Is the Equity Premium only in the USA?

Long term small cap US vs bonds vs World
data from Yahoo Finance, 5/3/2017

The “Equity Premium” was discovered by my associate Rajnish Mehra, together with Edward Prescott, in the late 1970s, though only published in 1985.  See Wiki article, original paper, and Mehra’s 2008 review.  The finding was a “surprise” because finance theory suggests if one investment consistently gives higher returns, investors or arbitrageurs will bid up the price of it.  From a higher price base, the return is lower assuming the same final price.

Thousands of papers were published proposing solutions to the problem, many mentioned in Mehra’s review.  Mehra also states in the review that the premium “is observed  in  every  country with a significant capital market.”  However, he also states “The United States together with the United Kingdom, Japan, Germany, and France accounts for more than 85 percent of the capitalized global equity value.

Two of those countries, Japan and Germany, were forbidden from funding large military forces after WWII, and most of their defense funded by the U.S.  They also benefited from postwar reconstruction assistance and planning.  Two of the most advanced industrial economics, both space and nuclear powers, did not have capital markets at all for most of the 20th century, Russia and China.  China now is the world’s second largest economy, making even Mehra’s recent 2008 assessment obsolete.

Japan’s markets fell after the peak of the late 1980s.  Since the Equity Premium is observed at 20+ year time horizons, it was the late 2000s before it could be evaluated whether Japan’s market still had a premium.  Currently it appears that after 35 years, it has not yielded a premium over bonds for investors who bought after 1982, and has presented a loss for many of them:

Nikkei 225
data from Yahoo Finance, 5/6/2017

Russia’s market begin in the early 1990s, only beginning to give valid Equity Premium data on the first few years of operation in the middle 2010s, i.e. just recently.  In 2011 when Putin was re-elected Russia’s market crashed badly, and in 2014 the twin disasters of the Ukraine war and the sanctions it entailed, and the fall of oil prices.  Still it does have a premium due to early gains from low value in the 1990s, but there is not enough data to assess whether it will continue.

China’s market since 1990 shows steady gains – IF you didn’t buy during one of the two large peaks.  See chart:


The peaks are when most people bought, and when you would have bought if you were permitted.  But of course, this wasn’t a free market at all.  Holdings by outsiders were strictly limited during this time frame, and still have serious limits.  China is still a tightly controlled and planned economy.  Perhaps it is no longer socialist enough to be called communist, but the ruling Communist Party has given up neither planning nor control.

In fairness, the U.S. economy is planned too, with growth targets set by the Federal Reserve, which “prints” money (actually electronically, buying bonds and mortgages and lending to banks) to meet those targets, balancing inflation and unemployment.  In my book The Equity Premium Puzzle, I argue this is the real reason for the equity premium.  By printing money to lend, the Fed suppresses interest rates, and no arbitrageur has deep enough pockets to fight a printing press.  The European Central Bank is charged only with preventing inflation, due to Germany’s fears from the 1930s.

Looking at the chart at the top of the page, with one bond fund and the rest small cap ETFs, which I deem to be more indicative of a particular country’s economy, and which usually perform as well or better than large caps, it appears only the U.S. market over the last 15 years has a clear premium over bonds.  Note that these are price plots, not total returns.  You have to add about 32% to the end of the bond plot for comparison, giving it a total return since 2010 (starting date for the bond ETF chosen) of 51% or about 5.2% per year.  But the U.S. small caps have a return over the same period, not even counting dividends, of 163%, or 12.8% per year.  That is not a long range return, as it was recovering from a market crisis.  From 2004, a 14 year period and as far back as that ETF goes, the return, sans dividends, is is 7.4%.  Add about 1% for dividends making it 8.4%, for a 3% advantage over bonds.

The only other countries on the chart showing a premium over the bonds are Britain and Canada.  Britain’s premium is small, and Canada has a premium only if one ignores the early data, the inclusion of which actually gives a negative premium.

