http://hypoventure-capital.com/?p=32
Manny Pacquiao lived on the streets as a child in Manila, fights for a living today, visited President Obama recently and will inevitably upgrade from congressman to presidential candidate in the Philippines in the next 10 years.
His days under cardboard on the streets of the sprawling city, after leaving home when his father allegedly slaughtered and cooked his pet dog, and his improbable rise to the Philippine congress, where he is the architect of new anti-sex slave legislation, make his story one of boxing’s most amazing.
Pacquiao will defend his World Boxing Organisation welterweight title tonight at the MGM in Las Vegas against the once brilliant but now slightly jaded Shane Mosley. He is unbeaten since 1995 and has added world titles at five weights since his last loss. As a fighter Pacquiao has won world titles at seven different weights and has a truly remarkable back catalogue of startling finishes in brutal fights. His savage series of meetings with Marco Antonio Barrera, Erik Morales and Juan Manuel Marquez, the finest Mexicans of this and arguably any generation, and his cold-eyed destructions of Ricky Hatton and Oscar de la Hoya guarantee Pacquiao a special place in boxing’s history books.
Last May he won a seat in the Philippine congress for the province of Sarangani and he has taken his congressional duties so seriously that his trainer, Freddie Roach, was convinced that he would walk away from the sport. “I think we will lose him to politics,” Roach told me last summer. However, Pacquiao is skilled at manipulating time and his entourage, which is a staggering moving, cooking, laughing and singing gang, and now includes his political chief of staff.
At his last fight in November against Antonio Margarito, he hired a 747 and flew in more than 200 people from Manila to Dallas. They disembarked to join his retinue in several plush suites, where Pacquiao always sleeps with a dozen or so close friends. The fighter and his people cook their own food, watch kung fu films and perform endless hours of karaoke in the days and hours before fights. His wife and any other women have their own rooms.
As a child in the Manila slums Pacquiao slept on the floors in gyms with dozens of other homeless and desperate little fighters. His passage from six-stone anonymity, fighting for peanuts in long forgotten Filipino outposts, to the smiling, bilingual boxer with a fortune estimated by Forbes magazine at $70m (£43m) is one of the legends of the boxing business. He had over 30 fights before turning professional, weighed less than 90 pounds and was unbeaten, always winning about $3 and enough rice to feed the other dwellers in the gym’s filthy bunk beds. He was just 16 when he turned professional, having lied about being 18 and he was still undoubtedly malnourished, often having to weigh in with lumps of metal in his socks. The $40 purses he received for his early fights meant he could eat and send money to his mother.
After 24 fights, and still when he was only 19, Pacquiao won and then lost the flyweight world title in bouts against the odds and against hometown favourites in Thailand. He was still well under boxing’s radar even when he won titles at super-bantamweight and reigned without equal for three years. In 2003 he arrived on the true international stage when he ruined Barrera in a non-title fight at featherweight, sending the exceptional Mexican staggering from corner to corner before the brutality ended in round 11.
Mosley will be Pacquiao’s 18th opponent since the night he dismantled Barrera; the list includes De la Hoya, left stunned on his stool at the end of seven rounds and looking like a man who had just glimpsed hell and not really fancied the journey very much. Hatton went down and out in two rounds and the Mexicans succumbed in slugfests that continually wrote and rewrote their way into the pantheon of great fights involving great fighters.
It is the quality of Pacquiao’s opponents over such a long period of time that places him with the modern giants; it is hard to mix talk about present-day and ancient fighters because of the way the sport operated before the 1960s. Pacquiao is one of the best boxers of the last 50 years.
Bob Arum, the promoter who travelled with Muhammad Ali and promotes Pacquiao, is convinced that he is a bigger star. “Ali never had this level of devotion,” Arum said. “In the Philippines he [Pacquiao] is the social welfare system – the best one. He helps everybody”.
The sharing of wealth is called balato and since his congressional victory it has become a lot more serious. The people of Sarangani do not have a hospital so Pacquiao went to see President Benigno Aquino III. “The sick had to travel for hospital care,” said Pacquiao. “I promised a hospital and they will get a hospital.” Pacquiao sat with Aquino and was given $5m to start the build. The ground will be broken in a ceremony when he returns after the Mosley fight. Aquino had pushed through legislation that guaranteed Pacquiao and his family military protection long before the new congressman sat with him and asked for a favour that he simply could not refuse.
