Thursday, March 26, 2015


What is it about 47%?

This percentage keeps coming up in the news.

Of course, 47% first received a lot of attention during the 2012 Presidential campaign when Mitt Romney made this statement to a group of wealthy supporters.

"There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it -- that that's an entitlement. And the government should give it to them. And they will vote for this president no matter what. ... These are people who pay no income tax. ... [M]y job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives."

The 47% that Romney referred to in his remarks came from the fact that in the 2009 tax year, 47% of tax returns filed owed no federal income taxes. As of 2013, the most recent year for which data is available, that number is now 43%.

However, 47% is not disappearing from the headlines.

There really seems to be something about that number.

A few examples from recent headlines.

47% of American households save nothing

47% Of All Jobs Will Be Automated By 2034, And 'No Government Is Prepared' Says Economist

Almost half of all jobs could be automated by computers within two decades and "no government is prepared" for the tsunami of social change that will follow, according to the Economist.
The magazine's 2014 analysis of the impact of technology paints a pretty bleak picture of the future.
It says that while innovation (aka "the elixir of progress") has always resulted in job losses, usually economies have eventually been able to develop new roles for those workers to compensate, such as in the industrial revolution of the 19th century, or the food production revolution of the 20th century.
But the pace of change this time around appears to be unprecedented, its leader column claims. And the result is a huge amount of uncertainty for both developed and under-developed economies about where the next 'lost generation' is going to find work.

Poll: 47% of Unemployed Have 'Completely Given Up' Looking for a Job

“This survey shows that millions of Americans are at risk of falling into the trap of prolonged unemployment, and it should give policymakers a greater sense of urgency to focus on the singular goal of creating jobs," said Bob Funk, CEO of Express and a former Chairman of the Federal Reserve Bank of Kansas City, in a release. "We can take heart that in these difficult times the American spirit of confident hopefulness endures, but we can’t accept this status quo—not for our country, not for our unemployed neighbors.”
Some of the key findings:
47 percent agree with the statement, “I’ve completely given up on looking for a job.” (7 percent said they “agree completely,” 7 percent “agree a lot,” 15 percent “agree somewhat,” and 18 percent “agree a little.”)  

Obama Approval Rating At 47% 

Poll: Only 47 % Think Obama Loves America

A new poll shows that a substantial number of Americans doubt President Barack Obama loves the United States. According to YouGov, fewer than half — 47 percent — say that the president loves America. However, one third — 35 percent — say the president does not.   
The poll also asked respondents whether they loved the country. For Americans over the age of 45, upward of 90 percent expressed love for the U.S. and virtually none reported they do not love America.
However, younger Americans are less certain.
“Only 71 percent of under-30s also say that they love America. Fifteen percent of under-30s say that they do not love America, while 14 percent aren’t sure,” YouGov reports. 

47% believe the country is less safe than it was before the Sept. 11, 2001, terrorist attacks

ISIS on people's minds.

Would You Believe That 47% of the U.S. Has No Residents

47% of Americans Say The New England Patriots Are Cheaters

They still won the Super Bowl.

47% of adults couldn't last a day without smartphone

Nearly half of U.S. adults -- or 47% -- said they wouldn't last a full 24 hours without their smartphone, a survey by Bank of America found.

Smartphones fall below only the Internet and hygiene when ranked by level of importance to people's daily lives, according to the survey. Ninety-one percent said their phone is as important as their car and deodorant.

Perhaps more concerning is that most Millennials deem mobile phones more important than deodorant and a toothbrush, the survey says.

Report: 47% of Meals Are Eaten Alone at Restaurants

They don't eat alone. They are with their smartphone.

I don't know about you, but if someone asks me the odds on something today, I am going to answer 47%.

Monday, March 23, 2015

Rolling on a River of Debt

We live in a world awash in debt.

There is over $100 trillion in outstanding debt in the world today.

$30 trillion in global debt was added in just the six years between mid-2007 and mid-2013 according to this Bloomberg Business article.

Over the same period, the value of global equities fell by $4 trillion to $54 trillion.

Looking at it in financial accounting terms, the world's debt equity ratio has soared from 1.2 in 2007 to 1.85 in 2013 ( a 50% increase).

It is not much different anywhere you look.

For example, look at the debt that has been taken on by Ohio's public universities over the last ten years as reported in a recent article in The Dayton Daily News.

Total debt outstanding at Ohio public universities
Borrowing at Ohio's 14 public universities more than doubled over the last decade. Most spending was for building construction and renovations.
The Ohio State University$814,606,000$2,605,528,000
Miami University$93,151,622$641,065,000
Wright State University$16,484,121$101,957,190
University of Cincinnati$894,596,000$1,236,000,000
Central State University$2,535,821$17,781,501
Youngstown State University$13,680,000$70,710,037
Northeast Ohio Medical University$0$40,649,167
The University of Akron$204,729,516$487,101,792
Bowling Green State University$84,400,000$147,100,000
Ohio University$171,300,000$332,900,000
The University of Toledo176,097,000$332,549,000
Kent State University$279,351,000$506,455,000
Cleveland State University$54,487,124$205,581,517
SOURCES: Provided on request by universities to The Dayton Daily News

Ohio State University's  debt outstanding has more than tripled to more than $2.6 billion.

Miami University's debt is up almost seven-fold from a measly $93 billion to where it now ranks third in total debt outstanding in the state at $641 billion.

The University of Cincinnati has over $1.2 billion of debt and Kent State and Akron each have approximately $500 million.

Bowling Green is the only major Ohio state university that seems to have been conservative with its debt load---it only has $147 million of IOU's.

The trend is the same across the nation.  Most public universities have at least doubled their debt load over the last decade according to Moody's Debt Service.

Where has the money gone from all of this borrowing?

Some went for new classroom buildings and technology upgrades. However, a lot of the debt has been taken on to pay for student amenities such as rec centers, student centers, food courts, hip residence halls, climbing walls and lazy rivers.

In recent years, colleges have embarked on a massive facilities binge in a competition to attract students that is reminiscent of the old-fashioned defense arms race between the U.S and the U.S.S.R. Dorms that resemble the TajMahal, recreation centers that look like they could be an Olympics venue and dining halls that are fit to serve meals straight from The Food Channel.

It all costs money and tuition and fees need to go up to pay for the luxuries and the added debt. Bucking the trend is career suicide to the college administrators should they fail to enroll the necessary numbers to fill their incoming classes.  After all, nobody wants to lose a good student and the tuition money that comes with her because they did not have a rock climbing wall in the rec center.

