3 Things 2-08

02/08/2021

Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it.

Thing One

Investing Tips From The 1700s

The founding father who first became known to many of us for flying a kite during a thunderstorm, Benjamin Franklin, is also known to have said, “An investment in education pays the best dividend.” There are different ways to interpret that statement. One can reasonably assume that the investment Franklin was speaking of back then was the time spent studying in a particular subject area and the dividend was the new knowledge gained as a result. But today that statement could literally mean making outlays of cash with the idea of improved outcomes for the investors (the students and their families). Either way, the idea of investing time or money is assumed to create a favorable return.

With that, please note the following statistics concerning San Francisco schools that were recently presented in a report by the non-profit group, Brightbeam;

“70% of white students are proficient in math, compared to only 12% of black students reaching proficiency—a 58-point gap.”

This is a fact despite all the money - California’s K-12 spending exceeds $20,000 per pupil - and time “invested”. Please note that while the data above concerns San Francisco, the problem is national and it’s being addressed in ways that should concern us all -that is if we’re interested in the long-term financial well-being of our young people.

For instance, in New York, which has a similarly bad proficiency gap, one of the solutions being implemented is admission quotas (limits) on high achieving students (typically Asian) to the elite K-12 schools along with the granting of admission to non-Asian students (typically black and Latino) with sub-par academic credentials to those same schools. The idea can only lead to a dumbing down of the standards at the high performing schools and a reduction (or possibly an elimination) of the supposed dividends to be attained by investing in education.

We believe Franklin’s assertion was right on. And we also believe the corollary must also be true: A non-investment in education pays the worst (or negative) dividends. Lowering educational standards is a non-investment. Expecting less from students from a particular demographic group is a non-investment. Excusing poor performance is a non-investment. The negative dividends will accrue to the students over their lifetimes in the form of reduced earning power and reduced ability to accumulate wealth.

We’ll end this post with a question: What would you do if you were given $20,000 to spend each year on your child for his/her K-12 education?

Maybe you should be allowed to make that investment choice – whatever it is. And maybe your neighbor should be allowed to make a different investment choice if he or she is so inclined.

Thing Two

The Poverty Lines

This post is written as a companion to both the picture at the top of this newsletter and the Benjamin Franklin post above.

Most of us are familiar with the poverty line, but as a refresher, a family of four would be defined as impoverished if their income level was at or below $26,000. In addition to that, and according to a study done by researchers at Duke University titled, Net Worth Poverty In Child Households By Race and Ethnicity 1989-2019, the net worth poverty line for a family of four is defined as having $6,500 or less (1/4th of the income poverty line for a family of four) in stock assets.

As the graph at the top of the page clearly shows, the income poverty picture has improved dramatically over the last 30 years for Black and Latinos but net worth poverty, which was above 50% for Blacks and Hispanics 30 years ago, has gotten slightly worse for Blacks and only gotten slightly better for Hispanics.

The authors of the study suggest that the problem, “cannot be fully explained by differences in characteristics such as education, marital status, or age that have been found to predict income poverty”. But our theory is that enough of it is explained by those three categories - taken in order - that we can get the bulk of the benefit by implementing self-help strategies related to each. Then, if any broader social policies targeted at these issues happen to benefit us as individuals, we can gladly accept the extra help.

Thing Three

Just A Thought

“The obscure we see eventually. The completely obvious, it seems, takes longer.” - Edward R. Murrow