tag:blogger.com,1999:blog-11148260.post112329325138890962..comments2023-09-06T08:56:14.610-04:00Comments on Eidelblog: Investing in stocks versus government bondsUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-11148260.post-1123971159373402562005-08-13T18:12:00.000-04:002005-08-13T18:12:00.000-04:00Corey, Michael Tanner of Cato said in the Great So...Corey, Michael Tanner of Cato said in the <A HREF="http://eidelblog.blogspot.com/2005/03/great-social-security-debate-part-two.html" REL="nofollow">Great Social Security Debate</A> that the average worker will receive only a 1.4% return on what he pays in.<BR/><BR/><A HREF="http://www.nysec.org/pdfs/condensednysecdebate3-15-05.pdf" REL="nofollow">http://www.nysec.org/pdfs/condensednysecdebate3-15-05.pdf</A><BR/><BR/>The 1.4% is only because others are paying for it, i.e. those at the upper brackets of the payroll tax. By definition, government doesn't earn anything on the tax dollars it collects. Even if puts some money in interest-bearing accounts, that's not enough to offset the disincentive of the initial taxes. Bruce Bartlett has mentioned a midline estimate of every $1 in taxes discouraging 20 cents of economic production.Perry Eidelbushttps://www.blogger.com/profile/09707615907666584863noreply@blogger.comtag:blogger.com,1999:blog-11148260.post-1123705366757894092005-08-10T16:22:00.000-04:002005-08-10T16:22:00.000-04:00If memory serves me correctly then by 2040 or so t...If memory serves me correctly then by 2040 or so the negative return goes over 100%. It is already negative now if you think about it. The SS 'trust fund' is about a $1.7 trillion loan to the general treasury. How can the general treasury pay that back? Only through taxes. Who pays the taxes? You and I. So in order to get that $1.7 trillion in SS benefits we will have to pay $1.7 trillion plus interest in taxes to the general treasury.<BR/><BR/>It is a scam.TKChttps://www.blogger.com/profile/00034651417671564654noreply@blogger.comtag:blogger.com,1999:blog-11148260.post-1123645144668779632005-08-09T23:39:00.000-04:002005-08-09T23:39:00.000-04:00I worked for a couple of years at Morgan Stanley, ...I worked for a couple of years at Morgan Stanley, at a retail branch. We had very nice color charts about stocks' performance to show potential clients who weren't sure about stocks. The best chart tracked inflation, Treasury bonds, small-cap stocks and large-cap stocks. Anyone can eyeball it for just a few seconds to see that both types of stocks are far superior. The key is to diversify.<BR/><BR/>When I started at Morgan Stanley as an intern, I asked my advising professor if he invested. If he wanted, I could have referred him to a good broker. My professor said he had money in a simple S&P 500 index fund. At the time I thought, "Certainly he could pick something with better returns?" Then I got deeper into the business and learned why S&P 500 index funds are great. They're ultra-diversified, you can maintain your investment for a fraction of a % (versus a professional money manager that will want 1%), and over time the S&P 500 is nothing to sneer at.<BR/><BR/>S&P 500 index funds are also the backbone of the Federal Thrift Savings Program. Read <A HREF="http://www.nationalreview.com/nrof_luskin/luskin200412271005.asp" REL="nofollow">this piece by Don Luskin</A> for more info. Half of the investment gains came via the S&P 500 fund, though only an average of 30% of the accounts' values were invested that way.<BR/><BR/>We can read Krugman's inanely pessimistic rantings, or we can read this incredible book: <I>The Morgan Stanley Guide to Personal Investing</I>. I highly recommend it from experience: it's a great primer for beginning investors, and a good refresher for experienced ones. One of its great points is that even had you invested in stocks just before the crash, today you'd still be in great shape. Give the markets time.<BR/><BR/>Oh, TKC, it's even worse: the last SSA trustees report said that Social Security will need to start redeeming the bonds in 2017. What will we do if it becomes 2016, then 2015? Time's already running out.<BR/><BR/>But let's follow Krugman's advice and make Social Security solvent by rolling back Bush's tax cuts. That's brilliant, you know, fixing Social Security while at the same time asphyxiating the economy and creating unemployment. One of my earlier blog entries pointed out that Krugman won't dare agree with big liberal (socialist) groups like the Economic Policy Institute. The EPI says Social Security can be made solvent immediately by lifting the cap on payroll taxes, i.e. you and your employer get taxed 12.4% on all income, not just the first $90K. Krugman's rich enough that paying it on his entire income is quite a hit -- and it doesn't have deductions like income taxes do.Perry Eidelbushttps://www.blogger.com/profile/09707615907666584863noreply@blogger.comtag:blogger.com,1999:blog-11148260.post-1123622005190871902005-08-09T17:13:00.000-04:002005-08-09T17:13:00.000-04:00Wow! Thanks to Perry for crunching the numbers. ...Wow! Thanks to Perry for crunching the numbers. I knew it would be a good sized chunk of change, but I didn't think it would be that big. And this sample is not an entire working life time. 1987 to present is only 18 years. I'll make a wild guess that most people will work around 40 years (age 25 to 65). So his sample is less than half. And since the DOW has never declined, EVER, in 40 year period, your retirement investment should snowball. <BR/>Come 2018 SS will have to start drawing from the general treasury instead of lending money to it. It is a double hit just to keep current spending levels. The first hit is that they'll have to get more in taxes to cover what the SS fund is no longer lending. The second hit will be the taxes that will have to raised to pay back what SS has already lended. Like any ponzi scheme, this is doomed to collapse. Guess who ends up holding the bag? Everyone paying taxes. <BR/>And to think an average worker could have had $130K portfolio as an asset at just under the halfway mark to retirement!!!! Instead we get $70K of a liability. If people only knew this then SS would be voted down tomorrow. Instead, people read Krugman, and are being led into disaster.<BR/><BR/>Unfreakinbelievable.TKChttps://www.blogger.com/profile/00034651417671564654noreply@blogger.comtag:blogger.com,1999:blog-11148260.post-1123604027108348902005-08-09T12:13:00.000-04:002005-08-09T12:13:00.000-04:00One of the statistics I've read is that if you had...One of the statistics I've read is that if you had invested $1 in the Dow Jones Industrial in August 1929 (1 month before the crash), that $1 would have been worth over $700 in 1989. Hello! I'm thinking that means that if you had put $1000 in in 1929 it would have been worth $700,000 60 years later. Keep adding zeros. That's a mighty impressive retirement. And way ahead of inflation. And the DJI is not risky or high growth. Compare that to the complete lack of growth in the money that you involuntarily invested in SSI over a 50 or 60 year period of time.Anonymousnoreply@blogger.com