I think it is time to admit that the Equity Premium is only striking in the U.S., and only exists in “planned” economies in which a central bank suppresses interest rates and prints money to fund growth.  Britain essentially “invented” the concept of the central bank, and the modern version of the stock corporation by which borrowed money is leveraged against equity to create excess growth (see book for details).

Britain probably suffered from membership in the EU with its paranoid banking policies.  The bank chief Mario Draghi “gets it,” but his German “overlords” do not.  They are punishing Greece and Spain, et. al., for their borrowing immorality (deserved) instead of funding growth and insisting the debtor countries use the funds for growth rather than welfare (pragmatic).  Yes it is warmed over Reaganomics, but the data show it works regardless of what one thinks of it morally, whereas welfare does not.

Japan’s central bank is waking up recently, but for decades was widely thought to be too tight, explaining their lack of premium.  China has a chance of holding its course, but its population has a great tendency to invest in bubbles.  Russia has a surprisingly strong central bank, and I expect if they ever get their politics straightened out they will have a strong equity premium.  But the U.S. is a much safer bet.

What if the U.S. is the only country with a really noticeable Equity Premium (3% or more), and we really don’t know why?  Then invest in the U.S. and don’t break it.  Globalization is a kind of unremitting equalization that will eventually break every equity premium on the planet unless all nations have one.  We’ve seen how well that works with currency policy in the EU, and it won’t work even that well with the EP.  If you invest, invest in the U.S.  If you invest in the U.S., oppose globalization.  It boils down to your pocket book, and whether central bankers and their overlords invest in growth.

I am not, by the way, saying unlimited growth is good.  But if it exists and you do not invest in it, then you are giving up your say in the world by falling behind in economic power.

Getting Out of Hercules Technology


Hercules Technology Growth Capital (HTGC) was favorably mentioned in some of my books.  It was a staple holding for me for around a decade.  I heard a radio interview with the founder some years ago and was impressed that he wanted to bring venture capital-like opportunities to regular investors.  I have sold it and no longer recommend it.

The disaster on the chart above would be enough.  It is unprecedented, if not for the magnitude, then for the surprise.  Confirmation was present in a second day follow through.  It might rebound a little, but then so did Countrywide Savings and Novastar Financial, lasting for several years before the final bankruptcy.  Financial companies are just too tempting to management to run scams, and it looks like that is happening to HTGC.

The first day’s drop was apparently precipitated by the announcement HTGC management would no longer work for HTGC, but for an outside management company wholly owned by the founder.  His interests would be aligned with the management company, not HTGC.  While not approved yet, shareholders do not have a record of voting their own interests with this company, and even if they did, apparently the company has already lost the founder’s true interest.  See article at The Motley Fool.

The very next day, adding insult to injury, the company reported a surprise 7 cents a share loss against a Wall Street expectation of 29 cents profit.  Companies whose business is to lend money are not supposed to have surprises, and when they do, it is really bad news and likely to continue.  Some of them like ARCC and even AGNC can bounce back from it, eventually, but I do not want to wait several years, especially with the change in management.  See announcement at Yahoo Finance.

HTGC dividends are around 8% presently.  Assuming they continue, now uncertain, they are non-qualified, so you can do better.  The “illusion” of capital growth, implied in the name, has run its course with the decline of the last two days.  The founder seems to want to convert it into a “growth” company.  But the ownership arrangements of the management company do not suggest he will remain focused on that.

I suggest instead Dynagas, DLNG, paying 10% fully qualified dividends.  In a non-taxable account, you can hold AGNC, or if able to mentally handle volatility, MORL (which pays 17% but typically declines 4-5% a year for a net of 12-13%, often more).

