Saturday, February 6, 2016

Wall Street’s ‘Unfairness’ Shouldn’t Scare the ‘Little Guy’ Out of the Stock Market

In an article for MarketWatch titled Wall Street will always crush the little guy, but the stock market could be fairer, Victor Reklaitis and William Watts did their beats to scare the wits out of we, the “little guys.”

I left these comments:

I am a union plumber, and my wife is a school secretary—presumably the very people who are supposedly “crushed” by Wall Street. Yet we weren’t “left behind,” because we chose not to be.

One doesn’t have to be a financial expert to learn and implement sound investment strategies. There’s no need to worry about “the pros” and their supposed “advantages unavailable to the average investor”: There’s no need to “compete” with them. One only needs knowledge of basic investing principles, common sense, and perseverance.

Bear markets? The bears of 1981-82, 1987, 2000-01, 2007-09 worked in our favor. Wall Street “scandals?” We sailed through them, too. Flash crashes; conflicts of interests; “rigged” markets; high-frequency trading; CEO pay; insider access to data and information; “uneven” playing fields; blah blah blah? Who cares? It’s all noise—provided you think long-term and have a sound investment strategy and make regular contributions through thick and thin. I’m much more worried about government meddling in the economy—which hamper profit-seeking private enterprise, and causes periodic economic upheavals like the housing bubble, financial crisis, stock market crash, and Great Recession—than Wall Street.

Rather than frighten and belittle average people, it’d be much more productive to teach them how to invest and ignore the scare talk. My advice to average folks: Don’t let columns like this one scare you away from investing in the enormous wealth-building opportunities presented by America’s great public companies. Above all, never let some elitist convince you that you are a “little guy.” The minute you think of yourself as “little,” you’re sunk as an investor—and in life.


After spending most of the article scaring investors half to death, Reklaitis finally gets around to giving a little bit of advice. At the bottom of page 5, he writes:

The only strategy for the average investor is to stick to longer-term holding periods for investments. Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, says individual investors shouldn’t be trying to compete with high-frequency traders, adding that he thinks the “jury is still out” on how harmful or helpful so-called HFTs are, given that they add liquidity to the market.

And that’s about it, as Reklaitis slides back to telling us, on the sixth and last page, how “scarey” the market can be. For good measure, Reklaitis slithers in a slap at everybody’s favorite whipping boy—inequality:

Meanwhile, the distribution of stockholdings threatens to amplify concerns over growing inequality.

Stock ownership is highly skewed by wealth and income class, noted Edward Wolff, a finance professor at New York University, in a paper. The top 1% by wealth owned 35% of all stock held by households in 2010, while the top 20% held 91% of the total.

“The main conclusion is that the rise in the stock market certainly doesn’t benefit the average household,” Wolff writes. “The reason is that stock ownership, including 401(k) plans, is highly skewed,” with the average 401(k) amassing only $13,000 in equities in 2010.

Right. As if what the next guy’s investment portfolio looks like has any relevance to your investment portfolio—unless your a selfless envyer who measures his sense of self-worth with a yardstick labeled “others.” Reklaitis  concludes with:

It isn’t all doom and gloom. Investors have grown more disillusioned with active managers, particularly after the financial crisis, leading them to put a growing share of money into passive investments.

And more advisers are switching to fee-based business models and putting their clients in lower-cost funds rather than relying on trading commissions. That means lower costs for 401(k)s and mutual funds.

In the end, that all adds up to a “a direct transfer of wealth from the financial-services industry to the pockets of working Americans,” Bullard says, “and that is a great story.”

I love index funds. They dominate my investing strategy. But if everyone is coming around to index funds, that sounds like a classic sign of an impending change in trend. Perhaps actively managed funds may be the place to be for the next few years. We’ll see.

Related Reading:

In Defense of Special Interests - and the Constitution

Thursday, February 4, 2016

A ‘Liberal’ Makes a Case for President Cruz—Sort Of

The Left-leaning New Jersey Star-Ledger was happy to see Ted Cruz “taking the wind out of the sails (however briefly) of Donald Trump.” But it still considers President Cruz: Still America's worst nightmare. “Let us count the ways,” offers the Star-Ledger—and then proceeds to list the many reasons for a liberty lover to support him.