However, the reality is that the university borrows the money for the facility upgrade, it passes the cost on to the student, who has to take out a federal student loan to pay the tuition and fees, and the federal student loan program is, in turn, funded by additional federal government borrowings (or Federal Reserve QE)!

It is debt, on top of debt, on top of more debt, when all is said and done. Of course, all backed up by the full faith and credit of the U.S. government (translated " the American taxpayer".)

What is especially troubling about all of this additional debt is that we are entering a demographic period when we will be seeing declining numbers of high school graduates across most of the nation. This is particularly the case in Ohio which, along with most other Midwestern states, will experience some of the biggest declines in prospective college students over the next few years.

This chart depicts the changes in high school graduates between 2008-2009 and 2019-2020.

         Credit:Western Interstate Commission for Higher Education

Of course, that is also why all of this money is being borrowed and spent. Faced with declining numbers of potential students, no university wants to fall behind. They can't afford to not borrow and spend even if they can't afford it.  So they borrow and spend to protect their turf and their jobs.

And the big wheel of borrowing and spending keeps turning.

And we keep rolling, rolling, rolling, down the river of debt.

Monday, March 16, 2015

Potential Pension Pain

I came across some interesting data on retirement assets lately provided by the Investment Company Institute.

As of the end of the third quarter, 2014, total U.S. retirement assets were $24.2 trillion. To put that in context, U.S. GDP for 2014 was an estimated $17.7 trillion.

U.S Total Retirement Market
(trillions of dollars)
Credit: Investment Company Institute

Retirement assets have increased by $10 trillion (+71%) since 2008. GDP in 2008 was $14.7 trillion. Therefore, U.S. retirement assets have increased by $10 trillion in six years while the total economy has only increased by $3 trillion. This is a clear indication of the Federal Reserve QE program that has inflated the value of financial assets.

Another way to look at it is that retirement assets equal about 1.4x GDP today.

In 2008, these assets only represented .7x of GDP.

For perspective, in 1985 retirement assets were .5x of GDP, in 1995, .9x of GDP and in 2005, 1.1 of GDP. Some of this increase is due to the aging of the population but a large amount of the increase is the result of the inflated value of financial assets due to QE.

Since the financial assets in retirement plans are largely a claim on future income and earnings of the economy, you have to wonder how reliable those asset values are right now looking to the future.

Anyone saving for retirement should not be too comfortable with their account balances right now. I would expect rougher waters ahead.

What I also found interesting is that IRA's (Individual Retirement Accounts) have more assets than company-sponsored defined contribution plans today. IRA's are now also approaching the same amount of combined assets as are in government and private sector defined-benefit pension plans.

By comparison, in 2000 defined benefit plans had nearly double the assets ($5T to $2.6T) that IRA's had. That is a pretty significant change in the space of fourteen years.

All of this is remarkable when it is considered that IRA's were first introduced in 1975 and Roth IRA's were not enacted until 1997.

Another interesting chart from the ICI data compares retirement assets with unfunded liabilities. This chart is downright scary and should serve to be a cautionary tale as to why politicians and the governments "they manage" should not be allowed to offer defined benefit plans. Politicians make the promises and the taxpayers have to write the checks for the inevitable shortfalls.

U.S. Total Retirement Entitlements
(trillions of dollars)
Credit: Investment Company Institute

Please note the unfunded liabilities as a % of retirement assets for the various defined benefit plan sponsors.

Private Sector        2%

State and Local     24%

Federal                 57%

Of course, defined contribution plans and IRA's are always fully funded. They will only pay out what the assets are worth in the long term. The participants takes all the risk of market declines.

Unfortunately, most of the participants in DC plans and IRA's are also assuming the risks for market declines in the assets of governmental DB plans as well. Any underfunded amounts will be made up in increased taxes on the private sector in the future in order to make the pension promises to government workers. And these plans are already significantly underfunded right now.

If retirement asset values drop, expect a lot of pain and pent-up anger. It will not be pretty.

Federal Reserve Charts on Historical Levels of Underfunding of DB plans.

Private DB Pension Funds
Unfunded Ratio

State and Local Government DB Pension Funds
Unfunded Ratio

Federal Government DB Pension Funds
Unfunded Ratio

Notes on this chart from The Federal Reserve: Federal government DB pension plans were largely unfunded for several decades, as illustrated above by an unfunded ratio of close to 90 percent of total liabilities of the sector in the 1970s. In the 1980s, the FERS--which was designed to be essentially fully funded--was introduced to gradually replace the CSRS, leading to a decrease in the unfunded component of federal DB pension liabilities. Additionally, in recent decades, the Treasury Department has been required to make "catch-up" payments to the federal DB pension funds from its general fund in order to gradually close the funding gap in federal DB pensions. As a result, the unfunded component has decreased from about 90 percent to about 58 percent of total DB liabilities of the sector.

One important difference between federal and S&L (or private) DB pensions, however, is that federal DB pension funds are invested almost exclusively in special-issue, nonmarketable Treasury securities. As a result, unlike private and S&L pension funds, the "asset holdings" of federal DB pension funds are not assets that can be sold in private markets in order to fund future benefits. Instead, they represent claims on the Treasury, and therefore the balances of the federal pension funds are available for future benefit payments only in a bookkeeping sense.

Sunday, March 8, 2015

Time Lost, Time Gained

I am traveling this week so I thought I would republish a post from two years ago on Daylight Saving Time. All you ever wanted to know on the subject as you try to recover from the hour of sleep you lost last night.

Originally published Saturday, March 9, 2013

Daylight Saving Time is upon on and I thought I would provide a little perspective on the subject. My first memory of DST is when I about 5 years old.  We lived just outside of Akron, Ohio and my grandparents lived in Cleveland.  Cleveland was on DST but Akron was not so there was always a lot of discussion about what time is was whenever we planned a visit.  Even to a 5 year old that was very confusing.

This confusion reigned across the United States in the 1950's and 1960's because each locality could adopt, start and end DST as it wanted to.  In fact, on one bus route between West Virginia and Ohio, passengers had to change their watches seven times in 35 miles.  In Iowa, 23 different pairs of DST start and end dates were in effect in one year.

