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Trump Can’t Reverse the Decline of White Christian America

My Comments: Remember the context. Racial tension has been a hallmark of our society since the beginning. Think pilgrims vs indigenous peoples in the 1620’s. Think black vs white in the 1860’s.

Right now the tension is elevated, and coupled with Trump’s inability or unwillingness to quash the tension, overreaction is going to surface. Reaction, within limits, will allow the ideology behind the tension to fade or lose. Otherwise the message becomes all about the confrontation rather than the underlying false premises of bigotry, racism, religion and political ideology.

Robert P. Jones \ Jul 4, 2017

Two-thirds of those who voted for the president felt his election was the “last chance to stop America’s decline.” But his victory won’t arrest the cultural and demographic trends they opposed.

Down the home stretch of the 2016 presidential campaign, one of Donald Trump’s most consistent talking points was a claim that America’s changing demographics and culture had brought the country to a precipice. He repeatedly cast himself as the last chance for Republicans and conservative white Christians to step back from the cliff, to preserve their power and way of life. In an interview on Pat Robertson’s Christian Broadcasting Network (CBN) in early September, Trump put the choice starkly for the channel’s conservative Christian viewers: “If we don’t win this election, you’ll never see another Republican and you’ll have a whole different church structure.” Asked to elaborate, Trump continued, “I think this will be the last election that the Republicans have a chance of winning because you’re going to have people flowing across the border, you’re going to have illegal immigrants coming in and they’re going to be legalized and they’re going to be able to vote, and once that all happens you can forget it.”

Michele Bachmann, a member of Trump’s evangelical executive advisory board, echoed these same sentiments in a speech at the Values Voters Summit, an annual meeting attended largely by conservative white Christians. That same week, she declared in an interview with CBN: “If you look at the numbers of people who vote and who lives [sic] in the country and who Barack Obama and Hillary Clinton want to bring in to the country, this is the last election when we even have a chance to vote for somebody who will stand up for godly moral principles. This is it.” Post-election polling from the Public Religion Research Institute, which I lead, and The Atlantic showed that this appeal found its mark among conservative voters. Nearly two-thirds (66 percent) of Trump voters, compared to only 22 percent of Clinton voters, agreed that “the 2016 election represented the last chance to stop America’s decline.”

Does Trump’s victory, then, represent the resurrection of White Christian America? The consequences of the 2016 elections are indeed sweeping. Republicans entered 2017 with control of both houses of Congress and the White House. And because the Republican-controlled Senate refused to consider an Obama appointee to replace Justice Antonin Scalia, who died in early 2016, Trump was able to nominate a conservative Supreme Court justice right out of the gate. Trump’s cabinet and advisors consist largely of defenders of either Wall Street or White Christian America.

The evidence, however, suggests that Trump’s unlikely victory is better understood as the death rattle of White Christian America—the cultural and political edifice built primarily by white Protestant Christians—rather than as its resuscitation. Despite the election’s immediate and dramatic consequences, it’s important not to over-interpret Trump’s win, which was extraordinarily close. Out of more than 136 million votes cast, Trump’s victory in the Electoral College came down to a razor-thin edge of only 77,744 votes across three states: Pennsylvania (44,292 votes), Wisconsin (22,748 votes), and Michigan (10,704 votes). These votes represent a Trump margin of 0.7 percentage points in Pennsylvania, 0.7 percentage points in Wisconsin, and 0.2 percentage points in Michigan. If Clinton had won these states, she would now be president. And of course Clinton actually won the popular vote by 2.9 million votes, receiving 48.2 percent of all votes compared to Trump’s 46.1 percent. The real story of 2016 is that there was just enough movement in just the right places, just enough increased turnout from just the right groups, to get Trump the electoral votes he needed to win.

Trump’s intense appeal to 2016 as the “last chance” election seems to have spurred conservative white Christian voters to turn out to vote at particularly high rates. Two election cycles ago in 2008, white evangelicals represented 21 percent of the general population but, thanks to their higher turnout relative to other voters, comprised 26 percent of actual voters. In 2016, even as their proportion of the population fell to 17 percent, white evangelicals continued to represent 26 percent of voters. In other words, white evangelicals went from being overrepresented by five percentage points at the ballot box in 2008 to being overrepresented by nine percentage points in 2016. This is an impressive feat to be sure, but one less and less likely to be replicated as their decline in the general population continues.

Updating two trends with 2015-2016 data also confirms that the overall patterns of demographic and cultural change are continuing. The chart below plots two trend lines that capture key measures of change: the percentage of white, non-Hispanic Christians in the country and the percentage of Americans who support same-sex marriage. The percentage of white Christians in the country fell from 54 percent in 2008 to 47 percent in 2014. That percentage has fallen again in each subsequent year, to 45 percent in 2015 and to 43 percent in 2016. Similarly, the percentage of Americans who supported same-sex marriage rose from 40 percent in 2008 to 54 percent in 2014. That number stayed relatively stable (53 percent) in 2015—the year the Supreme Court legalized same-sex marriage in all 50 states—but jumped to 58 percent in 2016.

