All Hail the Gerrymander

 
All Hail the Gerrymander

A Better Way

A Great Growth Stock

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Typically, I try to avoid partisan politics in these pages.

Typically, I succeed.

But today, I can’t stop myself.

The issue begins with the fact that Massachusetts grew by only 3.1% in the last decade, while Nevada grew at a blistering 35.1% rate.  As a result, Nevada gets to add a fourth congressional district, boosting its representation in Congress, while Massachusetts must reduce the number of its districts from 10 to nine.  

Nationally, 10 Eastern and Midwestern states will lose House seats, while eight mostly Western states will gain seats.

The political fallout will be messy, especially in states where both Democrats and Republicans hold seats.

Here in Massachusetts, all 10 current seats are held by Democrats, and it’s likely the next nine in this decidedly Blue State will be no different.  But when the political music stops, one guy will be out of a job.  So how this game of musical chairs plays out will be interesting—not least because this is the state with the dubious distinction of having invented gerrymandering, the process of drawing political districts to achieve political goals.

The overriding goal, of course, is to preserve power.

The word gerrymander was coined by political opponents of Elbridge Gerry, the governor of Massachusetts (1810-1812) whose cronies redrew the boundaries of the state’s districts to favor his re-election campaign.  

Here’s an 1812 cartoon depicting the infamous district, which critics derided as shaped like a salamander.  Gerry + salamander = gerrymander.  Note that Salem—my city—is the creature’s left claw.

Gerrymander

The strategy back then was to encompass most of the state’s Federalists in one district (allowing them to win just one), while the Governor’s party (the Democrat-Republicans) controlled all the others.  The redistricting succeeded, but public criticism of the practice—particularly effective because his opponents coined the term Gerrymander—doomed his campaign.

Gerry, however, went on to serve as vice president under James Madison, and died in office.

Yet 200 years later, gerrymandering lives on, throughout the country.

You can see it in Houston, Texas, where the oddly shaped District 22 was created for the benefit of former U.S. Rep. Tom Delay, the Texas Republican and erstwhile House Majority Whip who was convicted last year of money laundering.  Not for nothing was the aggressively partisan DeLay nicknamed “The Hammer.”

You can see it in Chicago, Illinois, where District 4 (shaped like earmuffs) connects two geographically separate Hispanic districts.

And you can see it in Columbus, Ohio, where the urban and mostly liberal population has been split into thirds and attached to conservative suburbs.

But Massachusetts may still be the champion.  After all, the Republicans haven’t been able to elected one of their own as Representative since 1994, even though 13% of voters are Republican, while 35% are Democrats and the remainder is Independent or other.

Consider this map showing our current 10 districts:

Current districts
 
District 2 looks (to me) like a kneeling camel poking its head into District 1, but Districts 3 and 4 take the cake.  District 4 is taking wealthy Republicans from the western suburbs of Boston and nullifying them with the strength of the blue-collar south around New Bedford.

And it’s all perfectly legal.

However, the process whereby these districts were created in 2000 wasn’t entirely legal.  

In fact, Thomas Finneran, Democratic Speaker of the Massachusetts House of Representatives at the time, pleaded guilty in 2007 to charges of obstruction of justice, stemming from the fact that he lied under oath about not influencing the redistricting plan.

He got 18 months unsupervised probation, a $25,000 fine, and the loss of his state pension.

And now, like recidivist alcoholics who can’t resist another drink, the Bay State’s representatives are at it again.

Despite a January poll that found 62% of state residents supported the creation of an independent commission to redraw the state's district lines, our representatives decided they’d rather do the work themselves.

They’re not unusual.  Only three states—Washington, Arizona and California—have created standing committees for the redistricting following the 2010 census.

Here in Massachusetts, the committee says it will act transparently.

But I’m skeptical.

Gerrymander sidebarI expect backroom dealing that determines which of the nine current representatives keeps a solid lock on his electorate, and which is thrown to the wolves.  The obvious choice would be freshman Representative Bill Keating—trouble is, his district (number 10) is mostly surrounded by ocean!

But that’s not necessarily an insurmountable obstacle.

In fact, as they redraw these districts, there are only a few rules to keep in mind.  One is that the districts must contain roughly the same number of people in each.  Another is that they must be geographically contiguous, although in practice, narrow strips of land beside highways have been used to meet that criterion.  And they can’t discriminate against minorities, although they can discriminate against political parties, which often amounts to the same thing.

In the end, the new map will undoubtedly be one that keeps Democrats in power.  But that’s no more surprising than the fact that the folks in Red States such as, say, Idaho will do the opposite.

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Isn’t there a better way?

