A soaring stock market means little

The Thinker by Rodin

Donald Trump is hoping to win reelection based on the soaring stock market.

Good luck with that. A soaring stock market doesn’t hurt, but these days a soaring stock market amounts to more evidence that more income is being redistributed toward the wealthy. Why is that? It’s because you have to be relatively wealthy to own stocks in the first place.

To the extent most of us own stocks, it’s probably through mutual funds we own as part of a 401-K and/or IRA. We do this because these investments are typically tax-advantaged. Unless you choose a Roth IRA, you defer taxes on the gains of these funds until retirement, plus these investments are typically pre-tax dollars, meaning you subtract the cost of buying these funds from your adjusted gross income, which means you pay less tax.

The bottom line, according to a 2016 study by NYU economist Edward N. Wolff is that the richest 10% of households control 84% of the total value of stocks. About half of U.S household own some stocks, generally through retirement funds. The other half doesn’t own any stocks.

When markets rise, wealth rises proportionately toward those who own them. Since about half of households don’t own any stocks, there is no stock appreciation to reap, so the rich simply get richer, increasing income inequality.

Our household is definitely not in the top 10% but we do hold onto a lot of retirement assets, principally in bonds and mutual funds. Markets are up about twenty percent this year, but the rise is not as big as it looks. As you may recall, in December 2018 markets gave up their gains for the year, effectively making 2018 a wash on the stock market. Over two years then stocks have gained about ten percent annually, which is definitely good but by no means amazing. Stock market gains during Trump’s tenure so far do not equal Obama’s. Of course, in Obama’s case there was no way for them to go but up, as stocks were severely underpriced after the Great Recession.

People who don’t own stocks mostly don’t own them because they can’t afford to own them. Their money is going toward more important priorities: keeping a roof over their head and food, most likely. Rental costs generally exceed inflation, and food usually does as well. So they are being stretched more. Lower income people aren’t stupid. If they could afford life’s basic necessities, they probably would be investing in the stock markets. It’s simply not an option for them.

As we learned, investing takes perseverance. If you want to fully reap the market’s gains, you have to keep at it persistently, relentlessly, in good times and bad. As a federal employee, I rarely missed a paycheck. When I did, it was because the government was shut down. I never lost money when the government was shut down. Plus, I earned enough money to allow us to invest.

And that’s pretty much how we built wealth: through steady paychecks and doggedness. As I noted, we profited from the Great Recession. In retrospect, this was the biggest factor between retiring okay and retiring comfortably. We bought a lot of mutual funds when they were priced artificially low and kept them while market values increased. I’ve done the math. Were it not for the Great Recession, I expect that our investment portfolio would now be worth about 25% less than it is.

While many of my friends have and continue to struggle with this economy, today’s economy feels to me like an unearned gift. While hardly in the top 1%, I sometimes feel like we should pay a wealth tax too. A lot of our gains seem unnatural and surreal.

This increase in wealth is having me rethink how I want to use it. It still doesn’t mean I will buy a bigger house, a fancier car or a second home somewhere. It’s not quite that large. But as someone nearly age 63 with hopefully twenty-five more good years ahead of him, it does expand the possibilities.

For example, a year ago we were visiting Ecuador and the Galapagos. It was not a cheap vacation. The two weeks cost us at least $15,000, probably closer to $20,000 when you add in all the airfare and extras. It was amazing and incredible but we probably wouldn’t have done it without all this unexpected extra wealth. And it didn’t impact our bottom line at all. It seemed surreal.

Consequently, we are setting our sites further. We could have afforded two Hawaiian vacations for what we spent in Ecuador and the Galapagos. Now we are thinking: why not sail the South Seas? I hesitate to be away from home for too long, as we have two cats. But when they are gone, why not take a round-the-world cruise? Why not a month long train tour around Australia?

But if I were one of those in the fifty percent of households without any stocks, I’d feel resentful. They might want to visit the Galapagos too, or at least Hawaii, but it’s probably not an option. I would feel, rightly, like my pocket had been picked. That’s because it has. Their productivity has been swept up and placed in my pocket instead, but much more disproportionately into the pockets of the very wealthy who can’t begin to spend all of this new wealth. The difference is that I think I can use it to make the rest of my life much more meaningful. Rest assured a fair amount of it is going to help others too, roughly $400 a month or so.

To change this, we need that political revolution that Bernie Sanders keeps talking about. This comfortable retiree will be voting to bring it about.

Trump is bumbling his way toward getting us out of the Middle East

The Thinker by Rodin

Most of us were grinding teeth this week. After our country assassinated a general in Iran’s Revolutionary Guard, we waited for the inevitable military response from Iran.