Despite the outcome of the 2016 elections, the key long-term trends indicate White Christian America’s decline is continuing unabated. Over the last eight years, the percentage of Americans who identify as white and Christian fell 11 percentage points, and support for same-sex marriage jumped 18 percentage points. In a New York Times op-ed shortly after the election, I summarized the results of the election this way: “The waning numbers of white Christians in the country today may not have time on their side, but as the sun is slowly setting on the cultural world of White Christian America, they’ve managed, at least in this election, to rage against the dying of the light.”

One of the most perplexing features of the 2016 election was the high level of support Donald Trump received from white evangelical Protestants. How did a group that once proudly identified itself as “values voters” come to support a candidate who had been married three times, cursed from the campaign stump, owned casinos, appeared on the cover of Playboy Magazine, and most remarkably, was caught on tape bragging in the most graphic terms about habitually grabbing women’s genitals without their permission? White evangelical voters’ attraction to Trump was even more mysterious because the early GOP presidential field offered candidates with strong evangelical credentials, such as Ted Cruz, a longtime Southern Baptist whose father was a Baptist minister, and Marco Rubio, a conservative Catholic who could talk with ease and familiarity about his own personal relationship with Jesus.

The shotgun wedding between Trump and white evangelicals was not without conflict and objections. It set off some high drama between Trump suitors, such as Jerry Falwell Jr. of Liberty University and Robert Jeffress of First Baptist Church in Dallas, and #NeverTrump evangelical leaders such as Russell Moore of the Southern Baptist Convention. Just days ahead of the Iowa caucuses, Falwell invited him to speak at Liberty University, where he serves as president. In his introduction, Falwell told the gathered students, “In my opinion, Donald Trump lives a life of loving and helping others as Jesus taught in the great commandment.” And a week later, he officially endorsed Trump for president. Robert Jeffress, the senior pastor of the influential First Baptist Church in Dallas and a frequent commentator on Fox News, also threw his support behind Trump early in the campaign but took a decidedly different approach. Jeffress explicitly argued that a president’s faith is “not the only consideration, and sometimes it’s not the most important consideration.” Citing grave threats to America, particularly from “radical Islamic terrorism,” Jeffress’ support of Trump for president was straightforward realpolitik: “I want the meanest, toughest, son-of-a-you-know-what I can find in that role, and I think that’s where many evangelicals are.” Moore, by contrast, remained a steadfast Trump opponent throughout the campaign. He was aghast at the high-level embrace of Trump by white evangelical leaders and strongly expressed his incredulity that they “have tossed aside everything that they previously said they believed in order to embrace and to support the Trump candidacy.”

The 2016 election, in fact, was peculiar because of just how little concrete policy issues mattered.

In the end, however, Falwell and Jeffress had a better feel for the people in the pews. Trump received unwavering support from white evangelicals from the beginning of the primaries through Election Day. As I noted at the beginning of the primary season, the first evidence that Trump was rewriting the Republican playbook was his victory in the South Carolina GOP primary, the first southern primary and one in which more than two-thirds of the voters were white evangelicals. The Cruz campaign had considered Super Tuesday’s South-heavy lineup to be its firewall against early Trump momentum. But when the returns came in, Cruz had won only his home state of Texas and neighboring Oklahoma, while Trump had swept the southern states, taking Georgia, Alabama, Tennessee, Virginia, and Arkansas. Trump ultimately secured the GOP nomination, not over white evangelical voters’ objections, but because of their support. And on Election Day, white evangelicals set a new high water mark in their support for a Republican presidential candidate, backing Trump at a slightly higher level than even President George W. Bush in 2004 (81 percent vs. 78 percent).

Trump’s campaign—with its sweeping promise to “make American great again”—triumphed by converting self-described “values voters” into what I’ve called “nostalgia voters.” Trump’s promise to restore a mythical past golden age—where factory jobs paid the bills and white Protestant churches were the dominant cultural hubs—powerfully tapped evangelical anxieties about an uncertain future.

The 2016 election, in fact, was peculiar because of just how little concrete policy issues mattered. The election, more than in any in recent memory, came down to two vividly contrasting views of America. Donald Trump’s campaign painted a bleak portrait of America’s present, set against a bright, if monochromatic, vision of 1950s America restored. Hillary Clinton’ campaign, by contrast, sought to replace the first African American president with the first female president and embraced the multicultural future of 2050, the year the Census Bureau originally projected the United States would become a majority nonwhite nation. “Make American Great Again” and “Stronger Together,” the two campaigns’ competing slogans, became proxies for an epic battle over the changing face of America.

The gravitational pull of nostalgia among white evangelicals was evident across a wide range of public opinion polling questions. Just a few weeks before the 2016 election, 66 percent of white evangelical Protestants said the growing number of newcomers from other countries threatens traditional American customs and values. Nearly as many favored building a wall along the U.S. border with Mexico (64 percent) and temporarily banning Muslims from other countries from entering the U.S. (62 percent). And 63 percent believed that today discrimination against whites has become as big a problem as discrimination against blacks and other minorities. White evangelicals also stood out on broad questions about cultural change. While Americans overall were nearly evenly divided on whether American culture and way of life have changed for worse (51 percent) or better (48 percent) since the 1950s, white evangelical Protestants were likelier than any other demographic group to say things have changed for the worse since the 1950s (74 percent).

