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Poll: Young Americans Are More Likely to Resent the Rich

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The Cato 2019 Welfare, Work, and Wealth National Survey finds that Americans under 30 stand out from their parents and grandparents’ in their attitudes toward socialism, capitalism, and resentment toward the rich. These results may help explain the striking success of self-described democratic socialist Bernie Sanders in capturing the support of the young. Young Americans feel more resentment toward the rich. Emily Ekins writes on Cato Institute: 

Young Americans are the only cohort in which a majority believe the wealthy didn’t earn their wealth. A slim majority (52%) of Americans under 30 say that “most” rich people in the United States got rich “by taking advantage of other people.” In contrast, a strong majority (72%) of seniors (65+) say that most wealthy people in America “earned their wealth” without exploiting people.

Across the board, younger people are more likely than older people to hold negative attitudes toward the rich. Americans under 30 are about 20–35 points more likely than Americans age 65 and older to feel “angry” when they read or hear about rich people (44% vs. 11%), to feel more “resentment” than “admiration” of rich people (39% vs. 16%), to believe it’s “immoral” for society to allow people to become billionaires (39% vs. 13%), and to believe that citizens taking violent action against the rich is sometimes justified (35% vs. 10%). Young people are also about 10–25 points more likely than older people to believe billionaires are a threat to democracy (51% vs. 26%), to disagree that billionaires earned their wealth by creating value for others (39% vs. 26%), and to disagree that rich people make society better off by investing in new businesses that create jobs and invent technology (38% vs. 21%).

The Rich Really Do Pay Lower Taxes Than You

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Almost a decade ago, Warren Buffett made a claim that would become famous. He said that he paid a lower tax rate than his secretary, thanks to the many loopholes and deductions that benefit the wealthy. The New York Times reports: 

His claim sparked a debate about the fairness of the tax system. In the end, the expert consensus was that, whatever Buffett’s specific situation, most wealthy Americans did not actually pay a lower tax rate than the middle class. “Is it the norm?” the fact-checking outfit Politifact asked. “No.”

Time for an update: It’s the norm now.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data.

That’s a sharp change from the 1950s and 1960s, when the wealthy paid vastly higher tax rates than the middle class or poor.

Since then, taxes that hit the wealthiest the hardest — like the estate tax and corporate tax — have plummeted, while tax avoidance has become more common.

American Banks Are Set to Automate Away 200,000 Jobs

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Over the next decade, U.S. banks, which are investing $150 billion in technology annually, will use automation to eliminate 200,000 jobs, thus facilitating “the greatest transfer from labor to capital” in the industry’s history. The call is coming from inside the house this time, too—both the projection and the quote come from a recent Wells Fargo report, whose lead author, Mike Mayo, told the Financial Times that he expects the industry to shed 10 percent of all of its jobs. Gizmodo reports: 

This, Mayo said, will lay the groundwork for, and I quote, “a golden age of banking efficiency.” The job cuts are slated to hit front offices, call centers, and branches the hardest, where 20-30 percent of those roles will be on the chopping block. They will be replaced by better ATMs, automated chatbots, and software instruments that take advantage of big data and cloud computing to make investment decisions…

It is not rare that a report forecasts the imminent erosion of an industry’s jobs picture, but it is a little rare that a prominent industry analyst for one of said industry’s largest companies is so brazen — even giddy — about trumpeting the imminent loss of those jobs…. It is the confidence and enthusiasm for this schema that is key, as that is what will transform the report into a self-fulfilling prophecy. If the banks buy what Mayo and Wells Fargo are selling, then the report will contribute to an automated arms race between companies to cut staff and purchase enterprise financial software products that is already underway. This is how a lot of corporate automation unfolds.

As a result, we can expect to interact with even more customer service chatbots and automated call menus (whether they work well or not), to see more financial decisions turned over to algorithms, and a continued flood of software products to enter the banking industry. And Wells Fargo certainly won’t be the only bank automating here: As the FT notes, Citigroup is planning to eliminate tens of thousands of call center workers, and Deutsche Bank expects to slash half its ~100,000-strong workforce.

