Posts Tagged ‘Thomas Jefferson’
“Wall Street sells stocks and bonds, but what it really peddles is hope”*…
Over the last several decades retail investors had been eclipsed in the stock market by institutions (e.g., pension funds). But COVID and the economic environment that surrounded started a trend that is reversing that polarity. Retail investors now account for roughly 30% of daily US equity volume, according to Goldman Sachs. Their stock trading in May of this year ran 10% above the previous record, set during the January 2021 meme-stock frenzy, and June set another all time high.
Much of that growth has come from the individuals known as day traders.” And while for the last 18 months or so, institutional investors have been cautious, often underweight, under-levered and short of conviction, these active amateurs in the retail crowd did the opposite, buying the dips, riding momentum strategies, and adding leverage. Retail investors tend to follow the herd, as can be seen in the surge in popularity – and valuations – of meme stocks and artificial intelligence stocks in recent years.
While historical performance is no guarantee of future results, history is not encouraging. The most “generous” reputable study your correspondent could find suggested that roughly 20% of day traders were at least marginally profitable; the balance lost money. Other studies suggest that 95-97% of all day traders lose money.
But as Simone Foxman reports, money is not all that they lose…
Surging retail trading isn’t just transforming markets; it’s also highly correlated with demoralization in young men, according to a new study.
One-quarter of men aged 18-29 said they trade stocks daily, and almost two-thirds of them (64%) report feeling like failures, according to a study of 2,000 men published Wednesday by the Institute for Family Studies, a pro-marriage think tank. The findings were strikingly similar to outcomes among men who gamble: Of the 23% of young men who said they gambled daily, including on sports and events, 66% reported similar angst, according to survey, which asked the young men a variety of questions about their personal behaviors and outlooks. Daily fantasy sports and pornography use were similarly correlated to feelings of failure, the survey found.
The struggles of young men are generating growing alarm among academics, pundits and billionaires. They warn that men are lagging in education and employment, gambling with their financial health on sports or event betting platforms and facing mental health crises.
At the same time, the line between gambling and investing has been blurred. Stock volumes from retail investors have doubled over the past 15 years, and day traders have driven record options volume. Now platforms like Robinhood Markets Inc. and Interactive Brokers Group are trying to capitalize on interest from Gen Z by also offering event-betting alongside stock-trading.
Some research suggests young people have embraced risky financial behaviors to try to generate returns in a world where homeownership and other markers of financial success are out of reach. Eighty percent of Gen Z investors said they’d invested or considered investing in stocks, options, crypto or prediction markets because they feel financially behind and see these investments as better tools to meet their financial goals, according to a Northwestern Mutual study.
The IFS researchers hypothesized that day trading, gambling, playing fantasy sports and porn use — among other activities — may be both coping mechanisms for dejection, stress and loneliness and also exacerbate them. Young men who engaged in these activities less than daily were about half as likely to report feelings of demoralization.
Overall, 42% of survey respondents said the statement “all in all, I am inclined to think that I am a failure,” described them very or somewhat well. This feeling was particularly strong among men without college degrees and those who were neither employed nor in school.
A quarter of participants said they felt lonely all of the time, while 30% expressed feeling that way some of the time.
The study also found disillusionment with the American dream, even as young men fostered high hopes for the future. Seven in ten respondents said that success is more a matter of who you know than ability or hard work, but 84% still said they had ambitious plans for their futures.
Further to the passing reference to “event-betting” above, we should note that prediction markets, while smaller than retail investing (at least for now), are growing explosively. Like day-trading, prediction markets are pitched in the language of empowerment and democratization. The former involves stocks and bonds, while the latter sells “event contracts“; but they share the same user base, the same psychological architecture, and the same uncomfortable gap between how they are marketed and what they actually deliver… so seem likely to contribute to the issues unpacked above.
Risky business: “Some 64% of Young Men Day Trading Stocks Feel Like Failures” (or here) from @simonefoxman.bsky.social in @bloomberg.com.
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As we parse symptoms and diseases, we might recall that it was on this date in 1966 that the U.S. Treasury Department, citing a lack of demand, ceased production of the $2 bill, which had been around in various forms since 1862. The (redesigned) denomination, featuring a portrait of Thomas Jefferson, was reintroduced in 1976… though readers will be forgiven if they mistakenly thought that “the deuce” was still retired: so few are in circulation that they are rarely encountered.
