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Investment Advice . . . “Sell!”

Out of the blue last week one of my sons-in-law asked me what was my favorite movie of all time. After I told him what mine was, I asked him the same question. He responded, “My favorite movie of all time is Death Wish.” (For those of you not aware, Death Wish was a 1974 movie starring Charles Bronson.) I do not recall ever seeing Death Wish, probably because in 1974 I was married and had three small children . . . in fact, I do not recall seeing any movies for the entire decade of the 70s! Anyway when he said Death Wish, my immediate thought was the N.F.L. In what other business do the employees tell the owners what to do? I still cannot understand the ownership of the N.F.L. If I knew anyone who owned an N.F.L. team my advice would be, “Sell, Sell now before the 2018 season begins.” Why??. . . Three basic reasons as detailed below:

The television viewership was down last year and I predict that it will continue to decrease. The N.F.L. is on the losing side of this National Anthem culture war, and  more importantly this can only lead to a decrease of interest in football in general, as well as the N.F.L. in particular, as the years go by.

Last year two of my grandsons played tackle football on a community youth team, but this year this same community could not field a team because of a shortage of players, and this same scenario occurred in the three surrounding communities.  Participation in high school football is down and has been down since 2008-09. In 2008-09 there was 1,113,062 high school participants in the U.S.A. whereas this number decreased in 2012-13 to 1,088,158. In Illinois there has been a decrease in the number of students playing high school football of 17%, from 47K to 40K over the last few years.

Last week I saw an email that in essence was an “N.F.L. Police Blotter” detailing a list of multiple N.F.L. players than have been arrested, charged and convicted of crimes. Here in San Diego there is a case involving an ex-pro football player charged with multiple counts of battery in association with sexual aggression. My first thought here was, “He’s got Chronic Traumatic Encephalopathy from football.”  My question is basically “which came first?” Are these guys basically violent to begin with, or are they violent because of C.T.E. that they have developed as a result of football? I am betting on C.T.E. to win, place, and show!

So in essence I see the N.F.L. on multiple losing sides of a polygon:                              decreasing T.V. viewership,                                                                                                             increasing awareness of C.T.E.                                                                                 decreasing youth participation in football

If there was a way to own stock in the N.F.L., I would be selling it short, and looking forward to a big payday perhaps ten years down the road!

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Underrepresented

“I have been underrepresented all of my adult life. It’s just not fair! When I was younger no one wanted me on their sports teams, and now that I am older, I am underrepresented in the corporate boardrooms. My group makes up 13.9% of the population in the U.S. and so we should make up at least 13.9% of those in corporate boardrooms. I am not going to take it anymore! I am tired of being nice! We need to pass a law to insure that we are proportionately represented. I am left-handed and proud of it.”

Any rational person reading this would probably have to resist laughing out loud. It should be obvious to everyone that boardroom representation would and should be based on merit. A corporation could appoint a bunch of southpaws to its board, but unless these left-handed individuals had concomitant excellent qualifications, this corporation would be setting itself up for failure.
But this doesn’t have to stop with left-handed individuals. For example, these same exhortations could be made by people of short stature . . . “Those of us men who are less than 5’7”, and those of us women who are less than 5’2” make up 19.75% of the U.S. population, and therefore it would only be fair if we made up at least 19.75% of the corporate boardrooms. All we short people have to do is get elected to state legislatures, and then we can propose legislation that encourages ‘fairness’ for a group that is obviously underrepresented in corporate boardrooms. If we can then get some vocal short legislators to feign enough anger and resentment to this obvious injustice, we can probably convince many of the other lemming-like legislators to agree that there is corporate bias against short people. Next we can propose and pass a law that corporate boardrooms in this state must not continue this prejudicial attitude. This new law will mandate that corporate boards have at least 20% of its members be people of short stature. It doesn’t actually matter that new law this is blatantly unconstitutional, because what’s fair is fair!”
I can hear all of you laughing out loud . . . but welcome to California!

