What will Democrats do with the U.S. and what should investors do?

by philg

Based on the Georgia Senate races, in which my friends who call themselves “feminist” cheered for the idea of someone identifying as a “woman” losing her important job, it looks as though the Democrats will be in charge of the U.S. (Regarding today’s events at the Capitol, an immigrant friend said “it’s like BLM just with white people.”)

Now that elite insiders are ruling again, what should we do as investors? To answer that question, first we have to try to figure out what the Democrats will do.

Let’s assume the first priority for the Democrats is to stay in power forever. The simplest way for that to happen is by ramping up low-skill immigration, which has been at the rate of more than 1 million low-skill migrants/year for more than 50 years (Pew). A migrant single mom in public housing is not going to vote for a white male Republican empty suit! A 70-year-old chain migrant parent who consumes $40,000/year in Medicare is not going to vote to trim the Federal budget. The procedure for becoming a citizen is not frozen into the Constitution, right? The Democrat-controlled Congress can streamline citizenship into a 1-year web-based process. That will guarantee a ton of new loyal Democrats for the 2022 elections. Ramp up low-skill immigration to 2 million/year to ensure continued power indefinitely.

(How can we be sure that this is the right strategy for Democrats? The Republicans thought it was, which is why they sought to curtail immigration during the dictatorship of the Trumpenfuhrer.)

The American working class will be the biggest losers (Harvard study), paying higher rents and receiving lower wages, with a massive transfer of wealth to upper-income Americans (the transfer was already at $500 billion/year 10 years ago, according to the Harvard eggheads). Life will be good for the rich, who will pay the same prices for Ubers, restaurant meals, etc. that they would pay if they went to some of the world’s poorest countries. The rich will receive higher rents for the urban real estate that they own and pay lower wages to the workers they employ (either directly or through corporations whose shares they own).

Can one trade on this expectation? We can’t short working class people or go long rich people, though.

Similarly, Bigger Government means the biggest enterprises will thrive. Many of the small businesses that accidentally survived 2020 will be destroyed going forward as increased regulation requires companies to “Go Big or Go Home.” But small businesses are not publicly traded, so there is no obvious way to short them.

How about buying a REIT that holds urban apartment houses? My theory for why urban Americans vote for Democrats while rural/suburban Americans vote for Republicans is that Big Government spends most tax dollars in cities: public housing, hospitals, government jobs, etc. In 2016 for example, Donald Trump won only 4 percent of votes in Washington, D.C., the ultimate example of a city that gets richer when government expands. The low-skill migrants will migrate primarily to cities where taxpayers will fund their housing for the next 100+ years (“means-tested” public housing programs of various kinds, not “welfare” when you pay $125/month, including utilities, for a 3BR in Manhattan or San Francisco!). Increased demand and the river of federal cash will drive up rents even for apartments not occupied by migrants.

Bigger Government is good for cronies. Here in Maskachusetts, for example, we are floated on a tide of federal cash subsidizing Big Pharma Big Higher Ed, and Big Health Care. (Where does the money come from? Medicare/Medicaid and tax subsidies for health insurance, $66 billion for the federal Department of Education, most of which ends up subsidizing student loans and grants) We can’t buy stock in universities or hospitals, though, as they are nominally non-profit. How about the companies that give money personally to Democrats, just before and just after they are in office? “Biden’s treasury secretary pick Janet Yellen earned more than $7 MILLION in speaking fees in 2 years from financial firms and tech giants including Goldman Sachs and Google” (Daily Mail) gives some insight into which publicly traded companies might look forward to favorable treatment.

(A neighbor’s house, photographed from the helicopter by my friend Tony, part of my poorly received #InThisTogether series on Facebook:

Note the solar panels that will be funded by middle-class taxpayers in Maskachusetts.)

One of the best features of the U.S., from the point of view of folks in New York, California, and other high-tax states, was that residents of lower-income lower-tax states had to subsidize rich Democrats in higher-tax states via the deductibility of state and local taxes. This program was cruelly ended for 2018 with the Trump tax law. It seems reasonable to expect that one of the first things a Democrat-controlled Congress will do is restore unlimited deductibility for state and local taxes. How to trade based on that expectation, though? Buy the Case-Shiller Index for houses in New York and San Francisco and short the South Florida sub-index? A house in New York should have a higher value if property tax and personal income tax associated with living in that house become deductible once more.

The Democrats are the party of the American rich. From the NYT:

Joe Biden has outraised President Trump on the strength of some of the wealthiest and most educated ZIP codes in the United States, … In ZIP codes with a median household income of at least $100,000, Mr. Biden smashed Mr. Trump in fund-raising, $486 million to only $167 million — accounting for almost his entire financial edge.

