Opinion

The Great Debate

from Anatole Kaletsky:

Markets: Exuberance is not always ‘irrational’

A pedestrian holding his mobile phone walks past an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo

With the stock market continuing to hit new highs almost daily despite the appalling geopolitical disasters and human tragedies unfolding in Ukraine, Gaza, Syria and Iraq, there has been much head-scratching about the baffling indifference among investors. Many economists and analysts see this apparent complacency as a symptom of a deeper malaise: an “irrational exuberance” that has pushed stock prices to absurdly overvalued levels.

The most celebrated proponent of this view is Robert Shiller, the Nobel Prize-winning, Yale University economist who is often credited with predicting both the 2000 stock market crash and the bursting of the U.S. housing bubble. Shiller may or may not have deserved a Nobel Prize for his academic work on behavioral economics but as a practical guide to investing, his approach has been thoroughly refuted by real-world experience.

Robert Shiller, one of three American scientists who won the 2013 economics Nobel prize, attends a press conference in New HavenShiller’s status as an investment guru owes much to the timing of his book “Irrational Exuberance,” published just days before the collapse of Internet and technology stocks in March 2000. What is less widely advertised, however, is that for decades, both before and after that predictive triumph, the stock market strategy implied by his analysis has turned out to be plain wrong.

Shiller’s argument that stock prices have been inflated to irrational levels is centered on a statistic called the cyclical adjusted price-earnings ratio, or the Shiller price-earnings ratio. Conventional price-earnings ratios divide the current level of share prices by the earnings estimated by analysts for the year ahead.

This ratio for the Standard & Poor’s 500 is now around 17. On this basis many conventional analysts, including Federal Reserve economists, conclude that U.S. stock prices are reasonably valued. A price-earnings ratio of 17 implies that if companies can sustain this level of profitability, they will provide investors with annual earnings of one-17th, or 5.9 percent, which compares favorably with long-term interest rates on government bonds of around 1 percent, after adjusting for inflation.

from Equals:

The problem with being a female football fan

Baltimore Ravens Rice reacts after scoring a touchdown during the second quarter in their NFL football game in Denver

It’s a weird time to be an avid NFL fan – particularly when you’re also a woman.

Beginning in September, I treat each Sunday as a holy day of chicken wings, beer and screaming at TVs. I play on an intramural football team. I own three Patriots jerseys (two, regrettably, bearing the name of a certain blue-eyed wide receiver who shall remain unnamed). I own the Patriots beanie, Patriots vintage tee, Patriots Christmas ornament and two Patriots beer koozies. I have funneled hundreds of dollars into the National Football League’s coffers.

When my fiancé and I recently went apartment hunting, we assessed each unit with our priorities clear: Where can we put the TV? Is the building wired for Verizon FiOS (NFL RedZone) or DirecTV (NFL Sunday Ticket)? Are there enough sports bars nearby?

‘When Harry Met Sally’ got it wrong 25 years ago

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This week marks the 25th anniversary of the release of the beloved romantic comedy When Harry Met Sally… Directed by Rob Reiner and written by the late, great Nora Ephron, the movie that gave us one of the most famous one-liners in Hollywood history — “I’ll have what she’s having” — has become a modern classic with good reason. It asks a question that is as relevant in 2014 as it was in 1989: Can men and women be “just” friends without, as Billy Crystal’s Harry put it, “the sex thing getting in the way”?

When Harry Met Sally… concludes that friendship between men and women is possible but ultimately unsustainable. Sooner or later, the friendship will involve sex and, in Harry and Sally’s case, love. Like so many other Hollywood romantic comedies, the movie posits that friendship between men and women is a holding pattern en route to the most desirable kind of relationship they can have. Harry and Sally’s friendship is based on respect and honesty, and it’s mutually beneficial; these are two people who care about and for each other. And yet, that’s not enough for them — or for the audience.

The notion of friendship as a consolation prize is the basis for the “friendzone,” a term that did not exist in 1989 but that would have made complete sense to a man like Harry. The friendzone is, in 2014 thinking, the place to which women cruelly relegate men in whom they have no sexual or romantic interest, with whom they want to be “just” friends. It is a hellish place, cultural wisdom tells us, a purgatory devoid of sex where men are forced to enjoy women’s affection, support and admiration without any coitus whatsoever. To be friendzoned is to be stuck at the halfway house with no hope of reaching your desired destinations: Sexburg and Boyfriendville.