New Universal Basic Income Experiment Finds 40% of Money Spent On Food

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The first data from an experiment in a California city where needy people get $500 a month from the government shows they spend most of it on things such as food, clothing and utility bills. Associated Press reports:

The 18-month, privately funded program started in February and involves 125 people in Stockton…. But critics say the experiment likely won’t provide useful information from a social science perspective given its limited size and duration. Matt Zwolinski, director of the Center for Ethics, Economics and Public Policy at the University of San Diego, said people aren’t likely to change their behavior if they know the money they are getting will stop after a year and a half. That’s one reason why he says the experiment is “really more about story telling than it is about social science.” Plus, he said previous studies have shown people don’t spend the money on frivolous things. “What you get out of a program like this is some fairly compelling anecdotes from people,” he said. “That makes for good public relations if you are trying to drum up interest in a basic income program, but it doesn’t really tell you much about what a basic income program would do if implemented on a long-term and large-scale basis.”

The researchers overseeing the program, Stacia Martin-West at the University of Tennessee and Amy Castro Baker at the University of Pennsylvania, said their goal is not to see if people change their behavior, but to measure how the money impacts their physical and mental health. That data will be released later….

Since February, when the program began, people receiving the money have on average spent nearly 40% of it on food. About 24% went to sales and merchandise, which include places like Walmart and discount dollar stores that also sell groceries. Just over 11% went to utility bills, while more than 9% went to auto repairs and fuel. The rest of the money went to services, medical expenses, insurance, self-care and recreation, transportation, education and donations…. “People are using the money in ways that give them dignity or that gives their kids dignity,” Castro-Baker said, noting participants have reported spending the money to send their children to prom, pay for dental work and buy birthday cakes.

Unemployment Rate Hits 50-Year Low

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The economy added 136,000 new jobs in September, according to Bureau of Labor Statistics. And the U.S. unemployment rate dropped to 3.5%, the lowest rate since December 1969. MarketWatch reports:

The resilience seen in the September job report will raise hopes that the economy can avoid a recession. Although manufacturing activity and business investment have been weak, consumer spending has held up well.

Many economists say the employment report is a lagging indicator and they will be watching for readings over the next few months before giving an “all-clear” sign for the economy.

The Federal Reserve has been cutting interest rates this year as insurance against a slowdown in economic growth, but the job report does not add to expectations of another cut in October.

The World’s Most-Used Cryptocurrency Isn’t Bitcoin

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What’s the world’s most widely used cryptocurrency? If you think it’s Bitcoin, which accounts for about 70% of all the digital-asset world’s market value, you’re probably wrong. Bloomberg reports:

While concrete figures on trading volumes are hard to come by in this often murky corner of finance, data from CoinMarketCap.com show that the token with the highest daily and monthly trading volume is Tether, whose market capitalization is more than 30 times smaller. Tether’s volume surpassed that of Bitcoin’s for the first time in April and has consistently exceeded it since early August at about $21 billion per day, the data provider says.
 
With Tether’s monthly trading volume about 18% higher than that of Bitcoin, it’s arguably the most important coin in the crypto ecosystem. Tether’s also one of the main reasons why regulators regard cryptocurrencies with a wary eye, and have put the breaks on crypto exchange-traded funds amid concern of market manipulation. “If there is no Tether, we lose a massive amount of daily volume — around $1 billion or more depending on the data source,” said Lex Sokolin, global financial technology co-head at ConsenSys, which offers blockchain technology. “Some of the concerning potential patters of trading in the market may start to fall away.”

17% of Young Homebuyers Regret Their Purchase

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Seventeen percent of millennial and Generation Z homebuyers from ages 18-34  regret purchasing a home instead of renting, according to a Zillow survey. These young homebuyers have regrets about their mortgage, saying they rushed through the process. The Mercury News reports: 

Speculating as to why, Josh Lehr, industry development at Zillow-owned Mortech, said getting the wrong mortgage may have driven that disappointment. For example, the Zillow survey showed 22% of young buyers had regrets about their type of mortgage and 27-30% said their rates and payments are too high.

