The Intolerance Behind Elizabeth Warren’s 11 Commandments of Progressivism

August 22nd, 2014

In a recent speech of which Politico claims absolutely energized the “Progressive” left, Elizabeth Warren laid out her so-called 11 Commandments of Progressivism.

In what follows, I will first give Warren’s “commandment,” and then explain how each so-called commandment cannot be implemented without official state violence and coercion. I emphasize that I am not going to use hyperbole or paint Warren in a false light. I’m sure she is a nice person when one meets her. My point is not that Warren is nice or nasty, but rather that she espouses a political economy that is based on political favors for some coupled with fierce intolerance toward many.

The 11 Commandments:

1. We believe that Wall Street needs stronger rules and tougher enforcement, and we’re willing to fight for it.

For all of the financial misconduct that we have seen from Wall Street, the problem isn’t a lack of regulation or a dearth of enforcement. No, the problem is that Wall Street is linked at the hip to the federal government and to the Federal Reserve System, which then uses Wall Street as a mechanism to pump cheap money into the system. At the same time, the state then protects Wall Street firms from the consequences that occur when investments in the financial bubbles the Fed creates fail.

Progressive Populists like Warren claim to abhor the tax-funded bailouts, but they don’t object to the inflationary actions of the Fed, nor do they call for a halt to the symbiotic relationship between Wall Street and K Street. Yes, they might complain about the relationship, but at no time has Warren or any of her ilk ever called for a severing of the ties between Washington and Wall Street.

What Warren actually is saying is this: We want the state to have an even greater role in directing investments and determining the outcomes, and when the outcomes invariably fail — as we can expect central planning to do — then we demand ever more of the same. The results may be economically disastrous, but they provide marvelous political theater.

Warren never will endorse free markets on Wall Street — and neither will Wall Street, which I believe to be instructive. Nothing would provide better discipline for the markets than free markets, but Warren is not interested in market discipline; she is interested in the markets being forced to provide outcomes that violate economic laws, and then demanding even more government coercion when disasters inevitably occur.

2. We believe in science, and that means that we have a responsibility to protect this Earth.

Warren obviously is referring to the fact that not all scientists believe we are in the middle of catastrophic global warming — and that makes her mad. In fact, it makes Warren so angry that she wants the state to intimidate scientists that don’t go along with Washington’s pre-determined “scientific” outcomes.

One does not “believe in” or “not believe in” science. Science is not — or should not be — a deity. Science is about using certain consistent methods to ascertain and test various theories about the natural world. It also is about determining probabilities for certain, repeatable events and it should never be hijacked by politicians for their own uses.

If Warren truly did “believe” in science, then she would have no objection to scientists like Roy Spencer and Judith Curry explaining in public forums — without harassment — why they believe the current fears that Warren promotes about “climate change” are overblown. You see, in real science, the “discussion” never is over. Skepticism is the very heart of the scientific method, something that the “discussion-is-over” people like Warren refuse to hear.

What Warren means is that governments should fund scientific research, and that the research should reflect what politicians like Warren want it to reflect. America’s current obesity crisis, for example, is linked directly to government bullying of scientists almost forty years ago, forcing them to accept the government’s “new” nutrition standards, including the government’s “war on fat,” which has been disastrous.

3. We believe that the Internet shouldn’t be rigged to benefit big corporations, and that means real net neutrality.

I am no expert on “net neutrality,” but I don’t think that Warren is much interested in protecting the interests and rights of ordinary individuals who use the Internet, as she remains strangely silent on illegal spying done by the CIA and NSA which does absolutely nothing to protect ordinary citizens.

4. We believe that no one should work full-time and still live in poverty, and that means raising the minimum wage.

Translation: If you are willing to work for pay that is below what the government demands you be given, then you are breaking the law. And what about those people whose productivity does not match what Warren believes the minimum wage should be? They are out of luck.

What Warren does not say is that the original purpose for imposing the minimum wage was never about getting people out of poverty. Instead, Progressives wanted to ensure that certain groups of people, blacks and Eastern Europeans living in the USA, would be priced out of the labor market. Given the unemployment rate for black teenagers in this country is at an all-time-high, one just might think that the Progressive strategy has worked very well.

It is the business owners that Warren so despises who have to foot the bill of increased labor costs, and if they cannot, then the business closes, but Warren would of course not lose a dime. Lest one thinks she has any respect for entrepreneurs and people who have invested, worked, and risked their own finances in order to start and maintain businesses, Warren has this to say, according to Progressive columnist E.J. Dionne:

“There is nobody in this country who got rich on his own,” she said. “Nobody. You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for.” It was all part of “the underlying social contract,” she said, a phrase politicians don’t typically use.

Entrepreneurs, in Warren-speak, are social and economic parasites that should get no credit at all for anything. They just take advantage of government services and business success comes almost automatically and the entrepreneurs then extract wealth from the community via profits.

 

5. We believe that fast-food workers deserve a livable wage, and that means that when they take to the picket line, we are proud to fight alongside them.

