Look Back, Look Forward

December 29, 2019

By Steve Stofka

In this last week of 2019, I’ll look way back for a bit of perspective heading into the coming election year. In 1932, voters elected FDR to the Presidency. More significantly, they elected an overwhelming majority of Democrats to the Congress to enable FDR to make big changes. Voters wanted an activist government to fix things.

$2.8 trillion is a lot of money, about 2/3rds of what the federal government spent in 2018 (CBO, 2019). That’s how much inflation-adjusted money depositors lost in bank failures during the Great Depression (Investopedia, n.d.). Imagine if ¾ of all the cash and money in checking accounts just vanished. That’s $2.8 trillion.

The Federal Deposit Insurance Corporation was created in 1933 to protect bank depositors from the loss of their life savings. During the 2008 Great Financial Crisis, Washington Mutual had losses of $307 billion. Depositors lost nothing. That’s activist government.

Republican advocate for a reactive rather than a proactive government – one that has a light regulatory hand. Too often this type of government ignores signs of trouble until a full-blown crisis develops like the 9-11 terrorist attacks or the Great Financial Crisis.

Voters will be asked to decide on which government role they prefer. Advocates for an activist government believe in grand communal solutions, many of which are poorly executed but are better than nothing. Cars, phones, computers and the social media that dominates our public policy discussions were all privately developed solutions that have adapted quickly to user demands. Government solutions are clunky contraptions of conceited ambitions that are slow to evolve as effective solutions. When they finally achieve some efficiency, the problem has changed. Examples include rent control, Social Security, Medicare, and the federal student loan program.

Advocates for a reactive government wait until the situation is near crisis levels, see that no one has created a solution yet and propose a public private partnership (PPP). These programs are not well designed to solve the problem but serve the purpose of funneling public tax dollars into private coffers while policy makers pontificate about free market solutions.  Examples are prisons, toll roads, and university student housing.

Presidents are usually elected for a second term. President H.W. Bush lost his bid for a second term in 1992 because of the lingering effects of a recession.  In 1980, President Jimmy Carter lost his bid for economic reasons as well. Divisions in the Democratic Party over the Vietnam War convinced an unpopular President Lyndon Johnson that he should not run for a second term in 1968. It’s unlikely that we will have a recession next year and that will increase the likelihood that Mr. Trump will be re-elected. Will that influence your financial decisions in any way?

The SP500 has gained 41% since President Trump took office in January 2017. Most of that gain has come in the past year. A record amount of money flowed into equity ETFs in December (Bell, 2019). Are investors chasing the high? Now is a good time for older investors to evaluate the risk-reward profile of their portfolio. An unpleasant task is to imagine what choices you might need to make if the value of your equity holdings were cut in half. That’s what happened in 2001-2002 and again in 2007-2009.  

97% of the U.S. is classified as rural but only 20% of the population lives there (Census Bureau, 2016). The map of the country may be colored a political shade of red, but there are relatively few voters per county. An ever-increasing portion of the people live in the scattered blue and politically purple areas. For decades the children who grew up in rural communities have left and not returned. The political fight for the direction of the country is not between rural and urban populations but between voters in smaller metro areas and suburban communities (Marema, 2019).



Bell, H. (2019, December 20). ETFs See Record $52B Inflows. [Web page]. Retrieved from https://www.etf.com/sections/weekly-etf-flows/weekly-etf-flows-2019-12-19-2019-12-13

Census Bureau. (2016, December 8). New Census Data Show Differences Between Urban and Rural Populations. [Web page]. Retrieved from https://www.census.gov/newsroom/press-releases/2016/cb16-210.html

Congressional Budget Office. (2019, June 18). The Federal Budget in 2018: An Infographic. [Web page]. Retrieved from https://www.cbo.gov/publication/55342

Investopedia. (n.d.). Bank Failures. [Web page]. Retrieved from https://www.investopedia.com/terms/b/bank-failure.asp

Marema, T. (2019, March 14). Contrary to What You Hear, the Rural-Urban Gap Didn’t Grow in 2018 Election. The Daily Yonder. [Web page]. Retrieved from https://www.dailyyonder.com/contrary-hear-rural-urban-gap-didnt-grow-2018-election/2019/03/14/

Majksner, Nikola. (n.d.). The Battle of Sutjeska Memorial Monument Complex in the Valley of Heroes, Tjentiste, Bosnia and Herzegovina. [Photo]. Retrieved from https://unsplash.com/photos/as_pS7EkK-Y

A Lump Of Coal

December 22, 2019

by Steve Stofka

While going through the personal items my mom left behind, I found a picture of her and some childhood friends lounging on the grass. The girls were dressed in simple clean dresses that looked homemade. The boys were dressed in pants whose legs could not keep up with a 7th grader’s growth spurt. The year was about 1934, the place a farming community in Texas during the Great Depression.

