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Tuesday, August 06, 2002
Muriel Siebert's suggestion, that all the economy needs is incentives for investors to pump more air into the bubble, is laughable. The most effective way to meet these objectives would be to double for three to five years the amount that investors can put into their 401(k) plans and individual retirement accounts. Currently individuals can contribute $3,000 annually to their I.R.A.'s and $11,000 annually to their 401(k) plans. These limits were increased slightly last year. Doubling them would benefit individual investors in several ways, providing additional income tax deductions and replenishing their tax-deferred portfolios. Investors are, ever so slowly, wising up, and aren't very likely to go throwing good money after bad. If there isn't growth in the value of the companies that correspond to stock shares, it is senseless to bid up their prices. That is the definition of a bubble, too much money chasing after too few assets. She's able to dismiss the objection with "Longer term, however, history suggests that equities are the better investment: returns are higher than the alternatives," which is precisely the sort of claptrap used by financial advisors to keep the little guy in the markets when things started looking dodgy. Hopefully, they won't fall for it again. It just doesn't make sense to buy into a badly shaken market. What makes Siebert so confident? Duh, of course! She's a stockbroker. |