About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, January 19, 2020

A Tribute To Gertrude Himmelfarb

On Monday December 30, 2019 Gertrude Himmelfarb died @ the age of 97.
Carol & I had the honor of meeting Professor Himmelfarb @ the October, 2007 ACTA higher education conference in Washington, DC that was highlighted by Professor Himmelfarb receiving the 2007 Phillip Merrill Award for Outstanding Contributions to Liberal Arts Education.
Professor Himmelfarb was introduced @ the awards banquet by both her son Bill Kristol & my friend Anne Neal, then-President of ACTA.  I remember Kristol pointing out that for every 850 word op-ed he had written that his mother had written a 350 page book.  In short, he was a guy with an opinion & his mother was a scholar.
Professor Himmelfarb's acceptance speech was entitled "The Sovereignty of Truth."
The speech, impeccably delivered, traced the origin of ACTA, a recollection of Philip Merrill as a public servant, publisher, entrepreneur, & philanthropist of great distinction, & the acknowledgement of the first two recipients of the award Robert George of Princeton & Harvey Mansfield of Harvard.
Professor Himmelfarb recalled how both of her predecessors, in receiving the Phillip Merrill Award, elaborated on ACTA's motto – "Promoting academic freedom & excellence."
She recalled how Robert George talked more precisely about freedom for excellence.  Not freedom for its own sake, but freedom for the sake of excellence – "the well-being & fulfillment of human beings" – one of my two passions in this world.
She then recalled how Harvey Mansfield had spoken in the same theme of excellence as Professor George, but not any kind of excellence in small things, but the specific kind of excellence that makes for greatness – not the human dignity that attaches to humanity as a whole but to the individual aspiring to greatness.  Now she had my full attention.
Professor Himmelfarb added to her predecessors remarks by adding two other ingredients into the recipe of excellence – morality, & not just morality for its own sake but for the sake of truth.  She pointed out, quoting John Henry Newman, that "truth is truth all the world over."
Now to me, who has lived Ayn Rand's philosophy my entire adult life, this sounded an awful lot like "A is A" bringing up the four tenets of objectivism: reality, reason, self-interest, & capitalism with reason being man's only absolute.  It is this call to reason that I regularly make encouraging readers of this blog not to believe anything they read on this blog unless it is consistent with what they already know to be true, or unless they have taken the time to research the matter to prove its accuracy to their own satisfaction – paraphrase from Neal Boortz to listeners of his radio program regarding Neal's program.
Professor Himmelfarb defended Victorian virtues in her work over the decades in a forceful defense of morality, not as a moral prude in a politically correct way, but rather as the basis of a realistic standard for living that creates goodness, wealth, & an understanding of what is right & wrong that perpetuates itself.  It is when mankind rejects moral absolutes & replaces them with how we think, how we feel, how we believe, or that we never want to say something that is politically incorrect that our culture is not in tune with a fixed standard of right & wrong.  Just look @ any of the problems or destructive movements our society is bogged down in today & see for yourself how throwing out standards of right & wrong is the root cause of just about all of these problems.
In summary, Gertrude Himmelfarb's life was all about freedom, excellence, morality, work, thrift, prudence, temperance, self-reliance, personal responsibility, & most of all the Sovereignty of Truth.  She thought that the moral excellence of doing what is right & avoiding what is wrong was the overriding factor in rejecting the countless number of destructive government dependent programs available to people.
A charter member of this blog, who Carol & I met all those years ago @ the Phillip Merrill Award banquet, wrote to me after learning of Professor Himmelfarb's passing that she "had an immense impact on me" & that the word "'brilliant' doesn't begin to capture it."
Brilliant yes.  But to me that night, October 5, 2007, I realized something more than that – I knew I had been in the presence of greatness.

