If you have money to invest, the most important thing you can do is pay off your credit cards and any other high-interest loans you might have. But if you've done that, then you have to decide what to do with the money you have left over. Felix Salmon recommends that you follow Henry Blodget's advice, which is conceptually simple:

  • Invest in a diversified portfolio of low-cost index funds
  • Rebalance automatically when the allocations get out of whack

Now, Felix complains that rebalancing is harder than it should be, and he's right. At the same time, it's not that hard. For most of us, it's really not important to rebalance more than once a year at most, and it's not as if you have to get your balancing perfect to three decimal places. If you've decided, for example, that you want to be invested 50% in stocks and 50% in bonds, and at the end of the year you're 55% stocks and 45% bonds, don't worry about it. That's close enough. If it gets farther out of whack at the end of the next year, then move some money around. Choose a round number that gets you close to your target and you're done. This doesn't have to be a constant battle.

Does this sound a little too cavalier? It's not. After all, how sure are you about your targets in the first place? Did you really have a compelling reason to choose 50/50? Or could it have been 60/40 if a few neurons had fired differently on the day you decided this? The fact is that there's just a lot of inherent slop in this stuff for us non-experts.

Of course, this gets a little harder if you have enough money that you want to diversify into half a dozen different funds and your targets are a little more complicated. But if you have that much money, you can probably also afford to pay someone to watch it more carefully for you. For most of us, simpler is better. You're way better off with a simple plan that gets you 80% of what you want than a complex plan that gets you 95% of what you want. That's because (a) that 95% figure is a mirage anyway, and (b) unless you're anal retentive and actively like fiddling with numbers, you're a lot more likely to actually follow the simpler plan. And any plan you follow is better than a plan you don't.

Greg Miller has a long piece in the Washington Post today about the meteoric growth of America's drone program under the Obama administration. It's well worth reading, largely because it so seldom gets any serious discussion aside from periodic spasms of attention when some foreign government complains that a bunch of civilians have been killed by a drone attack. That attention is fleeting, though, because drones have also been responsible for decimating the al-Qaeda network in the Middle East:

Those results, delivered with unprecedented precision from aircraft that put no American pilots at risk, may help explain why the drone campaign has never attracted as much scrutiny as the detention or interrogation programs of the George W. Bush era. Although human rights advocates and others are increasingly critical of the drone program, the level of public debate remains muted.

Senior Democrats barely blink at the idea that a president from their party has assembled such a highly efficient machine for the targeted killing of suspected terrorists. It is a measure of the extent to which the drone campaign has become an awkward open secret in Washington that even those inclined to express misgivings can only allude to a program that, officially, they are not allowed to discuss.

....Another reason for the lack of extensive debate is secrecy. The White House has refused to divulge details about the structure of the drone program or, with rare exceptions, who has been killed. White House and CIA officials declined to speak for attribution for this article.

The two bolded passages have long struck me as key, underdiscussed issues. I remain convinced that manned fighters would attract far more attention than drones, and we've allowed ourselves to be lulled into indifference simply because of the video game nature of the drone program. This is reinforced by the fact that there's essentially no partisan opposition any longer. Republicans are in favor of anything that kills more bad guys, regardless of collateral damage, and Democrats are unwilling to make trouble for a president of their own party. Put those two things together, and drones have become stealth weapons both politically and technologically.

The truth is that I'm not sure what to think of all this. The bulk of the U.S. drone program has been in Afghanistan, where we're fighting a declared war, and in Pakistan and Yemen, where drone strikes are carried out with the cooperation of the host country. (Though that may finally be ending in Pakistan.) But I wonder how long that will last. Somalia is next on the list, and an administration official tells Miller that it's an inviting target not because the host government would cooperate, but because there’s basically no host government to worry about. That's one more step along a slippery slope to simply using drones wherever we want because nobody is really paying much attention. That's not a slope we should be happy to slide down.

The New York Times reviews Mitt Romney 2.0 today in much the same way you'd review a new version of an iPad or an update of Microsoft Word. Verdict: He's layered a slightly retooled UI onto the same old chassis, and it's an awkward fit. The man can't make small talk, tosses weird wonkery around whether it's appropriate or not, and doesn't seem to quite understand the concept of humor. Occasionally, though, I think this serves him well:

A few moments later, a voter named David Rivers asked Mr. Romney whether there would be place for Mr. Paul, a Texas congressman, in a Romney White House. Mr. Romney treated the question as a joke, letting out a laugh and walking on by.

“I was actually kind of serious,” Mr. Rivers said in an interview afterward.

Seriously, what the hell can you say to something like that? I'm thinking of making him ambassador to Mars? Really, a nervous chuckle and a quick getaway was the only decent response.

