The President’s words last night on Social Security (emphasis mine):
To put
us on solid ground, we should also find a bipartisan solution to
strengthen Social Security for future generations. We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.
Well that all sounds nice. But how do we accomplish all those great things?
There is zero willingness in congress today to consider any
privatization scheme for SS. So the Prez has that right. However, in
order to a) not impact current retirees, b) protect those who are vulnerable/have disabilities and c) not cut future benefits; the only possible option is to raise SS taxes across the board.
Raising the retirement age and raising the cap on earnings subject to
SS withholding are steps that will come. But they do very little to
change the outcome. A bigger broader effort is necessary.
So I am left wondering about this. Additional details on how the
Administration expects to realize on this promise will be forthcoming (I assume/hope). One thing I am certain about at this point. The “solution” will not be a permanent increase in SS taxes.
What would it take to really “fix” Social Security? According to the
Trust Fund annual report it would require an immediate 1.9% increase in
SS taxes. That comes to about $100 billion a year. And rising every year
thereafter. That is as likely to happen as privatizing SS. So where
is the beef on the plan?
US accounting board softens fair value proposalNEW YORK, Jan 25 (Reuters) - In a big victory for banks,
U.S. accounting rule-makers moved on Tuesday to reverse a controversial
plan that would have forced banks to value many of their loans based on
market movements.
A big victory for the banks. Isn’t that lovely. We should all be so happy for them. Now we will never have any clue what their books are really worth. I am disgusted by this.
As of this morning our pals at the SEC have redefined what is an "accredited investor" (“AI”). Once you are an AI you can invest in a different series of investments that are not available to the public. The SEC on this:
An accredited investor is eligible to participate in certain private and limited offerings that are exempt from Securities Act registration requirements.
I am an accredited investor. Every year I have put some money to work
using this status. They are aptly referred to as “Club Deals”. Not all
of these have worked out, but they vast majority of them have. There is
no question that I have made money over time because I am a member of
the club.
Generally speaking you get in on the action if you have a net worth
greater than $1mm. A significant hurdle. But the SEC has today made that
hurdle even bigger:
The proposed amendments would exclude the value of an individual's primary residence in calculating net worth when determining accredited investor status.
The largest asset most people have is their home. By excluding it from
the calculation a whole bunch of folks will never make it to the club.
If you wonder why 1% of the population has 80% of the wealth; it is
rules like this that make it so. It really is not a level playing field.
Never was.
Bruce admire your hard work and consider you along withRG the Captain Number Crunchers.
Want to play with numbers try this one on for size and the loss's are to easy to see and will continue as the WallStreet crooks and the crappy pension fund managers suckered all.
https://www.calpers.ca.gov/mss-publication/pdf/xqPe5oXW2m1QU_2009-annual-investment-report.pdf
Sooo typical, the Administration increases the Federal Budget Discretionary
Spending by 13% in 2010 and now they propose a Budget Freeze at those
levels, since they already got theirs! Austerity, ya, right. The Social Security
fix is called 'Print to Infinity'.
try the link
Hey Krasting are we on or not?- I responded days ago and want to take you money (hopefully that won't take you under the AI threshold
http://www.zerohedge.com/article/how-will-they-will-prop-stocks-after-qe...
Sorry. We're on. What was the bet?
I believe you wrote that you would take his virtual ten bucks.
I don't know why he's still harping on it. Something about QEIII in perpituity.
Yes, protect the little guy. Sell him an annuity w/ an 8% upfront load that will take years to break even on. Sell him mutual funds that perenially underperform passive investable benchmarks like the SPY, and then add further layers of fees like 12b1 ... on top of the already inflated fees. Sell him a structured note where the credit risk is unintelligible, the derivatives are opaque and illiquid and the fees would make a brigand blush. Yes, protect him we shall.
It never was about protecting the little guy, of course.
I wholeheartedly agree with Bruce's comments above.
A) this is old news - our attorneys forced us to implement the changes mid-year 2010. I paid the bill.
B) It doesn't include either the faux-equity or debt on the house.
C) The idiots only changed the rule on Accredited Investors. Qualified Clients can still include their house in their slightly higher $1.5mm net worth threshhold. Most hedge funds charge performance fees, which generally requires investors to be Qualified, so by default this included Accredited Investors historically - now its a little hazy. If you have a client with a $1mm house, free and clear, and $500k in assets - you can let them in your fund, but you can't charge them management fees?
