WHAT TO DO WITH YOUR MONEY NOW?
Tim: ‘Your ‘guns, butter, and caviar’ quip seemed a good sum-up, but raises a historical question: What could a fretful person in 1969 or so have done to immunize himself?’
☞ Get out of any long-term fixed-income securities he owned; buy real estate with fixed-rate mortgages. Of course, that was then. How much of that applies today we’ll know better in 35 years. I do think the part about exiting fixed-income securities applies. But I’m not sure U.S. real estate is a bargain here. Some smart folks think now is a better time to be selling than buying. Either way, now might be a good time to convert your adjustable-rate mortgage to a fixed-rate mortgage if the cost of doing so is modest and you think you might be in your home for a long time. And now might be a good time to do that hardest thing of all – keep a chunk of your money safe, on the sidelines, waiting for irresistible opportunities. But the minute I say that, I hear the engine of Less Antman’s helicopter revving up as he prepares – think Apocalypse Now – to hunt me down and kill me for suggesting anyone try to ‘time the market.’ Most people should just keep socking that $100 a month or $100 a week, or whatever they can afford, into the two or three mutual funds they have chosen . . . hoping stocks will crater, so they can buy more shares ‘on sale.’
MUNI BOND SARCASM
Steve: ‘It has apparently escaped your attention that there is currently a shortage of the 30-year treasury bond, which has driven prices up (and yields down) to unusual levels. For a proper comparison with ‘tax-free’ bonds, you will need to use 30-year AAA Corporate bonds.’
☞ I did think about corporate versus Treasuries and decided that it was fair to stick with Treasuries – corporate bonds are backed by no taxing authority and just aren’t as safe over 30 years. As to the rest, though, Steve makes a good point I hadn’t thought of. So let’s check the Bloomberg screen again and compare, instead, 10-year municipals yielding 3.73% with 10-year Treasuries yielding 4.21%. A buyer of munis would be giving up $48 out of each $421 in interest, placing him, effectively, in the 11%-or-so tax bracket. So I think my larger point still holds – even 11% is a pretty low tax bracket for a guy pulling down $10 million a year in interest – but the sarcasm is less biting. And what, when you come down to it, is sarcasm without bite?
Meanwhile, there was an even more basic error in yesterday’s column – the math.
Terry Flanagan: ‘I think you are a little off on your calculation of the imputed tax rate on municipal bonds in your example yesterday. The tax rate is $9,000/$466,000 = .019 or 1.9%.’
☞ My face is getting redder and redder. I started yesterday’s example saying you were getting $10 million in annual interest . . . but then (and I want you to know that a 1982 bottle of port that Charles got me for Christmas had something to do with this) I did the calculation as if the $10 million was the size of your portfolio, on which you were getting $457,000 in interest. Someone needs to get more sleep or stick with Diet Coke, and it isn’t Terry Flanagan. Several other errors followed from this, but, as with Steve’s comment, the numbers change but the point does not.
SOMETHING FOR DEMOCRATS TO CHEW ON
From Wednesday’s New York Times:
Winning Cases, Losing Voters
By PAUL STARR
As Republicans revel in President Bush’s inauguration and prepare for his agenda-setting State of the Union address next week, many Democrats would like to consider almost anything but the substance of politics as the reason for their defeat last November. If only John Kerry had been a stronger candidate. If only the message had been framed differently. If only the party’s strategists were as tough as the guys on the other side.
The limits of candidates and campaigns, however, can’t explain the Democrats’ long-term decline. And while the institutional decay at the party’s base – the decline of labor unions and ethnically based party organizations – has played a role, the people who point to “moral values” may not be far off. Democrats have paid a historic price for their role in the great moral revolutions that during the past half-century have transformed relations between whites and blacks, men and women, gays and straights. And liberal Democrats, in particular, have been inviting political oblivion – not by advocating the wrong causes, but by letting their political instincts atrophy and relying on the legal system.
To be sure, Democrats were right to challenge segregation and racism, support the revolution in women’s roles in society, to protect rights to abortion and to back the civil rights of gays. But a party can make only so many enemies before it loses the ability to do anything for the people who depend on it. For decades, many liberals thought they could ignore the elementary demand of politics – winning elections – because they could go to court to achieve these goals on constitutional grounds. The great thing about legal victories like Roe v. Wade is that you don’t have to compromise with your opponents, or even win over majority opinion. But that is also the trouble. An unreconciled losing side and unconvinced public may eventually change the judges.
And now we have reached that point. The Republicans, with their party in control of both elected branches – and looking to create a conservative majority on the Supreme Court that will stand for a generation – see the opportunity to overthrow policies and constitutional precedents reaching back to the New Deal.
That prospect ought to concentrate the liberal mind. Social Security, progressive taxation, affordable health care, the constitutional basis for environmental and labor regulation, separation of church and state – these issues and more hang in the balance.
Under these circumstances, liberal Democrats ought to ask themselves a big question: are they better off as the dominant force in an ideologically pure minority party, or as one of several influences in an ideologically varied party that can win at the polls? The latter, it seems clear, is the better choice.
