Monday, April 25, 2016

Tornado Tale +55

It is tornado season. It is a time to keep your eyes on the sky and be alert.

Tornado activity was on the decline for three straight years until the number of twisters increased to just over 1,000 last year. That is long way off from the 1,800 that we encountered in 2004.

Before you look at this graph and let it lead you to believe that tornado activity is trending up, bear in mind that tornado reporting is much better today than it was 60 or 70 years ago. Nothing occurs on the face of our earth today that is not reported and chronicled. It was not always that way. In years past, many smaller tornadoes were never recorded.

For a better perspective, consider this graph from that shows tornado activity for just those storms that were rated f3+ to f5+ on the Fujita scale. These are the tornadoes that cause the most severe damage. Wind speeds of over 158 mph. This indicates that tornado activity is actually less severe recently than it was previously in the United States.  I know that this is an inconvenient truth for global warming alarmists who have predicted more severe tornado activity. However, facts are facts.

I had my own up close and personal experience with a tornado exactly 55 years ago today with a powerful f4+ tornado (Wind speeds in excess of 207 mph. Only about 1% of tornados reach this level of devastating damage).

I first blogged about my experience five years ago on the 50th anniversary of my brush with that twist of fate.  2011 was a particularly bad year for tornados--the worst since the mid-1970's for f3+ twisters.

This post is still the second most read blog post in the 5+years I have been writing BeeLine.

Keep your eyes on the sky and seek shelter immediately if one of these terrible tornados is heading your way.

A Tornado Tale
(Originally published 4/25/11)

50 years ago today I came close to death.  I was in a house that took a direct hit from an EF4 Tornado in Eaton, Ohio.  It was shortly before 400pm on a late April afternoon and I was in my bedroom organizing baseball cards with my best friend.  My mother was visiting a neighbor with my younger brother.  I looked out the back window and looming straight ahead about a half mile away was the tornado dancing back and forth right in front of my eyes.  It appeared to be on a direct path to our home.

I remember seeing details that you normally don't pick up in photographs.  I clearly could see lumber, shingles and other debris swirling around near the top of the twister.  We made a quick call to my friend's home to warn them of the approaching tornado and headed for the basement.  We bounded down the stairs.  We heard the sound of a car's horn racing down the main road that was parallel to the tornado's path.  We later learned it was the family who operated the farm behind us who had decided to run for it rather than go to their basement.

A few seconds later the tornado hit.  It was a deafening roar.  It was as if you were standing right by the railroad tracks and a train was going by at enormous speed.  I remember covering my ears with my hands because of the roar.  I remember my friend and I shouting at each other at the top of our lungs but you could not hear a word over the sound.  Suddenly it got even louder and it sounded as if the entire house was caving in.  I remember looking up at the floor and joists above me and thinking that this was it.  I fully expected to be soon buried alive.  Time did slow down.  I remember thinking I had just turned eleven years old and this was the end of the road.  It then became deathly quiet.  The floor had held and my friend and I checked each other to be sure we were all right.

We cautiously started up the basement stairs.  The door would not open but we both put our shoulder to it and pushed hard. We got it about half way open and slithered out.  Staring at us through the adjoining door to the garage was a steel beam that had been thrown around like a tooth pick. It had penetrated almost a foot through the door into the house.  The windows on the back side of the house that faced the tornado were all broken.  The draperies hung in tatters and were now blowing in the wind.  The windows on the front of the house were intact but were caked with dirt and grass that looked like it had been sprayed on. The dirt was so thick you could not see through the windows at all.  All through the house lay debris. Drywall from the ceiling was laying all over. You could look up and see the sky.

I tried to make my way back to my bedroom but I couldn't navigate the debris that littered the hallway.  My friend and I went out the front door and we could see the tornado continuing on its way to more destruction down the road.  The tornado looked much better from the backside.

I did not have shoes on but I began running toward the house where my mother was.  It had been spared but for some minor damage.  It was a debris field of 2x4's, downed electric wires and protruding nails to get to her. I saw some hay straw blown straight in to some siding as if it was a nail.  I reached my mother and looked back at our house for the first time.  I almost could not believe the sight.  It looked as if our house had been bombed.  I had a hard time choking back tears as I saw our house.  I kept saying to my mother, "Look at our house".  She just kept repeating, "It is ok.  You are alive".  Even after 50 years, you do not forget a day like that.

