First, I sincerely want to wish you a happy, healthy Labor Day, surrounded by family and friends. I thank you for taking the time out of your busy day to read my writings. Ideally, they help to increase both your wealth and your wisdom.
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The Amethyst Initiative
Today’s main topic is a hot one and a big one ... the question of whether it might be a good idea to reduce the legal drinking age in the U.S. from 21 to 18. The background: a group of 129 presidents and chancellors from colleges and universities have signed the Amethyst Initiative, which states simply that the current legal limit of 21 is not working and asks for an open unbiased discussion of the issue.
Here’s the Statement in its entirety.
“It’s time to rethink the drinking age.
In 1984 Congress passed the National Minimum Drinking Age Act, which imposed a penalty of 10% of a state’s federal highway appropriation on any state setting its drinking age lower than 21.
Twenty-four years later, our experience as college and university presidents convinces us that...
Twenty-one is not working
A culture of dangerous, clandestine “binge-drinking"-often conducted off-campus-has developed.
Alcohol education that mandates abstinence as the only legal option has not resulted in significant constructive behavioral change among our students.
Adults under 21 are deemed capable of voting, signing contracts, serving on juries and enlisting in the military, but are told they are not mature enough to have a beer.
By choosing to use fake IDs, students make ethical compromises that erode respect for the law.
How many times must we relearn the lessons of prohibition?
We call upon our elected officials:
To support an informed and dispassionate public debate over the effects of the 21 year-old drinking age.
To consider whether the 10% highway fund “incentive” encourages or inhibits that debate.
To invite new ideas about the best ways to prepare young adults to make responsible decisions about alcohol.
We pledge ourselves and our institutions to playing a vigorous, constructive role as these critical discussions unfold.”
Note that the signers of the Amethyst Initiative have not claimed that they want to reduce the drinking age to 18, only that want “an informed and dispassionate public debate” about the current situation.
I’m all for open, honest discussion ... but I’m skeptical that we’ll see one here, partly because the primary opponent of the Amethyst Initiative is Mothers Against Drunk Driving (MADD) and they’ve long pursued a zero-tolerance approach.
What to do?
Thoughts on Teenage Drinking
As with any big issue, the first step is defining the problem. MADD thinks the problem of underage drinking is best addressed by enforcement and education. It doesn’t want kids under 21 drinking, noting that early drinking leads to earlier dependency and other problems. The signers of the Amethyst Initiative think their problem-binge drinking on campus-might be solved by lowering the drinking age and letting students drink legally in appropriate social settings. As we learned from the Volstead Act, which in 1919 launched our 14-year experiment with Prohibition, when you criminalize a widely practiced behavior, you create a nation of criminals.
So I ask ... what might be the optimum legal limit for purchasing and consuming alcohol?
We’ve long accepted that 18 is the age at which a person can vote, sign contracts, serve in the military and serve on a jury. The age at which we allow a person to drive a car is substantially lower, reflecting our decades-long embrace of automotive culture. But the age at which you can drink is now 21, indicative of-among other things-our puritanical heritage. (Our Puritanism is also evident in our treatment of sexually-straying politicians; good-bye John Edwards and Elliot Spitzer. But I digress.)
Maybe the problem is not one of age at all; maybe the problem is keeping alcohol-impaired drivers from operating motor vehicles. Ignition interlocks that require the driver to blow into a tube that measures his alcohol content can help here.
But MADD is adamant about keeping the age at 21. The group claims that increasing the legal drinking age from 18 to 21 has been helpful in reducing drunken driving and I accept that; despite the fact that there is no clear cause-and-effect relationship between the imposition of the 21-year limit and the decrease in fatalities. I think MADD’s focus on education has helped, too. But is it possible that setting the legal age at 21 has contributed to irresponsible use of alcohol among people between the ages of 18 and 21 at the same time that it’s lowered drunken driving fatalities? And how do we measure those costs and effects?
Interestingly, the year I turned 18 was the year the Massachusetts legislature lowered the legal drinking age from 21 to 18. Like most of my friends, I was pretty happy about it. It made drinking easier, and I did appreciate not being a criminal. But did we drink and drive more because of the ease of access? Or did we act more responsibly because we were in establishments where “real” adults were present? I don’t know. Then-as now-there was no control group against which to measure our behavior.
