When I engage in activities such as this blog, because of my nature, I am usually conducting experiments in the back of my mind. One of those experiments relates to studying the Internet for its possibilities as a useful entity. Since I started the blog, I have been looking at websites that I hadn't seen before. I now believe that earlier I was inappropriately fixated on the NYRB and its blog, and that I had been laboring under some illusions regarding the NYRB's nature and intellectual integrity. Probably because it was one of the few places where one could find in-depth, well-written articles on a variety of topics, and because writers whom I respected such as Tony Judt and Freeman Dyson were contributors, I lulled myself into a false sense of its quality and openness. After examining a variety of websites, I now think that the NYRB is a limited organization that caters to a narrow group, and that most of the ideas that you find there are predictable, because they are the views that their readers want confirmed. There is nothing whatsoever about it that might be construed as cutting-edge.
Beyond the content of the articles in a publication, one gets a sense of its readership from its blog posts. The NYRB appeals to well-educated, relatively affluent liberals who like high quality and think of themselves as having broad interests, though they actually care mainly about hot-button liberal issues and some of the humanities, particularly from an academic viewpoint. They don't care much about science or empirical arguments. This flies in the face of the NYRB's image as a paragon of the open exchange of big ideas. Other less pretentious sites, particularly 3 Quarks Daily, have broader intellectual appeal. The latter attracts people who are interested in the sciences and philosophy, but also leaves room for virtually all of the humanities. From the standpoint of blog commenting, 3 Quarks Daily is far more open, because it allows posters to post without moderation. Like all websites, it has limitations, but by drawing from many websites, being well-managed, and placing little emphasis on image control, it is much more appealing to me than the NYRB.
Confirmation bias is a topic that has been widely discussed in recent years. I came across it in the context of economics, which now has a branch called behavioral economics, a break from the past, when most economists assumed that people always acted in rational self-interest. They've finally realized that irrationality pervades human life, and they are now rethinking some of their earlier ideas. This research focuses mainly on investor behavior, where, for example, men tend to be unrealistically confident, and women tend to be unrealistically risk-averse. There is now an entire industry based on making money from your investment mistakes. On a broader scale, confirmation bias relates to many other human behaviors, but decision-making is its focus in economics.
In a speculative, anecdotal way, I have been trying to determine what kind of person, if there is such a person, would be attracted to this blog. It is hard to obtain much data on this, because very few people look at it at all, and I have access to very little information about those people. Other than a handful of regular readers, I get new readers who click on a link to this site that shows up when I make posts on other blogs. I can't always tell much about where they are located other than their country, but often I can also determine their city. As you would expect, most of the pageviews are from the U.S., since most of the websites I comment on are in the U.S. and a very large chunk of English-language Internet activity is in the U.S. What surprises me is that I seem to be more likely to be viewed in Iceland, Ukraine, Russia or China than in the northeast U.S. where I live. This makes me ask what websites the people in the northeast go to.
The answer, which I can't prove, is probably that they are going to websites that are familiar to them and that present worldviews with which they are comfortable. That would not be unlike me when I regularly went to the NYRB website. I get the impression that the Internet is relatively ghettoized, and it seems to be dominated by commercial organizations like Amazon.com and Facebook that herd people into some sort of profit model by meeting their human needs. In the context of this post, one might say that they are drawn to sites that affirm their worldviews, don't challenge them much, and make them feel good about themselves: their biases are confirmed. In theory, American viewers are more satisfied with their lives and don't feel as much need to explore as the residents of Russia or China. Of course, there are other reasons why people in Russia or China might be interested in this blog, but I'm assuming for the moment that these pageviews are not from criminal organizations or government spies.
The working hypothesis that I've arrived at is that most Americans think they already know enough and don't need to know much more: they certainly don't need to extend themselves beyond their comfort zones. Thus, when commercial organizations such as the NYRB, the New Yorker, The New York Times, the Huffington Post, and so on, beckon them, whispering "Narcissism is OK," they happily indulge. That only leaves dissatisfied people in less privileged countries who stand outside and look in through the window out of curiosity. Here in the U.S., we are easily distracted from the underlying chaos of our existence by the Murti-Bing pills* freely dispensed by the government and corporations alike.
