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Folks:

I’ve drafted a product idea, Video Editing Tablet, and would appreciate comments/corrections.

Thanks.

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The stock market is up this week, with the S&P 500 closing at 1221, the highest it has been since the Collapse of 2008. Simultaneously, the Federal Reserve has announced plans to buy U.S. Treasury bonds (i.e., print money). Before we look at the nominal dollar figure and get excited about how well we’re doing, let’s look at the S&P 500 in euro:

• January 1, 1999, the date the euro started trading: S&P 500 at 1229, euro worth $1.18, so the stocks were worth 1042 euro
• November 4, 2010: S&P 1221, euro worth $1.42, same stocks worth about 859 euro

Valued in dollars, U.S. stocks have been flat over the 12-year period. Adjusted for inflation, they’ve fallen by 31 percent.

Valued in euro, they are down 17.5 percent. I haven’t found an authoritative euro inflation calculator, but it looks as though they’ve had a similar inflation rate to the U.S. So adjusted for inflation, an investor has lost about 42 percent in euro spending power.

The Federal Reserve has the ability to make us all billionaires. We’ll feel great about our new wealth until we step out of a plane in Paris and discover that USD$1 billion is also the price of a Diet Coke at Roissy.

[I am feeling slightly bullish on the stock market after the election. With opposing parties in control of various parts of the lawmaking process, there is a potential for gridlock. Our existing system of crony capitalism may not be ideal, but it is well understood by American businesses. They will very likely be more confident investing in the U.S. with some assurance that the legal and regulatory environment will be stable. If companies could be guaranteed that no laws would change for the next two years, that will be a far friendlier environment than having to adjust to dramatic new legislation that may intentionally or inadvertently favor competitors. If nothing else, the end of the election will give a boost to aviation businesses nationwide because Barack Obama won’t be flying out to Democratic fundraisers every day and shutting down 3000 square miles of airspace centered on wherever he happens to be. If Obama is at his desk in Washington working with the Republicans, it means that we flight instructors will get a chance to work as well!]

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The Level D simulators that are common for jet training are great at simulating gentle movements of an aircraft, but aren’t realistic for aerobatic maneuvers, such as rolls. Some guys in Germany combined a robot arm with standard simulation visuals to make a simulator that can do aerobatics: article (thanks, David, for the reference!). The robots were originally designed for amusement parks, so the hardware is much cheaper than traditional flight simulator hydraulics.

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I’ve talked to a few friends, talked to a few folks holding signs outside the polls, and voted. For a bit of fun, I will make some predictions about the outcome of the Massachusetts election. I have not tainted myself by looking at any pre-election polls. I’ll update this posting with inline results when the election is concluded.

Proposition 1: Deval Patrick added sales tax on top of existing alcohol excise taxes back in 2009. Prop 1 tries to roll this back. Due to Massachusetts’s Puritan background, I predict that the extra “sin tax” will stay with us and this proposition will fail by 45-55. It doesn’t make any practical difference except that it burdens alcohol retailers with additional forms and bureaucracy. If the state wants more money from alcohol sales it can simply adjust the excise tax at any time. [Result: Passed 52-48.]

Proposition 2: Tries to roll back a poorly understood law regarding affordable housing. A friend who is an architect says that he is familiar with a lot of projects built under this law and they’ve all been “horrible” blights on the landscape. Nonetheless, he is reluctant to vote “yes” to repeal because affordable housing is such an important goal to him. Based on people being afraid of change, I predict that this initiative fails by 42-58 with a lot of people not even bothering to vote on it. [Result: Failed 42-58.]

Proposition 3: This would roll back the sales tax to 3 percent from the existing 6.25 percent rate, established by Deval Patrick in 2009. Sales taxes fall hardest on poor people and inevitably a reduction in sales tax would result in higher income and property taxes, which means that the rich will suffer if this proposition is passed. A friend said “It would be terrible if this law passed because they would cut programs for the poor.” I.e., people whose main problem is that they don’t have enough money can only be helped if we take some of their money away, give 90 percent of it to $150,000/year unionized public employees, and then return 10 percent of it to the poor in the form of free visits to doctors earning $250,000/year.” Rich people will vote against this because of self-interest and, to some extent, because they can feel as though they are helping the unfortunate by maintaining high taxes on the unfortunate. Because they are primarily poor, not stupid, poor people will vote in favor of the rollback, but many of them will have to work two jobs today and/or will have their cars break down. Therefore more rich people will get to the polls and the proposition will fail by 45-55. [Result: Failed 43-57.]

