Aleppo, Clinton, ISIS & Trump

Photo from The World Bulletin Syria doctors plead with Obama over Aleppo siege.
Mahmoud Rashwani in The Guardian, read hereI have become an expert in pulling people out from wreckage, in distinguishing how deeply buried under rubble the screaming victims are, how to spot them in the chaos – they look very much like statues covered in dust  Those tight, shocked hugs that I get from the kids I carry out of the ruins of their homes won’t ever be erased from my memory. Nor can I clean their blood from my T-shirts. … After one of the latest air force attacks inside the city, I found a mother hugging a young girl’s leg, just a leg, and shouting: “I found it. It’s my daughter’s leg. I won’t lose it, it’s hers.”

Everyone agrees what’s happening in Aleppo is a tragedy – the civilians caught in the fighting who accuse the US of not doing anything to deter civilian casualties, the Assad government who blames rebels for starting the conflict, the Russians dropping the bombs to try and stabilize the Syrian government and fight ISIS, POTUS Obama who no one would suggest is not a softhearted liberal (or would they?), and last but not least and most important for the future: candidates Clinton and Trump.

Clinton’s position:  The rebels deserve more aggressive (military) support, which she argued for in Libya and just about everywhere else when Secretary of State.  It seems likely the rebellion in Syria started with the belief that the US would almost immediately provide air support as it did in Libya.  But it did not, as Obama choked.

Note:  The pro-rebel position is made less clear by the fact that Aleppo is defended by a coalition of US-backed rebels and the al Nusra Front, an Al Qaeda affiliate (or former affiliate if you trust them) which may or more likely may not have changed its ideological goals about things like the imposition of Islamic Sharia Law.  They even changed their name to Jabhat Fateh al Sham (see CNN article) which means “Front opening Sham.”  Sham is a Caliphate term for Damascus, Syria or the Eastern Mediterranean generally, suggesting the same “Caliphate” goals as ISIS.  Perhaps, since most of these terrorists are pretty fluent in English, it is an open admission the name change “is a sham”?

Trump’s position:  We do not know what’s best for these countries and are causing problems by meddling.  We should focus on the US (and implicitly, lead by example).  Some of the meddling likely contributed to the development of ISIS (or said with typical Trumpian flare, Clinton & Obama “founded” ISIS).

Trump has no political record.  As for his business record, we know that by the minimum attribution of others, he’s done decently from the starting point obtained from his father.  He does not chase lost causes but cuts them off (via bankruptcy, a normal business practice), and as a result has left some contractors bitter about unpaid bills.  Kind of like leaving rebels bitter about unmet expectations of support?  We are left to guess.

Clinton does have a political record, as the 2nd most influential person over US foreign policy for four years as Secretary of State.

Does Clinton’s political record contain evidence for Trump’s contention?  I’ve asked this question in a particular way, so that it is factual, but not conclusive.  If one asks “Did Clinton [unintentionally] foment ISIS, and are her policy views consistent enough going forward to suggest future similar mistakes?”  Then, the answer likely depends on who is selecting and interpreting facts from the record.  But the way I have asked it is just to determine if there are supporting facts in the record, not to conclude whether they are even sufficient, much less forward determinants.

Something unexpected emerges, however, which reminds me of Sarah Palin resigning as governor of Alaska, and makes me wonder if Hillary will have staying stamina as president.  I’ll just let that come out as it comes out, and you can decide if it means anything.

Most of the following points are summarized from the Wikipedia article on Clinton’s tenure as Sec. of State.

