Poverty

Pension blackhole widens

E20BF98F-6F7F-46C5-B555-401F47B2AD21.jpeg

CM has been saying for quite some time that the US public pension system is a runaway train running out of track. It seems Zerohedge today confirms many of those same trends. The ratcheting down of return targets by ridiculously small amounts because to actuarially mark-to-market to reality is too scary to contemplate.

To quote the article,

CalSTRS is making the bold move to drop its future goal to… 7%…And CalPERS is ratcheting down its return goals in steps to… wait for it, 7% by 2021.

with interest rates near their lowest levels in human history, it’s been difficult for these pensions to generate a suitable return without taking on more and more risk.

And that’s another big problem with pensions – their investment returns are totally unrealistic.

Most pension funds require a minimum annual return of about 8% a year to cover their future liabilities.

But that 8% is really difficult to generate today, especially if you’re buying bonds (which is the largest asset for most pensions). So pensions are allocating more capital to riskier assets like stocks and private equity.”

Does Trump have a right to brag about unemployment?

E8E0C7BE-1B5E-460A-A348-49B9C2837141.jpeg

The Trump vs Obama camps are lighting up over who was responsible for the drop unemployment rates. Looking at the long term decline one could argue that Obama was a key part of the decline and the incremental drops in the rate are Trumps. Here are the raw figures.

In Jan 2009, according to the Bureau of Labor Statistics, Obama had 115.818m people full time employed. In December of 2012 that number was 115.791m. (-270,000). There were 8.046m and 7.943m part time jobs over the same period. Minus 103,000. At the end of his 8 years, there were 124.3m FT jobs and 5.554m PT jobs. All told his FT workforce went up 8.48mn and PT fell 2.492m. So gross employment increased 5.98m.

Trump started at 124.3mn FT and as of May 2018 there are 128.657m FT jobs and 4.948m PT jobs. So he’s increased FT 4.347m and cost PT 606k. Net increase of 3.741mn jobs. So even if you ran the narrative that Obama’s second term was enough to put the “Great Recession to bed”, Trump has achieved 63% of Obama’s employment legacy in only 30% of his first term as president.

The number of people working two or more jobs surged to over 8mn (a record) under BHO as did food stamps (doubled to c.48m before coming down to 43m by his term end). SNAP stands at 40m now. 3mn fewer.

30 million people claim disability and welfare in the US. The Social Security Administration (SSA) highlighted that back pain and musculoskeletal problems are 33.8% of claims for disabled workers, followed by mental illness at 19.2% in 2013. This compares to 8.3% and 9.6% respectively in 1961. Half of claims in the 1960s came from heart attack/stroke and ‘other’ categories which made up only 17% of the 2013 figure.

Yet the truth is that if Americans wanted more of Obama’s successful policies, Hillary was Obama 2.0. No change in policies. Sensible to keep if they wanted the status quo. Ironic that 19 out of 25 states that voted for Trump had poverty levels exceeding the national average. Which means that had the “marry the state” policies of the Obama admin resonated with the poor it would have been a coronation for Hillary. This is a perfect example as to why a hollowed out middle America want to live the American dream rather than queue up for more welfare. God Bless America?

 

Racial bias in US school discipline? Some shocking correlations

1FFB4DF3-DBB4-4BD8-8331-F791394EFBF4.jpeg

The GAO has published a 98 page report on discipline in US schools. In a perhaps somewhat irresponsible manner of formatting, it suggests that teachers seem to pick on particular races and disabilities for those reasons alone. It is as if teachers are pushing kids with wheelchairs uncontrollably down ramps. Yet, ‘disability’ of course includes mental problems which could range from anxiety to depression. 11.7% of students are classified with a disability. Yet delving deeply within the stats, of the 56 million K-12 students, 5.7% have been in detention, only 0.4% of the total have been referred to law enforcement, 0.3% have been expelled, 0.2% received corporal punishment and less than 0.1% have been arrested. In short, 99.6% of students stay out of ‘big’ trouble and 94.3% stay out of detention. Single parent households and poverty levels are highly correlated to discipline. Reporting the headlines of the GAO makes for shock and awe but had they reported the 0.X% stats it would deflate the rhetoric.