When we were kids, my mom would not allow us to call someone names. Cursing was out. No surprise there. Even popular pejoratives like “fink,” “bozo,” and “retard” were out as well. “I will not have my children behaving like cheap white trash,” she would say. We never got a definition of cheap white trash. We could only get a sense of it. Bad manners, an insensitivity to the feelings of others, a lack of respect for authority and other people’s property, a lack of responsibility. Cheap white trash was not about a bunch of depression-era kids dressed in simple clothes. It was not about being poor in material wealth; it was about being poor in spirit.

President Trump is our century’s version of the circus ringmaster P.T. Barnum. Almost half of voters chose him in the hope that he could tame the beasts in Washington. He behaves in a brash and boorish manner that is better fit for a wrestling persona than a president. Mr. Trump’s overbearing manner echoes that of Silvio Berlusconi, the former Italian Prime Minister and billionaire media mogul.  

This week the House of Representatives voted to impeach Mr. Trump on two counts, one of which was obstruction of the House’s impeachment inquiry. Unlike previous impeachment proceedings, Mr. Trump refused to testify on his own behalf and blocked the testimony of several material witnesses. After the vote of impeachment, he sent a six-page letter to the House Speaker, Nancy Pelosi. The letter detailed his explanation of events and voiced his condemnation of the House’s impeachment process (Trump, 2019).

Mr. Trump is a champion of insensitivity who claims to be above the rules of propriety but holds his perceived enemies to a rigid code of conduct. One of the many contradictions that makes him such a colorful character.

I heard an interview on NPR’s Morning Edition this week. One of the program’s hosts, Steve Inskeep, interviewed a spokeswoman for the White House about the impeachment (NPR, 2019). Mr. Inskeep had to interrupt several times when her assertions contradicted known facts. She attempted several versions of the history of the impeachment proceedings. She reminded me of a running back who hits the defensive line, is rebuffed and persistently tries another opening.

Mitch McConnell, the Senate Majority Leader and the person who single-handedly controls the journey of most legislation, has promised to closely coordinate with the White House during a Senate impeachment trial. According to Ms. Pelosi, about 275 bipartisan bills passed by the House this year are buried in Mr. McConnell’s desk (C-Span, 2019). He is up for re-election in 2020 and faces challengers from the party’s base in his home state of Kentucky. He is standing very close to President Trump as a matter of survival, not principle. The first principle of political success is to get re-elected.

Politics in a democracy is a messy affair of conflict and compromise, bare knuckle bargaining and chess master tactics. Relatively few of us enter the field. Those who do must convince themselves that they have not compromised their character even when they had to compromise their principles. Many campaigned hard to get elected to office and work even harder to stay elected.

For more than two years of former President Obama’s first term, Mr. Trump was a leading spokesman for the “birther” movement to nullify Mr. Obama’s presidency because his birth certificate was a forgery. Only after Mr. Trump secured the Republican nomination in 2016 did he admit that Mr. Obama was born in the U.S. and that his presidency had been legitimate (NPR, 2016). In a touch of irony characteristic of an episode of the Twilight Zone, the House has put a certificate of another sort, the black mark of impeachment, in Mr. Trump’s Christmas stocking. He promised to revive the coal industry. Now he has his lump of coal.