*From The Captive Mind, by Czeslaw Milosz.
Showing posts with label Investing. Show all posts
Showing posts with label Investing. Show all posts
Saturday, June 21, 2014
Thursday, June 12, 2014
Thomas Piketty IV
In conclusion, Capital in the Twenty-First Century is an important and impressive book. Chief among its virtues is Piketty's commitment to a broad cross-disciplinary approach to his subject, economics, which he sees as a sub-discipline of the social sciences, along with history, sociology, anthropology and political science. Most people are fully justified in their lack of interest in economics, because it is usually presented as a narrow, technical field that doesn't relate directly to other subjects. In contrast, Piketty writes like an Enlightenment thinker who is concerned about important issues such as the future of mankind, not just little things such as U.S. GDP growth next year. In short, he is a big thinker, whereas Paul Krugman, Joseph Stiglitz and probably even Milton Friedman, comparatively speaking, are not.
Even so, I don't necessarily recommend that you read Capital unless you are particularly interested in policy discussions related to economics. It is a long, thorough and detailed book that touches on many topics, but the central message is quite simple. It is that the current state of the world is such that the wealthy are likely to become wealthier and the poor are likely to become poorer. As a believer in social justice and the responsibility of governments to maintain an acceptable level of equality, Piketty recommends that permanent new taxes on wealth be instituted globally. He also suggests that one-time taxes on wealth could be used to eliminate or reduce national debts. The latter would be preferable to decades of austerity, which has little effect on the wealthy but places a heavy burden on the poor.
Much of the book is devoted to showing how wealth inequality grew up until 1914, when it collapsed, and how it took off again during the recovery after 1945. His thesis, which he amply documents, is that the 1914-1945 period was a historical aberration. The wars and the Great Depression wiped out most of the prior wealth inequality, and the surge in economic growth after 1945 temporarily allowed the less-wealthy to advance economically. Now, Piketty argues, we have resumed the long-term trend in which the return on capital exceeds the return on labor. People who are wealthy now will become wealthier from their investments while the rest of society will languish indefinitely with little chance of making economic progress. Enormous wealth is accumulating in the top .1% of the population. The number of billionaires and multi-billionaires is growing, and even large private university endowments are growing faster than those of smaller universities. The largest endowments grow at the highest rates because the universities have the resources necessary for the best investment research. For example, Harvard, with an endowment of about $30 billion, spends about $100 million per year to manage its assets and gets a real return of about 10.2%, higher than that of all other universities except Yale and Princeton. In this environment, ordinary workers will never catch up with the wealthy and small, private universities will never catch up with Harvard, Yale and Princeton.
The parts of the book that I found most refreshing involved Piketty's critiques of the U.S. He debunks the idea of American exceptionalism, saying that current information suggests that social mobility is lower in the U.S. than in Europe. He attributes much of the wealth inequality in the U.S. to overpaid executives. He speculates that low top income tax rates have encouraged U.S. executives to bargain harder for higher compensation, since they can keep more of their earnings than they would otherwise. If higher top-level income tax rates were reinstituted, executives would have less incentive to demand higher pay and American wealth inequality would be reduced. Courageously, he goes on to say:
...no hypocrisy is too great when economic and financial elites are obliged to defend their interests-and that includes economists, who currently occupy an enviable place in the US income hierarchy. Some economists have an unfortunate tendency to defend their private interest while implausibly claiming to champion the general interest. Although data on this are sparse, it also seems that US politicians of both parties are much wealthier than their European counterparts and in a totally different category from the average American, which might explain why they tend to confuse their own private interest with the general interest. Without a radical shock, it seems fairly likely that the current equilibrium will persist for some time. The egalitarian pioneer ideal has faded into oblivion, and the New World may be on the verge of becoming the Old Europe of the twenty-first century's globalized economy.
