A Few Quick Thoughts

The last few days have been very busy. Kathy and I have been volunteering all day at the Texas State Championships Disc Golf tournament. As a result, I haven’t had much time for writing. Rather than write nothing this week, I thought I’d share a few quick thoughts about things on my mind.

Key Bridge Collapse

This has been all over the news, so I don’t have anything to add about the cause of the accident. And while we can’t completely rule out terrorism at this point, there is no good evidence that this is anything other than an accident. If you are seeing a lot of reporting indicating that it was an act of terrorism, you need to seriously reevaluate where you get your news. 

The Ultimate Sacrifice

Six people died when the bridge collapsed. They were all immigrants. I don’t know whether they were here legally or not and I don’t care. I am tired of people talking about immigrants as though they are subhuman criminals here to plunder our country. The truth is that most of them are hard-working people fighting to make better lives for themselves and their families. These six people were working in the middle of the night fixing potholes on the bridge when it collapsed. The next time you hear someone denigrate the huddled masses yearning to be free here, remember these six people who gave their lives trying to make better lives for themselves by making better roads for you.

The Drudgery of Dredging

From what I’ve read, the loss of the bridge and the blocking of the Port of Baltimore is going to have an impact on shipping on the East Coast. Opening the port means hauling away the old bridge and possibly dredging the channels into the port. That may take much longer than it should because the United States has a bizarre law, The Foreign Dredge Act of 1906, that prevents us from hiring foreign dredging companies. The problem with that is the United States dredging fleet is pathetic compared to our foreign peers. According to a study from Tulane University, “the combined capacity of the U.S. fleet is less than a single EU dredging vessel.” It also says that we spend $1 billion a year more on dredging than we would if we allowed Americans the freedom to hire foreign dredging companies.

Jonesing for Shipping

Even when the port opens, it will be difficult for any cargo that is even mildly hazardous to make its way north. It will be a long time before the bridge is rebuilt. The main alternate routes are tunnels and, for good and obvious reasons, we don’t ship most hazardous cargo through tunnels. One good alternative would be to ship goods from the Port of Baltimore to the Port of New York and New Jersey by sea. Sadly, that’s illegal. Technically, you can do it using the tiny fleet of ships that were built in the United States, owned by US citizens, and operated by US sailors. There aren’t very many of those and they are quite expensive. Sadly, the antiquated Jones Act prevents us from getting help from foreign shipping companies. In the best of times, the act is a nightmare for island states and territories like Hawaii and Puerto Rico, effectively requiring them to import goods from other countries. But now the Jones Act takes away a good option for helping with this crisis. 

Rebuild at Any Price

President Biden was quick to promise that the Federal Government will pay for rebuilding the bridge. I wish that he had also said that we’ll be smart about how we do it. Sadly, we’re going to waste a lot of money. The United States has become one of the least efficient developed countries in the world when it comes to building infrastructure. Other countries can buy their steel on the world market, but we handicap ourselves by requiring that only US steel be used, regardless of whether it is the most cost-efficient. We also have a law, the Davis-Bacon Act that requires that we overpay all of the workers on the project. Technically, we only have to pay them “prevailing wages”, but that always equates to much higher wages than the market wage. I suggest that we honor the immigrants who died when the bridge collapsed by allowing some of their fellow countrymen to emigrate to the United States to work on rebuilding the bridge and pay them vastly more than the wages they’ve been getting at home. We’ll save money. They’ll make more money. It’s a win-win. 

Financial Advice

Does anyone know a good fee-only financial advisor that they would like to recommend? This question has come up several times in the last few weeks in discussions with friends and I don’t have a good answer. It seems like most financial advisors want to work on a percentage of assets under management arrangement, which rarely seems like a good deal for customers.

Why is that, given that most advisors only charge a paltry 1% of assets? Instead of thinking about it as a percentage of assets, think about it as a percentage of expected earnings. If you are expecting a 5% annual return on your portfolio, that paltry 1% of assets is a whopping 20% of your expected earnings. That’s an awfully large share of your income. It seems like it makes more sense to pay someone a fee once every few years to review your portfolio and suggest actions rather than a huge annual fee.

And if you think my 5% expected annual return is low given the US stock market trend of 10% annual returns, check out this Ben Felix video Do Stocks Return 10% on Average. He points out that the after-inflation return is 7% and that this period of 10% returns coincides with a significant increase in stock valuations, which seems unlikely to be sustainable.

 That’s all I’ve got for this week. I’m exhausted and have another day of volunteering left.