Monday, August 8, 2016

One Third

In business, higher education, politics, everyday life, I have a theory. One third of people are right on, one third have some idea what is going on, and one third just don’t get it.

Entrepreneurs, managers, parents, teachers, and-at some point-everyone have to explain goals and intentions to another person in order to enlist help in achieving them. Too often, those brilliant explanations fall on seemingly deaf ears. They just don't get it!

The dangerous ones are those who think they get it but do not. Watch out for them.

We (the human species) worked out a long time ago how best to get by in the world. And the theory is tantalizingly simple. It's the practice that's a bitch.

We can quibble over who really said what (and when), but all the major religions and schools of ethical thought (and many of the minor ones) have come to a similar conclusion about the best way to live. Unfortunately, most of them didn't stop at the Golden Rule, but instead tacked on a lot of other junk about diet, fashion, and hygiene; because, let's face it, it's so much easier to dress correctly than it is to be empathetic to another human being.

There are some who have suggested that the propensity to think of others helped to spur human evolution. And there's certainly a case to be made that those who practice kindness were more likely to survive (and thus pass on that trait). It's an interesting hypothesis, but it seems a bit of a stretch to me, since we are one of the few species who kill and abuse our own kind. Animals (at least within their own species) don't really seem to have a need for the golden rule. In any case, humans probably did recognize early on that constant retaliation rarely solved anything in the long run.

Of course, there is certainly room for debate as to whether being "good to others" really is a rational strategy. And in our current geo-political climate, we're not likely to agree anytime soon. But interestingly enough, even game theory suggests that the best way to "get along" is to lead with kindness and then respond in direct proportion to how the other "player" reacts. Of course this strategy can still lead to a spiral of violence, for which game theory suggests that a re-set can be advantageous. That is, try leading with kindness again. You can sometimes catch your opponent off guard.

So how do we deal with the one third who don’t get? Be nice, even when they are jerks, be nice – so beware, you know who you are (I hope), I am going to be very nice to you, deal with it!

IN SEARCH OF BONDS - Money managers are worrying that when they need U.S. Treasury bonds, there won’t be enough at hand. On the surface, the concern might seem unwarranted: the U.S. bond market is the largest in the world and Treasuries are among the most easily traded asset classes. But a buying spree by central banks is reducing the availability of government debt for other buyers and intensifying the bidding wars that break out when investors get jittery, driving prices higher and yields lower. The squeeze could get worse if central banks in Japan and Europe decide as expected to step up their stimulus efforts. Among those feeling the worst pinch are pension funds and life insurance firms in Japan, Europe and the U.S., but even central banks themselves are having trouble finding all the bonds they need.

BIG BREW - The U.S. Justice Department has signed off on Anheuser-Busch InBev’s acquisition of rival SABMiller, removing one of the last major hurdles standing in the way of a roughly $108 billion deal to create a global beer giant. The antitrust enforcers took limited action against AB InBev, putting restrictions on the beer giant’s ability to pursue the fastest-growing part of the U.S. beer market and limiting the Belgian-based brewer from creating incentive programs that encourage independent distributors to sell and promote its beers over rivals. Now AB InBev faces only one more regulatory hurdle—China—and then the deal requires shareholder approval. But SABMiller’s board was expected to discuss the possibility of seeking new terms from AB InBev now that the U.K.’s vote to exit the EU has sent the pound plunging.

TECH'S BIG LOBBYING TAB - Several tech and telecom-related groups were among the top 20 lobbying spenders in 2016's second quarter, reports POLITICO Influence

Here they are:

- Google (No. 9, at $4.24 million)

- AT&T (No. 10, $4.07 million)

- National Association of Broadcasters (No. 11, $3.61 million)

- Comcast (No. 13, $3.38 million)

- National Cable and Telecommunications Association (No. 17, $3.04 million)

- Amazon (No. 18, $3 million)

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Tony Bennett (90) Manhattan, NY; Kevin Gallagher ...famous football gambler; Wayne Knight (61) Pasadena, CA.; Tom McGuire … famous yachtsman, Donna Redman … always looks good in Pink.

