Black and Hispanic conservatives and white male liberals: A common ground

Like it or not the reality is that there are racial differences in political opinions. I was listening to the radio and the commentator said that blacks and Hispanics were conservative but voted liberal and was wondering why. Both groups have higher percentages of regular church goers than whites but vote democratic. Whites on the other hand mostly vote Republican in national elections. Bob Beckel once remarked that the Democrats lost the white male vote in the Goldwater election and have slipped ever since. Given the high percentage of church goers I wondered how blacks and Hispanics could support a party whose leaders routinely trashed religion and actively seek to minimize it in America. So I was wondering whether blacks and Hispanics were truly conservative but thought it was in their best interests to vote democratic? The best site I know for looking at the answers is the Pew Research Center (pewresearch.org). I looked at the support for the hot button issues of abortion, gun control, gay marriage and immigration. Here is what I found from Pew Research Center polls taken in 2009.
Support for:
Abortion
White 47%
Black 50
Hispanic 39
Naturally I presumed that the lesser Hispanic support was because of Catholicism.
Ban Handguns:
White 38%
Black 64
Hispanic 61
I was stunned. I grew up in the deep south and every black adult I knew had guns. Basically the attitude was that protection was needed because the local law enforcement people would not. It would seem that blacks and Hispanics not whites would be the ones most in favor of handguns.
Gay Marriage:
White 39%
Black 26
Hispanic 45
Again I was stunned, not because of the low black support because homosexuality is still widely stigmatized in black communities but because of the high Hispanic support and their catholic faith.
Support for the Arizona immigration law:
White 72%
Black 42
Hispanic 27
Again I was stunned, but this time by the black percentage. Since illegal immigration has been touted as a vehicle for job loss for blacks, it would seem that blacks would favor more restrictive immigration laws.
Well back to the question: are blacks and Hispanics conservatives. The results from Pew indicate that they are not. Indeed, there are black and Hispanic conservatives but apparently their percentages equal those of white male liberals.

So what happens when China explodes?

What an amazing year! We have seen turmoil in Yemen, Iran, Algeria, Bahrain, Tunisia, Qatar, Syria, Egypt, Lebanon, Sudan, Morocco, Oman, Mauritania and Libya. Did I leave out any? The despots in the Middle East and Africa have probably not had a worse year. Naturally, the question is "when will China blow up"? Consider the following: everywhere in the world, the Chinese are capitalists. They are the entrepreneurs, the shop keepers, the bankers, the merchant class all over the world - except mainland China. In their native homeland, the communist government is practicing fascism - big government and big business and has allowed only limited entrepreneurship among the masses. If you think the Chinese economic engine is mighty now, imagine what it would be if the Chinese people's freedom to invest, to choose, to own property were unleashed? But right now, Chinese mightiness is vastly overstated and overrated. Consider that now domestic consumption is only a pitiful 35 percent of GDP. That emphasis on exports while surpressing imports is an historically failed strategy. It harkens back to mercantilism which was derided by Adam Smith in 1776 as lowering the economic well being of the British people. The same is true today. With the Chinese so dependent upon exports, the slowdown in the world economies is leading to a sharp decline in Chinese growth. Chinese well being has not been appreciably affected by its economic growth. The Chinese poor and its rural population have benefited hardly at all. At home, Obama fuels class envy. The same is doubly true in China where there is real discord between the poor majority toward the nonpoor and the well to do bureaucrats. China's problems have been compounded by the anger of its people over its staggering losses on its holdings of US Treasurys and other foreign assets estimated to be over $3 trillion. Add to this the growing threat of inflation and revaluation of the yuan. All this means that the Chinese are in real trouble. Jealousy and envy among its people, a faltering economy, authoritarian leadership, lack of democracy and a myriad of troubles point to the inevitable - a collapse of the Chinese economy and a revolt of its amongst its people that will make the upheavals in Africa and the Middle East look like little leaguers.

Barack Obama is brilliant - so what's the good news?

