It’s common to hear that Americans face a “retirement crisis.” In response, progressives have come up with their own solutions; including expanding Social Security and having the government run retirement plans for workers. In reality, though, the crisis is vastly overstated. And progressive solutions would do surprisingly little for those Americans who truly are underprepared for retirement. Real answers exist, but they are more about making government work better, than about making it larger.One prominent study claims that 53 percent of Americans won’t have enough income in retirement….

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The Federal Reserve’s talking heads have been hard at work over the last week. They have tackled issues ranging from early childhood education, to the Fed’s “duty to advance the maximum well-being of all citizens,” to regulatory compliance by financial firms. The Fed’s musings on topics far outside of its mandate seem odd for an institution that has a lot more thinking to do about-just to throw out a crazy suggestion-monetary policy. But the Fed’s regulatory mandate is also large, so its reflections on compliance are worth a closer look.New York Fed President William Dudley and Fed Governor…

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It is difficult to decipher why David Gordon of the Ludwig von Mises Institute is being so critical of Steve Forbes and Elizabeth Ames’ book Money: How the Destruction of the Dollar Threatens the Global Economy - and What We Can Do About It. His clearest objection is Forbes and Ames’ belief that money is a unit of measure that that needs a fixed gold price to remain a reliable and useful unit of value over time. In Gordon’s view this belief and this book are “odd”. Unfortunately, by the end of his review, the only “odd” thing is Gordon’s lack of understanding of some basic economic…

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Here’s a great example of using the right concepts and formulating a complex thought in a simple, retainable way. It’s from Daniel Henninger’s column in Thursday’s Wall Street Journal:
“The U.S. and Europe have paid a high price for six years of stimulus that didn’t stimulate, programmed consumption that fell short, regulatory expansions that froze private producers, and high tax-rate regimes that benefited the public-spending class and beggared everyone else . . .”
“Stimulus that didn’t stimulate”-a great phrase. It could be partnered with: quantitative easing that didn’t ease.
Foggy…

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I read two startling different commentaries on the health of the UK as a society this morning that made me recall the “best of times, the worst of times” quote from Dickens.

First up was a highly optimistic piece in the Financial Times titled Miserablism risks causing Britain serious harm which argues that we should all wake up to the fact that times are good right now and be wary of policies and politicians proposing radical moves that might well make things worse – e.g. price interventions and exiting Europe. This is the money quote:

Look at Britain as an informed foreigner might. Here is a country that responds to a secessionist threat to its existence by holding a free and fair referendum. It has evolved an economic model that is more hospitable to business than much of Europe and kindlier to the poor than America. It cuts public spending year on year without any civil disorder to speak of. Crime is falling. Unemployment is at 6 per cent. The politicians are small-time but basically honourable. The capital city is a miracle of the modern world.

Then I read the Guardian’s Bleak figures show a relentless slide towards a low-pay Britain which featured the graph below showing that real wages in Britain have now been declining for seven years in a row – only the third time that has happened in the last 150 years.

UKrealwagedecline

Between them these too perspectives capture the overall situation well. On the plus side the economy is performing well and society is stable, but on the downside, the spoils of growth are going to the rich, wage inequality is increasing and the social contract is in danger of falling apart.

The important question is what will happen next. The Guardian suggests two possibilities. The first is that unemployment is now reaching levels where there is little slack in the labour market and employers will find themselves having to increase real wages for the lowest paid. The second is that technological advances will continue to take jobs from mid-skilled workers, forcing them into lower paid jobs and driving real wages down. I’ve written about this before: Robots and artificial intelligence are replacing jobs.

Cycles in the economy and labour market will come and go, but the trend towards automation will run and run. For me the most likely scenario is that tightness in the labour market will force wages up over the next few years, but when the cycle turns again real wages will cycle sharply downwards. Our opportunity is take action now to help the situation. A couple of weeks ago rich Americans were worrying that The pitchforks are coming … for us plutocrats. That will be our fate too, unless we do something.

The solution is not to protect jobs or try to limit the adoption of technology, but to invest heavily in programmes that help people re-skill and get back to work. That would be the play that keeps us as when of best performing societies in the world. If we get through the current period of austerity successfully there might just have the money to do it.



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Apple stock rose over 2 percent on Monday as the company announced an increase of 13 percent in its quarterly profit, and sales of 39 million iPhones. And in a few days the company will roll out ApplePay, increasing the demand for the iPhone 6. Instead of a credit card, all people will need is their iPhone, which can be activated with a secure fingertip to prevent fraud.
South Koreans and Japanese have been using their phones as credit cards and train tickets for the past decade, but America has yet to catch on. Apple’s entry into the mobile payment space is not the industry’s first, but it…

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The global economy is beginning to resemble 1982, a deflationary environment that climaxed with that summer’s Peso Crisis and aggressive intervention by Federal Reserve Chairman Paul Volcker. Although certainly not as strong as twenty-two years ago, another bout of deflation (or ‘disinflation’) is underway. The bad news is: Federal Reserve officials are only slowly recognizing it. The good news is: they have time to avert its destructive consequences.
The parallels between 1982 and 2014 are eerily similar, although the circumstances are wholly different. During the lead-up to both…

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Though it’s highly debatable that European economic weakness is what’s “rattling” global stock markets, to the New York Times this bit of conventional wisdom makes perfect sense. Forget the IMF’s hopeless track record when it comes to predicting much of anything, to the Times the IMF’s assertion about weakness has been accepted without protest.
Not surprisingly, the Times is similarly accepting of the view that says a lack of government spending is the source of European hardship. In a front page story last Friday Times reporters Jim Yardley and Jack Ewing wrote that “the largest European…

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In a recent interview Marc Andreessen said:

I’m optimistic arguably to a fault, especially in terms of new ideas. My presumptive tendency, when I’m presented with a new idea, is not to ask, “Is it going to work?” It’s, “Well, what if it does work?”

