The SEC under Gary Gensler has failed to protect investors and has forced financial innovators abroad

In April of 2024, two Securities and Exchange Commission (SEC) lawyers were forced to resign as a result of false statements they made in the SEC's case against crypto company Debt Box.  The judge handling the case said that the SEC acted in "bad faith," was "deliberately perpetuating falsehoods" and had engaged in a "gross abuse of the power entrusted to it by Congress."  So egregious were the SEC's action in this case that the judge sanctioned the SEC and ordered it to pay attorneys' fees and legal costs of Debt Box.

The Debt box case is not the first time that the SEC under the current chair Gary Gensler has acted in bad faith against a crypto company.  Indeed, under Gensler's watch, the SEC had previously denied crypto company Grayscale's application to convert its bitcoin trust into an Exchange Traded Fund (ETF).  After the SEC's denial, Grayscale sued the SEC in order to force it to approve the conversion of the bitcoin trust to an ETF.  The judge handling that case labeled the SEC's denial as "arbitrary and capricious," and essentially mandated that the SEC approve Grayscale's bitcoin ETF application.

Gensler has stated numerous times that the crypto industry is full of hucksters, fraudsters, scam artists and ponzi schemes.  And, while this is no doubt the case, the SEC failed to take any action against the most egregious actors in the crypto space -- Sam Bankman-Fried of FTX and Alex Mashinsky of Celsius -- who defrauded customers out of Billions of dollars.  Meanwhile, the SEC has filed lawsuits against companies such as Coinbase and Kraken, exchanges that have never lost customers' assets and have tried to work with the SEC in order to comply with US regulatory laws.

I say "tried to work with the SEC" because it has become apparent that the SEC has no interest providing the legal clarity that the crypto industry needs in order to do business in a fully compliant manner.  To see how far the SEC has gone to avoid providing legal clarity to the crypto industry, one only has to watch this clip:
https://youtu.be/aIcNGfF8FDA?si=rq874dwD_inxyaeK
in which US Representative Patrick McHenry asks Gary Gensler if Ether -- the second largest cryptocurrency by market cap --  is a commodity or a security.  

The above video makes the SEC's playbook against the crypto industry clear.  First, the SEC states that the laws governing the crypto industry are clear (even though they obviously are not).  Second, the SEC refuses to impart any legal clarity when asked to provide it.  Third, the SEC sues crypto companies for a failure to comply with the law.  Due to the adversarial relationship Gensler's SEC has created, many American crypto-entrepreneurs have simply decided to incorporate their start-ups abroad.  The long-term result will be to hurt America's competitiveness in the fast-growing crypto industry.  

Rather than carry out the mission the SEC -- to protect investors. maintain fair, orderly, and efficient markets, and facilitate capital formation -- Gensler has used his time as chair to carry out a vendetta against the crypto industry.  It is far past time for Gensler to step down from his role as SEC chair and allow someone that puts the mission of the SEC first to take over.

On the federal minimum wage

Presently, the minimum wage in the United States is $7.25/hr, which works out to about $15,000/year.  While this wage is above the poverty line established by the Department of Health and Human Services  for an individual ($12,880), it is clearly below what many would consider a "livable" wage.  Indeed, in many US cities, rent for a 1-bedroom apartment is over $1,000/mo, which leaves less than $3,000/year for other essentials, like food and transportation.  As such, there has been serious discussion of late among politicians about raising the minimum wage to $15/hr.  While (I think) we can all agree that working individuals should earn a livable wage, the question remains if a federal minimum wage would be a net benefit to those who are currently struggling to make ends meet.  Below, I outline a few of my thoughts on the likely consequences (good and bad) or raising the minimum wage.

Consequence #1: increased wages for those with a job.  No explanation is needed here.  With a $15/hr minimum wage, all individuals that work full-time will earn about $31,000/year.  Based on the current cost of living in the USA, this wage is definitely livible (at least for individuals ... perhaps not for single parents).

