How Stupid Are We?

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Apparently, some of us are very stupid.

I’m shocked and saddened by the spread of evil bullshit by conservative Republicans and the McCain campaign — and the way some of the American public seems to be swallowing it.

It’s all over the Web. I can’t spend an hour reading respectable publications without finding more and more examples.

In a Time Magazine story, “In Battleground Virginia, a Tale of Two Ground Games,” writer Karen Tumulty describes a meeting at a Virginia McCain campaign office:

With so much at stake, and time running short, Frederick did not feel he had the luxury of subtlety. He climbed atop a folding chair to give 30 campaign volunteers who were about to go canvassing door to door their talking points — for instance, the connection between Barack Obama and Osama bin Laden: “Both have friends that bombed the Pentagon,” he said. “That is scary.” It is also not exactly true — though that distorted reference to Obama’s controversial association with William Ayers, a former 60s radical, was enough to get the volunteers stoked. “And he won’t salute the flag,” one woman added, repeating another myth about Obama. She was quickly topped by a man who called out, “We don’t even know where Senator Obama was really born.” Actually, we do; it’s Hawaii.

It’s the sheer stupidity of these McCain campaign volunteers that I find most offensive. Rather than learn the truth — for example, where Obama was born — they’d rather spread gossip, rumors, and lies. They don’t care how their candidate wins — as long as he wins.

And frankly, McCain’s not much better than his volunteers.

FactCheck.org, an independent, non-partisan organization with the lofty goal of checking the facts in public statements to expose the falsehoods, has been having a tough time keeping up with the bullshit hitting the airwaves and the Web this election season. While it has exposed some falsehoods and misleading statements made by the Obama campaign, the vast majority of false claims appears to be coming from the McCain side.

In ““He Lied” About Bill Ayers?,” FactCheck.org staff write:

In a TV ad, McCain says Obama “lied” about his association with William Ayers, a former bomb-setting, anti-war radical from the 1960s and ’70s….We find McCain’s accusation that Obama “lied” to be groundless. It is true that recently released records show half a dozen or so more meetings between the two men than were previously known, but Obama never denied working with Ayers.

In “Dishonorable,” FactCheck.org writes:

The McCain-Palin campaign released the ad, titled “Dangerous,” and said it would be televised nationally. It recycles a misleading, 14-month-old charge that Sen. Barack Obama disrespected U.S. troops fighting in Afghanistan by accusing them of “just air-raiding villages and killing civilians.” It also misrepresents votes in favor of withdrawing troops from Iraq as being votes “increasing the risk on their lives.”

New York Times Op-Ed columnist Gail Collins wrote a brilliantly sarcastic piece titled “Dear Old Golden Dog Days,” where she laments the passing of the early days of the campaign. Of McCain’s current campaign ads and the current Republican strategy, she states:

Now they’re all about the Evil That Is Obama. The newest one, “Ambition,” has a woman, speaking in one of those sinister semiwhispers, saying: “When convenient, he worked with terrorist Bill Ayers. When discovered, he lied.” Then suddenly, with no warning whatsoever, she starts ranting about Congressional liberals and risky subprime loans. Then John McCain pops up to say he approved it. All in 30 seconds! And, of course, McCain would think it’s great. For the first time, the Republicans appear to have captured his thought process on tape.

The Republican campaign strategy now involves sending their candidates to areas where everybody is a die-hard McCain supporter already. Then they yell about Obama until the crowd is so frenzied people start making threats. The rest of the country is supposed to watch and conclude that this would be an enjoyable way to spend the next four years.

One of the 212 commenters (so far) to the piece, Walt Ingram says, in part:

I don’t know if Sarah Palin is really mean spirited or if she understands what a disservice she is doing to the country. I do know however that she is drunk with the euphoria of cheering crowds and the power she has to excite and fire up the anger and hate within her crowds. She wants to get people to believe that Obama is “un-American.” Unfortunately some people are taken in.

The rest of his comment is certainly worth reading, as are the other “Editor’s Selections” comments for the post.