I left these comments:

Well, you convinced me to vote for Cruz, should he win the GOP nomination.

His support for abolishing ObamaCare is a good reason for voting for Cruz. I know for a fact that of employers, including local school boards, who are deliberately keeping employees below 30 hours wherever possible, so as to not have to insure them. It’s ridiculous to think that raising the cost of employment wouldn’t reduce employment. If not for ObamaCare (and also Dodd-Frank), the economy might have created 22 million jobs instead of 11 million. Jobs are the least of ObamaCare’s problems. Hopefully, Cruz would replace ObamaCare with free market healthcare reforms, which means giving more control to patients and healthcare consumers and less to government officials.

Support for a flat tax, abolishing the IRS, Energy, and other departments, giving control of Social Security to the workers, and other policies show he has significant respect for individual rights and reducing the size and scope of the federal government. His shuttering of the government over the budget was motivated by the right ideas, although not a good political tactic. But he showed he’s willing to really fight for limited government and fiscal responsibility. No wonder he’s demonized by the Left as an “extremist.”

It’s also to Cruz’s credit that he would reevaluate, at the least, the Iran deal. His vow to destroy ISIS shows that he takes national security seriously. I don’t believe he would indiscriminately kill civilians. But ISIS is the aggressor and we are acting in self-defense. That puts the moral guilt for any civilian casualties resulting from an unfettered American assault to destroy ISIS once and for all squarely at the bloody hands of ISIS.

True, from an individual rights perspective, his social conservatism and ties to the religious right are drawbacks. But he’s not a demagogue like Trump or Sanders, both of whom are authoritarians and both are, each in his own way, national socialists.

Cruz is not my first choice. For an Independent like myself who supports liberty in both the economic and social realms, it’s unlikely to find an ideal candidate. But I do agree with the Star-Ledger that Cruz’s knocking back of Trump is a very good thing. Unlike the S-L, I think we can do a lot worse than Cruz for President. But thanks for highlighting the many good policies that a Cruz Administration might implement.

Related Reading:

Trump’s Ban-All-Muslims Policy Undermines the Fight Against Islamic Jihad

Tuesday, February 2, 2016

New Jersey’s Still Debating Whether to Legalize Self-Serve Gasoline

New Jersey is one of only two states—Oregon being the other—that outlaws consumers pumping their own gasoline into their own cars. In NJ, repeated attempts to lift the ban have failed. This scenario may once again be playing out, as State Senate President Stephen Sweeney, the most powerful democrat in the state, has vowed to block enactment of a bill sponsored by state Sens. Paul Sarlo (D-Bergen) and Gerald Cardinale (R-Bergen) that would legalize self-service gas in NJ.

But then again, maybe there is finally a light at the end of the tunnel. As New Jersey Star-Ledger columnist Paul Mulshine observes, the chances for finally lifting the self-serve ban may be increasing to the point that it’s only a matter of time. A changing marketplace that now combines convenience stores and gas stations has encouraged the most powerful special interest roadblock to pump-your-own-gas legalization, the New Jersey Gas Retailers Association—now named the New Jersey Gasoline, C-Store, and Automotive Association—to drop its opposition to self-serve gasoline.

Self-serve gas can not come soon enough for me. I’m used to traveling out of state, so I’ve gotten used to the convenience of quickly getting in and out of gas stations without having to wait for some attendant to get to me. (A gas station attendant has got to be the most useless job in the world. With due respect for gas station attendants, the job offers no economic value, and exists in NJ solely by force of law, not market demand.)

Of course, my own annoyance is not a reason to repeal the ban. It’s a matter of the economic and moral propriety of government interference in our lives and the market economy. Two Star-Ledger  letters published under the heading Self-Serve vs. Full-Serve Gasoline in New Jersey continued the debate. In the first letter, Deborah Cohen complained that a law legalizing self-service would be hard on her because she has young children, and would rather not have to “go out of my car in the cold, in the rain, in the snow, in the heat, in the dark or out in dangerous areas” or “unbuckle the kids (often cold, tired and cranky; I've had small children), then put them back in the car. Who wants to disturb kids who may be sleeping?”