Photographs and other background on the tornado of April 25, 1961

Photo taken of the tornado by a local photographer at close to the time it destroyed our house.

Photo of what was left of the Turner farmhouse that was directly behind our house.  Witnesses said that when the tornado hit the 2-story frame house it lifted it straight up and the house exploded and deposited almost all of the debris in the basement.  Fortunately, the Turner family did not go to the basement for shelter.  Mr. and Mrs. Turner started for the basement but their 20-year son did not feel the house could withstand the tornado.  They jumped in their car and made a run for it.  That decision undoubtedly saved their lives. It was their car horn I heard in the basement right before the tornado struck.

Our house was totally constructed out of stone.  I was in the basement on the left side of the house as you look at this picture.  The people are on top of debris that used to be the garage and a back porch that were on a slab.  It was the sound of the collapse of this part of the house that had me thinking the entire house was coming down on me.

The house as it looked shortly after construction in 1957 (4 years before the tornado).  I was in the bedroom looking out the window on the far right side of the house when I first saw the tornado approaching.

The house from the right front showing the collapsed garage.  I was in the basement near this corner of the house when the tornado struck.

Through April 24, according to the National Weather Service, there have been 438 confirmed tornadoes in the United States. Only one has been an EF4 similar to the Eaton tornado of 1961.  We have already seen 306 tornadoes in April, 2011. This is the highest April total ever.  The previous record was 267 in 1974. The average number of April tornadoes is 163.  Keep your eyes on the sky and take shelter immediately if one of these terrible twisters heads your way.

Thursday, April 21, 2016

Cutting the Pie

There is a lot of talk during this Presidential campaign about how the "rich" receive an inordinate amount of the income and wealth of the United States.

Bernie Sanders and his fellow Socialists lead this chorus but we hear that we need to "level the playing field" in the United States from any number of politicians.

What follows is usually a call to "tax the rich" and arguments that capitalism is "unfair" and lacks "morality" and that the federal government has an obligation to right this wrong through some type of redistributive scheme

From hearing all of this you would think that the United States is unique in the world for the share of income that the rich earn.

What are the facts? Where does the United States of America actually stand on that measure compared to other countries around the world?

You never see these statistics in the media as they relate to other countries.  I was curious how the U.S. compared to other nations.  After all, in any society ever known to mankind there have been rich and poor people.  It was true in Babylon, Athens and Rome as well as in Moscow and Havana today. A quick Google search supplied the answer.

The United States actually ranks 73rd in the world (out of 156 countries, right in the middle of the pack) on the income share that the top 10% earns as a percent of all national income according to the most recent world data. The top 10% earn 30.2% of all income in the U.S.

To put that in context, in Communist China the top 10% earn 30.0%---almost exactly the same as in the United States. In Venezuela's socialist economy the top 10% earn 34.1%. In Russia, the top 10% earn 32.2% of the total. In other words, the rich have a smaller piece of the income pie in the United States than in Venezuela and Russia. How does that fit the Bernie Sanders narrative?

In addition, all of these countries in the Western Hemisphere have higher concentrations of income in the top 10% than in the U.S.---Haiti (4th), Columbia (12th), Guatemala (13th), Brazil (14th), Honduras (15th), Chile (16th), Panama (19th), Mexico (20th), Paraguay (22nd),  Dominican Republic (24th), Costa Rica (25th), Ecuador (29th), Jamaica (30th), Bolivia (32nd), Nicaragua (33rd), El Salvador (40th), Venezuela (43rd), Peru (47th), Uruguay (66th) and Argentina (70th).

If you are keeping track, almost every country in the Western Hemisphere has the rich with a higher share of national income than is the case in the Unites States. The only exceptions are Trinidad and Tobago (78th) and Canada (118th).

Cuba did not even make the list of 156 countries. It likely does not have reliable data anyway. It is also clear they don't have much income to spread around and what they do have undoubtedly ends up in the pockets of the communist party elite.