The McCain campaign is apparently able to whip up crowds to a frenzy of hate. As reported on CBSNews.com in “Kerry Condemns ‘Hate-Filled’ Language at McCain-Palin Rallies:”

“The reports are piling up of ugliness at the campaign rallies of John McCain and Sarah Palin,” Kerry writes. “Audience members hurl insults and racial epithets, call out ‘Kill Him!’ and ‘Off With His Head,’ and yell ‘treason’ when Senator Obama’s name is mentioned. I strongly condemn language like this which can only be described as hate-filled.”

The Kerry making this statement is John Kerry at a fundraising appeal for the Obama campaign.

CNN.com also reported on the change in McCain’s rallies in “Rage Rising on the MCCain Campaign Trails“:

With recent polls showing Sen. Barack Obama’s lead increasing nationwide and in several GOP-leaning states, some Republicans attending John McCain-Sarah Palin campaign rallies are showing a new emotion: rage.

The article goes on to report multiple cases of McCain-Palin rally attendees shouting racial epithets, calling Obama a “terrorist” and yelling “treason” when his name is mentioned, and booing McCain when he assures them that Obama is a “decent person.”

This topic even came up on NPR’s Diane Rehm show on its weekly News Roundup. The 10:00 AM segment for October 10 became heated when Diane and her three guests, Eleanor Clift, Matthew Continetti, and Juan Williams discussed how Republican rallies are generating hate toward Obama. Ms. Clift stated that the McCain camp was “flirting with very dangerous rhetoric” and voiced her concerns about vocalizations of “Kill him!” at rallies. (You can download the segment here; the discussion begins at 27:40 minutes.)

It seems to me that the McCain campaign isn’t doing anything positive to improve its chances of winning the election. Instead, it’s polarizing the public, driving a wide wedge between the believers of this “dangerous rhetoric” and the thinking public who know better. It’s dividing the nation.

What good will that do us, especially in these troubled times?

How can the McCain campaign continue with this policy of personal attacks against Obama, attacks designed to scare voters and fire them up to a hateful frenzy? How can this possibly prove McCain to be “presidential material”?

And can people really be stupid enough to believe the Muslim, terrorist pal claims?

I guess folks like these can — the craziness starts at about 2 minutes in:

"Don’t Panic!" Footnote

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I’m not the only one saying this.

A quick footnote to my “Don’t Panic!” post earlier today. I was reading the NYTimes online and stumbled upon an article by Alex Berenson titled “Those With a Sense of History May Find It’s Time to Invest.”

Not only does he refer to the tech stock bubble burst of 2000-2001 (as I do), but he claims:

Now investors have again convinced themselves that this time is different, that the credit crisis will push economies worldwide into the deepest recession since the Depression. Fear runs even deeper today than greed did a decade ago.

But in their panic, investors are ignoring 60 years of history. Since the Depression, governments have become far more aggressive about intervening when credit markets seize up or economies struggle. And those interventions have generally succeeded. The recessions since World War II, while hardly easy, have been far less painful than the Depression.

Read the article. It cites experts:

“I think in years to come — I wouldn’t say months to come — we will perceive this as being a great value-buying opportunity,” said David P. Stowell, a finance professor at Northwestern and a former managing director at JPMorgan Chase. “Two and three years from now, it will seem very smart.”

Don’t panic. It might just be the time to go bargain hunting on Wall Street.

Don’t Panic!

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Understanding how your investment transactions affect the market.

I really didn’t think a post like this was necessary, but after speaking with two different people about portfolio management in these troubled economic times, I realized that the average investor doesn’t have a clue about what a mutual fund is and how it works.

A Transfer is not Just a Transfer

Conversation One went like this:

Him: I’m thinking about transferring my Fidelity balances to bonds or t-bills.

Me: Don’t sell when the market is low.

Him: I’m not selling. Fidelity has bond and t-bill funds. I’m just transferring. When the market starts coming back, I’ll transfer back.

Conversation Two was remarkably similar:

Her: This week, I transfered all my mutual funds to a money market account.

Me: You sold your mutual funds? Now? When the market is in the toilet?

Her: No, I didn’t sell them. I just transferred them from one Putnam account to another. When the stock market starts going back up, I’ll just transfer the money back.

What followed was my attempt to explain that the “transfer” was, in reality, the sale of one mutual fund for the purchase of another. In both instances, my loved ones — yes, they are both related to me — were selling shares in a mostly stock-based mutual fund that had taken a beating with the Dow’s plunge and using the meager proceeds to invest in a different mutual fund based on less volatile (or more conservative) investment types with the same investment firm.

