Okay, maybe not award-winning, but I'm still a blogger. It's just that sometimes I get very busy with work, and sometimes after those busy periods I take a little vacation. Before you know it, a whole week has gone by without any posts.
Many things crossed my mind during the week of no posting.
First of all, John McCain is going to get slaughtered next month, but there are plenty of journalists and pundits writing some version of this story: "How McCain Can Still Win." From the perspective of a political scientist, this is silliness. We think that elections tend to be decided by the large tides of history (or at least the large tides of an election year): the state of the economy, partisan identification levels, approval ratings of the incumbent president's party, etc. Journalists and pundits tend to think that a particularly effective slogan, or ad, or debate performance, or persona ("McCain the fighter"), or a gaffe, or a bad interview, or a flat speech can swing the election one way or other.
This can get ridiculous. I once heard Mark Shields say that some politician or other lost a national election because, "People like to be asked for their vote, and he never asked for it." Yeah, that's why that guy lost... Anyway, the fundamentals that will decide this election were in place months ago, and those fundamentals always dictated that it would be a very tough year for John McCain.
(Of course, if McCain ends up winning, I'll point to his reference to Barack Obama as "that one" during debate number two as the moment that swung the whole thing in his favor.)
I've been reflecting further, too, on the whole mortgage debacle. It makes me wonder if there's a dissertation to be written about situations that our political system simply is not designed to handle. And I've been wondering if perhaps those situations only get "handled," therefore, through some kind of serious crisis or rupture.
In the case of the subprime mess, all of the political incentives pointed in the same direction: low interest rates, easy money, relaxed underwriting standards. Anybody who tried to swim against this current was a Scrooge, a party pooper, a Chicken Little, even a racist (because they wanted to deny home ownership to poor minorities). So, the political system let the crisis boil over, and it didn't get "solved" until the outside world intruded on politics and forced a solution. One can imagine the same thing happening with our budget deficit (e.g., people stop buying our debt), or with entitlement program solvency (e.g., tens of thousands of employers threaten to relocate abroad if the government raises payroll taxes in an amount sufficient to make up the Social Security/Medicare shortfall). Thinking historically, perhaps one can apply this model (if it is that) to the Civil War and the civil rights movement and urban riots as well. There are times when politicians simply can't or won't solve a problem that the country needs to have solved. So, the country enforces a solution in its own way.
Lehigh, you out there? This could be your dissertation...
Now, let's talk stocks. I did a little research and found that the current market correction is about as large as your standard correction gets. If it gets much worse, we're looking at a whole new economic world...one in which all bets are off. What does this mean for you? It means you should be buying a mutual fund indexed to the Dow or to the S&P 500. (Or both! Have fun with it!) Unless our economic future turns out to be very much different from our economic past, you'll make a fair amount of money in a fairly short amount of time. (This, by the way, is one significant respect in which "playing the market" is different from gambling in Vegas. In Vegas, you know that over the long run, the house always wins. When you play the market, however--and when I say "play the market," I really mean buying broad-based mutual funds and holding them for a while--you know that over the long run, you always win.)
Now, I'm sure you're asking why you should take my advice. I mean, if it's good advice, why aren't the really super-smart people giving it and following it, and why, then, isn't the market going through the roof? Because times like these are when people tend to be most afraid to invest--who wants to put money in an investment that's lost a third of its value in recent months?--even though the same factors that make you afraid to invest are the factors that make it likely you'll be getting a bargain. It's kind of like buying a house...NOW is the smart time to buy, but everyone seems to want to buy when prices are headed toward a new record.
And finally, back to the presidential election, I really like John McCain's health care plan...much to my surprise. (Didn't think I'd find any of his ideas interesting or innovative.) In fact, I think some version of it is probably the wave of the future. But I worry that if Barack Obama becomes president, some version of his system will be established, and then we'll never get to the McCain system. Then again, health care could be one of those issues of the sort I was describing above...the political system simply proves incapable of addressing it, so the issue finds a way to insist on its own solution (e.g., some massive, hugely expensive public health crisis that could have been avoided with simple, cheap preventive care for the currently uninsured).