“A bill of rights is what the people are entitled to against every government on earth, general or particular, and what no just government should refuse, or rest on inference.”*…
Following the often heated debate between Federalists and their opponents that led to the the ratification and adoption of the U.S. Constitution, the Anti-Federalists were still unsatisfied. Then-Representative James Madison, who studied the deficiencies of the Constitution pointed out by Anti-Federalists, collected proposals (16 in all), and then crafted a series of 12 proposed corrective amendments. Congress approved the twelve articles of amendment on September 25, 1789, and submitted them to the states for ratification. 10 were ultimately ratified– the first 10 amendments to our Constitution… or as we know them, The Bill of Rights.
In an excerpt from his book, Constitutional Myths: What We Get Wrong and How to Get It Right, Ray Raphael elaborates…
The Constitution of the United States, drafted in 1787 and ratified in 1788, did not follow the precedent set by these state constitutions. Despite spending almost four months drafting their new plan, the framers did not include within it a thoughtful listing of rights but only a scattering of guarantees. On September 12, just five days before the end of the Convention, George Mason finally suggested that delegates add a “Bill of Rights” similar to the state declarations of rights, but his motion failed to garner the support of a single state delegation.
Although state conventions ratified the Constitution, several included a caveat: the new plan should be amended as soon as possible. In fact, they proposed scores of amendments, some resembling provisions of what we now know as the Bill of Rights, but many others altering or even deleting structural features of the Constitution. New York’s convention coupled its list of proposed amendments with a demand for a second federal convention to consider these various proposals. The profusion of proposed amendments, plus the prospect of a second convention, frightened supporters of the Constitution, who feared that a new convention, if it met, would revise the fledgling Constitution before it could be put into effect and gut some of its major provisions.
Most leading Federalists hunkered down. In arguing against a second federal convention, they insisted that a bill of rights was not necessary and could even jeopardize rights that were not included. The job of the Constitution, they said, was to state what government could do, not what it couldn’t do. Rights already were secured because the government possessed no power that allowed it to impinge upon them. In fact, any catalog of specified rights would imply that rights were limited to those in the catalog, and not others.
James Madison and George Washington agreed with this argument, but they also took an accurate measure of people’s displeasure. It was strong and it was widespread. Rather than fight a rearguard action against the wave of discontent, they preferred to channel and control it. Article V of the Constitution stipulated that either Congress or state conventions might propose amendments. If Congress acted first, Madison and Washington reasoned, it could take charge of the issue and protect the substantive features of the new plan–congressional taxation, for instance–while giving ground elsewhere. Madison, meanwhile, pledged to his Virginia constituents that he would work to add a bill of rights if they elected him to represent them in Congress.
Once elected, in the First Federal Congress, Madison whittled down the large list of amendments suggested by the states’ ratifying conventions. With President Washington’s blessing, he proposed nineteen that did not endanger key constitutional components. After considerable debate and some revision, Congress pared Madison’s list down to twelve amendments, which it sent to the states for approval. Ten of these, which we call today the Bill of Rights, were ratified by three-quarters of the states, as required by the new Constitution. The genesis of the Bill of Rights, like the origins of the Constitution, was political as well as theoretical.
The short-term effect of the framing and ratification of the Bill of Rights was to put a Federalist stamp on the amendments and to doom the attempts by the Constitution’s opponents to modify the substantive or structural features of the new plan. The long-term effect was to reinforce America’s culture of rights and to infuse specific rights into American jurisprudence. After more than two centuries, the Bill of Rights, which had been so casually dismissed by the framers, figures so prominently in our minds that it often eclipses the Constitution itself. In an era when the word “government” has a bad name, the ten amendments that circumscribe the federal government’s authority over individuals are often viewed more favorably than the Constitution the framers created in 1787…
The backstory of the Bill of Rights, via the always-illuminating Delanceyplace.com
For more on the process that yielded them, and the texts of all 16 proposed amendments, see here.
* Thomas Jefferson, a critic of Federalists, in a 1787 letter to James Madison (who had originally been opposed to the idea of a “bill of rights,” both because he believed that the Constitution as written did not grant the federal government the power to take away people’s rights, and because he [and some other Framers] believed that we have natural rights too numerous to list– and that anything not explicitly included in a Bill of Rights would be unprotected.)