It is perhaps an open question whether Trump’s candidacy represents a true change in evangelicals’ DNA or whether it simply revealed previously hidden traits, but the shift from values to nostalgia voter has undoubtedly transformed their political ethics. The clearest example of evangelical ethics bending to fit the Trump presidency is white evangelicals’ abandonment of their conviction that personal character matters for elected officials. In 2011 and again just ahead of the 2016 election, PRRI asked Americans whether a political leader who committed an immoral act in his or her private life could nonetheless behave ethically and fulfill their duties in their public life. In 2011, consistent with the “values voter” brand and the traditional evangelical emphasis on the importance of personal character, only 30 percent of white evangelical Protestants agreed with this statement. But with Trump at the top of the Republican ticket in 2016, 72 percent of white evangelicals said they believed a candidate could build a kind of moral dike between his private and public life. In a head-spinning reversal, white evangelicals went from being the least likely to the most likely group to agree that a candidate’s personal immorality has no bearing on his performance in public office.

Fears about the present and a desire for a lost past, bound together with partisan attachments, ultimately overwhelmed values voters’ convictions. Rather than standing on principle and letting the chips fall where they may, white evangelicals fully embraced a consequentialist ethics that works backward from predetermined political ends, bending or even discarding core principles as needed to achieve a predetermined outcome. When it came to the 2016 election, the ends were deemed so necessary they justified the means. As he saw the polls trending for Trump in the last days before the election, in no small part because of the support of white evangelicals, Russell Moore was blunt, lamenting that Trump-supporting evangelicals had simply adopted “a political agenda in search of a gospel useful enough to accommodate it.”

White evangelicals have entered a grand bargain with the self-described master dealmaker, with high hopes that this alliance will turn back the clock. And Donald Trump’s installation as the 45th president of the United States may in fact temporarily prop up, by pure exertions of political and legal power, what white Christian Americans perceive they have lost. But these short-term victories will come at an exorbitant price. Like Esau, who exchanged his inheritance for a pot of stew, white evangelicals have traded their distinctive values for fleeting political power. Twenty years from now, there is little chance that 2016 will be celebrated as the revival of White Christian America, no matter how many Christian right leaders are installed in positions of power over the next four years. Rather, this election will mostly likely be remembered as the one in which white evangelicals traded away their integrity and influence in a gambit to resurrect their past.

Meanwhile, the major trends transforming the country continue. If anything, evangelicals’ deal with Trump may accelerate the very changes it was designed to arrest, as a growing number of non-white and non-Christian Americans are repulsed by the increasingly nativist, tribal tenor of both conservative white Christianity and conservative white politics. At the end of the day, white evangelicals’ grand bargain with Trump will be unable to hold back the sheer weight of cultural change, and their descendants will be left with the only real move possible: acceptance.

This article has been excerpted from the new Afterword in the paperback version of Robert P. Jones’ book, The End of White Christian America.

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Investment Returns Will Shrink

My Comments: Putting money to work for the future is something we all try to do. Our expectations vary all over the map. If you use the past to predict the future, you’re probably going to be disappointed.

This is very relevant if we have money sitting somewhere that we plan to use tomorrow to support our standard of living.

If we’ve stopped working for a living, our only recurring income comes from Social Security, pensions, and whatever money we’ve saved. All of which makes it imperative we find a way to manage financial risk going forward.

by Dr. Bill Conerly, August 5, 2017

What will an investment portfolio earn over the long term? That issue is important to individual investors, state pension agencies and corporations offering defined benefit pensions. State pension agencies have been lowering their assumed returns. A decade ago, 8.0 percent was the dominant assumption, with some states higher and some lower. Now the most common assumption is between 7.0 and 7.5 percent. The sub-seven assumption was never used as recently as 2011 but is now embraced by several pension authorities.

What assumption should a family, a government agency or a corporate pension fund use? For a long time, it’s been best to go back to the long-term averages, but the current outlook is less rosy. I personally have revised down the estimate I use in planning the Conerly family’s spending and saving, and I concur with public bodies who do the same. I’m not fully convinced that I’m right; I just think the pain from erring on the low side will be less than the pain of erring on the high side.

The traditional approach is to look at long-run returns, and the book of numbers for that analysis is the SBBI Yearbook covering stocks, bonds, bills and inflation (hence the SBBI name). This research is based on pioneering work done by Roger Ibbotson and Rex Sinquefield.

Since 1926, when their dataset begins, U.S. common stocks have rewarded investors by 10 percent per year, counting capital gains and dividends, before taxes. Corporate bond returns averaged 5.6 percent returns. An investment portfolio split 50 percent in stocks (the Standard and Poor’s 500) and 50 percent in corporate bonds would have earned 8.3 percent per year over 1926-2016. That justifies a long-run expected return around 8.0 percent as was common.

But don’t stop reading yet! Remember two important points. First, past returns are not guaranteed in the future. Second, even if the past points the way to the future, the past includes whole decades with negative returns to stocks, albeit just slightly negative.