Whether it’s better or not is debatable, but the “shortest splitline algorithm” is undoubtedly the most objective way to draw the map.

The algorithm uses only the shape of the state, the number N of districts wanted, and the population distribution as inputs. The algorithm (slightly simplified) is:
    Start with the boundary outline of the state.
    • Let N=A+B where A and B are as nearly equal whole numbers as possible. (For example, 7=4+3.)
    • Among all possible dividing lines that split the state into two parts with population ratio A:B, choose the shortest.
    • You now have two hemi-states, each to contain a specified number (namely A and B) of districts. Handle them recursively via the same splitting procedure until the desired number of districts is achieved.
    
The shortest-splitline district-drawing algorithm is simple, honest and cheap. But it ignores geographic features such as rivers, and cultural features such as major cities.  Most states don’t want their cities split into different districts unless there’s a strong motivation (notably, gerrymandering).

Here’s a splitline map of Massachusetts with 10 districts.  Note that Boston is bisected.

Splitline map

A more nuanced—and only slightly less objective—system is Voronoi Diagram Redistricting, named for Russian mathematician Georgy Fedoseevich Voronoi, who pioneered the idea a century ago. Basically, this involves identifying a population center (generally a large city) as the “seed” of each district and then “growing“ the districts, expanding their populations at equal rates until the map is full.  Voronoi regions are contiguous, compact, and simple to generate.  They’re respectful of large cities, although less so of geographic features.  More to the point, there’s only marginal room for political influence in the selection of seed points.

Here’s a typical Voronoi diagram:

Voronoi diagram

A further wrinkle comes from the K-means algorithm, which begins like the Voronoi, but then, once the districts are determined, shifts the “seed” location to the population center of each district and runs the program again, repeating the process until all districts are within population tolerance levels.  

The K-means algorithm produces districts that are even more compact than the Voronoi, and if the seeds are placed right, big cities should not be split into different districts.

That’s as far as I’ll be going into the arcane art and science of redistricting. For my money, an objective system that creates districts without regard to political affiliation would enable a more representative election—and more representative government—than the current systems of gerrymandering.

But I’m not holding my breath.

For the last word on gerrymandering, I give you a quote from Mark Miller, a student at the University of Maryland, who when interviewed on the subject commented, “There's sort of a cruel art to it.  It's the idea politicians get to pick their constituents rather than the other way around, which sounds like the opposite of democracy.”

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As to the market, all is well!

Trends are up and breadth is good.

So today I want to discuss a new stock that looks like a great investment.

It’s Constant Contact (CTCT), a company that helps more than 415,000 small businesses, associations and nonprofits connect with their customers.

The medium is email.

The tools include customizable templates to aid in email creation, tools to import and manage contact lists, and email tracking and reporting tools to analyze overall campaign effectiveness.

Constant Contact helps companies avoid being treated as spam, helps them avoid ISP volume limits, and generally helps them understand what happens to their email after it’s sent.

(I know a lot about this stuff, because that’s part of what we do at Cabot … though we don’t use Constant Contact.)

And the results have been terrific!

In fact, Constant Contact has grown in every year of the past decade, and in the Great Recession, it didn’t even blink, growing 73% in 2008 and 48% in 2009. Last year it grew 35%, posting revenues of $174 million.

And the bottom line has begun to fatten up nicely, with profit margins hitting a record 11.2% in the thirds quarter of last year and then 9.3% in the fourth quarter.

This year, the company has added new features that integrate with Facebook and Twitter, promising that the company will maintain its leadership in the age of social networking.

Looking forward, analysts are projecting that earnings will grow 68% in 2011 and 39% in 2012, but I find those analysts are typically conservative.

And most important to me is that the stock is hitting new highs!

Constant Contact was first recommend by Michael Cintolo, editor of Cabot Top Ten Report, back on December 13, when it was trading at 31.

Mike recommended buying between 27 and 29, and his subscribers had many chances to do that, as the stock built a textbook base over the next three months.

And patient investors have been rewarded, as the stock broke out—on big volume—two weeks ago and blasted ahead to new highs.  Notable—at least to me—was the fact that there was no news to account for the strong performance.  That tells me there’s something good that most investors don’t know about yet, and I like that.

So you could just step in and buy it here.

You could be patient and wait for a better buying opportunity, perhaps a pullback of a few points away from resistance at 35.

Or you could take a regular subscription to Cabot Top Ten Report so you can get twice-weekly emails about lots of companies like Constant Contact.

For your own financial well-being, I recommend the latter.

For details, click here.

Yours in pursuit of wisdom and wealth,

Timothy Lutts
Publisher
Cabot Wealth Advisory


Timothy Lutts can be found on Google Plus.

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