Thoughts @ Large: 73
Posted on February 1, 2021 by CHC   ᐃ ᐁ

•  Say you have a couple of years of extraordinary medical expenses, enough to surpass the 7.5% income threshold that lets you deduct some of them on your U.S. income tax return.  Then the next year or two, your medical expenses are still high, but not quite high enough to meet the deductibility threshold.  As a taxpayer, you can’t help but feel a bit disentitled at that point, even though you should be thinking, thank goodness I didn’t have as many medical expenses.

•  Lest you feel too sorry for yourself, consider: our friends in Great Britain can’t deduct any medical expenses from their income tax returns.  Because they have none to deduct.

•  Although this seems to come naturally to every dog-walker on the planet, I shouldn’t have to befriend your dog in order to make friends with you.  (That goes double for your cats.)  We’re human beings.  We evolved larynxes and language.  We shouldn’t have to rely on voiceless four-legged intermediaries to help us strike up conversations.

•  My spouse thinks our country needs a Robert Kennedy and that Biden is “too ho-hum.”  While I wouldn’t argue, I say we liberals can’t afford to eat our own at this point.  Biden did exactly what we needed him to do, which was to get Trump out of office.  That alone will satisfy me for a lifetime.  I cried with joy watching Trump’s plane take off for Florida.

•  I enjoy the satirist-commenter Bill Maher.  I like his observations and the way he crafts his jokes, even if his tone often misses my mark.  (Too many sex/scatological references — I don’t do that world.)  Thing is, whenever I mention Bill Maher, I always feel like I need to add a disclaimer about not agreeing with everything he says.  Probably because he once hosted a show called “Politically Incorrect” and is known to depart from the liberal line.  Nonetheless, Maher did an excellent piece the other night on how U.S. citizens’ lives are really improved — not by mobs wearing Guy Fawkes masks and wielding spray paint but by dedicated people who spend thousands of hours working on and within the system.  This totally-unexpected display of patriotism on his show almost brought me to tears.

•  My spouse bought us a ticket for the $730 million Powerball Lottery, but it was won by someone in Maryland.  That’s OK.  Swearing in two new Democratic U.S. Senators from Georgia and having a Democratic voting majority in the Senate feels like I already won.

•  When this song by Daft Punk (remember it? remember them?) was played on the radio way back when, I thought sure (and I’m not alone) that its title was “Mexican Monkey” and wondered what the hell that was all about.

•  It’s February.  Can you believe it?  A year ago at this time, Trump was being impeached.  No one was wearing masks.  The nation was divided.  Punxsutawney Phil did not see his shadow, signaling an early Spring.  450,000 U.S. citizens had not died yet.

•  Headwear as signifiers of good, evil and authority.  Compare and contrast:

People with headgear, representing good, evil and other attributes

•  Not to embarrass my spouse (I would not dare do that, with Valentine’s Day coming up and all) but I appreciate her more every day.  We have been getting along better than ever,  even in these confined quarters.  For my part, I have been trying to be more aware of when I’m being a pill so I can stop being so.  For her part, as far as I know, she hasn’t had to be anything other than who she always is and d0 what she always does.  What hasn’t killed us has made us lovers.

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High (and Low) Finance 2021
Posted on January 30, 2021 by CHC   ᐃ ᐁ

I’ve been watching the stock market with a bit of trepidation lately.  (Roughly half of our retirement/long-term-care money is in stock market mutual funds, the rest is in less risky bond funds and CDs.)  The current “Reddit Revolt” led by a self-assembled group of online trader-warriors against Wall Street hedge funds has turned the popular notion of stock-market-as-casino into something that feels more like the Running of the Bulls.

These self-styled Davids (you know, of Goliath fame), spurred along by everyday Joes and Josies tempted by quick profits, have led to wild gyrations — and absurd valuations — of the stocks of GameStop, AMC Theaters, Blackberry and whatever meme company that the Redditors will decide to target next.

I don’t think this will end well for those companies, for the speculators in those companies, nor inevitably for the whole idea of normal people like you and me using mutual funds as a means to secure one’s retirement.  Something has broken, and I am wary of the machine falling apart.

This Gamestop stock-market ploy smells a lot like the January 6th US Capitol rampage: a loosely-coordinated anarchical uprising of people wanting to take something back (but not sure exactly what) and who discovered their sudden and surprising power to create havoc.  As Sen. Susan Collins (no relation) of Maine would put it, this is all very troubling. Luckily, there have been no casualties so far in GameStopGate, as it is already called.