Sunday, January 5, 2020

Retirement Investment Quiz

Below is a real life Retirement Investment Quiz that should be taken seriously by anyone, regardless of age, but especially those approaching retirement or are new to retirement or those who have retired in the last five years.
If you have been thinking about reviewing your retirement investment plans this post is particularly timely because academic research shows that January (or a birthday) is the best time for people to review their plans or make new goals – like New Year's resolutions – & that the more specific & realistic the goals are the better the chances of keeping them & improving your life – like considering the points covered in the background below to the subject quiz & the questions themselves.
I know from talking to readers that people are confronting the situation discussed in the background below to the subject quiz & shown on the two graphics that follow. 
Please respond with as much detail as you can letting me know your answers to the questions in the subject quiz below which provides a good opportunity for everyone to learn from & respond to your comments.  You don't have to answer every question.  A good interchange of ideas is the goal.
I will post all reasonably correct answers or alternatively will send my solution privately to anyone who requests it for any of the questions in the quiz.
click on graphic to enlarge
The above graphic shows the danger of being fully invested in stocks @ retirement, like in the S&P 500 which is currently near an all time high, & how diversifying your portfolio to include 40% or 70% allocations of bonds with the rest in stocks mitigates this danger.  
The three simulations represented in the above curves each start with someone retiring in 2000 – a year designed to show the effect of a sharp decline shortly after retirement.  The double whammy of a sharp market decline while simultaneously taking withdrawals, & increasing them to account for inflation to help make ends meet, has scared many people into going back to work.
Someone retiring in 2000 fully invested in the S&P 500 found their hypothetical $500,000 initial portfolio valued @ less than $300,000, after the withdrawals specified on the graphic, just three short years after retirement – very scary indeed.  By 2019 the remaining value had dropped below $200,000 & of course the retiree is nineteen years older than when he retired & less likely to want to go back to work – if they can find a job.
Meanwhile the two portfolios with the above mentioned bond allocations went through the same downturns, just like the all stock portfolio but not as sharply, & are both currently valued more than twice as high as the all stock portfolio with the 70% bond allocation portfolio valued @ $508,000 – more than the initial value in nominal dollars, even after 4% annual withdrawals that included 3% annual compound inflation increases for the withdrawals for 18 years.
A word to the wise should be sufficient – it took more than 25 years for the Dow Jones Industrial Average to surpass its pre-Depression peak (1929 to 1954).  The DJIA first closed above 1,000 on November 14, 1972 & just two years later on December 6, 1974 it closed @ 577.60.
There have been plenty of rocky starts for retirees who were 100% invested in stocks & people retiring in November 1972 or January 2000, fully invested in stocks, are examples of them as shown by the above statistics.
The Nasdaq Composite Index, consisting of about 2,700 companies, is currently 9,000, near an all time high – but stalled starting in March 2000 falling far below the 5,000 level for 15 years before resuming its upward climb.  It is a very good chance that many people invested in the stock market were affected.
The other side of the coin is young people saving for retirement who have time on their side – these people will find investing in stocks quite beneficial if given enough time, patience,  discipline, & courage.  The above Nasdaq Composite Index account is a good example of why someone new to retirement should be knowledgeable of asset allocation & someone in their twenties & thirties, dollar cost averaging 10% of their gross income every year, has time to watch the market play out.
The following graphic shows that a 20 year older, now 70, who invested $1,000 in the S&P 500 on January 1, 1970 saw that initial investment grow to $138,908 on August 31, 2019 if they never touched the investment. 
 click on graphic to enlarge
The above graphic shows the importance of someone in the asset accumulation stage of their life staying invested.  Missing just the best day in the market during the almost 50 year time span shown on the above graphic reduced the growth of the investment by over $14,000 & missing the best 25 days reduced the growth by over $106,000.  Wow.
The men I used to buy gasoline from in the 1980s often told me of stocks they bought in the 1930s & 1940s that realized growth like that shown on the above graphic – much of which came from dividend growth.  Their philosophy was to buy while young & hold forever – but that gets us into stepped up basis for heirs & estate planning & the trade off of a market decline like that shown on the top graphic, or worse, versus paying capital gains taxes @ a market peak & reallocating the after-tax portfolio - which is beyond the scope of this post & doesn't even tangentially touch the point of the subject quiz.
Retirement Investment Quiz
Part A – Top Graphic – Better Safer Than Sorry, Three Allocations Of Withdrawals Following The 4% Rule
1.  Is the balance in someone's portfolio who stayed fully invested in stocks from 2000 to 2019, before taking inflation into account, more or less than 40% of the original value of the portfolio in 2000?  Is it more or less in 2019 than 40% of the original value of the portfolio after taking inflation into account?
2.  What is the amount of the initial withdrawal in 2000 for any of the three scenarios?
3.  What is the amount of the withdrawal in 2019 for a retiree who made an initial 4% withdrawal in 2000 & continued it every year thereafter including 3% compound annual inflation increases to protect the original purchasing power of the initial withdrawal?
4.  Actual inflation from 2000 to 2019 was an annual compound rate of 2% - a figure that is less than the 3% used in the graphic to account for inflation of each subsequent withdrawal after the first withdrawal.  Does a person who retired in 2000, invested in 30% stocks & 70%  bonds, have more or less real inflation adjusted purchasing power remaining in their portfolio in 2019 than they did when they retired based on the actual 2% inflation rate?  Please explain your answer.
Part B – Bottom Graphic – Hypothetical Growth Of $1,000 Invested In U.S. Stocks In 1970
1.  True or false:  Most of the growth of an investment that continuously doubles over time, without ever falling in value, increases most dramatically the first years of growth.
2.  Given the information from the CPI Inflation Calculator below provided by the Minneapolis Fed:  The portion of the growth from $1,000 to $138,908 in nominal dollars that is made up by inflation is A) less than $30,000, B) $30,001 to $60,000, C) $60,001 to $90,000, or D) more than $100,000?
 click on graphic to enlarge
3.  The difference between the compound annual rate of growth for the top return ($138,908) & the bottom return ($32,763) is closest to A) 1%, B) 10%, C) 15%, D) 25%, or E) 30%.
4.  Regarding Question #3: The difference between the real inflation adjusted compound annual rate of growth for the top return ($138,908) & the bottom return ($32,763) is closest to A) 1%, B) 10%, C) 15%, D) 25%, or E) 30%. 
5.  The past 20 years the average annual return on the S&P 500 has been 6.2% as the index moved to an all time high – source Glenn Ruffenach writing in the WSJ.  Is this rate of return greater than or less than the long term average for the S&P 500 over the past 50 years?
6.  What is the compound annual rate of growth for a $1,000 investment made in January 1970 that increased in value to $138,908 in August 2019?  What is the value of such an investment in constant 1970 dollars?