Of course, there is another important fact to keep in mind in all of this. If you are considering the well-being and welfare of the masses, it is perhaps more important to consider how big the national economic pie is before you get carried away with how the pie is cut.

The United States generates almost 17% of the world's income for a population that represents only about 4% of the world's population. To put that in perspective, China is now about on par with the United State on gross national income. However, China has over four times the population as the United States.

The country with the greatest equality of income in the world is Azerbaijan. The GDP per capita in Azerbaijan is about $3,250 per capita. That is about 1/15 of what it is in the United States. The people of Azerbaijan are almost all equally poor. Is that fair?

The Democrats like to talk about how "unfair" our economic system is and why we need to "level the playing field."

However, if it is so "unfair" why do so many people around the world keep pouring over our borders?

The numbers above give you a pretty good idea of why that that is.

Monday, April 18, 2016

Sovereigns Slaughter Savers

We formerly lived in a world that, when someone borrowed money, they paid interest on their debt until the loan was paid back.

That world increasingly does not exist anymore among many of the sovereign nation borrowers around the world.

The borrower no longer pays interest on its borrowings---it collects interest.

It is unheard of in recorded (or unrecorded) history.

For context, here is a chart that Business Insider prepared on historical interest rates going back to 3000BC.  Back in Mesopotamia the going interest rate was 20% per year on loans.

I have followed the trend of negative interest rates with some interest but I had no idea it has reached the level it has globally until I read a recent report from Elliott Wave International.

Elliott Wave reports (citing Bianco Research) that negative interest rates now constitute an astounding 46.2% of the non-U.S. bond market worldwide!

Japan alone has 66% of the world's negative-yielding debt. However, there are a lot of other European countries joining the trend as this chart from Elliott Wave demonstrates.

The sub-zero interest rate environment also now appears to be leaking into the European corporate bond market according to Elliott.

Last week, bond yields on the debt of Royal Dutch Shell Plc and Siemens AG dropped below zero. According to Bloomberg, about 16 billion worth of euro-denominated corporate debt is trading with yields below zero, spurred on by the ECB's latest deflation-fighting scheme of starting to buy non-bank corporate notes.

All of this has actually helped the U.S. treasury bond market in the short term. Since there is no interest rate yield in much of the rest of the world, the meager U.S. interest rates look relatively attractive. In fact, in the first quarter of 2016, U.S treasuries produced a total return of 9.8%, the best first-quarter performance since 1986 (per Bianco Research).

How long does all this last?

I don't know.

However, it will not last.

It defies all laws of economics, not to mention, common sense.

I don't think 5,000 years of history are wrong.

Those that hold these negative-interest rate bonds risk extraordinary losses when interest rates rise.

The central bankers around the world that are penalizing and punishing savers are playing a dangerous game that could put all of us at risk.

Economic progress is not made without the investment capital provided by savers and investors.

Without savers there is no investment. And without investment there is no economic growth.

Without savings deposits, banks can't make loans.

The economy eventually grinds to a halt.

Insurance companies, pension funds and others that need attractive positive bond yields for their business models to work are also placed at great risk in this environment.

Without positive yields, they risk collapse and the cascading effects to the economy would be severe.

The slaughter of savers will eventually strangle us all.

It needs to stop...and soon.

Thursday, April 14, 2016

Who Is Going To Get Berned?

Who is going to be "berned" if Bernie Sanders becomes President?

You can see by the Democratic primary election results that there are a lot of people enamored with the 74 year old Socialist. (He will be 75 years old on Election Day in November.)

His proposals are a liberal socialist nirvana. Medicare for all. Free public university tuition. A 100% clean energy infrastructure. Expanded Social Security benefits. And the list goes on and on.

How is it going to be paid for?

The non-partisan Tax Policy Center did an analysis of the cost of Bernie's tax proposals recently. If you think you already are paying too much in taxes, you might gain some new perspective when you see what Bernie has in mind for you.

In total, Sanders is looking at tax increases of over $16 trillion over the next 10 years. That averages about $1.6 trillion per year.

Let's put that in context, the federal government will collect about $1.5 trillion in individual income tax this year. Bernie's plan proposes to raise more than that amount of revenue in additional taxes each year to pay for his socialist ideas.