(see also “Biden is vastly outspending Trump in the final week of the 2020 race” and “Trump spent about half of what Clinton did on his way to the presidency”)

If the Democrats are funded by the rich, presumably the rich will be getting much richer in the coming years under Democratic rule. We can’t short the middle class and buy the rich. But maybe we can buy companies that make the things that the rich want. Let’s consider American cities. They’re on track to have Chinese levels of population density (with all of the new low-skill migrants) combined with Nigerian levels of infrastructure quality. Rich people will be happy to pay to escape these crowded virus breeding grounds. We already saw this to some extent in 2020. Luxury oceanfront real estate boomed. My friend who runs a Gulfstream charter operation had his best year ever. Could we trade on this expectation by purchasing shares in General Dynamics, Gulfstream’s parent company, and in luxury hotel chains?

How about Bitcoin? I personally think that Democrats’ stress on LGBTQIA+ issues is a way of delivering social justice without having to reduce personal spending. What if I’m wrong as usual, though, and President Harris does raise tax rates dramatically? We should expect a big rise in Bitcoin (but maybe this is already priced in via the recent lift? BTC is 3X what it was in October) as Americans try to move money offshore and/or out of reach of the IRS. (I personally know a fair number of folks who have big unrealized gains in BTC that are inherently hidden from government and financial institutions.)

One of my savvier friends (he doubled his wealth during coronashutdown, for example, by betting (with public equities) that Americans would be champions at cowering in place)):

If you hold cash, it’s about 3% value loss per year, accounting for inflation. I want to take out a huge mortgage to lock in a 2.5% 30 year rate. No way inflation stays below 3%.

Maybe this will be an even better strategy if Democrats lift limits on mortgage interest deductibility, which is a question of basic fairness. The current mortgage interest deduction limit is $750,000, which is a 1,200 square-foot apartment in a righteous area and a 4,000 square-foot single-family house among the Deplorables.

How about a simpler strategy of investing in Asia and selling off stocks that are mostly dependent on the U.S. economy. Kids in China spend 2020 in school; kids in the U.S. spent 2020 on Xbox and will probably stick with Xbox/Netflix for 2021. If education drives wealth, we have to expect Asia to perform better than the U.S.

Very loosely related… a 2008 photo of one of the whale sharks at the Georgia Aquarium, funded by Trump supporter and Home Depot co-founder Bernie Marcus.

Readers: What are your best ideas to profit from the return to rule by elites?

Related:

  • Programs to raise female wages will secure a voting majority for Democrats? quotes the Economist: “unmarried women are spectacularly loyal to the Democrats … The ‘marriage gap’ dwarfs the sex gap, by which women as a whole have long favoured Democrats.” (if women can earn a lot in the labor market they won’t bother getting married; another way Democrats can benefit is by making divorce lawsuits more lucrative; if more women are divorced that means more votes for Democrats, but this depends on state-by-state initiatives)
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Maine coast helicopter photo series: Kennebunk

by philg

Third of a series… near the peak of foliage season (mid-October) we decided to fly from Boston to Bar Harbor, Maine, following the shoreline, in a Robinson R44 helicopter. Tony Cammarata was in back with a door removed (frosty!) and a Nikon D850. Instrument student Vince Dorow was with me in the front seats.

Kennebunk (home of restricted airspace) to just before Old Orchard Beach, Maine:

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Travel to get an adenovirus-based COVID-19 vaccine?

by philg

One of my instrument flying students recently traveled back to his native Russia and got the Sputnik V vaccine (his wife had it too and the result was two days of fever for her, no significant negative effect for him). Although the U.S.-approved Pfizer-BioNTech and Moderna vaccines are supposedly quite effective, they’re also brand new technology that has never previously been tried in humans (see, from 2018 Nature, “mRNA vaccines — a new era in vaccinology”).

What about the idea of traveling to a country where a vaccine based on more conventional adenovirus technology is available? In addition to the Russian vaccine, the Oxford/AstraZeneca product meets this definition (explanation of function in NYT).

Why not take a trip to a Mexican beach resort, for example, and pay a private clinic for a dose of the AstraZeneca product? (produced and/or packaged in Mexico) Then go back a month or two later for some more poolside margaritas, a stop at a UNESCO World Heritage site, and the second dose?

(Why not get one of these vaccines here in the U.S.? The FDA might not approve it before 100 percent of Americans are infected (roughly half are already if we use the 8X multiplier that the CDC suggests). Even if the FDA does approve it, the centrally planned distribution strategy might make a adenovirus-based vaccine impossible to obtain as a practical matter.)

