Year: 2015

Everybody talks about it — “it’s like herding cats” — but here are the men who do it.

You won’t want to miss that.  But once you’ve seen the cat herders in action, you may want to turn your attention to the unsettled nature of the markets.  For that, I’ve gotten permission from Aristides’ Chris Brown to share with you his monthly letter, emailed yesterday from Toledo.  Chris is scary smart, so I pay attention.

1 September 2015

Dear Partners,

Aristides Fund LP celebrated its seventh anniversary by posting its best August since 2009, gaining 1.47%.  . . .  One hundred thousand dollars invested at the inception of Aristides Fund LP, August 15, 2008, is now worth $344,150, representing growth of 19.1% annualized. . . .

Several of you have asked for our thoughts on the recent market sell-off, so, although we have no special powers of market timing and no economic crystal ball, here goes. In the very short term, market sentiment was excessively fearful last week, meaning that it is unlikely that the market goes meaningfully (more than 2-3% below) the lows from August 24 over the next 3-5 weeks. Historically, it would also be more likely than not that we do have some sort of retest of those lows in the very near term.

Longer-term, we remain very guarded in our outlook for equities. Mebane Faber recently (May 31) published a great article called “10 Bearish Charts, 1 Bullish Chart” in which he points out that April 2015 had the highest level of U.S. corporate stock buybacks ever, that May 2015 had the highest ever value of mergers and acquisitions, that the average price of these M&A deals was 12.4x EV/EBITDA year-to-date (highest on record), that the percent of initial public offerings that are unprofitable companies is the highest ever, that the Shiller cyclically-adjusted price/earnings ratio is the 4th highest it has ever been (next to 2000, 1929, and 2007), that the price-to-sales, price-to-book, and price-to-cash flow ratio of the median S&P 500 stock are at all-time highs, that % of portfolio allocation to equities has only been higher in the late 1990s and the late 1960s, that margin debt is at all-time highs, and that average Investor’s Intelligence bullish sentiment in 2014 was the second-highest on record.

Equity bulls counter that the “equity risk premium,” the gap between the earnings yield on stocks and the yield on bonds, is very large currently (i.e. stocks are cheap relative to bonds), and likewise that there are factors that have permanently raised after-tax corporate profit margins (e.g. better corporate management, more oligopolies, less power of labor to demand higher wages, and creative tax management strategies).

If we’ve learned one thing from the great economic prosperity/bull market from 1982-2000, and the subsequent unwind, it is that economies look a lot better when the level of debt-to-GDP is on the rise, and that it’s a pretty hard slog when debt-to-GDP is contracting (or, for that matter, it has been quite a headwind, compared to what we had grown accustomed to, just to have debt-to-GDP stay the same). This is probably the most important and most underappreciated aspect of long-term economic cycles.

Debt-to-GDP in the United States has declined very modestly since 2008, from a very high peak, but is still much closer to a top than a bottom. Therefore, it’s probably safe to argue that downside risks to the economy outweigh the prospects for a new economic boom. Combine this with high valuations, and stocks are vulnerable.

Another immensely important yet underappreciated principal of the markets is that things don’t matter until they do. Just as the massive credit buildup in the U.S. was obvious to some smart folks for years, it didn’t matter to markets in 1994; it didn’t matter until it started to reverse itself, very quickly, in 2007.

The world’s second largest economy, China, has been on the biggest fixed capital investment binge in the history of earth for about the last fifteen years (or roughly double the length of time of the second-longest such binge). You might think of China as a very export-driven economy, but that is only part of the story. Net exports (exports less imports) account for only about 4 percent of Chinese GDP. The amount of China’s economy dependent upon fixed capital investment is astronomical. For example, from 2011 to  2013, in three years, China produced more concrete than the United States did in the entire 20th century.

Certainly the Chinese people are well-educated, hardworking, and industrious, but the Chinese “economic miracle” had another tailwind as well. Any guesses what it might be?

Surprise! It’s debt. While China’s economy has grown, China’s debt, especially corporate debt and local government debt, has grown much more dramatically.

