Am I stupid for not worrying too much about the stock market downturn?

Well, I know that I’m stupid, but I’m wondering if I should feel a little dumber for not tracking the stock market regularly. The S&P 500 (chart) is back to where it was in April 2014 (about 1800). It was about 1500 in 2007. If we adjust that 1500 for inflation we get 1715 in 2015 dollars. The U.S. economy is growing at about 2 percent per year (WSJ). If we start with 1715 and apply 8 years of growth at 2 percent we get 2009. So the market is down only about 10 percent from where we would expect it to be if the 2007 price was right. A 10 percent decline is no fun for investors but it doesn’t seem like a good reason to start digging a bunker. Maybe the 2007 price wasn’t right after all!

What about the stock market good times of 2015? We didn’t earn them with economic growth so we shouldn’t be surprised that they were taken away from us.

Readers: What do you think? Is there any reason to think this is going to another 2008-style bloodbath?

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How would you build a wall collage of digital picture frames?

Here’s an idea for home decor: a wall of digital picture frames, each slightly recessed into the wall. Why not just a single big TV showing a collage? That doesn’t seem as visually interesting or attractive as a collage of picture frames in a variety of sizes.

If people can walk right up to the wall we ideally want at least 200 dpi resolution (standard “photo quality” for prints). Thus for a display that is 20 inches on the long dimension we would want a 4K resolution; a display that was just 10 inches wide could be 1080p.

What would one use for actual displays, though? A bunch of computer monitors? A 4K monitor marketed as “24 inches” is about 20 inches in width and costs a semi-reasonable $345 (Acer at Newegg). What if you have a cluster of such monitors, though? Do you need to have a PC buried in a closet that is crammed full of graphics cards and then run DisplayPort cables out of it (an AMD card that can drive six 4K monitors; an equivalent from Matrox)? Given the low-bandwidth communication that is required (one new image every 5 minutes?) it would be a lot better if the monitor could grab images via WiFi.

What about a bunch of TVs? The smallest TVs out there seem to be 22-24 inches in size and are 1080p resolution maximum (example from Vizio). Perhaps that will change over the next year or two. TVs do typically have WiFi and USB ports, but how to drive them without going crazy?

How about a cluster of digital picture frames (Amazon’s current collection)? They are a little on the small side, 15 inches maximum, and tend to be low resolution (1024×768 for example). It is not obvious how to drive a typical digital photo frame, even one with WiFi, from a personal computer.

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The guaranteed growth assumption made by economists

“After 7 Years of Slow Growth, U.S. Now Sees More of Same” is a WSJ article on how the U.S. economy refuses to grow much faster than the population growth rate (i.e., it barely grows on a per-capita, inflation-adjusted basis).

Since 2009 I have been having an intermittent argument with a friend’s relative, a Nobel Prize-winning economist. His assumption is that growth was and is the natural condition of an economy in general, as people figure out new and better ways to do things, and that growth was and is the natural condition of the U.S. economy.

My argument was that an economy with a large percentage of GDP spent by the government could stagnate given sufficiently inefficient execution of centrally planned activities, such as road-building. Casey Mulligan, the University of Chicago economist, weighed in with the argument that if you pay Americans on condition that they not work, a lot of them will not work (see “Book Review: The Redistribution Recession“).

Based on the WSJ analysis, it seems that my friend’s relative is more typical of mainstream economists. They have consistently over-predicted growth for the U.S. economy. What can we learn from this? Maybe as investors not to believe these kinds of predictions!

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Unbreakable Kimmy Schmidt

Who else loves Unbreakable Kimmy Schmidt? If you liked Ellie Kemper as Erin on the Office and haven’t seen this show you definitely need to subscribe to Netflix! (Yes, I know that I am late to the party but maybe one of the readers of this weblog has been stationed in Antarctica for a year and hasn’t heard about the show.)