Governor: I asked friends what Deval Patrick had accomplished in his four years as governor. None of them could think of anything yet all will vote for his reelection. I asked a unionized public employee standing in front of the polling place with a “Deval Patrick” sign what he had accomplished. She replied “I’m a teacher and he’s supported us.” Given Patrick’s complete lack of accomplishment in the minds of voters, I predict that he will win with the smallest number of votes possible for a Democrat in Massachusetts, perhaps with as little as 47 percent of the vote (there are a couple of independent candidates, so Patrick can win with a plurality). [Result: Patrick reelected with 48.7 percent of the votes.]

Most of the remainder of the people on the ballot were incumbent Democrats running without opposition and/or candidates for offices that I did not realize existed. [Result: nytimes shows that every incumbent who ran for reelection in Massachusetts won. Two or three open positions were won by Democrats.]

[I would welcome other folks’ predictions in the comment section below. I’ll buy lunch or dinner (might have to be at a dog-friendly venue) for whoever comes closest to being right!]

Post-election analysis: If voters nationwide are supposedly unhappy with the things that the government has been doing, how could people in Massachusetts willingly assent to a continuation of one-party rule here? My theory is that the collapse of the U.S. hasn’t been that unkind to Massachusetts. We have universities that attract foreign students and federal government spending; California can go bankrupt and the Rust Belt can sink into the Great Lakes and Harvard and MIT will still be doing fine. We have a large money management industry that collects fees in good times and bad and the financial services sector has largely been shielded from any economic harm. We have huge biotech and health care industries that benefit from government spending in these areas. The troubles that plague the rest of the U.S.? We didn’t have much of a housing/building boom, so we don’t have to try to dig ourselves out of that hole. We lost our manufacturing jobs to the Carolinas 100 years ago, so we aren’t affected by the exodus to China. We have a disproportionate number of citizens with college and advanced degrees, who have generally prospered over the last few decades. So if we’re doing okay here (except for the 8.3 percent of us who are officially unemployed and perhaps the additional 5-10 percent who would be counted under other unemployment measures), why vote for change?

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Inspired by some recent news articles about airline unions trying to negotiate raises (example) now that the industry is recovering slightly, I’ve drafted an article on how unionization affects the U.S. airline industry and would appreciate comments/corrections.

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Back in 2005, I published an article on using a mobile phone plus dock as a home computer. The basic idea was “If you go through the effort of learning how to use a smartphone, why should you have to go to additional effort to learn the interfaces of a desktop operating system?” It was greeted with derision by all of my friends in the tech and venture capital worlds.

Now it seems that Apple may deliver a portion of the idea: http://www.cultofmac.com/iphone-5-will-enable-ambitious-remote-computing/66825

[Thanks to Ryan Tate for letting me know about this.]

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In my health care reform plan, I noted that back in 2008 or so, we spent more than 10 times as much as Mexicans on health care, yet Mexicans live nearly as long. How can the Mexicans, who suffer from all of the same junk food and obesity problems as Americans, live nearly as long without paying for the latest and greatest drugs and procedures? One possibility that I hadn’t considered is that the latest and greatest drugs and procedures are mostly worthless. That’s basically the message of an interesting article from The Atlantic, “Lies, Damned Lies, and Medical Science”. The author covers the work of John Ioannidis, a Greek doctor who found that most innovative medical procedures and drugs have not, in fact, been proven to be effective. “Why Most Published Research Findings Are False” is an example of Ioannidis’s work.

[Separately, the same issue of the magazine has a good article on the experience of our troops in Afghanistan. Maybe worthwhile to read before voting for politicians who continue to fund this war.]

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One of my favorite cousins traveled all the way from the hills above San Francisco Bay to attend Jon Stewart’s Rally to Restore Sanity in Washington, D.C. this weekend. Stewart’s assertion is that political discourse in this country has become too angry and that if people are reasonable, common ground can be found. This led me to wonder how much common ground there already might be among Democrats, Republicans, and Tea Partiers.

Could there be values or religious differences among the parties? I would argue that these are of slight importance to most Americans. My evidence for this is that most Americans claim to be Christian yet spend money on a new SUV rather than driving a 5-year-old Honda Accord and giving what would have been the SUV payments to help the poor and suffering. Christian Americans very seldom follow the teachings of the historical Jesus when those teachings conflict with financial goals. A voter might have a personal preference about whether or not evolution should be taught in public schools, but is not likely to sacrifice personal consumption to realize that preference.

That leaves economic policy as the area of real dispute. Yet if you listen to politicians from the three parties, they all seem to want substantially the same things: a lavishly funded military and continued foreign wars, government transfers of money from working to non-working Americans (e.g., Social Security), unlimited government expenditures on medical care for those over 65 and for poor Americans (i.e., Medicare, Medicaid, and Obamacare), government workers enjoying high salaries, early retirement, and a comfortable inflation-adjusted pension.

