Search This Blog

Sunday, January 24, 2021

Democracies Guarantee Absolute Freedom

I hope the degree to which this topic is an absolute myth is obvious.  Sometimes I wish the framers of the Constitution had also listed a Bill of Responsibilities.

I'll just leave this article here for you to read and to reach your own conclusions.  What does this have to do with financial planning?  Context matters.  Democracy matters.  Equity and fairness matter in our lives as well in the minds of our lawmakers.  Freedom without wisdom and responsibility is fatal.  And makes it extremely difficult for the average person to plan a future.

Statement on the Principles of Democracy

January 19, 2021

We, the undersigned, are scholars of democracy who have watched the recent deterioration of U.S. democracy with growing alarm.

We recognize in American democracy today many dangerous conditions from other declining democracies: hyper-partisan polarization, mutual political enmity and distrust, zero-sum politics, lack of tolerance for opposition and minorities, rampant propagation of falsehoods and conspiracy theories, and the encouragement or rationalization of violence. The willingness of prominent politicians to violate basic democratic norms is a common warning sign of democratic distress. And when these violations become routine and expected, the downward spiral is very hard to reverse.

But we also see something uniquely dangerous in America right now — an electoral system that allows for minority rule. It is not only possible but now common for one party to win the presidency and the Senate, and then seek to establish long-term control over the judiciary despite a majority of citizens preferring a different party. It has also become common under divided government for an opposing party to obstruct on purely partisan grounds a president’s ability to even have judicial nominations considered.

It is one thing to ensure that the rights of political (and other) minorities are respected, to plant, as our constitution does, restraints on majority rule. But it is quite something else in a democracy to give a political minority the power to rule.

Minority rule is dangerous in two respects.

First, it undermines the legitimacy of governing institutions. A basic principle of democratic legitimacy is that a government must have majority support in order to make policy. A government that allows a minority to rule over a majority (especially for a prolonged period) violates this principle.

Second, and more dangerously, minority rule can prompt and enable the minority party to take increasingly radical and anti-democratic actions to entrench its dominance, by changing the rules to make it harder for its opponents to win elections, or even to cast ballots.

The minimum condition for a system to be democratic is that its people can choose and replace their leaders in free and fair elections. When a ruling party bends the rules to suppress opposition votes or rig the political playing field, a country can no longer be said to be a democracy, no matter how much it may allow freedom of the press and association.

As the world’s oldest democracy, the American system suffers from many deficiencies and anachronisms in need of reform. But no goal of democratic reform is more urgent and foundational than the fairness and representativeness of our political system.

The Congress should take the following steps to enhance democratic equality and fairness:

  • Defend and expand the right to vote for all Americans.
  • Require nonpartisan commissions in each state to redraw congressional and state legislative districts, so that state legislatures can no longer gerrymander districts to advantage their party.
  • End the ability of a small group of ultra-wealthy donors to secretly bankroll candidates and parties by requiring transparency in all political spending.
  • Narrow the conditions under which the Senate filibuster can be used as a tool of legislative obstruction.
  • Grant the people of the District of Columbia and Puerto Rico the right to vote for statehood, which would provide full and equal representation to nearly four million Americans who are currently disenfranchised.
  • Establish a nonpartisan, independent federal elections agency to ensure that the voting process is fair, consistent, secure, and legitimate.
  • Study ways to reduce politicization of the federal courts.

The first three of these steps would be accomplished by the passage of HR 1, the For the People Act.

None of these reforms should be dismissed as partisan. Each of them seeks to address problems of unfairness and dysfunctionality that are eroding the capacity and legitimacy of American democracy at home and abroad. Each would make our precious constitutional system a more just and workable democracy, better able to address the great policy challenges that now confront us.

This is only a partial agenda for renewing our democracy. There would still remain the longer-term task of altering other perverse incentives that drive the hyper-partisan polarization of our politics. But these are harder questions that will likely require even bigger solutions.

In the near term, however, we urge our elected leaders to take these initial steps to make our democracy fairer, more inclusive, and more capable of addressing our major policy challenges. Even a democracy that seeks to prevent “tyranny of the majority” through checks and balances must ensure that, over time, government reflects the voice and interests of the majority, as they emerge through free, fair, and equal elections. Otherwise, democracy deteriorates into “tyranny of the minority.”