The show captures the inequality Zeitgeist well. Schmidt is mocked for thinking that a “millionaire” is wealthy or “looking like a million dollars” is a compliment. Even the cheap shots at the South are funny. When Schmidt asks her roommate to tutor her in math, he says “I went to school in Mississippi; we learned that the dinosaurs went extinct because a meteor impact turned them gay.”

The spoiled helpless Manhattan lifestyle is on display here, as Schmidt gets a job assisting a rich stay-at-home mom. In a flashback she tells her parents that she is “Dating a rich older [married] man and lying about my birth control.” She advises Schmidt to bring “a condom and a pin” on a date with a wealthy young man (consistent with the New York chapter of Real World Divorce, describing that child support profits above $2 million can be challenging to obtain, the goal of the accidental-on-purpose pregnancy seems to be marriage). A therapist is on call to collect a share of the family’s income for allowing the parents to “talk to the shame puppet.” Consistent with the attorney’s comment in that chapter, “A person’s decision to divorce is primarily financial. Of course there are people who are concerned about the kids, but they are not very common. Sad to say it is all about money here in the U.S.,” when a divorce is contemplated on the show the only consideration is the plaintiff’s potential post-divorce spending power. Neither she nor any other character expresses concern for the possible impact on the children.

For a series set in Manhattan there isn’t much of Manhattan on display. Nearly all of the scenes are indoors.

Readers: What do you think/like about this show?

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What happens when you do everything wrong? (Ashima Shiraishi, the climber)

New Yorker has a story on Ashima Shiraishi, a 14-year-old rock climber. She was born to Japanese immigrants living in Manhattan when her mother was past the age at which physicians recommend childbirth:

For more than ten years, they tried to have a child, availing themselves of every method they could afford. When Tsuya turned fifty, they were ready to give up, but their doctor urged them to try once more. “It was our last chance,” Tsuya said. In June, 2001, a daughter was born: Ashima. “She was a miracle baby,” Tsuya said.

Tsuya recalls that even in the hospital nursery Ashima ceaselessly moved her hands, arms, and legs: “All the time, not stop. I couldn’t believe it. I think she has monkey DNA.”

How about taking the doctors’ advice to rest up before the big climb?

Ashima often gets just five or six hours. She arrives home from climbing at eight-thirty in the evening, showers and eats, and then starts in on her schoolwork, which she insists on finishing. She’s often up well past midnight. “We say, ‘Don’t do homework!’ ” Tsuya said. When I asked her if Ashima got straight A’s, she said, “Yes. Well, sometimes she gets A-plus.”

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What would Martin Luther King, Jr. make of the Yale students and similar?

A year ago I posted “What would Martin Luther King, Jr. do for us today?”

That posting reflected the national discourse of the time, which was mostly about the extent to which government should redistribute income among residents and the portion of the economy to which Soviet-style central planning should be applied. In the intervening 12 months, the national discourse seems to have shifted back to the 1950s and 1960s concerns of Dr. King, i.e., rights for black Americans.

I’m wondering what he would make of our current situation in which young black Americans are preferentially admitted to our most elite universities but, once there, say that they feel “unsafe” (see Yale) while, on the other hand, crazy high crime rates in mostly-black cities, such as Baltimore and Detroit, are seldom newsworthy.

Readers: What do you think Martin Luther King, Jr. would be saying to us right now? I’m going to guess that he would have been opposed to the $15/hour minimum wage (since it will greatly exacerbate unemployment among black Americans, roughly double that for whites) and argue instead for an expansion of the Earned Income Tax Credit.

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America still has an active Prohibition Party

“Drunk with Power” is a New Yorker review of The War on Alcohol: Prohibition and the Rise of the American State, described by an Amazon reviewer as a “dreadfully dull and pedantic tome”. Perhaps this is a situation where it is better to read the review than the book!

There is some interesting material in here. The U.S. has a Prohibition Party, founded roughly 150 years ago, that still holds meetings:

Some of the old warriors kept the faith. (The Prohibition Party never disbanded, and held its most recent convention in July, by conference call; Gerrit Smith doubtless would have been more impressed by the technology than by the turnout, which was eleven.)

