Doctors And Patriots Versus My Friend Paul April 15, 2019April 12, 2019 [It’s April 15. Need an extension to file your return? Click here. Have a really simple tax situation? Try filing for free. Have income not subject to withholding? Your first quarterly estimated tax is due,] I know smart, good people who support Trump. I find that very hard to understand. In some cases, like my friend Paul, they readily acknowledge he’s a liar and a bully, vulgar, a racist, a tax cheat and all the rest. And there are a lot of specifics they don’t endorse — for example, they’re not fully comfortable with separating thousands of innocent children from their mothers. (Though they may be comfortable employing undocumented immigrants to care for their own children, or to clean their toilets or the toilets at Mar-a-Lago.) Yet somehow they see a big picture I do not. In Paul’s case, it has nothing to do with religion or appointing right-wing judges, or with being ultra-rich and feeling over-taxed. He’s an atheist who lives off Social Security and a modest pension. It’s more the general frustration he felt that the established order was broken, and the appeal of someone who could come in from the outside and just crack some heads. Traditional Washington wasn’t working. Get a business guy in there who can cut through all the crap and — how hard can it be? — get “everybody great health care at a tiny fraction of the cost!” Yes! Bring manufacturing jobs back and make America great again, the way it was in the Fifties when he and Paul were growing up (wait, what? when the top federal tax bracket was 90%?) and the Sixties (wait, what? when unions were strong and the top rate was 70% and we had race riots and Vietnam and no one had cell phones or GPS and half the country was addicted to the leading cause of preventable death?). Yes! “He alone could fix it.” Yes! And even though Paul — a sophisticated Ivy League grad — knew this was bluster, he liked the bluster. He liked the way Trump flew in the face of political correctness (which I agree has swung too far). So even though he didn’t take Trump literally, he liked the bandwagon and jumped aboard. Once you join a team, it becomes hard to switch. Somehow, nothing shakes him. He has a strong economics background; yet the $1 trillion deficit (racked up in good economic times, not to combat recession) . . . and the trade wars . . . and the quality of appointees like Steve Mnuchin and Wilbur Ross and, for the Fed, Stephen Moore and Herman Cain — well, Paul just laughs nervously, He’s gay; yet the restriction on transgender troops that went into effect Friday — well, Paul just deflects. I do hope that one day — perhaps when Trump literally walks down Fifth Avenue shooting people (he’s a TV producer: is this not the obvious finale?) — Paul will convert, the way former segregationist Alabama governor George Wallace ultimately did, or Media Matters founder David Brock spectacularly did, or so many “ex-gay” leaders have. (They’re now ex-ex-gays. Like this one.) In the meantime, though, Paul backs the Administration that calls 14,700 patriotic transgender Americans currently serving in uniform “deficient,” even as the medical establishment disagrees. . . . “The only thing deficient is any medical science behind this decision,” American Medical Association President Dr. Barbara L. McAneny said. . . . “They can dress it up in whatever words they want, but when you carefully look at this it’s total disrespect for these human beings by saying a core piece of them is not acceptable,” former acting U.S. Army Surgeon General Gale Pollock said. Pollock signed a statement with three former U.S. surgeons general and two former military surgeons general, saying they are “troubled by the Defense Department’s characterization of the need to undergo gender transition as a ‘deficiency,’ and by the addition of gender dysphoria to official lists of ‘congenital or developmental defects’ that include bed-wetting and ‘disturbances of perception, thinking, emotional control, or behavior.’” An estimated 14,700 troops identify as transgender. Military chiefs testified before Congress last year that they found no problems with transgender troops on morale or unit cohesion. Many have received medals since the armed forces welcomed them in 2016. . . . I assume Paul (not his real name!) opposes this specific policy, as he opposes all the lying and cheating and bullying and Putin-defending and press-bashing and judge-bashing and FBI-bashing and science-bashing. Yet still he’s with Trump. What will be the breaking point? I have begged him to read Michael Lewis’s The Fifth Risk. Maybe that will do it.
