Episode 26: My Way
It's Friday, 13th; anything could happen in this week's edition. If you are curious to see the date of every Friday, 13th, from 1801 - 2199, click here. Otherwise, let's dive in and explore what's happening in the world.
I want to describe a real rag to riches story. The protagonist is an against-all-odds character who rose from nothing and made it to the White House. Our hero is a simpleton, blessed with a big smile, kind eyes, and grit and determination. Some people thought he was too old to make it to the highest office, but he never stopped believing in himself. He knew America was the land of opportunity and the place where anything is possible. Of course, I'm talking about Major Biden, the rescue German Shepherd, who will be our Co-First Canine and reside at 1600 Pennsylvania Avenue, starting January 20th, 2021. He will be joined at the people's house by his brother Champ and his mom and dad, Jill and Joe.
The mainstream media declared Joe Biden the 46th President of the United States based on 290 electoral college votes (with Georgia pending). This Election marks the first time in 60 years that Ohio failed to choose the President. An official winner is pending legal challenges from President Trump. However, some things are uncontested. Joe Biden easily won the popular vote by 5 million votes. This Election brought the country several firsts:
This Presidential Election generated the most votes (approx. 150 million) in our nation's history and the highest percentage (66.4%) of eligible voters since 1900.
The Biden ticket received the most votes (more than 77 million) of any candidate in election history.
Kamala Harris is the first woman Vice President, plus the first black and first Asian American Vice President.
Kamala Harris' husband, Doug Emhoff, will become the nation's first, second gentleman.
President Trump has accused Democrats of widespread voter fraud and stealing the Election. These are serious allegations, and the President has legal rights afforded to him. His rights include legal challenges and lawsuits in half a dozen battleground states to reverse Biden's lead. Judges quickly dismissed most cases, and today Trump had a setback in Michigan, Arizona, and Pennsylvania. Trump also has the right to ask for a recount in states where the margin of victory is narrow. In Georgia, they are doing a hand recount to ensure valid results. However, a few factors are working against Trump in these efforts. For starters, there's been no material evidence presented. It's also hard to believe the Election was stolen by Democrats when Republicans gained seats in the House and (likely) held the Senate. Nefarious Dems would likely want to "steal" all branches of government and not just the presidency. Secondly, Biden won Georgia, a feat Obama couldn't do. A Republican Governor runs that state, and the Election Commissioner is also Republican (and a Trump supporter). Lastly, Biden's margin of victory in "blue wall" states such as Wisconsin, Michigan, and Pennsylvania exceeded Trump's margin of victory over Hillary Clinton in 2016. President Trump would have to invalidate roughly 55,000 Pennsylvania voters to overturn Biden's victory in the state. That's extremely unlikely. With that said, there remains a chance that Trump could win, but it's about the same odds that Lloyd Christmas had of hooking up with Mary Swanson in the movie Dumb and Dumber. On a serious note, the increase in mail-in ballots this year is a phenomenon that merits a closer look. I'm a purist and love the feeling of "pulling the lever" on Election Day; however, I suspect mail-in and electronic votes are the way of the future, and we need to ensure that form of voting supports high integrity elections and we have the appropriate infrastructure to support it.
Is it all doom and gloom for Republicans? Absolutely, not. This Election was a good day for Republicans not named Trump (more below). Furthermore, Trump increased his vote from 2016 by more than 9 million votes to over 72 million. This vote total represents the second-highest number of votes for any US presidential candidate. Trump also widened his margin of victory from 2016 in stronghold states such as Idaho, Utah, Arkansas, and Tennessee. Plus, he easily won Florida, which is a critical state each year for Republican candidates. Trump gained 12 points among Latino voters in the Sunshine State from the 2016 election, giving Republicans hope that their platform appeals to the US population's fastest-growing segment. The biggest disappointment for Republicans is losing Georgia and Arizona; both traditionally "red" states that he won by 5% and 3.5% respectively in 2016. The blame can mostly fall on the white vote's defection, which decreased by five points from the last election cycle, driven by a higher turnout of white females and lower support in the suburbs.
The world of politics now shifts to the state of Georgia, where two run-off races on January 5th will determine the balance of power in the Upper Chamber. The Republicans started with a 53/47 edge over Democrats. The Democrats flipped two seats (Arizona and Colorado), and the Republicans flipped one (Alabama). Republicans currently carry a 50 to 48 advantage, but if Democrats can win both seats in Georgia, a tie favors Democrats. In both races, the incumbent is Republican. Democrats have the best chance of winning the race against incumbent Kelly Loeffler. Her challenger is Raphael Warnock, senior pastor at the Ebeneezer Church in Atlanta. Warnock currently holds a 6% lead in that race heading into the run-off. In the other race, incumbent David Perdue (Rep) carries a 1.7% lead over Jon Ossoff (Dem). The Libertarian candidate garnered 2.3% of the vote, so those votes will likely go to the Republican. Historically, Republicans perform better in run-offs as their voters are more willing to show up for a Special Election. The question is whether Democrats in Georgia can rally their base to show up again. A lot is riding on the outcome, so this will likely become the most expensive Senate race in history. Whatever the outcome, Senators voted this week to maintain the two parties' leadership: Mitch McConnell will lead Republicans and Chuck Schumer the Democrats.