In full disclosure, I must say that I have some sympathies with wealth inequality. Historically, extreme wealth has often led to good art as a result of attempts by the wealthy to differentiate themselves. When the Italians were wealthy we got Botticelli, Michelangelo and Titian. When the Dutch were wealthy we got Bruegel, Vermeer and Rembrandt. When the French were wealthy we got Flaubert, the Impressionists, the Post-Impressionists, Debussy and Proust. The arts tend to flourish when there are rich people throwing money around. On the other hand, I can't say that wealthy Americans have much to show for their artistic interests unless you include bad taste (The Queen of Versailles comes to mind). Secondarily, also on the positive side, although I'm not rich, I'm wealthy enough that the book affirms that if I manage my investments properly, not only am I unlikely to experience financial difficulties, but my wealth will probably increase during the remainder of my life, thanks to the backward political process here and the absence in the U.S. of useful public intellectuals like Piketty.
At the conceptual level, I consider Piketty to be the responsible adult that few Americans seem able to be. Why didn't an American economist write this book? As Piketty politely refrains from saying, this is a narrow-minded, materialistic culture all the way up through the intellectual ranks. The policies he recommends should already be under consideration, but whatever headway they make will meet tremendous opposition at each step. It is possible that by following Piketty's guide and publicly debating the issues discussed in his book the state of society could be improved significantly. To me, this is a more serious approach than what has been brought up by either liberals or conservatives in recent decades. I wish Piketty's ideas the best of luck, but still hold fast to the view that humans ultimately are not sufficiently rational to organize themselves in an equitable and sustainable fashion. As I have said earlier, I don't believe that either capitalism or democracy is essential to human life, and this book does not look that far into the future.
Even so, I don't necessarily recommend that you read Capital unless you are particularly interested in policy discussions related to economics. It is a long, thorough and detailed book that touches on many topics, but the central message is quite simple. It is that the current state of the world is such that the wealthy are likely to become wealthier and the poor are likely to become poorer. As a believer in social justice and the responsibility of governments to maintain an acceptable level of equality, Piketty recommends that permanent new taxes on wealth be instituted globally. He also suggests that one-time taxes on wealth could be used to eliminate or reduce national debts. The latter would be preferable to decades of austerity, which has little effect on the wealthy but places a heavy burden on the poor.
Much of the book is devoted to showing how wealth inequality grew up until 1914, when it collapsed, and how it took off again during the recovery after 1945. His thesis, which he amply documents, is that the 1914-1945 period was a historical aberration. The wars and the Great Depression wiped out most of the prior wealth inequality, and the surge in economic growth after 1945 temporarily allowed the less-wealthy to advance economically. Now, Piketty argues, we have resumed the long-term trend in which the return on capital exceeds the return on labor. People who are wealthy now will become wealthier from their investments while the rest of society will languish indefinitely with little chance of making economic progress. Enormous wealth is accumulating in the top .1% of the population. The number of billionaires and multi-billionaires is growing, and even large private university endowments are growing faster than those of smaller universities. The largest endowments grow at the highest rates because the universities have the resources necessary for the best investment research. For example, Harvard, with an endowment of about $30 billion, spends about $100 million per year to manage its assets and gets a real return of about 10.2%, higher than that of all other universities except Yale and Princeton. In this environment, ordinary workers will never catch up with the wealthy and small, private universities will never catch up with Harvard, Yale and Princeton.
The parts of the book that I found most refreshing involved Piketty's critiques of the U.S. He debunks the idea of American exceptionalism, saying that current information suggests that social mobility is lower in the U.S. than in Europe. He attributes much of the wealth inequality in the U.S. to overpaid executives. He speculates that low top income tax rates have encouraged U.S. executives to bargain harder for higher compensation, since they can keep more of their earnings than they would otherwise. If higher top-level income tax rates were reinstituted, executives would have less incentive to demand higher pay and American wealth inequality would be reduced. Courageously, he goes on to say:
...no hypocrisy is too great when economic and financial elites are obliged to defend their interests-and that includes economists, who currently occupy an enviable place in the US income hierarchy. Some economists have an unfortunate tendency to defend their private interest while implausibly claiming to champion the general interest. Although data on this are sparse, it also seems that US politicians of both parties are much wealthier than their European counterparts and in a totally different category from the average American, which might explain why they tend to confuse their own private interest with the general interest. Without a radical shock, it seems fairly likely that the current equilibrium will persist for some time. The egalitarian pioneer ideal has faded into oblivion, and the New World may be on the verge of becoming the Old Europe of the twenty-first century's globalized economy.
