Time to start off a new week. Let’s hope this week has less tragedy than last week.
Will Japan get their nuclear power plants under control? Will fighting in Libya stop? Will the Government keep running? Will we have a break from man-made and natural disasters?
And then there is that secret Leprechaun and pot o’ gold coming up on Thursday. Any good recipes or events? Where is the best place to drink green beer?
Your choice of conversation.
Man this is ugly overnight action in the market. The Nikkei (Japanese index) is down 6.5%!
@Moon-howler
Hate to tell you, but the boomers are not getting the money that THEY paid into the system. That tax money is gone. There is no account. The boomers are getting the money paid into the system NOW. And any system of government that takes money from one group and pays it directly to another is a form of welfare. Social Security is a combination of ponzi scheme and slush fund tax. It passed constitutional challenges because it was described as a tax even though it was not marketed as such. Social Security is a tax. Its no longer our money. Medicare/Medicaid are the same. We paid into it, but its just another tax. There is no account for you or me.
Stealing from the poor and giving to the rich is completely American. From the Whiskey Rebellion to now, government has always taken from the poor and given it to the politically connected. What do you think that the stimulus bills were about? Even Social Security is a tax on the poor. Rich people don’t contribute any more money. Corporate welfare is the same thing. Tax the citizen to subsidize corporations.
I forgot the link. Read the comments, too. There is some good stuff in there.
http://www.realclearpolitics.com/articles/2011/03/07/why_social_security_is_welfare_109126-comments.html
@Moon-howler
I don’t see it as supporting a power grab and I’m still very uncomfortable with it. The idea of giving — Freedom of the City — to an unelected person and overthrowing the legitimate local government is not something I feel overwhelming comfort with. I square this with the idea of receivership. That’s also not to say that the person appointed couldn’t unilaterally raise taxes as well as crushing collective bargaining.. It would seem that all options would be open to that person.
I just don’t see any other available option. Some local governments just have dug themselves so far into the ditch and are so underwater that they just refuse to accept that they’re drowning.
It’s actually pretty sad.
Did anyone look at their Social Security account? If not, why not?
@Cargosquid
Thanks to the continiuing raids on the fund and the paper IOUs, you are right. Your money goes in my pocket . Bwaaaaaaaaa! So hurry up and turn old so you can collect yours before it is all gone. But trust me that getting old is not for wimps.
Agree with George. And George and I probably paid for you all’s grandparents. That’s the way it works.
And the raids continue. The lying bastards who are running VA (pssssst it isn’t the Democrats) also said they had a balanced budget last year. Guess who they balanced it? they raided the state pension fund all while the rest of the Republicans sat around hi fiving each other. I guess its ok then.
Me? I have declared war. I paid my way. Keep the welfare recipient talk up. Guess what my next words will be?
Is it almost time for me to say “I got mines?” The other words I will say …well one starts with F….the other starts with U.
Cargo, you don’t get your own money back from stocks or from 401k plans either. Does that make people who sell their stocks welfare recipients? How about taking monthly money from their 401k program?
@Moon-howler
I agree about the GOP and their “balanced budget” problems. I don’t like it either and I still don’t say that Virginia has a surplus. Until the bills are paid, there is never a surplus.
As for getting you money back from equity and 401K plans? I don’t quite follow.
If you put your money into an account and buy something, and then selling at a profit,…..that is not the same thing as the government taking someones’ money and giving it to you.
Over at Instapundit: READER RICHARD AUBREY OFFERS A THOUGHT EXPERIMENT:
So, suppose between the earthquake(s), the tsunami(s), the vulcanism, and possible large-scale radioactive contamination, the decision is made for all Japanese to leave the Islands. All.
Do we charge them to come here or pay them to come here? Front of the line in immigration? Hypo, of course, but perhaps cause some thinking in one direction or another about why one chooses either answer.
Hmmmmmm…….
