Impossible Dreams

Are there limits to technology?

Photo: NASA. Source: Wikipedia

Ever since we began to use simple tools, people have been fascinated with technology. But technology also represents a danger. The same tools that lift us from the mud can destroy our fortunes. A hoe can uproot as well as plant. The Ancient Greeks described this ambivalence in the story of Prometheus, who brings fire to humanity in defiance of Zeus and is punished for his act.

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Promises, Promises

Can we please have an adult conversation about Social Security?

Source: Wikipedia

The US faces a tsunami of retirement obligations. The Federal Government expends about $1.3 trillion per year on Social Security and Medicare, and takes in about $1.2 trillion. This deficit is covered by their trust funds, which on a combined basis will be depleted 2033—17 years from now. Considered separately, Social Security’s trust fund will last until 2035, not much longer. The Disability Insurance trust fund is just about out of money, and will probably be folded into Social Security, kicking the can down the road. But the road isn’t that long.

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Slicing Apples

What’s behind Apple’s monster first quarter?

Source: Pixabay

In a word: China. iPhone sales now constitute over 60% of Apple’s revenues, and Apple’s smartphone market share in greater China (Hong Kong and Taiwan included) went from 5% to 12%. That growth contributed to what was by any account a truly gargantuan report: $58 billion in sales; $13.5 billion in profit; 27% annual revenue growth. They plan to distribute $200 billion in cash to shareholders over the next 2 years. If present trends were to continue, Apple’s revenues would be equal to the entire world’s GDP in 20 years. Of course that won’t happen—and the stock isn’t priced for that kind of growth, either.

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Forever Blowing Bubbles

Does the economy depend on having bubbles somewhere?

Source: Pixabay

It seems like the global economy has moved from bubble to bubble to bubble. Over the past twenty years we’ve gone from the Asian Tiger bubble to the tech bubble to the housing bubble to the China bubble to the oil exploration bubble. In all cases we had overly-optimistic growth assumptions which led to overinvestment which led to oversupply and an eventual price collapse. Some have called this, “The Law of the Conservation of Bubbles.”

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Speedy (and Seedy) Traders

Are high-frequency traders cheating?

Photo: Gregory Wilson. Source: Wikipedia

High-frequency traders use computer programs to buy and sell securities on computerized exchanges. They write algorithms to analyze the microstructure of the markets and then execute trades. They remind me of the “locals” who trade in the Chicago commodity pits, who use systems, street-smarts, and speed to scalp a few pennies here or there from other market participants’ orders. Only these new folks do it with routers and data lines.

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Greece is the Word

Is Greece on the road to default?

Photo: © Martina Misar-tummeltshammer Source: Dreamstime Stock Photos

When I consider Greece I think of classical literature and ancient ruins. Others picture sparkling beaches and whitewashed architecture. We usually don’t imagine a bustling commercial center. And it’s unlikely that we look at Greece as the key to the Euro-zone’s financial stability. But that’s what’s in the news.

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Apple, ETFs, and Theseus

Why do stock indices matter?

Temple of Theseus, Athens. Source: Trustees of the British Museum

Theseus, the founder-hero of Athens, lived around 1200 BC. In order to keep his memory alive, Athenians are supposed to have preserved his ship, taking out planks and timbers as they rotted, installing new materials in their place. Over time, all of the original wood was replaced. After some centuries, philosophers asked, was Theseus’ ship in any sense the “same” ship?

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Mountains and Markets

How much attention should we pay to forecasts?

Tuckerman Ravine
Image Source: Douglas Tengdin

I recently hiked into the mountains for some spring skiing. The forecast wasn’t great: cloudy with showers, then partial clearing, with a front moving in the next day. When we arrived at the trail, expectations had deteriorated—the following day was supposed to bring worse weather—snow, sleet, and freezing rain. But there was a lot of snow right then, and we were prepared. If conditions deteriorated, we could always ski out. So we headed up.

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The New Capital

What’s causing capital income to grow?

Source: Pixabay

Ever since Thomas Piketty’s Capital in the Twenty First Century came out last year, economists have been discussing the role of capital income in the economy. The debate centered on Piketty’s simple but profound formula, r > g. That is, the rate of return on capital—r—is greater than the growth of the economy: g.

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