“I want to achieve the same in politics that I have in boxing,” said Pacquiao. “I will start with what I know best and what I know needs to change.” He has personally written parts of the anti-human trafficking legislation that he is pushing through the Filipino congress.
At the same time, the 32-year-old has unfinished business inside the ring and is still hoping for a showdown with the evasive American Floyd Mayweather in a fight that would guarantee the pair $50m if it can possibly be made. The partial motivation for fighting Mosley is to try to beat him inside the distance and improve on the points win by Mayweather against Mosley last year. Meanwhile, Mayweather has to answer serious criminal charges in Las Vegas in July. All planned attempts to get them together have sadly faltered, the main stumbling block being the American’s insistence on Olympic-style drug tests before and after the fight. Pacquiao has passed every drug test he has ever taken.
Pacquiao’s road show shifted from Roach’s shabby Los Angeles gym to the opulent plastic-plant wonder of the MGM this week. The entourage was in tow, swiftly setting up music and food areas in his suites. Pacquiao’s latest CD was released last month and reputedly sold out immediately. It is called Sometimes When We Touch and is a compilation of power ballads from the Seventies and includes no fewer than seven versions of the title song. His love of music does not end there – Roach has continually to monitor the time spent by his fighter in the ring and at the microphone belting out Tony Christie numbers – and tonight Survivor’s Jimi Jamison will perform “Eye of the Tiger” live for Pacquiao’s ring walk.
“My heart is in focus,” insists Pacquiao. “I ignore distractions and do what I have to do in boxing and in life.” One thing is certain: the tiny genius with the gloves and the mission will be missed when he quits.
Kings of the Ring: Steve Bunce’s five greatest fighters since 1960
1. Muhammad Ali
Won Olympic gold in 1960. He had 25 world title fights and regained the world heavyweight title three times. Backed up his boxing with his banter. 1960-1981: Won 56 of 61 fights.
2. Manny Pacquiao
Turned pro at 16, won first world title at 19. Has won world titles at seven weights and beaten the best at their best and at their best weight. 1995-present: Won 52 of 57 fights.
3. Sugar Ray Leonard
American won Olympic gold in 1976 and had 13 world title fights and held titles at five different weights. First to earn $100m in purses. 1977-1997: Won 36 of 40 fights.
4. Roberto Duran
Turned pro at 17. He had 22 world title fights between 1972 and 1998 and held titles at four weights. He once knocked out a horse. 1968-2001: Won 103 of 109 fights.
5. Oscar de la Hoya
Mexican American from a boxing family won Olympic gold in 1992, had 29 world title fights and won world titles at six different weights. 1992-2008: Won 39 of his 45 fights.
Wednesday, May 11, 2011
Hypo Venture Capital Headlines: The Geography of Superstar Sports Millionaires
http://hypoventure-capital.com/?p=30
The world’s elite athletes earn hundreds and sometimes thousands of times more than what an average citizen in their native countries brings home
Boxer Manny Pacquiao and baseball star Alex Rodriguez top the list of the world’s highest paid athletes, according to new data compiled by ESPN.
ESPN tracked annual salaries–the base pay the players received for their most recent season or calendar year (endorsements and other sources of income were excluded) across 182 nations and 17 sports, from baseball and basketball to badminton and cricket. Salary data was collected from “multiple sources, including leagues, agents, consulates, embassies, sports federations, cultural centers, and the U.N.”
According to the data, it’s not football, baseball, basketball, or even NASCAR that accounts for the lion’s share of sports superstars. Wake up, America: 114 of the 184 best-paid athletes in the world play soccer–almost seven times more than the next runner up (basketball, with 18 uber-rich players). For the rest, there are 12 baseball players, six auto-racers, five golfers, five football players, four cricketeers, three boxers, and three track and field contestants. Rugby and tennis each contribute two competitors, and there is one representative each from badminton, cycling, motorcycle racing, sumo wrestling, and yachting.