Isn't it interesting that usually the press accords someone with degrees from Harvard and Yale with intelligence - unless his name is George Bush? I am old enough to remember the emergence of Jimmy Carter on the national scene. He was trumpeted as being perhaps the most intelligent candidate for president since Woodrow Wilson. Indeed, he went to the US Naval Academy and was a nuclear engineer. Consider that he is also a Nobel laureate, a professor, best selling author, humanitarian and farmer, it is difficult to quarrel with Carter being an accomplished individual. The Christian Science Monitor has gone as far as saying that “Carter was one of the most brilliant presidents we have ever had”. I am not going to dispute that. One evidence of the truth of the statement was that he appointed me to run the National Credit Union Administration. However, all that brilliance and intelligence did not translate into a successful presidency. Carter was plagued by the Iranian hostage crisis and skyrocketing energy prices. He gave the impression that he could not make a tough decision. The usually fawning Washington Post ran a Herblock cartoon with Carter and his senior advisor Hamilton Jordan walking into a room full of the polls with Carter saying “Let’s go see what our policies are today”. The pundits concocted a misery index. The economy was in sad shape and there was a “crisis of confidence”. Carter famous “malaise” speech said:

“I want to talk to you right now about a fundamental threat to American democracy. . . . I do not refer to the outward strength of America, a nation that is at peace tonight everywhere in the world, with unmatched economic power and military might. The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation. . . .In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning. . . .I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit, and to set your thermostats to save fuel... I have seen the strength of America in the inexhaustible resources of our people. In the days to come, let us renew that strength in the struggle for an energy-secure nation.”

Isn’t it stunning how this speech – with the exception of the reference to God – could have come from the mouth of our current intelligent, brilliant president – Barack Obama?

Harold Black's First Law Lives

All my students know Harold Black's First Law: "Any law worth being circumvented will be". Evidence confirming the law abound. Indeed, it is harder to find disconfirming evidence. Consider the impact that regulators have had on community banks. Everyone knows that regulators always over-react. Rightly or wrongly the regulators were castigated for their perceived lack of regulatory oversight prior to the great recession. As a consequence, they have over compensated. The community banks are now faced with the regulators looking over their shoulders and micro managing. Since hardly any regulator has any experience actually running a financial institution, it is not surprising that they are mucking things up and actually working counter to any economic recovery. When lending should be encouraged it is being discouraged. Recently Main Street Bank of Kingwood, Texas has announced that it is giving up its charter and reorganizing as a pure small business lender. Community bankers tell me that every loan is closely scrutinized - so those loans that the banker would normally make based on experience, will not be made because the regulator does not understand the customer. Regulators are also telling bankers to raise capital even in cases in which loan losses are low. Regulators are demanding changes in portfolio balance based on what might happen rather than what is likely to happen. So many bankers are saying "take this bank and shove it". However, they have to get permission to quit with regulatory approval. The bankers who are quitting are not really giving up banking. Rather they are giving up being a bank. There are other institutions that perform banking functions without having to get a bank charter and have no banking regulator oversight (finance company, REITs and a mortgage banking company are examples). These institutions can't take deposits. Rather they borrow the money to fund their portfolios. So Main Street's bankers who got tired of trying to bank under the thumb of the regulators can quit and organize a bank-like firm and do what they do best - banking.

Rational markets? Who says?

One of the things taught in finance classes is that markets are rational. The markets, students are told, price stocks based on their estimate of future earnings. News does not move markets unless the news is unanticipated for markets have already incorporated news that was expected. Students are also taught that markets are informationally efficient but there are degrees of efficiency. Weak form efficiency is when stock prices reflect only past information. Semi-strong efficiency is when stock prices reflect publicly available information. Strong market efficiency is when markets know all information both public and private. There is evidence that all have some truth associated with them - yes even strong market efficiency. However, recent events belie all notions of market efficiency. The markets move on reports of unemployment, inflation, consumer sentiment, oil prices, riots in Tunisia, Greek debt, French banks, if the Fed might announce easing or if the Fed does nothing. None of this can remotely be considered rational - especially in light that every knows the economic numbers will be revised. It is also interesting that the revisions do not move markets even though the initial numbers are always wrong. Consider last week when the Fed announced no policy change. The Dow fell by 200 points. Then when the statement was scrutinized, the word went out that the Fed had actually said that while it anticipated no change, that it had discussed the use of a wide range of tools. The markets immediately rebounded by 500 points. Such actions by professionals can only be described as irrational and put a lie to all that finance professors teach. Maybe its time to admit that the markets have a herd mentality and all those traders simply don't have a clue. By the way, most make their money by trading and not by the profitability of their actions. So just keep that in mind. Brokers get paid by the trade regardless of whether the stock goes up or down so if you are out there churning your stock along with all those professionals, your net return will be lower than if you simply bought and held. Its time for all to re-read Burton Malkiel's Random Walk Down Wall Street.