When I was fifteen years old, I worked at a tourist attraction near Chattanooga called Rock City. No one — including the politicians — believed that I should have been making enough to live on my own. Likewise, the vast majority of fast food workers are not people trying to live independently; they are earning money to help pay for their expenses, save for college, make car payments, and the like.

First, Warren does not even understand what we mean by jobs and wages. A “job” is the application of labor to the creation of either a producer’s good or a consumer’s good. A wage is the payment given to the owner of the labor services for that particular service. It is nothing more than that.

Second, by insisting wrongly that employment is essentially a welfare scheme, Warren disconnects labor from production. To use a Marxian term, she endorses alienation as a labor doctrine in which the worker is alienated from any realities regarding his or her job. According to Warren, the job is nothing more than an income stream to the worker, with the stream having no connection at all with the value of what the worker produces.

If we were to take the reality — based upon laws of economics — of Warren’s statement, we get this: “If you are willing to work for less than what the state declares to be a ‘living wage,’ you will not be permitted to work at all, and should you seek employment without permission from the state, we will treat you like a criminal.” Unfortunately, in Warren’s new order, there would be lots of labor criminals, people working off-the-books and ultimately marginalized people turning toward the fringe occupations that the state declares to be illegal.

6. We believe that students are entitled to get an education without being crushed by debt.

Student loan burdens are becoming greater, but perhaps we need to ask why that is so instead of telling students that someone else — often someone not privileged to have had a college education — will foot their bills. If pushed hard enough, I suspect that Warren would agree with fellow leftists that college should be both tuition-free and relatively open-accessed. Furthermore, in their minds, that should be no problem. (I have spoken to enough faculty members where I teach to know that a lot of leftist Democrats believe that colleges should not charge tuition or anything else, period.)

At the very least, it would seem, Warren believes that individuals that rack up large education debts should not fully have to pay those debts, with the payments, instead, falling to the taxpayers, and even though it is quite clear that the personal “profits” from a college education tend to be privatized. Like the Wall Street firms and other crony capitalist outfits, Warren now wants an entire country in which certain politically-favored groups (and firms) find their profits privatized, but their losses socialized, and paid for by everyone else.

7. We believe that after a lifetime of work, people are entitled to retire with dignity, and that means protecting Social Security, Medicare, and pensions.

Interestingly, while shilling for increases in these things (which, as always, are covered fully by taxpayers who will be forced to supply the “dignity” to others), Warren is not willing to afford “dignity” to entrepreneurs who saved, took big risks, and took chances with their lives to provide goods and services for the benefit of consumers.

8. We believe — I can’t believe I have to say this in 2014 — we believe in equal pay for equal work.

Warren is not speaking of payment for men and women who do the same job in a market setting. In fact, there is a lot of evidence that shows that single women tend to outearn single men.

No, Warren is speaking of a term called “comparable worth,” in which government authorities determine the “equality” of jobs. Such a process is utterly politicized, so what Warren really means is that the state will determine the so-called worth of a job, and then force employers to pay accordingly.

9. We believe that equal means equal, and that’s true in marriage, it’s true in the workplace, it’s true in all of America.

If Warren meant getting the state out of the marriage business, I would support her point here. However, judging from all of her rhetoric, what she means is that everyone else should be forced to accept her definition of marriage, and anyone who does not will be fined or even arrested for holding onto dissenting views.

Warren constantly agitates for a thoroughly politicized society in which the state decides what is valuable, what is “legitimate,” and what kind of thinking should be permitted. When former Mozilla CEO Brendan Eich this year was forced out because he had contributed some money to a “man-and-woman” marriage initiative in California in 2008, it sent a clear and chilling message to workplaces everywhere in the US: the only thing that matters is politics.

It didn’t matter that Eich was a major player in helping develop the Internet and his skills will be sorely missed. No, the Elizabeth Warrens of this world care only about a person’s political views. (Maybe that is one reason Warren has expressed such hatred of successful entrepreneurs: they succeed outside of political ideology.)

10. We believe that immigration has made this country strong and vibrant, and that means reform.

Because the current immigration situation is a hot-button item that I would prefer not to touch, given I can see arguments on both sides, I only will say that Warren’s vision of unlimited immigration into an absolute welfare state would be a disaster. Warren has shown no proclivity to putting any limits on welfarism, and given her political record, I believe she sees new immigrants as a source of political support exchanged for welfare benefits.

11. And we believe that corporations are not people, that women have a right to their bodies. We will overturn Hobby Lobby and we will fight for it. We will fight for it!

The Hobby Lobby decision was quite limited, and the implications of the decision certainly did not call for the totally unhinged reaction Warren and others had. The US Supreme Court did not preventanyone from receiving birth control devices or anything else. All it said was that there were four kinds of devices or chemical compounds which abortion opponents call abortifacients that certain employers could be exempt from providing free of charge for employees.