C-Span. (2019, December 19). House Speaker Weekly Briefing. [Transcript]. Retrieved from https://www.c-span.org/video/?467564-1/speaker-pelosi-wait-senate-trial-details-naming-impeachment-managers

NPR. (2019, December 19). White House Responds to Impeachment. [Transcript]. Retrieved from https://www.npr.org/2019/12/19/789704256/white-house-responds-to-impeachment

NPR. (2016, September 16). Without Apology, Trump Now Says: ‘Obama Was Born In’ The U.S. [Web page]. Retrieved from https://www.npr.org/2016/09/16/494231757/without-apology-trump-now-says-obama-was-born-in-the-u-s

Photo by Nick Nice at Unsplash.com

Donald J. Trump, President of the United States. (2019, December 17). Letter to: The Honorable Nancy Pelosi, Speaker of the House of Representatives. [Web Page]. Retrieved from https://www.whitehouse.gov/wp-content/uploads/2019/12/Letter-from-President-Trump-final.pdf

Price Points

December 15, 2019

by Steve Stofka

This week I tested Alexa. You know who I mean. She who shall not be named in idle conversation for she will respond. She can do arithmetic, but can she do algebra? I asked her, “What are the factors to the expression x2+2x+1?” She gave me the simple factors x(x+2) + 1. A better answer would have been (x+1)2. Not bad.

We have adapted so quickly to these new technologies. It is normal to talk to a cylinder. Farmers guide their tractors with a cellphone app (Future Farming, 2017). A library of information readily available 24 hours a day. An earthquake on the other side of the planet and we learn of it within the hour.

Despite the accessibility of information and communication, we are bombarded with disinformation. We can’t talk to members of our family or some of our friends because of their political beliefs. Has technology unloosed our own demons from Pandora’s box? In one version of the myth, the demons burst out from Pandora’s box and she was so frightened and alarmed that she closed the lid before the last demon, Hope, could get out. Is hope a curse or a blessing?

We have become accustomed to the entertainment, communication, information and convenience of our phones. They make us powerful. We watched a movie on DVD tonight. I forgot we still had a DVD player. The remote didn’t work. We had to put new batteries in.

On a job site a decade ago, I heard a family arguing. Mom was taking her kids’ phone away because he did something or didn’t do something. A short while later I heard the kid crying. This was a big 12-year-old boy who had received a smart phone as a gift. The phone had become this kid’s heartbeat. He was addicted to a phone.

Have we become a nation of addicts? We are addicted to high energy use even if it does introduce much more carbon dioxide into the atmosphere than the plants, soils and oceans can absorb. Yes, it’s a problem, but …

I forgot my phone last week, turned the car around and came back eight blocks to get it. I was only going to be gone for a few hours. Yes, I know I’m addicted to my phone, but…

Are we addicted to our opinions? God forbid that someone should threaten our political or religious beliefs. Don’t try to change my mind about something. If I want to change my mind, I’ll do it on my own time, thank you. We have so much information at our fingertips that we can’t absorb it all, so we select a few sources and satisfy ourselves that we have a balanced enough perspective.

The stock market has gone up more than 10% in the past one hundred days. Is that the final hurrah before prices dive? Or is the market waking up to a new era of continued low inflation and healthy corporate profits? I’m surrounded by a cacophony of opinion.

In a decade, my calendar app will know what to remind me about. I won’t have to tell it. For that to happen, the app will need access to a lot of personal and financial information about me. “You paid for a subscription to National Geographic magazine last February,” my app will say. “Shall I add a reminder for this coming February?” Sure, why not. I’ve already given away so much information.  I will need an app to guard my information in case someone hacks into the database where my calendar app stores all my information.  

Each of us has price points – boundaries of what we’re willing to pay for something. There was a time in my life when I wouldn’t spend more than a $1000 on a car. Then it was $2000 for a reliable car. My price points were moving up.

Starbucks has been around for almost 50 years (Starbucks, n.d.). I couldn’t believe it. Sometime in the 1990s I became aware of them. Who would pay $3 for a $1 cup of coffee? Lots of people.

A decade ago, who would pay $700 for a phone? A decent computer could be bought for that price. Apple rolled out the iPhone 3G for $199 with AT&T as the exclusive carrier (Wikipedia, n.d.). More than a million people bought one in the first weeks. $199 was just the down payment on the phone. The two-year contract with AT&T included about $20 extra per month for the phone according to some estimates. That raised the cost of the phone to $700.

If the stock market goes down 20%, who buys and who sells? What are the price points? What about 30%? 50%? During the 2008 financial crisis, brokers said they got a lot of calls when the market was down 50%. They cautioned their clients that this was the wrong time to sell. Most of the damage had been done. Their clients couldn’t take it anymore. Sell, sell, please sell. There was a last hurrah of selling and then…the buying began in earnest.