More Missed Opportunities

I have essentially been away for a couple of weeks (at the Outer Banks working on my tan). I did not read a newspaper, nor looked at the news, nor did anything on the internet. When I got back I learned that the stock market has some wild swings - although it was almost at the same level as when I left. The Libyans had Qaddaffi on the run, Warren Buffett feels guilty about his tax payments, and the president has decided to run for re-election by bashing the Congress. First, I do not pay any attention whatsoever to the daily movements of the market. Since I am a long term investor, I care about trends and only look at what the market is doing quarterly. This day to day stuff can drive you crazy. It was shameful how the financial networks were milking the swings, actually saying that retirees should be worried about their 401Ks. Well if those accounts are not properly diversified then there should be concerned but otherwise - no. Second, I am certain that the administration's PR machine will tout the stance Obama took on Libya in supporting the NATO effort despite the criticism from Republicans for circumventing the War Powers Act. I guess this will be elevated to the "I got Usama" level. Third, there is already a mechanism in place for Buffett to send his guilt money to the IRS. However, in general if he is espousing raising the tax on the wealthy, he should know that there is not enough money there to make a serious dent in the deficit. Also, if the result will be to tax entrepreneurs and job creators, the result will be perverse. History tells us that when you raise the tax rates of upper incomes, you get less tax revenue. If you want to drive the high earners to shelters and off shore, then this is the ticket. Lastly, I am absolutely convinced that this president and his staff are tone deaf. Blaming the republicans in congress for the failures of this administration assumes that the voters forgot that Obama and the democrats had bullet proof margins in both houses of congress. Obama got health care "reform", Dodd-Frank, and everything else except Cap and trade (so he told the EPA to enforce it instead). His minions enacted the left's "progressive" agenda in all of the cabinets and agencies without a single republican vote. He surely can't be serious. Speaking of tone deaf, I have written before that this is a president that enjoys the trappings of the office but not the job. All the golf, parties, fund raisers and toney vacations speak to this juxtaposed to the lackluster leadership in the office of the president. What genius advised the president to go on a bus tour right after the Iowa caucuses in Darth Vader's bus? And what genius said take your vacation at the playground of the rich and famous during a time of perceived crisis, down economic times and general bad news? I would have advised the president to go to Dollywood or to Branson. Think of the power of those optics! I can't imagine Pat Caddell or Dick Morris or Bob Beckel advising any of this nonsense. The president seems clueless but perhaps he knows that unlike his predecessor, the media is going to be silent. But just ask yourself: what do you think the reaction would be if George Bush had done exactly the same things?

Congress has always been a joke. But now it is serious

There is a great website, brainyquote.com. Many of the following are from it.

Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.
Mark Twain

It could probably be shown by facts and figures that there is no distinctly native criminal class except Congress.
Mark Twain

I have wondered at times what the Ten Commandments would have looked like if Moses had run them through the US Congress.
Ronald Reagan

The only difference between death and taxes is that death doesn't get worse every time Congress meets.
Will Rogers

We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money.
Davy Crockett

Being elected to Congress is regarded as being sent on a looting raid for one's friends.
George Will

No man's life, liberty, or property are safe while the legislature is in session.
Gideon J. Tucker

No man's pocketbook is safe while Congress is in session.
Mark Twain

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.
Alexis de Tocqueville

We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution.
Abraham Lincoln