It does not prohibit Hobby Lobby employees from purchasing those particular chemicals or devices; the decision only says that Hobby Lobby does not have to pay for them, given the religious nature of the company’s owners and the fact that it is a tightly-held corporation.

Please understand what Warren is saying: the owners of Hobby Lobby have no rights. They are not people; only those with views similar to Elizabeth Warren have rights.

Original Article can be found at: http://mises.org/daily/6841/The-Intolerance-Behind-Elizabeth-Warrens-11-Commandments-of-Progressivism

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

William Anderson is an associated scholar of the Mises Institute and teaches economics at Frostburg State University. Send him mail. See William L. Anderson’s article archives.

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Opinion: Foreign Investment in U.S. Real Estate Widely Under-Reported

August 22nd, 2014

Fox Business

In 2013, foreign direct investment (FDI) in U.S. commercial real estate achieved record numbers and big headlines. Chinese companies alone were reported to have invested $14 billion in the U.S. last year, more than double their total in 2012. However despite the focus on foreign investment and the splashy headlines, the media have only managed to report on the tip of the iceberg – the actual amount of foreign capital pouring into U. S. real estate is vastly underreported. Data companies such as Real Capital Analytics look primarily at deed transfers to determine transfers to foreign investors, and therefore typically miss the substantial investments by foreign investors who partner with domestic operators.

It makes sense that foreign investors are increasingly taking on domestic partners.  The benefits to foreign investors are numerous, including safe and stable returns in a strong U.S. market, the ability to leverage the expertise of a local partner who knows how to navigate extremely competitive U.S. markets such as the New York City real estate market, and often mitigates transfer taxes, property tax hikes, and higher property taxes which would likely result had the foreign investor acquired a controlling interest in a property.

For U.S. operators, partnering with a foreign investor offers greater access to capital, and the ability to move quickly in a market where timing is often the deciding factor in closing a deal. However, as more capital chases a constrained supply of commercial properties, cap rates are driven down and prices up.  Eventually local markets feel the impact, as primary markets become saturated and secondary markets attract investor interest.

An increasing number of U.S. real estate companies such as Blackstone (BX), Tishman Speyer, Brookfield (BAM) and General Growth Properties (GGP) are sending executives on frequent trips overseas – from Europe to the Middle East to Asia – in an attempt to woo potential foreign investors into becoming limited real estate partners on various projects in the United States. Significant foreign resources are being quietly invested in domestic asset and property managers as well.

While there are numerous examples of underreported foreign investment, a select few include Cindat Capital Management, which is partnering with Zeller Realty Group in the $304 million purchase of 311 South Wacker Drive in Chicago, with Cindat taking 70% of the venture. In Brooklyn, New York, Greenland Holdings of China is purchasing a 70% stake in the Atlantic Yards, a Forest City Enterprises development, for approximately $200 million. Oxford Properties, the Ontario-based investor, is partnering with the Related Companies to develop the Hudson Yards mixed-use development on Manhattan’s Far West Side. Also in Manhattan, at Time Warner Center on Columbus Circle, Abu Dhabi Investment Authority is investing alongside the Singapore Sovereign Wealth Fund and Related Companies, the lead developer of Time Warner Center, to buy Time Warner’s space for $1.3 billion, with Abu Dhabi and Singapore reported to be funding 80% of the purchase price. SOHO China purchased a 40% stake in the General Motors Building for $700 million in a deal that values the Manhattan property at approximately $3.4 billion.

Many deep-pocketed foreign investors are strategically pulling capital out of their home countries and placing funds in U.S. real estate – often in the New York City market –a strong asset class for the long term. Some financial indicators have pointed to substantial credit and real estate bubbles in the Asian markets. The unwinding of these bubbles could well lead to some sort of financial crisis in China or in regional neighbors such as Australia and Singapore — yet another reason why we are now seeing an uptick in both direct and indirect foreign investment in U.S. real estate.

Foreign investors begin with different return expectations from those of domestic real estate investment trusts, institutional owners and pension funds. Since the main goal is to invest in a perceived safe-haven market where their money will be protected, foreign investors have lower return expectations and a much longer time horizon to achieve a profit. Making a current return is sometimes a secondary goal.

Original Article can be found at: http://www.foxbusiness.com/economy-policy/2014/08/20/opinion-foreign-investment-in-us-real-estate-widely-underreported/

Jason Meister is Vice President in the Capital Markets Group at Avison Young, a firm specializing in commercial real estate services. 

The Great Escape: Health, Wealth, and the Origins of Inequality

August 22nd, 2014

The Great Escape

Only Angus Deaton’s The Great Escape has been named: One of Bloomberg/Businessweek Best Books, One of Forbes Magazine’s Best Books, Honorable Mention for PROSE Award in Economics, Association of American Publishers Shortlisted for the 2014 Spear’s Book Awards in Financial History, and  A “Best Business Book of the Year for 2013″ selected on LinkedIn.

Joining me this Saturday on Your Financial Editor is Mr. Deaton Listen from anywhere Saturday morning @ 8am on AM 930 WFMD by logging ontowww.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here!

