Wall Street firm stocks

[natedogg]

If Bush gets his SS reform passed, that will mean that astronomical sums of money are available to be managed by various wall street firms.

One of the arguments against the Bush plan is that it is such a huge windfall for wall street.

If these firms really will make such a fortune off privatization of SS, are they a good buy right now on the chance that the reform gets passed?

Thoughts?

natedogg

[Baulucky]

Are you a CFA?

[natedogg]

No. Why?

natedogg

[zerosum]

[ QUOTE ]
If Bush gets his SS reform passed . . .

[/ QUOTE ]

It's not going to happen. Smoke and mirrors worked to hype Iraq, but it's not going to work for SS reform.

[GeorgeF]

1) I don't think he will pull it off. Mostly because if the US gov stops buying US treasuries it will piss of the foreign central banks.
2) If money goes from SS to stocks, there will be less money chasing US treasuries causing interest rates to rise and stock returns to decline, espescially for financial companies that borrow allot.

What Bush is proposing is alot more complicated than it seems at first, sort of like the Iraq expidition.

[natedogg]

[ QUOTE ]
1) I don't think he will pull it off. Mostly because if the US gov stops buying US treasuries it will piss of the foreign central banks.

[/ QUOTE ]

Hi George. Won't the "transition costs" they talk about need to be financed by selling more bonds? Are you saying that if the US govt is no longer buying billions worth of its own bonds, this will depress depend by flooding the market with more available?

[ QUOTE ]

2) If money goes from SS to stocks, there will be less money chasing US treasuries causing interest rates to rise and stock returns to decline, espescially for financial companies that borrow allot.

[/ QUOTE ]

Hmmmmm, so if this happens, don't you think that firms who take a management fee regardless of performance will do really well in that environment?



[ QUOTE ]
What Bush is proposing is alot more complicated than it seems at first, sort of like the Iraq expidition.

[/ QUOTE ]

Yeah, I see that now. I'm wondering how best to invest if it does happen though. I'm a total amateur.

natedogg

[zerosum]

If you're following the Social Security debate, you may find this article in Sunday's New York Times Magazine worthy of your time. It's the best single piece I've read on the subject.

The author mixes statistical and historical information with elegant description and context, and he touches on a number of points that are commonly either ignored or distorted.

A Question of Numbers
By Roger Lowenstein

http://tinyurl.com/5uo8m

[natedogg]

I'll read it, but I'm more interested here in how best to allocate in the case that the reforms go through. My hunch is that interest rates go up and equities stagnate, but that those firms raking in fees off the billions of private accounts will post relatively good profits.

Does anyone have any thoughts?

natedogg

[zerosum]

Consider using exchange traded funds that target financial services firms.

Financial Select Sector SPDR (XLF)
Vanguard Financials VIPERs (VFH)

[natedogg]

Thanks.

natedogg

[GeorgeF]

"Hmmmmm, so if this happens, don't you think that firms who take a management fee regardless of performance will do really well in that environment? "

The fee on an index fund is 0.3%. Most of that money will go to a few low cost operators like vanguard and tiaa-cref. The raw material of the finance business is debt. Anything that raises interest rates is not good for banking type businesses.