Stock market and social security

Here is the thing. At one time the media was much more honest then they are now. Because I distinctly remember reading an article about Mr. Bush proposing to a group of investment companiies about his idea to go private with social security. They didn't like the idea at first becuase of the liability of loss, etc, etc. I can't remember all the details, it was years ago that I had read that. Now - I feel like I imagined it, becaue the media doesn't even bring it up. The same thing about the war in Iraq. Before we went to war, deals were being made to have Saddam step down, and you don't here anything about that anymore either. Everyone is led to believe that we went to war take Saddam out, that's just not true.

"A fool says I know and a wise man says I wonder."

A myth about wealth

question, "I don't think your equation works very well at all.
It is like owning a house. If you do some landscaping and renovations, and keep up with repairs, your house will likely appreciate in value over time. This does not mean you have benefited at the expense of anyone else. Investing in stocks works the same way. The company reinvests most of its profits in expansion and improvements; if they do this wisely then the company will grow in value. It is not the zero sum game that you suggest it is."

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Answer: You still haven't told us how the wealth created in winners' gain. The sample you given is a misleading of company's activity with stock trading. A company of course must work hard to earn a profit so it can distribute dividend to investors. They plant, produce, or do a house repair as you said. It doesn't related to stock trading. The wealth company created was used to distribute dividend. When you said company reinvested its profit in business, that means company diverted the dividend investor deserved to re-investment. You know there had been a period that Microsoft holding the profit and hadn't distribute the dividends to the stock holders. That is typical story fits your "company grow in value". But it belongs to the category of dividend distribution. I have said the dividend is the same thing like interest paid by bank to its investors. There is totally nothing related to the profit gain in stock trading. If you want to know where the profit of winners came from, go to my eqation. It is from the losers and potential losers. Or you show me where it came from.

My equation: Profit( stock winners gain)+ Capital gain(Company issued stock) = Loss(losers) + Potential loss (One who hold the stock)

Or to satisfy you: Profit(stock winners gain) + Capital gain (Company issued stock) + Capital gain 2 (Company re-invest with money originally should be used as dividend) = Loss (losers) + Potential loss (One who hold the stock) + Loss (Investor loss of dividend)

That Capital gain (company re-investment) is always equal to Investors' loss of dividend. It should belong to the category of dividend. (I omitted it because it is similare to interest)

What I think is that the politicans in Congress should work together on a plan. There is too much Liberial vs. Conservative. Social Security is about people's retirement. Good grief! Those politicans better stop playing games and get on it.

I can't find the messages I posted after 8/24 in this thread. Someone took away the posts? Or is that only applied on me to make me look like insane?

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9. How to blow a balloon bigger (7/29/05)

If the paper value of the whole stock in maket is 20 t (trillion), then there may be only 1 t stock is active in trading. The rest stock is inactive (sleeping stock). Because some owners hold it to control the company; some owners hold it as long term investment. (mostly the people hold it as retirement investment)

Only a little fund can change the whole value. When there is 1.1 trillion investment fund entering the market and caused a 10% increase on 1 t stock, the rest sleeping stock(19 t) felt their asset increased by 10% too. That's how a baloon is multiplied by 19 times.

So there are two ways to increase stock market value.
1. To increase the investment fund in the stock market. This is what government has done to push the pension fund, 401(k) fund into the stock market. And Bush is doing now to put S.S. fund to the market.

2. To reduce the stock for sell also can raise the stock price.

When the money supply is 1 t. But the supply of stock for selling increased to 2 t, then there will be a 50% drop of price.(1t fund/2t is 0.5) Original $1.00 share can only get $0.50. If the stock for selling reduced to 0.5 t. Then the price will double. $1.00 share can sell for $2.00. A 100% increase. (1t fund/0.5t is 2) Reduce the quantity of stock for selling is a more effective way to boost the price.

This is why Bush's plan allow the privatization fund heritable. Old people would have sold the pension stock because it's foolish not to spend it before their death. Now they will think, "if I have no necessity to sell it, whatever happen to me, my son will have it." The inactive stock will go on sleeping. There will be a significant quantity of stock avoid to be sold in the market.