The world is a better place than it used to be. People are wealthier and healthier, and live longer lives. Yet the escapes from destitution by so many have left gaping inequalities between people and between nations. In The Great Escape, Angus Deaton–one of the foremost experts on economic development and on poverty–tells the remarkable story of how, starting 250 years ago, some parts of the world began to experience sustained progress, opening up gaps and setting the stage for today’s hugely unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and he addresses what needs to be done to help those left behind.

Deaton describes vast innovations and wrenching setbacks: the successes of antibiotics, pest control, vaccinations, and clean water on the one hand, and disastrous famines and the HIV/AIDS epidemic on the other. He examines the United States, a nation that has prospered but is today experiencing slower growth and increasing inequality. He also considers how economic growth in India and China has improved the lives of more than a billion people. Deaton argues that international aid has been ineffective and even harmful. He suggests alternative efforts–including reforming incentives to drug companies and lifting trade restrictions–that will allow the developing world to bring about its own Great Escape.

Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.

Angus Deaton

Deaton earned his B.A., M.A., and Ph.D. at Cambridge University, in 1975 with thesis titled Models of consumer demand and their application to the United Kingdom where he was a Fellow at Fitzwilliam College and a Research Officer working with Richard Stone and Terry Barkerin the Department of Applied Economics. Deaton was a Professor of Econometrics at the University of Bristol before moving in 1983 to Princeton University, where his appointment has been suggested by John P. Lewis former Dean of WWS. He is currently the Dwight D. Eisenhower Professor of International Affairs and Professor of Economics and International Affairs at the Woodrow Wilson School and the Economics Department at Princeton.

Roadside MBA Story

August 1st, 2014

Scott Schaefer, Co-Author of Roadside MBA will be joining me this Saturday August 2nd on Your Financial Editor. Listen from anywhere Saturday morning @ 8am on AM 930 WFMD by logging onto www.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here!

Road Side MBA

About the book:

We’re business professors who share a love of road trips… And we hit the road from time to time in search of stories of small- and medium-sized businesses that we can use to illustrate important ideas taught in leading MBA programs.

Roadside MBA got started way back in 2010. We were on the phone discussing economics-based strategy courses for MBA students, and were lamenting the fact that the typical Harvard Business School case study focuses on Procter and Gamble, or Ford Motor Company, or Microsoft, or Pepsi, or … somebody big with billions or hundreds of millions in annual sales. One of us — we all take credit, but nobody actually recalls whose idea it was — pointed out that owners and managers of small and medium-sized businesses might benefit from a dose of MBA knowledge, but that business schools don’t always serve that market very well.  So we decided to hit the road in search of stories that we could use to help translate MBA strategy frameworks for owners of small and medium-sized businesses.

Our first trip was from Memphis to Omaha in August of 2010. We went from Denver to Oklahoma City in winter 2011, Charlotte to Atlanta in spring 2011, Missoula to Portland in summer 2011, Chicago to Cincy in May 2012, and Atlanta to New Orleans in January of 2013.  We typically meet in City A, rent a car, stop in Cities B, C, D and E on consecutive days, visit 3-4 businesses per day, and fly to our respective homes out of City F. We have grown to like Holiday Inn Express quite a bit, although to date they have not offered us a sponsorship deal.

To date, we’ve visited around 100 small and medium-size businesses. We try to set a meeting with the owner or a general manager with significant operational and strategic oversight responsibility, and we usually start by just asking for the story of the business. From there, our visits usually turn in to a conversation in which the three of us ask questions about pricing, positioning, strategy, organization, succession, or other topics, depending on what strikes us as interesting. The people we’ve met are, without fail, creative and energetic, passionate and thoughtful, interesting and driven. It’s been really fun, and we have learned so much.

Scott Schaefer

About the Co-Author:

Scott Schaefer is the Kendall D. Garff Chair in Business Administration and Professor of Finance at the University of Utah’s David Eccles School of Business.

Scott’s research focuses on the economics of organization, with an emphasis on understanding employment relationships and decision-making inside firms.   He teaches economics-based MBA courses at the University of Utah, and makes regular guest-teaching appearances at Northwestern’s Kellogg School of Management.  He is co-author of the leading textbook Economics of Strategy and served as Associate Dean at the University of Utah’s business school from 2009 to 2012.  Scott moved to Utah in 2005, and previously held the Richard M. Paget Chair in Management Policy at Kellogg.  He has a PhD in economics from the Stanford Graduate School of Business.

Scott is the Roadside MBA driver, and insists that he follows Paul’s directions to the letter.  He is also a lifelong Chicago White Sox fan, which is great because he frequently has a bit of spare time in October for extra blogging.

