Friday, January 21, 2005

The New York Times > Opinion > Op-Ed Columnist: The Free Lunch Bunch

Mr. Krugman (as opposed to Ol' Shifty Eyes when his pieces sicken me) brings a valid point.

The value of private accounts depends on the difference in returns between stocks and bonds.

This is a basic piece of information.

The bickering begins when one side decides to interpret this to fits their ideology.

A point OSL tries to use to support his view is "...private investors are stupid, and will swap their valuable stocks for much less valuable government bonds."

Has he never heard of asset allocation and risk-reduction reallocation?

What are all those boomers going to do with the stocks in 401Ks, IRAs, annuities? How about those pension plans?

As long as the demographics tilt towards those with less time available than those with more, there will be a demand for fixed income securities, and if the Democrats continue to wage their scare tactics upon those same time-needy individuals, then governement bonds become more attractive.

With the upcoming demographic surge, shouldn't his worry be that there will be too much equity coming into the market?

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