Category Archives: markets

Who Owns our Economy?

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Greg Ip, a writer for The Wall Street Journal, says those of us older than 65 do.

As of the third quarter of last year, people 70 and over controlled roughly 39% of all equities and mutual funds owned by households, compared with 22% in 2007, according to Federal Reserve data. Their share of net worth—assets minus debts—was 32%, up from 20% two decades earlier.

And

Wealth accumulates with age, so people at retirement tend to have much more than younger generations, a pattern evident in Fed surveys back to 1989.

And so on.

Even were that true, it’s only a temporary ownership. What Ip missed is this truism: we can’t take the economy, or our wealth, with us when we relocate to Dirt Nap Acres. We leave that wealth to those younger generations, our children, and to a variety of charities and endowments, all of which benefit those younger generations.

All that means that tomorrow, those younger generations will own our economy, starting well before they become the next geezer owners of the economy.

It’s a generational cycle, and that background is the framework within which the economy’s business and political cycles play out.

Wrong Answer

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House and auto insurers’ profits and the rate increases they charge policy holders are coming under political scrutiny, but politicians’ proposed solutions are badly counterproductive.

New York Governor Kathy Hochul (D) this month became the latest state lawmaker to advocate profits caps on insurers, to tackle escalating home- and “crushingly expensive” auto-insurance rates.
Her plan would require home insurers with “outsized profit margins” to lower or justify their rates, and review the profits threshold at which auto-insurers are required to refund customers.
Also this month, lawmakers in states including Oklahoma proposed profit caps targeting insurance.

No.

Government definitions of “outsized profit margins” have nothing to do with business imperatives or what happens in a free market. Those definitions serve only the personal political ambitions of the politicians doing the defining, and they’ll vary across politicians and their political parties.

Beyond that, all price caps do is limit the availability of the product being capped—whether oil and natural gas and gasoline, rental housing availability and quality…or insurance policies. The limit on supply, too, hurts those on the lower economic rungs of our economy first and hardest.

Requiring insurers to justify their rates and the profit levels at which policy holder refunds are paid is a good idea, but government is the wrong crowd that must be satisfied.

Better simply to require insurers to disclose their profit margins and the basis on which they arrive at their definitions of profit. Their policy rates already are publicly available; making both sides of that process public would let the public more effectively shop for policies that suit their individual needs.

Doing that within an increasingly deregulated (not unregulated) insurance market environment would move the industry closer to a truly competitive market within which insurers would reap fair profits and insurees would pay fair premium amounts for the policies they want. And the Critical Item: “fair” would be defined within that competitive market by those market participants, not by any government.

Trump and a Chinese Idiom

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Walter Russell Mead’s Sunday Wall Street Journal op-ed opened with this subheadline:

For him [President Donald Trump (R)], extreme volatility and risk are not a problem but an opportunity.

Here’s an old and hoary Chinese idiom:

危機

These characters, 危 + 機 in their combination translate to Crisis, and the term is composed of characters meaning Danger + Opportunity

Mead’s piece expands on his theme of President Donald Trump’s (R) use of volatility and risk, but that’s just another way of saying, in Western diction, that Chinese idiom. The only difference between the two is whether the deviation is imposed from the outside or it’s created by deliberately deviating.

That idiom, and the Western rephrasing of volatility and risk, are essentially correct. Gains are not made without taking the underlying risks of deviating from the status quo. Great gains are possible only with making great deviations. Both Crisis and Volatility and Risk are those opportunities from great deviations.

Those who fear crisis or volatility and risk to the point of paralysis seek to have the rest of us similarly paralyzed lest they be left behind.

A Useful Test

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In their Wall Street Journal Tuesday op-ed, Michael O’Hanlon and Marta Wosinska, Brookings Institution Senior Fellows, pointed out that shotgunning moves (vis., universal tariffs on everything a target nation or group of nations exports to us and broadly barring exports to those same targets) as a means of altering the several links to the supply chains our economy needs to make the goods we need along with altering those links our economy wants to make the things we want. They then offered a three part test to better target those supply chain links that are most important and most time critical to us and our security.

  • First, a supply chain warrants special focus when its disruption would quickly threaten lives, core defense missions, or essential economic functions.
  • Second, when substitutes or workarounds can’t be instituted in time to mitigate the disruption.
  • Third, when surge capacity can’t be built on a reasonable timeline.

This approach, as they emphasize, acknowledges that developing resilience is costly and helps ensure that scarce capital goes to the most vital choke points. In fine, it targets links for better allocation of our non-tree-sprouting spending money

This is a good test, and it’s applicable in another way than purely domestically. It needs to be applied in reverse, also. What are the analogous critical choke points in our enemies’ supply chains? Applying the test to those would let us better target our enemies’ ability to wage and sustain war against us, our friends, and our allies.

“News” Media Arrogance Personified

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The lede demonstrates this “news” reader and opinionator Katie Couric’s personal arrogance in presenting what she’s pleased to call “journalism.”:

Katie Couric spoke out against “bothsidesism” in news coverage and insisted people don’t want “just the facts” in the current media environment.

Yes, we do. We want, even though “news”…presenters…don’t want us to hear, all the facts, even though Couric’s presenters prefer to provide only those that suit the presenters’ predetermined narrative. We object strongly to censored presentations, a censorship and bias that’s revealed by what facts are withheld as much as by what facts are selected for reporting.

We don’t mind biased, opinionated commentary, but we expect it to be in carefully labeled opinion pieces, not opinions masqueraded as fact in what is alleged to be news reporting. And, we expect even opinionated commentary to be informed by logic and facts, not hype or hyperbole. Couric again:

So what I try to do, and what we try to do, is help people stay abreast of everything that’s happening, which is increasingly difficult given the velocity of things that are thrown at us primarily by this administration. But try to understand and give them some perspective and context and help explain in some cases why people need to be aware and concerned about some of the things that are happening in this country.

Pick one. You can’t help us “stay abreast of everything that’s happening” when you insist on no ” bothsidesism,” when you insist on only presenting one side. [T]ry to understand and give [us] some perspective and context and help explain?

This is Couric insulting our intelligence. If she had the integrity to present all of the facts, we’d be able to understand for ourselves, to see for ourselves the perspective. We’re not stupid, as she so plainly says we are. Especially when she says she tries to give us some context when, with her own words, she withholds context by presenting only those facts she’s carefully selected for presentation. That contradiction is especially insulting to our intelligence.

And there’s Couric’s precious self-importance, her velocity of things that are thrown at us as though she and her cronies are the audience of any administration’s, much less the current one’s, actions. Couldn’t be that us citizens are the audience.

This is why the so-called news media—both reporting and opinionating—are so distrusted by so many of us.