COLLEGE CHRONICLES - NEW RULES FOR ONLINE COLLEGES: The Obama administration on Friday unveiled its long-anticipated proposal aimed at pushing states to beef up their oversight of online college programs. It would effectively require states to have a process for reviewing and taking "appropriate action" on student complaints about online programs that enroll their residents - even if the college isn't physically located in the state.

- The department dropped from earlier drafts the most controversial part: a provision that would have in effect required each state to actively review and regulate each college that enrolled any of its residents in an online course, even if the college is physically located in another state.

- The plan also will accommodate the multi-state reciprocity agreements aimed at making it easier for colleges that operate online programs across multiple states to satisfy the regulatory requirements in various jurisdictions. The largest, the National Council for State Authorization Reciprocity Agreements, which counts 40 states as members, praised the department's proposal:

PRIVATE COLLEGES STRIKE BACK: The Hillary Clinton and Bernie Sanders' camps may be celebrating their unification on a "debt-free" college proposal, but private colleges and universities aren't breaking out the champagne. Some are predicting dire consequences for their sector if Democrats get their way on providing free public college. As Clinton's plan stands now, families making up to $125,000 would be eligible for the free tuition. Patricia McGuire, president of Trinity Washington University, said it puts small institutions like hers "gravely at risk." She added: "We're going to ruin some of the places where low-income students get the best education, and are most likely to be successful."

- Sheila Bair, the president of Washington College in Chestertown, Md., said the free tuition proposal is simply unaffordable, and ultimately just shifts the burden to taxpayers. Bair, a moderate Republican, is a former chairwoman of the FDIC who sounded an early alarm about the nation's subprime lending crisis. If the Democrats' plan does move forward, Bair said the funding should be in the form of grants to an institution of a student's choosing - otherwise it would skew student choice away from the "unique kind of environment" that private schools offer. "I think what would happen is we would have to become more elitist because anybody who is not really wealthy is going to go to take the free option," Bair said. "I don't want us to be elitist. I want us to have a diverse student population.

GOOD READ -  "Underwater in the Las Vegas Desert, Years After the Housing Crash," by NYT's Jack Healy: "More than eight years after rotten loans and plunging home values made Las Vegas the center of the housing crisis, thousands of people have yet to recover."

APPLE EARNINGS FALL - Apple Inc. said its quarterly profit fell 27 percent as the company grappled with the first prolonged slump in iPhone sales since the product was introduced in 2007. Revenue fell for a second straight quarter, along with sales of its flagship smartphone, which is awaiting an expected refresh in September.

While the company reported strong sales of the smaller iPhone SE launched in March, overall its current models have failed to meet the booming sales of its first batch of large-screen iPhones, sapped in part by cooling demand in China and U.S. customers holding on to handsets for longer because of changes in carrier contracts. The results, and Apple's expectations for the current quarter ending September, were better than what Wall Street feared, and the stock rose more than 6 percent in after-hours trading.

PAYING DIVIDENDS - Technology stocks that predate the internet bubble of the late 1990s are hot again, thanks to a feature that many tech firms deliberately avoided in those days: hefty dividends. The sight of big-name technology companies paying large dividends is causing some double takes. Executives and analysts often contended during the technology boom of the 1990s that a company that paid a dividend was implicitly acknowledging limitations on its growth potential. The wave of cash now pouring into older tech stocks reflects investors’ willingness to pay up for investments that provide steady income. Meanwhile, in the slowest year for U.S. IPOs since 2009, we report that the downtrodden IPO market just can’t compete with buyers who are willing to pay big to take potential listings off the board. More companies, from Dollar Shave Club to oil company Centennial, are choosing a sale over a public listing.

HOW MUCH DOES HE MAKE??" -- State worker salary database: Now includes 2015 University of California pay, 2015 CSU pay, 2015 civil service pay, and 2014 state legislative pay. This database allows you to search the salaries of California's 300,000-plus state workers and view up to eight years of their pay history.

