Why I'm not a leftist any more
The short answer is that I had seen the future and it didn't work.
Let me elaborate. I spent nearly ten years working for the Social Security Administration, mostly in the SSI program, in a run-down small city north of Boston. What I saw was that the money used for welfare programs of one sort or another were at once too generous and too miserly. They were too generous in that they permitted one generation after another to live without making any serious attempt to get an education, a spouse, or a job. They were too miserly in the amount they provided and in letting people keep some of their pitiful savings. I'm not going into details, but when I recognized a homeless family on TV and knew the details behind their "plight," I had a lot more insight into it than the sympathetic reporter. Giving them more money was not going to help. They had already had a windfall and blown it in spectacular fashion.
Growing up during the Vietnam era had given me an unshakable distrust of the government. Seeing the devastation left by the anti-poverty programs led me to distrust the government even when it intended to do laudable things. Screw-ups were inevitable, and failures were never addressed. This set me apart from my brothers and sisters, most of whom are reliable Democratic voters. They continue to see government as essentially a good thing, income redistribution as justice, and concentration of power as benign, as long as it is in the proper hands. Seeing the effects in person persuaded me otherwise. I was seeing the unintended secondary effects, and they were destructive. From mistrusting those in power when I disagreed with them to mistrusting them even when I agreed with them was not such a big step. When Jimmy Carter came up for re-election, I voted Republican for the first time in my life. Why? Because Carter was not only clearly incompetent, but kept trying to fix things. Reagan was at least promising to do less, which meant fewer opportunities to make a mess.
Still, I'm a pretty poor excuse for a conservative
I can't say much of the social conservative program appeals to me. I'm the veteran of too many failed self-improvement campaigns to think I can do much to improve anyone else. Reagan's initial attraction for me was his lack of energy. Where Carter had even personally allocated court time on the White House tennis courts, Reagan took a lot of naps. In his two terms, I don't think I ever saw him posing on a golf course -- too strenuous, I suppose. I'm still inclined to vote for whoever seems likely to stay out of my hair for his entire term of office.
It turned out that Reagan actually had a few ideas. They weren't complicated, but he held them firmly:
- Governments are typically incompetent (see discussion above). It's best to give it fewer things to do, so fewer things will get fouled up.
- Communism, as one of the most intrusive forms of government, fouls up beyond any recovery. Clear some space for it to fall down.
- We live in a pretty nice place. Let's not mess it up ourselves or let anyone else do it, either.
- There may have been another, or maybe not.
There was not much of Pat Robertson's or Pat Buchanan's program enacted in the eight years Reagan held office. He may not have gotten around to it. The man was a genius at leaving things alone. Maybe Reagan was not much of a conservative, either.
MFS Again
OK, maybe I was a little hasty in opining that MFS was clean. According to this
Boston Globe article, the SEC is ready to bring indictments regarding market timing in several of their funds. The funds involved were large domestic funds, not the usual international or junk bond funds used in market timing. They put the policy in a memorandum, which makes the investigation a lot easier. Reading between the lines, it looks like one of the Prudential brokers is trying to make a deal by turning in his confederates. Again, market timing is not illegal, but there is a problem if the prospectus says they do not allow it while it is in fact permitted for favored clients.
There was not much of a market timing opportunity in the MFS funds where the practice was allowed. International funds attract market timers because the lag between the fund's pricing time and the underlying market's close creates an arbitrage opportunity. Junk bond funds create arbitrage opportunities because they hold many securities with very little liquidity, so the prices used to value the portfolio are often stale (that means wrong today, although maybe right last month). The MFS funds were large domestic funds, mostly domestic equity. Market timers were apparently exploiting the differences between the fund's price (based on the prior day's pricing until 4:00 PM) and the price of the closest related index, such as the S&P 100 for Massachusetts Investors Trust or NASDAQ for MFS Emerging Growth Fund. If there was a big upward move in the index, the market timer could buy the fund and lock in the gain for the day, since the fund was sold at a price that did not include the day's results. This would be a small amount in isolation, but a guaranteed profit of 1% for one day's investment is pretty good money over the course of a year.
This is particularly unfortunate for MFS because they had just settled their
previous SEC problem involving insider information on Treasury bonds.
The real problem for individual investors is that if the MFS funds track the indices so closely, why are they paying the steep fees to MFS for index performance? Why not buy a cheap index mutual fund or exchange-traded fund?
Another fraud indictment in the mutual fund scandal, this one involving market timing. This time it's
Invesco, the parent of the AIM funds. The fund group and its CEO are being charged with felony fraud. The company gives its side
here. Their statement basically sounds like "no controlling legal authority." It looks to me like the SEC took too much grief from the quick settlement of Putnam's misdeeds and is playing hardball now.
