Democracy and Economic Opportunity

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Frustration with polarizing politicians, unequal wealth distribution and personal economic opportunities breed dissatisfaction with democracy in America

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
– Winston Churchill

A Pew Research Center survey found that the discontent that many citizens of democratic countries feel are tied to concerns about the their respective domestic economies, individual rights and out-of-touch elites. Furthermore, most believe elections bring little change, that politicians are corrupt and out of touch and that courts do not treat people fairly. On the other hand, citizens are more positive about how well their countries protect free expression, provide economic opportunity and ensure public safety.

Several surveys of how well democracy is working for the average citizen vary considerably across nations. In Europe, for example, more than six-in-ten Swedes and Dutch are satisfied with the current state of democracy, while large majorities in Italy, Spain and Greece are dissatisfied, according to the Pew Research Center survey. Thus, it is safe to assume that citizens per capita income and their respective country’s economic business cycle seem to impact democratic dissatisfaction differently in some advanced and emerging economies.

Furthermore, it appears that there is a considerable correlation between the prevailing views of the domestic economy and the assessments of democratic performance. If the domestic economy is growing and the perceived distribution of wealth are seen as relatively equitable, then people tend to have a more favorable view of democracy.

Source: RICHARD WIKE, LAURA SILVER, AND, ALEXANDRA CASTILLO, “Many Across the Globe Are Dissatisfied With How Democracy Is Working”, APRIL 29, 2019

Importance of Embracing Failing

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Everyone, and we mean everyone, experiences failure in life.

The difference is that most successful people have embrace and learned invaluable lessons from failure. Essentially, when they fail; when they embrace failure, they tend to learn lessons from the experience. They tend to grow and mature. They achieve new understandings and perspectives on life, love, business, money, investments, relationships, and people.

You can’t control the volatility of the stock market, market forces, the miserable weather or readers dismal response to your blog post. What you can control is your reaction to it.

We must learn how to embrace failure positively and understand that fearing failure only holds us back from realizing our full potential. By recognizing and accepting that everyone fails, we are better able to embrace failure as a regular part of life. For example, American President Lincoln and British Prime Minister Churchill both failed multiple attempts to get elected to public office until becoming President of the United States and Prime Minister of Great Britain, respectively. Thus, since most of what we learn is from trial and error, beginning when we fall down again and again trying to walk, it’s only natural to recognize that everyone fails … and often.

“Winning is great, sure, but if you are really going to do something in life, the secret is learning how to lose. Nobody goes undefeated all the time. If you can pick up after a crushing defeat, and go on to win again, you are going to be a champion someday.” William Rudolph

Thomas Edison, one of the greatest inventors in modern history, once said, “Genius is one percent inspiration, ninety-nine percent perspiration.” While experimenting on the incandescent light bulb, Edison exclaimed to a reporter’s question, “I have not failed. I’ve just found 10,000 ways that won’t work.” Success typically comes after numerous failures. There’s something magical that happens when you don’t give up.

Failure can be an immense asset if we are trying to improve, grow, learn, or do something new. It’s the necessary feature that precedes nearly all successes. And, there’s nothing shameful about being wrong, about changing course. Each time it happens we have new options. Problems can become opportunities and new insights to solve old challenges. Deep down we know that our past failures have contributed immensely to our personal growth.

People fail in small ways all the time. To gain the benefits, we have to learned from the failure. The simple truth is – no great success was ever achieved without failure. It may be one seemily life changing failure. Or a series of failures. But, whether we like it or not, failure is a necessary stepping stone to reaching our ultimate goals and achieving our dreams.

Carried Interest Tax Loophole

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The carried interest loophole is just one of many ways the U.S. tax code offers preferential treatment to some Americans.

The U.S. tax code treats earned income from labor and investment income from dividends and capital gains differently.

If you are paid for performing a service (such as managing a company), your compensation is subject to ordinary income tax rates.

If you make an investment (such as buying the stock of a company), any profits you earn when selling that stock are subject to the lower capital gains tax rates.

Carried interest loophole allows people who manage investment funds, such as private equity funds and hedge funds managers, convert their compensation as if it were into lower-taxed capital gains, when it is actually derived from the labor and skill involved in managing other people’s investments.

Essentially, the partners in businesses that manage pools of money on behalf of investors are paid in two ways. One part of their income is a “management fee” for managing the investments. This fee is generally taxed as ordinary income.  The other part of the fund managers’ income is their cut of the fund’s profits. The fund managers treat their part of the fund’s earnings as a capital gain, subject only to the lower-taxed capital gains tax rate.

Balancing-Taxes-figs_webtable

Investment managers typically take a management fee equal to just 2 percent of the assets they manage—plus a 20 percent cut of their investors’ profits. In doing so, they are able to shield the bulk of their income from ordinary tax rates.  As a result, theses wealthy fund managers have experienced disproportionately large income and wealth growth compared to everyone else.

Source:  Seth Hanlon and Gadi Dechter, “Congress Should Close the Carried Interest Loophole”, (Washington:  Center for American Progress, posted December 18, 2012), available at  https://www.americanprogress.org/issues/economy/news/2012/12/18/48469/congress-should-close-the-carried-interest-loophole/

 

What Are Cyclical v. Defensive Stocks? – TheStreet

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Cyclical companies are those that see higher revenue growth when the economy is growing and lower revenue growth – sometimes contractions — when the economy is in recession.
 