People who say “The fall of the Chinese stock market is inconsequential to the wealth of most Chinese people” are correct in the same way that people who said “Subprime loans are a very small part of the loan market and an inconsequential part of U.S. GDP” were correct in 2006-2007. The dramatic rise and fall of the Shanghai index in the last 12 months is a symptom of debt becoming too widely available, and abused for speculative purposes (margin lending on stocks, in this particular instance), followed by the beginning of a contraction of debt.

Although even margin debt is a relatively small part of China’s economy, the willingness of Chinese individuals to extend credit to Chinese corporations is a key part of the Chinese economy. Chinese GDP has been growing more slowly than Chinese debt for several years now, and if credit conditions tighten in China, the world’s second largest economy is likely to slow considerably.

Already, key commodity inputs that had previously been buoyed by Chinese demand, including iron ore, copper, and oil, have fallen dramatically. The same is true for the currencies of countries whose economies heavily depend on exporting commodities, such as Brazil, Australia, Russia, and Canada.

Many countries are heavily dependent upon exports to China. Nearly 30% of Australia’s exports are delivered to China. Chile, Peru, and Brazil together send roughly 20% of their exports to China, so any slowdown in China could hurt an already fragile South American economy. Likewise, South Korea and Japan send China 24% and 18% of their exports, respectively. Even 10% of European Union exports (roughly 1.1% of the entire EU economy) go directly to China.

China has already devalued the yuan slightly, and has spent a small fraction of its considerable foreign currency reserves defending the currency and its stock market. If the yuan needs to depreciate much further, as some observers are speculating, the effects on China’s economic Asian competitors, such as Japan, could be profound.

To make a long story short, China has accounted for a very substantial portion of global GDP growth in the post-2008 period, so in a world that is heavily indebted and barely growing, a significant economic slowdown and currency devaluation in China would be bad news for many industries in many nations.

We aren’t scrambling to put on China-related shorts. Some other investors, like Jim Chanos, who are better at discerning macroeconomic trends than we are, have already had such positions on for more than a year, and have made a lot of money in the process. We don’t know how far along things are, or how bad they will actually get, and we know that by the time that even guys sitting in Toledo, Ohio, have access to the narrative, maybe the bottom is in or at the very least it’s probably about time for a counter-trend rally. But, nevertheless, it’s important to respect the fact that not all is rosy in the global economy.

Most of our thoughts these days, as usual, are on finding good opportunities one company at a time, both on the long side, and to a lesser extent on the short side. Our broad market hedges obviously did well in August, but we also made considerable money elsewhere. Unwired Planet performed well for us thus far, and the story is still very underappreciated, in spite of us writing about it on SeekingAlpha.  MAST Capital privately bought a large chunk of UPIP stock for $1.00 last month. Yet the stock is still below 80 cents in the open market!

Southern Missouri Bancorp finally got the rally it should have had three months earlier (when it said on a conference call that they would pay their SBLF funds back without a capital raise, unless an attractive acquisition came along).

EMCORE, which is still mostly a pile of cash, rallied off of strong earnings.

Our SAExploration bonds traded up even as oil (which we are short as a hedge) traded down; the price isn’t a fluke as (1) we sold $1 million face (we could have sold more but didn’t want to), and (2) Fidelity exchanged $10 million face worth of bonds for stock essentially priced at about $4.25 per share, well above the current market price. The bonds still yield about 25% to maturity.

Our small shorts in Mobileye (a great company that is massively, massively overpriced) and 6D Global Technologies (a bad company that is massively, massively overpriced) contributed meaningfully.

Kroger did not perform well, but was noteworthy in that we were able to buy 20,000 shares on the day of the market panic at an incredible price, and sell it 5 points higher about an hour later.

Of course, several positions lost money, as you’d expect with the market down six percent, but nothing got hit too badly, and all-in-all, we held up pretty well.

Thank you for your partnership. It’s anyone’s guess what the rest of the year will bring to the markets, but we will certainly try our best to continue to keep our assets buffered and to find some good opportunities along the way.