Dilemmas for Driverless Cars

Uber self-driving car on its side, March 25, 2017, Arizona

In the last week I’ve encountered half a dozen situations difficult for me, a human, to figure out and drive through.  Too bad they require my full attention and I cannot snap photos through the windshield.

walking stopsign

In one, signals were flashing on a 10 lane road (3 thru lanes and 2 turn lanes on each side, NASA Parkway, Houston, TX).  Usually cars treat this as a 4-way stop, complicated enough with so many lanes.  But a policeman was dragging a fold-up stop sign into the road.  He was several lanes away.  Wait for him?  Oh, there is another policeman farther away, also walking.  He makes some vague gesture.  I think he is telling the people to my right to go.  He gestures again and looks straight at the group of cars I’m in.  OK, I cautiously go.

dancing snow traffic

What would Uber do?  Probably treat it as a 4-way stop.  But how would it figure out whose turn it was?  It is extremely difficult in multi-lane intersections with turn lanes.  Would it run over the policeman (either of them) because they “failed to yield” as the other driver did in the wreck pictured above?  Most of my attention as I drive down the road is not on normal expected behavior, but is spent estimating whether approaching cars either on side roads or in other lanes are really going to yield as they should.  This is a “dance” that people do.  One develops a feel for it, which varies with culture and even by city or neighborhood.

traffic accident

Last night driving on Mississippi 17 between Vicksburg and Yazoo City, I saw blue blinking lights ahead in the dark.  I slowed down, thinking I should be prepared to pass in a different lane, but with no different lane available, perhaps go very slow.  My estimate of how slow kept decreasing.  I can’t imagine it being set by an algorithm.  When I got there, a wrecker was parked at an angle in the road, extending into my lane.  Apparently someone was off in the field, their car wheels so mired in the mud the frame was dragging.  I didn’t laugh.  I’ve been there myself.  On the other side some man was waving a little light back and forth.  Eventually I assumed he meant for me to go, as no one appeared to be coming from the other direction.  He didn’t shout or change what he was doing, so that must have been the correct thing to do.  I might have had to go off the pavement a little bit.


Frankel-ly, Gor-such a case got into the news last week.  It seems that even Supreme Court nominees cannot decide what to do in common road situations without engaging in the “absurd.”  The subject was Gorsuch’s dissenting opinion on a Minnesota truck driver whose company left him in 14 below weather to freeze.  After many hours, rather than die, he drove a trailer with locked breaks onto the highway.

Suppose you are in an Uber or Google or Apple or whatever, and it is 14 below, and the damn thing won’t go because some warning light is flashing, or maybe it simply cannot see the lane markers?


Even if it can see lane markers and cars, which might be 90% of freeway driving, it’s only, what 5% of residential driving?  0% of special situations?  Of course the easy part can be automated.  I heard a paper on automated driving at Oklahoma University in 1968.  Since then computers got smaller and cheaper and faster and sensors have improved, but I’m not aware of any progress on understanding special situations.

Frankly, the full range of human judgment is required in such situations, and even a judicial automaton is not adequate.  I don’t want Gorsuch for judge in the SCOTUS (where ALL the cases are difficult), nor do I want self-driving cars – until they can fully pass written and driving tests as humans do, under all conditions.

when red light shows

Who really undermined election credibility?

not my election

Choose the top two persons or organizations that you think undermined election credibility (if indeed any did), and at the end we’ll compare with my unscientific poll of one friend:

  1. Protestors who insist “Trump is NOT my president” after the election.
  2. James Comey FBI Director who announced re-opening of Clinton email investigation weeks before the election, withheld fact that he was investigating Russian counterintelligence since July, then later announced the Russian investigation and said that announcing it probably aided their goals
  3. Barak Obama whom Clinton thinks [now] should have announced the counterintelligence investigation in July
  4. Clinton herself who asserted Trump was unqualified and mentally unstable after he had won election as Republican nominee
  5. Putin-Russia who allegedly promoted fake news stories (the only one that comes to mind is the pizza-parlor child trafficking thing)
  6. Julian Assange-Wikileaks who released Podesta’s emails (whom some allege came from Russia, but Assange says not, and in any case he released them)

Here is what my friend said, which was not my list exactly but he persuaded me:

  1. Comey, who seems to have been squirrely for some time, possibly on a power trip.
  2. Obama a distant second, since what he says is not highly credible anyway
  3. Nothing else much matters


Travel ban blues? Take a que from Andrew Jackson

750px-Trails_of_Tears_enIndian removal, 1830-1835

 andrew jackson
Andrew Jackson

UPDATE 3/16/2017 – Apparently I am not the only one who thought of the Andrew Jackson angle.  See Robert Barnes: Trump Could ‘Go Full Andrew Jackson’ and Ignore Interference from Activist Judges.