The NY Times article implied there must be some sort of unconscious bias as teachers were being bigoted bullies. Doesn’t the mainstream media defend the very same people as the last bastions of educational excellence against the tyranny of Education Secretary Betsy DeVos. 80% of teachers are white. Although this has been on a long term decline.

If white students (K-12) represent 50.3% of the total is it fair to assume that they should hold an equal % of disciplinary actions? Do crime stats and incarceration rates reflect race based demographics anywhere in the world? In America, 24.7% of students are Hispanic and 15.5% are black. When it comes to higher levels of poverty, Hispanics are way under-represented in the disciplinary stats despite being higher proportions of the students. Whites are punished more or less in line with their population in that bracket.

In the interests of gender equality, why are girls, at 49% of all students punished at half the rate of boys? Unconscious bias or is it through our own experiences, women are far less likely to bring the wrath of teachers in class? A reasonably safe assumption to make.

Nearly half of all public school students went to schools where 50% or more of the students were low-income, and about a quarter went to schools where 75% or more of the students were low-income. Of the 11.5mn students in 75-100% low income backgrounds, 1 million spent time in out of school detention. Of the 9.9 million students in 0-25% low income schools, 217,000 spent time in out of school detention. 128,500 of those were white. Whites make up 78% of 0-25% low income school populations and only 16% of 75-100% low income schools. Therefore it stands to reason statistically that if students in less poverty stricken schools trigger fewer disciplinary issues, then the stats would naturally bear out such differences rather than it being pure racial profiling.

So it would appear that low income would impact the rates of delinquency. Referring to number of kids living with both parents/step-parent (according to a 2015 Pew Research Center study) in America we find:

Asian: 82%

White: 71%

Hispanic: 55%

Black: 31%

The GAO stats make clear that Asian kids get caught up in the least amount of disciplinary action both by absolute and percentage wise. Blacks the most, Hispanics second and whites 3rd. Could it be an inverse correlation? Psychological studies have shown boys seem to be more impacted by the lack of a father in the house than do girls. Children (especially boys) raised by single mothers are more likely to fare worse on a number of dimensions, including their school achievement, their social and emotional development, their health and their success in the labor market. They are at greater risk of parental abuse and neglect (especially from live-in boyfriends who are not their biological fathers), more likely to become teen parents and less likely to graduate from high school or college.

survey taken by the National Center for Education Statistics (NCES) in the US back in January of 1993 revealed poverty, alcoholism, student apathy and absenteeism were cited as big problems in secondary public schools. Lack of a parent was also high on the agenda.

The American Psychological Association, “poor (bottom 20 percent of all family incomes) students were five times more likely to drop out of high school than high-income (top 20 percent of all family incomes) students…Family poverty is associated with a number of adverse conditions — high mobility and homelessness; hunger and food insecurity; parents who are in jail or absent; domestic violence; drug abuse and other problems — known as “toxic stressors” because they are severe, sustained and not buffered by supportive relationships…Community poverty also matters. Some neighborhoods, particularly those with high concentrations of African-Americans, are communities of concentrated disadvantage with extremely high levels of joblessness, family instability, poor health, substance abuse, poverty, welfare dependency and crime

Broken homes and poverty are undoubtedly a big issue. The report said, “Besides lack of parent involvement, the school problems viewed as serious by at least 10 percent of public school teachers included student apathy, poverty, student absenteeism, student disrespect for teachers, parental alcoholism and/or drug abuse, and student tardiness. Behaviors and attitudes of students were more likely to be seen as problematic by teachers at the secondary level than by teachers at the elementary level. Parent alcoholism, on the other hand, was described as “serious” as often by elementary teachers as by secondary teachers and poverty was described as “serious” more often by elementary teachers.”

85% of kids likely to go to college or higher levels of education came from stable family backgrounds. 61% of kids likely to drop out before graduating high school are from broken homes. Sixty One Percent!

So before reading into it that teachers must be subconsciously racially profiling students in handing out punishment, perhaps the overwhelming weight of societal evidence points to far bigger problems that need addressing. Poverty, single parent households and a whole raft of issues need dealing before the government watchdog should report back racial bias at a top down level. According to the logic, perhaps teachers should be forced into student discipline quotas. That way (un)conscious bias won’t afflict teachers and whites can be punished in line with their demographically representation.