None of this is to say what will happen next — or that you should do anything about this (I bought a few shares of UPIP at 77 cents).  If you’re in the stock market with money you won’t need to touch for many years, which is the only sensible way to be in the market, the last thing you want to do is jump in and out.  But won’t you feel more knowledgeable around the barbecue this weekend?  “Do you know, guys: China produced more concrete in three years than we did in the entire 20th Century?  Pass me the relish?”

Jim Batterson:  “Success Academy results are amazing — but thought you might comment on this,” which addresses the issue of “backfill.”

. . . Between 2006 and 2014, the proportion of students at Success Academy who scored proficient in math ranged from 94 percent in third grade to 97 percent in eighth grade, according to the report.  But the number of test-takers declined with each passing year, as students departed, and the number of proficient students [at one of the schools] fell from 88 students in third grade to 31 students in eighth.  By contrast, many traditional schools see their numbers increase in later grades. In District 7, for example, between 2006 and 2014 the average number of test-takers increased from 77 to 109 between third and eighth grade, while proficiency fell from 30 to 28 percent.

“Without backfilling, a school can maintain the illusion of success,” Lyles and her Democracy Builders colleague Dan Clark wrote in a Wall Street Journal op-ed published in February. The organization is supporting a bill before the New York City council that would require schools to make public far more information about student attrition and backfilling.

In a recent WNYC radio interview, Success Academy founder Eva Moskowitz . . . said her schools now accept new students through fourth grade. Accepting older children who were not prepared academically for Success Academy’s rigors would be detrimental to other students, she said.

“It’s not really fair for the seventh grader or high school student to have to be educated with a child who’s reading at a second or third grade level,” she said, according to a report in Chalkbeat New York.

I’m told that Success Academy attrition on average is less than half that as similar public schools — less than 10 percent a year compared with 20 percent in the “co-located” public schools with which many Success schools share space.  And the attrition seems to come more from family circumstances — having to leave — rather than “failing to make the grade,” as it were.

“When we looked a couple of years ago,” says my friend at Success, “there was no difference in the scores of students who leave versus those who stay.  They are doing great, too; they just have to leave because their families move.  Success has only expelled one student in its history (this year).  However, as our schools mature, it would be fair to adjust for the lack of backfill and compare apples to apples through fifth and make adjustments (easy to do) to compare only scores of students who have been in same district since 5th grade.”

So this is a fair point, and we should figure out ways for more kids’ families to stay put — and/or to expand the number of Success-type charters so that those who depart could be “backfilled” with others deparating from similarly good schools, who’d have little trouble fitting in.

That’s actually sort of the situation in New Orleans, as I understand it from the article I linked to yesterday.  There, all the schools now follow a charter model.  No one has been turned away, and if they move from one New Orleans school to another, it, too, will be a charter.

Not that all charters everywhere work — by any means.  It’s important to restate that every time.  Some are awful!  A few are scams!  Many are mediocre!  But the New Orleans model appears to work . . .

. . . Researchers studying the enormous gains registered in New Orleans have been able to rule out the usual sources of skepticism. The schools are not using stricter discipline to expel higher numbers of troublemakers — the city’s suspension rate is lower than it was before 2005, and also lower than the statewide average. (The system has a citywide process for major discipline, eliminating even the ability of principals to use suspensions to push out low performers.) Nor is New Orleans shortchanging students with disabilities, whose graduation rate in the New Orleans system (60 percent) dramatically exceeds their graduation rate statewide (43 percent). Nor is there any reason to believe the gains have come from schools “teaching to the test” — student performance on tests that have no accountability measures for the staff (such as the ACT) have also risen, as have graduation and college entry rates.

New Orleans is the breakthrough in social equity liberals have been waiting for. “We tried to make urban districts better for 50 years. We tried more funding, more accountability, more pipelines of talent, more [professional development], more training, more certification rules, and on and on and on. After all of that time, and all of those cities, we still don’t have a single high-performing urban district in America. Not one,” Andy Smarick, an education-policy analyst, told me. “But the very first time we try an all-charter system, the first time ever, we get dramatically better results in only a decade.” And some liberals, like the Obama administration, have encouraged and praised its success. . . .

. . . and the Success Academy model seems to produce even more spectacular results.  It’s time for the progressivres among us to start embracing these successes in a big way.