Sounds like a real hardship. I wonder how young mothers do it in 48 other states!

Cohen also complained that, even if service stations maintained pump islands for full-service, the price would be higher than the self-serve islands. “Why should [people who don’t want to disturb the kids] pay more for full service?”

Another letter had a different complaint: It’s just not an important enough issue to waste lawmakers’ time on. Lawmakers should spend their time on more important legislative issues. Bruce Papkin wrote under the heading “Gas debate just smoke and mirrors”:

Is this really what we pay [the politicians] for? Don't they realize that there are "real" problems out there, such as high underemployment which creates tax drains on the state's economy? Or, the easily voted on PARCC test funding that really needed to be analyzed properly and fixed?

This is a smoke and mirrors kind of legislative battle going on to keep our eyes off the bigger problem: financial insolvency. The state is so far in over its head with crumbling roads and bridges, pension shortfalls and more. . .

I left these comments:

RE: Deborah Cohen:

What about people who are willing to “go out of my car in the cold, in the rain, in the snow, in the heat, in the dark or out in dangerous areas?” Or who have no children; or who see no problem pumping gas while their children sit a foot or two away in the car; or who are not helpless elderly; or who are not elderly? Why punish people who are willing to pump their own gas, if the station can legally allow it?

And why shouldn’t people pay more for full service gasoline? They’re getting a service, aren’t they? Paying more for full service, if that is the station’s policy, is perfectly fair to anyone who isn’t infected by an entitlement mentality.

More to the point, what right does the government have to make self-service gasoline illegal? None. Station owners have a right to operate their businesses as they judge best, so long as they commit no fraud and meet appropriate safety standards. This means they should be free to set their own service policies, be it full-serve and self-serve islands, same price for both, extra for full-serve, all full-service, all self-service, or what have you.

As to Gas debate just smoke and mirrors: I beg to differ. The ban on self-service gasoline is a manifestation of the cause of the “real” problems—the politicians’ power to micromanage our individual affairs. Why is the state in charge of the union pensions, rather than the unions? Why are the federal and state governments dictating one-size-fits-all [PARCC standardized] tests? The same reason it forbids self-serve gasoline. I say repealing any law that forbids law-abiding citizens from being self-sufficient—like the ban on self-serve gasoline—is well worth the debate, because the principles apply to so many other areas in which the government tries to run our lives.


As of this writing, the latest attempt to legalize self-serve gasoline has gone nowhere. So, this ridiculous debate will continue, and we NJ drivers will continue spending precious time waiting for attendants to fill our tanks.

Related Reading:

The Koch Brothers and the Nature of Government Regulation

Sunday, January 31, 2016

Turning a Subsidy into ‘Payment for a Value Delivered’: Corporate Welfare for NJ Solar Companies

A New Jersey bill introduced into the state legislature earlier in 2015 would “give New Jersey one of the nation's most ambitious goals for renewable energy sources like solar and wind power,” NJ Advance Media’s Matt Friedman reports for Friedman continues:

The bill (S2444) would require that 80 percent of New Jersey's energy use would be from renewable sources 35 years from now.

Supporters say the legislation is needed to crack down on carbon-producing forms of energy production like coal and gas.

“Crack down” is an appropriate term. In terms of reliability, scalability, and cost, solar and wind are incapable of competing with coal and natural gas openly and fairly in the market. So the solar power industry, as Friedman observes, has lobbied hard for the bill, because it must turn to government force, in the form of mandates—i.e., guns—to crush its competitors.

But, even the mandates aren’t enough. The renewable industry needs subsidies, as well. NJ’s existing state-imposed “renewable” energy program is funded by surcharges on electricity bills. As Friedman reports:

Stefanie Brand, New Jersey's rate counsel, said ratepayers are already on the hook for $5 billion in expenses related to solar power, and that the bill would result in almost $3 billion more.

