October 28, 2013
Investors are wary that the tranquility in eurozone bond markets could breed complacency ... Whether this new phase in the eurozone crisis is sustainable or simply the calm before the next storm will help determine the eurozone’s future. The stability reflects market confidence in the eurozone’s prospects – and the fact that fickle international investors fled at an early stage of the crisis. But overreliance on domestic investors has thrown Europe’s economic integration into reverse and may prove dangerous. While the calm may provide breathing space – lower bond yields cut financing costs – it could breed complacency. ... arguably a much bigger reason for the recent stability in eurozone bond markets across much of the rest of the region is that foreign investors have retreated. So far this year, domestic investors have accounted for almost 100 per cent of the net issuance of Italian and Spanish government debt, according to calculations by BNP Paribas. Of outstanding Spanish bonds, almost 70 per cent is currently held domestically. For Italy, the figure is almost 60 per cent. ... Japan has illustrated how a country, with strong domestic ownership, can operate with a level of public sector debt equivalent to more than 200 per cent of national output and still keep official borrowing costs down. Yields on 10-year Japanese government bonds are just 0.6 per cent. ... Yet the stability created by “re-domestication” of eurozone bond markets could prove fragile. A mounting concern of eurozone policy makers is the increased mutual dependence between banks and governments in the eurozone periphery, which could quickly exacerbate financial instability if a fresh crisis erupted somewhere in the financial system. ... The links between banks and sovereigns “basically changes the nature of the eurozone. Banks are acting as the arms of the central bank to help governments avoid default” ... Without outside investment, the struggling periphery economies could find it even harder to escape recession and produce the growth needed to reduce public-sector debt mountains.
In 1948, the behaviorist B.F. Skinner reported an experiment in which pigeons were presented with food at fixed intervals, with no relationship to any given pigeon’s behavior. Despite that lack of relationship, most of the pigeons developed distinct superstitious rituals and maneuvers, apparently believing that these actions resulted in food. As Skinner reported, “Their appearance as the result of accidental correlations with the presentation of the stimulus is unmistakable.” ... Superstition is a by-product of the search for patterns between events – usually occurring in close proximity. This kind of search for patterns is essential for the continuation of a species, but it also lends itself to false beliefs. As Foster and Kokko (2009) put it, “The inability of individuals – human or otherwise – to assign causal probabilities to all sets of events that occur around them… will often force them to make many incorrect causal associations, in order to establish those that are essential for survival.” ... The ability to infer cause and effect, based on the frequency with which one event co-occurs with some other event, is called “adaptive” or “Bayesian” learning. Humans, pigeons, and many animals have this ability to learn relationships in their world. Still, one thing that separates humans from animals is the ability to evaluate whether there is really any actual mechanistic link between cause and effect. When we stop looking for those links, and believe that one thing causes another because “it just does” – we give up the benefits of human intelligence and exchange them for the reflexive impulses of lemmings, sheep, and pigeons.
AS IF a global financial-market meltdown, the deepest U.S. recession in seventy years, an existential crisis in the euro zone and upheaval in the Middle East hadn’t already created enough trouble for one decade, now the unrest and anxiety have extended to some of the world’s most attractive emerging markets. Just in the past few months, we’ve seen a rough ride for India’s currency, furious nationwide protests in Turkey and Brazil, antigovernment demonstrations in Russia, strikes and violence in South Africa, and an ominous economic slowdown in all these countries. ... Adding to the uncertainty, as the carnage and confusion in Syria remind us, is the fact that there is no longer a single country or durable alliance of countries both willing and able to exercise consistent global leadership. ... it is all the more remarkable that there’s been so little noise from China, especially since the rising giant has experienced a once-in-a-decade leadership transition, slowing growth and a show trial involving one of the country’s best-known political personalities—all in just the past few months. Given that Europe and America, China’s largest trade partners, are still struggling to recover their footing, growth is slowing across much of the once-dynamic developing world, and the pace of economic and social change within China itself is gathering speed, it’s easy to wonder if this moment is merely the calm before China’s storm. ... Don’t bet on it. ... In a world where governments can’t afford to go it alone to protect their interests, China will struggle to build durable partnerships that extend its power.
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It was a show of force in keeping with the ambitions of American law firms that increasingly see the European Union’s vast apparatus as a vital lobbying opportunity for themselves and their multinational corporate clients. … As the European Union has emerged as a regulatory superpower affecting 28 countries that collectively form the world’s largest economy, its policies have become ever more important to corporations operating across borders. In turn, the influence business in Brussels has become ever larger and more competitive, rivaled only by Washington’s. … No group is proving more aggressive in claiming a share of that business — and provoking more criticism — than Covington and a dozen other major international law firms, some of which have imported American practices to Brussels, the seat of European Union power, while also operating with fewer constraints than in the United States. … The firms are taking advantage of weak ethics rules in Brussels, including one that allows some former government officials to begin exploiting their connections the day they leave office. … “There is a certain excitement of getting what you want through the system,” Mr. De Ruyt said in an interview, adding that he had learned the art of influencing decisions, instead of just making them. “I now know exactly how to do it.”
