DUMB RESEARCH WITH YOUR MONEY
     Where in the Constitution of the United States is it written that Mrs. Johnson, a hardworking maternity ward nurse at Riverside Hospital, must pay a significant slice of every paycheck to federal taxes which are redistributed to a wealthy university, or one of the thousands of "institutions," to pay for some academic's research study?     If Mrs. Johnson was ever able to stop working long enough to review how her money was being spent, I believe it wouldn't be so pleasant in the newborns nursery.
     It is unconstitutional to take Mrs. Johnson's money for these academic adventures, and a great number of these studies are nonsensical research with pre-determined, confirmation-bias results which a fifth-grader could have told us, while saving us millions of dollars.
     For example, last week Michael Kremer, Esther Duflo and Abhijit Banerjee were awarded the Nobel Prize in economics for their ground-breaking economic studies.  Profs. Duflo and Banerjee, who are married to each other and teach at Massachusetts Institute of Technology (MIT) traveled to India and conducted an experiment to compare changes in child immunization rates in several villages.  David Harrison and Paul Hannon for the Wall Street Journal reported, "In some villages, the researchers offered families a bag of lentils and a set of metal plates to encourage them to immunize their children.  Children in those villages were more than six time as likely to be immunized, they found."
     This is brilliant!  We discovered that poor people will show up if we bribe them with food and silverware.  I know guys that will go to Wal-Mart when they know the lady who passes out free samples is on duty, and that weekend Buffalo Wild Wings had the buy-one-beer-get-the-next-one-free promotion I think we watched 22 football games in a row!
     Harvard Professor Kremer traveled to Kenya and "found that children treated for intestinal worms are more likely to attend school and work in higher-paying occupations than those who weren't treated because of funding limitations, making it cost-effective for governments to fund mass-deworming campaigns."  So, not only did we have a Captain Obvious moment to understand that children who receive better medical care will attend school more frequently, but we even have attempted to document a study in order that one special interest group, or dare say the dewormer pharmaceutical company, can pursue their end objective of more government funding.
     Now, remember last year's Post, "The Government Has No Money," to know that when I say "government funding," there actually is no such thing.  There is just Bob, Susan, Marge and Mrs. Johnson funding.  Do you feel good about Harvard and MIT taking your tax dollars to send these academics on adventures which you will never get to experience, yourself?  Also remember that in our recent Post, "Harvard's Discrimination Keeps Going," that even with a gazillion-dollar endowment, Harvard still chooses to take your tax dollars for these "studies," and then the Nobel Prize Committee actually reinforces this ridiculousness.  This is the elitist, academia, deep state stuff that makes "fly-over-country" taxpayers lose their minds as they struggle to pay their own bills.
     For fun let's review a few other federally-funded studies.  Senator Tom Coburn has compiled an annual waste and abuse list, titled "Wastebook," and Derek Draplin at the University of Michigan created "The College Fix."  A few on their lists:

1.  The National Science Foundation (your money) awarded Professor Terrie Williams of the University of California - Santa Cruz $856,000 for testing mountain lions on treadmills.  The study concluded that "mountain lions do not have the aerobic capacity for sustained, high-energy activity."  Rather, "they are power animals...who use a burst of speed and the force of the pounce to knock down or overpower their prey."  Didn't I learn that on an episode of "Gunsmoke?"

2.  The National Science Foundation also funded the University of Rochester study of the gambling habits of monkeys.  It was concluded that the monkeys, just like my Vegas golf trip buddies, continued to ignore random scenarios and "make choices as if they expected a streak.  The monkeys showed the hot-hand bias consistently over weeks of play."  I can't tell you how many times we had to scream at Kevin to get up from the blackjack table.  "Now cash in your chips before you lose it all again!"