In full disclosure, I must say that I have some sympathies with wealth inequality. Historically, extreme wealth has often led to good art as a result of attempts by the wealthy to differentiate themselves. When the Italians were wealthy we got Botticelli, Michelangelo and Titian. When the Dutch were wealthy we got Bruegel, Vermeer and Rembrandt. When the French were wealthy we got Flaubert, the Impressionists, the Post-Impressionists, Debussy and Proust. The arts tend to flourish when there are rich people throwing money around. On the other hand, I can't say that wealthy Americans have much to show for their artistic interests unless you include bad taste (The Queen of Versailles comes to mind). Secondarily, also on the positive side, although I'm not rich, I'm wealthy enough that the book affirms that if I manage my investments properly, not only am I unlikely to experience financial difficulties, but my wealth will probably increase during the remainder of my life, thanks to the backward political process here and the absence in the U.S. of useful public intellectuals like Piketty.
At the conceptual level, I consider Piketty to be the responsible adult that few Americans seem able to be. Why didn't an American economist write this book? As Piketty politely refrains from saying, this is a narrow-minded, materialistic culture all the way up through the intellectual ranks. The policies he recommends should already be under consideration, but whatever headway they make will meet tremendous opposition at each step. It is possible that by following Piketty's guide and publicly debating the issues discussed in his book the state of society could be improved significantly. To me, this is a more serious approach than what has been brought up by either liberals or conservatives in recent decades. I wish Piketty's ideas the best of luck, but still hold fast to the view that humans ultimately are not sufficiently rational to organize themselves in an equitable and sustainable fashion. As I have said earlier, I don't believe that either capitalism or democracy is essential to human life, and this book does not look that far into the future.
Thursday, April 24, 2014
Thomas Piketty I
For many years I've had an interest in investing, which sprang from my desire to retire. I would have retired at age 30 if I could have afforded to, because I never much liked any of my jobs or considered them a meaningful use of time. Investing is related to economics, which did not interest me until recently. As an undergraduate, it seemed to me that the people who studied economics were conventional, unimaginative and materialistic: they were conforming to their parents' expectations and only wanted high-paying jobs when they graduated.
My academic path provided little intersection with economics majors. By nature I'm an empiricist, but I am also interested in aesthetic matters, which meant that I was not a perfect fit for either science or the arts. I ended up majoring in Philosophy, which in many ways is a compromise field that lies somewhere between art and science. Looking back, Philosophy was not a particularly good fit for me either. Part of that may have had to do with the fact that the course offerings at my college were limited. The relevant department was the Department of Philosophy and Religion, and several of its members had received divinity degrees prior to receiving their PhDs. The coverage of continental philosophy in the department was weakened when the one professor specializing in it left for an administrative position elsewhere. In hindsight, I was in a state of ignorance and denial as to my fit with Philosophy. I was exposed to British and American analytic philosophy, which I didn't enjoy much, find relevant to anything or consider to be of much intellectual importance. These days, philosophy departments are fighting to avoid being labeled obsolete, and, given their syllabuses, I'm not surprised.
When I later entered business school (an even worse fit, though I liked some of the courses and completed an MBA), I took two semesters of economics. It was hard for me to relate to the subject, because from the start I noticed that economists made assumptions about the world and proceeded from there even though the assumptions seemed highly dubious. My attention to economics increased in 2004, when I began to manage my mother's assets because of her Alzheimer's disease. For investors, some knowledge of market cycles has become crucial in recent years. My interest heightened after the 2008 collapse of Lehman Brothers and the start of the Great Recession. I followed Paul Krugman closely and read This Time is Different, by Carmen Reinhart and Kenneth Rogoff, which is the first major empirical study of financial crises. The fact that This Time is Different was published in 2009, after the crisis had begun, and that no comparable studies had ever been made, confirmed to me that economics as practiced in academia has an agenda that is largely disconnected from reality in a manner not entirely unlike that of academic philosophy.