Consequence #2: fewer jobs.  When does a business hire somebody?  The simple answer is when the cost of hiring that person is less than the additional revenue that person generates.  If the minimum wage is raised to $15/hr, it is reasonable to expect jobs for which an employee generates less than $15/hr of revenue to disappear.  With an increased cost of labor, it is also reasonable to expect that large corporations will intensify their efforts to reduce labor costs by automating many jobs that are currently carried out by humans.

Consequence #3: fewer small businesses.  Many large corporations, such as Amazon, Costco, etc., already pay their employees more than $15/hr.  Increasing the minimum wage to $15/hr will have no effect on these companies.  But, there are small businesses across the nation that are barely surviving as it is.  Increasing the cost of labor will almost certainly make many small businesses unprofitable, thereby leading them to close their doors.

Consequence #4: increased cost of living.  The rental market is very efficient.  Increased salaries will lead to an increased ability to pay rent.  Landlords will quickly discover this and will raise the rent they charge for apartments.  Indeed, grocery stores and restaurants will also raise the cost of food as they discover their clients have deeper pockets.  Will the increased income that results from a higher minimum wage offset the increased cost of living?  This is a difficult question to answer.

I do not think there is any way to predict exactly what the effects of raising the minimum wage will be.  So, I hesitate to say whether or not I think raising the minimum wage is a good or bad idea.  I will say, however, that doubling the minimum wage is a drastic step, which is likely to have many unintended consequences.  As such, if the government is going to raise the minimum rageI would prefer that they do so gradually.  I would also suggest that, rather than set a fixed dollar amount for a minimum wage, they should set a minimum wage that is pegged to some cost of living index, which might include things like the cost of food, rent and transportation.  Furthermore, this cost of living index should be location-dependent.

I would be very happy to read others' thoughts on this matter.

What people do not understand about the housing market

"Interest rates are low.  Now is a good time to buy a home."

If you have considered buying a home over the past five years, you have probably heard at least one person make the above statement.  Yet, I would submit to you that interest rates being low is not a good reason to buy a home.  In fact, buying a home when interest rates are low is a risky endeavor.  The reason is as follows:

When people are looking to buy a home, they typically have in mind a monthly payment they can afford and determine how expensive a home they can afford based on that.  For example, suppose that a home-buyer can afford to pay x units of currency per unit time on housing.  If the home-buyer takes out an interest-only loan for 100% of the value of a home, then he can afford a home whose value is x/r, where r is the interest rate on the loan.  This simple computation shows us that home prices are inversely proportional to interest rates.

If you buy a home when interest rates are at historic lows, then interest rates have only one way to go: up.  When interest rates go up, the value of your home goes down.  If you then try to sell your home, you will incur a loss.

On the other hand, if you buy when interest rates are high, then when interest rates go down the value of your home will go up.  What's more, if you do not want to sell your home, you can now refinance your mortgage at a lower interest rate, thereby lowering your monthly payment.

Admittedly, the above example is an over-simplification of home price dynamics.  There are many factors that determine the direction of home prices.  But, there is no doubt that, holding all other factors constant, home prices and interest rates move in opposite directions.  And, this being the case, it is much better to buy a home when interest rates are high rather than low.

Studying should be like training for sports

If you wanted to run a marathon in two months, how would you prepare for it?  Would you run a few miles each day, slowly adding distance over time?  Or, would run 20 miles the night before the big race?

If you wanted to squat twice your body-weight in a power-lifting meet in three months, how would you train for that?  Would you try to squat 1.9 times your body-weight the night before the meet?  Or, would you squat on a regular basis, slowly adding weight over time?

If you have any sense, in both scenarios above, you would choose the progressive, steady approach over making a last-ditch effort.  Studying, whether it be for an exam, a class or for your own personal edification, should be carried out in much the same way that you would train for an athletic endeavor.