Alcohol is still a problem:

There are about thirty thousand gun-related deaths per year in America—and about ninety thousand alcohol-related deaths.

Though perhaps consumption was more than in the old days:

By one estimate, in 1810 the average American consumed the equivalent of seven gallons of pure alcohol, three times the current level.

What do readers think? Given enough immigrants from societies where alcohol is not consumed, combined with a decreased tolerance for anything that is upsetting, violent, or risky, could the U.S. return to Prohibition, at least on a state-by-state basis?

Related:

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Childless political leaders the wave of the future?

Taiwan has elected Tsai Ing-wen, a childless never-married 59-year-old (Wikipedia). This is a non-traditional status for a 59-year-old person and I’m wondering how revolutionary this is. Germany, of course, is led by the childless Angela Merkel.

Readers: What other countries are led by people who never had kids? And could this affect their decision-making? (e.g., perhaps Angela Merkel isn’t worried about the long-term demographic shifts that her policies entail; by the time Germany is no longer recognizably “German,” she will be likely be dead)

Notable historical examples of childless leaders: Adolf Hitler, Lenin, Ho Chi Minh.

Arguable: George Washington (Wikipedia says that he was an active stepfather to Martha’s children).

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The last debate for the Democrats

Looking at “The 4th Democratic debate transcript”

Clinton: We have to get the economy working and incomes rising for everyone, … We need a president who can do all aspects of the job.

We will have a planned economy.

Sanders: ordinary Americans are working longer hours for lower wages, 47 million people living in poverty, and almost all of the new income and wealth going to the top one percent.

If voters aren’t angry enough about this, the government can let in another 10 million immigrants and tweak the “poverty” definition so that an advocate for higher taxes can talk about the “100 million people living in poverty.” (Actually that does raise the question of why, if life in America without rich parents is an intolerable grind, there are any migrants who want to come to the U.S. Did Tashfeen Malik come here because she thought that Bernie Sanders was going to get elected and redistribute wealth to her? Why wouldn’t all migrants seek to stay in their home countries and/or Europe?)

Sanders: And then, to make a bad situation worse, we have a corrupt campaign finance system where millionaires and billionaires are spending extraordinary amounts of money to buy elections.

How well did being backed by rich people work for Mitt Romney in 2012? Are the Koch brothers more powerful than the average American voter’s desire to be taken care of by the Great Father in Washington? Have they picked our next president yet? According to “Koch Brothers Officially Back Carly Fiorina” it would seem that we will all soon have to buy Compaq-brand PCs.

O’Malley: Eight years ago, you brought forward a new leader in Barack Obama to save our country from the second Great Depression. And that’s what he’s done. Our country’s doing better, we’re creating jobs again. But in order to make good on the promise of equal opportunity and equal justice under the law, and we have urgent work to do

It is great that we were sent a savior. But how come, after seven years of being saved, we still have “urgent work to do”? We were able to win World War II in four years. From the latest AOPA Pilot: “Of the 294,000 aircraft built in the United States for the war, 21,583 were lost domestically during test flights, ferrying, training, et cetera, and 43,581 were lost en route to and during theater operations. Most surplus aircraft were destroyed for their aluminum, but some were sold to civilians. Airworthy P–51 Mustangs sold for less than $1,000.”

Sanders: … we should have health care for every man, woman, and child as a right that we should raise the minimum wage to at least $15 an hour; that we have got to create millions of decent- paying jobs by rebuilding our crumbling infrastructure.

We are years into Obamacare, spend nearly 20 percent of GDP on health care, and don’t already have health care for Americans? There are going to be millions of currently unemployed people rebuilding our infrastructure? Who wants to be the first to drive over a bridge that has been built by the Obamacorps (folks who spent 99 weeks playing Xbox)?

Clinton: I would work quickly to present to the Congress my plans for creating more good jobs in manufacturing, infrastructure, clean and renewable energy, raising the minimum wage, and guaranteeing, finally, equal pay for women’s work. … decreasing the out-of-pocket costs by putting a cap on prescription drug costs; by looking for ways that we can put the prescription drug business and the health insurance company business on a more stable platform that doesn’t take too much money out of the pockets of hard-working Americans.