Source: http://www.roadside-mba.com/about-us/

The Obstacle is the Way- Ryan Holiday

July 17th, 2014

Ryan Holiday

Ryan Holiday is a media strategist for notorious clients like Tucker Max and Dov Charney. After dropping out of college at 19 to apprentice under the strategist Robert Greene, he went on to advise many bestselling authors and multi-platinum musicians. He is the Director of Marketing at American Apparel, where his work in advertising was internationally known. His strategies are used as case studies by Twitter, YouTube and Google and have been written about in AdAge, the New York Times, Gawker and Fast Company. His first book, Trust Me I’m Lying: Confessions of a Media Manipulator, was a Wall Street Journal bestseller. He currently lives in Austin, TX with his rebellious puppy, Hanno and pet goats.

Join me this week on Your Financial Editor!  Your Financial Editor airs Saturday mornings at 8am EST on AM930 WFMD. You can listen live from anywhere by clicking here: www.wfmd.com and clicking the listen live button! Can’t tune in? Don’t worry, our shows are recorded and you can listen to them here you can listen them here.

Obstacle

The book from the view of Mr. Holiday: The book is The Obstacle Is The Way: The Timeless Art of Turning Trials Into Triumphs. As all of you know, I’ve always been a student of Stoicism, a practical philosophy favored by influential Greek and Roman statesman and thinkers. I’ve long written about these things on my blog but never in a book. That changes now. This book isn’t about Stoicism, though. It’s a book about using the best parts of Stoicism to solve the actual problems that ambitious, hardworking people face. The premise of the book is based on a simple maxim by Marcus Aurelius:

“The impediment to action advances action.
What stands in the way becomes the way.”

From this maxim I’ve created a manual for overcoming obstacles and turning them into opportunities—illustrated with dozens of stories (many of which we read here first) from John D. Rockefeller to Amelia Earhart to Ulysses S. Grant to Steve Jobs to George Clooney to Barack Obama to Laura Ingalls Wilder to Arthur Ashe to Demosthenes to Abraham Lincoln to Thomas Edison. It is a book that will become more valuable to you as you revisit it, using it when faced with the challenges we all face in life.

Source: ryanholiday.net

Persistent Unemployment and Policy Uncertainty

June 19th, 2014

Join me this week on Your Financial Editor!  Your Financial Editor airs Saturday mornings at 8am EST on AM930 WFMD. You can listen live from anywhere by clicking here: www.wfmd.com and clicking the listen live button! Can’t tune in? Don’t worry, our shows are recorded and you can listen to them here you can listen them here.

Patrick Anderson

Mr. Anderson’s received the Edmund A. Mennis award from the National Association for Business Economic for his work on his paper titled, “Persistent Unemployment and Policy Uncertainty: Numerical Evidence from a New Approach.”

Abstract:

In the recovery from the deep recession that formally ended in 2009, unemployment has proven resistant to both aggressive fiscal policy and expansionary monetary policy. The persistence of high unemployment, fully four years after the trough of the recession and despite aggressive policies to combat it, raises a critical question about the ability of standard macroeconomics models to grasp fundamental business decisions facing private firms, including hiring and investment decisions.

One competing argument to those regularly made in fiscal and monetary policy debates is the policy uncertainty hypothesis. This holds that managers of private firms have been rationally avoiding hiring workers, due to the risk of higher future costs imposed by government policies. However, such a hypothesis cannot be directly testes in standard models of firm behaviors that rely on the presumption that firms maximize profits in each time period.  The probabilities of transitioning from one policy regime to another, the consequences of such transitions to the value of the firm, are not inputs to these models.

To formally test the policy uncertainty hypothesis, we used a novel “value functional” or “recursive” model of firm behavior, in which managers maximize the value of the business rather than its profits. This model allows for managers to explicitly consider policy uncertainty, and the consequences of future business decisions they might make if the conditions change. We create a data set that includes income statement information for firms in a selected U.S. industry in the relevant time period, parameters that reflect policy-related costs if employing workers in the industry, and probabilities of changes policies in the future.

Using this approach and these data, we demonstrate that policy uncertainty affects rational hiring decisions of firms. We show that business managers can make rational decisions to maximize the value of their businesses that forego available current-periods profits, due solely to uncertainty about future policy- related costs. Tests for robustness indicate that this effect is not dependent on particularly onerous assumptions, that the response to policy uncertainty is higher in some industries than others, and that the scale of the firm also affects its sensitivity to policy risk.

Finally, we conclude that this approach has potentially broad application within business economics, particularly in evaluating investment and hiring decisions; real options; and other aspects of uncertainty, fixed costs, and managerial flexibility.

©2013 Anderson Economic Group, LLC

About the Author

Mr. Anderson founded Anderson Economic Group in 1996, and serves as a Principal and Chief Executive Officer in the company.

Anderson Economic Group is one of the most recognized boutique consulting firms in the United States, and has been a consultant for states such as Michigan, Kentucky, North Carolina, Wisconsin and Ohio; the Province of Ontario; manufacturers such as General Motors, Ford, DaimlerChrysler, Honda; retailers such as Meijer’s and Kmart; telecommunications companies such as SBC and AT&T; utilities like ITC;  the University of Michigan, University of Chicago, and other colleges; and the franchisees of Anheuser-Busch, Molson, Coors, Miller, Harley-Davidson, Mercedes-Benz, Suzuki, Cadillac, Chevrolet, Ford, Lincoln, and Avis products.