The first map, above, by Zara Matheson of the Martin Prosperity Institute shows which countries these athletes live in. The richest two players, Pacman the Destroyer and A-Rod (both earned $32,000,000), live in the Philippines and the U.S. respectively (A-Rod spent much of his childhood in the Dominican Republic, but was born in New York City). Finland’s Kimi Raikonnen ($26.3 million) and Spain’s Fernando Alonso ($22.7 million), both auto racers, are the third and fourth highest paid. Venezuela’s Johan Santana clocks in at $21 million and some change; Italy’s Valentino Rossi, a motorcycle racer, earns $20,800,000.
The second map shows the ratio of the highest paid athletes’ salaries to a proxy measure for average pay–a country’s Gross Domestic Product or GDP per person. A-Rod’s $32 million salary, for example, is about 715 times the size of the per capita U.S. GDP of $44,872 per person. Jason Bay, who hails from Canada, makes $18.1 million playing for the New York Mets–455 times Canada’s per capita GDP. That sounds like–and is–a big difference. But Manny Pacquiao makes 18,000 times the per capita GDP of the Philippines and two other athletes’ salaries are even higher multiples. Samuel Dalembert of the Sacramento Kings hails from Haiti; he makes more than 19,000 times Haiti’s per capita GDP. And the salary of Emmanuel Adebayor, who plays soccer for Real Madrid on loan from Manchester City, is a staggering 24,000-plus times more than the per capita GDP of his homeland of Togo.
The 25 athletes with the highest ratio of salary to GDP are overwhelmingly soccer players from African and Latin American countries. But the $17.5 million salary that China’s Yao Ming earns is 4,600 times more than the per capita GDP of his home country; Peja Stojakovic, who plays for the Dallas Mavericks, earns 2,700 times what the average Serbian does. On the low end of the scale, there’s the track star Michael Junior Jackson, whose $5,000 per season is enough to make him his country’s highest-paid athlete, but is still $800 less than an average worker from the Pacific island nation of Niue makes.
The ratio of CEO pay to that of the average worker has become a common benchmark for massive rises in economic inequality. According the just-released 2011 edition of Executive Paywatch, the CEOs of S&P 500 companies took home an average of $11.4 million in 2010, up 23 percent from the previous year, and roughly 250 times America’s per capita GDP. According to The New York Times Economix blog, this amounts to “28 times the pay of President Obama, 213 times the median pay of police officers, 225 times teacher pay, 252 times firefighter pay, and 753 times the pay of the minimum-wage worker.” They are enormous gaps to be sure, but they’re a far cry from the difference between A-Rod’s and the average American’s salary and not even in the same universe as the light year-sized differences between the salaries of superstar athletes and the average citizens of their developing nations.
These are terrific athletes for sure, but do their talents justify such incredible rewards? I love sports, but do they add anything substantial to economic prosperity? What kind of signal does such a highly skewed reward system send about the kinds of talents and skills that really matter for economic growth?
More than 15 years ago, the economist Robert H. Frank famously critiqued America’s emerging Winner Take All Society, in which the super-successful take a bigger and bigger share of the riches, leaving the rest of us to fight over scraps. Things have only gotten worse in the intervening years; the economic crisis has done little, if anything, to abate this runaway trend.
Outlandish sports stars’ salaries illuminate the grotesqueries of the current age of super-star capitalism, and of our increasingly inequitable, irrational, and unconscionably unequal global economy.
ESPN tracked annual salaries–the base pay the players received for their most recent season or calendar year (endorsements and other sources of income were excluded) across 182 nations and 17 sports, from baseball and basketball to badminton and cricket. Salary data was collected from “multiple sources, including leagues, agents, consulates, embassies, sports federations, cultural centers, and the U.N.”
According to the data, it’s not football, baseball, basketball, or even NASCAR that accounts for the lion’s share of sports superstars. Wake up, America: 114 of the 184 best-paid athletes in the world play soccer–almost seven times more than the next runner up (basketball, with 18 uber-rich players). For the rest, there are 12 baseball players, six auto-racers, five golfers, five football players, four cricketeers, three boxers, and three track and field contestants. Rugby and tennis each contribute two competitors, and there is one representative each from badminton, cycling, motorcycle racing, sumo wrestling, and yachting.