Incredibly, as Friedman reports, “Solar industry executives disputed the idea that they're being given subsidies[!]” The $billions in inflated bills electric ratepayers are forced to pay to support solar installations around the state are “a payment for a value delivered,” said Lyle Rawlings, president and CEO of Flemington-based Advanced Solar Products and co-founder of the Mid-Atlantic Solar Energy Industries Association.

Even more incredible, Rawlings—apparently believing that the public will believe anything—flipped the argument, saying that the fossil fuel companies are the ones receiving subsidies!: “Being allowed to emit those pollutants,” he said, “is a subsidy, because the cost of that is borne by the public.” (If pollution is a subsidy, then renewable energy is also subsidized in the same way. But Rawlings evades renewables’ pollution problem, which are very significant.

I left these comments, edited for clarity:

I don’t know which is worse; a bunch of politicians sitting around voting to force “renewable” energy mandates on us, or a corporate welfare recipient claiming that the handout he receives is not a subsidy, but a non-subsidy is.

The fossil fuel industry is not simply “allowed to emit pollutants.” It is subject to anti-pollution laws, and it has risen to the challenge by making regular, expensive investments in new technologies, turning its product progressively cleaner over time—all the while maintaining an uninterrupted flow of cheap, plentiful, reliable energy to the public. Do the costs of pollution control and cleaner burning fossil fuels get passed on to the public? Sure, and rightfully so. After all, the consuming public does the “polluting” by buying and using fossil fuel energy sources.

When I buy a car, I pay, through the purchase price, for the catalytic converter that cleans up the emissions coming from the tailpipe of my car. Why shouldn’t I pay? I’m the one using the car. When I buy gasoline, I’m paying for myriad additives to make the gasoline burn cleaner. Why shouldn’t I pay? I’m the one buying and burning the gasoline. When I use electricity, my electric bill includes my share of the cost of the pollution control devices on electric power generating plants. Why shouldn’t I pay? I’m the one using the electricity. Should others be forced to pay for my catalytic converter; my gasoline additives; my share of the power plant cleaners, and other pollution clean-up costs that my spending decisions generate? If there is a pollution “subsidy,” then we all—from the driller to the refiner to the energy transport companies to the consumers—are responsible for it.

Rawlings’s view is rationalization writ large. The public gets stuck with this renewable subsidy “payment for a value delivered” while not receiving any actual value for the money. If the solar industry is truly delivering a value, then why must ratepayers be forced to pay for the subsidies through inflated electric rates? Why the mandates? The answer is obvious.

Our taxes and our electric bills are artificially inflated beyond what we would voluntarily pay, and the money is transferred to solar companies and their customers, not for a value delivered but to cover the solar company’s inability to compete. By definition, that is a subsidy. And then Rawlings has the chutzpah to assert that the fossil fuel industry is getting a subsidy?

But a subsidy is what the so-called “renewable energy” industry is forcing on me. The “renewable” industry doesn’t want its customers to bare the full cost of its uncompetitive product the way fossil fuel consumers willingly do. Instead, it lobbies for subsidies to make up for the value they cannot deliver, so they can stick taxpayers and electric ratepayers with the bill. To all of you “green” energy consumers plopping solar panels on your rooftops, I say: Welcome to the dole!

I’m willing to pay the pollution control costs embedded in the cost of the fossil fuels I buy because I judge fossil fuels to be a tremendous value to me. It’s a value not only in terms of dollar cost but also because I know that my life is cleaner, healthier, and safer—for longer—than the lives people had before life-giving fossil fuel energy prosperity arrived. Why should I also be forced to pay for somebody else’s “renewable” energy installation? Let them pay their own way.