Let’s not forget that financial institutions have often been targeted for charging black customers higher interest rates on loans than whites. What they always fail to mention is that Asians pay even lower rates than both. That is the problem with selectivity in data without meaningfully looking at the broader picture. Just like the recent Florida school shooting where a look at what is going on in terms of school security over decades paints a different picture to what the mainstream narrative would want us to believe.

Food insecurity & poverty levels by US state & the 2016 election result

Food Insecurity.png

The US Department of Agriculture listed the level of food insecurity by US state as at the end of FY2016. Looking at the data, Deplorables (states that voted Republican (red) in the 2016 election) made up 20 of the 25 states that suffered the most from it. Coincidence? Looking at the % below the poverty line and 19 out of 25 states voted for Trump. Coincidence? There is a touch of irony that the Democrats, which push for citizens to be married to the state, were by and large rejected by those suffering the most and want to be free of the shackles of poverty. So is it any wonder they’d reject the establishment. Should also be a signal for the Democrats to think more widely about what makes the Deplorable tick – not free hand outs. Opportunity!

Below poverty line.png

Italy votes – will it mimic the referendum?

BAA5E0F2-6EA4-4184-B79A-D8932E369AFA.jpeg

Remember the 2016 Italian referendum which was to decide on  whether to grant more power to the incumbent party to accelerate decision making? Well it ended up being a vote on ousting then PM Renzi who put his resignation on the ballot if it failed. The split between the yes/no was largely decided by economic condition. The poorer southern regions were distinctly red while a smattering of wealthy areas voted green (yes).

It is kind of telling that the furthest province in the north (Bolzano/Bozen) had the highest YES vote (63.69%) in the country while the Province of Catania (south-east Sicily) had the highest NO vote at 74.56%. Bolzano/Bozen was diligent with a 67.41% turnout vs 57.41% in Catania. It is a rich/poor divide by the looks of things. If you wish to dig into the details look no further than this site for who voted how.

The last poll showed Beppo Grillo’s eurosceptic M5S party leading with 28%. Berlusconi’s centre right Forza Italia alliance with the anti-immigrant The League is expected to get around 29%. The incumbent PD is looking at around 20%.

Since the collapse of Lehman in 2008, Italy has added 3mn to poverty (now 18mn or 29.7% of the population; EU average is 25%) with the unemployment rate above 11%. Since Merkel’s open door policy 600,000 illegal immigrants have flocked to Italy from Libya.

Italy is the 3rd largest economy in Europe and 30% of corporate debt is held by SMEs who can’t even make enough money to repay the interest. The banks have been slow to write off loans on the basis it will eat up the banks’ dwindling capital. It feels so zombie lending a la Japan in the early 1990s but on an even worse scale.

Monte Dei Paschi De Siena, a bank steeped in 540 years of history has 31% NPLs and its shares are 99.9% below the peak in 2007. Even Portugal and Spain have lower levels of NPLs. The IMF suggested that in southern parts of Italy NPLs for corporates is closer to 50%!

However one views the rising wave of nationalism in Europe, Italy will likely follow the pattern of Austria, the UK, Germany, Holland, Poland, Hungary and France. A growing number of European citizens want to be first in line rather than feel they have an EU directed obligation to bow down to political correctness. How else do we explain the AfD’s surge past the SPD?

If the eurosceptic/anti-immigrant patties get up  we shouldn’t be the least surprised. More Europeans want their own countries to be made great again. The house of cards is crumbling.

An eerily potent lesson for today

7982BBF4-DD27-4BE9-9ED7-A15102609D2A

In 2011 then Polish Central Bank Head Marek Belka spoke about why Eastern Europe understood austerity better than the West ever will. As our governments bloat budget deficits to avoid taking much needed reform and belt tightening he said of Western Europe….

“Because the people here still aren’t used to prosperity. Let me give you an example from my days at the International Monetary Fund. It was at a time when the Latvians had to implement a drastic austerity program, which caused consumer spending to drop by 25 percent in a year. I asked a Latvia negotiator how his country expected to survive this dramatic crisis. He said: What crisis? We had a crisis when the Soviets were sending us to Siberia. Here in Eastern Europe, many still remember why they were once poor, and they’re not afraid of reasonable reforms that are painful in the short term.”

Experience is a great teacher. It gives the test first and the lesson afterwards. Maybe time we prepare to be Latvians.

 

Scotland bans smacking children. Would you arrest Toya Graham?