The first map, above, by Zara Matheson of the Martin Prosperity Institute shows which countries these athletes live in. The richest two players, Pacman the Destroyer and A-Rod (both earned $32,000,000), live in the Philippines and the U.S. respectively (A-Rod spent much of his childhood in the Dominican Republic, but was born in New York City). Finland’s Kimi Raikonnen ($26.3 million) and Spain’s Fernando Alonso ($22.7 million), both auto racers, are the third and fourth highest paid. Venezuela’s Johan Santana clocks in at $21 million and some change; Italy’s Valentino Rossi, a motorcycle racer, earns $20,800,000.
The second map shows the ratio of the highest paid athletes’ salaries to a proxy measure for average pay–a country’s Gross Domestic Product or GDP per person. A-Rod’s $32 million salary, for example, is about 715 times the size of the per capita U.S. GDP of $44,872 per person. Jason Bay, who hails from Canada, makes $18.1 million playing for the New York Mets–455 times Canada’s per capita GDP. That sounds like–and is–a big difference. But Manny Pacquiao makes 18,000 times the per capita GDP of the Philippines and two other athletes’ salaries are even higher multiples. Samuel Dalembert of the Sacramento Kings hails from Haiti; he makes more than 19,000 times Haiti’s per capita GDP. And the salary of Emmanuel Adebayor, who plays soccer for Real Madrid on loan from Manchester City, is a staggering 24,000-plus times more than the per capita GDP of his homeland of Togo.The 25 athletes with the highest ratio of salary to GDP are overwhelmingly soccer players from African and Latin American countries. But the $17.5 million salary that China’s Yao Ming earns is 4,600 times more than the per capita GDP of his home country; Peja Stojakovic, who plays for the Dallas Mavericks, earns 2,700 times what the average Serbian does. On the low end of the scale, there’s the track star Michael Junior Jackson, whose $5,000 per season is enough to make him his country’s highest-paid athlete, but is still $800 less than an average worker from the Pacific island nation of Niue makes.
The ratio of CEO pay to that of the average worker has become a common benchmark for massive rises in economic inequality. According the just-released 2011 edition of Executive Paywatch, the CEOs of S&P 500 companies took home an average of $11.4 million in 2010, up 23 percent from the previous year, and roughly 250 times America’s per capita GDP. According to The New York Times Economix blog, this amounts to “28 times the pay of President Obama, 213 times the median pay of police officers, 225 times teacher pay, 252 times firefighter pay, and 753 times the pay of the minimum-wage worker.” They are enormous gaps to be sure, but they’re a far cry from the difference between A-Rod’s and the average American’s salary and not even in the same universe as the light year-sized differences between the salaries of superstar athletes and the average citizens of their developing nations.
These are terrific athletes for sure, but do their talents justify such incredible rewards? I love sports, but do they add anything substantial to economic prosperity? What kind of signal does such a highly skewed reward system send about the kinds of talents and skills that really matter for economic growth?
More than 15 years ago, the economist Robert H. Frank famously critiqued America’s emerging Winner Take All Society, in which the super-successful take a bigger and bigger share of the riches, leaving the rest of us to fight over scraps. Things have only gotten worse in the intervening years; the economic crisis has done little, if anything, to abate this runaway trend.
Outlandish sports stars’ salaries illuminate the grotesqueries of the current age of super-star capitalism, and of our increasingly inequitable, irrational, and unconscionably unequal global economy.
Hypo Venture Vapital Headlines: Why Washington should pay attention to the economy here and now
http://hypoventure-capital.com/?p=13
After a week of non-stop Osama Bin Laden, Washington is now returning to the battle of the budget deficit and debt ceiling.
All over Capitol Hill Republicans and Democrats are debating spending caps and automatic triggers, and whether to begin them before or after Election Day.
But if you don’t mind my asking, what about the economy? I’m not talking about the economy five or ten years from now, when projections show the federal budget wildly out of control or when foreigners might start dumping dollars.
I’m talking about the here and now economy — the one Americans are living in day to day.
The Labor Department reported today that unemployment for April was 9 percent, up from 8.8 percent in March. And that doesn’t count people working part-time who’d rather have full-time jobs.
Yes, 244,000 jobs were added in March — but that’s chicken feed. We’d need 350,000 a month, every month for the next three years, simply to get back to where we were before the Great Recession.