Douglas Hofstadter, the Pulitzer Prize–winning author of Gödel, Escher, Bach, thinks we've lost sight of what artificial intelligence really means. His stubborn quest to replicate the human mind. ... “It depends on what you mean by artificial intelligence.” Douglas Hofstadter is in a grocery store in Bloomington, Indiana, picking out salad ingredients. “If somebody meant by artificial intelligence the attempt to understand the mind, or to create something human-like, they might say—maybe they wouldn’t go this far—but they might say this is some of the only good work that’s ever been done.” ... Hofstadter says this with an easy deliberateness, and he says it that way because for him, it is an uncontroversial conviction that the most-exciting projects in modern artificial intelligence, the stuff the public maybe sees as stepping stones on the way to science fiction—like Watson, IBM’s Jeopardy-playing supercomputer, or Siri, Apple’s iPhone assistant—in fact have very little to do with intelligence. For the past 30 years, most of them spent in an old house just northwest of the Indiana University campus, he and his graduate students have been picking up the slack: trying to figure out how our thinking works, by writing computer programs that think. ... Their operating premise is simple: the mind is a very unusual piece of software, and the best way to understand how a piece of software works is to write it yourself.
What economists and marketers are learning from newly accessible consumer data … Around the world, billions of sales transactions every month, down to a can of Coca-Cola from a local store, are recorded in some way by Nielsen, the measurement and information firm that has been gathering data from retailers and consumers for 90 years. For most of its history, Nielsen shared those data primarily with its retail customers and manufacturing customers under strict agreements that protected customer confidentiality. Academic researchers gained access to some data by negotiating directly and often at length with Nielsen, or by partnering with a corporation and promising the data and results would be for internal use only. … Now Nielsen is sharing three datasets through Booth, with a staggering amount of information. One dataset covers purchases by 40,000–60,000 households in the United States. Another contains sales results from 35,000 stores—grocery stores, drugstores, discount chains, and similar outlets—for the years 2006 through 2011. Those records span up to 3 million bar codes, and the data represent about 33% of the volume at mass merchandisers and about 55% of US retail volume from grocery stores and drugstores. … The information now available is a gold mine for researchers, marketers primarily, but also economists who see the potential to explore longstanding questions about consumer behavior.
Steering his jet-black Cadillac CTS sedan along the streets of West Palm Beach, Fla., Brad Zahn offers a tour of the area’s cemeteries, one more tropically lush than the next. Zahn, owner of the Tillman Funeral Home & Crematory, embalms and buries people for a living. He employs his wife, Maribel, and one of their adult sons. Another son attends mortuary school. “My succession plan is in place,” Zahn says. He speaks evenly and wears muted business attire. One hand on the wheel, he seems the very picture of a confident entrepreneur. His demeanor turns anxious, however, when I ask about the funeral chain Service Corporation International (SCI). “How can you not be nervous,” he responds, “when the 1,000-pound gorilla gets even bigger?” In the death-care industry, as practitioners call it, SCI casts a long shadow. Based in Houston and publicly traded on the New York Stock Exchange (NYX), it operates more than 1,800 funeral homes and cemeteries in the U.S. and Canada. It has 20,000 employees and a market capitalization of $4 billion. For 40 years, SCI has gobbled competitors as the pioneer consolidator of a fragmented industry. Although it has overreached at times, suffering a corporate near-death experience after a late-1990s debt binge, SCI is hungry once again.
Few things are more American than Coca-Cola. ... But bottled water is washing away the palate trained to drain a bubbly soda. By the end of this decade, if not sooner, sales of bottled water are expected to surpass those of carbonated soft drinks, according to Michael C. Bellas, chief executive of the Beverage Marketing Corporation. ... “I’ve never seen anything like it,” said Mr. Bellas, who has watched water’s rise in the industry since the 1980s. ... Sales of water in standard lightweight plastic bottles grew at a rate of more than 20 percent every quarter from 1993 to 2005, he said. The growth has continued since, but now it has settled into percentages within the high single digits. ... If the estimated drinking of water from the household tap is included, water consumption began exceeding that of soda in the mid-2000s.