Readers: Which would you rather have? A leading-edge mRNA vaccine or a slightly-more-conventional adenovirus vaccine? (or no vaccine at all?)

[A medical school professor friend: “The adenovirus vaccine is more likely to have a known side effect than the mRNA vaccine. The mRNA is much more likely to have an unknown side effect.” Why did he prefer? “I don’t want to feel bad for a day or two and the probability of a significant negative effect from the mRNA vaccine is small, so I’d rather have the mRNA vaccine. In reality, it doesn’t matter because so many Americans will have been immunized by a COVID infection by the time I get my vaccine that my actual protection will come from herd immunity.” He does work in a hospital, but seldom sees patients and therefore is not likely to get a vaccine before March.]

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We ran but could not hide: more than half of Americans have now had COVID-19

by philg

The CDC says that multiplying the laboratory-confirmed COVID-19 “cases” by approximately 8 is the best estimate of the actual number of Americans who’ve been infected by the SARS-CoV-2 virus (i.e., “had Covid,” though if there were no symptoms, this is not the medically accurate term). See “Government Model Suggests U.S. COVID-19 Cases Could Be Approaching 100 Million” (NPR) and the academic journal paper on which it reports, “Estimated incidence of COVID-19 illness and hospitalization — United States, February–September, 2020”.

As of today, the CDC says that the U.S. has had 20,732,404 “cases” of COVID-19. Multiplying by 8, that’s 165,859,232 (important to have 9 digits of precision when guessing wildly for #Science). The Census Bureau’s pop clock says that the U.S. has 330.8 million residents (though Yale says that the error bars on undocumented migrants are in the millions).

I’m not sure that we’ll ever get a better estimate so it is reasonable, in my view, to say that today was the day when the majority of Americans had been infected, at least to some extent, by the virus we call “COVID-19.”

Related:

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Stop whining about the cold: The Impossible First

by philg

For lovers of Antarctica exploration tales, The Impossible First is worth reading. Struggling to muster the energy to head out into a windy Boston January to walk the dog? The author, Colin O’Brady, walked into 50-knot headwinds in -25 degree temperatures while pulling a 300 lb. sled containing supplies for a solo unsupported unresupplied coast-to-coast trip, via the South Pole, across Antarctica.

An endurance athlete, the 33-year-old O’Brady was racing against 49-year-old Louis Rudd, who also managed to finish the trip. To me that was even more inspiring.

One thing I learned from the book is that if you have enough money you can do almost anything that you want in Antarctica, including sleeping in a heated tent at the South Pole. A.L.E., the Antarctic Logistics company, will arrange everything. Climb a mountain, hassle some Emperor penguins, or just walk from the ski plane to your tent.

The author is not a gifted writer and there are a fair number of flashbacks to only loosely-related mountain climbing expeditions (including Everest, way more crowded near the top than Manhattan during coronapanic). Feel free to skim this filler if you’re more interested in Antarctica than in the author’s personal journey.

One question is how people today are able to do the coast-to-pole-and-back or coast-to-coast trip so much more easily than the original explorers, notably Amundsen, Scott, and Shackleton. Today’s adventurers don’t need companions, dogs, ponies, depots, etc. Seemingly more often than not, they are actually successful in accomplishing whatever they set out to do. Is it because the modern ultramarathon athlete is way more fit than the heroes circa 1900? Is it because the routes are mapped and today’s travelers have GPS? Is it because they can travel with a thinner margin of supplies, knowing that if the weather turns against them or if equipment fails a helicopter or ski plane rescue is a Garmin inReach message away? [See Update below for the main reason; O’Brady traveled a shorter distance, starting and finishing via aircraft rather than via ship.]

The author sold clothing companies, such as Nike and Columbia, on sponsoring the project with the idea that his story would inspire kids and ordinary folks. Maybe they couldn’t climb Everest, but they could climb their Everest. With even young healthy Americans generally too afraid to leave the house, this is kind of funny to contemplate. Maybe the most that we non-athletes can take away from this is that we shouldn’t complain if we have to bundle up for a 15-minute evening dog walk.

More: Read The Impossible First.

Mindy the Crippler is never a whiner… (from this afternoon)

Update: Paul (see comments) highlighted this National Geographic article, which shows the vastly longer distance traveled by Borge Ousland in 1997. Ousland was solo, but sometimes used a kite to help move the sled.

Looking at a map of Antarctica, you might wonder how O’Brady’s 932-mile route can be considered a crossing of “the entire continent,” as he calls it, since it appears to start and end several hundred miles inland, especially compared to the much longer journeys of Ousland, Mike Horn (who completed a daring 3,169-mile solo kite-ski crossing of Antarctica in 2017), and others.