Larry Diamond
Senior Fellow
Hoover Institution and Freeman Spogli Institute
Stanford University

Lee Drutman
Senior Fellow
New America

Steve Levitsky
Professor of Government
Harvard University

Daniel Ziblatt
Professor of Government
Harvard University

Deborah Avant
Professor of International Studies
University of Denver

Naazneen H. Barma
Associate Professor of International Studies
University of Denver

Frank R. Baumgartner
Professor of Political Science
University of North Carolina, Chapel Hill

Sheri Berman
Professor of Political Science
Barnard College, Columbia University

Robert Blair
Assistant Professor of Political Science and International and Public Affairs
Brown University

Henry E. Brady
Dean, Goldman School of Public Policy
University of California, Berkeley

Rogers Brubaker
Professor of Sociology
University of California, Los Angeles

John M. Carey
Professor of Government
Dartmouth College

Michael Coppedge
Professor of Political Science
University of Notre Dame

Katherine Cramer
Professor of Political Science
University of Wisconsin-Madison

Rachel Epstein
Professor of International Studies
University of Denver

Henry Farrell
Professor of International Affairs
Johns Hopkins University

Morris P. Fiorina
Professor of Political Science and Senior Fellow
Hoover Institution
Stanford University

Luis Ricardo Fraga
Professor of Transformative Latino Leadership and Political Science
University of Notre Dame

Francis Fukuyama
Senior Fellow
Freeman Spogli Institute for International Studies
Stanford University

Daniel J. Galvin
Associate Professor of Political Science
Northwestern University

Laura Gamboa
Assistant Professor of Political Science
University of Utah

Martin Gilens
Professor of Public Policy, Political Science, and Social Welfare
University of California, Los Angeles

Kristin Goss
Professor of Public Policy and Political Science
Duke University

Jessica Gottlieb
Associate Professor of Government & Public Service
Texas A&M University

Virginia Gray
Professor of Political Science Emeritus
University of North Carolina, Chapel Hill

David Greenberg
Professor of History and of Journalism & Media Studies
Rutgers University

Anna Grzymala-Busse
Professor of Political Science
Stanford University

Jacob Hacker
Professor of Political Science
Yale University

Hahrie Han
Professor of Political Science
Johns Hopkins University

Gretchen Helmke
Professor of Political Science
University of Rochester

Liesbet Hooghe
Professor of Political Science
University of North Carolina, Chapel Hill

Daniel Hopkins
Professor of Political Science
University of Pennsylvania

William Howell
Professor of Political Science
University of Chicago

Bruce W. Jentleson
Professor of Public Policy and Political Science
Duke University

Theodore R. Johnson
Senior Fellow
Brennan Center for Justice

Richard Joseph
Professor Emeritus of Political Science
Northwestern University

Eric Kramon
Associate Professor of Political Science and International Affairs
George Washington University

Katherine Krimmel
Assistant Professor of Political Science
Barnard College, Columbia University

Didi Kuo
Associate Director for Research and Senior Research Scholar
Center on Democracy, Development and the Rule of Law
Stanford University

Timothy LaPira
Professor of Political Science
James Madison University

Yphtach Lelkes
Assistant Professor, Annenberg School for Communication
University of Pennsylvania

Margaret Levi
Professor of Political Science
Stanford University

Robert Lieberman
Professor of Political Science
Johns Hopkins University

Scott Mainwaring
Professor of Political Science
University of Notre Dame

Jane Mansbridge
Professor of Political Leadership and Democratic Values
Harvard University

Lilliana Mason
Professor of Political Science
University of Maryland

Corrine M. McConnaughy
Research Scholar and Lecturer, Department of Politics
Princeton University

Jennifer McCoy
Professor of Political Science
Georgia State University

Suzanne Mettler
Professor, Department of Government
Cornell University

Michael Minta
Associate Professor of Political Science
University of Minnesota

Terry Moe
Professor of Political Science
Stanford University

Yascha Mounk
Associate Professor of the Practice of International Affairs
Johns Hopkins University

Pippa Norris
Professor of Political Science
Harvard University

Anne Norton
Professor of Political Science
University of Pennsylvania

Brendan Nyhan
Professor of Government
Dartmouth College

Norm Ornstein
Emeritus Scholar
American Enterprise Institute

Benjamin I. Page
Professor of Decision Making
Northwestern University

Kathryn Pearson
Associate Professor of Political Science
University of Minnesota

Tom Pepinsky
Professor, Department of Government
Cornell University

Anibal Perez-Linan
Professor of Political Science and Global Affairs
University of Notre Dame

Paul Pierson
Professor of Political Science
University of California, Berkeley

Ethan Porter
Assistant Professor, School of Media and Public Affairs, Department of Political Science
George Washington University

Robert D. Putnam
Professor of Public Policy
Harvard University

Kenneth Roberts
Professor, Department of Government
Cornell University

Amanda Lea Robinson
Associate Professor of Political Science
Ohio State University

Jonathan Rodden
Professor of Political Science
Stanford University

Nancy L. Rosenblum
Professor of Ethics in Politics and Government Emerita
Harvard University

Kim L. Scheppele
Professor of Sociology and International Affairs
Princeton University

Kay L. Schlozman
Professor of Political Science
Boston College

Daniel Schlozman
Associate Professor of Political Science
Johns Hopkins University

Cathy Lisa Schneider
Professor, School of International Service
American University

Gisela Sin
Associate Professor, Department of Political Science
University of Illinois

Dan Slater
Professor of Political Science
University of Michigan

Anne-Marie Slaughter
Professor Emerita of Politics and International Relations
Princeton University

Rogers M. Smith
Professor of Political Science
University of Pennsylvania

Susan Stokes
Professor of Political Science
University of Chicago

Alexander George Theodoridis
Associate Professor of Political Science
University of Massachusetts Amherst

Chloe Thurston
Assistant Professor of Political Science
Northwestern University

*Institutions and titles are listed for identification purposes only.