Lehr pointed out that 57% of the millennials shopped lenders online. Yet, they didn’t know what they didn’t know regarding the details of various financing instruments and finding the best fit for them.

List of the Most Tax-Friendly States

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Personal finance site Kiplinger just released its list of the most and the least tax-friendly states in America. To determine how big of a tax bite each state would take out of your hard-earned cash, Kiplinger used a hypothetical couple with two kids and $150,000 in income a year plus $10,000 in dividend income, and then looked at their income, property and sales tax burden.

Some of the most tax-friendly states don’t have income tax including Wyoming, Nevada and Florida. Tennessee has income tax but it only applies to interest and dividends and doesn’t apply to salaries and wages.

The 10 most tax-friendly states:

1. Wyoming
2. Nevada
3. Tennessee
4. Florida
5. Alaska
6. Washington
7. South Dakota
8. North Dakota
9. Arizona
10. New Hampshire

As for the least-tax friendly states, Illinois took the No. 1 spot on the list due to their very high property taxes. Both Connecticut and New York, which have pretty high income taxes, are next on the list. Surprisingly California didn’t crack the top 10 least-friendly tax states due to Kiplinger’s calculation method.

The 10 least tax-friendly states:

1. Illinois
2. Connecticut
3. New York
4. Wisconsin
5. New Jersey
6. Nebraska
7. Pennsylvania
8. Ohio
9. Iowa
10. Kansas

The Best Investment Advice You’ll Never Get

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For 35 years, Bay Area finance revolutionaries have been pushing a personal investing strategy that brokers despise and hope you ignore. The story of a rebellion that’s slowly but surely putting money into the pockets of millions of Americans, winning powerful converts, and making money managers from California Street to Wall Street squirm. Mark Dowie of San Francisco magazine wrote on December 2006:

As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.

Rosenberg didn’t turn the suitors away; he simply placed them in a holding pattern. Then, to protect Google’s staff, he proposed a series of in-house investment teach-ins, to be held before the investment counselors were given a green light to land. Company founders Sergey Brin and Larry Page and CEO Eric Schmidt were excited by the idea and gave it the go-ahead.

One by one, some of the most revered names in investment theory were brought in to school a class of brilliant engineers, programmers, and cybergeeks on the fine art of personal investing, something few of them had thought  much about. First to arrive was Stanford University’s William (Bill) Sharpe, 1990 Nobel Laureate economist and professor emeritus of finance at the Graduate School of Business. Sharpe drew a large and enthusiastic audience, which he could have wowed with a PowerPoint presentation on his “gradient method for asset allocation optimization” or his “returns-based style analysis for evaluating the performance of investment funds.” But he spared the young geniuses all that complexity and offered a simple formula instead. “Don’t try to beat the market,” he said. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow, and get on with building Google.

The following week it was Burton Malkiel, formerly dean of the Yale School of Management and now a professor of economics at Princeton and author of the classic A Random Walk Down Wall Street. The book, which you’d be unlikely to find on any broker’s bookshelf, suggests that a “blindfolded monkey” will, in the long run, have as much  luck picking a winning investment portfolio as a professional money manager. Malkiel’s advice to the Google folks was in lockstep with Sharpe’s. Don’t try to beat the market, he said, and don’t believe anyone who tells you they can—not a stock broker, a friend with a hot stock tip, or a financial magazine article touting the latest mutual fund. Seasoned investment professionals have been hearing this anti-industry advice, and the praises of indexing, for years. But to a class of 20-something quants who’d grown up listening to stories of tech stocks going through the roof and were eager to test their own ability to outpace the averages, the discouraging message came as a surprise. Still, they listened and pondered as they waited for the following week’s lesson from John Bogle.