That got me thinking. Andreessen is a smart guy who has a lot of experience with startups and who spends a lot of time thinking about the best ways to invest and build businesses. I don’t agree with everything he says, but when I don’t agree I always stop to think why. In this case I half agree, but think that only asking “Well, what if it does work?” is too simple.

I half agree because asking “Well, what if it does work?” forces you to think about how big something can get and to focus on the upside. The startup investment game is, as we know, all about finding big winners. For us that’s £100m+ exits. For Andreessen I’m sure it’s over $1bn. Thinking optimistically about the upside helps you find those big winners.

However, there’s no point in backing something that has no chance of succeeding, so it’s also important to think about whether an idea will work. In particular, it is important to think about whether the company will deliver it’s plan over the next twelve months (or at least something resembling it’s plan). This has two parts, asking “Does the plan work?” and asking “Can the team execute on the plan?”. Skepticism is helpful when asking these questions.

Time is plentiful when it comes to delivering the upside and it’s reasonable to assume that entrepreneurs can and will figure a way to make things happen – provided there are no fundamental reasons why they won’t be able to (e.g. it requires chip speeds we won’t see for another ten years). When it comes to delivering the next twelve months time is short and there is limited scope for experimentation and re-work. If Plan A fails badly everyone is going to wish they had done something else so it makes sense to think hard about whether it’s going to work. There will inevitably be lots of unknowns but identifying those assumptions up front leads to smarter investments and better plans.



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The latest regulatory challenge for Tesla, the upstart electric vehicle (EV) manufacturer, concerns a potential roadblock to direct consumer distribution of its luxury automobiles in Michigan. Under H.B. 5606, which passed the Michigan Senate 38-0 and the Michigan House 106-1, a new motor vehicle cannot be sold directly to a retail customer other than through a franchised dealer in Michigan, with the exceptions being a nonprofit organization or governmental agency. Moreover, Tesla cannot operate a showroom or gallery featuring its automobiles and provides information without conducting…

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European bond yields had calmed down as people believed that the worst of the European financial crisis and economic problems were behind them. Yet, in the past month the yield on Greek bonds is up over 300 basis points, with a 100 basis point rise in one day last week. This is restarting fears that interest rates on other European country bonds will rise to unaffordable levels (they have crept up a little already). The problem, however, is not the yields but the level of debt with which the countries are now burdened. After all, the Greek bond yields are just a return to the old normal.The…

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You’ve had a scary seven-year ride on the U.S. Economy Bus Line. The bus went into the ditch once, and it stayed stuck there for 18 months. Since then, it’s come close to running off the road several times. There are 319 million other passengers on the bus with you, and this vehicle is your only way forward.
The bus has wifi, your laptop is open, your E-Trade account is up, and you are trying to decide whether to buy or sell U.S. Economy Bus Line shares.
Federal Reserve Chairman Janet Yellen is driving the bus. Economist Paul Krugman is sitting to the left of Ms. Yellen, with Dallas…

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The GOP should dare Obama to do more.
Steep stock market corrections often create shrouds of pessimism that do bad things to people’s brainpower. And one of the absolutely stupidest things I have heard in recent weeks is that the recent drop in oil prices is bad. You heard me right. Serious people on financial television are saying lower oil prices are a signal of worldwide economic collapse. Here at home that translates to recession, deflation, a profits collapse, and rising unemployment.
I’ve been around for a while, and I’ve seldom heard such gibberish.
The latest stock market scare stems…

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I’ve just seen the video below of virtual popstar Hatsune Miku, a virtual popstar from Japan, as a guest on the David Letterman show. If that’s not enough for you check out this video of her performing live in front of thousands of fans in LA (caveat: the quality is poor and you have to wait until near the end to see her). She’s a blockbuster in Japan with hit video games, sold out shows, #1 singles and a virtual opera, and opened a tour for Lady Gaga in the US earlier this year.

Hatsune was created seven years ago by Japanese company Crypton Future Media as a visual representation of their song making software, i.e. a marketing gimmick, and developed into a phenomenon when people started remixing her tracks and an open source remixing community exploded online. Crypton Future Media says that Hatsune Miku fans have created over 100,000 original songs for her, over a million pieces of art and 170,000 YouTube videos. Google “Hatsune Miku fan site” and you get close to 150,000 hits.

The interesting question for me is whether Hatsune is a one off, or a sign of things to come?

From an emotional perspective it seems to me that absent human level artifcial intelligence engagement with a virtual popstar can’t be as rewarding as with a real person, but from the perspectives of engagement, participation and a feeling of co-ownership a virtual popstar community offers much more. I suspect we will see more of this.



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It was about a year ago when I was busy trying to work out and describe how the intersection of the global dollar short, through eurodollars, and the Federal Reserve’s very clumsy attempt at trying to carefully back its way into an eventual (and very much predetermined) exit from years of “emergency” intrusions might lead where they never expected. At the time, the yield curve was moving quite disorderly toward interest rates everyone was convinced were harmful. How times have changed, as this week the very clear disorder is now in the opposite direction, but curiously validating in many…

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