All of this chaos finally led Congress to pass a law in 1966 establishing set rules for observing DST nationally.  This law established DST as the national standard beginning on the last Sunday of April and ending on the last Sunday in October-exactly six months in duration.  However, it permitted any state to exempt itself from DST by passing a state law.  This was later amended to allow any state to make this distinction based on time zones in the state.  This resulted in Indiana (part Eastern and Central time) to split between standard and daylight time until the state finally went to DST uniformly in 2005. Right now Arizona and Hawaii are the only states that do not observe DST.

The main purpose of DST is to make better use of daylight.  DST allows for an hour of daylight to be moved from the morning to the evening.  Since people are generally more active and are doing more outdoors in the evening it has proven popular in many societies around the world.

Today I Found Out provides some of the background on how the idea for DST came about.
Ben Franklin often gets credit for being the “genius” who came up with daylight saving time.  Interestingly though, the letter he proposed something like what we now call daylight saving time and which was eventually published in 1784 under the title, An Economical Project, was actually a witty satire meant to entertain some of his friends, not to be taken seriously on any account.

The modern day version of DST was first proposed by the New Zealand entomologist George Vernon Hudson in 1895.

The credit though for the modern day DST system is often incorrectly given to William Willett who independently thought up and lobbied for DST in 1905.  He was riding through London one day in the early morning and noticed that a good portion of London’s population slept through several hours of the sunlit summer days.  Willet lobbied for DST until his death in 1915.  Ironically, it was one year later in 1916 that certain European countries began adopting DST.

It has been argued that energy conservation is another benefit of DST since there is more energy consumed in homes with lighting, televisions, computers and appliances in the evening compared to the morning.  After all, if you are able to be outside enjoying the daylight you are not using power inside the home.  In fact, during the Arab Oil Embargo in the early 1970's, Congress moved up the effective date of DST to early March to conserve energy.

A recent study has called into question whether DST actually results in any energy savings today. The increased use of home air conditioning in the warmer evening hours compared to the cooler morning hours may be the reason.

Scientists from the University of California, Santa Barbara, compared energy usage over the course of three years in Indiana counties that switched from year-round Standard Time to DST. They found that Indianans actually spent $8.6 million more each year because of Daylight Saving Time, and increased emissions came with a social cost of between $1.6 million and $5.3 million per year.

Commentators have theorized that the energy jump is due to the increased prevalence of home air conditioning over the past 40 years, in that more daylight toward the end of a summer’s day means that people are more likely to use their air conditioners when they come home from work.

Daylight Saving Time is not really necessary as you get closer to the equator as the days and nights are 12 hours each throughout the year.  It is only as you get further away from the equator that you get variations in the amount of daylight during the year.  In summer, daylight hours exceed darkness and the opposite is true in the winter with extremes being experienced the further you get from the equator.

You can see this graphically in this world map that shows which countries have adopted DST at some point compared to those that have never done so.  You can see that very few countries near the equator are using DST currently.


By the way, the way I found in researching this post that it is "Saving Time" not "Savings  Time". Daylight saving time uses the present participle "saving"as an adjective, as in "labor saving device". I had been saying it wrong for all these years. You learn something new everyday.

I still am confused about one thing.  Since we now have adopted Daylight Saving Time beginning the second Sunday in March through the first Sunday in November each year, it is actually more standard than our Standard Time.  We are using it the majority of the year. Doesn't it than make sense to make Daylight Saving Time the standard and rename Standard Time to Daylight Lost Time?

Enjoy the extra hour of daylight and don't forget to take a nap to make up for the lost hour of sleep.

Credits for the DST facts in this blog post:

Monday, March 2, 2015

Minimum Wage, Maximum Leverage

The issue of illegal immigration continues to divide Washington, DC. We saw it again last week when Congress could not agree on a bill that would fund Homeland Security and also prevent funding President Obama's "executive action' to legalize 4 million illegal immigrants.

We will see more headlines this week as Congress kicked the issue down the road for another seven days.

The argument we have heard most often for immigration reform in the past is that the United States does not have enough workers.

In fact, when President Obama announced his "executive action" in December he said the following.

"Part of staying competitive in a global economy is making sure that we have an immigration system that doesn’t send away top talent, but attracts it.” 

President Obama has supplemented this argument with a "humanitarian" view in his latest action in that generally those illegals that would be allowed to gain "legal" status through his use of his "executive authority" are the parents of U.S. citizens. In other words, if you came to this country illegally and had children that were born here, that then becomes your ticket to stay in this country. President Obama would call it keeping families together.

It would seem logical to me that if this is the case why wouldn't a minimum requirement also be that the parents should produce evidence that they also fully paid for the hospital costs involved with the birth?  If they did not pay or the costs were paid by Medicaid, why would we not require the newly legalized workers to be required to pay these costs back as a condition of their work permit status?

As an example, a vast majority of births in a number of hospitals in Texas are to illegal immigrants. At Parkland Hospital in Dallas (yes, the hospital in which John F. Kennedy died in) births to illegal immigrants have made up almost 75% of total births in recent years. Over half of the births at LBJ Hospital in Houston have been to illegal immigrants in recent years. Nationally, it is estimated that almost 1 in 10 births in this country today are to an illegal immigrant. A large portion of the costs for these births are paid by Emergency Medicaid or the costs are just absorbed as a loss by the hospital as these illegal immigrants do not pay anything for the birth.

Under Obama's "executive action", if an illegal immigrant has to produce a birth certificate to prove they are the parent of a U.S. citizen, shouldn't they also have to produce evidence the birth was not paid by U.S. taxpayers or was a bad debt of the hospital?

And shouldn't they be obligated to pay this money back since the birth is, in effect, their ticket to access the U.S. jobs market? The amount owed could be withheld from their future wages on an installment basis. The money could also be allocated specifically to fund Obamacare costs. This would be the logical way to handle this issue if President Obama's "executive action" is allowed to stand. Or does that make too much common sense?

Let's also examine the argument that we need the workers.

Hotels, restaurants, construction and a number of service industries argue that there are not enough Americans willing to work at lower paid jobs. They argue we need to provide opportunity to low-skilled foreign-born workers to enter the United States to do these jobs that will result in an overall benefit to the economy

On the other end of the education spectrum, high tech computer companies in Silicon Valley and other industries that covet STEM college graduates (Science, Technology, Engineering and Math) are big supporters of opening the borders for these graduates arguing we are developing enough native-born citizens with these skills.

What are the facts?

I thought this chart from The Washington Post that shows unemployment rates by college major was particularly interesting on that score.

Note that the current unemployment rate of recent high school graduates in the U.S. is almost 18%. The unemployment rate for experienced high school diploma holders is 9.9%. The unemployment rates for high school drop-outs is traditionally even higher. Where is the need to bring in more unskilled labor? There are already millions of Americans without jobs.