Defensive companies keep humming along whether or not the economy is growing.

— Read on www.thestreet.com/video/-what-are-cyclical-v-defensive-stocks–15178611

7 Low-Risk Investments With High Returns in 2019 | TheStreet

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Low-risk is a relative term when it comes to investing. The classic risk-free investment is Treasury securities, but even they carry some degree of price risk. For those looking for low-risk investments, here are some to consider….

— Read on www.thestreet.com/personal-finance/low-risk-investments-with-high-returns-15170504

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Technology companies, such as Google, Facebook, Amazon, and TikTok, are not only social media companies. At their core, they are primarily massive data collection companies which collect massive amounts of individuals’ public and private personal information.

When individuals share vacation photos on Facebook or search for birthday gifts on Google or use TikTok’s mobile app to share activities with a colleague, this information is collected, manipulated and assessed for the monetary benefit of the social media company.

Privacy of individuals’ information, a major concern of citizens of Western Europe and the United States, and nonexistent for citizens of Communist China and the Russian Federation, are a growing concern.

Compound Interest

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“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”
George S. Clason, Richest Man in Babylon

The real secret to compound interest is less about the amount that is saved, and more about the amount of time it is invested. One final advantage to begin saving and investing earlier rather than later is that the stock market presents a much better opportunity for long-term investors than it does for short-term investors.

Although nothing is ever guaranteed when it comes to investing, history shows that the longer you are invested, the greater your chance for favorable returns. What truly matters in investing is not timing the market but time in the market. Get money invested early so your time horizon is long enough to ride out short-term market volatility in pursuit of long-term gains and achieving long term goals.

Pay Yourself First and Automate Your Investments

It is recommended that you pay yourself first and that at least 10% to 15% of your income is saved into your retirement accounts.

Most Americans tend to save wants leftover after paying their monthly bills and spending on discretionary items. Instead, a better way is to spend what is left after first putting a percentage of income into savings. The easiest way to make this happen consistently is by setting up automatic contributions from each paycheck to a retirement savings account. But don’t stop there. It is also recommended that you increase your contributions each year or with each raise.

A small increase in your contributions won’t be very noticeable, but it will make a big difference in your balance over the long term.

  • The longer your money is invested, the more compounding you experience.
  • Stock market should be viewed as a long game, not a quick turnaround.

Because of these reasons, you should start saving and investing today.

Strong U.S. Economy

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The U.S. economy is strong and growing.  The job growth numbers have been good over the past several months and unemployment remains at the lowest rate in five decades for all Americans, including African-Americans and Hispanics.  Wages for non-supervisory workers are increasing and inflation rates continues to hover below two percent. The financial markets are at all-time high record levels.  Additionally, the likelihood for an U.S. economic recession in calendar year 2020 appears more unlikely.

Despite all the positive U.S. economic news, there are multiple areas of  concerns expressed my many Americans regarding the strong economy.  They point to structural changes in the economy, growing inequality between the upper and lower classes, and an uneven economic recovery in the wake of the Great Recession.  Essentially, the benefits and opportunities created by the strength of the U.S. economy have failed to filter down equally to every American.

Many Americans are feeling further economically marginalized and left behind by the changes in the economy and workforce.  You hear frequently from financial news and social media that there are not enough skilled workers to fill the job openings that exist in corporate America. Many high paying unskilled manufacturing jobs that existed two decades ago have migrated overseas to countries like Mexico, China and Vietnam.

The wealthiest Americans, especially those owning assets and large stock portfolios, have realized the most benefits from the strong economy and seemily never ending bull market.  This dichotomy of whom has benefited most from the strength in the economy is driving the widening rift between the haves and haves not within the country.

America must find away to ensure all Americans, not just the wealthy and elite, benefit from the strong economy and bullish equity financial markets.  Essentially, the prosperity of the counntry must truly lift all boats and avoid leaving some stuck in the mud.  

Porsche Experience Center in Atlanta

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Spent a fabulous rainy November Friday driving a 420 max horsepower 911 Carrera S at the Porsche Experience Center in the ATL. The experience was tremendous navigating the Porsche 911 Carrera S through hairpin curves, kick plate skids, controlled spins and at high speeds around the 1.6 miles of connectable track.

Enjoyed driving the one-mile handling course which is designed to mimic a winding country road with challenging curves and a straight roadway that allows the driver to achieve maximum speed. 

Must say that the best part of the ninety (90) minute Porsche driving experience was the wet, low-friction circle that tests a driver’s expertise to handle the vehicle during induced spinouts. A close second was the thrill experienced launching the Porsche from zero to sixty (60) mph plus in less than three (3) seconds. Handling the 911 Carrera S through a variety of dynamic and initiated spinouts, and launching was thrilling and challenged one’s skill to control the vehicle.

Was not sure what to expect or how much I would enjoy the experience of driving a high performance Porsche, especially in the rain, since I am not a “car guy”. I prefer to invest my money in appreciable assets such as stocks or real estate instead of in luxury, high performance vehicles. But, the thrill and delight derived from pushing the limits of the Porsche 911 Carrera S was an experience I shall relish.