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As we ponder precedent, we might recall that it was on this date in 1930 that a BBC newsreader had nothing to communicate. His entire script for the 8:45 pm news bulletin was: “There is no news”… after which piano music was played for the rest of the 15-minute segment. The wireless service then returned to broadcasting from the Queen’s Hall in London, where the Wagner opera Parsifal was being performed.
“A map does not just chart, it unlocks and formulates meaning; it forms bridges between here and there, between disparate ideas that we did not know were previously connected”*…
Readers may recall an earlier post on John B. Sparks’ Histomap, a well-known 1931 attempt to visualize the 4,000 year history of global power. Public Domain Review takes a look at Histomap‘s ancestor/inspiration, Friedrich Strass’ Der Strom der Zeiten (published in 1803), and its influence…
In his foundational textbook Elements, the Alexandrian mathematician Euclid defined a line as “breadthless length” — a thing with only one dimension. That’s what lines can do to history when used to plot events: they condense its breadth into pure motion, featuring only those people and places that serve as forces thrusting it forwards along an infinite axis. Early in the nineteenth century, Friedrich Strass proposed a different way to visualize time’s flow. A Prussian historian and schoolteacher, he published his chronological chart in 1803, a massive diagram titled Der Strom der Zeiten oder bildliche Darstellung der Weltgeschichte von den altesten Zeiten bis zum Ende des achtzehnden Jahrhunderts (The stream of the times or an illustrated presentation of world history from the most ancient times until the eighteenth century). The linear timelines that Strass resisted, like those inspired by Joseph Priestley, “implied a uniformity in the processes of history that was simply misleading”, write Anthony Grafton and Daniel Rosenberg. Strass’ stream, by contrast, allowed historical events to “ebb and flow, fork and twist, run and roll and thunder.” It would spawn several imitations as the century drew on…
Capturing history in its organic unfolding: “The Stream of Time,” from @PublicDomainRev. See the original at the David Rumsey Map Collection.
* Reif Larsen
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As we contemplate chronology, we might recall that it was on this date in 1800 that the Library of Congress was established. James Madison has first proposed a national library in 1783. But it wasn’t until 1800, when (on this date) President John Adams signed signed an act of Congress providing for the transfer of the seat of government from Philadelphia to the new capital city of Washington, that the deed was done. The Act appropriated $5,000 “for the purchase of such books as may be necessary for the use of Congress … and for fitting up a suitable apartment for containing them.” Books were ordered from London, creating a collection consisting of 740 books and three maps, which were housed in the new United States Capitol.
But in 1814, during the War of 1812, British forces burned the Capitol Building, and with it, the the collection (by then, around 3,000 volumes). The Library as we know it was created from those ashes. Thomas Jefferson offered to sell his personal library– 6,487 books– as a replacement, Congress accepted, and the Library of Congress grew from there.
“The only function of economic forecasting is to make astrology look respectable”*…
The pandemic economy has been strange and unpredictable from the get-go.
Throughout the past 14 months, the twists and turns have been surprising: The housing market boomed, the stock market soared, people got into day trading, everyone hoarded toilet paper, and lumber became a must-have. There’s been widespread disagreement about how much support from the government was needed, whether the country was doing too much or not enough, or whether help would come at all. We won’t know whether the country overshot or undershot the response for years, and there’s still uncertainty about what’s happening in the labor market, prices, and other areas. And the prevailing theme has been one that has nothing to do with the economy directly: As long as Covid-19 isn’t under control, the economy isn’t either.
“Having been a forecaster for 10 years, we were surprised all the time, because nobody has a crystal ball and particularly if you just pull out one data series, one month, there’s just no way,” said Claudia Sahm, a former Federal Reserve economist and now a senior fellow at the Jain Family Institute. “It’s going to be a wild ride; the data through the end of this year, they’re going to be tough.”
The country and the world are staring into a black box of uncertainty on the economy. It’s frustrating, but it’s also inevitable. Anyone who says they know exactly what is going on in the economy right now is lying. The same goes for anyone who says they know what’s going to happen next.
“Because of the unique nature of this crisis, there are going to be some swings,” said Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute. “In a year, they’re going to be trivia questions, but right now we’re obsessing about them.”
Few people will probably remember two years from now that the price of used cars and trucks went up by 10 percent in April.
We know that the economy is different now than it was a year ago and that it will be different a year from now. What’s not clear is exactly how. And what we need now — including economists, experts, and policymakers — is the intellectual humility to recognize that’s the case.