Over at Blue Marble, the subject is pickles:

Pickles are mysterious things. You take a regular old vegetable. Just your average cucumber, carrot, bell pepper. Add some brine, maybe a few spices, and then, a few days later, presto! A pickle.

This is followed by a half-hour podcast about the science of pickle making. If you're interested in pickles, you should listen.

But it didn't answer my question about pickles. Here it is. I adore dill pickles. However, the ones I adore are (I think) just simple brined cucumbers with no further flavoring beyond the dill. But pickles in jars all have various other flavorings. Why is this? Pickle slices of the kind used for hamburgers are unflavored and easily available, and all I really want is a jar full of the pickles from which hamburger slices are made. Why does no one1 offer such a thing? This is a mystery that has been preying on my mind lately.

Naturally, I assume the answer is that nobody but me wants such a thing, or else supermarket shelves would be groaning under the weight of jars of whole hamburger pickles. But why does no one else like plain pickles? Everybody likes them on hamburgers, after all. What's the deal?

1Actually, someone does. Flanagan pickles, which come in individual packages, fit the bill. But Flanagan is a mysterious outfit. Their pickles are apparently manufactured by the Comstock Michigan Fruit Division and distributed by the Great Lakes Kraut Company, but beyond that Google is silent. I would buy a jar of Flanagan pickles if such a thing existed, but apparently it doesn't.

The Guardian news quiz is too long, but it's worth taking just for the laughs. Even though this pair of questions refers to fairly arcane British trivia, I assume you can get the right answers. The pictures should help too.

Question 19 caught me in just the right mood and made me laugh too. Overall, though, there were too many UK-specific trifles for me to do well. Also too much random stuff I just didn't know. I only got 34 out of 55 right, so you should have little trouble beating my score.

Steve Randy Waldman:

Lisa Pollack at FT Alphaville mulls a question: “Why are we so good at creating complexity in finance?” The answer she comes up with is the “Flynn Effect“, basically the idea that there is an uptrend in human intelligence. Finance, in this view, gets more complex over time because financiers get smart enough to make it so.

That’s an interesting conjecture. But I don’t think it’s right at all.

Steve goes on to explain that finance has always been complex, and that this complexity is basically a way of collectively fooling ourselves into shoveling our money into risky investments that we probably wouldn't make if we really knew what risks we were taking. It's a pretty desolate view of things, and while there's a kernel of truth to it, I suspect it's driven more by despair over our immediate problems than by a more considered view of history. It's sort of like adopting just the bad half of Minsky and leaving it at that.

In any case, although I agree with Steve that Wall Street considers opacity in finance a feature, not a bug, I think Lisa Pollack basically has it right. Except that our increased smarts have nothing to do with either the Flynn Effect or with gray matter that's better at abstract reasoning than it used to be. Our facility for abstract reasoning has improved, but this is solely down to one thing: computers.

That's it. Take away cheap computers and cheap global communications nets, and finance today would look an awful lot like finance in the 60s. That's where our increased smarts come from.

This is, by the way, a fundamentally gloomier view than either Steve's or Lisa's. If complexity were truly just a con game, there's at least a chance that we might wise up and figure out a smarter way of running the world. Alternatively, if humans really were getting smarter, there's a chance that we might get a handle on all this complexity and harness it for good rather than evil.

Instead, we have humans of distinctly limited intelligence using digital computing power to create a financial system so complex that no one truly understands it. Like the blind man and the elephant, we get glimpses now and then of the whole, and certain individuals manage to understand small bits of the system in detail. But no one truly comprehends the entire thing. We just know that certain algorithms produce big profits for the right firms until they don't, and the trading of shiny new financial instruments creates millionaires out of the right people until everything collapses for reasons we're left to guess at. But that's OK. Who needs comprehension as long as the right firms and the right people benefit?

I don't think anybody can be said to genuinely understand global finance anymore. We understand certain large-scale features, and we understand certain minuscule details. But the middle ground, where most of the day-to-day action is? It's mostly a mystery. Financially speaking, we are all willing slaves of a capricious and uncaring master.

The Virginia Republican Party decided to change its ballot access rules last month, and as a result neither Rick Perry nor Newt Gingrich has qualified for the March primary. A friend from Virginia writes in to comment:

OK, lots of schadenfreude here. Lots of windy rhetoric about how elections shouldn't be about technical rules but who gets the most votes. (Unless you're black, Hispanic, a college student or out of a job). Damnit, a freakin' Mormon is going to win Virginia!