It is effectively placing an additional burden the size of the individual income tax on the entire economy. And a fair amount of the amount is raised on those individuals who provide the capital and provide the jobs in this economy.

He talks about taxing billionaires and Wall Street barons. However, the reality is that everyone would be "berned" by Bernie to some degree. A few will be singed. Most in the middle class will be torched. Those that produce the most wealth (and jobs) will be immolated.

Let's look at the numbers.

For those in the bottom quintile of household income (below $23,000), the average taxpayer will pay $165 more per year and their after-tax income will be reduced by 1.3%. Singed.

For those in the middle quintile (the heart of the middle class (household income between $45,000 and $81,000) the average taxpayer will pay $4,692 more per year and their after-tax income will be reduced by 8.5%. Torched.

For those in the top quintile ($142,601 and above), the average taxpayer will pay $44,759 more per year and their after-tax income will be reduced by 17.2% per year. Immolated.

Here is the Tax Policy Center chart summarizing the effects. The Addendum data breaks down the specific effects on the top quintile groups. The top 1% is not just immolated, they are incinerated. The top 1% ($730,000) would see their after-tax income reduced by 33.5%.

How is all of this accomplished?

Let's look at some of the specific tax proposals of Sanders that could have a direct effect on individual taxpayers. Of course, in addition to this list there are also a number of business tax increases which total over $1 trillion between 2016-2026.

  • A 2.2% income tax surcharge would be levied on all taxable income. 
  • Increasing tax surcharges would also be levied on income over $200,000. Marginal rates would range from 39.2% to 54.2%.
  • Repeal lower dividend and capital gain tax rates. All of this income would be taxed as ordinary income along with the surcharge.
  • The surtax on net investment income (as a result of Obamacare) would be increased from 3.8% to 10%.
  • Repeal the deduction of all health care expenses as well as the exclusion from income for employer-paid health insurance. Repeal deductions for health savings accounts.
  • Gains on gifts and inherited property would be taxed except for a $250,000 lifetime exclusion.
  • A new 6.2% payroll tax would be levied on all employers to pay for his health care proposal.
  • Social Security tax would be collected on all earnings above $250,000.
  • All employee and employers would pay a new 0.2% payroll tax (on the current Social Security wage base) to pay for universal Family Medical Leave.
  • Reduce the estate tax exemption from $5 million to $3.5 million and increase the death tax rates substantially.
  • Sharply limit the annual exclusion for gift tax (currently $14,000).
  • Enact a new financial transaction tax (FTT) with rates of 0.500 percent on stock trades, 0.100 percent on bonds, and 0.005 percent on derivatives. (Raises a projected $600 billion over the next 10 years)
  • Enact a new tax on “carbon polluting substances,” starting at $15 per ton of carbon dioxide or of carbon dioxide–equivalent content, phasing up to $73 per ton in 2035 and then rising by 5 percent plus the inflation rate in subsequent years. (Raises a projected $900 billion over the next 10 years.)

You can see the full estimated effect of the Sanders Tax Plan on tax receipts in this chart from the Tax Policy Center. (click on chart to enlarge).

The total increase of all his tax increases is a staggering 7.5% of GDP.  To put that in context, total revenues of the federal government in 2015 were 17.7% of GDP. This means that Sanders is proposing to increase the total federal tax burden by almost 50% over what we are accustomed to.

You might think you got burned with the amount of taxes you paid this year.

I dare say most voters don't know what "berned" is.

Tuesday, April 12, 2016

Fair or Foul?

It is tax filing time and there is an interesting story circulating about the recent move of hedge fund manager David Tepper from high income tax New Jersey to no income tax Florida.

David Tepper
Photo Credit: Bloomberg TV

Tepper's change of residence caused Frank Haines, a budget and finance officer with the New Jersey Office of Legislative Services to tell a State Senate  committee, “We may be facing an unusual degree of income-tax forecast risk,” this year, citing Tepper’s move late last year as a prime cause for concern.

Tepper has been considered by many to be New Jersey's wealthiest resident. Forbes puts his wealth at $11.2 billion. One estimate I saw put his income over the last three years at over $5 billion.