D) you can get around all of this with a couple hundred grand in income - and you won't have the typical minimum $100k investment if you don't meet one of the salary or net worth requirements anyway. Why would you even want the hassle of chasing a client who isn't well above all these threshholds?
Look at the ten year bouncing around. Enough to make you nauseated.
I always hate it when the government has barriers such as this to protect the public even if i occasionally benefit.
DBA = 33.7
There is no inflation or so we will hear at 2:00 today.
Every once in a while people mistakenly speak their minds and show anyone watching what hthey are really motivated by.
The first step toward fixing SS would be to eliminate separate Federal Pension plans (including Congress) and put them on SS like the rest of the us.
I've got to admit it comes as no surprise that FASB would lay down on the MTM unwind. I share your disgust, Bruce. However, if the banks were forced to play a straight game on asset valuation, the entire Ponzi fails. The truly sad outcome is that the bonus looting on disguised earnings continues to infinity.....or until a major interruption of Bennybucks chokes off the whole scheme, which looks unlikely so far.
Thanks for the glimpse into the Fascist "club"
The rule makers may be the Fascist's...the members are just the "boys" looking to make a living.
I am an accredited investor but am politically more along the lines of a Lew Rockwell libertarian. My being able to put money into some risky non-regulated invesments (mainly oil and gas) has definitely added to my financial well-being.
And, it is definitely easier to make money if you HAVE money. That is the reason the rich tend to get richer...opportunites and the ability to act.
Based on his wrtings, I consider Bruce a member of the resistance. The U.S. is a Fascist state masquerading as a democracy.
I go both ways...
:(~
Ewwwww.
LOL
"...1% of the population has 80% of the wealth...."
The crazy thing is that that 1% has so much wealth that a samll proportion of it could make a big difference at the other end of the scale and it wouldn't be missed. If I were worth, say, a billion pounds/dollars and earning even 1% on it, I would still be making 10 MILLION pounds/dollars per year. I think I could live on 1/2 or a 1/4 of that and still retain a degree of power, don't you? And yet it appears that all they want to do is to accumulate more and more, creating more and more hardship and ill feeling.
Or maybe that's why I'm not there - I don't think in the same way.
DavidC
You don't get it. They are not accumulating to create hardship for others. They are accumulating because mathetmatically that is what happens when you spend less than your income. It snowballs exponentially over time.
What snowballs over time is debt induced currency. Timmy bills require servicing in as yet uncreated FRNs that when conjured up in the future, further dilute the whole.
As for the sopping up of excess liquidity anytime Mr. Barnanke thinks appropriate, it hasn't happened yet, even though the underlying values of the securities-the values now being removed from the equation for admission into the club, have plummeted.
As reported before, US mint silver sales continue their relentless demand by our citizenry as an indication that FRNs, while currently "legal tender" for trade, may not actually be viewed as money or wealth in the future.
Now, when United States dollar notes redeemable 1:1 in US mint issued bullion coins finally gets issued we may see the flushing out of the cancerous FRNs from the US taxpayer. 50 years ago was the last time it was attempted. JFK bet his life on it. Our current POTUS is no JFK.
But hey, the market's up, bonuses abound and it's all good. Party on.
the key word is "retirees". SS is bloated with entitlements which should be addressed through other social programs. Obama could agree to save "retirees" and still cut a lot of the obligations.
one thing missing from this speech that was part of his 2008 campaign were any references to greed or corruption. both parties want to pretend it all went away, that the lion laid down with the lamb, but people know differently.
You are correct to say that the real problem with SS today is the Disability Fund. The retirement Fund looks much better.
If you stripped out DI the cost of fixing SS would be much less. But then what would you do with DI? That would cost the same $100b a year.
It has always been OASDI not OAS and something else called DI. I don't see how you could divide the two without the same cost result.
The same with the disability in the Veteran's Administration. I mean, can't you combine some of these positions so that we don't have to pay exorbitant salaries to government union (a government union? wtf for? Still sticks in my craw...) employees.
The savings on just the administration side of these programs would be mind-boggling money down the road.
_______
Sorry, OT:
The Euro is about to trip the wire...
We need to protect retirees, I think some people might argue that people with disabilities have greater needs. The disabilities portion should be kicked back down to the state level. (Benefits are already state tested? If you live in Alabama you receive something different than if you live in NY?) That is the sort of fundamental change the two parties might be able to agree on.
Disability should be a local and a family matter, whenever possible..
Just a couple of things regarding disability.