@Cargo, you are thinking present tense. The govt. took my money for years. I am assuming it gave it to someone else. When its my turn, they will continue to take my money but give me some money back for what I gave them.
If I pay into an insurance policy for years, my money goes to pay off clients. When I croak, someone else’s money will pay off my family.
I don’t see the differerence. I like to think that I paid for my grandmothers and parents to have social security. As for medicare, it isn’t even close to being free.
None of this makes me a welfare recipient. I have more than paid my own way.
Speaking of welfare, a lot of people are going to need it after today’s market action.
@Cato the Elder
You may get your wish about IBM at $151!
@Moon-howler
You are assuming that, like an insurance company, the government has a fiduciary responsibility to pay you as per your contract.
Social Security is nothing more than a tax. The money goes into the general fund and gets spent. Pay outs come from the general fund. And they can modify or stop it at any time.
Medicare isn’t free. Its still paid for by taxes.
@Cargo, no, I am not assuming that I have a contract with the govt to pay social security. I am saying that the pay in/pay out process works in a similar way.
As for SS being nothing more than a tax…sonny boy (putting on my grey wig), I think you are looking at SS from the wrong side of the desk. It is a great deal more than a tax to many people, soon to be 78 million more people.
The only point I am making is that it is not welfare and people who receive social security payments are not welfare recipients. People who say they are are being extremely insulting to a huge portion of the population.
At some point, the US will no longer be able to issue debt and sell it in the public markets to investors because of the inevitable loss of our creditworthiness and the resulting increase in interest rates. The US Treasury will be issuing junk bonds. At that point, we have three choices, (1) massive cuts in programs such as Social Security and Medicare, (2) massive tax increases, or (3) monetization of the debt. Defaulting on the government’s debt is also possible, but highly unlikely for the US in the next few decades as long as monetization is possible.
Choices (1) and (2) will never be politically palatable and the likely outcome is (3). Monetization of the debt means that the Federal Reserve buys the Treasury’s debt rather than the Treasury trying to sell it to the investing public. It is already taking place in the form of what’s being called, “quantitative easing.” Such a practice will keep the Social Security checks flowing, but will result in massive inflation. We’re not there yet, but keep an eye on measures such as the Fed’s balance sheet, reserves in the banking system, disposition of debt, etc. I’m watching these variables closely, and will do so even more intensely as we move forward. It’s possible to maintain the value of an investment portfolio and retirement savings in such an environment, but we will be investing very differently than we are now.
Why are we in this position? Gutless politicians who value short-term expediency more than serving the people who elected them. This is another reason monetization of the debt is the likely outcome. Everyone still gets their Social Security check, and the inflation is a growing cancer that the politicians can say is someone else’s fault.
@Moon-howler #16
Moon, again I’m with you on this point. Social Security is supposed to be a retirement pension that we have earned by paying into the system during our working years. Someone who is receiving something they have earned and paid for is NOT a welfare recipient. Many will not get that pension (or anything that has the value they were led to think they would get) because of the reasons I laid out in my previous post.
However, Cargo makes a valid point. In practice, Social Security has become a tax-and-spend program. Current taxes are used to pay benefits for current retirees, and however else politicians want to plunder the system. Social Security should not be run this way. ANYONE else (mis)managing a pension in this manner would be Federal prison.
The New York Stock Exchange has invoked Rule 48 to slow the stock market down. It appears to be in free fall state. Groan.
@NTK,
And our very own GA and governor did the same damn thing year before last with the VRS, the state pension program. I heard NO ONE howling about this but Robley Jones (VEA) and me. We were lone voices in the wind.
And the Republicans will go to their conventions and get togethers and glad hand all those MEAT HEADS who did exactly the same thing and claimed there was a balanced budget. There is really no binding legal agreement that the money will be paid back. The next GA can come in and change it all in a heartbeat. Technically, they never have to repay it. One little law can make it all go away.
I wish I had heard just ONE Republican call out the legislators (both D and R) for doing this last year.