Yes, fellow lefties, I realize that hedge funds and the big investment banks like JPMorgan, Goldman Sachs, Barclays and others, have been screwing ordinary saver-investors forever to enrich themselves and their high-net-worth clients.  But financial anarchy would portend something far worse.  Reddit speculators are not going to topple the powers-that-be and usher in a new era of capitalism-as-a-positive-force in our lives.  Rather, financial anarchy a la Reddit would be more like a forest fire, burning down anything in its path.  My fear is that government regulators would respond like forest firefighters, i.e., trying to contain things only after much damage is done and lives are ruined.

Have I painted a too fatalistic scenario?  I’m not sure.  The embers of the fire are there for all to see.

• • • • • 

With that sad taste-in-the-mouth, I offer an update on The Trend.  The U.S. stock market as of January 2021 is at a level well above what The Trend (its performance between 1950 and 2012) suggests is reasonable.  Below is an updated chart of how the S&P 500 Index has fared relative to The Trend since 1950.  As of this writing, the S&P 500 Index — which mainly reflects the stock prices of the big U.S. tech companies Apple, Amazon, Facebook, Google and Netflix — is almost 24% above The Trend.

This excess performance represents three-years-worth of normal stock market returns.  This is not sustainable, I repeat, not sustainable.  The party could go on for quite a while longer, or it could end tomorrow.

I take The Trend seriously — I lighten up on our family’s stock-market allocation when the Trend suggests we are 25-30% above historical price levels, as we are now.

• • • • • 

If you’re not a fan of The Trend, then may I offer this from Yale economist Robert Shiller.  Shiller created a metric (let’s just call it the Shiller P/E) that captures what investors are willing to pay for a dollar of corporate profits.  One would think that, after taking inflation and interest rates into account, the amount that an investor is willing to pay for a dollar of profits would be relatively stable.  But here’s the real story, a la Shiller:

The white line in the graph above is Shiller’s P/E Ratio, plotted from 2006 to the present.  Note how the P/E ratio (how much an investor is willing to pay for a dollar of earnings) has risen steadily since the Great Recession — then less than 15, now approaching 30.  Why?  Why are investors willing to pay so much more for the same return on stocks?

It’s not just about our ultra-low interest rates since the Great Recession.  Rather, it has much to do with the tons of money that have been pumped into the economy and where that money has gone.  The green line in the graph shows how the U.S. “M2” money supply (which includes checking, savings, and money-market funds) has grown over the same time period.  See any parallels between this and the prices being paid for stocks?

The Great Recession (Bush) tax cuts and Trump tax cuts, on top of the easy-money policies dictated by the Federal Reserve, have clearly benefited corporations, and those who hold corporate stocks, and those who receive corporate dividends, more than they did middle-income families.*   The haves who benefited the most from financial stimulus have been using the money to bid up the prices of the assets of greatest interest to them: stocks and real estate.  There’s only so much food rich people can eat, and only so much gas they can pump into their BMWs.  The rest of their money has to slosh somewhere.  That is why we have asset inflation (which the Fed mostly ignores) instead of food/energy inflation.

And that is why stocks are so expensive now, far beyond what The Trend and Shiller would deem that they are intrinsically worth.  And now, internet desperadoes have arrived on the scene to stir up this already-boiling pot.  Oh, did I forget to mention that we remain in the grips of a worldwide pandemic?  What (more) could possibly go haywire?  Stay tuned.

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* As Lino Zeddies said on positivemoney.org, “…money being created as bank credit systemically results in a multitude of direct and indirect factors that concentrate the distribution of power, wealth and income in the hands of fewer and fewer people.”
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Map Challenge II
Posted on January 11, 2021 by CHC   ᐃ ᐁ

Asked and Answered 11

As a followup to last year’s Map Challenge post, I thought I would pose a few geo-nerd problems inspired by the Four Corners in the southwestern U.S.  As most of you know, there is only one spot in the U.S. — about 12 miles north of the Sinclair gas station in Beclabito, NM — where four states meet at a single point.*  But this begs the question: what about the near-misses?  Shouldn’t those places get a little bit of nerd-love too?