Mike M.: “You seem oblivious to how ridiculous it is to say Success Academy didn’t start off with the cream of the crop because ‘their families applied and won the lottery to enter Success.’ Okay, how many of those children had parents who were incarcerated? How many parents were junkies barely able to survive? How many parents were mentally ill? How many parents didn’t speak the language sufficient to know to apply? How many of the parents smoked during pregnancy? How many of the students suffered from fetal alcohol syndrome? How many parents and/or students suffer from chronic lead poisoning? These are the realities of students in the real world of the ghetto, and those students go to ordinary public schools. Research shows that students with parents who are active in their children’s education do far better academically than average students. Just having parents who are intelligent and competent and concerned enough to apply for charter school makes them the cream of the crop in those kinds of neighborhoods. . . . You really should be ashamed of these posts.”

☞ “Thanks, Mike [I replied]. Did you know that, at least last I heard, fully 80% of the parents in Harlem DID enter the lottery for Success Academy?  So if you call 80% “the cream of the crop,” okay, but it’s better than, say, the most motivated 5%.  Also, half of the 20% who didn’t enter the Success Academy lottery did enter the lottery for some other charter school . . . so, actually, 90% are motivated enough to enter a charter lottery.  And here I’m just guessing, but if the mother is a drug addict or in jail, might it be the grandmother who’s there for the kid?  Does this change your view at all?”

(It did not.  But Mike also made important points about the ravages of the lead-paint poisoning that’s such a scourge, especially in poor neighborhoods.  Some of the kids affected by it doubtless have parents who apply for the lottery, and from the statistics, it would appear Success must do a pretty good job of rescuing them; but the lead paint stuff seems really important to me.  I wrote about it here . . . and feel bad I’ve not done more to push the case.  What an amazing infrastructure investment this would be: de-leadifying these housing units*.  The studies I’ve seen suggest a terrifically high return on the tax-dollar investment.  Why haven’t we moved on this?  GET THE LEAD OUT!)

*Bonus: creating a lot of decent jobs in tough neighborhoods for the five or ten years it would take to do the work.

Not all of them, certainly, but the Success Academy public school network in New York I’ve been writing about . . . and now, apparently, the charter schools of New Orleans . . . as reported here.

. . . The charters, which have open admission and public accountability, have produced spectacular results. Before the reforms, New Orleans students — like overwhelmingly poor students in most places — lagged far behind more affluent students. Since the reforms, the achievement gap has nearly closed. . . .

This is a big deal.  Not just better for the kids themselves, but better for us all: breaking the cycle of poverty, teenage pregnancy, dependency and crime; boosting the ratio of citizens who grow up to be productive, responsible, contributing citizens.

I keep coming back to this because imagine how amazing our country would be if almost all our kids succeeded.

Volcanos?  Our planet’s wobble?  Deforestation?

Nope!

Here, very well presented, from Bloomberg News.  (Thanks, Bryan!)

AMAZON

From Business Insider: 14 Quirky Things You Didn’t Know About Amazon.  My favorite:

An obscure book about lichens saved Amazon from going bankrupt.

Book distributors required retailers to order ten books at a time, and Amazon didn’t need that much inventory yet (or have that much money).

So, the team discovered a loophole. Although the distributors required that Amazon ordered ten books, the company didn’t need to receive that many. So, they would order one book they needed, and nine copies of an obscure lichen book, which was always out of stock.

And today, twenty years later, the company is valued at $234 billion.

NOT THE COUNTRY I GREW UP IN

There’s a lot wrong with it, as many will attest (if for different reasons on Fox than on MSNBC).

“The USA is not the country I grew up in and certainly not the country I came of age in,” writes a deeply critical, all-but-despairing contemporary of mine — a leftie, like me.  To which, having been blessed with the happy gene, I felt compelled to reply:

“True!  We have a black President and Attorney General, women are accorded far more respect (20 in the Senate, up from zero; 3 on the Court, up from zero), life is immeasurably better for LGBT Americans, most of the country is at least somewhat environmentally aware, our cars are safer and get triple the mileage, our air and water is cleaner, defense spending is down from 10% to 4% of GDP, we’re not being drafted to fight a pointless war, far fewer people smoke, life expectancy is up from 70 to 79, hips are easily replaced, our entertainment and communication choices are vastly greater, “boredom” is not possible for anyone with an Internet connection, and — perhaps most astonishing — watermelon is seedless.  I share your enthusiasm.”