Mr. Anderson has written over 100 published works, including the just-released Economics of Business Valuation from Stanford University Press. Three of his articles, “Pocketbook Issues and the Presidency”, “The Value of Private Businesses in the United States”, and “Policy Uncertainty and Persistent Unemployment” have each been awarded for outstanding writing from the National Association of Business Economics. Anderson’s views on the economy are often cited by national news media including The Wall Street Journal, New York Times, National Public Radio, and Fox Business News.

Mr. Anderson has taken a leading role in several major public policy initiatives in his home state. He was the author of the 1992 Term Limit Amendment to the Michigan Constitution, and the 2006 initiated law that repealed the state’s 4-decade-old Single Business Tax. His firm’s work resulted in a wage increase for Home Help workers in 2006, the creation of a Michigan EITC in 2008, and the repeal of the item pricing law in 2011. Before founding Anderson Economic Group, Mr. Anderson was the deputy budget director for the State of Michigan under Governor John Engler, and Chief of Staff for the Michigan Department of State.

Anderson is a graduate of the University of Michigan, where he earned a Master of Public Policy degree and a Bachelor of Arts degree in political science. He is a member of the National Association for Business Economics and the National Association of Forensic Economists. The Michigan Chamber of Commerce awarded Mr. Anderson its 2006 Leadership Michigan Distinguished Alumni award for his civic and professional accomplishments.

 

Big Bang Disruption: Strategy in the Age of Devastating Innovation

June 5th, 2014

big bang

It used to take years or even decades for disruptive innovations to dethrone dominant products and services. But now any business can be devastated virtually overnight by something better and cheaper. How can executives protect themselves and harness the power of Big Bang Disruption?

 
Just a few years ago, drivers happily spent more than $200 for a GPS unit. But as smartphones exploded in popularity, free navigation apps exceeded the performance of stand-alone devices. Eighteen months after the debut of the navigation apps, leading GPS manufacturers had lost 85 percent of their market value.

 
Consumer electronics and computer makers have long struggled in a world of exponential technology improvements and short product life spans. But until recently, hotels, taxi services, doctors, and energy companies had little to fear from the information revolution.

 
Those days are gone forever. Software-based products are replacing physical goods. And every service provider must compete with cloud-based tools that offer customers a better way to interact.

 
Today, start-ups with minimal experience and no capital can unravel your strategy before you even begin to grasp what’s happening. Never mind the “innovator’s dilemma”—this is the innovator’s disaster. And it’s happening in nearly every industry.

 
Worse, Big Bang Disruptors may not even see you as competition. They don’t share your approach to customer service, and they’re not sizing up your product line to offer better prices. You may simply be collateral damage in their efforts to win completely different markets.

 
The good news is that any business can master the strategy of the start-ups. Larry Downes and Paul Nunes analyze the origins, economics, and anatomy of Big Bang Disruption. They identify four key stages of the new innovation life cycle, helping you spot potential disruptors in time. And they offer twelve rules for defending your markets, launching disruptors of your own, and getting out while there’s still time.

 
Based on extensive research by the Accenture Institute for High Performance and in-depth interviews with entrepreneurs, investors, and executives from more than thirty industries, Big Bang Disruption will arm you with strategies and insights to thrive in this brave new world.

Joining me this week on Your Financial Editor is the author of Big Bang Disruption, Larry Downes. Your Financial Editor airs Saturday mornings at 8am EST on AM930 WFMD. You can listen live from anywhere by clicking here: www.wfmd.com and clicking the listen live button! Can’t tune in? Don’t worry, our shows are recorded and you can listen to them here you can listen them here.

larry downes

Larry Downes is an Internet industry analyst and speaker on developing business strategies in an age of constant technological disruption.

Downes is the author of the Business Week and New York Times business bestseller, “Unleashing the Killer App: Digital Strategies for Market Dominance” (Harvard Business School Press, 1998), which has sold nearly 200,000 copies and was named by the Wall Street Journal as one of the five most important books ever published on business and technology.

 

He has written for a variety of publications, including USA TodayHarvard Business Review, Inc.,WiredStrategy & LeadershipCIOThe American Scholar and the Harvard Journal of Law and Technology.

He writes regularly for The Harvard Business ReviewForbesCNET, and The Washington Post, covering the intersection of technology, politics and business.

Downes has held faculty appointments at The University of Chicago Booth School of Business, Northwestern University School of Law, and the University of California-Berkeley’s Haas School of Business, where he was Associate Dean of the School of Information. From 2006-2010, he was a nonresident Fellow at the Stanford Law School Center for Internet & Society.

He serves as Project Director at the Georgetown Center for Business and Public Policy’s Evolution of Regulation and Innovation project and as Research Fellow with the Accenture Institute for High Performance.