The solar industry is after corporate welfare. They’re just not honest enough to admit it. But most of we consumers are not that stupid. We know what a subsidy is, and that we are paying for it. We know they need the subsidies, along with whatever favors and mandates they can weasel out of the legislature, for one reason and one reason only: They can’t deliver a value equivalent anywhere near to what the fossil fuel industry has been delivering for decades. Otherwise, they’d be able and willing to compete on the free market and let energy consumers decide for themselves if Advanced Solar Products and its ilk actually do have a value to deliver. They'd be confident in their ability to convince consumers to voluntarily buy their product without coercive government “help”. They won’t face the market music, because, as of now, they know that without the protection of government coercion, consumers would see more value in fossil fuels, pollution costs and all, than in “non-polluting” renewables.

Unlike the “renewable” dogmatists, I’m not against any energy source. I simply want to stop being stuck with the costs of Solar’s corporate welfare bill. Let me and all consumers decide on a level market playing field which energy source is best. It’s time to end the crony socialism. If “renewables”—which aren't actually renewable—really are that good, they will have no problem doing to fossil fuels what digital photography did to the once dominant Eastman Kodak; what modern communications technology did to the AT&T monopoly; what the personal computer did to IBM’s mainframe business; and what electrification did to John D. Rockefeller’s near-total dominance of kerosene-based nighttime illumination more. Until that day comes, if it comes, stop demonizing and hampering the fossil fuel industry and its customers.

Related Viewing:

Excerpt from Response to Pope Francis’s Intervention into Global Warming—James H. Rust, The Heartland Institute:

It takes [abundant] energy to produce clean water and dispose of sewage. Fossil fuel energy is preferable for transportation than animals used in the past that despoiled roads. Fossil fuel supported energy is far cleaner and healthier for heating and cooking than wood and dung used in the past. Electricity is preferable for lighting than whale oil or candles use centuries ago. The list goes on and on.  All of the prosperity and good health of developed nations is attributed to fossil fuels.

Friday, January 29, 2016

Discussing the Difference Between Socialism and Capitalism (Part 2)

Here is the rest of the conversation regarding socialism vs. capitalism stemming from my definitions posted at the start of my commentary on the New Jersey Star-Ledger’s June 15, 2015 editorial, Like it or not, Sanders' socialism is mainstream. For part 1, and my definitions, see my 1/28/16 post.

In answer to my statements, “Socialism holds the collective as a separate entity above the individuals that make it up. I think observational evidence of socialism in practice supports my view,” Painter in Jersey wrote:

Like the socialized medicine that exists in every European country today? Does that support your claim? Is France a dictatorship? The Netherlands? Denmark? These are all countries practicing socialism and I can't for the life of me identify any of the phantom dictators you speak of.

At this point, correspondent clancy jumped in:

You forgot the two C's. Castro and Chavez.

Painter in Jersey:

Cuba is Communist not Socialist.


Communism is socialism. So is fascism. Socialism is the broader term. Communism encompasses state ownership of the means of production—the outright abolition of private property. Fascism is total control of the means of production, with ownership superficially left in the hands of private ownership. The difference, in practice, is superficial, as the history of the 20th Century demonstrates.

Painter in Jersey:

Communism is NOT socialism and now you are showing your blind spots. In communism there is no such thing as private property whereas socialism allows for all to gather private property.  


Split hairs. They both espouse statism, and that's their biggest problem.


Don't confuse a mixed economy with full socialism or full capitalism. All Western countries are mixed economies—mixtures of socialism and capitalism. None are fully free or fully dictatorship.

Every issue boils down to socialism or capitalism; i.e., either you are free to act on your own judgement, or your right to self-determination is superceded [sic] by government aggression. Socialized medicine is mostly dictatorial. But that doesn't mean the country is yet a full dictatorship; just heading that way.

[Great Britain is and never was a socialist country. It is a mixed economy; a mixture of capitalism (freedom) and socialism (statism). Britain still has largely free, private enterprise, freedom of migration, freedom of speech, press, and conscience, the rule of law. Full socialism is Nazi Germany and Soviet Russia. Soviet Russia had the complete nationalization of the economy. In Nazi Germany, all means of production was controlled by the government, with only nominal private ownership. In essence, they were the same.]

Painter in Jersey:

No one is saying all-encompassing socialism will govern America. We are speaking of the implementation of some socialist policies, but not all.

