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Rookie Investor
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Rookie Investor
Interviews with business people are often helpful in understanding the practical aspects of new public policy. This week we spoke with John Beresford "Tip" Tipton III, a leading investment banker.
Tip, have you heard about the government's new plan for the financial markets?
"Surely you know my feelings about such things. The financial markets are the purest of markets, and any government intervention will make them inefficient, and hurt the national economy."
But this newest one is supposed to help the economy.
"Impossible. What do those fools have in mind, now?"
Well, Social Security is running out of money, and there are some new ideas to solve the problem.
"Everyone should simply work harder and save more. Just as I have had to, ever since my grandfather gave away my inheritance. Now, don't misunderstand me: I'm willing to pay taxes to help the poor, and Medicare, that sort of thing; but I'll be damned if I'll help them retire!"
Actually, this time the idea seems to be to put the money to workÉ invest it, sort of.
"You mean, invest Social Security taxes? HowÉ I mean, what sort of investment?"
Instead of the Social Security trust fund earning interest from the Treasury at those low, guaranteed T-bill rates, invest in the stock market.
"Invest in my market? Really? Say, umÉ how much money are we talking about, here?"
Oh, estimates run to a trillion or two over twenty years.
[pause] "Why, I suppose that's the best idea I ever heard of. Say, how many people know about this? I mean, you haven't shopped the deal around, have you?"
The press has been talking about the concept for some time, but I have no idea if any arrangements have been made. Is there a problem -- shouldn't the government be talking to people here on Wall Street?
"Yes, of course; but investing in the markets is tricky. Dicey work, indeed. One can't just plunk a trillion or twoÉ dollars into the stock market and hope for the best. You must get good advice from the right sort of people."
Back up a minute. I thought you were opposed to all government intervention in the markets.
"Ah, but this isn't intervention, this is investment."
But what about the potential for manipulation or distortion, especially if you put a lot of money in the stock market all at once?
"Investments placed by capable advisors should cause no distortions. I suppose the value of stocks might go upÉ oh, a little."
What happens when you take it out?
"The stock market is the collective endeavor of thousands of disciplined professionals, steeled by experience against excitement. Of those, the investment managers with the best connections can liquidate substantial positions without causing market disturbances."
What about the temptation in Congress to direct investments to certain states, or districts, or companies?
"Congress can never be trusted with that sort of thing. Some disinterested private sector group should be appointed to do the work. Skilled in the market, of course."
You wouldn't have any recommendations, would you?
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