Israel’s Iron Dome is more like an iron sieve

An Iron Dome launcher fires an interceptor rocket in Ashdod

Israel’s vaunted Iron Dome defense system is more like an iron sieve. It fails to destroy all but a few of the rockets that Hamas and other Palestinian militant groups fire at Israeli communities. But Israel’s early-warning civil-defense systems have proved highly effective.RELATED COLUMNS Uzi Rubin: Iron Dome is an ironclad success

Plagiarism is dumb. Thinking you’ll get away with it is dumber.

My Approved Portraits

You’ve got to hand it to the New York Times for its exposé of the plagiarism committed by Senator John Walsh (D-Mont.) in the paper he submitted for his 2007 master’s degree from the United States Army War College. Walsh, who spent more than three decades in Montana’s National Guard and won a Bronze Star after his 2004-5 tour of duty in Iraq, was appointed to the Senate in early 2014 and is now in a tough race for election to his seat. Montana Democrats have made much of Walsh’s military service. The Times’ accusation of plagiarism seriously threatens that narrative.

In olden days, before we had computer-driven, heat-seeking plagiarism-discovery apps, proving that someone had plagiarized was like establishing that he had written pornography: You presented the text, made your argument and invited readers to know it when they saw it.

A computer user poses in front of a Google search page in this photo illustration taken in BrusselsThe Times story is vastly more advanced. It features a page-by-page “interactive graphic” of Walsh’s paper about the Middle East, titled “The Case for Democracy as a Long Term National Strategy.” Each improperly attributed passage in the paper is highlighted; when you hover over the passage, a pop-up box tells you where it really came from and how Walsh misappropriated it. The cumulative result gives new meaning to the term “dead to rights.” Worse, the plagiarism demonstrated by the story is not so old that it can be dismissed as a youthful indiscretion.

from Reihan Salam:

Paul Ryan’s promising new plan to end poverty

Ryan speaks at the SALT conference in Las Vegas

Paul Ryan has long been known as the GOP’s budget guru. With the release of his new report on expanding opportunity in America -- the most ambitious conservative anti-poverty agenda since the mid-1990s -- he is on the cusp of becoming something much more than that.

Loved by the right and loathed by the left, Ryan has been the architect of the most consequential Republican domestic policy initiatives of the Obama era. In spirit if not in name, Ryan spent much of President Obama’s first term as the leader of the opposition, rallying Republicans against Obamacare and in favor of long-term spending reductions. His controversial calls for entitlement and tax reform as chairman of the House Budget Committee were singled out by the president for over-the-top denunciation. In the spring of 2012, well before Ryan was named the Republican vice-presidential nominee, the president went so far as to characterize the Wisconsin congressman’s budget proposal as “thinly-veiled Social Darwinism.”

And yet Ryan soldiered on. As Mitt Romney’s running mate, Ryan often seemed ill-at-ease, uncomfortable in the role of attack dog. Those close to Ryan maintained that he would have been far more comfortable doing more listening than talking, and getting a feel for communities across the country still reeling from the lingering effects of the Great Recession. Once the campaign drew to a close, Ryan decided to do just that. He retreated from his role as the Republican Party’s chief intellectual strategist to think hard about the problems plaguing America’s most vulnerable neighborhoods and families. With the help of Bob Woodson, president of the National Center for Neighborhood Enterprise, Ryan and his team traveled across the country to find community groups, churches and local governments that were working to better the lives of the poor, and to learn about the obstacles they faced and how the federal government might lend a hand.

You can’t blame immigrants for gun violence

A pile of handguns are placed in a trash bin after they were surrendered during a gun buyback program in Los Angeles, California

The eruption of anti-immigrant fury over the federal government’s plans to temporarily relocate undocumented Latino children to shelters and Border Patrol facilities in Murietta, California, and other cities, is largely founded on the expressed belief that immigrants bring drugs and crime, threatening the safety of communities.

Yet as figures from the Murietta Police Department show, Latinos commit fewer crimes, especially drug offenses, compared to whites in their respective proportions of the city’s population.  Racially diverse areas with rapidly growing, younger immigrant populations are also becoming dramatically safer from gun violence, according to surprising new figures from the Centers for Disease Control.