Andrew Jackson is hardly one of my favorite people.  But his very existence refutes everything modern intellectual liberals “say” about what our country “is” whether you like Jackson or note, because he is in fact part of history, and along with a lot of other people did things in direct contravention of the liberal view, so much so that the preponderance of the constituent history of the USA has to be judged to be anti-liberal, anti-diversity, and totally discriminatory as to who is allowed to live within its borders.  Any recent counter-trend is just a blip in a long historical trend the other way.

Trump has called Jackson a “flawed and imperfect man” but in the same speech praised him for confronting and defying an arrogant elite.  So I guess the $20 will keep Jackson’s picture.  Jackson’s most famous fights were with the 2nd Bank of the US, and in opposing a Supreme Court decision protecting the rights of the Cherokee in Georgia.  He famously said of the chief justice, “John Marshall has made his decision, now let him enforce it.”

I disagree with Jackson on both counts.  But with goings on like this, the liberals simply can’t be right about the essence of America.  Even if I agreed with them, I’d have to admit this “fact.”  And it continued even after the Civil War.  In 1875 Congress passed a civil rights act forbidding discrimination by places of public accommodation, but in 1883 the Supreme Court struck it down.

A Federal Court in Hawaii has just struck down (or “blocked,” if there is any difference) the 2nd Trump executive order on immigration.  If you have read any of my recent blogs, you know I think there is constitutional grounds for discriminating against Islam, and not just on the basis of screening terrorists.  Maybe it is time to take the Jackson approach, to specifically cite Jackson, and direct the US Customs and Border Protection to carry on with the ban.

Is my view radical? Only relative to the liberal globalists who want no borders and no USA, just a monolithic one-world socialist melting pot with themselves at the top and everyone else their slaves.  I am dead center in American history, which has fought much less justified wars to settle borders and expel anyone who wasn’t fitting in.

Do I advocate expelling Muslims?  Of course.  Their holy book advocates killing any non-Muslims.  This is entirely treasonous.  If you don’t believe this (I have friends who don’t),   read the Quran for yourself.  Could this be successful?  Historically it has been one of the most successful things ever done.  Simply ask them to renounce the objectionable verses, or convert to another faith.  See previous post on a country that did this successfully.

CIA hacking story suppressed by U.S. Gov’t: real “Russian” hackers are CIA!

access denide

The above screen was obtained when attempting to access a CNN story at URL covering Wikileaks release of massive hacking and cyber-weapons activities at the CIA.  you should be able to get it if not using a government computer.  Civil servants are supposed to be able to use general web news and similar services when on lunch break, etc.  The rapid suppression of this article shows the intent of the U.S. government to suppress news.

I encountered the article this morning before coming to the office when I checked the BBC news, which I routinely do to get an outside perspective on U.S. and world events.  That article is here

They were not very thorough though.  The Yahoo version of the story was not blocked .  Probably because the Yahoo story is favorable to the CIA, criticizing the release and extolling the negatives.

I recommend watching the movie Snowden.  It already contained some of these revelations.  It explains why you might be targeted and your family messed with even if you have done nothing wrong.

The new release reveals hacking into self-driving cars.  There is a concern they could be used for untraceable assassinations.

So, what does the CNN story stay that got it suppressed that the Yahoo story doesn’t?  I will copy the full text below in case you can’t access it or it gets taken down later.  My guess is that the key fact is that the CIA has the capability to pretend to be Russian hackers.  That means that evidence for Russians hacking into the DNC and leaking emails favorable to the Trump campaign cannot ever be verified, because it might have been the CIA.

