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Minyan Mailbag - Social Security Reform


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.


I may have missed an article or two but has anyone on the 'Ville discussed the ramifications of social security reform? It seems to me that this could create an underlying bid to the market. If social security money (whatever percentage it would be) is used by individuals in the market, wouldn't we be looking at massive inflows that would lead to possible negative consequences? Certainly the move toward rationality would be delayed.

Unfortunately, the debate is too long to get into through an e-mail but I thought it would be worth a discussion in your forum.

Minyan Mike
N. California Red Sox Fan

An increase in equity flows will result in a decrease to bonds; on the margin this will drive rates higher. This will mute any equity effect.

Prof. Succo

From my perspective, the actual mechanics of such a thing are far less important than what social security privatization would "mean" from a psychological perspective. Heavy investment in equities by the general public at this particular juncture (sentiment extremes greater than 2000 peak, VXO 8 yr lows, mutual fund cash levels, and within a secular bear market) would be a classic - and I mean absolutely classic - trend fulfillment data point that, if it didn't mark THE cyclical bull peak within the secular bear market, would come close. Same type of extreme trend-ending news items accompanied the 2000 peaks.

Kevin Depew was the first to suggest this to me, so he deserves the credit. But I wholeheartedly agree with him (a low risk position).

Prof. Reamer
No positions in stocks mentioned.

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