  • Mid-January 2011:  Clinton makes 4-country trip to Middle East, criticizing Arab governments’ failure to move more rapidly vis à vis reform in unusually blunt language.
  • January 29, 2011:  Obama puts Clinton in charge of sorting out administration response to Egyptian protests.
  • January 30, 2011:  Clinton combined appearances on all five Sunday morning talk shows – stating publicly for the first time the U.S.’s view that there needed to be an “orderly transition” to a “democratic participatory government”and a “peaceful transition to real democracy”, not Mubarak’s “faux democracy.”
  • Mid-February 2011:  Beginning of Libyan civil war.
  • Early March 2011:  Clinton stated the administration’s position that Libyan leader Muammar Gaddafi “must go now, without further violence or delay“.
  • Mid-March 2011:  In CNN interview with Wolf Blitzer during her post-revolution visit to Cairo’s Tahrir Square [Clinton stated] that she had no interest in becoming Secretary of Defense or vice president or of running for president again.
  • January 26, 2012:  In a State Department town hall meeting Clinton [again] indicated her desire to remove herself from “the high wire of American politics” after twenty tiring years of being on it and added, “I have made it clear that I will certainly stay on until the president nominates someone and that transition can occur.”
  • Summer 2012:  Clinton developed a plan with CIA Director David H. Petraeus to send arms to, and perform training of, vetted groups of Syrian rebels, using the assistance of a neighboring state.  Obama rejected the idea.
  • July 2012:  Clinton visited Egypt for the first time since Mohammed Morsi became the first democratically elected president of the country.  As she arrived in the country, her convoy was met with a protest and had shoes, tomatoes and bottled water thrown at it, although nothing hit either Clinton or her vehicle.  Protesters also chanted “Monica, Monica”, in reference to the Lewinsky scandal.  She also faced conspiracy theories (in a country that tended towards them) that the U.S. was secretly aligned with the Muslim Brotherhood.
  • September 11, 2012:  An attack on the U.S. diplomatic mission in Benghazi took place, resulting in the death of U.S. Ambassador J. Christopher Stevens and three other Americans
  • November 6, 2012:  Obama was re-elected for a second term as president. Clinton said shortly before the election that she would stay on until her successor was confirmed, but that “this is not an open-ended kind of time frame.”
  • Mid-December 2012:  Clinton fell victim to a stomach virus contracted on a trip to Europe. She subsequently became very dehydrated and then fainted, suffering a mild concussion. As a result, she cancelled another trip and scratched an appearance at scheduled Congressional hearings on the Benghazi matter.
  • December 30 2012:  Clinton admitted to New York-Presbyterian Hospital for treatment and observation after a blood clot related to the concussion was discovered.
  • January 2, 2013:  Clinton was released from the hospital.  She returned to work at the State Department on January 7, when co-workers welcomed her back with a standing ovation and a joke gift of a football helmet featuring the department’s seal.  The illness did, however, put an end to her days of travel in the job.
  • January 23, 2013:  Clinton … gave more than five hours of testimony on the Benghazi matter before hearings of the Senate Foreign Relations Committee and the House Foreign Affairs Committee.

These events made no impression on me at the time, as I suffered an important personal loss, and was spending a lot of time traveling (to Ukraine, Russia, Turkey).  During this time I met my wife and was getting her into the country and getting married in the fall of 2012.  It was only in retrospect, researching this article, that I saw the events laid out in the timeline.

The “context” of my analysis is having grown up during the cold war, in which stability was accepted as preferable to revolution, at least “communist” revolution.  Oddly, I eventually married someone who voted communist in the 2012 Russian election and argues eloquently that the reform in Russia was a mistake.  Perhaps she has influenced my views.  I do not care for Putin’s repression, but his platform was to avoid “color revolutions” as too disruptive of society, and to evolve instead.  Some campaign signs were painted as graffiti on buildings, and here is a photo I took of one:


In said context, agitating for dramatic change in the form of government in Libya, Egypt, Syria and other countries would be assumed to run a high risk of resulting in chaos and unending civil war, or, if it ended, with some interests in power who were much more inimical to the US (and to the style of treatment of citizenry we favor) than the ones they replaced.

Let it be said that, in my opinion, Clinton did not cause war or unrest in the Middle East.  Some of that has been going on since … well, almost as long as we have records, certainly since the dramatic end of Bronze Age stability in about 1250 BCE (just over 3000 years).  Nor was it the existing governments, to tell the truth, as they had all been there for some time.

