Thursday, March 16, 2017

How to Kill US Gerrymandering

One of the most objectionable and undemocratic characteristics of American government is legalized gerrymandering.  Gerrymandering is defined as "the dividing of a state, county, etc., into election districts so as to give one political party a majority in many districts while concentrating the voting strength of the other party into as few districts as possible."  Basically, the votes of the minority are devalued further by grouping them into districts that give them as little representation as possible.  One person's vote is worth less than another - NOT democracy.

I lived in a gerrymandered district in Virginia.  It was drawn up by the Republican state legislature to guarantee a Republican federal representative, and it has delivered this result for over 35 years, in spite of the fact that the area voted for Obama twice and Clinton in the last election.  You can see that it was drawn to guarantee a result by looking at the map, which is carefully drawn to ensure enough Republicans to elect a Republican federal representative.  The map does not follow logical geographic, municipal, or any other boundaries.
Virginia 10th District, courtesy Wikipedia

Many districts in many states are like this, and they favor the right or the left depending on who owns the state government.

How to defeat this undemocratic abomination?

Answer: vote in the primary of the party that always wins the district.  Since the district is guaranteed to go to a particular party, your only choice is in the primary election of that party. Do you want a more moderate representative or do you want the other party to choose a radical?  Of course you, the minority voter, want someone who is more moderate.  If you have to register as a supporter of the other party to vote in the primary, do so.  It costs nothing and does not bind you to vote for them in the general election.  Also, what is the point of voting in the primary for your party?  They are going to lose anyway.

If enough people do this, you will get a more moderate candidate for the favored party.  A Republican who does not want to eliminate Social Security and Medicare or a Democrat who does not want to outlaw cars and turn the roads into Kale farms.

So this is my idea to improve democracy in the USA.  After the last 15 years of turmoil, we certainly need it.

Tuesday, March 14, 2017

USA to Canada - Moving Investments

This is an update to my guide to moving to Canada, covered in this post.

One of the issues with moving is getting your investments moved from the USA to Canada.  Why would you bother?

  1. The USA will consider you to still be a resident and will expect tax payments on your income.  But you now live in Canada, and the Canadian government expects payments on this same income.  Untangling this mess will take a lot of time and money from your tax accountant.
  2. Your US broker will likely kick you to the curb if they find out that you moved out of the USA.  They will quickly close your account and you will have to scramble fast to get the investments moved.  If you don't move the investments before the brokerage acts, they will sell all investments with resulting capital gains that you will owe to the USA and Canada.
  3. You will not be able to claim any Canadian tax reductions on dividends as your investments are held by a US brokerage and they don't calculate Canadian tax reductions.  You will also have more paperwork to submit concerning foreign investments, just trust me on this one.
  4. NB: You actually end up with two cost bases when you move from USA to Canada:
    1. The USA considers your cost basis to be what you paid for the investments.
    2. Canada considers the cost basis to be what the investments were worth when you moved.
So how do you make this transfer?  It does depend on the investments and the US brokerage or mutual fund company you used.

  1. If you can, convert your US mutual funds to ETFs.  Vanguard will do this at no charge and with no tax consequences.
  2. If you own mutual funds that cannot be converted to ETFs, you should call your broker/mutual fund dealer where your hold the mutual funds.  Call the customer service number, do not say who you are, then ask "what happens if a person who owns mutual funds with you moves to Canada?"  You may get these replies:
    1. No problem.  This is good.  Keep the investments with them and just change your address.
    2. You can continue to hold the mutual funds, but you can only sell them for cash, no changes in investments.  This is not so good.  You have to look at the tax consequences and your investment plan.  Should I sell immediately and take a gain or loss?  If I hold the funds for a long time, will I continue to be happy with them, will they meet my diversification goals, are the fees reasonable, etc.?  Probably best to talk to your financial planner.
    3. You must sell the mutual funds.  This is bad.  Again, you need to look at the tax consequences as you may trigger large gains or losses.  Probably best to talk to your financial planner.
  3. If you own stocks, bonds, or ETFs in the USA:
    1. Open a brokerage account in Canada with the exact same owners as you have in the USA.  If it is a joint account in the USA, open a joint account in Canada, same for individual account.
    2. Call your brokerage in Canada, get the forms to transfer from a US brokerage to their brokerage, and fill them out.  Call your Canadian broker to make sure you fill the forms out correctly and that you selected a straight transfer with no tax consequences (simple transfer of securities, no buying or selling).  Make double sure that you are doing this.  Make copies and send them via registered mail or similar method to your Canadian broker.  This will cause the US brokerage to send the securities to your Canadian broker and they will appear in your account.  Expect to get phone calls from both brokerages during the process to verify information, ask questions.  Expect to call your Canadian broker to follow up if you don't hear from them, it will likely not happen automatically with no intervention by you.
    3. After the transfer is done, inform your US broker that you are a Canadian resident.  In the case of stock brokerage accounts, they will start the "kick the foreigner to the curb" process immediately. 
NB: If you are a US citizen, do not buy Canadian mutual funds or ETFs unless you are willing to submit a lot of paperwork to the US government.  These are considered PFICs (passive foreign investment company), which, for some unknown reason, the US government does not like.