Notice also that the unemployment rate for recent college graduates is higher for Computers, Statistics and Mathematics majors (8.3%) than for Communications and Journalism majors (8.2%). If we can't employ nearly 1 out of 10 recent college graduates in Computers, Statistics and Mathematics, why do we think there is a need to bring thousands of additional foreign workers here. Why don't we get these young Americans employed first before bringing in additional immigrants?

The truth is that many of our political leaders and business interests keep calling for "immigration reform" when they really just want to increase the numbers of "legal" immigrants despite the fact that our economy can't provide enough good paying jobs to native born citizens as it is.

We are already providing legal "Green Card" status to over 1 million immigrants per year. No other country in the world provides more legal immigration each year than the United States already does.

The reality is that immigration reform is not so much an economic issue as it is a political issue. Democrats need the votes. That is all they seem to care about.

Corporate interests want to keep wage costs down. The labor unions should be anti-immigration but are more concerned with the success of the Democrat party than their own members.

Republicans in Congress are caught between the monied interests who want the cheap labor supply and their rank and file voters who fervently oppose illegal immigration. It is all about political interests and has very little to do with the best interests of this country, the American people, or especially, the American worker.

For the average American worker, the higher the immigration levels are, the lower their wages will be. That is basic economics. It is simple supply and demand.

That is why I would like to see the Republicans turn the tables on President Obama and the Democrats and combine an increase in the federal minimum wage with defunding of Obama's "executive action".

Pass the Homeland Security funding bill as a clean bill. Immediately thereafter, have the House of Representatives pass a bill increasing the federal minimum wage from $7.25 to $7.50 and defund Obama's executive action on immigration in the same bill and send it to the Senate

Failure to pass this bill requires Democrats in Congress and the President (if it passes and he vetoes it) to admit that 4 million illegal immigrants take priority over American workers.  And it also puts Democrats on the spot in that they have consistently been calling for an increase in the minimum wage for years. They suddenly don't want it if it means we can't legalize more illegal immigrants. That is a tough position to defend in anyone's home district or state.

Bear in mind that 29 states already have minimum wage laws in place that are in excess of the federal law. That should lay to rest fears that the GOP would be selling out on a major adverse economic issue.

Such a move could also be used by the Republicans to show that they are "working for the American worker" and are also "willing to compromise" on issues.

Sure, the Democrats would argue that GOP is just playing politics. However, I would much rather be on the Republican side of that political issue than be accused of trying to shut down the government or holding Homeland Security hostage to get the illegal action of the President de-funded.

What about you?

(Note: It goes without saying that the strategy I propose would have those on the Hill arguing it could not be done because it would violate some aspect of the Budget and Appropriations process. In other words, it would be illegal. However, when did that stop President Obama?  My advice to Speaker Boehner and Majority Leader McConnell? It is time to start playing the game the way the other side plays the game.

Tuesday, February 17, 2015

Turning Back The Clock

In my last post I quoted Winston Churchill's observations on Islam that were written in his book, The River War, about his experiences in the Middle East as a young British soldier.

No stronger retrograde force exists in the world. Far from being moribund, Mohammedanism is a militant and proselytizing faith. It has already spread throughout Central Africa, raising fearless warriors at every step; and were it not that Christianity is sheltered in the strong arms of science, the science against which it had vainly struggled, the civilisation of modern Europe might fall, as fell the civilisation of ancient Rome.

Today I came across an excellent article by Graeme Wood in The Atlantic on "What ISIS Really Means" that provides additional context and perspective on the issue and which seems to show just how insightful Churchill was one hundred years ago.

When Churchill speaks about a retrograde force he was not kidding. Wood points out that ISIS really does want to turn the clock back some 1,400 years. They truly believe the only pure form of Islam is exactly how it was practiced by the Prophet Muhammed during his life.

There is a temptation to rehearse this observation—that jihadists are modern secular people, with modern political concerns, wearing medieval religious disguise—and make it fit the Islamic State. In fact, much of what the group does looks nonsensical except in light of a sincere, carefully considered commitment to returning civilization to a seventh-century legal environment, and ultimately to bringing about the apocalypse.
The most-articulate spokesmen for that position are the Islamic State’s officials and supporters themselves. They refer derisively to “moderns.” In conversation, they insist that they will not—cannot—waver from governing precepts that were embedded in Islam by the Prophet Muhammad and his earliest followers. They often speak in codes and allusions that sound odd or old-fashioned to non-Muslims, but refer to specific traditions and texts of early Islam.
In addition, although President Obama likes to state that the Islamic State is not Islamic, that is just plain wrong.
The reality is that the Islamic State is Islamic. Very Islamic. Yes, it has attracted psychopaths and adventure seekers, drawn largely from the disaffected populations of the Middle East and Europe. But the religion preached by its most ardent followers derives from coherent and even learned interpretations of Islam.

What is most troubling about ISIS is that its leaders and the fanatical followers who have joined the movement believe that they are playing out carefully crafted parts in a coming Apocalypse that will result in the return of the Mahdi and see Muslims conquering the world before the end of days.

The Islamic State, also known as the Islamic State of Iraq and al-Sham (ISIS), follows a distinctive variety of Islam whose beliefs about the path to the Day of Judgment matter to its strategy, and can help the West know its enemy and predict its behavior. Its rise to power is less like the triumph of the Muslim Brotherhood in Egypt (a group whose leaders the Islamic State considers apostates) than like the realization of a dystopian alternate reality in which David Koresh or Jim Jones survived to wield absolute power over not just a few hundred people, but some 8 million.

It is pretty hard to negotiate or reason with a group who believes they are following God's calling, believe it is their responsibility to extend their religion by the sword, kill all unbelievers along the way and are part of God's plan for the end of days to boot.

Read the entire article and you will quickly realize that we are not dealing with the JV team.

Control of territory is an essential precondition for the Islamic State’s authority in the eyes of its supporters. This map, adapted from the work of the Institute for the Study of War, shows the territory under the caliphate’s control as of January 15, along with areas it has attacked. Where it holds power, the state collects taxes, regulates prices, operates courts, and administers services ranging from health care and education to telecommunications.
Credit:The Atlantic

Thursday, February 12, 2015

A Retrograde Force

Abraham Lincoln (born 206 years ago today) and Winston Churchill are the two historical figures I most respect.