What are our political price points? I asked Alexa. She doesn’t know that. What causes people to say, “I’ve had enough!” and go out in the streets to demonstrate? In the past month the world has witnessed large scale demonstrations in Tehran, Iran, in Hong Kong, in Baghdad, Iraq, in Santiago, Chile, and in Barcelona, Spain. I think 2020 will be an American crisis year and we will see such demonstrations in our country. I hope I’m wrong.



Future Farming. (2017, June 21). App turns smartphone into a cheap tractor guidance system. [Web page]. Retrieved from https://www.futurefarming.com/Tools-data/Articles/2017/6/App-turns-smartphone-into-a-cheap-tractor-guidance-system-1597WP/

Photo by Colin Watts at Unsplash.com

Starbucks. (n.d.). Starbucks Company Timeline. [PDF]. Retrieved from https://www.starbucks.com/assets/ba6185aa2f9440379ce0857d89de8412.pdf

Wikipedia. (n.d.). iPhone 3G. [Web page]. Retrieved from https://en.wikipedia.org/wiki/IPhone_3G

A Junk Drawer of Changes

December 8, 2019

A tip of the hat in respect to those servicemen who lost their lives at Pearl Harbor on December 7th, 1941 – almost 80 years ago.

This week I was cleaning out two kitchen drawers that had turned into junk drawers over the years. I became aware of how much things have changed in the past twenty years. There was a digital pedometer that we don’t use anymore. A cell phone app does that now. There were 9- volt batteries in the drawer that were long past their expiration date. The new lithium smoke and carbon monoxide detectors don’t need them. The manufacturer says to replace the entire unit after ten years. There were bayonet type Garden Accent light bulbs in the drawer. We use LED fixtures now. There were phone cords and phone couplers for landline phones. We don’t have those anymore. There were batteries for a modest digital camera. We use our cell phones to take photos now. There were expired C-batteries for a battery-operated adding machine that we don’t use anymore. Technology is changing more rapidly than I clean out my junk drawer. Maybe I should do that more often.

Talking about change….

I was in Amish country in Iowa a week ago. Although different communities have different rules, they ordinarily don’t use fossil fuels. We were in one store with a big iron wood burning stove. At a grocery warehouse, the clerk used a battery powered adding machine instead of a cash register. We saw a few men cleaning up the fields and tossing the remains of last season’s planting into a large container sized like a dump truck. It was pulled by a team of four horses. For tasks requiring gasoline, natural gas and electricity, the Amish rely on outsiders whom they call “English.” For farm work requiring a combine, they hire outsiders.

Most of us do not want to live the way of the Amish. We have become accustomed to the benefits of the very efficient energy provided by fossil fuels. Our society and economy thrive on energy. Stricter regulations have spurred technological advancements that enable our cars, furnaces and power plants to burn fuels much cleaner now. Climate scientists point out that we are putting far too much carbon dioxide in the atmosphere. Some scoff at the idea that carbon dioxide can be a problem. We breathe it out. Plants breathe it in. As part of the dynamic energy cycle, carbon dioxide itself is not a problem.

The threat to our way of life is the extra amount of carbon dioxide that our industrialized society is exhaling into our atmosphere. We are rapidly tapping a reservoir of carbon that was stored in the earth more than 300 million years ago. The key word in that sentence is “rapidly.” We are putting more carbon dioxide into the atmosphere than the plants can absorb. In some developing countries, people are cutting down the trees that absorb carbon dioxide as part of their life cycle.

From ice cores extracted from Greenland and the Antarctic climate scientists have been able to deduce a familiar cycle of events when the carbon dioxide concentration increases. The planet warms, the oceans rise, and precipitation increases. Permafrost at extreme latitudes melts and releases the carbon it has stored. That creates a feedback loop that intensifies the effect.

We need to slow down our consumption of fossil fuels, but we don’t want to give up the savings from the energy they provide. The internal combustion engine lowered food production costs, increased yields and lowered the cost of food for all Americans. Farmers dry their corn and other staple crops with fossil fuels. In another time, they might have plowed a damp surplus crop back into the ground.