Over the last few years, there has been a constant battle between liberals and conservatives over the causes of the 2008 financial crisis and the appropriate governmental response. I have found this disappointing, because the economists involved rarely cite any convincing studies, and the two camps go on their merry ways without addressing any fundamental issues. Finally we have a significant study, which has just been published in the U.S. It is Capital in the Twenty-First Century, by Thomas Piketty. I believe this book has the potential to change the debate for the better by infusing it with empirical data and a theoretical approach that exceeds the limited scope of American economics.
Piketty is a precocious French economist who completed his PhD at age 22 and then taught at M.I.T. However, he became frustrated with the way economics is studied in the U.S. and returned to France after two years:
To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.
The central thesis of Capital is that the rate of return from wealth usually surpasses the rate of return from labor, meaning that the rich usually become richer, gaining ground over the ordinary workers who make up most of the labor force. Simply put, investments provide a higher return than employees can obtain in the form of wages. We are seeing this today especially in the U.S., where the wealthy are becoming exceedingly wealthy and the middle class is just treading water. As obvious as this may be even to a casual observer, it is not a view accepted by many economists, policy makers or politicians. Piketty documents his claims with carefully compiled data covering longer historical periods than have been studied by other economists.
At a glance, this may not sound particularly exciting, but I think it may prove to be the most important publication on policy issues in several decades. Moreover, it seems doubtful that conservatives will be able to quickly whip up a counter-study, since this one took many years to complete and is unlikely to contain serious flaws. My hope, then, is that it will have a positive influence on political discussion and put to rest some of the myths that have been lingering from the Reagan-Thatcher era.
I've only just started to read the book and will probably have more to say about it later.
My academic path provided little intersection with economics majors. By nature I'm an empiricist, but I am also interested in aesthetic matters, which meant that I was not a perfect fit for either science or the arts. I ended up majoring in Philosophy, which in many ways is a compromise field that lies somewhere between art and science. Looking back, Philosophy was not a particularly good fit for me either. Part of that may have had to do with the fact that the course offerings at my college were limited. The relevant department was the Department of Philosophy and Religion, and several of its members had received divinity degrees prior to receiving their PhDs. The coverage of continental philosophy in the department was weakened when the one professor specializing in it left for an administrative position elsewhere. In hindsight, I was in a state of ignorance and denial as to my fit with Philosophy. I was exposed to British and American analytic philosophy, which I didn't enjoy much, find relevant to anything or consider to be of much intellectual importance. These days, philosophy departments are fighting to avoid being labeled obsolete, and, given their syllabuses, I'm not surprised.
When I later entered business school (an even worse fit, though I liked some of the courses and completed an MBA), I took two semesters of economics. It was hard for me to relate to the subject, because from the start I noticed that economists made assumptions about the world and proceeded from there even though the assumptions seemed highly dubious. My attention to economics increased in 2004, when I began to manage my mother's assets because of her Alzheimer's disease. For investors, some knowledge of market cycles has become crucial in recent years. My interest heightened after the 2008 collapse of Lehman Brothers and the start of the Great Recession. I followed Paul Krugman closely and read This Time is Different, by Carmen Reinhart and Kenneth Rogoff, which is the first major empirical study of financial crises. The fact that This Time is Different was published in 2009, after the crisis had begun, and that no comparable studies had ever been made, confirmed to me that economics as practiced in academia has an agenda that is largely disconnected from reality in a manner not entirely unlike that of academic philosophy.
Over the last few years, there has been a constant battle between liberals and conservatives over the causes of the 2008 financial crisis and the appropriate governmental response. I have found this disappointing, because the economists involved rarely cite any convincing studies, and the two camps go on their merry ways without addressing any fundamental issues. Finally we have a significant study, which has just been published in the U.S. It is Capital in the Twenty-First Century, by Thomas Piketty. I believe this book has the potential to change the debate for the better by infusing it with empirical data and a theoretical approach that exceeds the limited scope of American economics.