New Jersey has a top income tax bracket of 8.97%. 40% of its total budget comes from the income tax. And 1/3 of income tax revenues come from the top 1% of income earners alone.

Needless to say, when a guy like Tepper leaves your state it can leave a pretty significant hole in your budget.

The situation is similar in California and many other states. The top 5% of income earners in California pay 70% of the income taxes and the top 1% pay half of the total tab. To make matters worse, California relies on the income tax for 67% of its total state revenues.

California has become dangerously dependent on those top income earners pulling in large capital gains and income from stock options. The reality in California is that the share of income of the top 1% is very volatile in that it is so dependent on stock options, the stock market, real estate investments and capital gains.

This chart shows the volatility in capital gains as reported by California taxpayers since 1986.

Thank you Google, Facebook, Amazon and many others who made it happen. Thank you also to Ben Bernanke and Janet Yellen and low interest rates.

However, can California keep the people in the state who made these ideas a success?  Can they attract new talent and capital to the state over the long term with the tax, regulatory and political climate they currently have in place?

And what happens to California if interest rates climb and tech stocks fall?

Of course, people can leave a state and move to another in the United States of America if they think their money will be treated a little more kindly in another locale.

It is a different story if you are thinking about leaving a country. However, as I wrote in my recent post, "Millionaire Migration", it is happening more and more around the world.

I think it is always instructive around tax time to see who is paying the income tax bill in the United States. We often hear that the rich are not paying their "fair share".

The facts are that the top 1% are paying 38% of all federal income taxes. This is double their share of income. The top 1% are those with over $500,000 of income.

The top 10% is paying 70% of the tax burden.

The top half is paying 97% of all income taxes.

The bottom half is paying 3% of all income taxes. That is those with adjusted gross incomes of $40,000 or less.

Is it fail or foul?

I will leave that to you.

However, if after filing your tax return you do not think that you have paid your fair share, you are free to make a contribution to the U.S. Treasury to reduce our nearly $19 trillion in debt.

The contribution is tax-deductible and considered as a charitable contribution if you itemize.

$5 million was donated for this purpose last year. I could find no information on the number of individuals that were so generous, but I can assume it was extraordinarily small. For comparison, U.S. income tax collections last year were $1.5 trillion.

If you are inclined to contribute here is the information from the U.S. Treasury website.

There are two ways for you to make a contribution to reduce the debt:

At, you can contribute online by credit card, debit card, PayPal, checking account, or savings account.

You can write a check payable to the Bureau of the Fiscal Service, and, in the memo section, notate that it's a gift to reduce the debt held by the public. Mail your check to: 

Attn Dept G
Bureau of the Fiscal Service
P. O. Box 2188
Parkersburg, WV 26106-2188

Sunday, April 10, 2016

Amended Without Amendment

A proposal to amend the United States Constitution passed the U.S. Senate on March 22, 1972 by a resounding vote of 84-8 with 7 not voting. This measure had similarly passed the U.S House of Representatives in October, 1971 by a vote of 354-24 with 51 not voting. In that two-thirds of both houses of Congress had approved the proposed amendment, it directly went to the various States for ratification. (The President has no role when it comes to amending the Constitution. However, President Richard Nixon endorsed the proposed amendment upon its passage by the Congress.)

Within the first month, 14 of the required 38 states (three-fourths of the states) had ratified the proposed amendment. One year after the proposal had been approved by Congress, 30 states had ratified the measure.

It looked like the proposed Constitutional Amendment would be swiftly ratified and become the 27th Amendment to the United States Constitution.

Despite the fast start, the ratification effort starting to lose momentum and stall.

It never gained the necessary 38 states by the 1979 deadline established by Congress. The deadline was even extended by Congress an additional three years (to 1982) when the amendment was three states short. However, it never gained the required 38 states. In fact, five states ended up rescinding their earlier ratification.

What was the proposed amendment?

It was popularly called "The Equal Rights Amendment" ("ERA") and was supposedly designed to assure equal rights for women.

It read as follows,

Section 1. Equality of rights under the law shall not be denied or abridged by the United States or by any State on account of sex.

Section 2. The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.

Section 3. This amendment shall take effect two years after the date of ratification.

