Can My Dog Stay At Your Hotel? April 3, 2014December 27, 2016 But first . . . PLUTOCRACY With yesterday’s Supreme Court ruling, the $123,200 you were planning to contribute to federal candidates and committees this 2013-2014 cycle goes from being “all you can legally do” to “chickenfeed.” The limits on giving to individual candidates or committees remain unchanged; but the aggregate limits ($48,600 to all candidates combined, per two-year election cycle; $78,600 to all committees) have been struck down. So now you can contribute $5,200 to each of 468 House and Senate candidates (more, if you back more than one primary candidate) plus any number of Presidential candidates — roughly $2.5 million per cycle . . . . . . plus $10,000 a year to the federal accounts of each of the 50 state Democratic or Republican parties, which adds another $500,000 per year, bringing you up to $3.5 million for the cycle . . . . . . plus $32,400 to each of the national committees each year (the DNC, the DCCC, the DSCC), lifting the budget to around $3.7 million for the cycle . . . . . . plus $5,000 a year to as many federal Political Action Committees as you want — the Sierra Club PAC, the Human Rights Campaign PAC, the Goldman Sachs PAC, but also the PACs federal candidates have been setting set up themselves — so maybe another $2.5 million a year, for a grand total of $8.7 million for the cycle . . . compared to $123,200 now. A sad day for democracy. Thank you, Ralph Nader, for giving us the George W. Bush corporate plutocrat Court. (I’m sorry, but if we’re going to win, we must never forget the lesson: the perfect is the enemy of the good. Effective idealists — who actually want to make the world better — take reality into account in order to make as much progress as possible toward the ideal.) As a practical matter, some donors who gave the full $123,200 may now actually give less, as there’s no obvious specific goal to stretch for. Others will give more (and I’ll be asking them to, if they haven’t maxed out to the DNC!) But the real change comes for that relative handful of truly rich, for whom $8.7 million every couple of years is chump change. Most of them care more about lowering the tax rates on rich people than, say, raising the minimum wage. There are certainly liberal billionaires; but they tend to be appalled rather than thrilled by the influence of money in politics — and by decisions like Citizens United, and, now, McCutcheon v F.E.C. — and so are much less inclined to give, even though logic suggests they should. PLUTARCH I don’t normally repeat a quote two days in a row, but in light of the above? “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” – Plutarch, Greek historian, first century AD HEALTH CARE Rich Rand: “After reading your ‘Sarcasm Is Unavoidable‘ piece, I keep wondering why more isn’t made of the removing of lifetime caps by our Democratic friends. I think this is a huge step forward.” ☞ We’ve done such a bad job selling the Affordable Care Act. (Until President Obama’s remarks Tuesday, linked to here yesterday — watch!) And the other side, frequently unfettered by the facts or a sense of fair play, has done such a good job of weakening and demonizing it. But, yes: prior to Obamacare — and unbeknownst to many of them, 105 million Americans with health insurance were subject to lifetime caps. Now, you might say that’s only a third of the country, but when you consider that another roughly 50 million each had no coverage at all or Medicare or Medicaid — 150 million with no lifetime caps because they had no private insurance policies — then that 105 million number looks to be more like “most people” with employer-provided or individually-purchased health insurance. Which only matters, of course, if you get really sick or badly injured. But isn’t that what we most want protection against? Something like 62% of the more than 1 million personal bankruptcies each year are significantly related to medical costs. In fairness, only a fraction of those involve people who’ve hit the caps — which are generally $1 million or more (often higher). But Obamacare will also help many at the low end, as well, by capping their co-pays and closing the prescription drug loophole, and — over time — bending down the cost curve from what it would otherwise be. SARCAST, IT TURNS OUT, IS A WORD I was wrong. Thanks, Stephen. Here. CAN MY DOG STAY AT YOUR HOTEL? I always get in so much trouble when I am less than fully pro-cat. Out come reader claws. But the truth cannot be denied: I am way more of a dog person. (Real dogs, not the kind that fit in handbags or appear to be stick figures or poodles.*) Some of my best friends have been golden retrievers, as long-time readers may recall. Well, hurray for dogs! Click here! *Oh, God, oh, God, oh, God. Don’t kill me; I’m just being honest.