REALLY? - Paris Hilton thinks she could be ISIS' next target. Paris Hilton says she worries a lot about traveling the world, especially because she's a 'famous' person who could be a 'clear target of an attack' by terrorists. Oh yes, and did I mention Rink Rats has been nominated for a Pulitzer Prize.

REALLY? PART DEUX – Early last week, Donald Trump picked a prolonged fight with the parents of a dead soldier and said they shouldn't be permitted to criticize him; he called Hillary Clinton "the devil"; said the November election will be "rigged"; he falsely claimed he got a letter from the NFL complaining about the debate schedule; and he said radical Islamic terrorists are coming into the United States "by the thousands and thousands." Trump then told a USA Today op-ed writer that he would urge his daughter to quit a job if she were the subject of workplace harassment.

HARVARD REPUBLICAN CLUB -  won't endorse Trump for president: The Harvard Republican Club won't be endorsing Donald Trump, marking the first time in 128 years that the organization has not backed the Republican nominee for president ... The organization said Trump's platform would endanger Americans' security both at home and abroad, and his views are not consistent with conservative principles. It also said Trump's mocking and belittling of various groups and people is both bad politics and 'absurdly cruel.

RIGGED – The Trump Campaign’s full comments because they are so shocking and dangerous: "I think we have widespread voter fraud, but the first thing that Trump needs to do is begin talking about it constantly ... He needs to say for example, today would be a perfect example:

"'I am leading in Florida. The polls all show it. If I lose Florida, we will know that there's voter fraud. If there's voter fraud, this election will be illegitimate, the election of the winner will be illegitimate, we will have a constitutional crisis, widespread civil disobedience, and the government will no longer be the government"

The Trump Campaign is laying the groundwork for Trump to challenge the legitimacy of the 2016 election if he loses and suggesting there could be a "bloodbath." To this writer this seems to come close to the legal definition of fomenting insurrection against the US government. Short of that, all of the talk of a "rigged" election - with no evidence whatsoever and the election still months away - is deeply corrosive to a political system already deeply polarized and under significant strain. The last thing the US needs is for a sizable minority of the population to begin 2017 believing the election was stolen.

Such a scorched earth strategy from Trump would also have major economic repercussions. Washington is already dysfunctional and further damaging a weak economy. Should Clinton win, she would have at least some window to try and pass meaningful economic legislation that could combine badly needed infrastructure and tax reform. That could prove impossible if DC is even more divided than it is now. There is also likely to be a recession at some point in the next president's first term. The Fed will have little room to fight it. Congress and the White House will have to be functional enough to employ all available fiscal tools.

Al Gore recognized the critical importance of peaceful transitions of power in 2000 when the Supreme Court ended the Florida recount and awarded the presidency to George W. Bush. This year is not likely to be that close. But if it is, and Trump loses, the possibility of significant domestic unrest seems real. And that's a scary thought.

MUST SEE VIDEO - "3 a.m.": "Marge and Homer Simpson wrestle with the choice in this election." 2-min. video

1968 vs. 2016 - On comparisons between George Wallace in '68 and Trump in '16 : Wallace tapped into an angry electorate ... the people in Washington were making stupid decisions that ruined their lives. The more specific complaint in 1968, you had bussing policies, housing policies that Wallace was arguing against, and those were more invasive than anything Donald Trump complains about ... He doesn't have a list of particulars like Wallace did. One overlap is trade ... The rhetoric is very similar, the sense of grievance and obviously the law and order is a direct copy from Wallace. People think it's [Richard] Nixon, but Nixon was trying to keep up with Wallace when talking about law and order. And the idea there is to capture voters that are concerned about law and order, full stop, that's it, and then others who have a broader fear of the cities and for whom law and order is a way to tap into that fear.

--Is fact checking more important than ever?  On the one hand, there are more challenges, more spin, more that's not so that's said by politicians. So the fact checking and all of that is more important than ever. The question of whether it's more important gets into whether people are listening. Because there's a lot of fact checking that's been done that has not changed people's mind. There are even some studies that suggest the more they see contradictory information, the harder they cling to the initial untruth. So it's been never more necessary; whether it's beneficial and has the second part of it, which is, you hope help people make a more reasoned decision based on the facts, that we're not sure about.

