Nov 11, 2004

Grindin' em out

My personal anxiety level is red lining here. I sold too much too early. The tape has done an excellent job of morphing from buy electoral clarity, to buy a Bush win, to front run the social security privatization. My response has been to examine my positions and to force myself to get even flatter. The tape will offer a better risk reward later.

I will chime in here with my two cents on Social Security privatization. I am not sure the net flows will be so large for the markets. The plan will be offered as an option and currently nothing prevents savers from buying equities privately. Technically they could even own equities on leverage via the futures against their expected future social security income. I don't think anyone does this but it is an option for anyone that preferred equity risk to U.S. Gov't risk. The larger impact to me seems on the budget side as this program will make it more difficult for the Gov't to lump social security in general revenues. That is probably good long-term but could be extremely painful in the short run.

I would close with an interesting data point that came to light yesterday from Hewitt Associates. "On November 3, the Hewitt 401(k) Index logged the largest daily movement of money into equity funds since January of this year, with 0.13% of 401(k) balances transferring on a net basis. " This statement surprised me in a couple of ways. I am amazed that the average 401k investor was patiently waiting for the election to be done before moving funds and I am amazed they took rapid and decisive action the day after the election. Couldn't they have just shifted the allocation of future contributions to reflect their bullishness rather than the quick one day shift? Would have made more sense if the jobs number had come out the Friday before the election so they could be sure the economy was not falling apart. Not quite sure what to make of it since it is past but I thought it was an interesting statistic. No doubt that caused a large portion of our move higher and does a lot to explain how the tape remains so extended.

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