There was one person who was considered the most important voice in stalling, and ultimately stopping, the ratification of the The Equal Rights Amendment. Her name was Phyllis Schlafly.

Schlafly and the opponents of the ERA were able to defeat the rush to approve the amendment after they made a number of arguments that showed that, rather than protecting women, the ERA could actually undermine rights and privileges that women already had. After all, the ERA was intended to assure equality of rights "on account of sex", not on account of the female gender.

Phyllis Schlafly
Credit: Library of Congress

Legitimate questions were raised as to what would occur to the traditional right of a woman to receive alimony, to receive social security benefits even though they never worked, or to be able to attend a women's only high school or college.

Three other significant arguments were also made by Schlafly and other opponents of the ERA. Of course, the supporters of the ERA brushed these opposing views away by villifying and ridiculing them. They were considered to be ridiculous red herrings that were nothing but a fanciful distraction from the important issue of women's rights.

What were these issues that the opponents warned about should the ERA be incorporated into the U.S. Constitution?

  • Gay couples would be allowed to marry.

  • People would be allowed to choose which gender restroom they wanted to use.

  • Women would be required to register for the draft and serve in combat.

All of this is happening before our very eyes today.

And all of it has occurred in this country without an amendment to the Constitution ever being passed.

Witness what is going on in North Carolina which recently enacted a law (NC House Bill 2) that was in response to a Charlotte city ordinance expanding the "rights" of transgender to use public restrooms based on their gender identity.

Witness the Supreme Court's 5-4 decision to allow gays to marry despite the fact that 30 states had specific provisions in their state constitutions limiting marriage to a man and a women and the "Defense of Marriage Act" which has been enacted by Congress (and signed into law by President Clinton) in 1996.

Witness the Defense Department's ruling that opens all combat roles to women that clearly would also require that all women be required to submit to the selective service draft.

Has any of this been done by amendment to the Constitution? No.

Has any of this even been done by consent of our elected representatives in the United States Congress? No.

It is all happening either through the unilateral action of our judiciary or by regulatory action of the executive branch.

The Constitution has been "Amended without Amendment."

This is not the constitutional form of government our Founding Fathers designed.

Isn't it time to return to those founding principles?

Saturday, April 9, 2016

Masters Moments

The Masters golf tournament is in full swing this weekend.

I have been fortunate to attend The Masters three times over the years. The first time was in 1973 when I ventured over from Atlanta with some law school classmates for the Wednesday practice round.

To provide some perspective, Tom Watson just played his last competitive round at The Masters yesterday. It was the 42nd consecutive year that Watson has played in the tournament. That string would not start until two years after my first visit to Augusta.

My last visit was three years ago. To provide some perspective on that, Jordan Spieth, the defending champion and the leader going into the 3rd round this year, did not even have his full time status on the PGA Tour and would not tee it up for the first time at Augusta National until the next year (2014).

The Masters is "a tradition unlike any other." Legends beget legends on those fairways. Consider the fact that Tom Watson played his first practice round at Augusta with Gene Sarazen who had won the second Masters in 1935. Sarazen was born in 1902.

On the other hand, Bryson DeChambeau, the U.S. Amateur who was paired with Spieth in the first two rounds and was tied for second going to the 18th hole yesterday before a disastrous triple bogey on the final hole, was born in 1993.

The following is a blog post from April 15, 2103 right after I had attended The Masters that provides a first hand report of the experience if you cannot be there yourself this year.

The Masters (first published April 15, 2013)

I had the privilege of attending The Masters golf tournament this year.

If you are a golf fan it is one event that is well worth attending.  It is a first-class experience in every respect. The course is both beautiful and immaculately maintained.  The spectators are treated as true patrons which is what Augusta National prefers to call the golf enthusiasts who attend.

Food and beverages are very, very reasonable.  A pimento cheese sandwich costs only $1.50.  A turkey sandwich is $2.50. A soft drink is $1.50.  A candy bar or moon pie goes for $1.00.  A domestic beer is $2.50.

The tournament is run like a well-oiled machine.  Every detail has been thought out and is run efficiently from the concession stands to the rest rooms to the golf shop.  Everyone must pass through metal detectors to gain entrance to the grounds and you must pass 25 security guards on your way in.  Every ticket is scanned.  Every bag searched. Cell phones and cameras are strictly prohibited.  The crowd is polite and knowledgeable.