Davd Leonhardt On Climate Change April 12, 2019April 12, 2019 Climate Change Is Coming — And the Pinkertons Are Ready. But first, my classmate Dan writes: “Octopi are amazing. For example, each arm has its own personality. I’ve stopped consuming them.” This is troubling, because I sure do like grilled octopus. Now if I keep ordering it I’ll have to wonder whether I’m eating the Sally Sunshine arm or the Sourpus arm or the Neurotic But Fun To Be Around arm. One more reason to favor eggplant parmesan. The reason this has come to mind is the article Dan and I just read about capturing an octopus. What a miraculous, delicate world. We should try really hard not to throw it out of balance. I.e.: climate change. I like the notion of The Freedom Dividend (Andrew Yang‘s $1,000 a month for every citizen between 18 and 64) funded in part by The Climate Solution (a carbon tax). David Leonhardt takes a different tack. He writes: The politics of climate-change can sometimes feel unwinnable. The oil and coal industries spend large sums of money to spread falsehoods. The leadership of the Republican Party echoes those falsehoods. Many voters, struggling with slow-growing living standards, are hostile to policies that would address climate change — namely, increases in energy prices. And so far the top-tier Democratic presidential candidates haven’t put the issue at the center of their campaigns. But for all of these challenges, I think there is a more promising political approach than many people realize. In the upcoming issue of The Times Magazine, I’ve written an essay about it, and it is online now. The brief version: Americans are skeptical of policies that directly raise the cost of energy, such as a carbon tax or cap-and-trade program. But polls show that most Americans are in favor of policies that promote clean energy even if those policies indirectly raise the cost of energy. One example is a mandate requiring utility companies to use more clean energy; most states already have such a mandate, and Michigan and Nevada have recently made theirs tougher. Another example is federal spending to subsidize clean energy — a program, in other words, that looks like a Green New Deal. Obviously, programs like these don’t eliminate the costs of moving away from dirty energy. But they can change the political calculus. When a policy calls attention to the costs of the transition, as a carbon tax does, people are wary. When a policy calls attention to the benefits, people often have a more favorable attitude and are willing to accept slightly higher costs. As a result, many climate activists have been changing their political strategy in recent years. “It makes sense to set a goal,” as Rhiana Gunn-Wright, a climate-policy expert, told me while I was reporting the magazine story. When people understand the goal — like a clean-energy economy — they are much more open to solutions than when the policy discussion focuses on mechanisms for reaching that goal. Even if the country adopted a sensible climate policy today — and it’s inconceivable under President Trump — it is too late to avoid some of climate change’s terrible damage. But it’s not too late to make a big difference. My article is part of the Magazine’s climate issue, and you can find more of it here. The theme is deliberately scary: “Putting a Price on the End of the World.” Also, the writer Nathaniel Rich has just released a book based partly on his August 2018 cover story for the Magazine on the history of climate policy. Last night, Nathaniel and I talked about climate change at the Brooklyn Public Library, and you can watch the conversation here. Related: Thomas Friedman argues that smart climate proposals could well be damaging to a president who has denied climate change at every chance he’s gotten. “If Democrats approach this right,” he writes, “they can win on this issue in 2020 and make Trump the laughingstock.” Have a great weekend. Read about octopi. And climate.