Why? For the simple reason that the United States and Great Britain might not exist today but for the leadership they provided their countries in desperate times.

Their principles, passion and perseverance at a time when it was needed most is something that is cause for great respect and admiration. They did not flinch or falter when they were tested. They stood tall and rallied their nations when their people needed a strong leader.

Most Americans know more about Lincoln than Churchill.

Winston Churchill was born in 1874 and was an officer in the British Army, an historian, writer, artist and politician. He was the Prime Minister of the United Kingdom from 1940-1945 and 1951-1955.

While he was a young Army officer he also developed a sideline activity as a war correspondent for several London newspapers and eagerly sought out postings to active campaigns so he could be near the most battle action. He ended up seeing combat in Cuba, India, the Second Boer War as well as in the Sudan. You might say he was a well-traveled young man as most of these experiences had occurred by the time he was 26 years of age.

Churchill later also served as an officer in World War I.

After his experiences in the Sudan, Churchill wrote a two-volume book on his experiences in the Middle East entitled The River War.

This is what he wrote about Mohammedanism (Islam) in that book.

How dreadful are the curses which Mohammedanism lays on its votaries! Besides the fanatical frenzy, which is as dangerous in a man as hydrophobia in a dog, there is this fearful fatalistic apathy. The effects are apparent in many countries. Improvident habits, slovenly systems of agriculture, sluggish methods of commerce, and insecurity of property exist wherever the followers of the Prophet rule or live. A degraded sensualism deprives this life of its grace and refinement; the next of its dignity and sanctity. The fact that in Mohammedan law every woman must belong to some man as his absolute property – either as a child, a wife, or a concubine – must delay the final extinction of slavery until the faith of Islam has ceased to be a great power among men.

At the same time, Churchill admired the individual qualities of the Muslims he met as well as their bravery in battle.
Thousands become the brave and loyal soldiers of the Queen: all know how to die: Individual Moslems may show splendid qualities. Thousands become the brave and loyal soldiers of the Queen; all know how to die; but the influence of the religion paralyses the social development of those who follow it. No stronger retrograde force exists in the world. [5] Far from being moribund, Mohammedanism is a militant and proselytizing faith. It has already spread throughout Central Africa, raising fearless warriors at every step; and were it not that Christianity is sheltered in the strong arms of science, the science against which it had vainly struggled, the civilisation of modern Europe might fall, as fell the civilisation of ancient Rome.

I was especially taken with Churchill's observations that in Islam...

      "No stronger retrograde force exists in the world."

Since I first became aware of the rise of Islamic Fundamentalism with the fall of the Shah of Iran in the late 1970's it always has seemed to me that the goal of Muslim extremists is to take the world back about 1,000 years.

You begin to appreciate the retrograde nature of what has occurred within Islam just in my lifetime by looking at the comparison of life in some Islamic countries between then and now.

These are photographs of Iran in the 1970's courtesy of

This is a picture of a female soldier in the Iranian Army in 1979.

Credit: Pakistan Defence

These are female soldiers in the Iranian Army in 2011.

Credit: Pakistan Defence

These are Afghanistan women in the 1950's compared to 2014.

These are Egyptian students at Cairo University.



We are now in an age where we see and hear about beheadings, prisoners being burned alive and young female relief workers who are taken prisoner and killed in the Middle East by ISIS.

In Africa, another Muslim extremist group, Boko Haram (which translated into English is "Western Education is Forbidden") has killed thousands in Nigeria and has caused 1.5 million to flee their homes in the conflict zone.

We also recently saw the cold-blooded murders of 11 people in Paris because of a cartoon and another four Jewish people in a kosher deli. We are still trying determine if President Obama has connected the dots yet on this "random" act.


This is how the Merriam-Webster dictionary defines it

: returning to an earlier and usually worse state or condition
: moving backward

You decide whether Sir Winston Churchill was right.

 “The further backward you look, the further forward you can see.”
                                                              -Winston Churchill

Hat tip to loyal reader JWA for pointing me to this Churchill history.

Sunday, February 8, 2015

Millennial Squeeze

I have written before that when the history of the Obama era is written, I think one of the ironies that historians will focus on will be the level of support that younger voters provided for Obama that will clearly be seen as having been against their self-interest when viewed in the fullness of time.

Voters do not typically vote against their self-interests. That is why the unions and government workers who believe in big government and big spending typically vote for Democrats.  It is also the reason that small business owners and investors who are concerned about high taxes and government regulations vote for Republicans. It is why young voters in the Vietnam era voted for Eugene McCarthy and George McGovern and why generations of African-Americans voted for Republicans after the Civil War.

Obama carried two-thirds of voters aged 18-29 in 2008.  He carried this demographic with about 60 percent of the vote in 2012.  When you consider the following it is hard to understand why.

We know the obvious. Over $6 trillion in national debt has been added in the Obama years.  The President's budgets over the next two years look to be more of the same. His recent budget submission to Congress projects another $500 billion in debt for next year and does not even attempt to balance the budget over the next ten years.When Obama leaves office these young voters will be inheriting almost $20 trillion in federal debt that they will have to pay for from future taxes.

Student debt over the Obama years has increased from $640 billion when he took office to over $1.2 trillion today.  That's right, student loan debt has increased an average of $100 billion per year since Barack Obama took office. He not only has doubled the federal debt while in office, he has also presided over a doubling of student loan debt.

Unfortunately, Mr. Obama will not be responsible for paying the interest and principal on these debts. That will fall largely on the Millennial generation, those born between the early 1980's and early 2000's. The very voters who overwhelming voted to put Barack Obama in office---twice!

This generation has already had its challenges. The first Millennials were just trying to enter the workforce in substantial numbers when the Great Recession hit in 2008. Millennials are struggling with a tougher employment outlook than older generations. Workers 25- to 34-years-old have an unemployment rate of that is almost one-third higher than Americans between 35 to 44, according to the Bureau of Labor Statistics.

They also have an estimated savings rate of negative 2% according to The Wall Street Journal which cited a study by Moody Analytics. This compares to a 3% savings rate for the 35-44 age group and 6% for those between 45 and 54.

You might think that young people have always struggled with putting money away. However. Moody Analytics found that 25-34 year olds were saving 5.2% in 2009. The weak job market and increased student debt are clearly responsible for additional pressure on the pocketbook of the Millennials.

However, I came across another interesting factor that seems to be at play in raising havoc with Millennial budgets that you don't hear about---the changes in spending patterns of Americans. And those changes in how people spend their money have been particularly disadvantageous for younger people.