And yes, I agree with you. Expediency. Just member to include current politicians.
On a day like today, remember the wise words of Saint Warren: “be greedy when others are fearful.”
What looks good? Anything on sale? (she said, licking her chops.)
@Cato the Elder
The price of day trading.
I’m dipping into some APKT and RVBD because they’re holding up relatively well in a terrible tape. Also looking at LULU and WFMI and DECK (if 80 holds). Got into AAPL at 340 and change and am stalking GOOG.
Be aware you will have a 2nd chance at low prices IMO. I’m playing for a very short term bounce and I expect it to be sold and sold hard. Being nimble is key.
@Need to Know
It is interesting that you don’t mentionanything about:
A. Foreign Aid
B. Corporate subsidies/welfare
C. Farm subsidies to include the mega agribusinesses, not just Sam Farmer with 40 acres and a mule.
D. The cost of two wars–$1 million per soldier/sailor/airman/Marine per year.
E. The cost of wasteful military spending–creating new toys just for the sake of creating new toys. And look at military “work” uniforms or utility uniforms. Each service has their own design or designs since in some cases they have two or three different utility uniforms.
Hacking away at Social Security and medicare is not the answer–those fixes would be realatively easy but again as you have pointed out, we have something approaching 535 gutless idiots on a hill in the District of Columbia.
@George,
I am so glad you are out there. Totally right on those wastes. SS and Medicare are low hanging fruit. They are easy to attack by those ‘not getting theirs.’ However to millions of Americans, that SS payment is part of the plan. That is not to say that changes don’t need to be made. However, the continual talk by the sprouts with a greedy eye on SS and Medicare is just making those of us closer to the magic pot of gold (yea right!) angry.
I can see now that not only is it a class war, it is also an age war.
This market drop could turn out to be a great buying opportunity. Joe Kernan on CNBC said this morning that he had received a call from some actual scientists (as opposed to pundits and talking heads). He said that they warned him to tone down the media hype. The Japanese reactors have several safe-guards that the media isn’t even aware of. They don’t expect the Japanese sitatuation to turn into a global nuclear catastrophe. Moreover, some of the more responsible reports I’ve heard said that the nuclear rods are indeed slowly cooling, and that in a few days this crisis will be over.
I’m not a nuclear scientist and am not in a position to evaluate any of these statements. However, if the damage from the Japanese reactors turns out in a few days to be limited, we should see a strong rally regaining the value we have lost in the past few days. Aside from selling some fixed-income funds I wanted to get rid of anyway at the now higher prices, I’m sitting tight and waiting to see what happens.
Recall that Cato is a short-term trader, and I invest with a long-term perspective. He and I may be approaching this differently.
George and Moon – I didn’t hack at Social Security and Medicare at all. If anything, I’m trying to support them. My point is that gutless politicians plunder the money that should be left in the Social Security trust fund to pay for the benefits being promised to people. I want to see both programs managed in a way such that they are sound.
George – I like your list. If we could, I would join you in going downtown with our butcher’s knives to do some serious budget cutting.
No, you didn’t hack at SS. @NTK. I hope I didn’t indicate that you were one who did. I might have responded to something you said and then went off on my own tangent. I tend to do that. Sorry.
Well, I have both long and short term accounts. In my retirement accounts I flipped into TIPS about two weeks ago. In my short term accounts I’ve been selling into strength and before today was positioned 20% short, 10% long and 70% cash.
You are quite correct in your approach of standing aside for the time being. I’m making some quick buys that I intend to flip very quickly, but it’s important to understand that the trend in the market is down, at least in the short term, and that any relief rally coming is going to be counter-trend. Long term investors should stand aside until the uptrend begins to reassert itself. The index is currently in no-mans land and there isn’t a lot of support until S&P 1225.
I am standing aside for a while too, after taking a look. I am a long term investor. I don’t do short term intentionally, unless there is drastic need.