Piketty is a precocious French economist who completed his PhD at age 22 and then taught at M.I.T. However, he became frustrated with the way economics is studied in the U.S. and returned to France after two years:
To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.
The central thesis of Capital is that the rate of return from wealth usually surpasses the rate of return from labor, meaning that the rich usually become richer, gaining ground over the ordinary workers who make up most of the labor force. Simply put, investments provide a higher return than employees can obtain in the form of wages. We are seeing this today especially in the U.S., where the wealthy are becoming exceedingly wealthy and the middle class is just treading water. As obvious as this may be even to a casual observer, it is not a view accepted by many economists, policy makers or politicians. Piketty documents his claims with carefully compiled data covering longer historical periods than have been studied by other economists.
At a glance, this may not sound particularly exciting, but I think it may prove to be the most important publication on policy issues in several decades. Moreover, it seems doubtful that conservatives will be able to quickly whip up a counter-study, since this one took many years to complete and is unlikely to contain serious flaws. My hope, then, is that it will have a positive influence on political discussion and put to rest some of the myths that have been lingering from the Reagan-Thatcher era.
I've only just started to read the book and will probably have more to say about it later.
Thursday, April 3, 2014
Retirement
My mother died on August 17, 2007, and had accumulated more money than expected. I had been managing all of her assets since 2004, ever since she went into assisted living, and knew exactly what she had and that I would eventually receive one third of it. That plus my own savings, pension, and future Social Security were enough for me to retire. At the time I particularly disliked my job at R.R. Donnelley & Sons Co., and, from a career standpoint, at age 57 in a dying industry, there was little point in continuing to work. After thinking it over, I abruptly retired on September 9, 2007, giving no notice.
I am interested in investing and spent much of my time on that for the first few years. As it happened, the stock market peaked on October 9, 2007, declined throughout 2008, and then crashed precipitously starting in September, 2008, with the collapse of Lehman Brothers. At the lowest point I had lost about 40% of my holdings, but they have more than recovered as of today, and my total assets after almost seven years of retirement haven't changed much. I elected to start receiving Social Security in 2012 at age 62. Though this is negative in that it will reduce the total payments that I'm likely to receive, it provides a significant portion of my annual cash needs and allows me to keep all of my assets permanently invested. If my investments do well, I may even come out better than I would have by taking Social Security later. Either way, I am unlikely to run out of money. I haven't spent much so far, except on telescopes.
Another thing that I did initially was look up old friends. I found and visited an artist friend who became a Hindu monk and lives in Ganges, Michigan. I contacted a former college roommate who is now a lawyer living in Portland, Oregon. I contacted and later was visited by a former college acquaintance who was then a computer science professor at Clemson University and has since retired to Asheville, North Carolina. I contacted an Iranian acquaintance from college who was in Tehran during the 1979 revolution and has lived in England ever since. Also, 2008 was the fortieth anniversary of my high school graduation, and I was in touch with several people from Pelham, New York. One of them got me thinking about Vermont, because she has lived here since the 1970's. She and her husband are like old hippies. They live in Bristol, Vermont, where he is a potter and she spins and weaves wool from sheep that they keep. We visited them when we first came to explore the area but haven't seen much of them since. In case you're interested, here is their website: http://www.robertcomptonpottery.com/.
On the whole, I have found it unrewarding to contact old acquaintances, and probably won't do it anymore. At best, you may catch up on a few things, and in my experience not much comes from it. People move on with their lives, and after forty years they're not about to change their habits. Although I have very few friends, I find that I am more interested in people generally than most people are.
Another time consumer for me has been Internet discussion. I put a fair amount of effort into comments that I made at The New York Review of Books, but, as mentioned earlier, I now find that to be an unacceptable organization. I still am looking at other sites and make posts occasionally, but with much lower expectations than previously. I like to write down what I'm thinking mainly as an exercise in clarity, and now have almost given up on the idea that meaningful communication might occur during Internet discussion between strangers.