We do tend to have a problem in Virginia with the parties monkeying with the rules when no one is looking (you ought to see our gerrymanders) and this one seems to have blown up in the GOP's face. I have no doubt that this was done to knock out the charlatan factor, esp. Cain who, with his unapologetic lack of organization, was probably the one surging when these rules were drawn up. The friendly fire aspect of taking out Perry was likely a surprise to the crafters of the rule change.

http://legalinsurrection.com/2011/12/va-ballot-madness/

This is a riot. Seriously, I wonder if the Virginia GOP hasn't already responded — Hey, we're Republicans, this is what we do!

The indignation is really something. I know it's not the same thing as de-legitimizing millions of voters through voter ID laws — but it doesn't take much scratching to draw up the comparisons.

Frankly, considering the clown show the GOP has put on so far this year, I'd be sort of disappointed if they hadn't done something like this.

For chrissake. Ron Paul's excuse for writing lots of racist and nutball crap in his newsletters is that he didn't write the newsletters and doesn't know who did.1 Now Newt Gingrich has decided this is such a peachy excuse that he's going to use it too:

The Wall Street Journal reports today on a memo from April 2006 on the website of Gingrich's Center for Health Transformation. In the memo, filed under the "Newt Notes" column and written in the first person, Gingrich calls RomneyCare the "most exciting development of the past few weeks" and says he "agree[s] strongly" with the "principle" of the individual mandate....These days the mandate, and by extension RomneyCare, are treif2 in GOP orthodoxy. What to do, then, about this memo?

[Gingrich spokesman R.C.] Hammond said the Newt Notes essay wasn’t written by Mr. Gingrich himself.

I would like to announce for the record that I have been paying various local high school students to write most of this blog for the past ten years. I never asked for their names and paid them under the table by giving them answers to SAT questions, so I don't know who they are. I assume this brings an end to questions about some of the unfortunate posts written here, which I disavow completely. As of now, it's old news. Move along, please.

1Actually, "doesn't know" should be rendered in scare quotes. Paul is lying. He knows perfectly well who wrote this stuff.

2adj. Judaism ritually unfit to be eaten; not kosher.

In the Washington Post, David Fahrenthold writes about the Republican mantra to "repeal and replace" Obamacare. Jonathan Bernstein comments:

Fahrenthold does a good job of pointing out how little Republicans have done to carry out their “replace” promise. But he doesn’t quite nail down just how much of a betrayal it has been.

....The chairs of five House committees, in an op-ed they published right after the first House repeal vote, [were] pretty specific: “hearings in Washington and around the country” to develop the new legislation. It’s something that they had full control over (as opposed to actually passing legislation, which depended on the Senate and the president). And it’s something that just didn’t happen.

I consider this a highly metaphysical question. Is something really a lie if no one was intended to believe it in the first place?

Consider the various audiences. The Republican base certainly didn't care about "replace." They just wanted to repeal the socialist abomination that was Obamacare, full stop. The press surely never believed it either. They knew perfectly well that Republicans have never shown the slightest interest in passing healthcare legislation. Democrats knew it was a sham, of course. And independents.....

Aye, there's the rub. Did independents actually believe Republicans were serious about replacing Obamacare? Or did they see the implied wink and nudge just like everyone else? This I don't know.

Was "repeal and replace" an actual promise? Or was it merely political sloganeering best interpreted as "We hate Barack Obama, and if you do too then vote for us"? Where's Wittgenstein when you need him?

The 2009 stimulus bill included a tax cut called the Making Work Pay tax credit. Bruce Bartlett writes about what happened last year, when it was set to expire:

At the end of 2010, all of the tax cuts enacted during the George W. Bush administration were scheduled to expire, as well as the Making Work Pay credit. Although President Obama wanted the tax cuts for the rich to expire on schedule, Republicans insisted on an all-or-nothing strategy. Republicans also asked that the Making Work Pay credit be replaced by a temporary two-percentage-point cut in the employees’ share of the payroll tax.

....In short, the payroll tax cut was a Republican initiative. So why did they turn against it? The answer is unclear.

Unclear? Let's roll the tape:

  • 2009: Obama favored the Making Work Pay tax credit. Republicans were opposed.
  • 2010: Obama wanted to keep the MWP and initially opposed the payroll tax cut. Republicans supported it.
  • 2011: Obama is in favor of extending the payroll tax cut. Republicans are now opposed.

Do you see the trend? Sure you do.

Also of note: Bruce includes a chart from the Tax Policy Center showing why Republicans wanted to replace the MWP with a payroll tax cut in the first place. Partly to annoy Obama, of course, but it turns out that the payroll tax cut is far friendlier to rich people than the MWP. The absolute dollar amounts are small enough to be a rounding error for the truly wealthy, but I guess it's the principle that counts.