(in case of takedown):

Wikileaks claims to reveal how CIA hacks TVs and phones all over the world

The CIA has become the preeminent hacking operation, sneaking into high-tech phones and televisions to spy on people worldwide, according to an explosive WikiLeaks publication of purported internal CIA documents on Tuesday.

To hide its operations, the CIA routinely adopted hacking techniques that enabled them to appear as if they were hackers in Russia, WikiLeaks said.  WikiLeaks also claimed that nearly all of the CIA’s arsenal of privacy-crushing cyberweapons have been stolen, and the tools are potentially in the hands of criminals and foreign spies.  WikiLeaks claimed the stolen tools ended up in the hands of “former U.S. government hackers and contractors… one of whom” leaked documents to WikiLeaks.

U.S. Rep. Ted Lieu of California called for an immediate congressional investigation.  “I am deeply disturbed by the allegation that the CIA lost its arsenal of hacking tools. The ramifications could be devastating,” he said in a statement. “”We need to know if the CIA lost control of its hacking tools, who may have those tools, and how do we now protect the privacy of Americans.”  “The potential privacy concerns are mind-boggling,” he said.  

WikiLeaks said it published the documents to show the potentially hazardous ramifications of the CIA’s covert hacking program — and the massive theft of those tools.  “There is an extreme proliferation risk in the development of cyber ‘weapons,'” said WikiLeaks editor Julian Assange in a statement.  WikiLeaks, an outfit that believes in transparency, backed up the claims by publishing a massive trove of what it says are secret CIA documents. It calls the collection “Year Zero,” and it consists of 8,761 documents and files.  

The CIA, citing standing policy, declined to say whether the published documents are genuine.  “We do not comment on the authenticity or content of purported intelligence documents,” said CIA spokeswoman Heather Fritz Horniak.  

Shocking claims 

WikiLeaks portrays the CIA as a powerful hacking organization that has managed to infiltrate common personal devices — with the power to spy on nearly everybody’s personal lives.  

CIA frames other hackers: The CIA rules say that its hackers must use cyberweapons in a way that can’t get traced back to the “CIA, U.S. government, or its witting partner companies,” according to WikiLeaks.  After a person, company or government gets hacked, cybersecurity experts worldwide are typically hired to conduct reviews. These reviews of tools and techniques usually allow someone to identify the attacker.  WikiLeaks said there’s an entire department within the CIA whose job it is to “misdirect attribution by leaving behind the ‘fingerprints'” of others, such as hackers in Russia.  

Cybersecurity experts have repeatedly warned against the tendency to quickly blame a nation for a particular hack. This revelation could lend further credence to those, like President Trump, who doubt whether Russia did indeed hack the Democrats in an attempt to sway the recent American election.  

Phones, TVs spy on you: A team within the CIA developed spy software that infects Samsung smart TVs — placing televisions on a “fake-off” mode that still listens to conversations and sends them back to American spies, WikiLeaks claimed. The program, called “Weeping Angel,” was created with the help of the British spying agency MI5, it said.  WikiLeaks reports that another team within the CIA built hacking tools that can remotely control iPhones, iPads and Android devices — secretly taking video from the camera, listening with the microphone, and tracking your location.  

In the past, consumers have been warned that Samsung TVs were eavesdropping on private conversations — with the microphones implanted into the TV.  CNN has also reported how the NSA can “turn on” your phone remotely. But it was not previously known that the CIA has a similar capability.  Apple and Samsung — whose products were mentioned by WikiLeaks — did not immediately provide comment to CNN. Google declined to comment. Microsoft said: “We’re aware of the report and are looking into it.”  

People who are careful about their privacy have resorted to encrypted apps to place phone calls and send text messages. The most common are Signal and WhatsApp.  WikiLeaks pointed out that if a phone is infected by the CIA, spies could potentially still monitor communications. Cybersecurity experts have long noted that an infected device should be considered “compromised.”  

It’s currently impossible for the average person to know if their phone, computer, or TV has been hacked by the CIA.  

