We will make sure the money can only go into a conservative mix of bonds

[bigtree]

Bush in the SOTU: "We will make sure the money can only go into a conservative mix of bonds. We will make sure that your earnings are not eaten up by hidden Wall Street fees. We will make sure there are good options to protect your investments from sudden market swings on the eve of your retirement."

Bonds are not risk free. Bonds have the potential for increases or decreases in value when you sell them. The value of bonds and interest rates rise and fall in opposite directions. When interest rates go up, the value of bonds go down. When older bonds don't pay out as high a rate as investors can get on bonds bought today, the market value drops. Also, the longer the maturity, the higher the risk of swings in value. So, if interest rates are unstable, a two-year treasury note, for example may move very little, while a 30-year treasury bond can move all over the place.

When interest rates go down as they have recently, bonds with yields higher than current market rates go up in value. Investors benefited from this in the last couple of years, as rates have fallen.

So I would ask, with interest rates at low, and with our economy coming out of a recession, won't interest rates go up?
How can Bush claim that they will be "protected from sudden market swings?"

And what happens if the government goes bankrupt and defaults? What guarantee do investors have that future revenues won't be eaten up by hidden fees and monies paid out to pensioners?

Also, won't the real beneficiaries be the pension fund associations and investors? Won't our government eventually have to allow foreign investors a share of the pie since we are running such a large debt, over 40% foreign owned?

[liberal N proud]

1. ENRON

[bigtree]

5. precicely

analysts and big investors are the ones who benefit from short-term gyrations. there will be a tendancy for the government to pretend there is strong growth to attract more investors. would Bush lie to us to lure us in? . . . without a doubt. They already present the current deficit as harmless and continue selling off more of our country's debt to foreigners who are more than happy to oblige. the start up investment would be nothing but borrowed money, even if they robbed the SS 'surplus'.

[newportdadde]

2. Good summary on bonds.

Your right bonds aren't the place to be right now with rising rates and once you start a fed rate move it takes awhile to slow down and change course. Back in 2000 I went into all bonds with my 401k as things started getting ugly and rates started being dropped, got out last spring. If your in bonds now keep a close eye on it.

[bleedingheart]

3. he meant to say "my conservative friend's bonds"

[DebinTx]

4. He cannot guarantee positive returns

and once inflation REALLY sets in, it will only be harder to combat.

And if the country does see something like that happening, guess who'll have to pick up the tab for those losses? The rest of us.

[bigtree]

7. It's all borrowed money that he's playing with.

Seems to be a pattern with Bush, baseball team, Harken, etc. This man has no concept of earned income.

[K-W]

6. He's asking you to believe that the US economy is going to expand.

greatly. I'm sure thats his plan, but hes living in a dream world.

But Im sure the people really behind this plan know full well it makes no sense at all.