Remember, you should talk to a competent financial planner before taking action.  This blog is just a single information source and a lot of information on the Internet is wrong, maybe including this blog, so do your research before taking a decision.

Photo credit: flickr

Thursday, February 16, 2017

Do Your Expenses Decrease After Downsizing?

In August last year, we downsized from a 3800 sq foot suburban house with 2 cars in the USA to an 1800 sq ft urban condo with one car in Canada.  This is supposed to be a trend for baby-boomers: urban to suburban, bigger to smaller, Trump to No-Trump, etc.

  1. But what happens to your expenses?  
  2. Do they really decrease and is it significant?  
  3. What are the sources of the savings?
Luckily, I track expenses using Quicken and we follow a budget so the answers should be easy to find.  We also have not changed our lifestyle or budget since downsizing.

The answer to 1. and 2. is yes, there are savings of about 10 to 15% overall, depending on which downsized month is compared to our previous full-size average.

The harder question to answer is number 3, what are the sources of the savings.  
  • Unfortunately, the biggest absolute saving was in a category that I call "household" and includes a lot of miscellaneous expenses: decorating items, small services, small purchases, etc.  I am not sure why our expenses dropped by 8 to 10% in this category.  Maybe we don't have the space for impulse purchases or the need for a lot of services?
  • Utilities dropped by about 10% and that makes sense.
  • Auto expenses dropped by 50%
  • Groceries went up by 15%, prices are higher at urban supermarkets
  • HOA fees went up, home repairs and services went down, for no net change
  • Entertainment expenses went up by 10%, there is more to do downtown than out in the suburbs.
But net-net, our expenses have gone down by about 10 to 15%.  So you can expect some savings but this will not radically change your lifestyle.

Monday, February 6, 2017

Killing the USA While Defeating Terrorism

The US public is afraid. They are bombarded daily with negative stories about muslims, terrorists, immigrants, crime, climate change, wars, and unemployment.

Some of the fear is justified, but much is not.

Let's look at terrorism, one of the greatest and most emotional fears. It is behind the immigration ban, airport security measures, security at concerts, government surveillance, militarizing the police, huge security spending, casualties in Iraq, Afghanistan, Libya, and other negative and inconvenient changes to our daily routine. Fear of terrorism helped elect Donald Trump, a racist bombastic narcissistic misogynist.

But how big a problem is terrorism? The last attack on the US by organized terrorists was the underwear bomber about 10 years ago. All other attacks were from self radicalized lone wolves. The casualty rate from all attacks averaged 171 per year from 1995 to 2014, or 0.00005% of our population. A very very low rate compared to deaths from drugs (47,000 per year), traffic (32,719 per year), crime (14,196), workplace accidents (4836 per year), and medical malpractice.

Yet we are radically changing our society to combat this tiny terrorist threat. Why spend trillions on something which kills so few? Why change our society into a repressive police state with intrusive surveillance for such a small problem? Why divide our country by whipping up fear and enacting controversial laws such as immigrant bans and encouraging suspicion of certain religious groups? Why give up our rights and liberty? Are all our military casualties worth it?

Clearly some measures make sense such as airport security since we know terrorists have repeatedly targeted aircraft. Increased police activity makes sense since they have caught some terrorists before they acted.

My point is that US society is changing for the worse due to massive efforts to combat a small problem while we neglect other more serious threats to our health and safety such as opioid addiction, violence in the inner city, health care for the poor, bad roads, and our low high school graduation rate.

We are turning America into a divided, fearful, less free, overly policed, and more racist society to combat a threat that is 300 times less that the problems of drug addiction or traffic deaths. We have to rethink our priorities, or America "the shining city on a hill" will be destroyed in our misconceived all-out fight against terrorism.