This is a chart from The Wall Street Journal that shows changes in spending patterns for Americans between 2007 and 2013. Spending pattern changes take account of both price increases but also behavioral adjustments required due to rationing limited income sources.

Overall, income for Americans was up only 0.2% between 2007 and 2013, but total spending was up 2.3%.  This is a chart that graphically illustrates the middle class economic squeeze.

However, when you look at the spending categories that have had the largest increases, you particularly see just how poorly the last six years have been to Millennials.

What are some of the spending categories that are most important to this age group?

Education                  +22.9%
Rent                           +26.0%
Cell Phones               +49.1%
Internet                      +81.3%

You add in the requirement to buy health insurance under Obamacare  (+42.1%), which a good number of this age group were not purchasing before, and you can readily see the financial stress the Millennials are under.

When you look at some of the categories where spending has been reduced, most were of no benefit to this age group whatsoever.

Residential phone       -30.7% (never had one)
Household textiles      -26.5% (using stuff that their mother gave them)
Homes owned             -11.5% (no house, struggling to pay student debt,
Major appliances          -8.3% (living in basement or comes with apartment)

Unfortunately, the worst is apparently still to come for the Millennials.

What are they going to do when faced with much higher taxes and interest costs to pay for all the debt that has been accumulated during the administration of Barack Obama?

I don't envy their future. They are on the hook for $18 trillion and counting in federal debt. They are the hook for many more trillions in public sector pension costs for state and local  workers. They are on the hook for over $1.2 trillion in student loans that are not dischargeable in bankruptcy. More than 1 in 2 is underemployed.

The poor economy and low interest rates are keeping millions of Baby Boomers in the workforce and blocking their career advancement. They almost certainly will pay much more into Social Security and Medicare than they will ever get out of it. Or they will end up caring for Mom and Dad somewhere down the line.

However, almost 2 out of every 3 of them has no one to blame but themselves. They had a choice to make for their future but were more enthralled with "cool" than with "competent".

It is something I don't understand. It is something that I don't think history will understand. For the sake of their own future, I hope the Millennial Generation will soon understand what is happening to them and demand real change.  It is their only real hope to create their own history. If not, they will just pay for ours.

Monday, February 2, 2015

Beware the Herd

I always taught my children to be wary of following the herd.

You often feel better and more secure in conforming and not sticking your head out from the crowd. However, the crowd you are following can sometimes be heading in the wrong direction.

This was demonstrated a few years ago in a research study at the University of Leeds conducted by Professor Jens Krause.

The study showed that it takes a minority of just five percent to influence a crowd's direction - and that the other 95 percent follow without even realizing what is going on.
Professor Krause, with PhD student John Dyer, conducted a series of experiments in which groups of volunteers walked randomly around a large hall. Within the group, a few received instructions regarding where to walk. Participants were not allowed to communicate with one or intentionally influence anyone.
The findings in all cases revealed that the informed individuals were followed by the others in the crowd, forming a self-organizing, snake-like structure (or flock of sheep, take your pick). 
"We've all been in situations where we got swept along by a crowd," said Professor Krause. "But what's interesting about this research is that our participants ended up making a consensus decision despite the fact that they weren't allowed to talk or gesture to one another. In most cases the participants didn't realize they were being led by others at all." 
This is consistent with the observations of sales and motivation consultant, Cavett Robert, who I have quoted in these pages in the past.

“Since 95 percent of the people are imitators and only 5 percent initiators, people are persuaded more by the actions of others than by any proof we can offer.” 
                                                                       – Cavett Robert

This is the fundamental principle of the law of social proof. The fact is that most people are significantly influenced in their behavior by looking at others.

Most people want to conform. They don't want to stand out in a crowd. They are very comfortable in going with the flow. That type of human behavior works well when you have moral, ethical leaders. As a result, society functions well.

It does not work well when the leaders and initiators are evil. This has been proven over and over and over again throughout history. Some imitators imitate. However, most of the 95% become invisible. They keep their heads down and they just stay quiet so as to not rock the boat.

I am sure that most of you have also seen this famous quote that is attributed to Sir Edmund Burke.

"The only thing necessary for evil to triumph is for good men to do nothing."
                                                                           -Sir Edmund Burke

However, Paul Rosenberg of the Casey Daily Dispatch places all of this in a useful context by pointing out that evil, by itself, is inherently weak and does not replicate easily. It only flourishes when the good let themselves be led astray. People obey when they should be objecting.

Yes, there is a time when good men and women must stand up for what’s right, even when it involves risk, but that moment comes only after evil has already been well established and is powerfully on the move.
Fighting evil may be an essential thing, but it isn’t the first problem—it matters only after thousands or millions of mistakes have already been made. And if those first mistakes had not been made, great fights against evil wouldn’t be necessary.
Let’s begin with a crucial point: Evil is inherently weak.
Here’s why that’s true:
Evil does not produce. It must take advantage of healthy and effective life (AKA good men and women) if it’s to succeed. Evil, by its nature, is wasteful and destructive: It breaks and kills and disrupts, but it does not produce and invent. Evil requires the production of the good in order to do its deeds.
How much territory could Caesar have conquered on his own? How many people could Joe Stalin have killed with no one to take his orders? How many people could Mao have starved to death without obedient middlemen? With duteous followers, however, evil rulers killed some 260 million people in the 20th century. The truth is that evil survives by tricking the good into doing its will. Without thousands of basically decent people confused enough to obey, evil would fail quickly.
The great tragedy of our era is the extent to which evil has been successful in convincing people to service it. Good people having yielded their wills arm evil, accommodate evil, and acquiesce to its actions.
Hannah Arendt summarized it this way:
"The sad truth is that most evil is done by people who never make up their minds to be good or evil."
People end up supporting evil because they don’t want to make up their minds at all. They want to avoid criticism and vulnerability, so they hold to the middle of the pack and avoid all risk.
These people wouldn’t initiate murders by themselves, but in the name of duty, loyalty, unity, and/or the greater good, they cooperate with evil and give it their strength. But each plays a small part—none of them stretches so far that they’d have to contemplate the final effects of their actions.
In the 20th century, however, the actions of such people led directly to the murders of 260 million people. And they did this precisely by avoiding decisions… by merely obeying.

A few useful questions to ask yourself.

Are you leading or following?

Are you following your own conscience or someone else's?

Are you more concerned with fitting in than standing up for what is right?

Are you obeying when you should be objecting?