3.  One more from our favorite National Science Foundation (remember, your money).  The Foundation funded Columbia University $5.2 million to create an interactive game aimed at engaging people to get involved in climate change activism.  They created Future Coast, "a collaborative game set in an alternative world where fictional voicemails have been transported back in time.  One message describes sunny 75 degree weather in Antarctica compared to a chilly -2 degrees in Arizona with expected hailstorms."  I am not making this up!

     The federal government collects approximately $4.5 trillion each year from all of us and redistributes it like this, and the polls claim that over half the country is okay with raising taxes and giving them more!  What is the definition of insanity?
     For decades I have been shocked at the absurdity of these farces presented as research studies in academia, and hopefully now that you are aware, you are too.  Do everything in your power to stop giving technocrats your money, government and academic.  They have no capitalistic bottom line, no consumer need to satisfy, no competition to sharpen the saw of efficiency, and no constitutional right to use your money.  Their adventures weaken your lifestyle, your security and retirement, and your pursuit of happiness.
     Be educated.  Understand what is really going on with your money.  Choose not to be a pawn.  The Nobel Prize Committee might not take you out for champagne brunch, but it would have been on your tab, anyways.  Stay diligent!

"The most dangerous poison is the feeling of achievement.  The antidote is to every evening think what can be done better tomorrow."  -  Ingvar Kamprad

** Thank you to the WSJ, Forbes, Fortune, Wastebook, & The College Fix.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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WHY WE NEVER MAKE 10%!
     As you may have seen recently during the 917 commercials interspersed with a few moments of football (my attention span just can't sit through that many commercials anymore!), Schwab finally just cut their trade commissions to zero.  E-Trade quickly followed, along with TD Ameritrade, and Fidelity rolled out their zero expense ration mutual funds.
     This prompted a few requests for JAM VIEWS to delve deeper into uncovering why real people, you and I, over the long-term never make the rates of returns advertized in the latest Wall street book, or espoused by Jim in Receivables who always lies about his 401k performance.
     First, realize that trading commissions only make up about 7-12% of these institutions' top line revenue, so we don't need to fret over their future success.  After running a Broker-Dealer (B/D) and Registered Investment Advisor (RIA) for two decades, I can tell you that the company makes money in twenty different ways aside from the client commissions.  But, this week let's focus on why these commission prices are just one of the shiny objects which distract us from achieving long-term wealth.  A quick list of more fundamentals below:

1.  INDEX FUNDS VS. ACTIVE FUNDS?  Bottom line is that it doesn't matter.  Index funds buy or track a fixed basket of stocks or other investments, while active funds are daily operated by a manager or team of managers who make specific decisions on what to buy or sell.  Generally, active funds will charge a .5% to 1% higher expense ratio because there are actual managers.  Recently, for an extended period, index funds have outperformed active funds, so the marketers and the media now promote this as a historical truism.  This is usually the point when the cycle reverses, as this one will also.  They always do.  Joel Greenblatt of Gotham Asset Management, a very successful hedge and mutual fund advisor, states, "Warren Buffet says most people should index, and I agree with him.  But Warren Buffet doesn't index, and neither do I."  The answer for us is to buy both.  Buy the index funds which are appropriate for your long-term goals, and buy high-quality, experienced managers who have weathered many different cycles.

2.  BUY STOCKS, BONDS, MUTUAL FUNDS, HEDGE FUNDS, EFTs, INDEXES, FUTURES, OR COMMODITIES?  Bottom line is that we should buy a little bit of everything.  In our investment firm, we preached thirteen (13) slices of the pie as a minimal blend to smooth out a client's performance chart, so they didn't hurt themselves (covered later).  The simple key is to own a big basket of different investments which are aligned with your mission, yet which likely perform well (and poorly) at different times.  In your Statistics 101 Course they labeled things that moved in tandem as having a correlation of 1.0, and things that moved opposite of each other as having a correlation of -1.0.  You want your basket to, as closely as possible, have a correlation of 0.00.  You want some things to be "zigging" while others are "zagging."  Again, for most of us the answer is to access all of these categories through mutual funds, ETFs or Indexes, since we don't have the money, expertise or time to buy all of the individual stocks or bonds.