Potential car hacking: WikiLeaks also claims that the CIA in October 2014 was exploring the possibility of infecting the internet-connected systems of modern cars. In the past, CNN has documented how car hacking is a real possibility. Cybersecurity experts have long suspected the U.S. government has developed this capability.  

U.S. consulate in Germany is a secret American hacking base, WikiLeaks says: Several U.S. State Department employees who work out of the consulate in Frankfurt, Germany are actually undercover CIA hackers who spy on Africa, Europe, and the Middle East, according to WikiLeaks.  

Proving the documents are real 

WikiLeaks has a long history of publishing authentic documents that have been stolen or leaked from government agencies, corporations and powerful individuals. However, this latest batch has not been authenticated by independent experts. CNN is reviewing the material.  

In its statement on Tuesday, WikiLeaks said it withheld immediately publishing technical details about the malware allegedly used by CIA to prevent it from dispersing online. However, if and when those technical details are made public, computer experts could use them to track CIA hacking activity.  For example, cybersecurity researchers can pull together new information on alleged CIA hacking techniques and compare it with existing evidence of past cyberattacks. It’s an effort that could potentially prove whether the CIA hacked a specific person, company or government. 

CNN’s Ryan Browne contributed to this story.
CNNMoney (New York) First published March 7, 2017: 2:26 PM ET

How Trump will End Protests

jobs-and-protestsCNBC Feb 20, 2017 (article)

Subtitle: Negative effects in economic protest movements

Introduction & Thesis

I have long noted an anecdotal correlation between unemployment and countries that have a lot of protests of one kind or another.  Researchers have asked this question, but results are complicated because several factors influence protests (Kerbo & Shaffer, 1986). In 2011 The Economist noted (article) the dramatic increase in protests in developed economies, e.g. Occupy Wall Street in the US, and in Europe anti-austerity protests.

Anti-austerity protests attracted on average 60 times more protestors than anti-war protests, according to The Economist.  The large participation in economic protest movements might, we conjecture, lead to corresponding amplification in any negative effects.  Outright suppression of protests is not considered by this article.  We are looking for natural and indirect effects.

The objective will be to classify, understand, and show examples using existing data, to support our thesis that economic protests have a tendency to either undo themselves without actually accomplishing their stated goals, or generate a backlash that makes the original complaint worse.  For example, protestor sentiment could change, government policy could be aimed at supporting factors rather than the objective per se of the protests, and the government could be changed having an effect that produced consequential changes (which might include outright suppression in the end, but our analysis stops with the unfavorable change of government, not a critique of the policies).

Historical Data Analysis

The Economist finds a 1% increase in GDP decreases large protests by 0.4 events, but a 1% decrease in government budgets increases protests by about 1 event, or twice the sensitivity of general economic conditions.  On the face of it, austerity policies seem to be the trigger.  But austerity is a response to a declining economy, and may only be a trigger.

Walker & Mann in 1987 studied two orientations that might lead to protest formation:

  1. Egoistic relative deprivation – perceived gap between personal expectations and attainments.
  2. Fraternalistic relative deprivation – gap between “ingroup” and “outgroup” expectations and attainments, i.e. whether certain social groups, be they simply non-elite workers, ethnic groups, immigrant vs non-immigrant, our nation vs other nations, etc. felt left behind.

Fraternalist relative deprivation was found to be more important.  One may suppose that people resort to collective action (e.g. protest) primarily in response to perceived collective harm.  After all, if only one person is out of a job, who is he going to get to protest with him or her?  But if he is a member of a group who perceives his or her plight as actually or potentially a slight on the group, they may join the cause.  The actual protestors may not even be the ones most grievously harmed.  This is especially evident when protests are on behalf of someone already dead or incarcerated or deported.

But the situation is neither static nor necessarily favorable to the protestors.  Successful movements like women’s suffrage (right to vote) and civil rights may be deceptively inspirational and not reflect the actual potential for success. Economic protests involve negative feedback over the long or short term.

