I have done far better financially when a Democrat is president.
So has the country.
George Girton, a college classmate, was playing around with ChatGPT from his home in Southern California. He fed data from the St. Louis Fed on new jobs created in the U.S. and prompted ChatGPT to make a bar graph of those numbers during the terms of recent presidents. It produced the chart below.
It was easy and fast to do, he wrote me. No surprise. He was a software developer for his career.
I would summarize the chart this way: More jobs during Democratic administrations than Republican ones. George's chart reminded me about the boom and bust rhythms of the economy during presidential terms of office.
Below is a chart of the U.S. stock market, beginning in 1985 when I began my 30-year career as a financial advisor.
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| 1985 to 2026 |
The big trend over the 40 years is onward and upward.
But notice something: that big capital M-shaped graph line in the middle. The left point on that M is the market top in March 2001, in what we now understand to be the end of the internet bubble. The internet bubble didn't seem fragile on the 18-year run-up to form the left side of that M. The "irrational exuberance" seemed pretty rational during the years that technology stocks kept climbing. The midpoint bottom of the M is the 2002 bottom after the recession that followed 9/11. Stocks generally lost nearly half their value in two years. Technology stocks lost 80 percent of theirs at that midpoint of the M. The market rebounded to make the second high point of the M in 2007. That coincides with the time of great optimism among bankers, pension funds, and homeowners who believed that financial engineering with mortgages had created a risk-free way to make money. After all, real estate only goes up, and people never fail to pay their mortgage. By the time the market hit bottom in March 2008, amid the Great Financial Crisis, the market was back in price to where it was about 12 years prior. Adjusting for inflation, it was a 14-year period where investors made no money.
The bar graph below overlays those numbers to presidential terms.
Democrats tend to regulate; Republicans like to de-regulate. Cheap money and deregulation lead to misallocation of resources and debt that cannot be repaid. Trump is careless and impulsive. He has a history of foolish risk-taking with debt, leading him to file for bankruptcy six times. He has an incoming Fed chair who wants to accommodate him. The Fed is proposing to reduce the reserve requirements for banks. Trump is deregulating crypto. Trump is shaking up the international order. We are in a war.
Lots could go wrong.
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As I've said before, Trump is now doing for the U.S. what he did for Trump Steaks and in the process, he's making sure nobody feels sorry for us or is tempted to help.
ReplyDeleteUnfortunately, the low information voters think republicans are better at managing the economy, something that is just not true.
ReplyDeleteIt feels like we’re living in a “Black Swan”
ReplyDeletemoment, with “never befores” all around us. Less than 1% of the world’s population (77m/8b) voted to put a man in power who is delivering on his promise to upend every economic, geopolitical and most importantly, every moral norm at a global scale. Millions around the world are now suffering - and more will needlessly suffer and die because of it. The impact will last generations.
Modern technology had already shown its capacity amplify every kind of deception and expose our vulnerabilities to lies, and now we have AI redefining the role of human cognition, which for all its flaws is the basis for democratic governance.
The thing about black swans is you can’t rely on past patterns to predict the future. Hang on.
In the final graph, I'm surprised that you charted the median, rather than the arithmetic mean, or average. The median is the percentage growth right in the middle, the mean or average is just the total divided by the number of Presidential terms.
ReplyDeleteIt's common in economic series for the mean to be higher than the median. And so it is in this case. The mean gain for the Rs is 6.07% and for the Ds it is 8.08%.
This means that a risk neutral player should choose the Ds over the Rs. Risk neutrality means a dollar gained is just the negative of a dollar lost and they sum to zero. Most people are risk averse, meaning that a dollar lost hurts them more than a dollar gained helps them.
So for even a risk neutral voter, and much more so for a risk averse one, the Democrats look like a better bet.
Correction: The medians in this case are actually higher than the means. (I wrote it down wrong.) My basic point that risk neutral and risk averse voters should prefer the Ds only depends on the mean, and so is unaffected by this. Sorry for the confusion.
ReplyDeleteThis data demonstrates that economics is often not the primary motivation for voting.
ReplyDelete“Kamala is for they/them; Trump is for you,” the most effective campaign ad in the 2024 election, was not about economics.