3.  BUY GROWTH OR VALUE, LARGE-MID-SMALL CAP, CORPORATE OR GOVERNMENT BONDS, DOMESTIC OR INTERNATIONAL?  Bottom line here is to invest in each style and sector.  You, or the smartest managers and computers, will never predict what is going to be the hot spot next year.  As in #2, take a little slice of each, and you will be light-years ahead of your neighbors.  Remember, just when every singe advisor on CNBC and CNN says that Value Investing is dead, these funds will begin to outperform growth funds.

4.  AMAZON'S LAST MILE?  Have you followed how even mighty Amazon has struggled with the most efficient and effective logistics answer to get those Tory Burch shoes to your front door step?  They offered employees to buy truck routes, are testing automated trucks, and of course those drones.  Investing has the same problem.  All of the above strategies, plus a million more, never work for us real humans, because we are human.
     The television commercials and the ads in Forbes, Fortune and the Wall Street Journal are simply marketing strategies to gather dollars, trillions of dollars.  They never help real people master Behavioral Economics.  If you want to build wealth long-term, you must understand this.  Everyone, and I mean everyone, buys high and sells low, especially Jim in Receivables - he just won't show you the real truth.  Warren Buffet for many decades averaged 21% a year, double the average of the stock market, by simply buying good investments at fair values and holding them forever.
     Joel Greenblatt again states, "When people can check their returns 30 times a minute on the internet, time horizons shrink, investors are impatient and sell at any sign of underperformance."  The truth is that Jim in Receivables always does much worse than Susan in Shipping who never checked her 401k until a week before retirement.
     Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals and institutions.  Economist Richard Thaler was awarded the Nobel Memorial Prize in Economic Sciences of "establishing that people are predictably irrational in ways that defy economic theory."  Robert Shiller, winner of the 2013 Nobel Prize in economics, claims "the central issue in behavioral finance is explaining why market participants make irrational systematic errors contrary to the assumptions of rational market participants."

     I know it sounds complicated, a lot to understand, but as with so many other topics we dissect in JAM VIEWS, successful long-term investing is much simpler than the world makes it out to be.  Schwab's zero fees marketing is BS.  Vanguard's 40-year war claiming .5% less fees were the Holy Grail didn't' make one real person one more dollar.  More importantly, in October 1987, in 2000, and in 2008 Vanguard's .5% less fee didn't stop one American citizen from selling out their 401k after the market dropped 50%, and didn't ensure they were fully invested when the markets recovered up another 100%.
     Don't be distracted by the shiny objects.  Do opposite of what feels good.  Understand that these cycles many times last for years.  Just as I try to always talk you into first doing your own taxes, first understand the long-term investing basics.  Then, if you want some help and oversight, get yourself a partner who doesn't follow the noise.
     Have a great week!

ps.  Did you see that CNBC hedge fund guru, Jim Cramer, has now joined Bull Market Fantasy to provide "expert opinion and advice on Fantasy Football with a Wall street twist?"  Need I say more?

pss.  Secret -  Schwab makes 60% of its total revenue by simply sweeping cash nightly from customers' brokerage accounts into the firms' banking accounts.

"Humans make 95% of their decisions using mental shortcuts or rules of thumb - heuristics."  -  Daniel Kahneman.