Have a great weekend.

MEET MORINGA . . .

“The African superfood that’s healthier than kale” — 25 times the iron of spinach, 15 times the potassium of bananas, 9 times the protein of yogurt, vitamins, antioxidants, an appetite suppressor — grows like crazy, requires little water, good for the African women and others beginning to grow and harvest it  . . . well, read up.  I already have the tea; planning to make some salad.

And now . . .

POLITICS

Here’s a little more about the Donald’s possible reading habits, including the excerpt from Marie Brenner’s 1990 piece in Vanity Fair:

Last April, perhaps in a surge of Czech nationalism, Ivana Trump told her lawyer Michael Kennedy that from time to time her husband reads a book of Hitler’s collected speeches, My New Order, which he keeps in a cabinet by his bed. Kennedy now guards a copy of My New Order in a closet at his office, as if it were a grenade. Hitler’s speeches, from his earliest days up through the Phony War of 1939, reveal his extraordinary ability as a master propagandist.

“Did your cousin John give you the Hitler speeches?” I asked Trump.

Trump hesitated. “Who told you that?”

“I don’t remember,” I said.

“Actually, it was my friend Marty Davis from Paramount who gave me a copy of Mein Kampf, and he’s a Jew.” (“I did give him a book about Hitler,” Marty Davis said. “But it was My New Order, Hitler’s speeches, not Mein Kampf. I thought he would find it interesting. I am his friend, but I’m not Jewish.”)

Later, Trump returned to this subject. “If I had these speeches, and I am not saying that I do, I would never read them.”

Most who oppose the deal don’t know this background.  (Which leads the author to conclude: “A defeat for Khamenei and Iran’s hardliners is good for the Middle East and ultimately for Israel and the United States. The invasion of Iraq in 2003 consolidated the hardliners’ power in Iran. Congress should not give Khamenei a big victory just when he is in the jaws of defeat.”)

And don’t know that we were offered a good deal in 2003 but rejected it.  (” . . . a proposal from Iran for a broad dialogue with the United States, [that] suggested everything was on the table — including full cooperation on nuclear programs, acceptance of Israel and the termination of Iranian support for Palestinian militant groups.  But top Bush administration officials, convinced the Iranian government was on the verge of collapse, belittled the initiative.”)

If you have doubts about the Iran deal, please click both links.

I mentioned the 340 rabbis in a previous post — they support the deal.  And a whole lot of others.  Here are 29 prominent scienctists, like the former head of Los Alamos, some Nobel laureates, and a physicist who helped develop our hydrogen bomb, concluding that before we made this deal, Iran was just “a few weeks” from having the nuclear material required for a bomb and praising the deal in a two-page letter.

And here is Congressman Jerry Nadler, whose analysis makes so much more sense to me than Chuck Schumer’s.

Please make the three phone calls.

One gets the feeling most who oppose the deal don’t know this background.  (Which leads the author to conclude: “A defeat for Khamenei and Iran’s hardliners is good for the Middle East and ultimately for Israel and the United States. The invasion of Iraq in 2003 consolidated the hardliners’ power in Iran. Congress should not give Khamenei a big victory just when he is in the jaws of defeat.”)

And don’t know that we were offered a good deal in 2003 but rejected it.  (It seems we received ” . . . a proposal from Iran for a broad dialogue with the United States, [that] suggested everything was on the table — including full cooperation on nuclear programs, acceptance of Israel and the termination of Iranian support for Palestinian militant groups.  But top Bush administration officials, convinced the Iranian government was on the verge of collapse, belittled the initiative.”)

If you have doubts about the Iran deal, please click both links.

I notice that the market has dropped smartly this past several days.  The short answer is: “I don’t know.”  But, as any of the stocks you own because of me were bought with money you can truly afford to lose — and because they are speculations just as interesting (or daft) today as they were a week ago — I hope you can be philosophical about it.  After years without a correction — or even, perhaps, a bear market — these things happen.  And even offer potential opportunities.  Stocks are on sale.  They could get a lot cheaper — or snap back.  But a decade or two from now they are likely to be a lot higher.