And personal anecdotes, while they sometimes make great stories, are a poor guide toward solving problems affecting a more diverse population. For the same reason, the fact that my wife and I have successfully raised two daughters into their 20s and are on the same path with a son who’s 16 is irrelevant.
I do understand the perception that binge drinking has become a bigger problem on campuses in recent years; in my day, beer pong, Jell-O shots and vodka luges had yet to be invented. But I know that even back when my father was in college at the University of Maine, drinking was big. In fact, the traditional school fight song was (and still is) Rudy Vallee’s “Maine Stein Song” ... written before Prohibition.
Looking for more information and guidance, I found last year’s report by the Surgeon General of the U.S. The last Surgeon General I (and most Americans) can name was C. Everett Koop, who focused on reducing cigarette usage in his term (1982-1989) and did a good job of it. The most recent Surgeon General was Vice Admiral Richard Carmona, who left office when his term expired on July 31, 2006. After that Rear Admiral Kenneth P. Moritsugu served as Acting Surgeon General, and now we have Rear Admiral Steven K. Galson in the same role.
The PDF of the Surgeon General’s report, titled “The Surgeon General’s Call to Action to Prevent and Reduce Underage Drinking” is 107 pages, but the conclusion comes on page 86. The rest is References, Acknowledgements, Editors and Appendices. I read it as far as the conclusion, which I’ve copied here.
“Underage alcohol use remains a major public health and safety problem in the United States, creating serious personal, social, and economic consequences for adolescents, their families, communities, and the Nation as a whole. An emerging body of research on the effects of underage alcohol use on human maturation adds new urgency to the decades’ long effort by the public and private sectors to prevent and reduce underage drinking.
Pervasive drinking by youth and the emergence of alcohol misuse and dependence in late adolescence are intertwined with developmental processes. Therefore, the prevention and reduction of underage drinking must be addressed within a developmental framework, which takes into account the dynamic processes of human maturation, the influence of social systems within an adolescent’s environment, and the role of individual characteristics in the adolescent’s decision to drink. Because adolescent development unfolds within many contexts in American society, including family, peers, school, extracurricular and community activities, part-time work, the community itself, and the overall culture, every American has a responsibility to help protect adolescents from the potentially adverse consequences of alcohol use.
As the Call to Action makes clear, each of us has an important role to play in the prevention and reduction of underage drinking through our individual and collective efforts, ensuring that the future America offers its youth is neither shortened nor impaired by the consequences of alcohol use. This Call to Action is exactly that-a call to every American to join with the Surgeon General in a national effort to address underage drinking early, continuously, and in the context of human development. Underage alcohol use is everybody’s problem-and its solution is everybody’s responsibility.”
This report came out last year. I didn’t notice it then, and I’m guessing that many of the college Presidents who’ve signed the Amethyst Initiative didn’t either. But this report-and my memories of how effective Surgeon General Koop was at curtailing cigarette smoking-helped guide my thinking on the issue.
Before I got there, however, I checked out the situation in Europe. Drinking ages are lower in much of Europe, and we’re familiar with the stories of Frenchmen who allow their children a little watered-down wine at dinnertime. But the evidence shows that binge drinking is an even bigger problem in Europe, especially in the UK, Ireland, Netherlands, Denmark and Germany. Among European countries, it’s lower than the U.S. only in Turkey, thanks to the influence of the Muslim culture.
Peripherally, it’s also worth noting that in Europe teenagers drive cars far less than Americans. The cost of fuel is higher, cars are more expensive and it’s harder to get a license. In Germany, for example, children can’t drive a car until they’re 18; before then they’re restricted to motorcycles.
Somewhat facetiously, I’m guessing that if we lowered the drinking age to 16 and raised the driving age to 21 we’d have far fewer teenage deaths on the roads.
