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As long as we want to ensure that some people are not wiped out by imprudent or unlucky investments I don't see a privatisation scheme working in the long term
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In the last few decades, index funds have been invented, whereby this single-person imprudence or unlucky risk is removed. Bush's plan allows you to allocate your funds among 5 index funds. None of the index funds are actively managed, but rather are neutral.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891 -
And a well-managed fund does better than an index fund. But the average small investor can't afford to properly manage his money. The surfeit of bad mutuals out there proves this.
I don't see why the fund shouldn't simply be managed as a Crown corporation. The more money you get together the better a person you can hire to manage it and the more diverse it can afford to be.
Economies of scale, young Paduwan.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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Because you don't want the Crown picking winners and losers in your economy. There's a lot of potential for abuse, and besides, I have no confidence that the fund would be well run. Lastly, having a well-run fund costs lots of money. Index funds are famously cheap to run.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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The Crown doesn't. The corporation does.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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The more removed from government and more transparent the selection process for management of the Crown corporation the more independence and result-based action it will demonstrate.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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Yes, but there's still way too much room for abuse. A central bank is watched like a hawk and there are important protocols that they follow. Still, it's only acceptable for central banks because there's no other way to do it yet.
Index funds are an exceptional advance.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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Index funds are of course famously cheap to run. They're not managed at all.Originally posted by DanS
Because you don't want the Crown picking winners and losers in your economy. There's a lot of potential for abuse, and besides, I have no confidence that the fund would be well run. Lastly, having a well-run fund costs lots of money. Index funds are famously cheap to run.
Believe it or not, it is possible to outmanage the index. Some people manage to do it consistently. It's a lot of hard work by some bright people, so it costs money to do it. Get enough money in one place and it becomes worthwhile. That's what I just said.
Also, God knows an index fund could never drop 50% of its value virtually overnight *cough*NASDAQ*cough*12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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I never said that it wasn't. Difficult, but possible. That said, I want the market picking the winners and losers, not any corporation affiliated with the government. This seems like a reasonable goal, if there are tools available to do it.Believe it or not, it is possible to outmanage the index.
The NASDAQ index is not available as a fund in Bush's plan. In any event, if the fund loses value, everybody in that fund loses likewise.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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The government's already a huge part of that market, Dan.
It accounts for 30% of the US economy (50% of the Canadian). A fund simply out to make money for itself does not necessarily distort the market in any meaningful way, even if its assets are collected and disbursed through the agency of the federal government.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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Yes, and?Originally posted by DanS
The NASDAQ index is not available as a fund in Bush's plan. In any event, if the fund loses value, everybody in that fund loses likewise.
My point is that through imprudence a private-account plan holder can always lose significant protions of his savings. That's the downside of choice. Personally, I trust a Crown corporation at arms-length from the government, staffed by experts and motivated to make me money more than I do myself. Investing is not a game to be played by amateurs.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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You are right that it doesn't necessarily distort the market in any meaningful way, I would just seek to ensure that it doesn't distort the market.
No, this is not possible using the index funds that Bush's plan uses. You can choose enough that your assets are invested appropriately for your age, but not so much that you can do significantly better or worse than the market.My point is that through imprudence a private-account plan holder can always lose significant protions of his savings. That's the downside of choice.I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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So your nebulous fear of moving the markets one iota by the presence of a Crown corporation outweighs the very real benefits of greater diversity and growth possible under a well-managed social security fund?12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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****, Dan. You're ten times the ideologue I am.
I'm impressed.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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Greater diversity? I'm interested in what you have in mind. Real estate? Gold coins?I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891Comment
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Income trusts, government paper, foreign markets, ...12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio RegumComment
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