“Saint Jack” is the living scourge of Wall Street. Though a self-described archcapitalist and lifelong Republican, on the subject of brokers and financial advisers he sounds more like a seasoned Marxist. “The modern American financial system,” Bogle says in his book The Battle for the Soul of Capitalism, “is undermining our highest social ideals, damaging investors’ trust in the markets, and robbing them of trillions.” But most of his animus in Mountain View was reserved for mutual funds, his own field of business, which he described as an industry organized around “salesmanship rather than stewardship,” which “places the interests of managers ahead of the interests of shareholders,” and is “the consummate example of capitalism gone awry.”

Bogle’s closing advice was as simple and direct as that of his predecessors: those brokers and financial advisers hovering at the door are there for one reason and one reason only—to take your money through exorbitant fees and transaction costs, many of which will be hidden from your view. They are, as New York attorney general Eliot Spitzer described them, nothing more than “a giant fleecing machine.” Ignore them all and invest in an index fund. And it doesn’t have to be the Vanguard 500 Index, the indexed mutual fund that Bogle himself built into the largest in the world. Any passively managed index fund will do, because they’re all basically the same. [Read more…]

These Retirees Couldn’t Afford America — Now They Live Their Dream Life on $2,000 a Month in Ecuador

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At 72, Jacqueline Mackenzie has lived in nearly every state in the U.S. But it’s in Vilcabamba — an Andean foothills town in southern Ecuador — where the retired teacher plans to spend the rest of her life. MarketWatch reports:

The Mackenzies live on about $2,000 a month, most of that coming from Don’s pension (he’s retired from the military), they say. “We couldn’t afford the States, but here we are rich,” Jacqueline says — adding that they now live in a home with a “million-dollar view.”

Their biggest expense when they first moved to Ecuador was rent: They paid $400 a month for a three-bedroom house on a quarter-acre of land before they moved to the eco-village last year; now they don’t pay rent, having built their home for about $38,000. They lease the land for free because they help out at the eco-village; when they die their home and most of its contents will go to the owner of the eco-village. They paid for the house through a combination of savings and loans.

Now they spend the biggest proportion of their money on food — roughly $375 a month — in part because, as Jacqueline says, they are committed to eating organic whenever they can. Other significant expenses include transportation — they don’t own a car but spend about $350 a month on taxis — and health insurance. That costs them about $100 a month, though they do have out-of-pocket health-care costs like doctor’s appointments and prescriptions, which can add up. Internet service costs them a little over $80 a month, and a mobile-phone plan costs $28 a month. They also spend money on things like gardening tools, gardeners, seeds, trees and soil.

In addition to their simple lifestyle, they save money by not having a television — “we’ve not had access to a TV for eight months, so we are entertained by nature’s sunrises and sunsets,” Jacqueline says — and by not traveling a lot and not eating out. “We like the rural lifestyle,” says Jacqueline. “Eating out is not a big deal to us. We’ve already been to bazillions of concerts and plays. Now we listen to music with a glass of wine on the patio.”

Yahoo Security Breach Proposed Settlement

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If you had a Yahoo account anytime in 2012 through 2016, a pending class action settlement may affect you.

A Class Action Settlement has been proposed in litigation against Yahoo! Inc. (“Yahoo”) and Aabaco Small Business, LLC (together, called “Defendants” in this notice), relating to data breaches (malicious actors got into system and personal data was taken) occurring in 2013 through 2016, as well as to data security intrusions (malicious actors got into system but no data appears to have been taken) occurring in early 2012 (collectively, the “Data Breaches”).

