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| May 19, 2000 | |||
SmartMoney.Com Gives Gore "Lowest" Score
Gore Flunks Investor Test
Vice President Al Gore thinks investing in the stock market is just too "risky." Both for Social Security and for himself, apparently. As his campaign insisted to the Wall Street Journal Tuesday, the Vice President of the United States of America doesn't own any stock. Zinc mines, yes. Stock, no.
That's highly unusual for someone of Gore's age, earnings, and background. According to Equity Ownership in America, "The typical investor with stock mutual funds outside employer plans is 48 years old, with household income of $63,000 and household financial assets of $120,000. Nearly 70 percent are married, more than three-quarters are employed, and almost three-fifths are college graduates."
Al Gore is married, 52 years old, has annual household earnings close to $200,000 -- and zero equity holdings. The New York Times Wednesday quoted David G. Dietze, president of Point of View Financial Services, as saying it was highly unusual for someone of Mr. Gore's age and income not to be invested. " 'There's probably only one chance in 100 that someone of his ilk would not have investments in the stock market,' Mr. Dietze said."
"When E.F. Hutton talks, Al Gore doesn't listen." --New York Times
Why is this of concern? Because Al Gore stands between American workers and responsible Social Security reforms like creating Personal Savings Accounts that offer them higher returns and a more secure retirement. He has labeled proposals to create these individually owned and directed accounts too "risky." Wednesday's New York Times relays Gore's admonition to graduate students at Fordham Business School in Manhattan:
"Tens of millions of investors who have not gone through the Fordham Business School, who have not had an opportunity to gain some basic knowledge to protect themselves against fraud," Mr. Gore said, "would be placed in a situation where a lot of financial shenanigans could take place, where they are losing their investments because they are not equipped in the way that sophisticated investors are. It happens all the time."
Wow! Talk about risk-adverse elitism. According to a May 16, 2000, Gallup Poll, 54 percent of American households own stocks. That means "tens of millions" of investors are already in the market. Meanwhile, the typical Fordham Business School graduating class is about 500 students. It's safe to say most American families whose financial futures rely on invested funds do not include a Fordham graduate and, therefore, are susceptible to "financial shenanigans" that "happen all the time." That's not to say that financial fraud is non-existant. Rather, Gore is apparently unaware that the proposals offered in Congress and elsewhere all include oversight to assure the investments remain secure.
Investors Rate the Veep
That's what Al Gore thinks about investing and investors. What do investors think of Al Gore's investments? "Shocking," says SmartMoney.Com, a joint online publishing venture of Dow Jones & Co. and Hearst Communications, Inc. "A lease on a zinc mine and no mutual funds? Shocking." For those of you without an Internet connection, here's the rest of the review:
That's right: Al Gore's assets look more like 1899 than 1999. As things stand, the vice president is without anything with a P/E, let alone an IPO: no stocks, no funds, not even a bond. What does he have? Land -- as far as the eye can see. Oh, and a zinc mine he's leasing out to an Australian mining company, Pasmineo. He also had at least $39,000 in bank or money-market accounts in 1998.
Of course, if Gore were an investor, he'd be encouraged to keep his money in a blind trust -- much like President Clinton, who has $1,000,000-plus in three blind trusts. While Gore's Puritanical portfolio may be conflict-of-interest free, it's also making him, well, not exactly poor, but it sure ain't making him rich. Gore's net worth has apparently dwindled while he's been in office, from a maximum of $1.6 million in 1992 to a max of $1.2 million in 1997 (based on the ranges provided by FEC documents).
In 1998 alone, the Gores missed out on a 28.6-percent return in the Standard & Poor's 500 index. The veep's non-portfolio had our financial planners sputtering with indignation. "The fact that he hasn't been willing to participate even on a blind-trust basis," says David Feldman, financial planner, "means he's lost out on one of the major bull markets of U.S. financial history." Dee Lee, author of "Let's Talk Money," gives Gore her lowest score for not planning ahead at all: two out of a possible 10. "If he were to drop dead," Lee reasons, "his wife would have to sell some of the houses."
Fortune magazine reached a similar conclusion two years ago. The magazine observed that Gore's "net worth has been dropping for years" leading the magazine to conclude, "this potential president could be a financial dolt." Fortune, in its August 3, 1998, edition [p. 30], also had this to say:
After all, since 1993 he has made $171,500 a year, plus $1,186,261 in royalties for his bestseller, Earth in the Balance, and an additional $100,000 from Tipper's 1996 book of photography, Picture This: A Visual Diary. Granted, there were book expenses and taxes; but for five years they have had extremely low housing and medical costs. They have received a sizable entertainment allowance. They haven't had to buy airline tickets -- make that any tickets -- or kick in for vacation rentals.
Two million dollars in income since 1993, no housing costs, his own plane, and an expense account, yet his net worth has been dropping. As Fortune summed up, "This is a family in dire need of a money manager."
Veep Takes Wrong Direction
"Shocking" was SmartMoney.Com's assessment. The same might be said about the Vice President's approach to Social Security reform. All gimmicks and no substance. He supports reforms that would do nothing to help retirees, like general fund transfers, but opposes allowing individuals to prepare for their retirement by investing a portion of their payroll taxes in private markets. As the Washington Post yesterday [p. A6] observed, "Both the Congressional Budget Office and the General Accounting Office dismissed [Gore's plan] as little more than a budget-shuffling exercise rather than a serious attempt to grapple with Social Security's structure."
Worse, the Vice President has proposed to increase Social Security's unfunded liabilities by increasing the benefit promised to seniors. Over the next 10 years, his proposals would reduce Social Security's trust fund balances by almost $400 billion. Over Social Security's 75-year actuarial window, these proposals would increase the system's unfunded liabilities by almost a third! [See RPC paper, "Gore-Mongering Social Security," 5/10/00]
Leave it to the Experts
According to Fortune, "The Vice President's Financial Acumen 'Ain't Worth a Bucket of Warm Spit' " (-- this was the article's headline: Fortune Magazine, August 3, 1998.) Neither is his position on Social Security. In one breath, the Vice President attacks Personal Savings Accounts as a "roll of the dice." In the next, he proposes adopting new obligations that will make the system go broke faster. These are not responsible positions.
Right now, Social Security has only enough money to pay just a portion of the benefits promised to seniors for the next 75 years. Any proposal to reform Social Security must be measured against that reality. Personal Savings Accounts offer workers higher levels of ownership, control, and returns from Social Security by investing a portion of their payroll taxes in private markets. This is a subject the Vice President obviously knows nothing about. He should leave the discussion to the experts.
[Note: all references to the New York Times are from two articles on p. A18, of the May 17, 2000 edition, "Gore Denounces Bush Social Security Plan as Too Risky," and a sidebar story, "Gore Has Not Bought Stocks for Decades."]
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