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Old 05-18-2005
kathaksung kathaksung is offline
Governor

 
Member Since: Feb 2001
Location: San Jose, Ca. U.S.A.
Posts: 524

   
Re: See US politics From another angle .

4. The reverse point

As I have said, a growing up stock market must be supported by increasing investment fund. A $100 market grew up 10% in first year with $110 investment.Next year, to support a $110 market growing another 10% up, you need $121 new investment fund. And $133 for the third year..... To blow a ballon bigger, you need more air.

That's what happened in past 40 years. It's a process of how babyboomers cast their retirement fund into the stock market. It's a process how babyboomers exchanged their treasure(retirement fund) with papers (stock shares). When I said potential losers hold a bunch of papers, I mean the stock paper may lose value any time. (Unlike the certificate of CD which banks guarantee to cash or Grand deed of a house that you have a house, no one has obligation to cash your stock certificate, the only interest(dividend) was often cancelled in the name of re-investment by company)

Now it goes to a reverse point. The first generation of babyboomers reach their retirement age, they will not put money in pension fund any more, instead they will cash the stock in their portfolio for their retirement spending. If the market was originally at 10% growing up step, ($100 stock with $110 new investment fund) now it will be a staggering market or a recess market. The new investment fund becomes 105,(due to less retirement fund) the stock for sale becomes $105 (more old people cash their portfolio), then the stock market stagerring with no growing up. Or a recess, $100 new investment fund with $110 selling stock. Market will fall at 10% rate. (depends on retirement rate)

The World War 2 ended in 1945. The first generation of babyboomers were born in 1946. If the legal retirement age was 63, 1945 + 63 = 2009, then starts from 2009, same problem face to Social Security will face to stock market. Less working people contribute to pension fund, more old people to cash portfolio. A long term grow up stock market will become a long term recess market. The fairy tale will break up.

That's why Bush set the date of his privitization of S.S. in 2008. To save the stock market from collapsing. And deliver the bubble at the cost of young people's retirement fund.
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