Rebuilding a national political majority will mean distinguishing between positions that contribute to a majority and those that detract from it. As last year’s disastrous crusade for gay marriage illustrated, Democrats cannot allow their constituencies to draw them into political terrain that can’t be defended at election time. Dissatisfied with compromise legislation on civil unions and partner benefits, gay organizations thought they could get from judges, beginning with those on the Massachusetts Supreme Judicial Court, what the electorate was not yet ready to give. The result: bans on same-sex marriage passing in 11 states and an energized conservative voting base.
Public support for abortion rights is far greater than for gay marriage, but compromise may be equally imperative – especially if a reshaped Supreme Court reverses Roe v. Wade by finding that there is no constitutional right to abortion and throws the issue back to the states. Some savvy Democrats are already thinking along these lines, as Hillary Clinton showed this week when she urged liberals to find “common ground” with those who have misgivings about abortion.
And if a new Supreme Court overturns affirmative-action laws, Democrats will need to pursue equality in ways that avoid treating whites and blacks differently. Some liberals have long been calling for an emphasis on “race neutral” economic policies to recover support among working-class and middle-income white voters. Legal and political necessity may now drive all Democrats in that direction.
Republicans are leaving themselves open to this kind of strategy. Their party is far more ideologically driven and more beholden to the Christian right than it was even during the Ronald Reagan era. This is the source of the party’s energy, but also its vulnerability. The Democrats’ opportunity lies in becoming a broader, more open and flexible coalition that can occupy the center.
In the long run, Democrats will benefit from their strength among younger voters and the growing Hispanic population. But the last thing the Democrats need is a revived interest group or identity politics. As the response to Senator Barack Obama’s convention speech showed, the party’s own members are looking for an expansive statement of American character and national purpose.
Secure in their own lives at home, Americans can be a great force for good in the world. That is the liberalism this country once heard from Woodrow Wilson, Franklin Roosevelt and John F. Kennedy – and it is the only form of liberalism that will give the Democratic Party back its majority.
Paul Starr is the co-editor of The American Prospect and the author, most recently, of “The Creation of the Media.”
☞ I don’t agree with every word of that, but it is certainly the kind of thoughtful piece Democrats should be discussing. Note – on choice, for example – that abortions went down under Clinton and have come back up under Bush. We need to be sure everyone knows those facts . . . and that they hear our pro-choice message not as shrill but, at least, as caring. As Senator Clinton and others have long phrased it: ‘Abortion should be safe, legal, and rare.’ This is not everything the other side wants. But it genuinely respects their view – as we absolutely should . . . both because it is a view worth respecting and because it makes it easier for people who agree with us on most other things to vote our way.
On the gay marriage issue, it should be noted that our candidate (and all his viable opponents in the primary) did oppose gay marriage, favoring civil unions instead. And that the only party strategists who were enthusiastic about gay marriage were Karl Rove and company. Gay activists didn’t put gay marriage on 11 state ballots, Republicans did. With the benefit of hindsight, one can regret that the Massachusetts Supreme Court found in favor of equal rights when it did (couldn’t it have waited one more year?) . . . or that some loving couples went to court years ago to sue for equal rights, setting all this in motion. But what practical way would there have been to shut the legal system to these couples? And would anyone really have wanted to?
That said, Starr has given us a lot to think about as – sticking firmly to our principles – we look for ways to appeal more broadly to the good-hearted citizens from whom we’ve become estranged. After all, wasn’t Jesus the original liberal Democrat? If you don’t think so, just re-read the Sermon on the Mount.
A GREAT IDEA FROM TOM FRIEDMAN
Click here. The essence of it (though it’s worth the full click):
Let me put this as bluntly as I can: There is nothing that the Europeans want to hear from George Bush, there is nothing that they will listen to from George Bush that will change their minds about him or the Iraq war or U.S. foreign policy. Mr. Bush is more widely and deeply disliked in Europe than any U.S. president in history. Some people here must have a good thing to say about him, but I haven’t met them yet.
In such an environment, the only thing that Mr. Bush could do to change people’s minds about him would be to travel across Europe and not say a single word – but just listen. If he did that, Mr. Bush would bowl the Europeans over. He would absolutely disarm and flummox people here – and improve his own image markedly. All it would take for him would be just a few words: “Read my ears. I have come to Europe to listen, not to speak. I will give my Europe speech when I come home – after I’ve heard what you have to say.”
It is possible to deeply resent the way we were misled into attacking Iraq and the tragic incompetence with which we failed to plan for the aftermath . . . to be anguished that 100,000 Iraqi civilians may now have died (equivalent to well over 1 million Americans, if their population were the size of ours) . . . to grieve over the heroic American loss of life . . . to be pessimistic about the prospects . . . and yet to be enormously proud of and grateful to our troops, and to hope that Sunday’s election is one day seen to have been a turning point. That – somehow – the Iraqis can summon the courage to stand up for themselves against those, both the murderous thugs and the deeply misguided martyrs, who are determined to see it all fail.
Go, Green Bay!
Quote of the Day
When it comes to banking and money, the four most dangerous words in the world are, 'This time, it's different.'~Allan Sloan, Newsweek, March 13, 1995, on repeal of Glass-Steagall
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