While a small amount of investment fund (say, 1t) support a fantacy of a big treasure ballon (say, 20t), interest group hope more people sleep on the paper stock to go on with their dream. So it will make them easy to blow the balloon bigger and delay the crisis from exploding.

10. "Sleep with the stock paper", better forever(8/9/05)

When I have learned the rare data about average investor's return (3.7%), I was surprised that how such a data could be leaked from a tight censorship net of Inside Group.They want people sleeping in the dream that stock market is a gold mine with high profit gain.

A lot of people thought because company having a good business, so stock could be sold at a higher price. That the profit of stock trading was from the wealth comapny created. It's wrong. The wealth company created were distributed by dividend. Even some CEO re-invest or buy back the stock, the money they spent is still a steal from the dividend that shareholders deserved. The reality is sellers profit (or loss) came from the money paid by buyers not from company.

If a company had a profit margin at 1.00/share, and stock price was $10.00, when it makes 1.20/share next year, should the stock price be raised to $12.00? Not neccessarily. When buyers is tight with money. It could be still $10.00 or even a loss, $9.00. It depends on the supply and demand - the stock for sale and new fund willing to invest.

The Nasdag collapsing in 2000 is such sample. When Inside Group thought it was time to harvest, they poured out the stock they held. The investment fund couldn't maintain the usual price, a collapse took place. Did high tech. business had trouble then. No, they still made same profit as usual. But when there was not enough fund going to the market to buy increased amount of stock for sale, the stock price dropped to the bottom too. Nasdaq index lost 2/3 from 5000 to 1700. Those who slept with stock paper with the dream of high profit gain lost their most. The loser is always average investor.

I re-read that "Break the buy-high, sell-low pattern". I found the point of article is: "And that's where some of the good news comes in. Investors slowed the rate of redemptions last year to a pace that would lengthen average stock-fund ownership to 4.2 years. (the 20 years average is 2.9 years) " It advised that if people could hold the stock longer, the return would be better. So in the end it wrote, "As a long-time practitioner of dollar cost averaging, I can note one other benefit: You don't have to make a lot of decisions and you don't second-guess yourself. So you sleep better."

The purpose of the article is clear. With the release of data, it wants you hold the stock not for trading. The longer the better. In last message "9. How to blow a balloon bigger" I've told of the best way to boost stock price is to reduce the quantity of stock for selling. It will make them easy to blow the balloon bigger and delay the crisis from exploding. That's why Inside group want you "don't make a lot of decisions and sleep" on that paper. Better forever.

11. Squeeze every bit of your retirement fund to support a stock market balloon.

Read my message "9. How to blow a balloon bigger" you know There are two ways to keep stock price from falling. The two articles from Mercury News show how this government and the media they controlled are working hard to push every bit of money to the stock market to keep the balloon from exploding.

1. One way is try to find every bit of money available in 401(k).

Re: "Automatic enrollment in 401(k) plans is endorsed

Workers must choose not to contribute

By Jack Sirard, Sarcramento Bee

..... Studies show that up to 20 percent of employees who are eligible to join theri
comany's 401(k) plan fail to do so.

..... Automatic enrollment, which is a growing trend nationally, changes a worker's decision from having to choose to join a 401(k) to having to choose not to join. "
(Mercury News, 7/24/05)

Thus the 20% workers who haven't made up their mind are automatically being pushed into an investment pension fund.

2. The other way to keep the stock price from falling is to reduce the stock for selling.
Re: "Almost half of job-switchers cash out 401(k)s

By Kaja Whitehouse, Dow Jones

Almost half, or 45%, of all workers who left their employer last year opted to cash out their 401(k) savings, according to a new study. .....

Employers would often force distributions for accounts worth less than $5,000 because they found them too costly to maintain. .....