Citing a lack of diversity in corporate boardrooms, California lawmakers on 8/30/18 sent Gov. Jerry Brown a bill that would require women to be included on the boards of directors of firms based in the state.The bill (co-authored by Sen. Hannah-Beth Jackson, D-Santa Barbara, and Senate leader Toni Atkins, D-San Diego) states that publicly held corporations in California include at least one woman on their boards of directors by the end of 2019, and at least two by July 2021. Corporate boards with six or more members would be required to have at least three women on the panels by the middle of 2021. That means that a corporate board with six members would be required to have 50% of the panel members be female by the middle of 2021. Does it also mean that if there are three members on a corporate board of directors in July, 2021, that two of them, 67%, must be female?

“We are not going to ask anymore,” Sen. Hannah-Beth Jackson said in a fiery floor speech. “We are tired of being nice. We’re tired of being polite. We are going to require this because it’s going to benefit the economy. It’s going to benefit each of these companies.” It is perplexing to me that a politician would know what is best for a company! . . . especially a politician with a hyphenated name!

Atkins responded angrily to those who said the bill isn’t necessary. “I am sick and tired of being in a position of influence and power and yet seeing so many people like me who are still pleading to be given that opportunity,” Atkins told her colleagues. This statement speaks volumes! Reread it carefully.

The legislation was opposed by a coalition of 30 business groups including the California Restaurant Association, the California Chamber of Commerce, the California Trucking Assn. and the Long Beach Area Chamber of Commerce. They issued a joint letter saying that they support gender equity but that the legislation is illegal.

The state chamber of commerce said the measure “requires publicly traded corporations to satisfy quotas regarding the number of women on its board or face significant penalties, which is likely unconstitutional, a violation of California’s Civil Rights statute and a violation of the internal affairs doctrine for publicly held corporations.”

Governor Brown has a month to sign or to veto this bill. Hopefully he will recognize that “fairness” and constitutionality are not the same despite what these two angry and fiery senators think!

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What if? . . . What to do about it

In the last essay, I outlined the problem of the upcoming tsunami of state and local pension deficits. Today I will explore the possible ways out of this disaster!
Recently there was a mixup with some AT&T pension payments. However the problem in this situation was that some pension recipients were inadvertently overpaid, and AT&T wanted the overpayments back. Some of these overpayments were thousands of dollars, and this money was long gone! Interestingly the general consensus sided overwhelmingly against AT&T. The basic sentiment went something like this, “AT&T made the error, and so the pensioners should not be punished.” But what will the sentiment be when there isn’t enough money to pay the state and local pensioners what they were promised? Should the pensioners be punished because the politicians were in bed with the union negotiators? On the other hand should the state’s populace be punished because of that same politician-union rep skullduggery? In general can this problem be solved? Can the state of California get out of its mess?
When you think about the problem, there are only a limited number of possible solutions:
#1 The most obvious solution is to not pay the retirees what they were promised. Besides the fact that the courts have thus far sided with those who are owed the money, I would find it hard to imagine the rest of us going along with stiffing these retirees. Compromise, Maybe. Stiffing them, No.
#2 The second way out of this conundrum is for the Federal Government to make up these pension plan deficits for each state. Since these payoffs would be with real money, this real money would have to come from somewhere. I can’t imagine states like Tennessee, Indiana, Nebraska, or Wisconsin (the four states that are the least in the hole per capita) going along with this. Why should their federal tax money go to paying for those states that have let themselves fall into such a deep hole. This will never happen!
#3 The third way out of this mess is for the powers that be to devaluate the dollar. This will never happen for basically the same reason as #2 will never happen. Those states that owe the least would not go along with the punishing of their citizens  to save the few states that are the worst off.
#4 The last option is for each state to sink or swim on its own. This may be the only feasible way out of this mess. Under this scenario, each individual state would have to solve its own deficit problem. To me the only way for each state to make up its own deficit is to raise taxes to whatever it would take to pay what they owe to their retirees. For those states with a low or a zero tax rate, it would be painful for the residents of that state, but a reasonable compromise. However in those states that already have a high state income tax, increasing this rate even higher would be extremely painful for its residents. For instance in California with an already very high state tax, each man, woman, and child is on the hook now for $25,166 to make up for these pension shortfalls. Considering that many of the residents of the state do not pay any taxes, where is this pension deficit money going to come from?
Not from me, as I will be moving!