Studying for 15 minutes per day, 7 days a week is a far more effective way to learn than studying for 2 hours once per week.  If you want to learn a new skill, make a habit of spending a little time on it every day.  Doing so will enable you to learn material at a deep quickly and retain it for a long period of time.

Time-saving tip for submitting letters of recommendation

Every time an undergraduate applies for graduate school, a graduate student applies for a postdoc, or a postdoc applies for a tenure-track job, he or she must ask at least three professors for a letter of recommendation.  And, every time and tenure-track professor goes up for a promotion, his or her institution must ask 5-20 professors for letters or recommendation.  As a result, many professors find themselves writing 10-20 letters of recommendation per year. 

Many institutions recognize that writing a letter is a time-consuming task.  As such, they make submitting a letter a quick and painless process: click on a link, upload a letter, done.  But, at some institutions, in order to submit a letter, a professor must additionally fill out some bullet-based rating of the person he or she is writing about.  When one considers that undergraduates typically apply to 10+ graduate schools, filling out such bullet-based rating systems quickly eats into a professor's time.

My department chair suggested a method to me a few years ago that he uses to minimize the amount of time he spends on such rating systems.  At the end of every letter of recommendation he writes the following:

P.S. If your application system requires that I fill out a number- or bullet-based rating form, I have either omitted this or filled out the highest rating for everything if the system did not allow me to continue otherwise. I appreciate that you use this information in your evaluations, but I recommend that you change your system to account for the over-extension that all of us in academia experience with writing of many letters of recommendation each year.

This method saves him time and does not hurt the student for whom he is writing a letter.  I now use this technique when I write letters and find it to be a significant time-saver.

Betting against your desired outcome

A few years ago, my favorite American football team -- the Minnesota Vikings -- made it to their conference championship game.  If they won the game, they would play in the Super Bowl.  This was the third time in my lifetime that the Vikings had played in the conference championship game.  On the two previous occasions, they lost in overtime in heart-breaking fashion.

As the most recent championship game approached, I thought to myself, "I'd pay $100 to guarantee that the Vikings win."  Unfortunately for me, $100 was not a sufficiently large amount of money to bribe the Viking's opponent -- the Philadelphia Eagles -- to lose. 

So, I decided to place a $100 bet on the Eagles to win the conference championship.  That is, I bet against the Vikings.

My reasoning was as follows.  Had the Vikings won the game, I could view my losing bet as a $100 payment for the Vikings winning the game.  Had the Vikings lost the game, the disappointment I would feel after seeing them lose the conference championship game for third time in my lifetime would be offset from the winnings from my $100 bet.

In case you are wondering, I collected on my $100 bet.  I still have not seen the Vikings play in the Super Bowl.

There are many situations in life in which you may want something that you cannot buy.  For example, you may want the next leader of your country to be affiliated with a particular political party.  In many of these situations, there are betting exchanges in which you can bet against your desired outcome (check out PredictIt.org for political bets).  In order to assuage the pain of your desired result not occurring, you might consider doing as I did and placing a bet against your desired outcome.

Want students to solve more practice problems? Try this.

Most textbooks in STEM disciplines include at the end of every chapter a number of practice problems.  Solving these problems (or at least trying to) is, in my view, one of the best ways for students to learn the material in a given text.  Because solving problems is an effective tools for learning, I assign some of these problems as homework to be turned in and graded.  Unfortunately, attaching a grade to a homework problem has an unfortunate side effect.  Rather than try to solve these problems on their own, some students simply copy the solutions from their friends (or from a website).  These students get credit for "their" work, but miss the opportunity to learn.

Here is a simple remedy for the above-mentioned unwanted side effect.  I tell students that one of the problems on an upcoming exam will be similar to one of the homework problems in the textbook.  Doing this accomplishes two things.  First, because I do not specify which textbook problem I am referring to, I ensure that that students will look at all of the problems (or, at least as many of them as they have time for).  Second, by telling students that the exam problem will be similar to a textbook problem, I ensure that students will actually try to understand how to solve the textbook problems rather than simply copy the solutions.