The proximate cause for the “Arab Spring” was some financial shenanigans with bundled mortgages pulled by Wall Street banks.  How, you ask?  I was struck when visiting Ukraine in 2009-2010 how they complained of being hard hit by the 2008-2009 Financial Crisis.  We hardly even trade with Ukraine.  But we trade with the EU, their largest trading partner, and the world trades with Russia, a major supplier of oil and a big Ukraine trading partner at the time.  Since Ukraine’s trading partners got hit, they were slung about like the tail end of a rope and their economy smashed, which as we saw later led to a bloody conflict there, as they tried to join the EU and Russia and some regions resisted.

The man who immolated himself in Tunisia to set off the Arab Spring did not shout any religious or anti-Western slogans.  He did shout something, though.  “I just want to work!”  He supported a number of relatives, the sole worker, and his fruit vending cart was confiscated by police for lack of a license one too many times.  Unemployment was over 25%.  Just like Ukraine, they were whipped about and given undeserved “lashings” at the tail end of the economic trade rope – that Trump wants to cut or restrain.  Oh yes, we hear all about the benefits of trade, but never mind the fact that a region of the world that has supported itself for 5000 years is devastated and foments a major US enemy (ISIS) because of newfound and unmanageable connections to the new global economy.  “What economy?” the unemployed ask.  They aren’t getting any benefit.

Clinton herself cannot be blamed for this “root cause” of the Arab Spring.  Or can she, by association?  Is she a member of a class of people who believe in and routinely foster unstable global connections?

There have been several eras of global trade.  I already mentioned the end of the Bronze Age, an era noted for extensive trade between the then four main empires, destabilized by migrants (the Sea Peoples) among other things and falling flat in a mere 25 years.  The Assyrian Empire was thought to have destabilized and emerged more militant because of rapidly expanding trade contacts.  The Arabs and then the Ottomans obtained a stranglehold on the East-West trade from about 400 AD (or CE, if you prefer) to the end of World War One.  The European diaspora of “exploration” appears like a bunch of ants running in any direction imaginable (including some infeasible ones) to find a way around that blockage.  By 1900, for purposes of trading with the European empires (especially Britain) the US adopted the “gold standard,” and by 1914 the first World War began.  Add to that a technological revolution (automobiles and radio in the 1920s) along with a severe debt crisis (Germany’s war debt due in gold) and you have a recipe for another World War and the development of nuclear weapons.

After a period of relative isolationism – at least the Eastern bloc traded mostly unto itself, and the Western bloc had relatively high tariffs – a re-globalization era was initiated after WWII, thinking that trade would bind nations together and prevent world war.  This eventually became the WTO, EU, NAFTA, TPP (yet to be signed), etc.

Ah, yes, WWIII has [so far] been avoided, at the cost of whipping about the weaker coupled nations and creating things like the Arab Spring.  Clinton can be found in association with her husband in the adoption of NAFTA, and 20 years later advocating the TPP which could lead to the largest loss of American jobs ever.  To be sure Republicans are not found wanting, as Nixon initiated relations with China, and Bush let them join the WTO in 2001.  However the process was begun and fostered from 1996 by a Clinton administration that saw only exports to China and failed to see the overwhelming wave of imports.

There is nothing to suggest Hillery Clinton’s thinking has changed since then, or differs substantially from her husband’s.

So, we can associate Clinton legitimately with trade forces that caused [most directly if not entirely] the Arab Spring, which in turn permitted chaos to develop in Syria, where ISIS was in fact able to form under the protective umbrella of a standoff between the US and Russia – supported aggressively and actively by Secretary Clinton – which created an ungoverned territory favorable for ISIS’ development.

Certainly Clinton is not the sole cause, as Bush instigated the war in Iraq, which most people now realize was a mistake – an “add on” to the war with the Taliban and Al Qaeda under pretenses about WMDs that were either mistaken or misleading.  Incidentally, Bush promised less intervention in foreign affairs during his campaign.  Presidents do change their minds.  We have no guarantee about Trump.  We do have repeated reliable performance from Clinton.  We know she will intervene and aggressively pursue globalism without a thought as to any of its negative consequences, except insofar as they are brought up by opposing candidates.  She’ll have four years with no opposing candidate.