Ousland skied from water’s edge on the Ronne to water’s edge on the Ross. When he undertook his expedition two decades ago, this was considered the only way to claim a crossing of Antarctica.

“To me, Antarctica is what you see on a satellite map,” says Ousland, noting the ice shelves have been a part of Antarctica for at least 100,000 years.

But there is a continent somewhere under there, detectable with remote sensing equipment. In recent years, adventurers have begun claiming a crossing by citing this unseen “coast.” Some, in order to please sponsors and media, did this only after failing in their attempt at a full crossing. Suddenly an Antarctic “crossing” had shrunk in half.

… adventurers eager to shorten the feat quickly seized on the new abbreviated definition. An unsupported couple crossed in 2010, skiing 1,118 miles. A solo woman crossed (with two food drops) in 2012, skiing 1,084 miles. But O’Brady took the invisible coastline strategy to its extreme—his journey was nearly 200 miles shorter than these earlier trips, and the shortest route yet that anyone had claimed as a “crossing of the continent.”

Put another way, it’s not so much that no one had been able to cross Antarctica this way before, it’s that no one had defined a crossing in such achievable terms.

Maybe this is the athletic/exploration equivalent of “A good lawyer knows the law; a great lawyer knows the judge.”

Related:

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Maine coast, south of Portland

by philg

Second of a series… near the peak of foliage season (mid-October) we decided to fly from Boston to Bar Harbor, Maine, following the shoreline, in a Robinson R44 helicopter. Tony Cammarata was in back with a door removed (frosty!) and a Nikon D850. Instrument student Vince Dorow was with me in the front seats.

Here are some of the images, in 8K resolution, starting just north of Portsmouth, New Hampshire:

The 226-room Cliff House just south of Ogunquit (maybe one of the COVID-19 billionaires will purchase this as a personal quarantine residence for the next round of mutant virus?):

Ogunquit through Wells, Maine:

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CVS, the Pfizer vaccine, and a retirement home

by philg

From my moles in the retirement-industrial complex (a.k.a. “Mom and Dad”)… Two CVS technicians showed up to their “independent living” retirement apartment building in Bethesda, Maryland yesterday with the Pfizer/BioNTech vaccine. They started at 9:00 am. Each of the 250 residents came downstairs and proceeded through a waiting room, then to get stuck, then to a rest area with juice and cupcakes (because it is like giving blood?) for 15 minutes. CVS packed up and left at 1:00 pm (31 shots per hour per technician).

Mom and Dad report no side effects of any kind, not even soreness at the injection site.

There does not seem to be any effort made to track who is vaccinated. Maybe that’s impossible in a country without a national ID card system, as is conventional in Europe and Asia. My parents were supplied with paper cards inscribed with pencil and instructed to bring the cards back for the second shot (my Dad already lost his or maybe was never given one). (I am inferring that if there were some sort of tracking database that my parents wouldn’t have to bring the physical card to the second shot appointment.)

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Sweden will have a lower death rate in 2020 than it had in 2010

by philg

This Statista bar chart has been suggesting for months that the all-cause death rate in Sweden for 2020, a year in which the country gave the finger to the deadliest virus within the memory of Humankind, will be lower than the death rate in 2010, an unremarkable year from a disease point of view.

90,487 residents of Sweden died in 2010, when the population was 9.34 million (Google). The population today is 10.4 million (Statistics Sweden, a government agency).

The 2010 death rate applied to the 2020 population would be consistent with approximately 100,750 deaths.

The Statistics Sweden folks make fine-grained death data available for download. The latest iteration, released today, shows 95,022 deaths for all of 2020. However, it seems that the data are incomplete starting on December 21. If we normalize Dec 21-31 with averages from 2015-2019, we would expect Sweden to experience an additional 1,846 deaths in 2020, for a total of 96,868 (i.e., well below the 100,750 who would have died if the 2010 death rate occurred).

[Update: The January 18, 2021 version of the spreadsheet shows 97,941 deaths for all of 2020. More than the above guess, but still occurring at a lower rate than in 2010. It seems that the 2022 versions of the big official spreadsheet describe 98,124 deaths (sum Column G in Table 1), which is still a lower number than the 2010 death rate applied to the 2020 Swedish population size (as noted above, the result would have been 100,750.).]

It will be worth checking back in a couple of weeks for the near-final 2020 number. (The Swedes will publish their final number for 2020 on February 22, 2021, seven weeks after the end of 2020. Their U.S. counterparts at the CDC, published their final numbers for 2018 in January 2020, 13 months after the end of 2018.)

