Holiday Snacks

November 24, 2019

by Steve Stofka

I’ll keep it short this holiday week and pass on a few things that caught my attention. The comedian John Oliver called it “whataboutism.” When accused of something, point to someone else and say, “What about them?” I thought the term was new, but Wikipedia says it goes back to 1960s Russia (Wikipedia, n.d.). I did it when I was a kid. My kids did it. In Russia, the practice is a national pastime.

In the impeachment hearings this week, several Republicans repeatedly defended their President of crimes by raising up the Steele dossier. Not familiar? There’s a book out by the two former Wall St. Journal reporters who formed Fusion GPS (NPR, 2019).  It’s the same argument Republicans gave to accusations regarding wiretapping at the Watergate complex.

Until the Supreme Court decided the 2000 election in Bush v. Gore, I thought the judiciary was above this. They were not. The decision was a rare one for the Supreme Court and it was careful to note that the decision set no precedents (Oyez, n.d.). A few months later, the stock market began its hard fall from the dot com boom, China was admitted into the World Trade Organization and later that year, the tragedy of 9-11. That election and the year 2001 marked the end of American innocence. By the time President Bush stumbled into the Iraq war, we were wearing the masks of our own folly.

Now Russia’s Putin smiles wryly as he watches the Americans behaving like Russians. When accused of something, point to someone else and say, “What about them?” Every week comes another revelation of secret visits to Ukraine by someone on the Trump squad. Devin Nunes, the ranking member on the House Intelligence Committee, has just been fingered by Lev Parnas, one of Mayor Giuliani’s indicted Ukrainian fixers. In a crowd of crooks, who knows what the truth is? Putin sees the arrogant Americans pointing fingers at each other and smiles.

Let’s move on to other news. County by county surveys reveal that half of single person senior households have trouble meeting basic expenses each month (Elder Index, 2019). Ouch. A quarter of two-person senior households have the same problem. I was even more surprised to learn that seniors can now live less expensively in Los Angeles than in Denver. Whether renting or having no mortgage payment, costs were higher in Denver. Another ouch. Denver has California-itis. Interested readers can check the web site in the notes below and compare counties of their choosing.

There’s got to be some good news in this week’s blog! Sales of existing homes climbed 4.6% in October. Hooray. On the other hand, less than a third of those sales were to first time buyers, who are getting left out of the market.

Ok. I’ll stop. Next week, I promise I’ll have some cheerier news.



Elder Index. (2019). The Elder Index™ [Public Dataset]. Boston, MA: Gerontology Institute, University of Massachusetts Boston. Retrieved from

Haddad, T. (2019, November 23). After Giuliani ‘Fixer’ Alleges Nunes Met with Ukrainian Officials to Seek Biden Dirt, Congressman Threatens to Sue Media. Newsweek. [Web page]. Retrieved from

NPR. (2019, November 22). Book Reviews: In ‘Crime In Progress,’ Fusion GPS Chiefs Tell The Inside Story Of The Steele Dossier. [Web page]. Retrieved from

Oyez. (n.d.). Bush v. Gore. [Web page]. Retrieved from

Photo by Steve Stofka

Wikipedia. (n.d.). Whataboutism. [Web page]. Retrieved from

The Tweet Heard Round the World

November 17, 2019

by Steve Stofka

Those who voted for Mr. Trump in 2016 were drawn to his plain-spoken if gruff manner. Some older voters might have been reminded of another New Yorker with the same characteristics: Archie Bunker, of the 1970s TV series All in the Family. During the financial crisis, politicians handled the financial elite with kid gloves while ten million families lost their home to foreclosure (Picchi, 2018). Despite candidate Barack Obama’s 2008 promise to treat homeowners fairly, most of those foreclosures happened on his watch (Qiu, 2017). Tired of mealy-mouthed rhetoric from politicians of either political party, almost half of voters in 2016 pulled the lever for a candidate with no political experience.

This past Friday, former Ukraine ambassador Marie Yovanovitch testified before a House Select Committee on Intelligence. Ms. Yovanovitch is a highly decorated officer with the foreign service, and for several decades has served both Republican and Democratic presidents. Shortly after her opening statement on Friday morning, President Trump tweeted an attack on Ms. Yovanovitch, linking her service in dangerous regions like Mogadishu with the unrest in those countries (Shear, 2019).

Mr. Trump’s spiteful tweet reminds us of someone who rode a wave of worry in post-WW2 America. In 1953-54, Senator Joseph McCarthy hunted down communists in the U.S. and found them everywhere, including the U.S. Army. Thousands of American citizens ran afoul of Mr. McCarthy’s self-aggrandizing campaign and suffered the permanent loss of their careers. This included several high-profile actors, writers and directors in Hollywood.