1. The ADA (thanks, George Bush I)
2. Asbestosis.
When you realize how big these two items are and how deep they reach into the fabric of the US, you realize that disability compensation is only going to increase.
The states cannot handle disability.
All that special stuff should be parsed out, taken over by the government and run on their books. The government could take all claimed cases of asbestosis, for example, claim some special cause on them and then "negotiate" with the insurance companies and health care providers to treat these patients.
Take the three-way rat-trap out of the way and you could save some serious money there, too. All medical class-action lawsuit victors could be seen in the same way, so that if it ever happens again, you can move the victims into a special class of patient that the private sector is mandated to treat at a discount.
Medicare already does this, which is why there are many physicians hanging up their spurs. We should concentrate more on medicine not being a "business model" and more on it being a humanitarian and a right thing to do. So you don't have a yacht yet, doctor? Well, neither do I.
Fantastic post. I am disgusted with the state of health-care as a business model as well. It creates a perverse incentive to keep people sick. Unfortunately, there seems to be absolutely no desire to do anything about it.
Yes, medicine is yet another club and if you're not in it, you're out. A perverse incentive to keep people sick is exactly what it amounts to. Can't make any money by giving people proper nutrition advice and decent food. Now, giant corporations are creating frankenchickens and there is still fluoride in our water.
Our generation has been screwed from the get-go and I hope I am alive to see this massive swindle (and I mean everything...) exposed for what it is: the greatest crime wave the world has ever seen since Atilla the Hun.
And I see Cramer's pic on the side saying - how to profit from stocks..
re: FASB ruling. Ever see the movie The Village? Isolated pre-industrial village that brainwashes it's kids that wandering past the boundary will get them killed by boogeymen.
This is what I think of with the propaganda the banks have created. Don't give us what we want and the collapse boogeymen will get you!
Sounds like a good screenplay. But this time the village implodes when the banks continue to get what they want by perpetuating the lie. I guess it could be a disease that wipes out the entire population because no one will leave.
The hurdle for "accredited investors" is not intended to keep you out, it is intended to protect widows from Squids looking for an easy mark.
The irony is we know there is no such thing as a "sophisticated investor" who is able to fend for himself.
The landscape is littered with sophisticated high net worth morons who get taken to the cleaners by Wall Street again and again.
You are correct in all your points.
Absolutely true - just look at the sophisticated Madoff "investors".
On Wall Street, there are good con men and then there are really, really good con men - it's a rigged casino IMO. And paper ANYTHING is gas-soaked garbage waiting for a match to set it to flames.
caveat emptor
Yes Banzai, that was always the objective. To protect the widows and orphans. But this change of rules is not about widows and orphans at all.
This new rule will exclude some who own their own home. You could argue that this is a good thing. But trust me, this is a party you want to go to.
This rule is another example of cockamamie BS--
Real Estate is a REAL ASSET and happens to be maybe half of all the value in our capital markets, so excluding it is BS. IF they want to raise the bar, fine, raise it, but to do this is just stupid and deceptive--nothing to do with widow and orphans.
Well my parents own their home free and clear and I am happier that the shmuck who manages their accounts can't tick the box and run them on a string. ;-)
You are right Willie.....and, so is Bruce. The real problem that underlies all this is a financial system that makes risk analysis so opaque that it too favors the "sophisticated investor," and a regulatory system that "blinks" at the shearing of small money folk. The real problem is one of morality. If I was interested in investing in any of this garbage, I would be pissed if I was barred because of my net worth...but, on the flip side, I know that crooked investment managers will screw people out of their organs, if they were allowed to use them for collateral.
It's only money http://www.youtube.com/watch?v=YBvnxxigrIM
and http://picquotes.tumblr.com/post/422712709/i-dont-care-to-belong-to-a-cl...
The hurdle is 1mm. If they have that free and clear (including the house) they should not be excluded.
No IPO's or secondaries for a person with a net worth of 1mm? Maybe Mom and Pop should not play in that space. But there are many out there who are sophisticated enough to evaluate the risks. I just think that excluding the home (why now, after 40 years?) is arbitrary.
By the way, the SEC changes are mandated by FINRA. You think that law really protects you?
<dupe>
There are some advantages to being a protected retail investor and some advantages to being able to invest in what ever you want. Real value can be added within both systems if you're the kind of person who is willing/able to do a bit of homework. Serious out-performance however will be found disproportionately in the sub group of "club" investors who do a lot of homework. Being in "the club" isn't the most important factor though (although it can be significant) as Madoff investors found out.