That is the data I promised to present.  You can stop here and draw your own conclusion.  Now there are two loose ends, if you care to see them tied up:

Staying power – Clinton either doesn’t have it, or isn’t honest.  The strain of the failures in Libya and elsewhere seem [this is interpretation and opinion] to have gotten to her.  She is no Iron Lady.  The final five or so of the points above show her collapsing and retreating from politics.  Either that or as some would say, she might be lying about her true motives.  Take your pick.  Either one portends a risk.

Trump’s insight – Say what you will about him personally.  Almost no one likes the man except those who profess to be close to him (actually, this is “normal” except for celebrities, who are often intolerable to those close to them).  But he either came up with his insights on globalism and trade, or listened to someone carefully when it was not in vogue to listen to that point of view.

What we CAN conclude – While we might only conclude that there is some evidence in Clinton’s record on the matter of her contribution to ISIS, but that the weights are “in the eye of the beholder” so to speak, some other conclusions are more definite:

  • I wrote my first book analyzing the negative side of trade (it’s in the Equity Premium Puzzle) during the government furlough of 2013, long before Trump announced his ideas.  And he certainly didn’t get them from me.
  • Clinton’s predilection for globalism was in evidence before that, and aside from campaign hedging, she is vocal in that it has not changed.
  • Trade and globalism are connected to the Arab Spring and the formation of ISIS (and Al Qaeda before, as bin Laden was widely known to be opposed to the dissemination of Western culture through trade).  Clinton contributed to these problems not only in the obvious way through advocacy of interventionism and meddling in the affairs of other countries, but also in her positions on trade and excess inter-dependency.
  • Trump is therefore more likely to advocate and implement policies in concurrence with my own prior findings than Clinton, findings which I believe will lead to more stability, more even distribution of wealth, and greater happiness for more people generally, than “trade-trade-overthrow governments.”

These policies likely may sacrifice the maximum possible economy, what would we call it, not domestic product, it’s global.  World Total Product – WTP?  Does that even sound like something we want?

MIT now says that diverse teams are the most successful (see article), but not the most happy.  Even the Commission for Racial Equality admits that its own research shows that diversity does not lead to happiness.  Could it be that a globalized world is a bit like a diversified team – leading to the most success in economic terms, but not really enjoying it?

If that is true, and here we have two approximate if not exact studies, one from a source so unexpected as to be absolutely unimpeachable, then arguments that Trump’s policies will not lead to maximization of WTP are not actually negatives, but positives.  After all, last time I checked, only humans are allowed to vote in elections, and most humans, if pressed, will choose happiness over WTP.  Or any other acronym for that matter.


Moore’s Law to End Civilization

Computer technology is now essentially free.


A high performance PC either the size of a USB stick or a beer can now costs $100.  I bought one and tried it out.  Windows 10 is included, but the PC costs less than Windows 10, so the actual cost of the PC is less than zero.

This is the result of Moore’s law (coined by Intel chairman emeritus Gordon Moore 51 years ago in 1965 when he worked for Fairchild R&D).  It’s something you’ve probably heard of but don’t really understand.  I’ll try to explain briefly:

  • Circuits are reproduced on silicon wafers by essentially photographic means, i.e. maybe some setup costs but almost free after that.
  • To make the circuits smaller, shorter wavelength light is used (and a few other tricks).  By 2020 TSMC will be making circuits on contract to anyone with feature sizes of 5 nanometers using ultraviolet lithography.  That is only about 10 times the size of an atom.  Intel makes 7nm chips today.  But don’t worry about the party stopping because of atomic dimensions.  That is a distraction from the real counter-force to Moore’s law, which is social.
  • The smaller circuits run faster, just because they are smaller and have less area-based capacitive loading and shorter distances for signals to travel.  The area-based improvement is a square law, so they get a lot faster.
  • The smaller circuits use less power for the same reason, the area-based capacitive loading, and this is a square law also, so they use a lot less power.  Instead of bulky power cables like laptops, the new PCs just use USB phone chargers.  Soon they’ll run off of ambient solar or thermal noise.
  • At the smaller size, more circuits fit on a wafer, and this is a square law also.  So we have kind of an agricultural-like productivity, and indeed a decade ago transistors became cheaper than grains of rice.  Soon powerful CPUs will be cheaper than rice grains.