In full disclosure, I also have to admit that I waste time playing games on my computer. I like bridge, and have been playing a very good computer program, which I think has significantly improved my bridge skills. Recently I tried playing online hearts, which I liked, but I was put off by some of the bad Internet behavior exhibited. It was not uncommon for people to get a losing hand and drop out of a game immediately and disrupt it for everyone else. Some people were rude and insulting, especially when they were losing. I also play off-line games such as chess, which I'm not particularly good at.
I like being outside and doing things outside. The winter limits what you can do here, unless you want to ski, and I don't. During the warmer months I spend time on lawn mowing and gardening. I have done a lot of tree removal, because we had many dead trees blocking views and near power lines when we moved in. I had hoped to do a lot of hiking here, but so far haven't much. The better hikes require ascents of at least a thousand feet and take several hours, and I'm more interested in that than my partner is. We do go on walks together on the dirt road by our house. It dead ends to the south at a farm near our house, and runs to the north for several miles, with good views of the Adirondacks, which are about 30 miles away. The sky conditions have been poor for stargazing over most of the winter, though I left out the telescope all winter and viewed even when it was near zero. Currently my telescope is in storage until I return from Missouri.
My partner is in charge of our social life, and we are gradually getting to know a few people here. As mentioned earlier, I'm not very interested in routine socializing.
I am interested in investing and spent much of my time on that for the first few years. As it happened, the stock market peaked on October 9, 2007, declined throughout 2008, and then crashed precipitously starting in September, 2008, with the collapse of Lehman Brothers. At the lowest point I had lost about 40% of my holdings, but they have more than recovered as of today, and my total assets after almost seven years of retirement haven't changed much. I elected to start receiving Social Security in 2012 at age 62. Though this is negative in that it will reduce the total payments that I'm likely to receive, it provides a significant portion of my annual cash needs and allows me to keep all of my assets permanently invested. If my investments do well, I may even come out better than I would have by taking Social Security later. Either way, I am unlikely to run out of money. I haven't spent much so far, except on telescopes.
Another thing that I did initially was look up old friends. I found and visited an artist friend who became a Hindu monk and lives in Ganges, Michigan. I contacted a former college roommate who is now a lawyer living in Portland, Oregon. I contacted and later was visited by a former college acquaintance who was then a computer science professor at Clemson University and has since retired to Asheville, North Carolina. I contacted an Iranian acquaintance from college who was in Tehran during the 1979 revolution and has lived in England ever since. Also, 2008 was the fortieth anniversary of my high school graduation, and I was in touch with several people from Pelham, New York. One of them got me thinking about Vermont, because she has lived here since the 1970's. She and her husband are like old hippies. They live in Bristol, Vermont, where he is a potter and she spins and weaves wool from sheep that they keep. We visited them when we first came to explore the area but haven't seen much of them since. In case you're interested, here is their website: http://www.robertcomptonpottery.com/.
On the whole, I have found it unrewarding to contact old acquaintances, and probably won't do it anymore. At best, you may catch up on a few things, and in my experience not much comes from it. People move on with their lives, and after forty years they're not about to change their habits. Although I have very few friends, I find that I am more interested in people generally than most people are.
Another time consumer for me has been Internet discussion. I put a fair amount of effort into comments that I made at The New York Review of Books, but, as mentioned earlier, I now find that to be an unacceptable organization. I still am looking at other sites and make posts occasionally, but with much lower expectations than previously. I like to write down what I'm thinking mainly as an exercise in clarity, and now have almost given up on the idea that meaningful communication might occur during Internet discussion between strangers.
In full disclosure, I also have to admit that I waste time playing games on my computer. I like bridge, and have been playing a very good computer program, which I think has significantly improved my bridge skills. Recently I tried playing online hearts, which I liked, but I was put off by some of the bad Internet behavior exhibited. It was not uncommon for people to get a losing hand and drop out of a game immediately and disrupt it for everyone else. Some people were rude and insulting, especially when they were losing. I also play off-line games such as chess, which I'm not particularly good at.