The biggest problem is getting a ticket for the tournament.  The face value of a tournament pass is $250 but the going value is over $5,000 for the week. At present, there is not even a waiting list you can get on to get tickets.  It is clearly the toughest ticket to get in all of sports.  Your only choices are to know someone who has access to tickets, buy through a ticket broker or register for an online lottery that The Masters opened a couple of years ago for a limited number of daily tickets.  You can go here in a month or two to apply for tickets for the 2014 tournament.

One of the more interesting sites for me was the golf store.  I did not pass it one time when there was not a line to get in the store and it was packed like nothing I have ever seen.  I was told that they sell $1 million of merchandise per hour.  That doesn't seem too far off from what I could see.

For example, here are the famous Masters folding chairs that surround almost every green.  Masters etiquette is such that you can place your chair at your favorite venue early in the morning and tour the course and your chair will still be there for you.  No one will touch it, remove it or sit in it. These chairs go for $30 in the golf store.

Another example is this photo of Adam Scott on the 10th green right after he sank his winning putt in the playoff yesterday. Notice the large number of Masters umbrellas and the total absence of anything else. These all came from that on-site golf store.

Credit:  AP Photo/David J. Philip

The Masters understands the principles of scarcity and exclusivity very well and it is a marketing marvel as a result. The tournament committee really knows what it is doing and does it well.

If you are looking for an interesting summer book I suggest you consider "The Making of the Masters: Clifford Roberts, Augusta National, and Golf's Most Prestigious Tournament". I read the book over ten years ago and it is a fascinating story of the origins of the founding of Augusta National and its guiding force, Clifford Roberts, over the years. It will give you a keen understanding of how "touch and go" it was to even get the club built and financed in the midst of the Depression.

If you are a golfer you can only wish that someone in your family would have signed on the dotted line for Mr. Roberts when he was desperately trying to sell memberships in the club in the early 1930's. As I recall, a membership could have been purchased for a few hundred dollars. Oh, but to think of what might have been.

Congratulations to 2013 Masters Champion Adam Scott and the membership of Augusta National for providing me with a most memorable experience.  There is nothing else like it in the world of sports.

Friday, April 8, 2016

The Theory of Relativity

Albert Einstein introduced his "Theory of Relativity" in 1905.

I have my own theory of relativity.

Every choice in life is relative.

Choices are constrained based on availability, limits and reality. It does not matter what you may want. The only thing that matters is what you can have.

If a man is stranded on an island and discovers that there are only two women to choose from on the island, it does not matter that he believes that the ideal woman is Scarlett Johannson. It does not matter that he does not find either woman on the island is attractive. He has only the choice in front of him.

Likewise for the women. If the man is the only living, breathing male human on the island it does matter if their dream guy is Ryan Reynolds. Their choice is clear. Take him or leave him. If you don't take him, enjoy the beautiful sunsets on the island alone.

I am reminded of this as I view the polling data on the possible choices in this year's Presidential race.

It looks to be an interesting example of my Theory of Relativity.

We see it in the GOP nomination process.

In the exit polls conducted by NBC News for the Wisconsin primary just 61% of Republican voters said they would vote for Donald Trump in November. I remind you, these are Republican voters.

When asked if they will vote for Trump, nearly one in five (18%) GOP voters said they will vote for a third party candidate in November. 8% would not vote at all. 10% would vote for Hillary.

Ted Cruz does marginally better but there still are a lot of GOP voters who want another choice (and it is not John Kasich who was on the ballot and got 13% of the vote). 66% of GOP voters in Wisconsin will vote for Cruz in the fall. 18% say they will vote third party, 6% will vote for Hillary and 5% will stay home.

It is an even bigger issue in the general election if the choice is between Donald Trump and Hillary Clinton. We hear a lot about having to choose between the lesser of two evils, this may be the textbook case.

John Zogby wrote a recent column in Forbes on that possibility, "Mr. Unfavorable vs. Mrs. Favorable", that defines the choice that voters may face. Zogby sums it up this way,

America – and the world – knows Donald Trump and Hillary Clinton – and they do not like what they see. And this is even before the two start punching and counter-punching.