Now let me explain the social consequences:

  1. To make the same revenue and avoid stock price collapse, more applications must be found.  This has to follow the square law.  So, lots more applications.  $100 PCs mean I can have one on every TV, even TVs I don’t often use, say at vacation homes.  But this is current.  What about the future?  The answer is the IoT: internet of things.  Initially these will be fairly dumb, but web connected devices.  You won’t have any choice.  Everything you buy will be internet connected.  Like digital controls on microwaves, nothing else will be available.  But as Moore’s law progresses, they will become very smart.  Every device in your house will have a camera and microphone and be able to converse with you, within about 6 to 8 years.  Annoying, I know, but that is not the real problem.
  2. The real problem is what businesses use the surplus computing capacity of Moore’s law for.  They have long since run out of genuine value added ideas, and the only thing they can think of is productivity increases.  Since we already have an inflation free, deflation tending economy, this does not mean more stuff (except for tech stuff, of course).  It means every business created in the last two decades or so has been jobs-negative, by intent.

Is there a solution?

There is no Moore’s law for economics.  It is easy to form a Utopian vision of a future in which there is no need for labor, and material goods are free.  However, no economist – ever – has put forward a vision of a practical transition plan.

Instead, as jobs disappear and countries fall into economic chaos (Greece, Syria, Tunisia), social chaos appears.  And it spreads.  Migrants flood the well-off countries and jobs disappear there.

Humans are very adaptive.  They can adapt to most anything in about one generation (20 years) in developed countries.  Tradition bound countries, not so fast.

  • The Middle East is little changed since 1900, or for that matter 700 in many places, and of the vast number of schemes by many governments and organizations to change it, the number of successes is zero.
  • China still behaves much as the Chinese empire did in the 1700s, exporting while refusing to buy anything other people make.  At that time it was tea rather than technology.  Britain’s attempt to extract itself from this trade deficit led to both the Opium Wars and to the American Revolution (as they tried to rig the tea distribution system with unequal taxation).
  • India exports gurus, only now they are tech gurus instead of yoga gurus.
  • Africa exports unskilled forced labor, only now they are “economic migrants” instead of slaves.
  • Etc.

The bottom line?

As the cost of Gigahertz class computing substantially disappears in a single generation, and this is used to automate everything, even complex tasks like driving and brewing beer and waiting on tables, the percentage of jobs disappearing in a single generation will at some point exceed the ability of any society to adapt.  Given no economic theories, this means jobless-induced civil strife will spread to all nations.

Civilof or relating to citizens; polite, courteous, etc.

If we take the civil out of civilization, it won’t matter how much tech we have.  We won’t have civilization.  Therefore, it appears to me that the endpoint of Moore’s law will not be atomic dimensions, but its ability to undermine the civilization that powers it.

So don’t blame Trump or Obama, blame Gordon Moore.


Impact of MP shooting on Brexit

Will the shooting of MP Jo Cox while shouting “Britain first” impact the Brexit vote?  Think about all sides and form your own opinion before you read mine.

No.  Brexit is already leading by 6%.  No sane person would risk a negative reaction while their side was ahead.  Therefore the shooter is either insane, or engaged in some Machiavellian intrigue.  It is unlikely the cool-headed Brits will be influenced either way.  Violence there may be rare these days, but it’s not like they never saw it.

I predict Britain will leave the EU.  If not now, soon.  It will keep coming up.  It is a part of a mega-trend, in case you haven’t noticed, a reaction to the failed economic visions of the 2nd half of the 20th century.  Britain cannot accommodate the economic equalization of Spain, Greece and Italy through free and open migration of displaced workers.  This chain continues as workers from Moldova, Ukraine, Syria etc. have entered Greece, Italy, etc.  It is like the sea peoples that ended the Bronze Age.