Shortly after Iran’s bombs hit two bases in Iraq where our soldiers were stationed, my Facebook page lit up with friends saying we were beginning war with Iran, or maybe even starting World War III.

In general, no one plans to start a world war. Certainly no one expected one after Austrian Archduke Franz Ferdinand and his wife were assassinated in 1914. Our political assassination of General Qasem Soleimani was more or less its equivalent.

We may still get one, but I noted on Facebook that Trump really listens to Fox News, and Tucker Carlson was against going to war with Iran. So ironically, we may have Tucker Carlson to thank for this not escalating this further, at least for the moment. But also, Iran showed more sanity in its response than we did when we killed its general, deliberately targeting its missiles at places on these bases away from American soldiers.

The strange thing is, the more saber rattling we do, the more effectively we push ourselves out of the Middle East. The Iraqi government’s response to our assassination on its soil is to send us packing. At the moment, the Trump administration is playing tone deaf. In reality, our 2003 war in Iraq has brought nothing but misery for the Iraqi people. As bad as Saddam Hussein was, they’d have been much better off had he stayed in power. Most likely most the 200,000 or so Iraqis that subsequently died would still be around, and their infrastructure wouldn’t have collapsed. Iran’s Revolutionary Guard probably would not be in the country. ISIL probably would not have arisen because there would have been no power vacuum. And of course thousands of our soldiers would not have died and we could have spent trillions of dollars on something else, probably more tax cuts for the rich.

Effectively, we made it easier for Iran’s paramilitary forces, not to mention its Revolutionary Guard (an official part of Iran’s government), to extend their influences west and south. This caused even more conflict, principally in Syria and Yemen, but also in places like Lebanon. For the real war in the Middle East is Sunni vs. Shia. Thanks to us, it looks like the Shia now largely control Iraq.

In a way this is good. Those who attacked us on 9/11 were not Shia, but Sunni-aligned. Ironically, the very nation that supplied almost all of the terrorists that caused 9/11 (Saudi Arabia) is now the getting more U.S troops so they can create more future Osama bin Ladens. So, effectively, Iran is winning a lot of ground in the Middle East, largely thanks to our country’s ineptness, and people who practice Shia Islam are occupying and controlling more territory.

None of this is good for peace or for the millions of refugees these conflicts have caused. And arguably it was counterproductive for Osama bin Laden, al Qaeda and forces like ISIL related to al Qaeda. A lot of the success for driving out ISIL can be attributed to Iran-leaning paramilitary forces in Iraq and Syria. At times, our troops have worked somewhat awkwardly with these forces. At times, we have even working with General Soleimani, somewhat indirectly, to accomplish the same aims.

If Trump’s secret desire is to disengage us from the Middle East, he may be doing just that in his stupid and inadvertent way. If Iraq succeeds in forcing us to leave its country, at least they won’t have us to cause more death and destruction. Iran’s Revolutionary Guard has proven quite effective at getting rid of ISIL. An Iran-dominated Iraqi government with the USA out of there may give Iraq something close to the peace it had before we invaded, minus the prosperity and liberality its citizens often enjoyed.

Withdrawing our modest forces from Syria is doing the same thing: making Syria safe for continued Shia domination. And without an actual war with Iran, which Trump seems now to want to avoid, the net effect of all of this is to extend Shia influence across the Middle East. It’s likely though that none of this had happened had not a headstrong George W. Bush plunged us into a war in Iraq, and our even more inept president Donald J. Trump had not bungled his way through the unbelievable complexities of the politics of the region.

All this of course is not so good if you care about restraining Russia’s sphere of influence. Trump’s actions seem all about letting Russia do just this. None of this brings more freedom and democracy to the people of the Middle East; in fact is does just the opposite. But if you truly want to make the United States more isolationist, Trump seems to be bungling his way toward accomplishing just this, while making his supporters think he is doing just the opposite.

And it will be a lot easier to be isolationist when increasingly the world community see us as crazy and radical as our supposed enemies. We’re not bringing freedom and democracy. We’re doing just the opposite instead. Reagan saw our country as the shining city on the hill. Trump sees our nation as a deeply isolationist one where only white people retain privilege and where we let the rest of the world fend for itself.

Trump is making our country an outlaw country like Iran, one increasingly not even subject to rule of law. Those looking for countries with real freedom and democracy best look elsewhere.

It’s likely to be a crazy 2020

The Thinker by Rodin

In case you haven’t noticed it, were in the midst of Future Shock.