Trump is viewed unfavorably in Zogby's poll data by 59% of American voters. Hillary by 54%.

Hillary is viewed unfavorably by 56% of men. Trump is at 53%.

Trump is viewed negatively by 66% of women. Women are supposed to be Hillary's strength but 53% of women do not like her.

Trump is supposed to have great potential appeal to blue collar Democrats. However, his unfavorables are 83% with all Democrats and 54% with weekly Wal-Mart shoppers. One of the only groups that he has a slight favorability edge is with NASCAR fans where he is 48% favorable and 45% unfavorable.

Both Hillary and Donald are viewed very unfavorably by 18-29 year olds. Trump turns off 74% of this age demographic. Clinton has a 59% unfavorable rating with the same age group. In some respects this is worse for Hillary than Trump's number considering that Obama got two out of every three votes from this age demographic over the last two elections.

Interestingly, in a race between Trump and Clinton the election may not be decided by who the voters like more, but rather by who they loath more.

Who will be more motivated to vote? #NeverTrump or #NeverHillary voters.

The same is true in the stretch run to the Republican convention.

Are you going to vote for Trump?  Or are you going to vote against Trump?

That is the only choice left.

It does not matter what you want.

What you don't want sometimes matters even more.  It is the theory of relativity.

Sunday, April 3, 2016

Millionaire Migration

Money is mobile.

Money also tends to migrate to where it is treated best and/or is safer.

The people that have money follow the same rules.

This is an important lesson for politicians to remember.

I was reminded of these truths when I came across a report by New World Wealth on "Millionaire Migration in 2015" that tracked the migration patterns of millionaires last year around the globe.

What countries are millionaires leaving and where are they going?

France and Italy saw a large exodus of millionaires. last year. Cultural tensions in both countries appear to be causing concerns among the wealthy about their safety. In addition, the redistributive rhetoric of President Hollande's Socialist Party has clearly caused concerns among that nation's richest residents. Lack of economic opportunities in both those countries are also cited as a reason for the out-migration.

China's migration is not really a large issue as that country continues to produce many more millionaires annually relative to those migrating out of the country. That is not the case in France and Italy.

On the other hand, 8,000 millionaires migrated to Australia, the United States gained 7,000 and 5,000 more millionaires ended up in Canada.

The 8,000 new millionaires who migrated to Australia were enough to boost that country's millionaires by 3% in just one year. Canada boosted its total by 2%. 7,000 new millionaires to the United States almost had no effect percentage wise. 4,180,000 millionaires call the United States home---the most of anywhere in the world. It takes #2 Japan, #3 Germany and #4 China added together to equal the number of millionaires in the U.S.

What cities saw the largest loss of millionaires in 2015?

No real surprise that Paris and Rome lead this list considering the numbers we saw above on France and Italy. Athens is also not a surprise considering the financial turmoil Greece is under.

However, it is interesting to see Chicago on this list. What are the reasons? Rising racial tensions and rising crime levels are deemed to be driving millionaires to leave the Windy City. Is it a coincidence that President Obama is not moving home after his term ends in January?

Why does the fact that millionaires are leaving a country (or a city or state) matter?

From the report...

Bad sign - millionaires are often the first people to leave. They have the means to leave unlike
middle class citizens.

Money outflow – when millionaires leave a country, they take large amounts of money with them
which impacts negatively on the local currency, local stock market and local property market.

Lost jobs - millionaires employ large numbers of people. Around 30% to 40% of millionaires are
business owners.

Lost revenue and tax – millionaires spend a lot of money on local goods and services and pay a
large amount of income tax. 

Pensions & benefits - millionaires are not reliant on state pensions and benefits, which makes
them a relatively easy and cheap group to please.

Resilient – millionaires are resilient to economic downturns and can keep an economy going
during tough times.

Brain drain – millionaires are normally highly skilled and highly educated. Many are also

It is easy for politicians to complain about the rich not paying their "fair share".  However, they would be wise to consider this report...and the alternative.

What if the wealthy leave and take their money with them?

What do Paris, Rome or Chicago become without these people?

I assure you it is not something that anyone should care to see.