Sunday, December 22, 2019

Christmas & New Year's Message For Hong Kong

Long time readers will remember the Christmas & New Year's post of 2013 dedicated to Ukraine – a country fighting for its freedom much like America was on Christmas night 1776.
My interest in Ukraine started when Google provided me with statistics showing that Ukraine consistently had the second biggest readership in RTE, after the U.S., for over two years running.  I know that many pro-liberty protesters in Ukraine use Facebook posts & blogs to communicate with each other.  I am just so humbled & honored to think that RTE played even an infinitesimal part in this revolution for freedom.
Well, in this same light I was very surprised the past few weeks to see that the readership in Hong Kong has skyrocketed to more than three times the U.S. readership.
The situation in Hong Kong is a little different than in 1776 America or 2013 Ukraine – both America & Ukraine had gone through the bondage to spiritual faith & spiritual faith to great courage stages & had moved to the courage, fighting for liberty stage of a young country seeking freedom.
Hong Kong had experienced freedom under British rule from 1842 until July 1, 1997 when once again Hong Kong was returned to China under the "One Country, Two Systems" principle that called for Hong Kong to be autonomous for 50 years, until 2047, – Hong Kong is part of China but has a largely separate legal & economic system.  In 1997 Hong Kong was both freer & wealthier than mainland China but the wealth gap has narrowed while the freedom gap has widened.
Equating freedom to taxes – Hong Kong has no capital gains tax, no withholding tax, no estate tax, no dividend tax, no sales tax or value added tax, & no tax on interest.  Tax is paid by property & land owners @ a rate of 15% of their rental income.   The first tax in America was the Tariff Act of 1789 that imposed a 5% flat rate tariff on all imports.  See graphic below that shows the low rate of taxation from 1792 until 1913 when the income tax was implemented & the mid 1930s when the Social Security payroll tax was implemented & then again in the mid 1960s when it was expanded to include the Medicare payroll tax.  Notice the height of the yellow line over the entire time frame of 1792 to 2016 which shows the method & level of taxation of our Founders.
  click on graphic to enlarge
The problem for Hong Kong started last June when a bill that would have allowed Hongkongers to be extradited to mainland China for trial was introduced – this didn't sound good to them.  On June 9 an estimated one million people marched in an antigovernment protest of this bill & Hong Kong has not been the same since.  One large protest march after another has followed & confrontations with the police has escalated.  See photo below that shows the inspiration America is for this freedom movement.  Hongkongers are calling for U.S. support – not from anyone or any place else.  The U.S. is the only place that enthuses hope for freedom & that is why we are constantly being beaten down by enemies – both foreign & domestic.
click on photo to enlarge 
The quest for a constitutional republic with strong democratic principles like America usually starts with a few people of substance, living under tyranny, quietly getting together to plan a better way.  This is happening in many dictatorships around the world today & of course is squashed by the dictatorship as soon as it is discovered – with the freedom planners being killed.  Ukraine & Hong Kong are still in the liberty to abundance stage while America has descended into the apathy to dependence stage, unfortunately led by millennials who don't know better, that every democracy goes through once the voters foolishly realize that a majority can always vote for the candidates who promise the most benefits from the public treasury – & boy do we have that now with every Democrat candidate for president outdoing each other in their lurch toward total government dependence (i.e., socialism & communism).
Last month Hongkongers exercised their right to vote when pro-democracy candidates won 201 seats to only 28 for the Hong Kong establishment or pro-Beijing parties.  This was a very great defeat for the Hong Kong government set up by Beijing.  The turnout was over 70% of eligible voters.  The problem is that the district councilors elected have little power except for local concerns so the freedom fighters are still living under the heavy handed threat of the tyranny & brute force of mainland China – but they persist as we did in the 1770s.
So it is to Hong Kong, & specifically the libertarian people who dare greatly to protest in the streets against as brutal a regime as exists on earth, that I dedicate this Christmas & New Year's message – namely, it is the future that they bring when tomorrow comes.