The Citizens for a Planned Economy will support this! Hillary’s ministry of wages will set the fair salary for every woman in America (maybe they can use the federally mandated child support guidelines as the starting point). And the federal government will also allocate revenue to favored companies in the health insurance and pharma industries.

Clinton: And third, I would be working, in every way that I knew, to bring our country together.

Except for the Republicans, whom she hates, because they are staging a “concerted assault on voting rights, on women’s rights, on gay rights, on civil rights, on workers rights.” (a little farther down in the transcript)

O’Malley: I would lay out an agenda to make wages go up again for all Americans, rather than down. Equal pay for equal work, … raising the minimum wage to $15 an hour

“I too can find wise ministers to run a centrally planned economy.”

O’Malley: we need a new agenda for America’s cities. We have not had a new agenda for America’s cities since Jimmy Carter. … that will invest in CBVG transportation,

Okay, what is “CBVG”? And why can’t state governments make agendas for cities within their states? Should there be the same agenda for Honolulu, Hawaii and Bangor, Maine?

Sanders: I stood up to the gun lobby and came out and maintained the position that in this country we should not be selling military style assault weapons.

So Americans will be able to buy an AK-47 but it has to be pink with polka dots?

Sanders: I have supported from day one and instant background check to make certain that people who should have guns do not have guns. And that includes people of criminal backgrounds, people who are mentally unstable.

I’m not a gun expert, but does all of this paperwork make a difference? Didn’t Syed Rizwan Farook and Tashfeen Malik acquire guns through a friend (latimes)? And wouldn’t they have passed most background checks in any event?

Clinton: He voted to let guns go onto the Amtrak

How else are you going to shoot yourself when you’re stuck for what seems like an eternity on an Acela train crawling feebly between Boston and New York? (Regrettably it seems that the bill Sanders supported was for guns in checked bags, so you wouldn’t have access to your beloved gun while Amtrak was making you miserable.)

Clinton: He voted for immunity from gunmakers and sellers which the NRA said, “was the most important piece of gun legislation in 20 years. “

If it were possible to sue gun manufacturers for damages following shooting deaths, wouldn’t all guns then be made offshore and imported by LLCs that were dissolved every year or two?

O’Malley: I’m the one candidate on this stage that actually brought people together to pass comprehensive gun safety legislation. This is very personal to me being from Baltimore. … It was because we were burying over 300 young, poor black men every single year … I drove our incarceration rate down to 20-year lows, and drove violent crime down to 30-year lows

The New York Times just ran an article showing that O’Malley was so successful that Baltimore is now slightly safer than El Salvador and Honduras. There were 344 homicides in 2015 and 93 percent of the victims were black.

O’Malley: I’ve never met a self respecting deer hunter that needed an AR-15 to down a deer.

Spoken like a man who has never planted a rhododendron or tulip…

Clinton: Well, sadly it’s reality, and it has been heartbreaking, and incredibly outraging to see the constant stories of young men like Walter Scott,

Supposed the court system and prison industry in life; supporting Hillary in death.

Clinton: One out of three African American men may well end up going to prison.

Sanders: We have a criminal justice system which is broken. Who in America is satisfied that we have more people in jail than any other country on Earth, including China?

But our federally-mandated child support system requires that we put a lot of these guys in prison (see “Post-Divorce Child Support Collection”).

Clinton: I took on the health insurance industry back in the ’90s, and I didn’t quit until we got the children’s health insurance program that ensures eight million kids.

She took on the industry and ultimately gave them 8 million new customers, whose premiums are paid for by tax dollars? Can she please also take on my industry?

Clinton: We finally have a path to universal health care. We have accomplished so much already.

Sanders: … we have to deal with is the fact that 29 million people still have no health insurance.

We have moved from an expensive system in which tens of millions of Americans were uninsured to a crazy expensive system in which tens of millions of Americans are uninsured.