The only important point of difference seems to be whether or not the above-mentioned “wants” are affordable for American society. For people who believe that America’s future prosperity will be much greater than today’s, the 2009 and 2010 federal budget deficits totaling $2.7 trillion (CBO source) are hardly worth worrying about. That’s about 20 percent of today’s GDP, but it would be only 2 percent of 2020’s GDP if we were to enjoy real GDP growth of 25 percent annually instead of our historical average of 3.3 percent . Similarly the unfunded pension obligations of states and cities, estimated at perhaps $4 trillion (Economist), will be easily affordable by a future generation of very highly paid American taxpayers.

Looking at the U.S. Census Bureau’s historical median income table (follow the P-5 link), Voter A could look at the median male worker’s income rising from $22,648 (2009 dollars) in 1953 and reaching $34,762 in 1973, perhaps because all of the technology innovations of World War II had finally been fully adopted by American industry. If that trend were to start again in 2010, perhaps explained by enthusiasm over the iPad, we could all expect to have 50 percent more income in 2030 than we do today and it would be correspondingly easier to pay off our debts, pension obligations for past and present government workers, and for the world’s most expensive health care. Voter A would presumably think it very reasonable for a politician or party to propose an expansion of government spending, in the same way that a college student might prudently borrow money in the expectation of having a reasonably well-paying job at age 35.

Suppose that Voter B, however, happens to concentrate on a different section of the same table. Voter B notices that median income for a working male American was actually lower in 2009 than in 1973, having slipped during those 36 years to $32,184. Voter B expects the average American to be no better off in 2030 or 2036 than he or she is today. Thus Voter B would think it insane for the government to propose spending a future generation’s money, in the same way that it would be insane for a 55-year-old to borrow money planning to pay it back at the age of 70.

The purported great divide and incivility among Americans in political discourse might be as simple as one group that thinks 2010-2046, economically, will look like two replays of 1953-1973 back to back while the other group thinks it will look like 1973-2009. As nobody has a crystal ball, there is really no way to be sure who is right. So perhaps on this election day we can be mindful that the person voting for the opposing party actually wants all of the things that we do; it is simply that he or she has a different expectation about American wealth circa 2046.

[The posting is not meant to minimize the importance of the choices that voters face. If optimistic Voter As prevail and are wrong about America’s future wages, the country is bankrupt. If pessimistic Voter Bs prevail and are wrong about America’s future wages, we’ll have unnecessarily deferred a lot of things that we desire.]

[You might ask why I considered only male Americans in this discussion. It is because women changed the way that they participated in the workforce over the years in question. It is more sensible to compare a male working in 1953 to a male working in 2009 than to do the same for women, whose educational and professional opportunities have been so greatly expanded.]

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I’m a member of the Massachusetts Audubon Society, part of a larger group criticized in a management consultant’s report for being perceived as “having a narrow bird-oriented focus”. I received a spam from the group yesterday urging me to vote in favor of preserving Massachusetts’s permanently temporary 6.25 percent sales tax. The sales tax had been 5 percent for decades, was raised by Governor Deval Patrick to 6.25 percent in 2009, and a ballot proposition would push it down to 3 percent in order to make Massachusetts retailers more competitive with online and New Hampshire stores (public employee unions are fighting this one, as you might imagine).

The push for higher taxes goes beyond birds, as the Audubon president notes “Along with many other nonprofits across the state, we urge you to Vote No on Question 3.”

The Audubon’s argument against the tax cut is that all state agencies would have less money. In particular, they cite possible cuts to budgets for running parks and monitoring compliance with federal “health and environmental standards” (the federal EPA has quite of a few of its 18,000 full-time workers here, so I’m actually not sure what state workers do to supplement the efforts of the 18,000 federal employees).

I thought it was odd that a non-profit organization would lobby for higher sales taxes at all. You could argue that high death or income taxes might help a non-profit organization by encouraging tax-deductible donations. But a sales tax that leaves everyone with a little less money to spend would be likely to reduce donations to non-profit organizations, no?

Another possible explanation comes from the fact that taxes reduce economic activity and growth. A society made poorer through higher taxation wouldn’t have as much money to destroy bird habitat through development. We wouldn’t have as many SUVs and McMansions. I don’t think this argument makes sense, though, because there are plenty of poor countries, e.g., Haiti, that are very poor and simultaneously have very degraded environments.

The one explanation that I can come up with is that Audubon is mostly funded by rich people whereas the burden of sales taxes falls most heavily on poor people. Were the sales tax to be cut, it is not credible that government spending in Massachusetts would be cut (most of our spending is determined by public employee union contracts and pensions). Therefore, income and property taxes would be raised and that would hit the folks who tend to donate to Audubon.

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I was talking to a friend of mine about how a remodeling project was going. “I’m tired of living with Mexicans,” was her reply (apparently the relaxed crew that shows up at 10:00 am every day is from south of the border). I thought that if I’d gotten that on video it would have made an awesome negative political ad.

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