There was a news article on Yahoo Finance today making fun of a survey showing the public expects investing returns of 10-11%.  But consider, there was later a segment on Marketplace about pension funds and university endowments backing unscrupulous hedge funds because of exactly that expectation!  An expectation formed by 70 years of exactly that kind of return, ending exactly at the end of the century in 2000.  All of the new starts and trade since 2000 is/are predicated on cannibalizing jobs, decreasing the size of the market into which corporations are selling goods, in other words: anti-growth.  And the EU has the lowest growth and is the most failed of any civilized group of nations.  (Is Nigeria civilized?  Unclear.)

Mega-trends do not start spontaneously.  There is not simply a “reaction” of nationalists to the modern global society.  Rather, it is a fact that the global society has for many decades been destroying more jobs than it creates while seeking short term profits, and this is now catching up with groups from OPEC to China, from Nigeria to Syria, from the US to the EU.

I am not opposed to “shareholder value” in fact, there can be no shareholder value unless there is a market for a company’s products.  That market consists mostly of the employees of other corporations.  If corporations collectively attempt to produce and sell goods and services fundamentally without employing people, they will have no market and no value.  It is a simple matter of short vs. long term thinking, and of stupidity vs. intelligence.  Read what a former CEO says about shareholder value.

Two things with similar effects have caused the post-2000 no-growth era:

  1. Trade with countries that have broken or corrupt economies so that the benefits of trade do not fully flow down to the citizens and their currency is not allowed to equalize.  The remain low cost labor sources, transforming good jobs into bad jobs that never get better, until finally the country completely breaks and the citizens who now have poor expectations, political habits and work habits spread the malaise to other countries.  This is why Brexit will eventually exit the EU, because the pressure will keep building if they don’t.
  2. Emphasis on increasing productivity and decreasing labor when there is a lack of demand for labor.  If there is unemployment, or if employment is not satisfactory (people working two jobs because each pays half as much as before), then there is no business case for marketing productivity methods and tools.  Yet this is just about the only concept US business startups have had since the late 1990s.

The global society, for all of recorded history and likely before, has reacted to one way to such situations, whether it was the organized productivity of the Bronze Age, the Roman Empire, the Industrial Revolution, the Colonial Powers, or what have you.  It engages in worldwide migration, chaos and war until trade and productivity are both destroyed.

Then full employment becomes necessary for reconstruction.  Wages rise and expectations rise and a boom follows.  Finally someone complains about plumbers having nice houses and the decline starts all over again.

The US will follow Britain in rebelling against destructive globalism and mindless robotic productivity.  When, I do not know.  Frankly, there is an opportunity now to elect someone who is hated by Republicans, but whom they are likely to vote for, and who embraces Democratic notions on LBGTs and gun control.  If we wait, then we will find it is not just old white guys who are out of work.  It will be black guys, black women, Hispanics, everyone.  Such an extreme could elect a true tyrant.

Watch out when the proponents of something start threatening.  Extortion is a sign of a position that has no merit, and everyone from EU leaders to President Obama is “threatening” Britain with dire consequences if they leave the EU (Obama said they’d go to be back of the queue on trade negotiations).  Extortion is what people resort to when they have no good argument.  It only works if you have a secret police to make the opposition “disappear.”  People do not like to be extorted, recognize it easily, and mostly will vote against it.  I think Brits are in that category.

The more dire predictions you hear, the more certain you can become (in the absence of real reasoning) that it is probably the right thing to do to oppose the fear-mongers.  The world will not fall apart no matter what Britain does … unless someone gets so mad they take it apart themselves, which the Brits won’t do.  So it’s a pretty safe bet the Brits will leave the EU, and after perhaps a little glitch, markets will rise and the world will go on.  Don’t let anyone spook you.

Will more nations leave the EU?

Probably.  We already know the EU is broken because Greece, Italy and Spain cannot realistically share a currency with Germany, the Netherlands, etc.  The southern Europeans need to have a currency devaluation to reduce their debt and lower the cost of their exports, so they can export their way out of trouble.