@Moon-howler #21
Moon – you know at least one Republican who will call out Democrats and other Republicans for fiscal mismanagement – ME! Look at my comments when we discussed balancing the State budget on the back of the VRS last summer:
https://www.moonhowlings.net/index.php/2010/07/20/virginia-budget-faux-surplus/comment-page-1/#comments
Yea, you did, NTK. I apologize. Did you tell them about it? They should have known better. That just enraged me. All the talk about fiscal responsibility and those chumps do the same thing. arrggghhhhhh
I really hate political parties. They make for very dishonest politics–both of them.
@Need to Know
My point about “hacking at Social Security and Medicare” is that you mentioned them as the first of three possible choices with the caveat that they weren’t “politically palatable”. It seems that Social Security and Medicare are always the first choices of budget cutters while the items I mentioned above never see the light of day. I no longer have the references but the fixes for Social Security and Medicare are not that tough. For Social Security, raise the wage ceiling against which Social Security withholding is paid. Medicare may be more difficult but getting the waste and fraud under control would go a long ways toward a fix. And it might be a good idea to consider separating Part D Medicare (the prescription drug program, which I absolutely believe in) into its own program. That or institute some of price controls on the cost of prescription medications.
@George who just hit another homerun. The D part of medicare is critical. I never realized it until I had to manage my mother’s plan (before D ) The expense was more than some people bring in in a month and she wasn’t on anything that fancy. Of course, a few doses of Procrit can put a person in the poor house.
SS could be easily fixed by raising that ceiling. It could even be made less painful by requiring less of a % after a certain point. Anything but just cutting it off.
Again, we protect those with more means.
I discussed it with people I know. The big guys don’t like to talk with people like me because I say things they don’t to hear. Do things their way and they might win the next election if not too many people are paying attention. Do things my way and you might not be as popular in short-run for not giving people exactly what they think they want, but we’re much better off in the long-term. That’s how I invest also. I’m more focused on the impact of my decisons in five years rather than five weeks. That’s good in investing. Maybe not so good for getting elected or influencing politicians.
@NTK, and that’s why I don’t belong to a political party also….and it sickens me. What bothers me is that anyone I talked to about raiding VRS just gave me lip service. Yet they are all more than willing to talk about our balanced budget and what good shape the state is in.
I agree with you about investing. Look for the long run…..
@George S. Harris
George, I favor strongly raising the Social Security retirement age for people currently in the pipeline. If people would work two or three years longer, paying into the system and not taking benefits, the problem would be solved. When Social Security was created, people lived only a few years past retirement. Now, we’re living much longer. Why should anyone, including myself, expect a benefit paid for by my children in excess of the value of the contributions I paid into the system, just so I can retire earlier. That’s the individual responsbility part of the equation. People can’t expect something for nothing and think our economy won’t falter.
@NTK but it isn’t expecting something for nothing if you have paid in.
My grandmother lived to be 105. She sure beat the stats. I would favor lifting the ceiling. People also didn’t make anywhere near the money they made when the system first started. People who do hard labor also can’t be expected to do it until they are 70. Postponing retirement isn’t an option for many people. This new idea of working until you drop dead at the work-place is really not a good plan.
I suppose I am not all that protective of my children. It won’t hurt them to support poor old mom and dad for a while with SS. I did it for my parents and grandparents or at least a couple of them. I never thought anyone was being unfair to me.
http://www.politico.com/news/stories/0311/51212.html
http://twitpic.com/49kcwg/full
PWC will have three US congress members? (well,sorta)
And Manassas heads southeast?
Ford and Netflix are in the green. Amazing.
In a true defined benefit pension plan, your benefit should reflect a number of things including the amount paid in on your behalf by you and your employer, how long you were paying in, and an actuarial estimate of how long you will receive benefits (in order words how long until your expected death). In private pensions, mostly ERISA (Federal law) and some other laws and regulations govern precisely how these calculations should be done and set requirements for employer contributions into the plan, and for maintenance of minimal levels of assets and how those assets can be invested.