But getting back to the Surgeon General. C. Everett Koop was instrumental in opening America’s eyes to the dangers and costs of cigarette smoking. It’s been 20 years since he declared nicotine as addictive as heroin and cocaine. Eventually, cigarette advertising was sharply curtailed, tobacco companies were sued and Philip Morris changed its name. Thanks to the efforts of Koop and those who followed his lead, American lungs are far cleaner today. And European countries have followed America; you can’t smoke in an Irish pub anymore!
So why can’t a new Surgeon General tackle the alcohol problem? The recent acting Surgeon Generals are fairly useless; we need a big brave person who’s not afraid to make waves, who has the political support of the President, and who can first educate Americans on the scope of the problem and then motivate them to work together to do something about it.
The message he or she should spread is this: Alcohol is appropriate when consumed in moderation among responsible adults. Alcohol abuse, by both young and old, is dangerous. Alcohol can be especially harmful for developing minds.
Prohibition doesn’t work. Preserving the freedom to choose is paramount. But those who act irresponsibly should be punished.
And here we come to the big idea. If drastically curtailing cigarette advertising was a major factor in reducing cigarette smoking, shouldn’t we do the same for alcohol? Can you imagine a Super Bowl without Budweiser ads?
What do you think? Let me know and I’ll publish the best responses on Thursday.
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A Reader’s Letter
Moving on to the investment world, I received the following email last week.
“Timothy,
I am very interested in your letter, but wanted to get your take before I subscribed. Do you at all subscribe to the notion that this time might be different? With all the debt the US is carrying, the housing crisis, subprime problems, all the leverage employed, GDP forecast to be nothing spectacular, etc..... I really have trouble wrapping my head around the next “leg up” in the market. Don’t get me wrong - I am aware that there is always a place to make money, but I wonder how this could be the start of the next run up when we are really in a pickle - both here and internationally.
I would love to hear your take on all this.
Thanks, and I really enjoy your information.
Bill B. SmithBarney”
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My reply:
“Dear Bill,
Throughout history, people living in the present (as we all do) have said, “It’s different this time.” And history has proven them wrong. Yes, there are troubles, but the world economy continues to grow, and well-managed companies continue to serve markets profitably. So I remain a long-term bull. I do recommend that you avoid financials and housing; focus on what’s working ... what’s hitting new highs.
Best wishes,
Timothy Lutts”
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So here’s an idea, a stock that was hitting new highs on Friday.
It’s Thoratec (THOR), a maker of heart pumps (technically ventricular assist devices, or VADs), that’s strong because its newest model is smaller and better than anyone else’s.
The stock has appeared in Cabot Top Ten Report twice in the past month. Here’s what editor Michael Cintolo wrote most recently.
“Thoratec makes ventricular assist devices (heart pumps) for patients who are terminally ill or waiting for heart transplants. And it’s now enjoying accelerating revenue growth, thanks to the HeartMate II..., which was approved by the FDA in April. Unlike previous devices, this one is implanted inside the chest, and instead of pulsating, it moves blood in a continuous stream. Designed to dramatically improve survival and quality of life, it can provide up to 10 years of support in a broad range of patients, including women and patients for whom prior devices were too large. ... Second quarter revenues, released July 31, jumped 44%-the fastest growth in many years-while earnings soared 122% to $0.20 per share, thanks to a fat profit margin of 14.6%.”
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Editor’s Note: Subscribers to Cabot Top Ten Report received a more complete report on Thoratec, as well as nine other recommendations, on the day that was published. Since then the stock is up from 25 to 27, and the charts tell us more upside is likely. But you shouldn’t just jump in and buy THOR here. Buying at the correct level is a critical part of successful investing. That’s why Cabot Top Ten Report gives recommended buy prices for every one of the stocks it recommends. If you’re in the market for fast-growing stocks, there’s no better advisory than Cabot Top Ten Report, and there’s no better time to start than now. The newsletter is typically published every Monday, but because of the holiday, this week’s issue goes out on Tuesday.
Subscribe today, at our low introductory rate, and you’ll have tomorrow’s issue in your email inbox tomorrow night! To get started with your no-risk trial subscription, simply click the link below.
http://www.cabot.net/info/ctt/cttib01.aspx?source=wc01
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
Cabot Wealth Advisory