Tax The Rich? April 11, 2019April 11, 2019 The Patriotic Millionaires held a half-day conference in DC yesterday morning. Fox News’ Stuart Varney hated it. Not that he attended, but he didn’t need to. He hates socialism — and apparently believes that America in the 1950’s under Eisenhower (when the marginal rate on the best off was 90%) was a socialist country . . . that America remained a socialist country in the 1960s and 1970s under Kennedy, Nixon, Ford, and Carter (the top rate was 70%) . . . and veered even more drastically socialist with the imposition of Medicare (as the Hollywood actor Ronald Reagan famously warned it would). The truth, of course, is that lots of things people like are socialist: free roads, public education, parks, unemployment insurance . . . even the free quality health care that the citizens of all our industrialized competitors enjoy. Instead of calling what Democrats — and most Republicans — want “socialism,” it might be more accurate to call it “Capitalism Plus.” Patriotic Millionaires love capitalism. But it needs to be regulated . . . competition needs to be kept vigorous (through anti-trust enforcement) . . . and the spoils of its success need to be shared (through, among other things, progressive taxation and a robust tax on billionheirs). It’s perfectly legitimate to argue around the edges — how high should health insurance co-pays be, if you have them at all? At what age should full Social Security benefits kick in? Should the top rate be 49% or 59% or 69%? Should it kick in only above $10 million in income? $50 million? And it’s important to try to think through unintended consequences. Would a tax on high-frequency trading really produce $1 trillion? Or would it just kill high-frequency trading or drive it offshore? A lot of work needs to go into the details. But you can’t tell me that if the corporate tax rate — cut from 35% to 21% in 2017 — were reset at 25%, it wouldn’t bring in more revenue. Or that if the carried-interest loophole almost everyone decries were abolished, it wouldn’t bring in more revenue. Or that if the “stepped up basis” on inherited wealth were done away with it wouldn’t bring in more revenue. There are plenty of sensible ways America can remain capitalist — and become more prosperous — by taxing the very richest among us more heavily. If you only got to keep $3 million a year instead of $4 million, life would go on. Likewise, if you inherited only $200 million instead of $300 million. The incentives would still be there to start new businesses and get rich, just as they were there in the Fifties and Sixties and Seventies. With that background, watch the conference? (Or on Facebook here?) Or just the first few speakers?
270 Or Bust April 10, 2019April 10, 2019 Picking up from yesterday . . . (“According to a new poll, 55% of Americans favor abolishing the Electoral College. Unfortunately, because of the Electoral College, 55% is less than half.” — Seth Myers) . . . here is Why Every Argument For Preserving The Electoral College Is Wrong. And here is how we fix it — the National Popular Vote Compact. We’re up to 189 of the needed 270 votes. We’re getting there. (But as I’ve mentioned in the past: don’t worry! Each state would still have two senators, so the sparsely populated, overwhelmingly white, states would still have far more than their proportional share of power overall, and a disproportionate say in the composition of the Judiciary Branch.)
It Took 99 Years, But H.L. Was Right April 9, 2019April 7, 2019 From Commander In Cheat: You might be thinking, “What does golf have to do with being president? What does it matter that he cheats at it? What’s it got to do with leading the country?” Everything. If you’ll cheat to win at golf, is it that much further to cheat to win an election? To turn a Congressional vote? To stop an investigation? If you’ll lie about every aspect of the game, is it that much further to lie about your taxes, your relationship with Russians, your groping of women? If you’re adamant that the poor don’t deserve golf, is it that much further to think they don’t deserve healthcare, clean air, safe schools? Oh, and there’s so much more. Not that any of the parts I’ve read are surprising. (“Somebody who makes his caddies cheat for him to earn their tip is not a gentleman. Somebody who bullies and manipulates and yells that his courses are the best in the world when that world absolutely knows otherwise is not a gentleman.” As if there were anyone in the world who thinks Trump is a gentleman.) I checked. According to Snopes, H.L.Mencken really did write in the July 26, 1920 Baltimore Evening Sun: “As democracy is perfected, the office of the President represents, more and more closely, the inner soul of the people. On some great and glorious day, the plain folks of the land will reach their heart’s desire at last, and the White House will be occupied by a downright fool and a complete narcissistic moron.” We have so many great Democrats running for President, many of them until recently all-but-unknown. Yesterday, I linked to Mayor Pete on Meet The Press. Pretty much out of the ballpark, no? Here’s another: John Delaney. Given him 48 seconds. If you’re intrigued, the whole 9 minutes. Whoever accepts the nomination in Milwaukee July 16, 2020, will need us to have done a tremendous amount of voter registration and organizing now, in 2019, and in the first half of 2020. If you’re for powering a massive blue wave that puts the country back on a sensible, progressive path, click here. I’ll see whatever you do, to say thanks. Don’t be put off by the huge numbers — there’s a field to enter a human-size contribution, too. I’d rather have 50,000 $50 contributions than 50 $50,000 contributions. But until we get campaign finance reform, we need both. Seth Myers: “According to a new poll, 55% of Americans favor abolishing the Electoral College. Unfortunately, because of the Electoral College, 55% is less than half.”