** Thank you to the WSJ, Forbes and Fortune for their above quotes, statistics and advertisements.

** The above is not investment, tax or legal advice.  Consult your advisors

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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HARVARD DISCRIMINATION KEEPS GOING!
     Earlier this year I wrote about the secret discrimination going on against Asian-Americans in Ivy League college admissions due to the Asians' high academic and extracurricular performance.  I have written on numerous occasions about the sneaky efforts of teachers unions to undermine charter schools due to their significant outperformance  And, we have recently discussed the obvious need for merit-based immigration in order to continue our economic expansion in the face of aging demographics.
     Last week the socialists, the apologists, the redistributors, the elitist protectors scored another victory against the overachievers, but hopefully only momentarily.  Federal Judge Allison Burroughs ruled that Harvard was not discriminating against Asian-Americans by ruling that it was okay to discriminate against Asian-Americans.
     As you may remember from our Post, Harvard assigns subjective "personality" and likeability" points in order that Admissions may fudge scores to penalize Asians and bring their totals within the range of white applicants.  To overcompensate for this behind-closed-doors adjustment, Asians must score about 140 points higher than whites on the SAT to be accepted, and 300-400 points higher than other demographic groups.  Otherwise, the approximate 20% Asian enrollment at Harvard would have grown to the 43% enrollment as at the elite California Institute of Technology, whose admissions process is race-blind.
     As a reminder, Harvard accepts your tax dollars (Can you believe they take federal tax dollars even with a gazillion-dollar endowment?), so they must adhere to the 1964 Civil Rights Act, which states this is illegal.  Shockingly, Judge Burroughs stated that it's "possible" that Asian applicants "did not possess the personal qualities that Harvard is looking for at the same rate as white applicants," and "it would be unsurprising to find that applicants that excel in one area, tend to be somewhat weaker in other areas."
     Why is CNN not losing their minds over this and calling for Judge Burrough's impeachment?  What if she had made this same statement about another demographic that she felt may "excel" in let's say athletics, but tends to be weaker in "other areas?"  Where is the tribunal?  Why don't we protect Asians like we do other minorities?  Because, they are overachievers, that's why!  They make the rest of us look bad because they study all night while we binge watch Game Of Thrones.  They are that guy on the factory line who assembles too many widgets and makes the rest of us get yelled at by the foreman.
     We have to reverse this way of thinking.  Unfortunately, this human trait has a long history.  Columnist Jason L. Riley tells us that in 1914 about 40% of Columbia University's students were Jewish, and then with quotas by 1918 it was reduced to 22%.  In 1925, Harvard's freshman class was 30% Jewish, and then quotas the next year dropped it to 15%.  These quota levels remained for decades because the Jewish students were excelling far beyond the rest.
     Human beings have always dragged the top down and then persecuted the weakest, most vulnerable sector.  It is a defect in our genetic code.  Study every culture, color, and socioeconomics and you will find this always true.  In prison, a violent microcosm of our society, the cars (gangs) ensure that each individual is not more important than the car, and if violence breaks out, everyone must participate.  Also, there is a clear pecking order of who rules and who is persecuted, with persecution even taking place within the subgroup.  Everyone believes that someone above must be dragged down and that someone below is to be tormented.  Wall Street is no different than prison, just with Canali suits and Charvet ties.
     We JAM VIEWS members must provide leadership by example for our compatriots.  We must provide grace to those less fortunate, and we do this by fighting for merit-based systems in all things, pure capitalism, and free markets whose rising tides raise all boats.  We must call out and oppose all discrimination.  We must shine light on Government shadows.  We must use our personal energy and capital to support causes and organizations which build and create, instead of propagating inferiority and dependency.
     Don't focus on breaking up big, successful companies, but on creating the regulatory and capital markets which enable thousands of smaller companies to become big also!  Just as pure capitalism cleanses the market, merit-based systems strengthen all of us.
     Stay diligent and pay attention to the Students for Fair Admission's battle against Harvard all the way up to the Supreme Court.  This is important.  Have a great week!