Under the new rules, employers are required to either maintain small balances - defined as anything between $1,000 and $5,000 - or automatically roll the money into an IRA when workers depart. This way, workers with small balances will only take their money in cash if they take the initiative to do so. "
(Mercury News, 7/26/05)

This is how they push workers to join 401(k) investment plan, and try their best to prevent workers from cashing their 401(k) portfolios, even if it's a small amount.

12. Paper value (9/2/05)

Why did I say people who bought the stock are sleeping on a paper? Because if it is liqudated, most likely you will get little money back. And CEO of these big firms don't work for the interest of shareholders but for the interest of Inside Group.

Five years ago, when managers of pension fund held billions of Enron's stock, they never knew they were holding only a bunch of pieces of papers which worth nothing. Did Enron lost its value in one night or just in a short period? No. A lot of firms are run in same way. What about GM? It's bond was ranked as junk recently. What does that mean? It means GM is in same level like Enron had been. The debt it owes is much bigger than its asset. The long term bond GM issued is about 300 billions. Compare to Iraq war, its cost is only 68 billion a year. Yet, GM is still a foundamental stock of Dow Jones index. How many other companies are in the same level?

Since stock market is such a market full of balloon. Those expert who know it deeply avoid to get involve in it. Here is an article published recently.

"Greenspan invests cautiously

By Jeannines Aversa, AP,

Greenspan keeps all of his holdings in money-market accounts and Treasury securities, which are considered the world's safest investment, a financial disclosure form shows."

(Mercury News, 7/29/2005)

Further more. on 8/27/05, Mercury News reported:

"It can 'readily disappear' if economy stumbles

Rising house and stock prices have made many people feel more wealthy and have helped to support consumer spending.

Greenspan, however, said people shouldn't count on that paper wealth, which can evaporate if economic conditions deterriorate rapidly."

I have repeatedly said the stock is no other than a paper in this thread. Seven days ago, Greespan's comment proved my opinion.

13. Fallacy (9/12/05)

Fallacy 1. "Politicians stole all the extra SS tax money and spent them in the general fund for their own purpose."

Answer: The surplus of S.S. tax are now in the form of "I.O.U." which is no difference to the national bond.

To the logic of fallacy, when people deposit their money in bank, he will rant: "The money is all gone. The bank spent it by lending it to the others. But what's the business with him how does bank spend the deposit? What people care is the bank will pay them back the deposit with interest.

In sameway, what's business with him when the Congress spend it in general fund? Only when they will pay it back with interest. Remember if they don't borrow from S.S.Trust fund, they still will borrow by issueing Treasury note.

Fallacy 2. "I like privatization because I can handle it by myself. I want have my own choice."

Answer: The original purpose to set up Social Security is to guarantee people will have a stable income when they retired. Privatization won't guarantee this. It put Social Security in a risk.

People pay insurance company. The payment is guaranteed to be used in retirement payment. Bush lured them to a casino, said that people may win more. The reality is people then will exchange their money with a paper its value may evaporate when economy turns downward.
It's not for a stable society but lead the society to an dangerous gamble.

Yes, there are many choice of gamble: Black Jack, slot machine.... but more you gamble more you will lose.

Fallacy 3. "Social Security will collapse".

Answer: It's an intimidation. A tactic Bush used to use all the time. He had cried, "sky is falling" 28 years ago, the sky didn't fall.
Re: 'For Bush, a Long Embrace of Social Security Plan
By RICHARD W. STEVENSON
Published: February 27, 2005

in the summer of 1978, in the heat of his unsuccessful race for a House seat from West Texas, G.W.Bush said Social Security "will be bust in 10 years unless there are some changes,"

http://www.nytimes.com/2005/02/27/politics/27social.html?pagewanted=1&a
mp;ei=5094&en=0a958f02348dd46b&hp&ex=1109480400&partner=h
omepage

He scared us into an unnecessary war. He is now scaring us to give him the power to handle our retirement fund. But insolvency is 37 years away. (2042) If US could solve the same problem in 1978, so can they do in 2042. Bush has better to deal with the historical national deficit which he created. If he can't handle the war spending and disaster spending well, US economy will collapse much earlier than S.S. he intimidated.