Scotland is banning smacking children. It is a contentious issue. Sensible parenting would suggest spanking is done as an absolute last resort. Germany has banned it since 2000. Of course, preventing child abuse is a no-brainer. Recall single mum Toya Graham who shot to fame after slapping her son when she found he disobeying her direct order to stay away from the Baltimore protests. She gave her son a schooling which was widely praised in the media. Call it tough love or whatever but her son literally didn’t know what hit him. How anyone could see it as anything other than unconditional love for her ‘only’ son is beyond words? Even the media were calling her “Mom of the year”.

Yet in this powder-puff world, more laws are being put in place to wrap kids in cotton wool and cage parents behind barbed wire. Is it any wonder we have so many unadjusted millennials who need safe spaces, trigger warnings to prevent micro-aggressions? Why not ban rugby and football for kids because by the same token, contact sports are inherently violent and would only reinforce the many studies which have tried to link those kids who are on the receiving end of corporal punishment to being “more” likely to be aggressive.

As a statistician though, collecting enough credible data on this is incredibly hard to do. For one, kids stepping out of line is not only random in terms of time and severity but age and a whole host of factors. Can one honestly say that a kid who was smacked twice a year is likely to be twice as prone to anxiety in later life than one smacked once a year? Can we honestly link the event of a father smacking his 7yo who stole money from his mother’s purse to buy candy was directly related to his PTSD in later life? Indeed if there is serious and continuous child abuse then that is a whole different story. What is next? Will the government use a stern telling off by a parent as ‘verbal abuse’ of children? Who  determines the line of what constitutes parenting and abuse?

Perhaps we should look at the incidence of single parent households around the world. Maybe parent responsibility (or rather lack thereof) is a far bigger factor in causing ‘problems’ in later life than a smack for insolence. Starting with America – the top 10 counties where kids are in households raised by one parent is over 70% with the ironically named Loving County in Texas the top at almost 100%. In Japan single parent households are now 25% of all families up from 15% in 1990. In Scotland, 25% of families (170,000) are single parent. As a statistician it is far easier to draw a link between growing single parent households and maladjusted kids. The bottom line is that there is a large body of literature showing that children of single parents are more likely to commit crimes than children who grow up with their married parents.

From the report ‘The Real Root Causes of Violent Crime: The Breakdown of Marriage, Family, and Community

“Most delinquents are children who have been abandoned by their fathers. They are often deprived also of the love and affection they need from their mother. Inconsistent parenting, family turmoil, and multiple other stresses (such as economic hardship and psychiatric illnesses) that flow from these disagreements compound the rejection of these children by these parents, many of whom became criminals during childhood. With all these factors working against the child’s normal development, by age five the future criminal already will tend to be aggressive, hostile, and hyperactive. Four-fifths of children destined to be criminals will be “antisocial” by 11 years of age, and fully two-thirds of antisocial five-year-olds will be delinquent by age 15.”

Maybe the Scots should make getting divorce much harder more than preventing corporal punishment? After all single parent benefits are so easy to get making the decision to split so much easier. In Japan divorces sky-rocketed when the government entitled women to 50% of their spouse’s pension. Policy matters.

Before those that want to point at poverty as a factor in crime they might want to know that the Chinese in San Francisco in the mid-1960s had the lowest family income of any ethnic group (less than $4,000 per year) but next to no crime: only 5 Chinese in all of California were then in prison.

How many parents today use iPhones or iPads as modern day pacifiers to naughty kids as a substitute for good parenting? Easier to stuff an iPhone in their face after they’ve stepped out of line than spend 5 minutes looking eye to eye to explain right and wrong. Instead threats like “wait til I tell your father when he gets home” have been replaced by WiFi password changes, temporary confiscations of devices and the cruelest of all – denial of the charger. Different families have different views about discipline. Yet, kids are continuous learners – they quickly learn what they can and can’t get away with. They are sponges. Who could forget this video of a 3yo kid obviously copying his father saying to his mother, “Linda, Linda, Honey! Listen!” Little Kevin worked out that Grandma was a far softer target.

I’m sure most kids from my generation have had a smack from a parent which was thoroughly deserved. I am sure most of you have made it without safe spaces or trigger warnings. So before the Scots declare a huge victory over banning smacking kids, perhaps society needs a deeper hard look at these other issues.