Sanders: We’re not going to tear up the Affordable Care Act. I helped write it. But we are going to move on top of that to a Medicaid-for- all system.

If I get free health care under Bernie’s Medicaid-for-all why would I want to buy additional insurance through healthcare.gov? (And I hope that we’re not all getting Medicaid because with Bernie’s higher taxes we will all readily qualify for this poverty-relief program!)

Sanders: The real issue is that in area after area, raising the minimum wage to $15 bucks an hour. The American people want it. Rebuilding our crumbling infrastructure, creating 13 million jobs, the American people want it. The pay equity for women, the American people want it. Demanding that the wealthy start paying their fair share of taxes. The American people want it.

The most accurate statement in the debate!

Sanders: I do believe we have to deal with the fundamental issues of a handful of billionaires who control economic and political life of this country.

How do we explain the loss of Mitt Romney then? The imposition of the Obamacare surtax on investment income? Is it that the billionaires have such sophisticated tax avoidance strategies that they didn’t mind President Obama and his higher tax rates? Billionaires care about tax rates in Bermuda, Ireland, and the Netherlands, but not the U.S.?

Clinton: I know how much young people value their independence, their autonomy, and their rights.

… so the central planners in Washington will set their wages, tell them that they don’t have the right to refrain from buying overpriced health insurance, etc.

Clinton: he’s criticized President Obama for taking donations from Wall Street, and President Obama has led our country out of the great recession.

Obama gets credit for the U.S. economy’s dead cat bounce! What would have happened if Mitt Romney had been elected? Every business in the U.S. would have had to go Chapter 7 with the assets sold to Mexican, Canadian, and Chinese firms?

Sanders: The leader of Goldman Sachs is a billionaire who comes to Congress and tells us we should cut Social Security, Medicare, and Medicaid.

And yet these programs grow every year. This is not one of the billionaires who, according to Bernie, controls the U.S. economy then? The Goldman billionaire is one of the powerless billionaires that Congress ignores?

Sanders: We do that by doing away with the absurd loophole that now allows major profitable corporations to stash their money in the Cayman Islands, and not in some years, pay a nickel in taxes.

“I don’t want there to be any major profitable corporations that are headquartered in the U.S.”

Sanders: I pay for it through a tax on Wall Street speculation.

“I want all of the trading to happen in some other country where there is no tax.”

Clinton: I’m the only candidate standing here tonight who has said I will not raise taxes on the middle class. I want to raise incomes, not taxes, and I’m going to do everything I can to make sure that the wealthy pay for debt free tuition, for child care, for paid family leave.

Her Central Ministry of Wages will be setting incomes, so the promise to raise incomes is credible. We will make high-income people work longer hours, and therefore have fewer children, to transfer money to child care and family leave so that we encourage low-income

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Wall Street Journal on airline labor costs

“Airlines’ Rising Labor Costs in Focus Ahead of Earnings” is a January 16, 2016 WSJ article making some of the same points that I made in “Unions and Airlines” back in 2010. Labor rates tend to be set during times of high profit:

As fuel prices have plunged, employee pay and benefits have returned as airlines’ biggest expense item. Because the industry—which not too long ago was mired in red ink—appears to be minting money now, its pilots, flight attendants, mechanics and other workers are demanding to be rewarded for aiding in its turnaround. They also want to recoup concessions they made when companies went through bankruptcy-court protection.

This leaves nothing for investors if the good times end. Right now the good times are mostly a result of a lack of competition (the government approved every conceivable merger; efficient competitors such as Ryanair are prohibited from offering their services to American consumers for domestic flights). Perhaps the oligopoly won’t end, but profits for investors could end if the next round of labor negotiation transfers the profits from lack competition into employees’ pockets.

My recommendation: Don’t buy stock in any U.S. airline!

A reader comment is interesting:

And the regional airline pilot’s/crewmember’s pay?? Too funny. Nothing like contacting tower for takeoff, knowing the pilots in front of your airplane are making 4-6 times more money for the same job. Interesting to see how the industry looks 10 years from now!

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