On the first point, the structure of the economy has changed substantially since 1925 when the good data begin. Jeremy Siegel in his book, Stocks for the Long Run, shows stock market data back to 1802. He finds a seven percent annual return from 1802 through 1925. This suggests that we cannot take investment returns fixed in stone; they can be higher or lower over long periods. (Siegel’s book is one of my top two picks for the average person making investment decisions. The other is Burton Malkiel’s A Random Walk Down Wall Street.)

Stock market returns have been pretty good recently. Look at the S&P 500 since 2012 (counting capital gains and dividends, before taxes):
2012 +16%
2013 +32%
2014 +14%
2015 +1%
2016 +12%

But high returns can be due to overly optimistic speculators rather than economic fundamentals. We know that economic growth has been below normal in recent years. We also know that interest rates have been well below long-run averages. That suggests – but does not prove – that returns on capital are lower now than in the historic average.

Low returns on capital might trigger a stock market gain in the short run, as lower interest expense makes corporate profitability look better. But in the long run, stock market returns must reflect the returns of investing capital in a business. So if low corporate bond interest rates today reflect low returns on capital, then stock market returns should be low in the future.

The story for low returns on capital now is simple: much of our new production requires very little capital. A steel mill or car factory requires lots of capital. A Google or Facebook requires far less. With less need for capital, the owners of capital will earn lower returns. And the global supply of savings is rising, partly due to aging baby boomers around the world and partly because a larger share of world income is in countries with weak social safety nets. I provided more detail in “Returns on Capital – And Interest Rates – Will Be Low In The Future.”

The second caution mentioned above is the tremendous variability of returns. The long-run average for stocks may be ten percent, but the entire decades of the 1930s and the 2010s had negative returns. An investor ended a ten-year period with fewer dollars than at the beginning. And don’t forget the spectacularly bad years: 1931, -43 percent, and 2008, -37 percent.

The long-run average tells you little about next year’s return. If the next bad decade starts just as you retire, you may feel pretty uncomfortable waiting for the long-run average to return. And if you can’t stomach the occasional bad year, then you’re likely to shift into a low-return investment when the stock market rebounds.

If I have to make a best guess as to how the next 100 years will look, I roll with the long-term average and say that stocks will return about ten percent. But I have arranged my personal affairs so that long-run returns can be much lower and I’ll still be able to eat.

Wall Street is sending huge warning signs for stocks

My Comments: Sooner or later, the penny will drop.

Joe Ciolli \ Jul 30, 2017

To a growing chorus of strategists and investors across Wall Street, the stock market looks like it’s headed for a rude awakening.

Their mounting pessimism comes at a time when US equities are looking healthy, at least on the surface. Major indexes are hovering near record highs they reached this past week, while corporate earnings are growing at a blistering pace.

Yet some market experts think this apparent strength is just masking deeper problems brewing under the surface.

Count Marko Kolanovic, JPMorgan’s global head of quantitative and derivatives strategy, as one of those stressing caution. In a client note on Thursday, he said that record-low volatility should “give pause to equity managers.” Kolanovic even went as far as to compare the strategies that are suppressing price swings to the conditions leading up to the 1987 stock market crash.

“The fact that we had many volatility cycles since 1983, and are now at all-time lows in volatility, indicates that we may be very close to the turning point,” he said.

A sudden move down in US stocks on Thursday — including a notably outsized loss in tech — was widely attributed to Kolanovic’s note, highlighting just how seriously many investors have started taking such warnings.

His consternation extends into the hedge fund world, where investment managers are also crying foul about low volatility to anyone that will listen.

Baupost Group, a $30 billion fund, recently highlighted the lack of price swings as a harbinger of pain to come, calling it a possible “accelerant for the next financial crisis.” Meanwhile, Highfields Capital Management, which oversees $13 billion, said this past week that low volatility is giving people the false impression that the market is risk-free.

Going beyond the much-maligned low-volatility environment, Bank of America Merrill Lynch has its own reasons for expecting an upcoming rough patch in stocks — one it sees coming sometime this autumn.

Michael Hartnett, the chief investment strategist of BAML Global Research, points to how the S&P 500 has continued climbing to new highs, even as the size of the Federal Reserve’s balance sheet has stayed relatively unchanged. He says this divergence is a “classic euphoria signal.” Such overexuberance has historically been a sign that investment sentiment is overextended.

Legendary investor Byron Wien, who currently serves as vice chairman of Blackstone’s private wealth solutions group, agrees with BAML. He sees the stock market outpacing the Fed’s balance sheet as problematic and called the development “disturbing” in a July 26 client note.

BAML also points to record low private client cash levels as a sign that the stock market may be close to maxing out. With investors looking fully invested, there’s limited dry powder for them to put to work in the market, should they feel inclined to add to positions.

And, perhaps most importantly to BAML’s call for a market top this autumn, a proprietary indicator maintained by the firm sits on the brink of reaching a sell signal. It’s put together a list of things that need to happen for the market to peak in August:
• The dollar index falls to 90, coinciding with “unambiguous” US labor/consumer weakness (non-farm payrolls lower than 100,000) and a flatter yield curve
• The end of high-yield leadership, which “should be an early warning system”
• Fatigue in equity growth leadership, in areas like the Nasdaq Internet Index, emerging markets Internet, and semiconductors

But, amid the growing pessimism, there are still strategists on Wall Street who see the S&P 500 hanging in there, at least through the end of 2017. A survey of 20 chief equity strategists conducted by Bloomberg shows an average year-end forecast of 2,439, basically unchanged from Friday’s close.