I dare say that if every good man and woman asked these questions more often, the world would be a much better place to live.

Thursday, January 29, 2015

Apple Of My Eye

I was driving on the interstate a couple of years ago and a nice, new Mercedes SL500 convertible zoomed by with these vanity plates.

I immediately understood why that guy was driving that car.

2013 Mercedes 500SL

I wrote about the Apple (symbol;AAPL) stock success story four years ago in my blog post, The Mall, Main Street and Wall Street., in which I stated,

In Apple's first quarter results for fiscal 2011 that were announced yesterday, Apple sold 4.1 million iMacs, 16.2 million iPhones and 7.3 million iPads. These are sales in just 3 months! They had $27 billion in revenue and $6 billion in profit in the quarter. Remember, this is a company that had annual revenues of $ 5 billion for the entire year in 2001.

Apple released its first quarter results for fiscal 2015 this week so let's revisit the AAPL story compared to four years ago.

  • Total revenues of $74.6 billion (compared to $27 billion four years ago)
  • Net profit of $18.0 billion (compared to $6 billion)
  • Cash and marketable securities on hand of $179 billion (compared to $50 billion)
  • Market cap of $695 billion (compared to $312 billion)
  • 74.5 million iPhones sold (compared to 16.2 million)
  • 21.4 million iPads sold (compared to 7.3 million)
  • 5.5 million iMacs sold (compared to 4.1 million)

Let's put a few of these numbers in perspective.

This is a chart prepared by Zero Hedge that shows Apple's cash position compared to other large S&P 500 companies. Again, this compares Apple's cash on hand compared to the total value of the other companies.

Back to that Mercedes 500SL with the OWNAAPL license plate that zoomed by me like I was going backwards.

A purchase of 1,000 shares of Apple stock at its closing price of $14.33 on December 31, 2002 ($14,330), or approximately the price of a Honda Civic at that time, would now have a cost basis of $.97 per share adjusted for stock splits.

At today's closing price of $115.31 per share, that $14,330 investment in Apple would now be worth $1,703,497---or about 119 times the original investment.

Stated another way, that would be one 2015 Mercedes 550SL and $1.6 million in AAPL stock today.

If I had been smart enough to own Apple in 2002 until today (except for selling a small chunk for that one car), I might deem myself worthy of a vanity plate like that myself.

Thursday, January 22, 2015

Large and Long Chunks Required

How do you know if someone is really smart?

The kind of person who is really exceptional and can make a true difference in this world.

The half of one percent of the human race- the very smartest- who have the ability to create real wealth through productivity enhancements that improve livings standards and our way of life.

I just finished reading Andy Kessler's book, "Eat People and Other Unapologetic Rules for Game-Changing Entrepreneurs", and he argues that finding exceptional people who can both see and lead the way to great things is absolutely critical to advance our economy and society.

I wrote about Kessler and his ideas almost four years ago when his book first came out.  I read a review and summary of the book and was intrigued with his thinking. Let's just say that I am little behind in my reading.

Kessler's basic thesis is pretty simple.  Technology eats the jobs of people.  However, the economy is incredibly dynamic. History shows that labor-saving machines do not decrease overall jobs even when they make some jobs obsolete.  The new economic growth creates new jobs, raises the standard of living for everyone and the lost jobs ultimately are quickly forgotten-if the policy makers let it happen.

This is how he describes it in the introduction to his book.
There is only one definition of an economy I’ve ever been comfortable with: a system that increases the standard of living of its participants. Period. Everything else from credit to money supply to quarterly earnings releases to minimum wages is just a tool or else a meaningless characteristic of an economy.
Increasing standards of living doesn’t happen automatically. It’s not a gift from heaven. Someone has to invent the future. 
I call them Free Radicals. We’ve seen them throughout history.
Charles Curtis’s 1903 steam turbine generator electricity to the masses. Using that electricity, in 1907, James Spangler, a janitor with asthma, invented an electric suction-sweeper, today’s vacuum cleaner. William David Coolidge’s thermionic X-ray tube of 1913 changed medicine. That same year, the Walker brothers in Philadelphia invented the first electric dishwasher. In 1916, Clarence Birdseye perfected the flash-freezing process (and Birds Eye potato puffs). In 1928, Thomas Midgley, Albert Henne, and Robert McNary synthesized the first chlorofluorocarbons (trademarked as Freon in 1930), ushering in safe refrigerators and air conditioning (other coolants eventually replaced Freon). Paul M. Zoll created the cardiac pacemaker in 1952. And Percy L. Spencer in 1945 watched a magnetron melt candy, leading to the invention of microwave ovens.

To invent the future you have to have someone who can understand, see and conceptualize things better than everyone else. Without that, we never break out of the status quo. We need the smart people who can see what others don't see and do what others can't do.

Kessler turned to Bill Raduchel, who has a Harvard PhD and was also on the faculty there, for his thoughts on the subject of "smart". After his stint in academia Raduchel was the CFO and CTO of Sun Microsystems in the 1990's and was also with America Online before its merger with Time Warner. Kessler observes that Raduchel has seen a fair share of smart people in his days between Cambridge and Silicon Valley so he asked for his perspective on what it means to be really smart.

Raduchel breaks down intelligence into four main parameters. Each of these characteristics are in each of us and they vary in degrees. There is a variability in all of them with all of us.

First, how fast do our brains work. How quick is someone on their feet? How quickly do they process information? Some people are brilliant but they don't reach conclusions quickly. Others are lightning fast. The comedian Dennis Miller comes to mind when I think fast thinkers. Most studies find a relatively narrow range on its clock speed---about three to one. This is called the Stroud number after a psychologist who focused his academic work on the processing rate of the brain.

Second, is the chunk recall factor. Human memory in the brain appears to be organized as linked lists of chunks of information. When we open these chunks or containers we seem to know everything in them. However, there seems to be a limit on how many chunks we can keep open at one time and recall the information. For most people that number is seven. That is why U.S. phone numbers were set at seven digits. Again, these is variability in the chunk recall factor that is fairly limited---between three on the low end and twelve on the high side.

Third, is the number of thought generators a person has in their brains. The human brain is great at evaluating but it generally needs to compare it to something it already knows. It is not good at evaluating in a vacuum. Therefore, the brain uses templates (prior thoughts) as anchors to compare new input. It then sends the new thought off to be evaluated as yes or no. The more thought generators in place and active, the better to evaluate properly. Again, we are talking a narrow range of two to ten with an average of five in the general population.