Mr. McCarthy, a heavy drinker, was noted for his lack of decorum at the committee hearings he chaired. Fed up with the personal attacks and insults at a hearing, the Army’s lawyer, Joseph Welch, asked Mr. McCarthy, “Sir, have you no decency?” (U.S. Senate, n.d.). The question resounded with the American public who soured on McCarthy and the hearings. He quickly lost power and the witch hunt was over.

Mr. Trump attempts to vindicate himself against criticisms that he was the chosen candidate of Russian leader Vladimir Putin. As Republicans in Congress gather around to defend the president, they are ignoring the fact that the 2016 Russian disinformation campaign was launched against fellow Republican candidates before it was turned on Democratic candidate Hillary Clinton.

The comments by members of either party surrounding this week’s proceedings are characterized by a low signal-to-noise ratio. Each side tries to frame the debate, the process and the facts in evidence. The contradictions in speech and behavior thrive like weeds in a sunny field. When House Republicans launched impeachment proceedings against President Clinton twenty years ago, Democrats protested procedures and cried foul. These are experienced politicians with access to the same playbook.

Despite assertions to the contrary, the Constitution specifies no rules of impeachment. In 1998, the Congressional Research Service (CRS) prepared a history of previous impeachments for the U.S. Senate. What is an impeachable offense?

Each of the thirteen American impeachments involved charges of misconduct incompatible with the official position of the officeholder. This conduct falls into three broad categories; (1) exceeding the constitutional bounds of the powers of the office in derogation of the powers of another branch of government; (2) behaving in a manner grossly incompatible with the proper function and purpose of the office; and (3) employing the power of the office for an improper purpose or for personal gain.

(CRS, 1998)

 13 impeachments? Presidents are not the only federal officers subject to impeachment. Our political system is an organized street fight. There are rules of engagement that both sides have agreed on and each presidential impeachment has been prompted by a breach of those rules.

In 1868, President Andrew Johnson was impeached for the termination of a cabinet member without approval by Congress (CRS, 14). A Democratic House impeached Mr. Nixon because he obstructed a Congressional investigation into illegal campaign activities during the 1972 election (CRS, 15). Mr. Clinton was impeached for lying to Congress about his dalliance with a White House aide, Monica Lewinsky. Mr. Trump has been accused of parlaying foreign aid to Ukraine to gain an electoral advantage in the coming election.

No president has been convicted of the charges of impeachment brought against them. The Republican led Senate seems little inclined to break that tradition in President Trump’s case. In 1974 the public impeachment hearings of Mr. Nixon helped the Democratic House turn public opinion in their favor. Responding to public pressure, Republican Senators advised Mr. Nixon that they could not guarantee his safety against a vote of conviction. Mr. Nixon resigned rather than face the ignominy of a conviction in the Senate.

Democrats are hoping for a similar shift of opinion against Mr. Trump. While there is only a slight chance of conviction, Democrats hope that the impeachment hearings will convince a decisive number of voters that Mr. Trump does not deserve a second term in office. If he is to be convicted, it will be at the ballot box next November.


Picchi, A. (2018, September 14). 5 groups still recovering from the financial crisis. [Web page, video]. Retrieved from

Qiu, L. (2017, January 5). Barack Obama’s top 25 campaign promises: How’d he do? [Web page]. Retrieved from

Photo by Wim van ‘t Einde on Unsplash

Shear, M. (2019, November 16). With a Tweet, Trump Upends Republican Strategy for Dealing With Yovanovitch. New York Times. [Web page]. Retrieved from

U.S. Senate. (n.d.). Have You No Sense of Decency? [Web page]. Retrieved from

Congressional Research Service (CRS). (1998, October 29). Impeachment Grounds: A Collection of Selected Materials. [PDF]. Retrieved from Pgs. 14, 15, 26.


November 10, 2019

by Steve Stofka

All states require that automobiles be insured. Would you support a state law that stipulated that you had to provide proof of insurance in order to start your car? It might be a card reader or a fingerprint reader that interfaces with an electronic interlock system. An insurance card might be a small chip on a key ring. Insert the chip, the car verifies the insurance and is ready to start.

 Some states already mandate such interlock systems called IIDs for drivers convicted of DUI and DWI offenses (McCurley, n.d.). In their implementation just laws can become unjust. A New York Times investigation recently revealed that the breathalyzers used by police are unreliable (Cowley, Silver-Greenberg, 2019). Thousands of cases have been thrown out because the machines were not calibrated and gave high readings. Some states have ignored or tried to cover up the inaccuracy of their tests.

The federal government has mandatory Social Security payments that we must pay when we work. States have mandatory sales taxes that must be paid when buying many goods and some services. Mandates are part of our everyday lives and yet people vociferously protested the Obamacare mandate to buy health insurance. Why? Working and buying things are activities that have some voluntary component. Obamacare’s mandate was on the activity of breathing, on being alive.