  • 2012 Data Security Intrusions: From at least January through April 2012, at least two different malicious actors accessed Yahoo’s internal systems.  The available evidence, however, does not reveal that user credentials, email accounts, or the contents of emails were taken out of Yahoo’s systems.
  • 2013 Data Breach: In August 2013, malicious actors were able to gain access to Yahoo’s user database and took records for all existing Yahoo accounts—approximately three billion accounts worldwide. The records taken included the names, email addresses, telephone numbers, birth dates, passwords, and security questions and answers of Yahoo account holders. As a result, the actors may have also gained access to the contents of breached Yahoo accounts and, thus, any private information contained within users’ emails, calendars, and contacts.
  • 2014 Data Breach: In November 2014, malicious actors were able to gain access to Yahoo’s user database and take records of approximately 500 million user accounts worldwide. The records taken included the names, email addresses, telephone numbers, birth dates, passwords, and security questions and answers of Yahoo account holders, and, as a result, the actors may have also gained access to the contents of breached Yahoo accounts, and thus, any private information contained within users’ emails, calendars, and contacts.
  • 2015 and 2016 Data Breach: From 2015 to September 2016, malicious actors were able to use cookies instead of a password to gain access into approximately 32 million Yahoo email accounts.

Plaintiffs claim that Defendants failed to adequately protect their Personal Information and that they were injured as a result. Defendants deny any wrongdoing, and no court has made any ruling in these matters.

Who’s Included? If you received a Notice about the Data Breaches, or if you had a Yahoo account at any time between January 1, 2012 and December 31, 2016, and are a resident of the United States or Israel, you are a “Settlement Class Member.”

What does the Settlement provide?  Yahoo has enhanced, or, through its sucessor in interest, Oath Holdings Inc. (“Oath”), continues to enhance security of its customers’ Personal Information stored on its databases.  Defendants will also pay for a Settlement Fund of $117,500,000. The Settlement Fund will provide: a minimum of two years of Credit Monitoring Services to protect Settlement Class Members from future harm, or Alternative Compensation instead of credit monitoring for Class Members who already have Credit Monitoring Services (subject to verification and documentation); Out-of-Pocket Costs for losses related to the Data Breaches; and reimbursement of some costs for those who paid for Yahoo premium or small business services. The Settlement Fund will also be used to pay for attorneys’ fees, costs, and expenses, and Service Awards for the Settlement Class Representatives. These are only a summary of the benefits. For complete information, dates, and details on the benefits, visit the Settlement Website www.YahooDataBreachSettlement.com. 

What are my options? In order to receive any benefits, you must file a claim online or by mail by July 20, 2020.  If you want to keep your right to sue the Defendants yourself, you must exclude yourself from the Settlement Class by March 6, 2020. If you exclude yourself you will not receive any credit monitoring or monetary relief from the Settlement.  If you stay in the Settlement Class, you may object to the Settlement, and/or the amount of attorneys’ fees, costs, and expenses, and/or the amount of Class Representative Service Awards by March 6, 2020.  If you do nothing, you will not receive any credit monitoring or monetary benefits but you will still be bound by the Court’s decisions. Complete information and instructions on Filing a Claim, excluding oneself from the Settlement, or Objecting are available on the Settlement Website at www.YahooDataBreachSettlement.com. 

The Court has scheduled a hearing in this case at 1:30 pm on April 2, 2020, in Courtroom 8 of the U.S Courthouse, 280 South 1st Street, 4th Floor, San Jose, CA 95113, to consider: whether to approve the Settlement; any objections; a request for Class Representatives’ Service Awards; and attorneys’ fees, costs, and expenses for investigating the facts, litigating the case, and negotiating the settlement.  The motion for attorney fees, costs, and expenses will be posted on on the date it is filed or as quickly thereafter as practicable. You may ask to appear at the hearing but you do not have to.

Gap Between Haves and Have-Nots Highest in 50 years

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The gap between the haves and have-nots in the United States grew last year to its highest level in more than 50 years of tracking income inequality, according to Census Bureau figures. AP News reports:

Income inequality in the United States expanded from 2017 to 2018, with several heartland states among the leaders of the increase, even though several wealthy coastal states still had the most inequality overall, according to figures released Thursday by the U.S. Census Bureau.

The nation’s Gini Index, which measures income inequality, has been rising steadily over the past five decades.