To calculate just how badly you did yesterday — or anything else you’re in the mood to calculate — dinkytown.net offers a complete suite of personal finance calculators, free.  Lots to play around with.

Have fun.

Les Rosenbaum:  “I know, from your book, that you don’t think very highly of annuities. What about the Qualifying Longevity Annuity Contracts? Any thoughts?”

☞ These are annuities you buy in your IRA now — at age 60 or 70 — in a lump sum — $100,000 or $1 million — that will pay you a monthly income for the rest of your life . . . but not beginning until you turn 80, say, or 85.  Your protection in case you live to 90 or 100 or even 116.

I don’t know much about QLACs, except that you’d presumably want to pay more to buy one that includes a cost-of-living adjustment (lest inflation render the whole point of the thing moot) . . . although, because Social Security DOES have a COLA built-in, maybe if it’s cheap enough, in buying your QLAC, you’d be willing to bet on decades of very LOW inflation.

The main thing is: this is a very hard item to “shop for” – and if I were the insurance company I would price my QLACs to cover not just the actuarial cost of the product, but also the sales cost, legal cost, administrative cost, the cost of whatever hedges I’d be buying to cover my risk, and a nice fat profit.  All fair – how could they not? – but all eating into the value of the deal for you.

So basically, from a math point of view it likely wouldn’t be a great deal unless you lived a really, really long time – as I hope you will.

But from a peace-of-mind point of view, especially if you get one with a COLA (and from an insurance company you expect not to outlive, which is also an issue), I can see how it could have strong appeal . . . which is what the annuity salesman is counting on.

I concluded my email to Les by “blind-copying someone smarter than me on this just in case he wants to offer more – or Less.”

Less Antman, that is, the financial planner next to whose name at the right of this page an asterisk has been discreetly blinking 60 times a minute for 5 million minutes now (give or take).

Happily, he chose to offer more:

While Andy has already offered good reasons to be leery of QLACs, I’d like to add a couple more:

(1) The irrevocable loss of flexibility on the committed funds – In the hypothetical world of projections, nobody has unexpected expenses, needs lump sums, or has a future opportunity to gain a tax advantage from another strategy rendered impossible by the purchase of the annuity.  Real life isn’t so clean.

(2) The selection of a non-growth asset in a growth-oriented situation – Assuming someone is thinking of buying one of these at age 70 to reduce RMDs until the mandatory start of payments on the QLAC at age 85, we’re talking about 15 years of potential equity growth sacrificed for a non-growth investment.  Sure, there are no market guarantees, but a globally diversified equity portfolio that hadn’t risen significantly after 15 years would be unprecedented (while the failure of an insurer promising the payments would not be, and would be even more likely in an environment in which equities didn’t rise significantly over a 15-year period).  Fixed income investments should be thought of as ways of addressing the short-term uncertainty of equity investments, which means having liquidity to get through the next bear market.  The promise of cash 15 years out and beyond provides no such liquidity.

Longevity annuities have been around for over a decade.  The only thing new with the QLAC is it being permitted for retirement assets that otherwise were subject to Required Minimum Distribution rules.  Since this is only a deferral and packs added RMDs into fewer later years, potentially INCREASING taxes by pushing the older retiree into higher brackets, I don’t personally think this changes the equation.

Let me say, though, that there is one situation in which I might be inclined to use retirement annuities, including QLACs.  I’ve known a few retirees who were incapable of saying “no” to their children and who allowed their retirement assets to be drained by requests for money by their offspring.  The loss of flexibility in such circumstances might even be a positive.  Even there, though, I’d be inclined to use an immediate variable annuity such as the Vanguard Lifetime Income Program, which allows the use of growth investments, rather than giving up on growth.

[I should also mention that a retiree who has done a poor job of saving and investing and who will need every dollar they can get during their lifetime might find an annuity is the best strategy.  Again, though, I’d likely be recommending an immediate variable annuity such as the VLIP rather than a longevity annuity.]