Summary: the Swedes sent their unmasked children to school, sent their unmasked selves to work, sent their unmasked selves to the gym and social events, and generally went right into November before losing their nerve (adopting masks on public transport and cutting “public events” (not private house parties) back to 8 people max). They’ve emerged from what in most countries was the Year of Coronapanic with their psyches, civil liberties (freedom to gather, freedom to travel), education, and work skills intact. They’ve suffered more deaths than in some previous years (but maybe partly this was due to having fewer-than-expected deaths in the most recent years), but have had a lower death rate than they had in 2010 and they’re not even on the first page of countries ranked by COVID-19-tagged death rate.

(What does a moderately northern place with a big city look like when the Church of Shutdown is worshipped and the Ritual of the Mask is observed? The Maskachusetts COVID-19 death rate per 100,000 people is 182 (CDC). Sweden’s rate is 86.)

Separately, for those who are interested in questions of government efficiency, particularly in a declared time of crisis/emergency .. I sent a question to the Statistics Sweden public email address using the World’s Greatest Language (i.e., not Swedish). It was the middle of the night there. I received an English-language answer at 9:47 am Swedish time the next day, also in the world’s greatest language. The answer, from Tova Holm, addressed the apparent discrepancy between the Statista numbers and the spreadsheet numbers (Statista’s chart was correct, but based on an earlier version of the spreadsheet), pointed me to specific sheets within the Excel file, etc.

Readers: If you emailed a U.S. government agency with a random question, how long would you expect to wait before receiving an answer? (Probably not worth asking what would happen if we turned the languages around and queried the U.S. government in Swedish!)

Related:

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Helicopter images of the New Hampshire coast in foliage season

by philg

First of a series… near the peak of foliage season (mid-October) we decided to fly from Boston to Bar Harbor, Maine, following the shoreline, in a Robinson R44 helicopter. Tony Cammarata was in back with a door removed (frosty!) and a Nikon D850. Instrument student Vince Dorow was with me in the front seats.

Here are some of the images, in 8K resolution, starting in Newburyport, Massachusetts and going through Hampton, New Hampshire:

Up through Rye, New Hampshire:

and then to Portsmouth, New Hampshire:

I’m also working on an 8K YouTube video, tied up for some time in a copyright dispute due to scammers downloading public domain music from musopen.org, rolling it into profit-seeking YouTube “albums”, and then claiming it as their own original copyright material. (The copyright claim seems to be cleared now, but YouTube’s servers are still crunching away to build 4K and 8K versions.)

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Rich white Americans help themselves to subsidies from Black Americans

by philg

“Complacency and wasteful spending blight US higher education” (ft.com):

The push by American progressives to have Joe Biden’s incoming administration forgive $50,000 of student debt per borrower is deeply stupid, but at least clarifyingly so.

More polite language fails to capture the absurdity of singling out college attendees for an unprecedented $1tn transfer of wealth — equivalent to the total spent on cash welfare in the last 40 years. The top sources of US student debt are professional business and law degrees. [Brookings]

(The comparison to “cash welfare” is misleading because nearly all U.S. welfare spending is officially “not cash” and, for Democrats, “not welfare”. A person who gets a free “means-tested” house, a free “means-tested” health insurance policy, free food via SNAP/EBT, and free phone service via Obamaphone is not “on welfare” and is not receiving “cash welfare”.)

The article contains some other fun facts. College here costs 2X what it costs in Germany or France. Only one quarter of the folks who sign up at two-year community colleges earn a degree within six years. And the author points out that young people would be stupid not to take the opportunity to enjoy “sports and parties, sex and alcohol” for four years at taxpayer expense.

What the author doesn’t mention is that Black Americans will be paying for this while white Americans will be the ones primarily enjoying the sports, parties, sex, and alcohol.

If 2020 was the year that old white rich Americans stole a year of life from young healthy slender Black Americans (by locking them down to “protect” them from a disease from which they faced minimal risk), maybe 2021 will be the year that young white rich Americans steal massive quantities of cash from Black Americans via student loan forgiveness?

Related:

  • “Who owes the most in student loans: New data from the Fed” (Brookings): The highest-income 40 percent of households (those with incomes above $74,000) owe almost 60 percent of the outstanding education debt … The lowest-income 40 percent of households hold just under 20 percent of the outstanding debt. … education debt is concentrated in households with high levels of educational attainment. In 2019, the new Fed data show, households with graduate degrees owed 56 percent of the outstanding education debt—an increase from 49 percent in 2016. The 3 percent of adults with professional and doctorate degrees hold 20 percent of the education debt. These households have median earnings more than twice as high as the overall median.
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