"There are two types of people who will tell you that you cannot make a difference in this world: those who are afraid to try and those who are afraid you will succeed."  -  Ray Goforth

** Many thanks to the WSJ, Forbes and Fortune for the above quotes and statistics.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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DAVID KOCH
     This week we again honor, and learn from the life of, another American capitalist.  David Koch, owner and Executive Vice President of Koch Industries, recently moved onto his next adventure at age 79.  His name immediately extracts labels, categories, and condemnations from so many in our, sadly, polarized-politicized society.  Yet, as with most successful individuals, very few in our society actually understand or appreciate his great contributions to the country.
     David Koch was that guy who had six CD's in the car deck - Sinatra, Aretha, Stones, Placido, Snoop and Taylor Swift - so that you could never put him in a box or truly label him.
     He certainly favored free markets, liberty, and capitalism, but he also gave $1.3 billion to arts, prison reform, and medicine.  He supported the Thurgood Marshall Scholarship Fund, the Lincoln Center, the National Association of Defense Attorneys, the New York-Presbyterian Hospital, and, truly, hundreds more, while his do-nothing detractors critiqued his every move.  This is the unfortunate reward to most true leaders.
     Many don't know that he earned TWO chemical engineering degrees at MIT, while also setting the school record for the most points scored in a single basketball game.  He and his brother, Charles, built Koch Industries into an energy-oil refining giant, which made them instant targets of the Left.
     In business, Mr. Koch created well-paying jobs for thousands of Americans.  Alex Epstein, founder of the Center for Industrial Progress reflected, "While oil refining, one of the key businesses of Koch Industries, is treated as shameful, it is one of the world's most life-giving businesses.  Every product and service we use is better and cheaper because of oil power - from the food we eat to the vacations we take to all the amazing items we buy on Amazon."
     William McGurn, the Main Street columnist, adds, "Any honest accounting of the connection between fossil fuels and human well-being would acknowledge that these sources of energy have helped lift desperate millions out of poverty, and that, at least for the foreseeable future, there is no alternative that could deliver the same."  To be economical, not political, how about we follow AOC's plan after she first helps desperate millions? [She better hurry because she says we have only 12 years left!  But, wait, didn't Al Gore say we only had 10 years left, 13 years ago?  I must have that wrong].
     David Koch took care of "stakeholders" before it was cool to say stakeholders, and certainly without government involvement.  His Guiding Principle No. 3 stated, "Principled Entrepreneurship:  Practice a philosophy of mutual benefit.  Create superior value for the company by doing so for our customers and society.  Help make Koch the preferred partners of customers, employees, suppliers, communities and other important constituencies."
     Chandra Bozelko, Vice President of the National Society of Newspaper Columnists and author of the Blog Prison Diaries, teamed up with Mr. Koch in 2015 for the Bipartisan Summit on Criminal Justice Reform.  A former prisoner, and working for a "liberal organization," Ms. Bozelko asserted, "David's greatest contribution was to disprove the notion that people can't work together without agreeing on everything."  She states, "But insisting on homogeneity of thought is a surefire way to arrest progress."  She also summarized, "I disagreed with David Koch on climate change and many other things, (but) I am for the almost 2.3 million people who are incarcerated and the approximately 113 million family members who go through the criminal justice system with them.  I don't need a purity test to get something done."  Brilliant.
     Finally, David Koch put his money and energy where his mouth was, and got his buns off the couch, to run for Vice President on the Libertarian ticket in 1980, promoting free markets and limited government. [Thankfully, President Reagan also supported these principles].  Yet, showing his convictions and independence, more recently he openly did not support the anti-free-trade and anti-immigration wings of the Republican party.  He followed his beliefs.  He continually took a stand.
     As we stated last week that we shouldn't scream for refugee asylum immigration until we, personally, sponsor one family into our own homes, we should not scream about David Koch's positions until we, personally, do even a fraction of the good he has done for others and for our great country.
     A salute and gracious thank you to a great American off on what is likely another amazing adventure.
     What are you going to do this week to make a difference, to make it count that you were here?  You can do it!

"All our dreams can come true if we have the courage to pursue them."  -  Walt Disney

** Many thanks to the WSJ and Forbes for the above quotes and statistics.

** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

* SUBSCRIBE TO JAM VIEWS

* PLEASE USE THE BELOW SHARE BUTTONS TO SPREAD THE WORD!