So while it’s anyone’s guess what will transpire in the coming months, it’s good to at least be aware of the cracks forming in the market’s foundation. And don’t say you weren’t warned.

How do I safely invest my retirement savings for growth?

My Comments: Financial illiteracy is a huge problem. But many people have no idea it applies to them.

The other day I was trying to explain something to a widow in her 70’s and it was like talking to my six year old grandson.

People should be exposed to the markets. But they need to shift some of the risk associated with the stock and bond markets to an insurance company. Over the next 10 – 20 years they’ll have a better overall rate of return without the headaches. There is a way to remain invested and not be exposed to all the risk. But you have to be careful about the fees. Send me your email (see Contact Info above) and I’ll explain further.

by Walter Updegrave/May 30, 2017

I have a retired friend who knows he needs growth to ensure his nest egg will last throughout retirement, but at the same time is nervous about the investing in the stock market. Any advice for how he should invest?–D.F.

First, let me say that I don’t blame you (I mean your friend) for being skittish. Even though stock prices have more than tripled after bottoming out in the wake of the financial crisis a little more than eight years ago and now stand at or near record highs, there’s that nagging concern in the back of many investors’ minds that the market could suddenly reverse course and we could be looking at another major selloff and a prolonged slump.

And, of course, at some point that will happen, as it has many times before. We just don’t know when or what will trigger the downturn. So the question is how do we invest our nest egg so we can take advantage of stocks’ potential for long-term growth without leaving ourselves too vulnerable to devastating setbacks that could jeopardize our retirement security?

The answer comes down to balance. But not just balance in an investing sense, or creating an investing strategy that reflects an acceptable tradeoff between risk and reward. I’m talking about balance in an emotional sense too, achieving a level of equanimity that helps us keep our composure when the markets are in turmoil, so we don’t do something we’ll later regret, like selling stocks in a panic at depressed prices.

The first step toward achieving investing balance is to build a portfolio of stocks and bonds that can generate acceptable returns while also providing reasonable downside protection. For help in creating such a stocks-bonds mix, you can go to Vanguard’s free risk tolerance-asset allocation tool.

The tool will also give you a sense of how such a blend of stocks and bonds has performed in the past, and you can also see how many years the various portfolios have suffered a loss and how each has performed on average over many decades.

You shouldn’t think of this as any sort of guarantee of how a given combination of stocks and bonds will fare in the future. If anything, many pros believe average returns going ahead for both stocks and bonds will be considerably lower than in the past. But at least you’ll have a good idea of how different mixes have behaved under a variety of market conditions.

In your zeal to protect yourself against setbacks, however, you don’t want to end up with a mix that’s so wimpy that you run a high risk of running through your nest egg too soon. So to get a sense of whether your recommended mix of stocks and bonds will be able to support the type of spending you envision during a retirement that could very well last 30 or more years, I suggest you also go to this retirement income calculator.

(The tool assumes you’ll live to age 95, which I think is a reasonable assumption for planning purposes. But if you’d like to see how long you might be around based on your age and health status, you can check out the Actuaries Longevity Illustrator.)

The calculator will estimate the chances that you’ll be able to maintain your planned level of withdrawals from your nest egg. If that probability is lower than you’d like — as a general rule, I’d say you’d like to see an estimated success rate of 80% or more, give or take — then you can re-run the numbers with different asset mixes and different withdrawal rates.

In general, though, as long as you keep your initial withdrawal rate within a range of 3% to 4% or so, you should be able to have decent assurance that your nest egg will support you at least 30 years. You can go with a higher withdrawal rate, but you’ll find that the chances of your money lasting throughout a long retirement start to drop off pretty quickly as you push your withdrawal rate above that range.

Once you’ve settled on an asset mix and withdrawal rate, you can turn your attention to emotional balance. I don’t know of a tool that can help with this aspect of investing and planning. Rather, the idea is to find ways to stay cool when the markets are (or seem to be) crumbling around you, and to avoid giving in to the impulse to take action when every fiber of your being is screaming at you to do something, anything!

One way you might maintain your composure when most investors are all shook up is to remind yourself that not all market downturns turn into full-fledged routs. You could even take a few minutes to review instances in recent years (Brexit, the Greek debt crisis, fears of a slowdown in China’s growth rate) when many investors were convinced a market drop would lead to a major selloff but stocks recovered. If nothing else, this exercise could reinforce the notion that it’s foolish to try to outguess the markets.
And even if things get truly ugly, you might take a few minutes to recall the process you went through to arrive at your portfolio and remind yourself that you factored the likelihood of a significant setback into your decision-making when you settled on your asset mix. Indeed, the whole point of the exercise was to create a portfolio that you could stick with regardless of what’s going on in the markets and that, aside from occasional rebalancing, you wouldn’t have to re-jigger.

And while I wouldn’t go so far as to suggest you don’t keep track of economic and financial news, you certainly don’t want to follow it obsessively, especially if watching every tick of the market’s downward trajectory gets you so rattled that you’ll eventually cave in to the urge to abandon your long-term strategy.