Another problem is that the EU is essentially an illegal trade preference.  An important tenant of the WTO, which uses trade to try to prevent another global war like WWII, is that member countries must give every other member country “most favored nation” status.  This does not mean they cannot charge tariffs, but that they cannot discriminate in doing so.  But they can discriminate against non-members.  This makes membership in the WTO and dependence on global trade a deterrent to war.  However, trading block agreements – whose legality seems dubious other than by mutual agreement to ignore the rules – undermine the WTO.  The threat of the EU trade block absorbing Russia’s trading partners is effectively what started the war in Ukraine.  Russia had only just joined the WTO, and one could never expect Russia to give up so much sovereignty as to join the EU!  If you are a US citizen, what would you think of us joining the EU?  Heck, we can’t even pass immigration reform among ourselves.  So support Britain’s referendum.  Even if they have it several times.


What returns should you expect?

Today Yahoo Finance published the results of a survey holding that Millennials expect a 10.2% return, and the general public even higher at 11%.  The two commentators and the host seemed to think this was absurd.  See article and video.

Later in the day Marketplace ran a segment on how pension and endowment funds are demanding similar profits from hedge funds, because our retirements are based on greater performance than they have obtained in the market since 2000.  During the early 2000s market commentators urged on this sort of expectation.  It is poor form to pretend now that it is unrealistic.  In fact, it was quite realistic from the 1930s until 2000, with returns averaging 7% in capital gains and 3% or so in dividends.

I suspect a flaw in the survey. The respondents probably were answering what the return for a particular investment should be if it is successful, not the portfolio average. It turns out that about 11% is the answer required to generate an average return in the 3% to 5% range since traditional growth ceased in about 2000. This is only a point better than corporate bonds for a much riskier proposition.

If you look at returns of people on the Fortune top 10 list, they range from slightly negative to +30%, with a preponderance at the high end. In the cases where this return has continued for many years, and some it has, then it is a reasonable expectation a professional money manager, subject of course to additional constraints, should be able to attain at least a third of it.

What’s really going on is that the market is over-invested with spurious gimmicky companies being founded to flounder. Successful high flyers can evaporate in a day (e.g. Valeant). Companies base their businesses on eliminating jobs rather than finding ways employees can create value, and this impacts the customer base. That “growth” would dry up in the era of productivity is inevitable. If you look at returns from WWII to 2000, including dividends, in fact they did average around 10-11%. They would still with sound policy.

Millennials have more of their life experience in the post-growth era, so logically their expectations are a little lower.  The commentators did not actually comment on life experience vs. expectations, probably because that undermines their point that the public is unrealistic.  Instead they wanted to blame investment marketing hype.  Frankly I have no use for hype either, but that is not what is causing these expectations.  If you look into the other writings of these commentators, they are a bit on the liberal side, as typical for media wonks outside of a few right wing sites, and it is simply the liberal agenda that investors should expect to be fleeced, either by their corporate officers or by the government.  What happens then is a spiral into deflation caused by poor expectations, a spiral which the planet has been rotating on the brink of since 2008, barely buoyed by negative interest rates and the like.

The problem is self-correcting.  But you may not like the cure.  Conflicts and unstable governments will arise which will destroy production capacity.  For example, the Syrian economy is basically offline, Iraq constantly teeters, and Nigeria’s solution to vanishing income from oil sales is to destroy and shut down their oil industry – not by consensus but by conflict.

Once production is low, and productivity is low, then if and when recovery begins, it will begin will full employment, wage inflation, and rising expectations.

The Green Submarine (North Korea)

Is this serious, or political humor?  You decide.

The Beatles sang about a “Yellow Submarine.”  North Korea has a green one.

[US Government Photo]

And guess what?  It can launch a missile!

NK sub missile launch
[North Korean Government Photo (obviously)]

It has tried several times to launch a missile, and while some have failed, at least some have succeeded: .  The most recent test was this weekend: .  Question … how close could NK get to Washington, NY, San Francisco or LA without being detected?  Or more likely, how close would each presidential candidate allow them to get before destroying the sub and probably starting a [nuclear] war?