We can’t attribute the lower cost of food entirely to fossil fuels, but a comparison of prices surprised me. A hundred years ago butter cost .58 per lb. in NYC (BLS, 2006). That’s $7.54 in current dollars. Eggs were .57 per dozen, so about $7.40. Current price for eggs was $1.28 last month (BLS, 2019). That’s a sixth of the price a century ago. Milk, a government subsidized product, was .28 per 1/2 gallon – approximately $3.64 in today’s money. The current price for milk is $3.12 for twice as much, a gallon. Milk today is about 40% of the cost it was a century ago.

Sixty years ago, the development of nuclear energy plants promised cleaner and less expensive energy. After the Three Mile Island accident in 1979, the building of new nuclear plants was severely curtailed [Wikipedia, n.d.]. Each year more coal miners die in accidents than all the people in history who have died from a nuclear accident. When it comes to nuclear, people disregard comparative statistics.

We don’t like making hard choices. We don’t like inconvenience. We absorb change and become accustomed to it. We put our old ways of doing things in the junk drawer of history and forget about it. We don’t want to live like the Amish to adapt to a planet with rising levels of carbon dioxide. What choices will future generations make?


Bureau of Labor Statistics (BLS). (2006, May). 100 Years of U.S. Consumer Spending. [Web page, PDF]. Retrieved from https://www.bls.gov/opub/100-years-of-u-s-consumer-spending.pdf

Bureau of Labor Statistics (BLS). (2019, November). Average Retail Food and Energy Prices, U.S. City Average and Northeast Region. [Web page, PDF]. Retrieved from https://www.bls.gov/regions/mid-atlantic/data/averageretailfoodandenergyprices_usandnortheast_table.htm

Photo by katherine cunningham on Unsplash

Wikipedia. (n.d.). Three Mile Island accident. [Web page]. Retrieved from https://en.wikipedia.org/wiki/Three_Mile_Island_accident#Effect_on_nuclear_power_industry

Thanksgiving Leftovers

December 1, 2019

by Steve Stofka

My wife and I were visiting dear friends in Cedar Falls, Iowa, a college town surrounded by farms, small industrial businesses and several Amish communities. The people are friendly, the town is bucolic, and the downtown area has been revitalized after a flood several years ago. I was introduced to Hurts Donuts, a franchise of cake style donuts that just opened in Cedar Falls (KWWL, 2019). Yum, yum.

A 1600 SF house built in the 1950s can be had for less than $200K. I priced one house in Cedar Falls that would have sold in Denver for $350-$400K. Asking price was $180K. We helped a friend move into a townhome with 1100 SF living area and a garage. Rent? $850 per month, half of what I could rent a townhome in Denver.

Do the residents make considerably less? Not according to Best Places (n.d.). Their median household income and average income are almost exactly the national average. Cedar Falls sister city is Waterloo, which has the largest population of African-Americans in Iowa. At about 10,000, that’s less than 2% of the state’s population. That’s half of the black population in a neighborhood two miles from where I grew up in New York City. Iowa doesn’t do black. New York City does.

The city made the local news this year when the financial web site 24/7 ranked the city as the worst place in America to be African-American. Ouch. A reporter with the Waterloo-Cedar Falls Courier dug deeper into the Census Bureau numbers used by 24/7 and confirmed that the data was not skewed or taken out of proper context (Steffen, 2019).

Presidential candidates visit the twin city area frequently. Elizabeth Warren was going to be back in Cedar Falls on December 1st, but we couldn’t stay there. Candidates for either party pound the rostrum and offer solutions for big problems. The biggest problems are the small ones next door to us.


Works Cited:

Best Places. (n.d.). Cedar Falls, Iowa. [Web page]. Retrieved from https://www.bestplaces.net/economy/city/iowa/cedar_falls

KWWL. (2019, November 6). Hurts Donut open today in Cedar Falls. [Web page]. Retrieved from https://kwwl.com/news/top-stories/2019/11/06/hurts-donuts-open-today-in-cedar-falls/

Steffen, A. (2019, February 2). Waterloo Confronts List’s Label as Worst Area to Be Black. Waterloo-Cedar Falls Courier. [Web page]. Retrieved from https://www.usnews.com/news/best-states/iowa/articles/2019-02-09/waterloo-confronts-lists-label-as-worst-area-to-be-black

Wikipedia. (n.d.). Bayside, Queens. [Web Page]. Retrieved from https://en.wikipedia.org/wiki/Bayside,_Queens