That’s not to say you can never make a move. There may be times when you should. If, for example, it becomes apparent that you overestimated your appetite for risk when setting your stocks-bonds mix, then you need to re-assess and do some fine-tuning. But if you do make a move, you should do it calmly, rationally and as part of a well-thought-out plan, not in response to the latest dip in the market or on the basis of some pundit’s prediction of coming Armageddon.

The Business Case for Fighting Growing Inequality

My Comments: I consider income inequality the greatest existential threat to our democracy. It manifests itself as a shrinking middle class in these United States.

It has the potential to erode what we think of as rational and peaceful co-existence among nations globally. It’s what continues to drive the tensions and conflict in the Middle East where income inequality overwhelms the average young person and their hopes for the future.

This article explains why it’s also bad for business and how business would be well served to address this growing problem. It serves no purpose to build a business empire if what you sell is not affordable.

Guy Miller, Zurich Insurance, June 30, 2017

Despite the current recovery, the global economic outlook remains beset by structural issues as the fallout of the financial crisis continues to be felt a decade later. As policymakers search for solutions, social unrest and the resurgence in populism have focused attention on how economic gains are distributed. International institutions are urging governments to target more inclusive and sustainable growth.

Global concern about economic risks is underlined by the interconnections with other risks: unemployment increases pressure on state social protection systems, for example, while inequality feeds political polarization. Many economic problems undermine social cohesion. In doing so, they also contribute to conditions that are bad for future economic prospects. Business leaders should recognise that these are issues for them, as well as for politicians and economists. Spending power is squeezed, while wasted potential dampens productivity and innovation.

The UN Sustainable Development Goals include “decent work for all”. But the latest Economic Outlook of the Organisation for Economic Cooperation and Development (OECD) shows this remains a distant ambition. While global employment indicators are improving, productivity and wage growth “remain subdued”. The report upgrades the global growth forecast for 2017 from 3.3 percent to 3.5 percent but attributes this to modest cyclical expansion.

In January, the International Labour Organization’s (ILO) World Employment and Social Outlook forecast that 3.4 million more people would find themselves unemployed this year (a rise from 5.7 percent to 5.8 percent). With the rapid global growth in people looking for work, the number in vulnerable jobs is expected to rise by 11 million. Policymakers clearly have their work cut out. But as the private sector looks to mitigate economic risks, it should also play its part in creating inclusive 21st Century growth models.

Profit Sharing and Productivity

According to the OECD, the gap between rich and poor in OECD countries is the highest for 30 years and continues to grow. Changing this trend will require more equitable profit sharing. The OECD says labor’s share of income declined from 66 percent to under 62 percent in advanced economies between 1990 and 2009.

Guy Miller, Chief Market Strategist & Head of Macroeconomics, Zurich Insurance Group, said today’s high capital share may be linked to underinvestment in training and measures to improve productivity. Governments could use taxation initiatives or partnerships to encourage private investment in these areas that would also benefit the macro economy, he added.

The slowdown in productivity growth has spread to emerging markets after affecting 90 percent of OECD countries this century. Hopes that the Fourth Industrial Revolution will raise productivity have not been realised so far. Instead, technological change and the growing capture of rents by frontier firms are causing some regions in developed nations to be left behind. Christian Kastrop, Director of the Policy Studies Branch at the OECD Economics Department, said while automation will cause job losses, it could also create new jobs. “Reskilling or upskilling must become normal, so people feel included even if they lose their jobs,” he said. “Governments must take action with concrete interaction with civil society, and fostering good working relationships between business and trade unions is imperative.”

The Labor Force Learning Imperative

As growth is increasingly driven by automation and the knowledge economy, workforces will need to become more dynamic and flexible. Automation is now a threat not only to low-skilled workers but also to “mid-tier and even higher-tiered knowledge workers”, said Mr Miller. Economies need a new emphasis on life-long learning if they are to adjust.

Automation’s potential impact on unemployment, along with structural changes like the rise of the sharing economy, should focus policymakers’ minds. Employers must also recognise how funding training is likely to reap rewards in time. “A sense of learning how to learn must be more deeply embedded in our culture and throughout the career cycle,” said Steven Tobin, Team Leader of the ILO’s Labour Market Trends and Policy Evaluation Unit.

Skills mismatch is already a persistent problem in many countries. When workers lack the skills the market demands, it is a “lose-lose-lose” situation, said Steven Kapsos, Head of the ILO’s Data Production and Analysis Unit. “Workers are less productive, firms less profitable, and overall economic growth suffers,” he said. Policies that promote economic activity among women and older workers would stimulate growth in countries with ageing populations, he argued.

Closer collaboration between the public and private sectors on training and active labor market programs is vital, said Mr Tobin. “Far too often, public sector training and skills programs have been designed without consulting social partners, notably the private sector.”