Since the 2018 mid-terms, Democrats have a 232/197 advantage in the Lower Chamber (plus an independent and five open seats). Some races are still undecided, but the Republicans could gain as many as 15 seats this election cycle. If this proves true, when Congress convenes in January, Democrats will have the smallest majority since the Republicans had 221 seats two decades ago. All of this adds up to trouble for Speaker Nancy Pelosi, and her leadership is likely to be challenged. Republicans improved their female representatives from 13 to at least 26. This percentage is far short of where it needs to be but progress nonetheless. All four members of the "Squad" (Ihan Omar of Minnesota, Alexandria Ocasio-Cortez of New York, Rashida Tlaib of Michigan, and Ayanna Pressley of Massachusetts) won re-election; however, the progressive movement failed to gain broad appeal and possibly cost the Democrats seats in the House.
In the economy, the US government is bleeding money. The country posted a record budget deficit of $284 billion in October, an 111% increase over the same month last year. The previous record was $176 billion in October 2009 during the Great Recession, so the record was shattered by a staggering 61%. For the fiscal year (which ended September 30th), the US recorded a $3.13 trillion deficit, more than triple last year's loss. The financial shortfall is a combination of high COVID-related spending but less tax revenue. This grim picture is the backdrop as Congress fights over the size of the next COVID-relief measure. Our nation's total debt now stands close to $30 trillion, and fiscal year 2021 is expected to add another $2 trillion of debt, assuming no further coronavirus relief. The Dems are lobbying for another $2.2 trillion in financial support, while Republicans anchored on a much lower $500 billion figure.
The stock market welcomed several pieces of news this week, leading to large gains. First, a Biden presidency and forecasted Republican control of the Senate pleased markets. That will most likely change if the Democrats can win both run-off seats in Georgia and gain control of the Senate. Markets also applauded Pfizer’s announcement of a 90% effective coronavirus vaccine. It’s fascinating that this news released the first working day after the Election results. Still, this is positive news and hopefully a coronavirus vaccine will be available nationwide by Spring, 2021.
Alex Trebek passed away this week at 80 from complications due to pancreatic cancer. Trebek started working on the game show Jeopardy 37 years ago and became a household name. He made his two-year battle with cancer public, hoping that his story would comfort others and help fund research. Trebek filmed his last show just ten days before his death.
I. Below are the articles I found interesting the past week:
Most people love low-interest rates. Low rates make payments for various purchases more palatable—automobiles, mortgages, credit card debt, etc. However, one problem with a low-interest-rate environment is it’s tough on savers. Bank accounts, money-market mutual funds, and other short-term instruments offer a measly return. Rates are lower in nominal terms than they were 30 years ago because of a long-term decline in inflation, but they are also lower in real terms. In 2020, the 10-year bond reached the lowest level in America, Germany, and the UK. The 10-year yield started the year at 1.88% and fell to 0.52% in August before bouncing slightly to its current rate of 0.88%.
The one-year Treasury bill yields 0.13%, so at that rate, it would take more than 530 years to double your money. So what’s a fiscally conservative saver to do? They can save less and spend more, which is what the Fed and US government would prefer. (The Fed has been below its target inflation benchmark. They’d love the assistance of inflation to help lower the burden of rising national debt.) They can save a higher percentage of income to make up for the lower returns. Lastly, they can put money into riskier assets, such as equities, or alternative asset classes. And there’s the rub. None of those are great long-term options. Anxiety about the pandemic helped push America’s savings rate to a record high of 14.1% back in the Spring. The yield was less critical than the preservation of capital.
However, the two segments of the population I’m worried about are (1) seniors who have fixed savings and rely on interest to live and (2) people who have over-risked their portfolios to seek yield. Some can’t live off the interest of their savings with these rates. They are forced to draw down their principal, and they run the genuine risk of running out of money. For the equity-heavy individuals, they have been vindicated over the last decade by a 24x7 equity party. Further, the Fed has provided the kerosene to this situation by giving an unprecedented signal of low-interest rates for the foreseeable future. With returns on bonds and cash so low, stocks are comparatively attractive. But what happens when the party ends? In the UK, the FTSE 100 index is below its 1999 level. In Japan, the Stockmarket is still below its high mark in 1989! The bottom line is it’s important to remember that investment carries risk and the best way to guard against that risk while preserving the promise of return is with diversification.
Low interest rates leave savers with few good options
II. The rest of the best
For Dads in the pandemic: lows, highs and constant uncertainty
The strange ingredients found in vaccines
Uber founder turns real-estate mogul for ghost kitchen startup
13 things you should give up if you want to be successful
Apply for PPP Forgiveness? Here are some things to know
III. Name that Tune!
As I write this email, I am listening to My Way by Frank Sinatra.
Frank Sinatra is one of the best selling artists of all time, having sold more than 150 million records worldwide. Sinatra found his first commercial success in 1943. However, in the 1950s, when Sinatra’s career stalled, he turned to Las Vegas, where he became a resident performer, an official member of the Rat Pack (Dean Martin, Sammy Davis Jr, among others), and his career was reborn. Sinatra also forged a highly successful career as a film actor. He won an Academy Award for From Here to Eternity and received critical acclaim for his performance in The Manchurian Candidate. Sinatra would later receive the Golden Globe Cecil B. DeMille Award in 1971. Frank Sinatra popularized the song My Way in 1969. The music was originally composed and written by French songwriters Claude Francois and Jacques Revaux and performed in 1967. The song was a success for a variety of performers including, Elvis Presley and Sid Vicious. However, Sinatra’s version spent 75 weeks in the UK Top 40, a record that still stands.
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