While the United States still confronts  serious gun violence, its parameters have changed dramatically. Twenty years ago, young Latino men were among those most at risk of dying from gunfire; today, older white men are more endangered.

$18 billion in job training = lots of trained unemployed people

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President Barack Obama told Americans in his July 19 weekly address that every worker deserves to know that “if you lose your job, your country will help you train for an even better one.” A nice sentiment — and politically safe. It’s just the wrong answer. Those “better jobs” don’t exist, and training doesn’t create jobs. Despite all that, every year the U.S. government spends billions of dollars on job training, with little impact.

In 2007, then-candidate Obama visited Janesville, Wis., location of the oldest operating General Motors plant in America. Echoing his current promise to support unemployed Americans through job training, Obama proclaimed, “I believe that, if our government is there to support you, this plant will be here for another hundred years.” However, two days before Christmas and just about a month before Obama’s inauguration, the plant stopped production of SUVs, which made up the bulk of what was built there, throwing 5,000 people out of work. This devastated the town, because most residents either worked in the plant or in a business that depended on people working in the plant. Congress paid for a $2-million retraining program, using state community colleges the way the government once used trade schools, a century ago, to teach new immigrants the skills they needed to work at GM.

This time around, however, many laid-off workers who finished their retraining programs became trained unemployed people rather than untrained ones. Having a certificate in “heating and ventilation” or skills in new welding techniques did not automatically lead to a job in those fields. There were already plenty of people out there with such certificates, never mind actual college degrees. Of those who completed some form of training, nearly 40 percent of them did not find work. And those in Janesville who did find work in some field saw their take-home pay drop by 36 percent on average. A look at Craigslist job ads for the town shows one ad for heating and ventilation work, with a requirement of three years of experience. Under “General Labor,” the openings were for janitors, newspaper delivery and things like light manufacturing at $8.50 an hour.

Sanctions finally find Russia’s Achilles heel

Russia's President Vladimir Putin gestures as he chairs a government meeting at the Novo-Ogaryovo state residence outside Moscow

Russian President Vladimir Putin and President Barack Obama were reportedly engaged in a heated telephone conversation last Thursday when Putin noted in passing that an aircraft had gone down in Ukraine. The tragic crash of the Malaysian airliner in rebel-held eastern Ukraine continues to dominate the headlines, but it is important to remember what agitated Putin and prompted the phone call in the first place — sanctions.

Sanctions against Russia have been the centerpiece of the U.S. response to Putin’s interference in Ukraine. While they primarily have been directed against prominent friends of Putin and their businesses, the underlying target has been a weak Russian economy.  The sanctions have definitely found Russia’s Achilles’ heel, and with harsher sanctions looming in the aftermath of flight MA17, Putin is finding it increasingly difficult to craft an effective reply.

Obama had raised the ante for Russia the day before the Malaysian airliner disaster by unexpectedly announcing a new round of sanctions. The designated enterprises included several major Russian banks (Gazprombank, VEB), energy companies (Rosneft, Novatek) and arms manufacturers. They were not, however, the full sectoral sanctions that Putin dreads the most. These would essentially exclude Russia from the international financial system and restrict major technological transfers. Though key Russian banks and energy companies are now prohibited from receiving medium or long-term dollar financing, U.S. companies are not otherwise prohibited from conducting business with them.

The war in Gaza threatens Egypt too

A Palestinian woman wearing clothes stained with the blood of other relatives, who medics said were wounded in Israeli shelling, cries at a hospital in Gaza City

Cairo’s efforts to mediate between Israel and the Palestinians in Gaza, according to conventional wisdom, have largely been dictated by President Abdel Fattah al-Sisi’s animosity toward Hamas. After all, Hamas is an offshoot of the Muslim Brotherhood, which Sisi’s government has declared a terrorist organization and regards as a serious threat.

That is why, this argument goes, the Egyptian ceasefire proposal ignored Hamas’ conditions and why the Israelis so quickly supported it. The proposal called for an immediate ceasefire. Only then would the terms be negotiated, including Hamas’ demands for an end to Israeli attacks, an end to the blockade of Gaza and the release of rearrested Palestinians who were freed in a prisoner 2011 exchange.

The story is far more complicated, however, for both Sisi and Egypt. Because the longer the war goes on, the more Gaza becomes a domestic problem for the Egyptian president. One he does not want.

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