They didn’t see it this way because they mistakenly think that they are invested in the investment company: Fidelity, Putnam, Janus, Dreyfus, etc. They don’t understand that each mutual fund really consists of huge investments in regular publicly traded companies like GM, Washington Mutual, AIG, and countless other firms that have yet to hit the news. When they sell shares of a mutual fund that includes investments in, for example, GM, they are effectively selling GM stock. If everyone is selling, the price goes down.

Panic Feeding the Decline

Clearly, investors are the ones causing the stock market decline. Their panic sales are what’s driving down the prices, thus feeding the panic. The worse the prices get, the more people panic. Every one who cashes out — even by transferring stock based mutual funds to money market funds — is making the situation worse.

Take, for example, GM. On october 12, 2007, its shares were selling for $42.64 each. Although share prices declined slowly throughout the year, the panic of this past week really hit home. On Friday, GM shares closed at $4.89. You can see the decline in this chart:

GM.jpg

Let’s look at the reality of this. According to market valuation of GM stock, GM lost nearly 89% of its value in a year. What happened? Did a UFO hover over a few GM plants and suck them into the sky, leaving a gaping hole? Did GM inventory get spirited away by pixies in the middle of the night? Were all of GM’s cash reserves shredded for some kid’s hamster cage? Were GMs huge asset investments in equipment scrapped for their recycling value?

Of course not. GM’s company value is not just 11% of what it was this time last year. While the original stock price may have been inflated — I can’t say because I’m not an analyst and have not studied GM’s financial statements — there’s no way in hell that the company can be worth a tenth of what it was twelve months ago.

But do investors believe that GM’s total value has declined by 89% in a year? I don’t think so. I believe they’re just panicking, trying desperately to save their finances by cutting their losses. They’re running — screaming that the sky is falling — away from stocks and the declining mutual funds that are based upon their values. As a result, they’re causing much of the mayhem.

More About Mutual Funds

My personal portfolio has declined in value by at least 40% in the past year. I can’t tell you the exact amount. I haven’t looked since Monday. I’m afraid to.

My portfolio includes my retirement funds. And yes, most of them are mutual funds. Most of them were doing very well — one was posting consistent gains of 25% a year and had doubled in value in five years. Like most Americans, I’m a lazy investor. Why do all my homework to handpick investments and then watch them from day to day when an investment firm has experts who can do that for me?

But at least I have an idea of what’s in my mutual funds. Fund names often have a clue. For example an S&P 500 fund is directly tied to the securities that make up the S&P 500. If the S&P 500 goes down 5 points, so does my fund. Pretty simple, right? Another fund name might include the words “Small Market Cap.” That fund is invested in stocks of small market capitalization companies.

Let’s say, for example, that Maria’s Big Cap Fund includes investments in 10 stocks named A – J. (In reality, it would likely include investments in far more securities, but this is a simple example.) Let’s also say that 1 share of Maria’s Big Cap Fund consists of one share each of companies A – J. When I sell a share of Maria’s Big Cap Fund, I’m selling 10 shares of stock — one each in companies A – J. If I have 500 shares of Maria’s Big Cap Fund and I “transfer” my investment to Maria’s Great Money Market Fund, I’m really selling 500 shares each of companies A – J and buying the equivalent dollar value investment in a money market.

Now say that Maria’s Big Cap Fund is really popular and there are 50,000,000 shares of it held with investors. As those investors panic and “transfer” or sell their shares in Maria’s Big Cap Fund, they’re really selling lots and lots of stock. As stock is unloaded in bulk, its value decreases. As value decreases, its price goes down.

This is part of what’s making the stock market so screwed up right now.

No Loss Until Sold

But what’s worse is that many investors are unnecessarily taking losses on their investments. They bought at one price and, as prices drop, they may be selling at a lower (or much lower) price. That’s a loss.

But if they held onto their investments and didn’t sell (or “transfer”), they wouldn’t have a loss — at least not yet. Sure, it would look horrible on their account statements or in Quicken or on whatever online service they might use to track investment value. But until the stock is sold, there is no loss.