Days until the 2016 election: 92.

DINING – A must have is the calamari at the Sea Chest on Moonstone Beach Drive in Cambria, California. This writer has enjoyed calamari from New York to San Francisco, from Boston to Boca Raton – the Sea Chest’s is the best.

SPORTS BLINK -- In long-awaited comments, Tom Brady speaks softly: Tom Brady speaks! Stop the presses. Freeze Twitter. Close the New York Stock Exchange for 10 minutes. Interrupt all Trump coverage. Brady ended his six-month silence Friday morning at Patriots practice when he took eight questions from the local football media for approximately five minutes. It was a shoutdown frenzy, and Tom found it easier to answer 'How much did you rely on your family to get through the whole ordeal?'' than 'Why did you drop the appeal when you did?


Major League Baseball Game of the Week: Saturday August 13, 8:05 p.m. ET, CSN: Detroit Tigers (61-50) vs. Texas Rangers (65-47). Detroit has been one of the hottest teams in baseball after the All-Star break. But they have difficulties always in Texas. Texas wins, 8 – 3.

Season to date (55 -39)

MARKET WEEK  - Per a Rink Rats favorite BlackRock Chief Investment Strategist Richard Turnill: “Global stocks are up year-to-date, having shaken off worries about the strength of the global economy in the wake of the United Kingdom’s Brexit vote. Can they move higher into year-end? This week’s chart helps explain why further gains require a meaningful improvement in company earnings, particularly in developed markets.

The chart above shows how multiple expansion — or rising price-to-earnings ratios — has been the main driver of equity returns in many markets this year. This reflects a trend seen in recent years. Fundamentals remain lackluster for the most part, with second-quarter earnings growth in many regions flat to negative.

The worst of the U.S. profits recession does appear to be over. Second-quarter earnings growth for the S&P 500 likely will still show contraction from last year’s levels. Yet we find reasons to be marginally more optimistic about the second half. Sales growth has been better than expected, and is on track to turn positive for the first time since the fourth quarter of 2014. We also see the energy sector’s drag on earnings fading by year-end. The problem? High U.S. valuations and strong flows into U.S. equities already appear to reflect part of the good news. A U.S. market overweight has become a consensus trade, our analysis shows, raising the risk of sudden reversals.

In Europe, analysts have slashed their expectations for 2016 earnings growth since the beginning of the year on a collapse in expectations for the banking sector. Earnings are set to contract in seven out of 10 European sectors in the second quarter. The bright spot: global multinationals with geographically diverse sales, in sectors such as health care, materials and technology. In Japan, many companies are predicting a weaker yen in the second half, surveys show. This increases the risk of downward earnings revisions if the yen stays strong and hurts the overseas earnings of Japanese companies.

The main takeaway for investors: Be selective. We prefer quality companies that can increase earnings in a low-growth environment or grow their dividends. U.S. stocks with high dividend payouts, by contrast, look expensive and offer limited earnings potential at this time.” In other words, go global.

DRIVING THE WEEK - Donald Trump and Hillary Clinton are giving dueling economic speeches in Detroit. Trump goes first tomorrow, and Hillary goes Thursday.

Clinton campaigns in Florida on Monday and Tuesday ... Trump is in North Carolina on Tuesday ... Treasury Secretary Jack Lew is in Minneapolis on Monday "to meet with community and business leaders to discuss the state of the U.S. economy" ... Labor Market Conditions index at 10:00 a.m. Monday expected to rise to 1.5 from -1.9 ... JOLTS report Wednesday at 10:00 a.m. expected to show openings rise to 5,675K from 5,500K ... Retail Sales on Friday at 8:30 a.m. expected to rise 0.4 percent and 0.2 percent ex-autos ... Univ. of Michigan Sentiment at 10:00 a.m. Friday expected to dip to 91.5 from 92.0.

Next week: We are going dark for two weeks, time for a summer break. See you on August 29 with Higher Education, what next and our Football Season Swami picks.

Until Next Time, Adios.

Cambria, CA

August 8, 2016


CARTOON OF THE WEEK – Decision 2016

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