Get Ready For the Subprime Mortgage Crack-Up 2.0

June 5th, 2014

May 28, 2014

By Edward Pinto via Real Clear Markets

In 1991 community advocate Gail Cincotta, in testimony before the Senate Banking committee stated: “Lenders will respond to the most conservative standards unless [the GSEs] are aggressive and convincing in their efforts to expand historically narrow underwriting.” The next year Congress imposed affordable housing mandates on Fannie Mae and Freddie Mac. Over the next 15 years the Department of Housing and Urban Development (HUD) forced the abandonment of traditional underwriting standards, which led to an accumulation of an unprecedented number of weak and risky non-traditional mortgages. The collapse of housing and mortgage markets, and the ensuing Great Recession, may be directly traced to those events in the early-1990s.

Earlier this month the following headline appeared in the Wall Street Journal: “U.S. Backs Off Tight Mortgage Rules: In Reversal, Administration [HUD/FHA] and Fannie, Freddie Regulator Push to Make More Credit Available to Boost Housing Recovery.” Clearly memories as to the causes of the recent housing market collapse are short.  Indeed, political pressures are once again increasing on the private sector to degrade sound lending practices.

The headline refers to two policy statements made May 13, one by Mel Watt, director of the Federal Housing Finance Agency (FHFA), and the other by Shaun Donovan, secretary of HUD. The FHFA is the regulator of Fannie Mae and Freddie Mac, which along with the Federal Housing Administration (FHA) are responsible for guaranteeing about 75 percent of all mortgage credit in the United States.

Watt announced a course reversal from his predecessor Edward DeMarco. One of his most significant moves was the alignment of FHFA’s policies — with respect to discouraging private sector discretion in adhering to strong underwriting standards — with those of the FHA. Watt warned lenders and private mortgage insurers that “credit overlays result in the rejection of many loans that would otherwise meet [Fannie Mae and Freddie Mac] credit standards.” This echoes FHA Commissioner Carol Galante’s 2013 statement: “[L]ender overlays are damaging the recovery by limiting access to creditworthy borrowers.”

The parallels to Cincotta’s statement are unmistakable: regulators must convince lenders and private mortgage insurers to stop utilizing more conservative standards than allowed by government agencies.

Why do policymakers want to force the private sector to originate easy credit loans? First is the desire to use easy credit to juice an anemic economic recovery. Yet we have already had 6 years of the lowest interest rates in generations, combined with already loose lending standards. The result has been increasing home prices in concert with stagnant incomes, leading to reduced affordability, particularly in places like California.

Second is to expand access to “creditworthy borrowers.” This statement is duplicitous. The real goal is to get the private sector to originate more loans to sub-prime borrowers with credit scores below 660 or pre-tax debt-to-income ratios above 43 percent, and to non-prime loans to borrowers with tiny down payments. This is a continuation of a fifty-plus years housing policy based on using ever greater leverage in a futile attempt to expand homeownership by helping unqualified borrowers buy homes.

This leverage has taken the form of reduced down payments, higher debt ratios, extending loan terms to 30 years, and credit to those with impaired credit histories. This policy failure is evidenced by a stagnant homeownership rate which today stands at 62 percent (excludes owners with seriously delinquent loans), the same rate as in 1960. Yes, the rate did hit 69 percent in 2004, but that was thanks to the loose lending standards resulting from Congress’ following Gail Cincotta’s prescription. Contrast 1940 to 1960, a period during which the home ownership rate rose dramatically for both blacks and whites. Why? Precisely because home lending until 1960 was not highly leveraged, making it low risk to homebuyers and lenders alike.

The cautionary remarks of Watt’s predecessor, Ed DeMarco, also made on May 13, are pertinent: “[d]o not confuse weakening underwriting standards and underpricing risk with helping people or promoting market efficiency. A government effort to assist families with limited resources and poor credit history to take on increased leverage seems a curious public policy.”

American Enterprise Institute (AE) resident fellow Edward Pinto is the co-director of AEI’s International Center on Housing Risk.

BlackRock CEO says leveraged ETFs could “blow up” whole industry

June 5th, 2014

File photo of Blackrock CEO Larry Fink at a business roundtable meeting of company leaders in Washington

BlackRock Inc Chief Executive Officer Larry Fink is pictured at a business roundtable meeting of company leaders and U.S. Republican Presidential candidate Mitt Romney in Washington in this June 13, 2012 file photo.

CREDIT: REUTERS/JASON REED/FILES

(Reuters) – BlackRock Chief Executive Officer Larry Fink said on Wednesday that leveraged exchange-traded funds contain structural problems that could “blow up” the whole industry one day.

Fink runs a company that oversees more than $4 trillion in client assets, including nearly $1 trillion in ETF assets.

“We’d never do one (a leveraged ETF),” Fink said at a Deutsche Bank investment conference in New York. “They have a structural problem that could blow up the whole industry one day.”

Fink spoke during a conversation with Deutsche Bank co-CEO Anshu Jain in a broader discussion about regulating financial companies. ProShares, a leading leveraged ETF firm, disagreed with Fink’s remarks.