I need to say that again, in some different words for those who might not have understood the previous words:

If you do not sell your stock, you do not lose any money.

You can argue this all day long but you will not win. A loss is only on paper until the sale is made. Paper losses aren’t worth the paper they’re printed on. (Pun intended.)

Remember “Black Monday” in 1987? At the time, it was the largest one-day percentage decline in stock market history. Remember when the dot-com bubble burst? Wikipedia even has an exact date for it: March 10, 2000. How about the market right after September 11, 2001? These are just three examples of disaster in the stock market.

But guess what? In each case, the market rebounded. Sure, a bunch of companies were shaken out of existence — primarily after about 50% of the dot-com startups were revealed to be based on ideas that couldn’t generate enough revenue to warrant their market values. But the market that emerged after these disasters was stronger. Values for most “good investments” came back.

I’ve been actively investing in the stock market, through both individual stock purchases via an online brokerage firm and mutual funds. As I mentioned earlier, my entire retirement portfolio is in a variety of diversified mutual funds. I survived as an investor through the dot-com bubble burst — my investments recovered their value within two years. And I fully expect to survive as an investor from the current market madness.

Why? Because I’m not going to sell.

I’m lucky, in a way. Although I’m not a kid, I’m still 15 years away from minimum retirement age. I have time to let my portfolio recover.

Not everyone is that lucky. Some people are just getting ready to retire. Other people — like my mm and stepdad — are already retired and tapping into that investment nest egg to meet their financial needs every day. These people are pretty much screwed — unless the stock market rebounds in a hurry.

And the stock market simply won’t rebound if everyone panics and keeps selling.

Hurricane Norbert

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Too weird for words.

You might think that Norbert is a pretty unusual name. In this country, it is. But it’s also the name of my father and brother. In the tiny NJ town where I spent many of my early years, there were four Norberts — two pairs of fathers and sons — among the 2,000 or so residents.

But that’s not what I’m blogging about. I’m blogging about Hurricane Norbert, which is currently off the west coast of Mexico, heading north. It’s a hurricane with the same name as my brother.

What’s weird is that the previous Pacific hurricane was named Marie, which is pretty darn close to my name.

Okay, you’re saying. That’s an interesting coincidence. But it’s not exactly your name so it really isn’t worth blogging about.

True. But an earlier Atlantic hurricane this season was named Laura. That’s exactly my sister’s name.

So you tell me: what are the chances of three named hurricanes, all happening one after the other, being named almost exactly for all three of the kids in a single family?

Too weird for words.

Team Earth

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I really don’t understand.

I like to think that I’m a “citizen of the world.” To me, that means that I feel that I (and my country) should be a team player on Team Earth.

Team Earth is the team that works together for the benefit of our world. When we see a crisis looming — global warming comes to mind — we work together to try to prevent it. When we see drought in one part of the world causing mass starvation, we step in with funds and technology to help the victims. When we see genocide killing off huge ethic groups in a country or region, we take action against the murderers.

The players on Team Earth do what’s right for the world. They don’t do just what will benefit themselves, especially at the expense of others.

So I can’t understand it when I hear the comments of some Americans — especially those living the good life — when they talk about “bombing the hell” out of one country, stealing the oil of another country, and ignoring the serious problems of yet another country.

I can’t understand why people would rather set up oil rigs in a pristine wilderness to provide just 5% of our country’s current oil use in 2020 or beyond when they could be spending the same money developing alternative energy sources that don’t destroy the planet — or simply act responsibly to reduce their consumption of fossil fuels. (Do we really need to commute to work in vehicles like Hummers?”)

I can’t understand why people who have health plans (today) are so opposed to a universal health care system that would protect those who are less fortunate from financial ruin in the event of a catastrophic health problem.

I can’t understand why any American — other than a very wealthy one — would support a candidate who would give a taxpayer earning more than $2.9 million per year a $269,000 tax cut (on top of the tax cuts already handed out by G.W. Bush) while cutting the taxes of folks making less than $19K by less than $20 — all while the government is funding an expensive War in Iraq and bailing out financial institutions. (The numbers are summarized here, and here’s a video for those who struggle with tables of numbers.

I know I’m not the only player on Team Earth. But am I the only American player on the team?