I like being outside and doing things outside. The winter limits what you can do here, unless you want to ski, and I don't. During the warmer months I spend time on lawn mowing and gardening. I have done a lot of tree removal, because we had many dead trees blocking views and near power lines when we moved in. I had hoped to do a lot of hiking here, but so far haven't much. The better hikes require ascents of at least a thousand feet and take several hours, and I'm more interested in that than my partner is. We do go on walks together on the dirt road by our house. It dead ends to the south at a farm near our house, and runs to the north for several miles, with good views of the Adirondacks, which are about 30 miles away. The sky conditions have been poor for stargazing over most of the winter, though I left out the telescope all winter and viewed even when it was near zero. Currently my telescope is in storage until I return from Missouri.
My partner is in charge of our social life, and we are gradually getting to know a few people here. As mentioned earlier, I'm not very interested in routine socializing.
Monday, February 10, 2014
Investing
Over the last 10 years I've spent quite a bit of time planning investments, particularly because I've been retired for 6 of those years. This experience highlights to me the absurdity of the American economic system.
In order to follow the program here, the constraints are quite extreme. First, you must figure out at a relatively young age how to procure sufficient earnings to live your life and save an amount sufficient for retirement. Most people are at the mercy of the job market and the economy, unpredictable forces beyond anyone's control. Generally you are on your own, and you won't find much help. Once you get a job, your employer is likely to be indifferent to your career path and will fire you on short notice if you are perceived to be a subpar performer.
Assuming that you are somehow able to save enough money for investing, you are then faced with another series of daunting challenges. The financial services industry is there to make money, and whether you happen to make money or not is incidental to its goals. This in itself would not necessarily be an insurmountable problem, but it becomes so because of the complexity of investing these days. Most of the investment advice I've come across is either incomplete or incorrect. Even Nobel Prize winners in Economics don't seem to have a handle on it. It is clearly too much to expect of the 70% of U.S. adults who lack four-year college degrees to navigate these murky waters.
The absurdity here has to do with faith in private markets. We know from the health care system that private markets don't always work as well as large-scale public operations. Left to doctors, hospitals, insurance companies, pharmaceutical companies and medical suppliers, health care in the U.S. became the most expensive in the developed world. Here it was obvious that a federal system had to be put in place, but the Affordable Care Act is only in its infancy. What is needed is a comprehensive retirement savings program at the federal level that will make financial decision-making much simpler and less voluntary, like Obamacare. As it stands, the financial services industry is primarily a wealth-redistribution device that makes a very small number of people extremely wealthy at the expense of the majority, who are increasingly finding themselves underpaid, uninformed, and facing bleak retirements. The majority needs far more help than will ever be supplied in this free-market system.
In order to follow the program here, the constraints are quite extreme. First, you must figure out at a relatively young age how to procure sufficient earnings to live your life and save an amount sufficient for retirement. Most people are at the mercy of the job market and the economy, unpredictable forces beyond anyone's control. Generally you are on your own, and you won't find much help. Once you get a job, your employer is likely to be indifferent to your career path and will fire you on short notice if you are perceived to be a subpar performer.
Assuming that you are somehow able to save enough money for investing, you are then faced with another series of daunting challenges. The financial services industry is there to make money, and whether you happen to make money or not is incidental to its goals. This in itself would not necessarily be an insurmountable problem, but it becomes so because of the complexity of investing these days. Most of the investment advice I've come across is either incomplete or incorrect. Even Nobel Prize winners in Economics don't seem to have a handle on it. It is clearly too much to expect of the 70% of U.S. adults who lack four-year college degrees to navigate these murky waters.
The absurdity here has to do with faith in private markets. We know from the health care system that private markets don't always work as well as large-scale public operations. Left to doctors, hospitals, insurance companies, pharmaceutical companies and medical suppliers, health care in the U.S. became the most expensive in the developed world. Here it was obvious that a federal system had to be put in place, but the Affordable Care Act is only in its infancy. What is needed is a comprehensive retirement savings program at the federal level that will make financial decision-making much simpler and less voluntary, like Obamacare. As it stands, the financial services industry is primarily a wealth-redistribution device that makes a very small number of people extremely wealthy at the expense of the majority, who are increasingly finding themselves underpaid, uninformed, and facing bleak retirements. The majority needs far more help than will ever be supplied in this free-market system.
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