Specific movement categorization and analysis

Examples of protest movement negative results:

  • Decades of a successful labor movement, promoting unionization and collective bargaining, resulted in migration of jobs to states with right-to-work laws, and to countries outright abusive of labor, even employing child or prison labor.  The effect even became obvious to workers, and on Feburary 15th workers at a Boeing South Carolina plant turned down a unionization proposal (article Washington Post) just days before a scheduled Trump visit.
  • The Arab Spring was triggered by a Tunisian man immolating himself, declaring “I just want to work.”  Four years later, unemployment among youth is higher in many of those countries, including Tunisia, where many reforms were initiated and the government changed.  (article, see table 2)
  • The Euromaidan (Ukrainian revolution of 2014) – Removal of a corrupt government and institution of reforms led to a still-unresolved civil war, over 9,000 deaths, worsening of the financial and economic conditions in Ukraine, and seemingly permanent loss of about a quarter of the country’s territory.
  • Communist revolutions generally.

The Euromaidan fits nicely with the theory of Walker and Mann.  Ethnic Russians, who are acutely aware of being hated by Ukrainians (I experienced this personally when speaking Russian in west Ukraine during a 2011 trip, and when I switched to English I was treated much better), felt threatened by laws excluding the use of their language in certain instances, and rhetoric of neo-Nazi factions even if they weren’t a majority.  The fraternally-Russian group was rapidly losing access to political (and one would presume as a consequence economic) power that they once took for granted.  However, their current situation is arguably worse.

It is not so obvious how the Arab Spring is fraternal, but I have several suggestions.  In Tunisia, the previous reference suggests youth vs. others are the two groups.  In Egypt, it was the Muslim Brotherhood vs. secularists.  In Syria it was the Shia Muslims vs. the Alawites and Christians.  Alawites believe in the Trinity, which Mohammad specifically condemned, calling it “a thing most monstrous“.  As the Alawites are (were) in complete control of the government, the majority Shia Muslims felt any economic problems they might have, which were worsening rapidly after the 2008-9 financial crisis (even though there were no bundles of Syrian mortgages, western markets for Middle Eastern goods took a nose dive).  So the fraternal basis was there.

With regard to our conjectured classification of feedback that makes the original complaint worse, it seems the most striking examples are where the protest has escalated to violence provoking a strong reaction from an outgroup (e.g. Syria) or violence directly destroying economic activity (Libya).  In Egypt there were two government changes, the second one “returning” to oppression, and clearly endorsed by a different fraternal class (secular groups, even if they are merely secular Islam).

Both the Euromaidan and Arab Spring are economic protests, even though racial and economic factors underlay them.  Clearly there are fraternal factors, ethnic and religious.

Likewise the labor movement is economic.  The fraternal aspect may be working class vs. capital class, echoing the motivational ideology of many communist revolutions of the early 20th century, all but a couple of which have now been undone.

We tentatively confirm Walker and Mann’s thesis.  However the economic protests particularly, and others in some instances, had a destructive feedback (negative in the sense of the opposite of the protest objective) specifically on the conditions instigating the protest – unemployment in the case of economic protests.

In most of the cases above, with fraternal basis, the protest itself and its immediate consequences diminished the opportunities for a different group, and so the back reaction was swift, taking only three or four years.  In these cases the fortunes of the protesting group may never rise at all, or only very briefly.

In the case of the labor movement, the protest group experienced rising fortunes over many years.  To the extent unions predominated, the “other” significant fraternal groups were management and consumers.  As long as the standard of living was rising and collective bargaining nearly universal, there wasn’t a specific group harmed as a result, and so the motivation for counter-protest was not supported by the stronger fraternal basis, and was largely individual.  At first as trade and outsourcing grew, the number of people impacted was small and did not gain a fraternal basis.  But as the percentage of companies engaging in such practices grew, a fraternal basis grew in several dimensions: those unemployed for related causes, those employed who had repudiated collective bargaining, etc.