You can also see there is variability in brain power but it is not enormous from one person to the next in the first three characteristics. That is not the case with the fourth parameter.

The final factor, the size of the memory chunk, what is called the "Halstead length", is the biggest determinant in a smart person. This is how much is crammed into one of those chunks or containers that is open. As you get into complex issues and problems the only way to comprehend something effectively is for it to be all stored in a couple chunks--the fewer the better--because there are limits on our chunk recall (as discussed above).

"The longer the Halstead length, the greater the problem you can comprehend, the richer the data structure you can employ", observed Raduchel.

The average chunk size is a Halstead length of 250. In Silicon Valley terms, that is about fifty lines of software code. However, when this was studied by Maurice Halstead for which the "Halstead length" is named, he found that the very best programmers had lengths of over 60,000! There is a big difference between 250 and 60,000.

That variability is also immense when you consider that the other characteristics of intelligence between each of us only varies by a factor of three to five. The "Halstead length" can vary by a factor in the hundreds.

The fact is that some people have the ability to comprehend something incredibly complex because it is a 50,000 Halstead length problem and they have the brain power to handle up to 60,000. The average person has no chance at all to do the same if their "Halstead length" is a mere 250.

Those of us who are mere mortals can be invaluable in supporting the big ideas created by the very smart by working on the pieces of the big concept or idea. However, the productivity of the top one-half of one percent is critical as they are needed to develop the big thought--the design or concept--that can be implemented by others in smaller chunks. It is the only way it works.

The reality that everyone has different attributes and assets. We need different contributions from different people to be successful in our society.

Kessler puts it this way.
You see, we are not equal. Forget this way of thinking. Forget the politically correct tropes about the dangers of IQ tests and aptitude measuring. Some are smarter than others. If you went to high school, you know this. If you work at a company you know this. So quit trying to say we are all equal. 
Equal opportunity, yes. Equal, well, no.

Now you have a better idea of what makes someone smart.

It is about chunks and lengths.

And you thought that size didn't matter?

Think again.

Sunday, January 18, 2015

Duke Derangement Disorder

I have always had a special affection for Duke University. I have a number of close friends who are graduates of the university. I have visited the campus often and love the feel of the place. I also have great respect for the basketball program that Coach K has developed there over the years. There is no better venue to watch a basketball game than in Cameron Indoor Arena.

However, when it comes to the Duke University administration, I am at a total loss of what is going through their heads. It is as if they have something called Duke Derangement Disorder with their liberal, politically correct ideas.

The latest example was Duke's announcement early last week that it was going to allow the Muslim call to prayers to be piped out of the university's iconic chapel.

Duke University Chapel

This is the same university which kicked Chick-fil-A out of its campus food court. I wonder why?

It is the same university that would not allow a pro-life group to hold a meeting in its women's center.

It is the same university that hosted a pro-Palestinian Solidarity Movement Conference on campus.

It is also the same university that threw its entire men's lacrosse team under the bus choosing to believe the claims of an African-American stripper over those of their own student athletes. Taking sides in the case against their own students (who were later totally exonerated), cost Duke what has been estimated to be over $100 million in legal settlements to the families of the three lacrosse players who were falsely charged and other members of the 2005-2006 team, legal and public relations fees.

By the end of the week, Duke's administration reversed its decision of the Muslim call to prayer citing, among other factors, safety concerns. My guess is that a bigger factor was that Duke found out quickly that alumni giving might suffer substantially if they proceeded with their political correctness plan gone mad.

All of this is even more difficult to fathom when you consider the original by-laws of Duke University in which the first paragraph reads as follows.

The aims of Duke University are to assert a faith in the eternal union of knowledge and religion set forth in the teachings and character of Jesus Christ, the Son of God; to advance learning in all lines of truth; to defend scholarship against all false notions and ideals; to develop a Christian love of freedom and truth; to promote a sincere spirit of tolerance; to discourage all partisan and sectarian strife; and to render the largest permanent service to the individual, the state, the nation, and the church. Unto these ends shall the affairs of this University always be administered. (emphasis added).

In fact, you can see these words inscribed on a plaque that is near the Duke Chapel by going here. They were still the first paragraph of Duke's by-laws until last May.

The Duke Board of Trustees amended these "aims of Duke University" on May 9, 2014 so that it no longer was centered on "the teachings and character of Jesus Christ, Son of God" and the aims of the university were no longer "to develop a Christian love of freedom and truth".

That was quite convenient don't you think?

It almost appears that someone within Duke's administration had the foresight to remove that little obstacle in the university's by-laws before they felt comfortable blasting the Muslim call to prayers all over the campus.

The new Duke University "aims" are as follows. Note that it takes a lot more words when you don't truly believe in anything and are trying not to offend anyone at the same time.

The aims of Duke University (the "University") were originally set forth in a statement that President John C. Kilgo wrote for Trinity College in 1903. Kilgo's statement, which grounded the University's purposes in the Christian tradition of intellectual inquiry and service to the world, was adapted for Duke University upon its establishment in 1924. Recognizing its origin in this tradition, its continuing relationship to The United Methodist Church, and the diverse constituency that has developed since its founding, the University is committed to creating a rigorous scholarly community characterized by generous hospitality towards diverse religious and cultural traditions.  The University therefore pursues the following aims: to foster a lively relationship between knowledge and faith; to advance learning in all lines of truth; to defend scholarship against all false notions and ideals; to develop a love of freedom and truth; to promote a respectful spirit of dialogue and understanding; to discourage all partisan and sectarian strife; and to further the advancement of knowledge in service to society. The affairs of the university will always be guided by these ends.

Jesus Christ and the Christian love of freedom and truth have been replaced by the following .

... "the University is committed to creating a rigorous scholarly community characterized by generous hospitality towards diverse religious and cultural traditions";  (Of course they are!)

... "to foster a lively relationship between knowledge and faith"; (The eternal union of knowledge and religion set forth in the teachings and character of Jesus Christ has been replaced by a lively relationship between knowledge and faith? I especially like the fact that it is a "lively" relationship.)

..."to develop a love of freedom and truth"; (Forget that Christian love stuff. Love is all that matters.)

Of course, it concludes with "the affairs of the university will always be guided by these ends".

Didn't the original by-laws state the same thing?

We now know that at Duke "always" doesn't mean forever. It just means as long as it is politically correct. Or until rich alums quit writing checks. After all, dollar bills can quickly cure most anything on today's college campuses. Even Duke Derangement Disorder.