The Gini Index grew from 0.482 in 2017 to 0.485 last year, according to the bureau’s 1-year American Community Survey data. The Gini Index is on a scale of 0 to 1; a score of “0″ indicates perfect equality, while a score of “1″ indicates perfect inequality, where one household has all the income…

The inequality expansion last year took place at the same time median household income nationwide increased to almost $62,000 last year, the highest ever measured by the American Community Survey. But the 0.8% income increase from 2017 to 2018 was much smaller compared to increases in the previous three years, according to the bureau.

Will America’s Massive Debt Really Doom Us?

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America’s massive debt will doom us. That’s common wisdom, but wrong. In Manhattan, a giant clock displays not only the total — almost $23 trillion for now — but your share, ticking up every second. Pundits say it’s trouble. But U.S. debt fears have lurked forever and those troubles are no closer now than decades ago. In some ways, they’re further off. Ken Fisher writes on USA Today: 

The $23 trillion total seems jaw-dropping, but says little about what really matters: How readily Uncle Sam can pay the piper.

Pundits cite our debt-to-GDP ratio as evidence of a debt addiction. With $21 trillion of GDP, that ratio is 103% — lower than Italy’s and Japan’s, but higher than Germany’s and Britain’s. Debt topping GDP sounds dire. But that’s misleading. The federal government itself owns more than a quarter of U.S. debt, money the government essentially owes itself. It’s an accounting entry. As an asset and a liability, it effectively cancels out. Otherwise, net outstanding public debt is $16.7 trillion— 76% of GDP. That’s still unimportant…

Government solvency isn’t about paying off debt. It’s about affording interest payments and rolling over maturing bonds. Currently, annual U.S. interest payments represent just 9.8% of tax revenues, lower than any time in the 1980s and 1990s, when they peaked at 18.4%. 

Average Millennial Has $27,900 In Debt

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Millennials carry an average of $27,900 in debt, not including mortgages, according to new data released today by Northwestern Mutual. Gen Z, the oldest of whom are now 22 years old, have an average debt of $14,700. Buzz Feed News reports: 

Having sizable debt at a young age “is the new normal,” said Chantel Bonneau, wealth management advisor at Northwestern Mutual. “There are lots of people who exit school, and before they start their first job, have debt. That is a different situation from 30 years ago.”

Millennials’ main source of debt is credit card bills, and Gen Z’s is student loans. In a previous poll by CreditCards.com, 40% millennials said the top reason they carried a credit card balance was daily expenses such as groceries, childcare, and utilities, and about 20% pointed to unexpected emergencies such as medical bills and car repairs. Bonneau said discretionary expenses such as vacations and eating meals out also contribute to credit card debt.

About 45% of millennials and 43% of Gen Z reported feeling guilty about their debt at least every month — more than other age groups. But debt is a major stressor across age groups. One-fifth of all respondents said their debt made them physically ill at least monthly, 45% said it made them anxious at least monthly, and 35% said they felt guilty once a month or more.

Empty Stomachs Lead to Poor Decisions, Research Says

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Scientists at the University of Dundee in Scotland found that hunger significantly altered people’s decision-making, making them impatient and more likely to settle for a small reward that arrives sooner than a larger one promised at a later date. The Irish Examiner reports:

The research suggests being hungry actually changes preferences for rewards entirely unrelated to food and may carry over into other kinds of decisions, such as financial or interpersonal ones.

Benjamin Vincent, who carried out the study, believes it is important that people know an empty stomach might affect their preferences and there is also a danger those in poverty may make decisions that entrench their situation.

Dr Vincent added: “This is an aspect of human behaviour which could potentially be exploited by marketers, so people need to know their preferences may change when hungry.

“People generally know that when they are hungry they shouldn’t really go food shopping because they are more likely to make choices that are either unhealthy or indulgent.

“Our research suggests this could have an impact on other kinds of decisions as well.

“Say you were going to speak with a pensions or mortgage adviser – doing so while hungry might make you care a bit more about immediate gratification at the expense of a potentially more rosy future.”