Thomas L. Friedman on the Front Page News. "What’s going on here?" Thomas Friedman asks, with regard to, well actually, everything (London burning, Arab Spring, Israeli Summer, Athens to Barcelona, the Tea Party, etc., etc.) Friedman decides we are in need of a unifying theory of the world right now. "There are multiple and different reasons for these explosions, but to the extent they might have a common denominator I think it can be found in one of the slogans of Israel’s middle-class uprising: 'We are fighting for an accessible future.'" But why now? Friedman pinpoints technology: "[I]t is a critical reason why, to get into the middle class now, you have to study harder, work smarter and adapt quicker than ever before. All this technology and globalization are eliminating more and more “routine” work — the sort of work that once sustained a lot of middle-class lifestyles." To compound this, "All of this is happening at a time when this same globalization/I.T. revolution enables the globalization of anger... This globalization/I.T. revolution is also 'super-empowering' individuals." So in short: "We are increasingly taking easy credit, routine work and government jobs and entitlements away from the middle class...at a time when citizens have more access to media to organize, protest and challenge authority and at a time when this same merger of globalization and I.T. is creating huge wages for people with global skills...thus widening income gaps and fueling resentments even more. Put it all together and you have today’s front-page news."
David F. Swenson on Myths About Mutual Funds. Lately the stock prices have been absurdly volatile, and trades have naturally been more peculiar. But David Swenson, Chief Investment Officer at Yale, argues that while "Individual investors bear some responsibility for ill-advised responses to the ups and downs in the market," for decades, "the industry, which manages more than $13 trillion for 90 million Americans, has employed market volatility to produce profits for itself far more reliably than it has produced returns for its investors." He challenges the conventional belief that "mutual funds provide a safe haven," which causes investors to place "a misguided trust in brokers, advisers and fund managers." In fact, "the industry has a history of delivering inferior results to investors, and its regulators do not provide effective oversight." He notes that "for decades, investors suffered below-market returns even as mutual fund management company owners enjoyed market-beating results." This is one of the main reasons for this unfortunate result: "the churning of investor portfolios hurts investor returns. First, brokers and advisers use the pointless buying and selling to increase and to justify their all-too-rich compensation. Second, the mutual fund industry uses the star-rating system to encourage performance-chasing (selling funds that performed poorly and buying funds that performed well). In other words, investors sell low and buy high." And mutual funds benefit from the fact that there is little outcry, because investors naively trust the funds because they have little financial knowledge of their own.