Our buddy Rob of Emphasis Added blogs about the rapt attention with which his beloved Eunice bestows her investments and the potential impact on Wall Street of private Social Security accounts for all working Americans.
Wall Street expects holders of private Social Security accounts to pay the same amount of attention that holders of current IRAs and 401ks currently pay: next to nothing over the life of the average account. If only every single IRA/401k holder was as tenacious as Eunice, I would have fewer fears for private accounts. But even voracious readers like Eunice miss fine print (me too, by the way) -- fine print that is deliberately obscured so that even the finest investors still get screwed.
And what about the Dot.com bomb? How many incredibly smart and skeptical investors lost their butts in the market decline of 2000? Even if they’d watched their accounts as hawkishly as Eunice, would they have been able to stop the bloodbath? Might they even have accelerated or exacerbated the freefall of stock valuations in a frantic sell-off? How is this security when even the shrewdest investors got hammered?
I remember having several conversations in late 1999 about a potential hedging product with a Fortune 100 manufacturing company's treasury folks; this product was based on futures, not unlike products that a certain energy company was promoting at the time. During low points of business cycles, the treasury guys were often the difference between a profit and a loss for the company, based on the amount of funds held in varying currencies and hedge funds and managed exposures at any given moment in nearly any market. We talked about Enron at length; these guys, some of the best in the business, couldn't figure out how their counterparts at Enron were doing it, could not suss out what drove Enron's apparent success. They just scratched their heads and marveled at what looked like absolute genius or sheer madness; they didn't know which it was even though they traded in similar to overlapping markets and followed the same rules (or so they thought)...
If these highly-experienced traders, bright stars of the financial world with MBA's from top schools around the world, couldn't make out the business model (or lack thereof) behind a darling investment of Wall Street, what the hell will Joe SixPack make of it?
Assuming, of course, that his job at Walmart actually pays enough to build any equity in his private Social Security account...or that Joe SixPack pays the same rapt attention to his accounts that Eunice bestows upon hers.
10:40:18 PM 