I will call these areas Four-State Circles — circles that include at least some part of four different states, other than the aforementioned Four Corners.  Here are my challenges:

  1.  What and where in the U.S. is the smallest Four-State Circle (and its runner-up)?
  2.  Similarly, what about the smallest Five-State Circle (and its runner-up)?
  3.  Finally, the smallest Six-State Circle (and its runner-up)?

I am sure you’ll all agree that we can safely stop at six states without feeling like we have shortchanged the topic.  So let’s go exploring — and here’s a map to help.

Four-State Circles

When scanning the map for potential four-state solutions, the key is to focus on regions where two nearby states don’t share a border.  This suggests a closer look at places like the Oklahoma panhandle and the contorted path of the Mississippi River south of Illinois.

But it turns out that both the winner and the runner-up for the smallest Four-State Circle lie east of the Appalachians.  Surprisingly, neither circle involves Rhode Island, and both include my home state of Pennsylvania.

THE RUNNER-UP

Zoom to 39.594ɴ, 78.350ᴡ, 100 feet from Pepper Lane in Doe Gully, West Virginia.  Next draw a circle of 8.83 miles radius around that point.  This circle touches four states: from north to south, Pennsylvania, Maryland, West Virginia and Virginia.  This may be the runner-up Four-State Circle, but I believe it is the shortest path that crosses four states, a subtly different problem.

THE WINNER

Now shift your focus 200 miles eastward to 39.676ɴ, 75.666ᴡ in Delaware, across the street from an industrial park in Christiana.  A 6.55-mile radius circle around this point is mostly Delaware, with slivers of New Jersey, Maryland and Pennsylvania.  This would be a conflicted place to be a sports fan: 7 miles from three different states with major league sports teams, but not one to call your own.

Five-State Circles

The Five-State Circles were more painstaking to sort through.  It’s not like one can just enlarge a Four-State Circle a few miles in order to pick up a fifth state.  And what’s worse, all of the obvious candidates were so similar in size that some very careful plotting was needed to find the winner.  Here are the results:

THE RUNNER-UP

Take U.S. 60 toward Grayridge, Missouri, then head a couple of miles south, and you will find — besides a lot of farmland — the center of the runner-up Five-State Circle.  This 28.8-mile-radius circle takes in parts of Kentucky, Tennessee and Missouri, plus razor-thin slices of Arkansas and Illinois.  S0, Grayridge, population 122, you are now on the map.  Welcome to internet fame.

THE WINNER

Here is where the Oklahoma panhandle gets its chance to shine.  A 27.1-mile radius circle centered on 36.892ɴ, 102.514ᴡ, just north of Boise City, touches parts of five states: New Mexico, Colorado, Kansas, Oklahoma and Texas.  Although the center of the circle is now just a pile of rubble next to U.S. 385, just wait until some enterprising Okie gets wind of this and builds a McDonalds there.

Six-State Circles

There are two attractive candidates here — the area around Baltimore, MD, and the area around Springfield, MA.  Only one of these, the smallest Six-State Circle, can be crowned the winner — the other will be the runner-up who, a la Miss USA, will assume the title if for any reason the winner cannot fulfill its duties.  So, may I have the envelope please…

THE RUNNER-UP

Cold Bottom Road crosses Piney Creek and I-83 at 39.563ɴ, 76.665ᴡ, just north of the National Lacrosse Hall of Fame in Sparks, Maryland.  The six states within 58.9 miles of this spot are: Maryland, Pennsylvania, Delaware, New Jersey, West Virginia and Virginia.  If Washington, D.C., were a state, this would be the winning Seven-State Circle but sorry — rules are rules.

THE WINNER

The center of the smallest Six-State Circle is American Legion Post 452 in Chicopee, MA, at 42.1456ɴ, 72.6140ᴡ.  (The post meets on the fourth Thursday of each month at 17:30, so snap to it.)  This 43.2-mile radius circle covers parts of Massachusetts, Connecticut and Vermont plus thin slices of New York, New Hampshire and Rhode Island.  And yes, Rhode Island is a state, not a plantation.

So there you have it, asked and — exhaustively — answered.  But for those who need even more bar-bet material, here’s one last bit of U.S. state-border trivia.  The number of places where three (or four) states meet is (a) 55, (b) 68 or (c) 92.  Answer below.

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* The four states which meet at one spot are Arizona, Utah, Colorado and New Mexico.  And by my count, there are 55 places in the U.S. where three or four states meet at a point.
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