On the morning of April 15, 2013, Chris Connolly, a sergeant with the Boston police bomb squad, completed a ritual he had performed annually for the past eight years. It started after dawn at the corner of Boylston and Dartmouth in the city’s tony Back Bay neighborhood. There Connolly and his teammates peered inside trash cans, peeked into car and store windows, and inspected flower planters. ... In the post-9/11 world, this was standard operating procedure, a precaution practiced by civilian bomb squads around the country. Later that morning half a million spectators would watch nearly 25,000 athletes run the Boston Marathon, and security experts have considered major sporting events to be potential terrorist targets since the bombing at the Atlanta Olympics in 1996. Even at this early hour, revelers were starting to gather, most ignoring the techs methodically working their way around bars and restaurants and postrace recovery areas. ... A sweep and a long wait: This was the life of an urban bomb squad. The hardest part, as Connolly knew, was staying alert. It’s difficult to maintain vigilance in the face of overwhelming statistical evidence that nothing is going to happen. Soon runners started coming in—the swift ones first, but gradually the slower ones, in greater numbers and more celebratory. ... It happened at 2:50 pm. Connolly didn’t see the first explosion; he felt it. By the time his brain registered what it was, he felt another.
The global obesity epidemic and related nutritional issues are arguably this century’s primary social health concern. With breakthroughs in the field of medicine, huge leaps in cancer research and diseases such as smallpox and polio largely eradicated, people around the globe are, on average, living much longer and healthier than they were decades ago. The focus on well-being has shifted from disease to diet. The whole concept of healthy living is a key pillar of our Credit Suisse Mega - trends framework – themes we consider crucial in the evolution of the investment world. In this report, we specifically explore the impact of “sugar and sweeteners” on our diets. ... Although medical research is yet to prove conclusively that sugar is in fact the leading cause of obesity, diabetes type II or metabolic syndrome, we compare and contrast various studies on its metabolic effects and nutritional impact. Alongside this, we question some of the accepted wisdom as to what is perceived as “good” and “bad” when it comes to sugar consumption, namely as to whether a calorie consumed is the same regardless of where it is derived from – sugar, fats, or protein – and whether solid foods are “nutritionally different” to liquids. ... What can we expect in the future? What should investors focus on? Although a major consumer shift away from sugar and high-fructose corn syrup may be some years away, and outright taxation and regulation a delicate process, there is now a trend developing. From the expansion of “high-intensity” natural sweeteners to an increase in social responsibility mes - sages from the beverage manufacturers, we see green shoots for dietary changes and social health advancement. Ultimately, we expect consumers, doctors, manufacturers and legislators to all play a crucial role in changing the status quo for sugar.
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“We’ve lost credibility in the market,” said Sergio Marxuach, director for policy development at the Center for a New Economy, a nonpartisan research institute in San Juan, the capital. “We used all that money to finance current expenditures, to refinance debt that had little or no impact on the real economy.” ... Colon de Armas said Puerto Rico’s leaders haven’t done enough to make local industry competitive in the global economy and are instead counting on tax incentives or other assistance from Washington to protect businesses. The global slowdown and Detroit’s bankruptcy are less important, he said. ... “We were in recession when the world was having good economic times,” he said. “It’s true that the world has had bad economic times recently, but we are uniquely depressed.” ... Besides the economy, rising crime is also persuading people to leave. The homicide rate is about 27 for every 100,000 people, compared with the U.S. average of 4.7, according to 2012 data from the FBI.
Early this year, as part of the $92 million “Data to Decisions” program run by the Defense Advanced Research Projects Agency (DARPA), the Office of Naval Research began evaluating computer programs designed to sift through masses of information stored, traded, and trafficked over the Internet that, when put together, might predict social unrest, terrorist attacks, and other events of interest to the military. Blog posts, e-mail, Twitter feeds, weather reports, agricultural trends, photos, economic data, news reports, demographics—each might be a piece of an emergent portrait if only there existed a suitable, algorithmic way to connect them. ... There is no doubt that the Internet—that undistinguished complex of wires and switches—has changed how we think and what we value and how we relate to one another, as it has made the world simultaneously smaller and wider. Online connectivity has spread throughout the world, bringing that world closer together, and with it the promise, if not to level the playing field between rich and poor, corporations and individuals, then to make it less uneven. There is so much that has been good—which is to say useful, entertaining, inspiring, informative, lucrative, fun—about the evolution of the World Wide Web that questions about equity and inequality may seem to be beside the point. ... But while we were having fun, we happily and willingly helped to create the greatest surveillance system ever imagined
Inside Ted Ligety's masochistic plan to take over the ski universe, starting with the Sochi Olympics ... IT'S A JULY MORNING in Park City, Utah, and U.S. Ski Team star Ted Ligety, six of his teammates, and I are locked in an intense game of basketball. From the first inbound, Ligety, who is five foot eleven and 185 pounds of power, drives hard, tosses elbows, and blows through picks. Then—"Ahhhh!"—he comes down hard on his ankle, turning it over. It starts to swell, and Ligety limps around with clenched teeth, but after ten minutes he shakes off the pain. He has to: the Winter Games in Sochi are only seven months away, and Ligety is expected to contend for numerous medals. There's a lot of training to do. ... "Ted figured out a way to ski that nobody has duplicated"