It Takes All Kinds April 8, 2019April 7, 2019 Did you see this Army vet’s commentary on CBS Sunday Morning? She makes the case that military service should not be limited to straight white men, as it once was. That our military is stronger (and more American) if it can draw on the talents of qualified black, female, and LGBT Americans, too. The Trump Administration disagrees. Did you know that, a century ago, it was pink for the boys, blue for the girls? This gender stuff can be confusing — even threatening. It certainly was to me growing up. Or it can be about self-expression and freedom. Life, liberty, and the pursuit of happiness. “Between the Shades” is a documentary fresh from the festival circuit to iTunes this month. Already in hundreds of libraries and colleges (Penn State, Duke, Columbia) and licensed by PFLAG chapters, it shows that, in addition to your basic (wonderful!) heterosexual males and females (I can’t emphasize this too much: I am a huge fan of heterosexuals) . . . there is an almost endless palette of other shades. Fifty folks are interviewed, ranging from the very square, who could easily pass for straight if they wanted to, to some variations you might not before have encountered. But whose happiness you might find yourself rooting for. Imagine if high school kids were forced to watch this film at the end of their sophomore year, just before going off on summer vacation. “We are forcing you to watch this film,” the principal or guidance counselor might say just before the lights dimmed, “not to make you uncomfortable — though we imagine it will make some of you uncomfortable. And not to confuse you, though we know gender and sexuality can be confusing at any age — and certainly for kids as young as you. No way do you need to label yourselves today. Or try to fit yourself into some category other than ones into which most of you do or will fall: standard straight males and females who for much of history in most societies were the only visible or acceptable categories. (And let us be clear: we at this school love and admire standard straight heterosexuals.) “Rather, we are forcing you to watch this documentary for three reasons: “First: In your lives — and perhaps even in this school — you will encounter people whose gender expression doesn’t fit the norm. You may hate them or fear them — or love and embrace them — or pretty much simply ignore them. That will be entirely your choice. But we wanted you to have a chance to meet some of them today so you’d be aware of what’s out there in the world. Our own feeling is: good citizens, and good friends, can come in endless varieties. We’d like you to consider that point of view. “Second: Many kids your age have an easy time knowing who they are in terms of sexual orientation and gender expression — and that’s great. And many more, given peer pressure, pretend they know. But an awful lot of kids don’t know — indeed, some adults don’t entirely know until they’re much older — and we want those kids to know they are not alone. And that there’s no rush to figure it out. And that happiness is possible for every student in this room even if, as is so natural growing up, you feel unsure or insecure about some of this stuff. “Finally: We’re forcing you to watch because we know that for most kids this stuff is embarrassing. To have to raise your hand and ask a question about sex is really hard. To stand out from your peers because you chose to attend a film like this could be really hard. We don’t want to put any of you in that position. So look: feel free to say you hate being here. That you hated watching this film. Either because you actually did hate it or because it embarrassed you or because you actually found it very, very interesting and didn’t want anyone to know. “But consider this: kids kill themselves over fear they won’t fit in . . . that they will be rejected for being different. We at this school want all of you to know that if you’re honest and kind and useful, a wonderful life can lie ahead for you no matter how traditional or untraditional your love life winds up being. Just ask the folks you’re about to meet in this film.” Something like that? If I were giving that speech today, I might add, “Hey, the people of Chicago just elected a lesbian mayor. The people of Colorado just elected a gay governor. The CEO of Apple is gay. The CEO of United Therapeutics is trans. A thoroughly credible candidate for President who acquitted himself superbly on Meet The Press this past Sunday was reelected mayor of South Bend as an openly gay man with more than 80% of the vote.” Love is love. In America, all are welcome to contribute. Or at least — Trump notwithstanding — we’re getting there.