PLUTARCH – HEALTH – GARIX April 2, 2014April 1, 2014 PLUTARCH Thanks to John Mauldin (and Plutarch) for this: “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” – Plutarch, Greek historian, first century AD Someone should tell the Koch brothers. If today’s Republicans get their way, they will lower the estate tax rate on billionheirs — to zero — freeze the minimum wage, cut tax rates further for the rich and food stamps for the poor . . . and find other ways to continue widening the imbalance — “the most fatal ailment of all republics.” If we pledge allegiance to the Republic, and if Plutarch was right, then today’s Republican Party should really consider reverting to its moderate, reasonable, grand old self. And until it does, my moderate Republican friends should come out in droves this November to elect moderate Democrats. HEALTH CARE Beyond cool. Try to find 20 minutes to watch the President’s remarks on the Affordable Care Act from yesterday afternoon. The law is making all Americans more secure — a couple tens of millions of them very directly, because they have health insurance coverage they never had before; more than a hundred million a little less directly, in that they no longer have to worry about “lifetime caps” or (should they want or need to switch jobs) “pre-existing conditions” or (soon) the prescription drug “donut hole”; and all 320 million of us in the sense that a healthier population with less-rapidly-rising health care costs is more competitive and thus more secure. All this while cutting the projected deficit . . . which was possible, in large part, because the law upped the tax rate affluent investors are asked to pay on dividends and capital gains — albeit not to rates as high as they were paying in Ronald Reagan’s day — which covered the cost of an awful lot of health care security. A good thing that our friends across the aisle tried more than 50 times to repeal, worked hard to undermine, and still seek to disparage at every turn. Watch the way the President talks about this. GENIX, GONIX, GARIX Eric Schoenfeld: “You recommended GENIX and GONIX earlier this month. Just wondering: how would you assess how much of one’s savings to split between those two? And — part 2 — how can the preeminent evangelist of low-expense investing recommend such high-expense vehicles?!” ☞ For now, each has a $250,000 minimum. There’s a chance that may be sharply reduced but in the meantime, I should have told you about GARIX, which is pretty close to what you would get if you blended equal portions of GENIX and GONIX.* I know this sounds a little Goth — were these characters in a Hobbit movie I didn’t see? Or from Game of Thrones? But the basic notion of all three is pretty simple. Namely, what if you had some really, really smart people come up with algorithms that ranked stocks two ways: First, how intrinsically “good” is the business? (Across quite a few metrics, Google seems to be a pretty good business; whereas airlines, by their natures, are horrible businesses — enormous fix costs combined with vicious price competition to fill seats that would otherwise go empty.) Second, how “expensive” is the business? And what if you then bought the least expensive “good” businesses and sold short the most expensive “bad” ones? While weird things could happen in any given year, over time — if you did this really, really well — there’s reason to think you’d have a pretty strong wind at your back. Knowing the guy who heads this all up as I do, my guess is that he and his team have done it really, really well — and (to address Part 2) by more than enough to justify the otherwise horrifying 2.25% annual management fee. (Fundamentally-weighted or value-weighted index funds — which are the stock-market tool of choice I suggest in my book for most of that portion of a person’s money she or he wants in stocks — have much lower expense ratios.) Because these funds are short as well as long, they may very well under-perform when the market is shooting up; but should do less badly when it is tanking. So these funds may be safer than index funds. And because the cheap stocks of good companies are likely to do well and the expensive stocks of bad companies selling are likely to do poorly, my hunch . . . which of course it comes with no guarantee! . . . is that these funds will, over time, meaningfully outperform even my preferred index funds. As a result, I have a good chunk of my own IRA in GENIX and GONIX. One last point: Within an IRA, tax efficiency is not an issue. In a taxable account, it very much is — which is another reason I’ve long leaned so heavily in favor of index funds, which expose you to minimal taxes until you eventually sell with, one hopes, a low-taxed long-term capital gain. But I wouldn’t rule out GENIX, GONIX, or GARIX in a taxable account, because the manager’s team is likely to manage well for taxes, too. You’d almost surely have somewhat higher tax exposure each year. But you might also have higher returns. *If you own equal amounts of GENIX and GONIX, you are effectively 60% long the market, because together the funds will be 145% long and 85% short. GARIX, which is close to a blend of the two, is designed to be 120% long the market and 60% short — again, net 60% long.
