structures (more keyed to the bottom end).

But that's not so important. For anyone on this board, unless there's a really devoted public interest lawyer, SS is irrelevant because the benefit levels are way low. Even if you pay in the max amount each year, the current benefit is about $24k/year. Not a pittance, but hardly enough to keep anyone living in the manner to which they've become accustomed. I've been saving because I don't want to live on only that. And I'd save regardless of SS.

[Greedy,Greedy,Greedy]

Originally posted by Bad_Rich_Chic
Current old people & near retirees can go fuck themselves. They are the richest quintile of the population, they voted for Regan (twice), and if they blew all their money on SUVs and monster houses expecting to be able to suck off the public teat when their income dried up, well they can just fuck off and die old, alone and eating cat food. Of course, we also know that I am the queen of the "fuck the oldsters" routine.
2.

I think the fuck the oldsters approach should be modified -- you are, for the most part, talking about separate sets of oldsters. I will talk about them, if you will, as two groups -- your parents (the people who can fuck themselves) and my parents (the people who need and deserve social security). No offense, please, and no similarity to actual people is intended (except that my parents really are my parents).

Your parents are the middle and upper middle and filthy rich oldsters who voted for Ronnie, spent money on big houses, and are now left with (i) big house, fully paid for, (ii) a fat 401(k) that they don't want to draw down too fast, and (iii) little income, all blown. For them, social security is a safety net, but they have alternatives.

My parents worked hard their whole life, voted Democratic, lived in a rural pit where house prices never did really appreciate, and ultimately retired on a small pension, some IRA money put aside over time, a little inheritance from one grandparent that was enough to finish off the mortgage, and social security. Social security is about 60% of one parents income, about 35% of the others (they are divorced).

Don't screw my parents. If we have to screw someone, make it your parents -- stick some kind of means testing on it that gets to that big ole house.

If we screw your parents, they have to let out the spare bedroom.

If we screw my parents, they have to move in to my spare bedroom.

I will pay royally to keep my parents out of my spare bedroom.

[Greedy,Greedy,Greedy]

Originally posted by Mmmm, Burger (C.J.)
When they say this, what exactly do they mean? I think SS will be around in a form similar to what it is now, albeit different benefit structures (more keyed to the bottom end).

But that's not so important. For anyone on this board, unless there's a really devoted public interest lawyer, SS is irrelevant because the benefit levels are way low. Even if you pay in the max amount each year, the current benefit is about $24k/year. Not a pittance, but hardly enough to keep anyone living in the manner to which they've become accustomed. I've been saving because I don't want to live on only that. And I'd save regardless of SS.

Not irrelevant at all. See prior post about my parents moving in.