“What To Do With Your Money Now” April 5, 2019April 6, 2019 Back when I was writing for magazines, this was the only headline my editors ever really wanted me to address. Sometimes they would put NOW in all caps. Wednesday, I suggested caution. Yesterday, Aristides Capital’s Chris Brown included this thought in his monthly investor letter: “The yield curve inverted this month, portending a high-likelihood of recession within the next two years, so I am unexcited about cyclicals and financials here, while growth stocks remain historically expensive relative to value, so it’s hard to be excited about them either. We’re at a point in the economic cycle where even completely fraudulent companies can sport a $100 million to $300 million market cap, and money-losing companies can be worth billions or tens of billions. It’s a good time to find shorts.” Chris is a deeply skilled investor but most mortals should avoid shorting stocks — you can go very broke shorting stocks even if, in the long run, you are proven to have been right. And few investors come out ahead over the long run trying to time the market. So especially if you’re young, just keep adding $100 a month or $500 a month to your Vanguard index fund and be thrilled if the market tanks — you got your new shares on sale. Mary U: “I agree recession seems inevitable. The R’s will create a huge deficit, and the D’s will have to turn it around. Again (like Clinton) And again (like Obama) and AGAIN (like whoever gets the nomination in Milwaukee July 16, 2020). Could you explain what you mean by putting your money in cash? Certainly you can’t mean getting a savings account with .ooo1 % interest.” Having a cash cushion safely on the sidelines is the big picture. Whether you’re getting a .0001% or a 2% after-tax return on it, I don’t much care — but, yes: you can get more like 2%. Ask your bank if they have a deal like one of these — though the convenience of sticking with your current bank or discount broker is worth something, too. And then there are the stocks you may own with money you can truly afford to lose. The obscure lottery tickets we’re still hoping to cash in. I certainly wouldn’t sell even a share of BOREF — who knows? Even if there’s just a 10% chance WheelTug makes it, and I think the chance is considerably higher, its shares are undervalued. And I have a new one for you. Background: a friend owned a big chunk of FANH when he first told me about it in 2013. The stock was trading around $5.40 (under the symbol CISG) but had $8 a share in cash, he said, and a growing auto insurance business in China. The Chinese guy running it, he thought, was honest. So I bought a bunch, and suggested it to you (and then again at $5.76 a couple of years later). You just wait, and wait, and wait — but sometimes, patience pays off. A year ago, we sold some or all of it above $30. (Now, at $26, he’s give all his away but still thinks there’s good upside. I’ve sold almost all mine.) ANYWAY . . . I ran into him last week at a Democratic fundraiser thing and thanked him for all his support and good works (he is a superstar) — and for recommending FANH. “I have another one for you,” he said. Selling for under four times earnings, growing 20% a year. NYSE symbol: CNF. They do home equity loans in China. (China may be in the latter stages of a real estate bubble; but he says the most they’ll lend is 50% of a home’s value, so even if the bubble bursts, they may survive it.) Normally, of course, a company growing at 20% a year might sell for 20X earnings, not 4X. It’s very thinly traded. I bought a chunk for myself; if everybody else does, it could run up from the $6 or so I paid to $8 or $9 or wherever — and then fall right back down. And of course, not everything works out. We have a shot at doing well with CNF over the next few years, as we did with FANH. But you truly never know. Have a great weekend!
Help Writing Your Commencement Speech April 4, 2019April 2, 2019 One of you, my esteemed readers, owns both mannkind (the speculative biotech stock) and humanity (the website). I don’t know whether he’s underestimating the risks in MNKD shares (on a lark, I bought a few when they dipped to $1.01 a while back; Guru counseled against it). I do know he’s not overestimating the risks to humanity. Click here to read his advice to this year’s commencement speakers. Then scroll down for his links to the 10 best commencement speeches of all time . . . and his index of the best commencement speeches from 1936-2013. Also a few outstanding class day speeches. And suggestions on how to write a commencement speech of your own. Sally from Iowa: “Thank you so much for writing about the Patrick Melrose novels on Audible. I will sign up so I can hear them. I had read a few before seeing the Showtime series, which I was eager to watch because of its star. It was one of the best things I’ve ever seen on TV. (The very best? The Wire.) I was amazed at how so much internal dialog from the book was expressed in so few words by the characters in the TV show. In other words, such a great adaptation. I so recommend it. (Sorry you couldn’t find the John Lithgow Bonfire and hope that changes so I can hear it. Funny story: I once bought Moby Dick from Audible, and when I began listening, it was in an English accent. That book, to me, is the Great American Novel, and there is no way I could bear listening to it in an English accent!)”
