Would it be possible to invest Social Security funds in the Stock Market....

[postalanthrax]

in such a way as to keep them protected from the volatilities of the market?

I know it's been the Republicans' wet dream to hand over Social Security to Wall Street and reading the writing on the wall it seems Obama is willing to "negotiate"....

[notesdev]

1. Did you have a 401(k) in 2008?

If so, has your butt healed from the experience?

[FreakinDJ]

2. Why

[AlabamaLibrul]

3. No, you can not invest money in the "stock market" and keep it protected from

the volatility (see also: boom-bust manipulation) of the stock market in the same way that you can not cook a ham in a toaster.

[obxhead]

4. Figure out how to do that and you'll be a millionaire

overnight.

The market is just another casino. You might as well try to beat the crap tables in Vegas.

[spanone]

5. no. no. no. no. no. no. no. no. no.

no

[Proud Liberal Dem]

6. Is Obama even considering this????

If so, I sure haven't heard anything about this. I think that this was tried once in 2005 and, well, it didn't work out so well then- and we had a Republican WH AND Congress then. :shrug:

[postalanthrax]

9. Payroll tax "holiday" is foot in the door to furthering the privatization of SS.

[Lord Magus]

25. No, it is not.

Republicans have tried very hard to privatize Social Security as means of eliminating it. Even when they had total control of all branches of government, they couldn't do it. It won't happen.

[blindpig]

35. It took Nixon to go to China. n/t

[Historic NY]

7. If you put money on the table in Vegas and lose do you still get to keep it.?

[kiranon]

10. Perfect response. n/t

[postalanthrax]

13. Only if your name is Goldman Sachs

I get it.

Dumb question, I know.

Just wondering what's up the sleeves of the Republicans in pushing for Wall Street to control SS.

[EC]

20. What's up their sleeves?

Well, now that the banks (the uber rich)have plundered all the expendable cash from the middle class, they want our SS to play with too. When that's gone they'll start going after each other until there is so much $$ concentrated in one bank, they could buy every country in the world..Anyway, the SS is to keep them placated so they don't start going after each other.

[prairierose]

17. Great answer...thanks....n/t

[Richard Steele]

8. No. Duh.

nm

[Turbineguy]

11. In a word:

No.

The stock market is a market. And the basic idea is to take more money out than you put in. In order for somebody to do that, they have to take out somebody else's money as well. Guess who puts the money in and guess who takes the money out. It used to exist for investing and price discovery but is now little more than a sophisticated casino.

[Coyote_Bandit]

12. Derivatives

can be used to hedge an equity investment. The effect is to create and guarantee a return which will fall within a pre-defineed range.

Volume of available contracts in the derivatives market would be grossly inadequate to hedge Social Security funds.

[Ruby the Liberal]

14. The market it volatile by definition, so no.

[Kokonoe]

15. When you get your Social Security benefits, just hand it over

To Goldman Sachs.

Mission Accomplished.

[phasma ex machina]

16. No! The stock market is actually a shark tank with a vampire squid bankster at one end.

They eat "retail investors" alive.

[Kaleva]

18. Would be better to invest in municipal bonds.

In the link below, there is a table that gives the cumulative historic default rates (in percent).


http://en.wikipedia.org/wiki/Municipal_bond

[Oilwellian]

22. They used to be safe

We have 100 cities wanting to file bankruptcy. I doubt their municipal bond holders are feeling confident these days.

[Kaleva]

30. I wonder how many of those cities have A to AAA ratings.

[applegrove]

19. The stock markets may not do all that well in the generation to come.

Peak oil, growth in Bric countries, etc...

[WinkyDink]

21. No. And SS is not just for job-holders, FYI. And $$$$$ to the "fund managers" is the real Grail.

[bluerum]

23. Dream on.

[Warren DeMontague]

24. That sounds like a GREAT idea!

Except that it doesn't make any sense. The 'volatilities' ARE the market. No volatility, no market.

The whole point of social security, from the get-go, has been to secure at least a portion of working America's retirement AWAY from the vagaries of the markets.

[MilesColtrane]

26. No

Equities inherently carry more risk than other types of investments.

There's a reason that professional financial planners recommend that people very near to retirement age limit their exposure to the stock market.

[JDPriestly]

27. No. Honest economists will tell you that you can't

"pick stocks" successfully. It's a casino. People who do well on the stock market are just plain lucky or so rich that they can afford to take their losses. If you throw gallons of paint at a wall, quite a bit of it will stick. But if you only have a couple of teaspoons of paint to start with and you throw it at a wall, you will have spots of paint on the wall if you are lucky.

Older people are warned over and over that stocks are not a safe investment for those of us who need secure income. That very common advice should be followed with regard to Social Security and government pension money.

[quaker bill]

28. No

There is no way to be in the market without being subject to volatility.

[On the Road]

29. There are Ways to Reduce Market Risk

Over the last century, stocks have performed better than the kind of bonds Social Security is invested in now. But there are crashes and secular bear markets which make it foolish to simply put the whole fund in the market. If part of the fund is put the market, it would be wise to limit potential losses:

Companies that have been stable over the long term are better choices than technology stocks with high betas. Investing in broad indexes is less risky than choosing individual companies, although indexes can be quite volatile, too. There are ways to hedge positions so that when the market rises or drops 10%, the investment only rises or drops %5 or 1%. All these come at the cost of lowering long-term return, but if it's done right, the overall performance of the Social Security fund could improve somewhat.

The problem is more with the human element. Any plan is bound to be political, which does not bode well for making money in the market. Even worse is the likelihood of getting the timing right. If the investment had been made in March of 2008, even a conservative investment is likely to have doubled. But everyone was running screaming from the market at that point, and no political with any sense of self-interest is going to step forward at that particular time. When did the most serious discussions occur about Social Security investing in stocks? Predictably, at the height of the bull market when everyone was euphoric and making money. Unless you had a completely independent and contrarian Social Security administration run by someone like Warren Buffet, the timing will almost always be wrong. And wrong timing generally means losses.

It's frustrating that the trust fund builds up so little interest. It's not bad to explore other options. But in practical terms those options are likely not to pan out as expected.

[JoePhilly]

33. Here's my summary of what you said .... in almost talking point form ...

When you are talking about the POLITICS of putting Social Security into the Stock market, you can take an INFINITE time horizon.

But, when you talk about REALITY, my personal Social Security funds do not have an infinite time horizon. And so if I need those funds during a crash, I'm screwed.

Given that, the government would have to ensure that the benefits were NEVER reduced due to a market crash at any given point in time. And similarly, market increases would not give some greater benefits simply based on timing. And all benefits would need to be guaranteed.

And its that last part that I think the GOP would work to kill. Your social security would be based on what the market was doing when you needed the money.

[JoePhilly]

31. No. And Obama won't be putting Social Security in the Stock market,

It is a silly idea. Obama knows it.

[RegieRocker]

32. Grrr

SS was started because of the stupid stock market!

[BOG PERSON]

34. would it be possible to have cake

in such a way as to allow the eating of said cake?

[liberal N proud]

36. Where were you for the last 3 years?

Thank GOD, we didn't have our Social Security in the Stock Market.

Poof!