 

Your Constructive Comments are Welcome!

Sunday, January 17, 2021

Financial Advisers Keep Their Clients From Procrastinating

Well, all know this isn't true.

But it isn't your fault.  This last year Gary Duell was the procrastinator.  None of the smartest people in the room (not including yours truly) could agree on what was going to happen and what to do about it.
 
Now that a major source of craziness will largely be out of the picture, I'm more comfortable with recommendations for this year:
 
  1. Focus on Goals and Cash Flow-  block out the massive media intrusions into your lizard brain, the eat, lust, fight, flight instincts.  Focus on your goals and the plans in place- or that we're working on -to achieve them.  Review your budgets and determine which expenses are in your control and which don't contribute to your goals.  Then eliminate them.
  2. Manage Risk- note that I don't say avoid risk, commonly defined as volatility.  As I say repeatedly in my classes, when you're accumulating savings volatility is your friend due to dollar cost averaging.  When you're spending, or on the cusp of spending, your retirement funds then volatility is your enemy.  Manage where and to what degree you allow volatility in your portfolio.  This usually consists of either algorithm-based risk managed ETF and/or third party backed guarantees.
  3. Remember Taxes!  Taxes, not healthcare, will be your largest retirement expenditure (on average).  Do you have a plan for future [higher] taxation?
  4. Be a perpetual student.  Recent studies have shown investors procrastinate 5-10 years before implementing our advice.  That hasn't been my experience.  But I get chagrined if my clients wait 5-10 months!  Especially now.  So never stop listening and learning.
  5. Seek good returns but follow evidence and ethics.  As data becomes easier and easier to collect and analyze, the bad actors in our economy will be taken out of the game.  It's inevitable.  I am really encouraged by the surge in ESG, SR & Impact investing.  Most of us know without being told that lying, cheating and stealing never work out well in the end.  Companies that foist their costs onto the environment or other people will either evolve or die.  Don't invest in them.
  6. Take care of your physical, mental and social health.  Without a mind and body it's tough to enjoy anything.  Keeping connected to others, to nature and things outside yourself, your odds are improved!

Your Constructive Comments are Welcome!

Monday, January 11, 2021

Divinely Inspired Algorithms Can Beat the Market

As the case I'm going to describe would indicate, it is a solid myth that divine inspiration can feed your greed.  

That is so wrong on so many levels, isn't it?  But some investors apparently didn't think so.

(this blog post is based entirely on the case described in Wealth Management magazine regarding two Utah con men titled, "SEC:  "Divinely Inspired" Traders Were Mere Frauds") 

Thomas J. Robbins & Daniel J. Merriman "lost" $11 million of their clients' money by investing them in a fake company aptly named "ConTXT",  They claimed their algorithm-from-God (my portrayal, not in the article) would yield returns of 7.5% per week.  That's right, per week.  And with no risk!  I think you'd even have trouble doing that dealing crack.  But I don't know.

They appeased early investors for failure to achieve these returns by explaining technology was not yet sufficient to manifest their "spiritual revelation".  This while never investing the money and just spending it on themselves, using it all up within months.  To keep investors engaged, Robbins & Merriman touted their religious faith and phony large clients like the Mormon church, the Rothchilds, etc.

The article didn't mention this but a common thought pattern of such crooks is they believe their victims deserve to lose their money for being so greedy as to think they could actually get such outrageous returns.  I nearly agree with them in this case; tell me how that thought can exist in a healthy mind, all at the same time.

So here are the key points, if we're to learn something from yet another bunch of scammers:

  • Both men (four were actually involved) were ex-cons who had met in prison, their attendance in which had been precipitated by prior financial fraud.  
  • As a result, neither was licensed or registered to give financial advice or sell financial products.
  • None of the investors had looked them up on https://brokercheck.finra.org/ before handing over their money.  It's free.  It takes one minute.
  • The investors were driven by misplaced trust (religion and money never mix well) greed and FOMO (fear of missing out), the worst investor motivators.
  • Had they performed some due diligence, none of them would have been victimized.
  • Had they focused on their goals and reasonable proven ways to realize them they wouldn't have had any interest in ConTXT to begin with.  (I love that name.  What a blatant giveaway.  Robbins & Merriman put the "Con" in ConTXT.)

Your Constructive Comments are Welcome!