At this point Molly53 jumped in:

an awful lot of words to spread nonsense.  So, only the right is pro-liberty?  The right that supports NSA spying or the right that has dragged us into unwinnable wars? [sic]


Yes. To the extent the NSA violates rights, it is not capitalist.

Properly understood, only the Right is pro-liberty. But in today's confused jargon, both "left" and "right" are pro-liberty on some issues, and anti-liberty on others. For example, social conservatives are anti-liberty because they want to violate rights to to gay marriage, abortion, etc. Liberals are anti-liberty because they want to restrict rights in the economic realm.


You don't make any sense.

Welcome marshwren:

When one argues from a position of ideology instead of practicalities, they rarely do make any sense.


Ignoring the ideology behind the practicality is not practical.


Which makes even less sense than what you wrote previously.

Welcome John Derr, in reply to Molly53’s comment above, “only the right is pro-liberty?”:

Yea but [Bernie Sanders is] a war hawk and a lot of defense dollars go to his state of Vermont. Don't be fooled by his progressive rhetoric? [sic]


War hawkism fits nicely into the statist socialist framework, as statism is an aggressive state that wages war against its own people, which ultimately leads to war with other countries. E.G.—the Soviet/German pact to launch WW II, the North's attack on the South in Korea and Vietnam.

[B]eing a socialist or "progressive" does not preclude being a war hawk. Statism in any form, including socialism—being based on aggressive force—is not a peaceful political ideology, whether or not it wages war against another country.


Sanders has been opposing the militaristic adventurism of neo-cons ever since he was first elected to Congress.  To claim he's a "war hawk" is perhaps the single most ignorant, uninformed, anti-factual thing anyone can say about him.


I did not say Sanders himself is a neo-con supporting war hawk.


Capitalism isn't a system of political governance; it's a system of economics that is profoundly anti-democratic.  All the advances in the conditions of the working class--minimum wage, paid leave, benefit packages, the 8 hour day, the 40 hour work week, weekends off, unemployment, disability, SS, Medicare--were achieved over the often bloody objections of capitalists, who saw unions are "restraints of free trade", and the great conglomerates and cartels as free enterprise.

Unions weren't outlawed until 1935 (Wagner Act) because they opposed all of these reforms, but because they advocated them.  Your ignorance of labor history in the US is beyond appalling; just as your equation of capitalism equals freedom, and socialism equals slavery, is simply childish.  Ordinary citizens in social democracies such as western Europe and Scandinavia have higher standards of living, a better quality of life, vastly superior governmental services, and more freedoms (particularly voting rights) than Americans. [sic]


"All the advances in the conditions of the working class--minimum wage, paid leave, benefit packages, the 8 hour day, the 40 hour work week, weekends off, unemployment, disability, SS, Medicare."

Then why didn't those become reality before capitalism? Statist governments have existed for thousands of years. Yet "the advances in the conditions of the working class" only came about after the prosperity of capitalism, which brought about the rise of the middle class, could finance them.

Unions were never illegal in this country, and under the freedom of capitalism never could be. What was illegal before 1935 was for unions to have the power to force employers to deal with them, and unwilling workers to join them, violating the rights of employers and employees alike.

Capitalism is not anti-democratic. Rather, capitalism properly limits the power of the majority to trample all over individuals' rights. Full socialist democracy—which does not exist in the regions you mention (they are mixed economies)—features unlimited majority rule, which is a manifestation of totalitarianism. In this sense, capitalism is anti-democratic. The feature of capitalism that prevents democratic majorities from becoming plundering mobs is a moral strength of capitalism.

End of conversation.

What comes across in this thread is that the fight for capitalism requires a difficult, long-term strategy of education. The widespread ignorance and/or denial of socialism’s nature risks a repeat of the bloody evidence of the 20th Century.

Related Reading:

Individualism vs. Collectivism: Our Future, Our Choice—Craig Biddle for The Objective Standard

Related Listening:

Radical Capitalist Episode 13: Why Socialism Won't Die—Yaron Brook