The constituency of immigrant groups

In the article associated with the lead photo above, workers at many companies were fired after participating in the “A Day Without Immigrants” protest.  Participation in the protest was not given as a reason for any of them, and likely was not or at least would not have been discovered without absence from work.  If the protestors had been unemployed, they would not have experienced a negative impact so immediately.  But one could say that prior reform such as the Reagan amnesty (widely criticized at the time for this potential) encouraged and enabled both illegal immigration and the employment of immigrants (which was a specific objective of the reform).  The long-term result is now an anti-immigrant political movement with power over both houses of Congress and the Executive Branch, and possibly soon the Supreme Court.

News articles have not reported the legal status of workers participating in “A Day Without Immigrants.”  Based on some protest slogans and interviews, it seems that a group has arisen which does not view legal and illegal immigrants as different groups.  For example the slogan “no human is illegal.”  This is counter-intuitive to political factions that wish to enforce immigration law.  They do not understand why a legal immigrant identifies with illegals, and assume illegals take jobs from legals.  But immigrants who were initially illegal or who have relatives or friends that are illegal have a stronger binding force (self, family) than legal status.  So employed, and in many cases we assume legal, immigrants took part in the protest.  Everyone in America is an immigrant, even the Native Americans who came from Asia.  it is a question of when and under what status.  One could suppose an ethnic bias, but there is no data for it (previous ethnically different groups were at first opposed due to ethnicity and later accepted – so the current situation may be in line with historical norms).  And some of the business owners who have fired workers are members of the same ethnic group (see video in lead photo reference).


The Trump administration has promised to increase jobs and deport illegal immigrants (especially those considered criminal or seditious).  Increasing jobs will increase jobs for immigrants as well, decreasing any threat they may not feel based on rhetoric.  Those who have lost jobs following the current event will, if they find new jobs, likely be deterred from further protest.  This could be a greater deterrence if it does not receive the attention most protests need (so far just the one article, which is fairly low key).

Deporting dangerous illegals, who are more likely to have no job and be available for and motivated for participation in protests, will directly decrease the fraternal constituency of the protesters.  In our estimation, loss of protestor jobs creates a split in the immigrant fraternity between the employed and unemployed, with a negative “personal expectations and attainments” motivation for participation in protests for the employed, likely the larger group.  Diverse small businesses do not make a good target for protests as there are too many of them and not a single point of influence.

Therefore IF Trump is successful, even partly, in either of both of the objectives of deportations and employment, indirect factors will fragment and reduce the size of the fraternal group motivated to protest.  I project that protests will peak in the first year of the Trump administration, and gradually decline in proportion to policies, one of which (employment) is not directly related to the perceived cause.  As the current fraternal group experiences a negative impact from protest participation, the actual impact will weigh against the perceived impact of group identification which includes either illegal immigrants or banned immigrant populations.  The problem of exclusion of legal immigrants who were swept up in the ban will likely be fixed, in order to get the ban reinstated, and as the ban is only for 90 days, that issue will go away on its on.

Side Note: The explicit right to protest?  And limits on freedom of religion.

It is interesting that many protest participants either did not call in to report their absence (which was in some cases grounds for firing), or reported their genuine reason (to participate in a protest).  Traditionally in the U.S., protests are conducted via “sick outs” in which employees call in sick, technically not violating their employment agreements.  It seems this omission was deliberate.  There is an element of suggesting protestors have the right to change government policy and even overturn elections by process of protest.  The U.S. constitution does not contain any such right.  Specifically the first amendment says:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Thursday’s protest was not a petition to the government, nor was it assembly, nor were any speeches given, so it was not in any way protected.  The first amendment generally constrains only Congress.  It does NOT constrain the President or the executive branch generally.  Thus an order could be given to put a specific religious group in concentration camps, as were the Japanese in the US during WWII.  Nor does it constrain employers or state governments.  It appears from a strict reading state governments and the President could do all sorts of things that were prohibited to Congress.  The Executive Orders might likely be restricted.  But it is hard to see how state governments are restricted by the first amendment.  Islam could be banned state by state, or city by city, etc.