“At this point, most things should be presumed temporary until proven permanent,” said Jed Kolko, chief economist at the jobs website Indeed.
It’s unnerving to admit what we don’t know, and the pandemic has been a real exercise in that. But after so long of staring into the abyss, maybe it’s time we embrace it…
Anyone who says they know exactly what’s happening in the economy is lying. Emily Stewart (@EmilyStewartM) explores that uncertainty and what it might mean: “The black box economy.”
* John Kenneth Galbraith
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As we consult the stars, we might note that today is National Be a Millionaire Day. While many sources confirm this celebratory fact, there’s no real information on its origin. The term “millionaire” was coined in France around 1719 to describe speculators in the Mississippi Bubble who earned millions of livres in weeks before the bubble burst; it seems first to have appeared in the U.S. in 1786, when Thomas Jefferson wrote about the French… so the “holiday” surely dates from sometime after that.
“Humanity’s 21st century challenge is to meet the needs of all within the means of the planet”*…
One evening in December, after a long day working from home, Jennifer Drouin, 30, headed out to buy groceries in central Amsterdam. Once inside, she noticed new price tags. The label by the zucchini said they cost a little more than normal: 6¢ extra per kilo for their carbon footprint, 5¢ for the toll the farming takes on the land, and 4¢ to fairly pay workers. “There are all these extra costs to our daily life that normally no one would pay for, or even be aware of,” she says.
The so-called true-price initiative, operating in the store since late 2020, is one of dozens of schemes that Amsterdammers have introduced in recent months as they reassess the impact of the existing economic system. By some accounts, that system, capitalism, has its origins just a mile from the grocery store. In 1602, in a house on a narrow alley, a merchant began selling shares in the nascent Dutch East India Company. In doing so, he paved the way for the creation of the first stock exchange—and the capitalist global economy that has transformed life on earth. “Now I think we’re one of the first cities in a while to start questioning this system,” Drouin says. “Is it actually making us healthy and happy? What do we want? Is it really just economic growth?”
In April 2020, during the first wave of COVID-19, Amsterdam’s city government announced it would recover from the crisis, and avoid future ones, by embracing the theory of “doughnut economics.” Laid out by British economist Kate Raworth in a 2017 book, the theory argues that 20th century economic thinking is not equipped to deal with the 21st century reality of a planet teetering on the edge of climate breakdown. Instead of equating a growing GDP with a successful society, our goal should be to fit all of human life into what Raworth calls the “sweet spot” between the “social foundation,” where everyone has what they need to live a good life, and the “environmental ceiling.” By and large, people in rich countries are living above the environmental ceiling. Those in poorer countries often fall below the social foundation. The space in between: that’s the doughnut.
Amsterdam’s ambition is to bring all 872,000 residents inside the doughnut, ensuring everyone has access to a good quality of life, but without putting more pressure on the planet than is sustainable. Guided by Raworth’s organization, the Doughnut Economics Action Lab (DEAL), the city is introducing massive infrastructure projects, employment schemes and new policies for government contracts to that end. Meanwhile, some 400 local people and organizations have set up a network called the Amsterdam Doughnut Coalition—managed by Drouin— to run their own programs at a grassroots level…
You’ve heard about “doughnut economics,” a framework for sustainable development; now one city, spurred by the pandemic, is putting it to the test: “Amsterdam Is Embracing a Radical New Economic Theory to Help Save the Environment. Could It Also Replace Capitalism?“
* Kate Raworth, originator of the Doughnut Economics framework
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As we envisage equipoise, we might recall that it was on this date in 1791 that President George Washington signed the Congressional legislation creating the “The President, Directors and Company, or the Bank of the United States,” commonly known as the First Bank of the United States. While it effectively replaced the Bank of North America, the nation’s first de facto central bank, it was First Bank of the United States was the nation’s first official central bank.
The Bank was the cornerstone of a three-part expansion of federal fiscal and monetary power (along with a federal mint and excise taxes) championed by Alexander Hamilton, first Secretary of the Treasury– and strongly opposed by Thomas Jefferson and James Madison, who believed that the bank was unconstitutional, and that it would benefit merchants and investors at the expense of the majority of the population. Hamilton argued that a national bank was necessary to stabilize and improve the nation’s credit, and to improve handling of the financial business of the United States government under the newly enacted Constitution.
History might suggest that both sides were correct.
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