The Cost of ‘Quarterly Capitalism’

Daryl Brewster is CEO of U.S.-based CECP, a CEO-led coalition of more than 200 major companies, founded “to create a better world through business”. Its members represent USD 7 trillion in revenues and USD 18.6 billion in societal investment. But Mr Brewster said 86 percent of the coalition’s CEOs feel they are too focused on what he calls “quarterly capitalism”. McKinsey Global Institute’s Corporate Horizon Index shows that companies with long-term approaches outperform peers. And CECP has launched its own initiative to enable CEOs to present long-term plans to long-term investors.

“We think it could help change the narrative from a slash and burn approach to one of building sustainable societies,” said Mr Brewster. “By taking a longer term horizon with regular updates, companies will attract better employees, enjoy more stable societal situations, and have more customers who can afford their products.”

Balancing Fiscal and Monetary Policy

A low interest rate, low yield environment has become the norm for many economies that have become reliant on central banks for economic stimulus. But mixed results have led to an increasing number of dissenting voices. The ILO argues that coordinated fiscal stimulus could “jump-start” the global economy. In doing so, it could cut unemployment and raise investment demand.

Zurich’s Mr Miller said monetary policy has disproportionately favoured the asset rich. Greater efforts are needed to show where fiscal spending is most likely to deliver high multiplier effects and long-term impact, he added. “It‘s important that when the next downturn emerges, a combination of both fiscal and monetary tools are used, ideally in a coordinated manner across regions,” Mr Miller said. He also suggested that “temporary fiscal transfers between debtor and creditor nations” should be considered in the Eurozone. Mr Kastrop said the Eurozone is an exception to the need to end reliance on monetary policy, since a change might favor Germany over weaker nations.

An Era of Equitable Growth?

The global economy may be experiencing a cyclical upturn. But the OECD says it is not “good enough to sustainably improve citizens’ well-being”. Achieving that will require concerted actions by policymakers, while Mr Brewster is also clear about the role business can play.

He said the recent socio-political climate should be a “wake-up call” for business, adding “Having more of the world participating in the economy rather than fighting against it is in companies’ best interests.”

This is true because it is often impossible to separate economic risks from social and political risks. If people feel the economy no longer offers them a fair chance, these feelings will soon come to the surface in other areas. Getting closer to the UN goal of decent work for all would surely lower the rising risk of political polarization. It would also favour international cooperation over a return to protectionism.

What is at stake goes far beyond stimulating short-term growth or meeting the next performance targets. The current recovery, combined with changes in corporate culture, offer a window of opportunity for reforms that could enable an era of more equitable growth. Both policymakers and business leaders must recognise that they have a clear interest in creating stronger economies for all.

Key takeaways

• While automation is nothing new, the pace and breadth of current change is striking. It is no longer just the low-skilled that are at risk from automation, but also many mid-tier and even high-tiered knowledge workers.

• Having a flexible workforce and one that is trained in the latest thinking and techniques can create a dynamic and proactive culture that is more suited to a changing competitive landscape. This means investing in people as well as in capital.

• Life-long learning will be vital in the digital age and the public sector must therefore consult more closely with the private sector, especially in relation to the skills companies want.

• Businesses that target long-term performance and help drive inclusive economic growth can boost their bottom line as well as social cohesion.

Everything Looks Like A Bubble

My Comments: The article below comes courtesy of a writer by the name of General Expert.

He/she/they write extensively and appear on an investment news feed I follow called Seeking Alpha. You’ll have to draw your own conclusions about the message but I, for one, find it interesting and informative.

Here’s a link to the news feed: https://seekingalpha.com/author/general-expert.xml

Jun. 5, 2017

Summary

Calling the top is in fashion as the market makes new highs.

I see nothing in the market that is indicating a bubble.

Consumers are taking on more debt, but debt is essential for growth.

Consumers and corporations have no problems servicing their debts.

I see no reason why the Fed can’t keep interest rates low if there is a need.

Everything looks like a bubble… if you are a hedge fund manager that wants to protect your reputation or if you are a fearmonger that is just relishes schadenfreude on the off chance that everyone suffers.

I am never a mindless optimist, but I believe that we are currently experiencing one of the best economic environments since the financial crisis. Major indices such as the S&P 500 (NYSEARCA:SPY) and the Dow (NYSEARCA:DIA) are making new highs every week, but so what?

I believe that this is a testament to the economic strength of the U.S. rather than a reflection of the irrational exuberance of market participants. Today I would like to address two of the major arguments that I see being repeated again and again by bears, and why they are of no concern.

Too Much Debt

Consumers have been taking on more debt as the economy grew:
But debt isn’t bad. In fact, I would go on to argue that debt is great. Debt is what fuels economic growth. Part of the reason why recovering from a financial crisis is so difficult is because credit market freezes up and no one can take on debt to spend or to invest. But are we taking on too much debt? I believe that the answer is a firm “no.” As I mentioned in my previous article, consumers’ ability to service their debts is nowhere near pre-crisis levels.

Of course, a bear would say that this is all a ponzi scheme perpetuated by the Fed, which is keeping interest rates artificially low.

The Fed

The Fed’s dual mandate is simple enough: lower unemployment and stabilize prices. If these two objectives are achieved, it is likely that the economy will do well. The Fed took drastic measures (i.e. near zero interest rates) to stimulate spending during the financial crisis, and because interest rates are still low right now, bears are saying that the Fed is prolonging the inevitable collapse of the economy as the Fed can’t print money forever (both through QE and low interest rates to encourage lending). But why? I see absolutely no reason why the Fed cannot simply keep interest rates low for the foreseeable future if the economy is truly dependent on low interest rates.