Fifty years ago, Alvin Toffler wrote the book of the same name warning us that a cavalcade of forces were coming together that were likely to make our future a confusing and frightening mess. Future shock is basically the effects if too much change coming at society too quickly.

It’s painfully clear from the last few decades that we are winging this future shock thing. No one has really figured out how to deal with what we’ve unleashed, but there it all is in all its chaos and messiness, so we have no choice but to figure out how best to deal with it somehow. In our new decade, it’s likelier to get worse and get messier.

You might say the Trump Administration started the year off with a bang, by killing Iran’s special forces commander Qasem Soleimani in Iraq with a drone strike near Baghdad’s airport. Presumably this was in retaliation for the attack on our embassy in Baghdad’s Green Zone, which seems to have been helped by Iranian forces in Iraq.

As usual, Trump didn’t bother to inform Congress of his planned actions, even though the law requires it. If Trump were smart enough to be diabolical, one might envision a strategy behind this. Based on what the polls tell us so far, he’s unlikely to survive reelection, even with all the voter suppression and election hijinks going on. So wars can be convenient if you can rally a nation behind them.

Some of us with longer memories remember how this all began: when President Bush unwisely invaded Iraq in 2003. Hundreds of thousands of lives and about a trillion dollars later, our latest headstrong president seems to be willing to follow the script that got Bush reelected in 2004. Without that horrendously bad and unnecessary war, yesterday’s killing probably would never have happened. It’s not even clear if Iran would still be our enemy.

So expect a lot more tit-for-tat now, but whether it can be deescalated at some point is problematic. A lot of Americans really have no idea why we should hate Iran anyhow. There are plenty of reasons why Iranians should hate us. We overturned its system of government twice and led many embargoes and other actions against the country over the decades. It’s true that to some extent they sponsor international terrorism, but plenty of other countries do too and anyhow so far they haven’t directed it at us. Iran is not nearly as evil as North Korea, and yet Trump told us he “fell in love” with its dictator Kim Jong Un. In general, Trump seems to love dictators. But perhaps he doesn’t like Iran because it’s not dictatorial enough. They do have a real legislature, after all, although its decisions can be overruled by their Supreme Leader Ali Khamenei. Their legislature may be more fairly representative than ours.

Anyhow, this killing is not a good omen, so we may look back on 2019 with some nostalgia. Our 2020 election, no matter how you look at it, will be bad. If Trump wins reelection, that obviously will be bad: he’ll have four years to govern with impunity because Congress will refuse to check him. If he loses, Democrats win, and Democrats take Congress, Trump probably will say the election was rigged against him, will refuse to concede, barricade himself in the White House and bring on a constitutional crisis that way. His supporters are already threatening civil war if he is impeached and removed – how democratic of them! But Trump has never been about democracy, he’s about authoritarianism. In short, November 3 is likely to be the most momentous day in our history since the real Civil War began, and might spark a new one. Happy New Year!

Meanwhile, we’ll probably look back on Trump’s 2017-2019 presidency as the good old days. His tweets get more numerous, threatening and blacker every day. His lying increases at exponential levels. Trump is scared of accountability, so he will pull all stops to get reelected and it’s likely his party will aid and abet him. We probably can’t count on the courts to help us, certainly not after Citizens United. Trump’s inevitable Senate trial will result in a partisan exoneration which of course he will tout endlessly.

I can take some schadenfreude perhaps in Trump’s misery, except that we cannot escape his misery: he inflicts it on everyone. My hope, such as it is, is that Trump’s ungluing conveniently coincides with an illness that makes it impossible for him to govern. I am absolutely convinced that he won’t live to complete a second term, and his obvious physical and mental issues may not allow him to complete a campaign. If he is nominated by the Republicans and he dies or becomes incapacitated, could Republicans still nominate anyone in time to field in an election? Laws will vary by state but that in itself could become a huge constitutional crisis.

We know that Trump is quite ill. The mental illness should be obvious, but he is also physically ill. Trump has heart disease, which means he has a moderate risk of a heart attack in the next three to 5 years. His mother and sister died of Huntington’s Disease, whose earliest symptoms are often subtle problems with mood or mental abilities. He’s likely got dementia. His father died from the same thing that killed my mother: Progressive Supranuclear Palsy, but also frontotemporal dementia. His recent “lab work” at Walter Reed coincided with him taking the back stairs out of Air Force One and having a White House physician accompany him, not just on trips, but in the presidential limousine.

So buckle up, mates. 2020 is going to be crazy. Let’s just hope that 2021 will be less so.