Wednesday, December 21, 2016

America is the New France

We used to make fun of the French and all their socialist protectionist laws and lack of ethics in foreign policy.  But now it looks like the USA will be the new France, check out the comparison below:

France, Flag, Map, French Flag ...French Government Action
USA Flag, 6/2014 US Flag, ...Old US Government Action
... Trump | by Gage SkidmoreNew Trump US Government Action
A plant is being shut down and the production moved to a lower cost country
Government pressure on the company to keep the plant open.  Regulations and laws make it difficult to close.
No action, let the market take its course.
Government pressure on the company to keep the plant open.  Regulations and laws make it difficult to close.
A dictator is suppressing his people but also battling terrorists
Support the dictator.  Send weapons if needed.
Pressure on dictator to give up power.  Offer help to combat terrorists.
Support the dictator.  Send weapons if needed.
A rebellion is threatening US or French companies in a foreign country.
Send in the foreign legion to restore order.
Do nothing
Send in the special forces and/or arm the government.
A country invades another country and takes territory.
If it is good for France or has no impact, it is OK.
Condemnation, maybe armed intervention like the first gulf war.
If it is good for the USA or has no impact, then it is OK.
Foreign country makes higher quality lower cost products than domestic, eg Japanese cars
Raise tariffs or other barriers to the foreign products.
No action, let the market take its course.
Raise tariffs or other barriers to the foreign products.
Comedian makes fun of President
File a lawsuit.
Ignore the insult.
File a lawsuit.

Wednesday, December 14, 2016

Why are Americans Unhappy with America?

Lots of articles being written about how the average American worker has not advanced in terms of pay over the last 10 years or so.  The Economic Policy Institute statistics below show that pay has barely risen over 15 years, especially at the lowest income levels (10th to 50th percentile).


Hourly wages by wage percentile, 2000–2015 (2015 dollars)

Wage by percentileWage ratio
Annualized percent changeWage ratio change

Meanwhile, Real GDP has grown from 12.6 Trillion dollars in 2000 to 16.4 trillion.  That is an increase of 1.7% per year or 30% over the 15 year period.

What is happening?  Wages adjusted for inflation did not increase or decreased for the bottom half of workers between 2000 and 2015 but GDP increased by 30%.  Who got the 30%??

The answer seems to be that the top 10% of earners got the money, or most of it.  See the table above, workers in the top 10% of income got about 1% a year in increases or 16% of the money.  This seems to be born out by the CBO statistics showing that the rich in the USA are getting richer and the poor are getting poorer, see the chart below.

So it seems that half of Americans are not sharing in the prosperity of the wealthiest and most prosperous country in the world, which might explain why they are unhappy and voting for a misogynistic blowhard billionaire who says he will "Make America Great Again".

Unfortunately, Trump's plan of cutting taxes for the wealthy and deregulation are most likely to benefit the rich and will not trickle down to those workers in the bottom half of the income distribution.

Wednesday, November 23, 2016

I Stopped Watching US News

When Trump got elected, I stopped watching US news and it confirmed to me that the US media and particularly the networks are not portraying the real state of the world.

In Virginia, news is big.  The local news starts at 4pm and runs to 6:30pm, then the national news comes on until 7pm or 7:30pm.  We used to start watching at 5pm while making dinner and continued until 7pm.  We got a pretty good sense of what the news programs were reporting and it is at least 90% negative and sensational - "if it bleeds, it leads".  Based on watching this news, you would think:

  1. Crime is increasing, particularly violent crime against innocent white people like blonde haired young women.
  2. Police are shooting black people regularly without provocation.
  3. Islamic terrorists are mounting attacks on the US regularly.
  4. Unemployment and poverty are very high.
  5. Opioid addiction is everywhere.
  6. Traffic accidents are more frequent than ever and people are dying in droves.  Cell phone usage is causing huge numbers of crashes.
  7. Infectious diseases like Ebola, Zika, Tuberculosis, and Lyme are sweeping the nation.  
  8. Governments at all levels are dysfunctional and do not serve their citizens.  The people in the government are evil.
In actual fact:
  1. Crime has decreased and violent crime particularly has decreased for the last 20 years.
  2. This does happen, but not frequently and usually the police are charged.
  3. You are more likely to be killed by lightning than an Islamic terrorist on average.  You are certainly more likely to die through medical malpractice than terrorism.
  4. Unemployment is at a very low level, the US is almost at full employment.  Poverty is quite low compared to the middle of the 20th century.
  5. This has some truth, opioid addiction is increasing and the "war on drugs" waged for 30+ years has achieved nothing.
  6. Traffic fatalities are at an all time low on a deaths per miles travelled basis.  Cell phones are a problem but not a big one yet.
  7. Nothing bad happened with Ebola despite all the hysteria, Zika is a problem that can be solved, etc.  With all the medical technology in the USA, its not a big issue.
  8. Governments are run by officials and civil servants who try to be helpful and mostly they succeed.
  9. Global warming by greenhouse gases generated by man is well supported by scientific analysis.  But in spite of the fact that this will decimate the whole world, it rarely gets reported because it is too hard to explain in 20 seconds and there is no sensational video to show in the background as the news reader intones on its gravity.