The problem is that government pensions, including VRS, are not subject to most of these laws and regulations. That’s how the State government can defer what would be a required contribution to the pension plan in the private sector and claim to have balanced the budget. If sponsors of a private pension plan had done what was done with VRS last year, people would be going to jail. Social Security is not subject to much of anything other than political expediency and the politicians have turned it into essentially a Ponzi scheme.
With the current retirement age structure in Social Security the value of benefits people are receiving exceeds the actuarially correct value of benefits they have earned. That excess is what I’m calling the “something for nothing” part. True Social Security reform would base benefits on precise calculations such as are mandatory in the private sector rather than what is politically expedient as is done now.
Plus, have you looked at the portfolio for the VRS? More risk than I would expect a pension to be carrying.
@Cato the Elder
No, I have not seen that and didn’t know it was available to the public. Can you post a link?
http://www.varetire.org/Publications/Index.asp?ftype=annualreport
Cato, can you compare the risk say in 2005 to today’s risk?
I know that VRS used to get national accolades for being a well run public fund. That wasn’t all that many years ago.
Mrs. Eric Cantor is the chairman of the board of directors. I do think she has the credentials. I just feel ill at ease over her position because of the Republican attacks on public servants and public servant pensions. Perhaps not fair of me….but once a mind set is made, it is hard to break it.
Thanks Cato. I don’t have time to review this material in detail now, but have some intitial observations from skimming through the most recent annual report.
Overall performance doesn’t seem to be much better than they could have obtained just buying an S&P 500 index ETF, and some bond ETFs at far less cost.
Too many many submanagers each taking a cut of the pie that should be serving the pension beneficiaries.
Too much reliance on over-priced, underperforming hedge funds.
I’m beating their return using cheap ETFs and an asset allocation strategy.
My bottom line conclusion is that too many firms are feeding at the VRS trough taking far too much of its assets and delivering far little value for the beneficiaries.
Yeah, my thoughts exactly. Too much risk for too little return, and a lot of pigs feeding at that trough.
Can’t really speak to 2005 vs. present.
That’s one of the biggest problems with these large pension, endowment and foundation portfolios. The paid managers and board want to practice CYA and blame shifting. If you farm out management of the assets to a multitude of sub-managers, as VRS apparently does, instead of managing the money as you are being paid to do, you can blame them if something goes wrong. If performance is good, you take credit for hiring good managers. End-of-the-day result is overall underperformance from the beneficiaries’ point of view as so many pigs at the trough gobble up so much of their money.
As I wrote before, I’m doing as well or better just using inexpensive ETFs and my own asset allocation strategy.
Also, I just came out of a meeting on another matter with someone who is a retired nuclear engineer and worked in a nuclear plant. His view is that most of this media hype is just that, hype. There certainly are problems at the nuclear plants in Japan but his view is that safeguards and backup systems are more than adequate to contain the problem and that there is no catastrophe in the making.
I would prefer to err on the side of caution myself. I am not really sure what the hype is other than reporting what is going on. Most people don’t know jack about nuclear reactors.
The same could probably be said about earthquakes and tsunamis.
Moon, I’m not an expert in any of those areas either. I’m just trying to find out something from people who aren’t trying to build ratings or sell advertising. I hope the fellow I spoke with was right.
I don’t think we are all going to die of radiation poisoning sitting here in the United States from what I have heard on TV. It is very serious for the Japanese though…since they are getting particles. That’s what I have been able to gather.
About 3 throwing food in the trough for every 1 feeder.
http://slate.com/id/2288243/
Some good suggestions about donations for Japan.
http://www.slate.com/id/22882431
http://www.slate.com/id/2288243/
Grrr.
And you thought it was only the Ides of March…
http://blog.cleveland.com/metro/2011/03/the_buzzards_return_to_hinckle.html#cmpid=v2mode_be_smoref_face
More Angry Birds humor (it never gets old): http://theoatmeal.com/comics/angry_birds