If someone were to use a QLAC in spite of my reservations, I’d emphasize, as Andy did, the need for the payments to be indexed to inflation.  Note that the COLA offered by many insurers often isn’t true protection against unexpected inflation, but is merely an arbitrary percentage change in the payments each year that starts the payments smaller and goes up by a fixed percentage regardless of the actual inflation rate.  Only indexing to the CPI-U or an equivalent is true inflation protection.

In my view, Social Security alone is a sufficient guaranteed income to allow the remainder of a retiree’s portfolio to be invested for growth.  To the extent liquidity is needed for unexpected lump sums or to avoid withdrawals from the market during deep bears, it should be in the form of cash equivalents, short-term high quality bonds, or TIPS.  Warren Buffett’s directions to the trustee of his wife to keep 90% in diversified equities and 10% in short-term government securities seems like a good approach.  Annuities don’t provide emergency cash.

I am enthusiastically neutral among all our fine Democratic candidates — knowing that whichever one gets the nomination will be miles ahead (in my view) of the Republican.  As noted a couple of weeks ago, that’s not blind partisanship; it’s recognition that their nominee would appoint Supreme Court justices like Bush 41 / 43 appointees Thomas, Roberts, and Alito; where ours would appoint justices like Clinton / Obama appointees Ginsburg, Breyer, Kagan, and Sotomayor.  And that their nominee would favor the powerful and wealthy at a time when the pendulum has already swung too far their way.

It’s also a recognition that the stock market and the economy do better under Democrats than Republicans.

• During the 12 Bush years, net private-sector job creation totaled just 747,000 — versus 19.6 million during the Clinton years and 8.5 million so far under Obama — or 12.8 million if you don’t count the first few horrific months he inherited.  So that’s: 747,000 jobs under the 12 most recent years of Republican leadership, as deficits ballooned*; 30 million under the 14.5 most recent years of Democratic leadership, as deficits were brought back under control.**

• Invested in the S&P 500 only during Republican administrations since 1929, and excluding dividends, $10,000 would have grown to only about $12,000 — versus about $600,000 if invested only during Democratic administrations.

So if any of our candidates is unfairly characterized in one way or another (as I think Kerry was, when he was swift-boated or Gore was on multiple fronts), I’ll be eager to offer my two cents — or, in this case, yours:

Tom:  “I worked for many years at Reader’s Digest, on the business side.  In 2005, the CEO, who was my boss, decided to re-institute a longstanding tradition of inviting politicians to a lunch at our ‘guest house’ on the campus.  And thus he invited Hillary Clinton, our senator at the time (and neighbor just down the road in Chappaqua).  As I recall there were only eight of us including Hillary and one of her aides.  She spent three full hours with us and was amazingly impressive.  Her grasp of policy down to the detail (she had a better handle on New Orleans geography, in this post-Katrina time, than my boss, who was from Louisiana), her openness, her passion, her wisdom, were all on display as we moved from topic to topic, driven solely by our questions.  And beyond that, she was very gracious, easy to share a laugh, relaxed, the whole bit.  Of the six of us Readers Digest-types on the management team who were there, I believe four were Democrats and two Republicans.  I’m not sure who was more impressed among us, but the GOP guys were raving about her after the lunch.  Whenever I read stories about how Hillary’s closest friends ‘wish everyone knew Hillary as they did,’ I think of that lunch.  Perhaps the punchline is, I wasn’t gaga from then on.  I voted for Obama ultimately.  I thought he was the more inspiring leader of the two.  But I still think that Hillary has what it takes to be a great President, easily.”

Bernie anecdotes, plugs for O’Malley, Webb, or Chafee welcome as well.  As much as it matters which of our folks gets the nod, it matters 100 times more which party’s candidate wins the general election.

That didn’t used to be the case.  But with the Republican Party now devoid of moderates — 17 candidates and not one moderate — it is now.

Have a great week-end!

*Including the $1.5 trillion “2009” deficit for the fiscal year that began four months before Obama even took office.

**Clinton left Bush a surplus.  And under Obama the deficit has been cut more than two-thirds, such that the National Debt is back to shrinking relative to GDP.