What is a bubble? A bubble is something that is unsustainable. I would really like to be educated as to why the current regime could collapse at any time. Low interest rates have not caused rampant inflation contrary to the opinion of many experts, nor has debt spiraled out of control, neither at the consumer level (see previous graph) nor at the corporate level (below).

As we can see, interest coverage has risen far above pre-crisis levels, meaning our corporations have become less susceptible to shocks than before.

If the Fed can keep rates low forever then why bother with rate hikes and why should it unwind its balance sheet? While the Fed could keep interest rates low forever, it needs to proactively prevent the formation of bubbles. Because consumer confidence has risen since the election, the logical thing to do would be to offset this increase by enforcing a tighter monetary policy. The expectation of higher interest rates should allow corporations and consumers to make more level headed decisions. In my opinion this does slow down growth, but higher interest rates should reduce the volatility of the business cycle. Note that there is no reason to believe that the current level of spending is excessive, as evidenced by the low debt servicing ratio graph shown earlier.

Conclusion

I believe that the economy is in very good shape right now and any talk of a bubble is ludicrous. Neither corporations nor consumers are having any trouble servicing their debts. The Fed’s act of “printing money” is not harmful and I fail to see why low interest rates have to go away. While the Fed is raising rates, this is being done with the intention of offsetting rising consumer confidence. Even though higher rates may hamper growth, the Fed must make the safe choice in order to prevent the formation of an actual bubble, as opposed to the fictitious one that is often discussed in the media today.

Social Security “Facts” Or Myths

My Comments: It’s clear from the questions I get that people starting the transition to ‘retirement’ are easily confused by Social Security. They know it’s there; they’ve been paying into it for years. But there are enough variables to paralyze you if you let them.

Todd Campbell \ Jun 26, 2017

There’s a lot of misinformation out there about Social Security that could lead people to believe things about this valuable program that simply aren’t true. Can you spot fact from fiction? Here are seven statements about the program that don’t pass muster.

1. Members of Congress don’t pay into Social Security

This isn’t true anymore. Beginning in 1984, all the members of Congress (and the president and vice president too) pay into the Social Security system. Prior to 1984, most federal government workers were covered by an entirely different program, called the Civil Service Retirement System (CSRS). Therefore, the only federal employees who aren’t paying into Social Security are those who were employed prior to 1984 and who didn’t switch to Social Security from CSRS.

2. Life expectancy was less than 65 when Social Security was enacted

Yes, higher infant mortality rates meant life expectancy from birth was less than 65, but the majority of people who reached adulthood and were working and paying into the system lived to 65 and beyond. In fact, those who made it to age 65 could expect to live an additional 13 years.

3. Social Security numbers include a code indicating a person’s race

Nope. That’s not true. At one point, though, the numbers did show what region of the country a person lived in at the time they filed for their number. Today, however, the numbers are random.

4. The government has raided the trust fund

The federal government does not take money from Social Security to pay general operating expenses. Payroll tax revenue has gone into Social Security’s trust fund ever since the fund was created in 1939, and this trust fund is separate from the country’s general funds.

However, the trust fund does invest in government-backed securities, including special obligation notes, that pay interest. So, in this way, it does provide funding for the federal government, but it does so no differently than an individual who buys U.S. Treasury bonds as an investment.

5. I can’t collect on my ex’s Social Security

Your ex might not want this to be true, but former spouses can collect on their ex-spouse’s Social Security record, as long as certain conditions are met. And it won’t reduce an ex-spouse’s payment.

In order for this to happen, a marriage has to have lasted at least 10 years, and the individual has to be unmarried. An ex-spouse can collect up to 50% of the former spouse’s full retirement benefit; however, that amount can’t exceed what the person would otherwise receive based on their own work record. If their own payment would be bigger, then that’s the payment they’d receive.

6. Social Security is broke

No, it’s not broke, but there are financial question marks that need to be addressed.

Social Security is financed by payroll taxes on current workers, and the number of retiring baby boomers means there are more recipients and fewer workers paying taxes. As a result, payroll tax revenue hasn’t covered the program’s expenses since 2010, and that’s forcing Social Security to tap its trust fund to make up the difference.

If Congress doesn’t make some changes beforehand, Social Security’s trustees estimate that the trust fund will no longer be able to close the funding gap beginning in 2034. At that point, Social Security payments will have to be reduced by 25% across the board to match whatever money comes in from payroll taxes.

7. Social Security guarantees financial security in retirement

Not necessarily. Social Security is designed to replace about 40% of pre-retirement income, and increasingly, people are entering retirement with bigger mortgages and more student loan debt, and that’s straining their budgets. Financial security in retirement is also under pressure because fewer employers are offering pensions, and workers are failing to save enough money in retirement accounts to pick up the slack. About half of baby boomers have less than $100,000 in retirement accounts. That’s unlikely to be enough to guarantee a worry-free retirement — especially since the average retired worker is only collecting $16,320 in Social Security income this year.