“Leveraged ETFs are well regulated, transparent products and there is no credible evidence that they have any harmful effect on the markets or our industry,” said Tucker Hewes, a spokesman for ProShares.

Leveraged ETFs account for 1.2 percent of the $2.5 trillion in global ETF assets under management. At the end of April, there were nearly 270 leveraged ETF funds with $30.3 billion in assets, said Deborah Fuhr, managing partner of ETF research firm ETFGI LLP. A leveraged ETF uses financial derivatives and debt to amplify the returns of an underlying index. Some leveraged ETFs have become more aggressive, ramping up risk and potential returns, as the ETF industry gains popularity with individual and institutional investors.

Leveraged ETFs have attracted $1.8 billion in net new assets during the first four months of 2014, Fuhr said.

They are showing up more as buy-and-hold investments in the portfolios of retail investors, as financial advisers grow more comfortable recommending them, and first gained a foothold among traders who wanted an investment vehicle to make fast and enhanced bets on big index moves or the direction of gold prices, for example

Last year, when the Standard & Poor’s 500 Index rose 32 percent, the $348 million Direxion Daily S&P 500 Bull 3x Shares ETF gained 118.9 percent, or nearly quadruple the S&P 500′s gains.

Last month, Direxion Funds launched two leveraged ETFs with three times exposure to the daily direction of gold prices. Direxion Daily Gold Bull 3X Shares ETF, for example, seeks 300 percent of the daily performance of the Comex Gold Futures benchmark.

The industry’s largest leveraged ETF is the ProShares UltraShort 20+ Year Treasury, which has about $4 billion in assets.

Fink said he believes regulators should focus on the structure of financial products.

“If you want to create a safer and sounder marketplace, it has to be at the product level,” Fink said.

U.S. Securities and Exchange Commission staffers have issued warnings about leveraged ETFs, though no action has been taken to curb their availability. Regulators say individual investors may not realize that the investment products are designed to achieve their performance objectives on a daily basis rather than over the long term.

 

BY TIM MCLAUGHLIN

Thu May 29, 2014 8:23am BST

http://uk.reuters.com/article/2014/05/29/us-funds-etf-blackrock-idUKKBN0E90JG20140529

(Reporting By Tim McLaughlin; Editing by David Gregorio and Tom Brown)

The Physics of Wall Street

May 29th, 2014

This week on Your Financial Editor is James Owen Weatherall to talk about his latest book:

 Physics of Wall Street

After the economic meltdown of 2008, Warren Buffett famously warned, “beware of geeks bearing formulas.” But as James Weatherall demonstrates, not all geeks are created equal. While many of the mathematicians and

software engineers on Wall Street failed when their abstractions turned ugly in practice, a special breed of physicists has a much deeper history of revolutionizing finance. Taking us from fin-de-siècle Paris to Rat Pack-era Las Vegas, from wartime government labs to Yippie communes on the Pacific coast, Weatherall shows how physicists successfully brought their science to bear on some of the thorniest problems in economics, from options pricing to bubbles.

The crisis was partly a failure of mathematical modeling. But even more, it was a failure of some very sophisticated financial institutions to think like physicists. Models—whether in science or finance—have limitations; they break down under certain conditions. And in 2008, sophisticated models fell into the hands of people who didn’t understand their purpose, and didn’t care. It was a catastrophic misuse of science.

The solution, however, is not to give up on models; it’s to make them better. Weatherall reveals the people and ideas on the cusp of a new era in finance. We see a geophysicist use a model designed for earthquakes to predict a massive stock market crash. We discover a physicist-run hedge fund that earned 2,478.6% over the course of the 1990s. And we see how an obscure idea from quantum theory might soon be used to create a far more accurate Consumer Price Index.

Both persuasive and accessible, The Physics of Wall Street is riveting history that will change how we think about our economic future

 

Listen from anywhere this Saturday morning May 31st@ 8am on AM 930 WFMD by logging onto www.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here

About the Author:

James Owen Weatherall

I am a physicist, mathematician, and philosopher. I hold a position as Assistant Professor of Logic and Philosophy of Science at the University of California, Irvine, where I am also a member of the Institute for Mathematical Behavioral Science. I am currently acting as Director of Graduate Studies for the department; I am also the department DECADE mentor.

I am the organizer of the Southern California Philosophy of Physics Group, which meets several times a quarter in Irvine.  Until recently, I served as managing editor of the journal Philosophy of Science, the official journal of the Philosophy of Science Association.

Most of my recent work has been on the mathematical and conceptual foundations of space-time theories and on issues in general philosophy of science (and epistemology more broadly), with particular interest in questions concerning model building in finance; I also maintain serious interests in category theory and the foundations of mathematics, atomic physics and quantum control, and in the foundations of quantum theory. My book, The Physics of Wall Street, which explains how ideas have moved from physics into financial modeling over the last century, was published by Houghton Mifflin Harcourt in early January, 2013.