Some people resent jury duty for the same reason. People are called every few years where I live. For those who are unemployed, the reimbursement is small (NCSC, n.d.). In some states, jurors are paid about the same as convict labor. However, there is some choice. I can choose to move out of the district and avoid the frequency of being called. On the other hand, how do I avoid an Obamacare mandate on simply being alive?

Should young people be subject to mandatory national service of some kind? When I hear that suggestion, it usually comes from an older person. Younger people, who don’t make as much money earlier in their careers, will vote for mandates that older people making more money should pay higher taxes so that the government will be able to afford more services for younger people.

Retired people want mandates for those who are working to pay more money into the Social Security system so that retirees can be assured of getting their full pension checks. It is part of the human condition that we like mandates imposed on other people more than we like them imposed on us. We want more prisons but not in my neighborhood because that might drive property values down. We want more housing for the homeless but not in my neighborhood. I want to be charitable, but I have an obligation to protect my property values more than the homeless. We want more money for the poor and unfortunate but don’t want to pay higher taxes because we’re already taxed enough. Can’t the government get the taxes from the rich guys and leave me alone? Elizabeth Warren thinks so.

This year’s election was held last Tuesday and now we have a year of election festivities before the Presidential election in 2020. Among the Democratic contenders, Ms. Warren speaks with greater ease and confidence on the stage. She has policies and plans to pay for those policies and it’s the rich guys who are going to pay. I like that. I pay enough already. Ms. Warren fights for middle class families but she fights just as hard for the idea of big beneficial government, a variation of the philosopher king who rules his people with temperance, strength and charity.

President Trump is now the spokesman and leader of the Radical Right. Mr. Trump believes he is the philosopher king, immune from all laws while he is president. So his lawyer argued last week to a dumbfounded courtroom. Republicans believe in a philosopher king of another sort – the free market. This king rules with the wisdom of crowds, the temperance of competing interests and the strength of competition. That’s the idea at least. In practice the free market is not free. Politicians pass legislation to protect market interests from competition both domestic and foreign.

This coming election will feature candidates who have captured the extremes of either party yet claim that they represent the center. It is the other side that is radical. That’s the rhetoric we have been hearing from a radical Republican, leader Kevin McCarthy. “We’re normal. They’re crazy.” Welcome to the crazy ward at Congress, whose job approval ratings are in the low 20s (Real Clear Politics, n.d.). Why is that? Well, it’s because those crazy Democrats are trying to impeach our President and not getting anything else done. That’s one sentiment. However, Congressional approval ratings have improved since the Republicans held the House last year.

Every time I hear a politician say the phrase “the American people,” I know that I am about to hear utter nonsense following that phrase. They often profess to know and speak the will of the American people but few of them have the slightest clue or their job approval ratings wouldn’t be so low.

230 years ago, a large multinational company like the East India Company needed a powerful government like England to protect its interests and profits. This country fought a war against England to check the dominance of the East India Company. Today, Republicans openly support corporate interests over much else. Democrats say they are for the little guy, but they supported large financial institutions, big corporations and big unions during the financial crisis. They believe in big government; they need the support of big corporations to enact their big plans with their big government. The Senate minority leader, Chuck Schumer, hails from New York City and helped soften laws and regulations designed to curb Wall Street’s abuses.

The Radical Republicans believe in a form of anarchy that they call small government. Small, however, does not include military spending or subsidies to their friends and constituents. When Republicans spend big, it’s small government. When Democrats spend big, it’s socialism. We’ll get plenty of this nonsense in the coming year.

 The Radical Democrats keep insisting that this country is a democracy. No, it’s not. Look it up. The country was specifically founded on the principle that this was not a democracy. It was a republic. Shortly after the Constitution was written, the French Revolution vindicated the founders’ antipathy toward democracy. Democracies lead to either pandemonium or paralysis. In a democracy, the majority rule and inevitably enslave the minority. James Madison pointed to the institution of slavery to prove his case (Feldman, 2017). A republic of competing sectional interests would provide a better balance between warring factions within the new nation.

The Radical Republicans run against wind and solar subsidies because they are serving the interests of the oil and gas industries who have received direct and indirect subsidies for more than a hundred years. Businesses which dominate market share in an industry generously support their friends in Congress. There was no free market 200 years ago, there is no free market today and there won’t be one 150 years in the future.

Adam Smith published the Wealth of Nations the same year as the signing of the Declaration of Independence. The free market was an ideal that Adam Smith proposed after detailing the corruption that people and governments bring to any market. He didn’t like the idea of a free market but saw no better alternative. In his day, mercantilism dominated the economic and political system. Governments competed to protect the industries in their country against competitive pressures from those same industries in other countries.