Recession Signs April 3, 2019April 1, 2019 By focusing on corporate tax cuts that have widened inequality yet further instead of on critically needed infrastructure revitalization that would have put people to work at good jobs, Trump has given us the largest budget deficit in history and, with his trade wars and threatened Mexican border shutdown, a possible end to the long Obama recovery. John Mauldin titles his most recent newsletter “Recession Signs Everywhere” and ends it thus: . . . Last year, I explained how trade wars can spark recession and trade deficits are nothing to fear. I won’t repeat all that here. But we have since seen several market swoons/rallies as harsher trade restrictions looked more/less likely. Whether you like it or not, asset values depend on the (relatively) free flow of goods and services across international borders. Interfere with that and all kinds of assets become less valuable. Starting a trade war, at the same time growth is slowing for other reasons, is more than a little unwise. Agricultural tariffs have already ripped through US farm country to devastating effect, leaving losses some farmers may never recover. The president’s tariff threats had other impact as well. Companies raced to import foreign-supplied components and inventory before the tariffs took effect. This jammed ports and highways last year, not with new demand but future demand shifted forward in time. This is important, and I think we will see the impact soon (if we are not already). Transport and logistics companies geared up for last year’s surge, expanding their facilities and hiring new workers. Importers built up inventory in an effort to avoid tariffs that were supposed to take effect in January. The deadline was extended, but the threat is still alive. At some point, all this has to stop. Carrying inventory is expensive and will eventually outweigh the benefit of avoiding tariffs. Then the boom will come to a screeching halt. Imports will fall as companies work down inventory. All those jobs and construction projects will disappear. That, combined with the other cyclical factors and high debt loads everywhere, could easily add up to a recession. Exactly when is hard to say. Recessions usually get pronounced in hindsight, so there’s some possibility we are in one right now. But I still think we’ll avoid it this year. Getting into this box took a long time and so will getting out of it. Regardless, we’ll have a recession at some point. I think the next subprime crisis will be in corporate debt. Next week, we’ll look deeper into the timing question, what the yield curve tells us, and why the next decade will bring little or no economic growth. I realize this is not a happy conclusion, but I call them as I see them. I’ll leave you with one final but critically important thought: Prepare, don’t despair. Tough times are coming but we can handle them. You have a chance to get ready. I highly suggest you take it. What does getting ready look like? Not quitting your job; cutting back wherever you can to save all you can; not borrowing on margin; and, depending on your situation, perhaps moving some of your assets — if you’re lucky enough to have assets — into cash. If a recession never comes, no harm done. But with interest rates already low and the Republican deficit out of sight (as it was under Reagan, Bush, and Bush, with only Clinton ad Obama handing their successors a National Debt shrinking relative to the economy as a whole), if a recession does come, it could be a challenge getting out of it in the usual ways. (The usual ways are cutting interest rates and ramping up government spending.)
The Death Of Truth April 2, 2019April 1, 2019 Last week I offered, from New York Magazine, Trump Nominates Famous Idiot Stephen Moore to Fed Board. But Robert Samuelson, writing in the Washington Post, explains that . . . The real reason that Stephen Moore does not belong on the Federal Reserve Board is not that he is unqualified for the job, though he is. Nor is it that he has been a highly partisan and divisive figure for many years, though he has been. The real reason is that, if confirmed by the Senate, Moore could become the Fed chairman — and that is a scary possibility. It could spawn a global financial calamity. . . . Read the whole piece. And have you gotten around to Michael Lewis’s The Fifth Risk? And then there’s this: Michiko Kakutani’s The Death of Truth: Notes on Falsehood in the Age of Trump. Up is down, black is white, truth is false. Remember love and truth? Light and logic? Excellence and modesty? Is there any trace of those in Trump?