How Long Will YOU Live? April 1, 2014March 31, 2014 But first . . . this chart perhaps says it all about FOX News: If it’s not immediately clear why this graphic is not “fair and balanced,” click here. And by the way? With all the folks rushing to make yesterday’s deadline, and still in process this coming week, it’s not inconceivable we’ll actually hit the 7 million target. Despite those awful first few weeks. And despite a concerted effort from the other side to discourage people from buying coverage. (Amazing, no? I can see someone opposing a law that requires you to wear seat belts — hey, personal freedom! Don’t tread on me!!! But once it passes, actually spending time and energy to try to persuade people not to wear them? Really? Seriously? To me that’s not much different from what the Republicans have been doing here. What a horrible thing it would be if people who wanted health insurance bought it! Or if we extended Medicaid in Republican-controlled states to cover more struggling families! They can do that in Massachusetts — sure. And in the rest of the developed world — sure. But not in today’s Republican’s America. No way!) And speaking of health . . . HOW LONG WILL @YOU@ LIVE? The answer is not guaranteed, but just going through these 13 questions every so often should boost your resolve to be health-smart. Way better than someone’s nagging at you (though nag at you I will). At the end of the exercise, Northwestern Mutual offers a raft of other free calculators, some designed to steer you toward the purchase of whole life insurance. I could not resist taking the financial literacy quiz. I answered all 14 questions correctly (well, please!) — and scored a B. They docked me for missing two questions. The first: 2: What is the best way to minimize losses in your investments when the stock market declines? Your three really bad choices? (a) Have a diversified portfolio. (b) Don’t buy stocks in the first place. (c) Be the first to sell at the slightest hint of a downturn in the market. (A) Is incorrect because — while diversification is always good — if the market declines 20% (say), your diversified portfolio is likely to decline about 20% as well. (B) Was my choice, because if you want to avoid that 20% decline, this is a guaranteed way to do it. It’s a bad investment strategy, of course, because over the long run (which can be very long), stocks will outperform all other asset classes. But that wasn’t what they were asking. (C) Is actually a good choice in a sense, because, as with (B), if you own no stocks you’ll experience no decline. But it’s wildly impractical. What are you supposed to do — sell everything any day the market drops a little? The best answer would be (D): “If your investment horizon is long-term, and your investments sensible, just hold on.” The stock market will always go up and down, but over long periods — and especially in a taxable account — you are almost sure to be more successful paying no attention to market fluctuations than trying to “time” them. But they didn’t offer that answer. They said (A) was the right — though it’s clearly NOT a way to avoid a decline in the market. (It would be a fine answer to this question: “What is the best way for the average stock market investor to minimize risk?”) The other question I got wrong was about whole life insurance: You are supposed to check off which of six really great benefits it provides. Northwestern Mutual (a good company, by the way) sells whole life insurance. For 150 years, that’s been its bread and butter. Not surprisingly, I checked off all six. I wasn’t born yesterday. I scored wrong on this because, yes, the first five should have been checked off, but the sixth — “You can change who the policy insures whenever you want” — is incorrect. It should be “whom the policy insures.” Bad grammar offends me, too, but it shouldn’t count in a financial literacy quiz. And of course that wasn’t their real reason for saying I got it wrong. I had assumed they meant you can change whose financial security the policy assures at any time — i.e., you can change beneficiaries. What else could they possibly have meant? Apparently, they were being more literal, to weed out those financial illiterates (of whom there are actually none on the entire planet) who believe you can buy a $1 million life insurance policy on yourself, aged 27, and then transfer it to cover your mother, aged 103, dying in the next room. Really? Seriously? Anyway, I got a B. I’d still make bold to suggest that you buy competitively priced renewable term life insurance — not whole life — and only to the extent you need life insurance at all. And I’d ask you this: For what you pay for the advice on this page, do you even deserve A-rated talent?