These are our choices for next election: two philosopher kings. The big benefits of a strong, wise and caring government vs a market that can be efficient, just and cruel, that rewards effort and innovation but leaves many of the unprotected in despair. Those who don’t like mandates will vote for the market because they reason that markets can’t pass laws and mandates. Not directly, that’s true. However, dominant businesses try to get government to pass mandates which protect their profits. In either case, we are going to get mandates.


Works Cited:

Cowley, S. and Silver-Greenberg, J. (2019, November 3). These Machines Can Put You in Jail. Don’t Trust Them. N.Y. Times. Retrieved from

Feldman, N. (2017). Three Lives of James Madison: genius, partisan, president. [Print]. New York: Random House.

McCurley, J. (n.d.). Ignition Interlock Devices: Costs and Requirements. [Web page]. Retrieved from

National Center for State Courts (NCSC). (n.d.). Jury Management: State Links. [Web page]. Retrieved from

Photo by Willian B. on Unsplash

Real Clear Politics. (n.d.). Congressional Job Approval. [Web page]. Retrieved from

What Hides Below

November 3, 2019

by Steve Stofka

Think the days of packaging subprime loans together is gone? Nope. They are called asset-backed securities, or ABS. The 60-day delinquency rate on subprime loans is now higher than it was during the financial crisis (Richter, 2019). The dollar amount of 90-day delinquencies has grown more than 60% above the high delinquencies during the financial crisis. Recently Santander U.S.A. was called out for the poor underwriting practices of its subprime loans. In this case, Santander must buy back loans that go into early default because of fraud and poor standards.

Credit card delinquencies issued by small banks have more than doubled since Mr. Trump took office (Boston, Rembert, 2019). Did a more relaxed regulatory environment encourage these banks to take on more risk to boost profits?

In the last century, geologists have developed new measuring and analytical tools to better understand the structure of the Earth. GPS technology can now detect movements of the earth’s crust as little as ¼” (USGS, n.d.). The same can’t be said for human foolishness. During the past half-century, financial analysts and academics have developed an amazing array of statistical and analytical tools to understand and measure risk. Despite that sophistication, the Federal Reserve has mismanaged interest rate policy (Hartcher, 2006). Government regulators have misunderstood risks in the banking and securities markets.

Earthquake threats happen deep underground. I suspect that the same is true about financial risks. To gain a competitive advantage, companies try to hide their strategies and the details of their financial products. On the last pages of quarterly and annual reports, we find a lot of mysterious details in the notes. After the Arthur Anderson accounting scandal in 2002, the Sarbanes-Oxley Act was passed to bring greater transparency and accountability to financial reporting. Six years later, the financial crisis demonstrated that there was a lot of risk still hiding in dark corners.

The financial crisis exposed a lot of malfeasance and foolishness. Some folks think that investors are now more alert. After the crisis, corporate board members and regulators are more active and aware of risk exposures. Are those risks behind us? I doubt it. Believing in the power of their risk models, underwriters, bankers and traders become victims of their own overconfidence (Lewis, 2015).

Each decade California experiences a quake that is more than 6.0 on the Richter scale. Following the quake come the warnings that California will split away from the North American continent. Still waiting. The recession was due to arrive eight years ago. We did experience a mini-recession in 2015-16, but it wasn’t labeled a recession. The slowdown wasn’t slow enough and long enough. Eventually we will have a recession, and all those people who predicted a recession in 2011 and subsequent years will claim they were right. In many areas of life, being right is all about timing. Few of us are that kind of right.

The data demonstrates the difficulty of financial fortune telling. The Callan Periodic Table of Investment Returns shows the returns and rank of ten asset classes over the past two decades (Callan, 2019). An asset class that does well one year doesn’t fare as well the following year. An investor who can read the past doesn’t need to read the future. Does an investor need to diversify among all ten asset classes?  Many investors can achieve some reasonable balance between risk and reward with four to six index funds and leave their ouija boards in the closet.



Boston, C. and Rembert, E. (2019, October 28). Consumer Cracks Emerge as Banks Say Everything Looks Fine. Bloomberg. [Web page]. Retrieved from

Callan. (2019). Periodic Table of Investment Returns. [Web page]. Retrieved from

Hartcher, P. (2006). Bubble man: Alan Greenspan & the missing 7 trillion dollars. New York: W.W. Norton & Co.

Lewis, M. (2015). The Big Short. New York: Penguin Books.

Richter, W. (2019, October 25, 2019). Subprime auto loans blow up. [Web page]. Retrieved from

Szeglat, M. (n.d.) Photo of lava flow at Kalapana, HI, U.S. [Photo]. Retrieved from

USGS. (n.d.). About GPS. [Web page]. Retrieved from