GLOBAL - Asset management firms could be among those most affected by the US presidential election.
Since last summer ISI (International Strategy & Investment) Group’s analysts have been recommending investing 15% of a so-called ‘Bush Portfolio’ – 20 stocks that would outperform the market if President Bush is re-elected. These include State Street Corp., T. Rowe Price Group and Charles Schwab.
This is because “vastly expanded IRAs and Social Security private accounts could increase the amount of assets under private management” and of course the profits of asset managers.
Such advice looks like justifying John Kerry’s accusations that Bush’s pension reform is a big “gift” to his “friends”.
“George Bush’s scheme hurts seniors by cutting benefits and it hurts our economy by increasing the deficit,” Kerry has said. “The truth is, the only people who benefit from George Bush’s Social Security scheme are the special interests.”
The Kerry campaign mentioned a study by Chicago Business School professor Austan Goolsbee about Bush’s plan to privatize Social Security: according to it, financial institutions would earn 940 billion dollars in fees for managing the new private accounts.
Not only has Kerry refused to discuss any kind of privatization of Social Security, but also he promised to “protect Social Security, not raise the retirement age, not cut benefits for people that rely on them, not raise taxes on the middle class”.
And private retirement accounts’ fans – such as the Cato Institute and the former State Street Global Advisors’ principal Bill Shipman – stress that the “940 billion-dollar windfall” coming from the privatization of Social Security is a great exaggeration.