  • Hillary – Can’t be awakened at 3 AM.
  • Sanders – Where is North Korea?  Don’t they have a Workers’ Party?
  • Cruz – It is illegal for NK to launch missiles under UN resolutions.  Subs are OK.
  • Trump – Clint Eastwood is my new Secretary of Defense.
  • Kaisch – North Korea is less dangerous than Trump.

Unemployment claims deceptive

We have the lowest new filings for unemployment benefits since 1973.  See article.

  1. We already had a trend toward people working multiple jobs to make ends meet in an era of lower wages and reduced benefits.  If a person loses ONE of those jobs, technically they still have “a job” and aren’t eligible for unemployment benefits.
    – If you work one hour a week and are paid at least $20, you are not eligible.
    – There are currently enough full-time jobs for only 44% of the adult population.
    (it should be at least 50%)
    See article for both stats.
  2. Household income (adjusted for inflation) has been declining since 2000 – that’s a whopping 17 years, nearly a generation!  For the bottom fifth of us, it’s declined about 25%.  See 3rd chart here.
  3. If people take a severance package they may not be eligible for unemployment, and for sure if they take any kind of early retirement they aren’t eligible.  Recently two of my friends in their early 50s took such a deal.  They happen to have no children and can afford it, but are not “happy” about it and most of us can’t afford such a move.
  4. Since 2007 all the other quin-tiles (20% brackets) and even the top 5% have taken losses.  (same 3rd chart as in #2 above)  These losses were precipitous, then nearly recovered, and have recently started down again.  So, a large cross section of people are quite anxious that they are about to lose big time what they have.
  5. 51% of Americans make less than $30,000 a year.  But of course this is more than $20 a week, so they aren’t eligible for unemployment.

No wonder we have such a strange set of presidential candidates with voters in both parties disaffected from the establishment.

He said it!

Not Trump.  Not Sanders.  Not Cruz.  Certainly not Hillary.  And not even me.  Who?  Obama said it.  I was astonished at the CLARITY of the statement, considering most economists and all establishmentarians believe something entirely different.

(You know, my computer is underlining “establishmentarian,” but I clearly remember being required in school to learn to spell “antidisestablishmentarianism,” which is basically the same word with two prefixes.  If I can remember it, surely a mufti-gigabyte computer can!)

From Yahoo Finance, “Obama articulates why Americans are so unhappy“:

There are a lot of reasons [why wages and incomes haven’t gone up as quickly as people had been accustomed to in previous generations]. (1) Global competition. (2) Technology. You know, (3) corporate practices have changed. In some cases (4) tax policies that I’d like to see changed, and I’ve tried to push Congress to change have made a difference.

#1 is just another way of criticizing “free trade.”  You’d think Trump or Sanders would have said it.

#2 is almost anti-American, but I’ve been saying it for a few years now, since discovering the role of productivity in causing deflation (see The Equity Premium Puzzle…).

#3 touches on the purpose and function of corporations, vs. what we have come to assume.  Corporations exist for the greater public good, and the grant of incorporation is a privilege (not a right) granted in exchange for amassing capital and creating employment beyond what we might otherwise have.  If corporate “practices” are slowing the growth of our prosperity, the privilege of incorporation should be revoked.  “Profits” are tied to incorporation, and are only a privilege granted as long as the corporation serves the public good.

#4 I imagine Obama thinks the rich are not taxed enough, he doesn’t say.  But I have a slightly different slant.  Our tax code prevents people from becoming rich and keeps them dependent on employment by over-taxing income, especially in the transition region between upper income working class and minimal self-sufficient investor class.  In Money, Wealth & War I argue that if the upper 10% of income earners would make the transition to capitalists instead of workers, that would make the top 10% most attractive jobs available, and everyone would move up in employment and wealth.  This would provide the salary recovery that has been missing since 2009.  While it is not the intent of this article to make a political recommendation, I note that while Sanders and Trump both appeal to those who have not done well since 2009, Sanders would impose great tax obstacles to becoming wealthy and keep everyone trapped in a job, whereas Trump has devoted a great part of his life to writing books and producing TV shows to try to get people to be more successful and entrepreneurial.