And the percent of working-age Americans actually working — 64.2 percent — hasn’t improved. It’s almost as low as it was in the depths of the recession. 13.7 million people remain out of work.
Hello Washington?
Even for Americans with jobs, wages are going nowhere. Basically, the only employers hiring are paying peanuts. McDonalds just announced it would start hiring big time.
In fact, there’s reason to worry we’re heading back toward recession. The Labor Department also reports new claims for unemployment insurance soared to 474,000 last week.
In the first quarter of this year the U.S. economy slowed to a crawl — a measly 1.8 percent annualized growth — down from over 3 percent last fall. Higher gas and food prices are putting even more squeeze on American households.
And housing prices continue to drop.
Washington is fighting over how much to cut spending over the next ten or twelve years.
But right now we need more public spending to get people back to work, stronger safety nets to help those who have lost their jobs or can’t find new ones, lower payroll taxes on average workers, and a requirement that Wall Street banks renegotiate mortgage loans so Americans can keep their homes.
Why isn’t Washington paying attention to what most Americans need in the here-and-now economy?
Because the White House and congressional Democrats don’t dare admit how bad the economy continues to be for so many people. They’re holding their breath, hoping the recovery catches fire next year before Election Day.
Republicans don’t dare admit how bad the economy is because they don’t want to increase public spending or strengthen safety nets. And their patrons on Wall Street don’t want to modify mortgages. Republicans would rather Americans believe their big lie that taming the deficit will create jobs and restore the economy.
So Washington would rather fight over the long-term budget, spending caps, taxes, and trigger mechanisms than do something about the pain most Americans are experiencing today.
But the here-and-now economy the most important thing on Americans’ minds.
Ironically, Washington’s disregard for what’s happening right now is also worsening the long-term budget problem. That problem is not the debt per se; it’s the ratio of debt to the overall economy. If the economy sputters or continues to grow at a snail’s pace, that ratio becomes worse and worse.
After a week of non-stop Osama Bin Laden, Washington is now returning to the battle of the budget deficit and debt ceiling.
All over Capitol Hill Republicans and Democrats are debating spending caps and automatic triggers, and whether to begin them before or after Election Day.
But if you don’t mind my asking, what about the economy? I’m not talking about the economy five or ten years from now, when projections show the federal budget wildly out of control or when foreigners might start dumping dollars.
I’m talking about the here and now economy — the one Americans are living in day to day.
The Labor Department reported today that unemployment for April was 9 percent, up from 8.8 percent in March. And that doesn’t count people working part-time who’d rather have full-time jobs.
Yes, 244,000 jobs were added in March — but that’s chicken feed. We’d need 350,000 a month, every month for the next three years, simply to get back to where we were before the Great Recession.
And the percent of working-age Americans actually working — 64.2 percent — hasn’t improved. It’s almost as low as it was in the depths of the recession. 13.7 million people remain out of work.
Hello Washington?
Even for Americans with jobs, wages are going nowhere. Basically, the only employers hiring are paying peanuts. McDonalds just announced it would start hiring big time.
In fact, there’s reason to worry we’re heading back toward recession. The Labor Department also reports new claims for unemployment insurance soared to 474,000 last week.
In the first quarter of this year the U.S. economy slowed to a crawl — a measly 1.8 percent annualized growth — down from over 3 percent last fall. Higher gas and food prices are putting even more squeeze on American households.
And housing prices continue to drop.
Washington is fighting over how much to cut spending over the next ten or twelve years.
But right now we need more public spending to get people back to work, stronger safety nets to help those who have lost their jobs or can’t find new ones, lower payroll taxes on average workers, and a requirement that Wall Street banks renegotiate mortgage loans so Americans can keep their homes.
Why isn’t Washington paying attention to what most Americans need in the here-and-now economy?
Because the White House and congressional Democrats don’t dare admit how bad the economy continues to be for so many people. They’re holding their breath, hoping the recovery catches fire next year before Election Day.
Republicans don’t dare admit how bad the economy is because they don’t want to increase public spending or strengthen safety nets. And their patrons on Wall Street don’t want to modify mortgages. Republicans would rather Americans believe their big lie that taming the deficit will create jobs and restore the economy.
So Washington would rather fight over the long-term budget, spending caps, taxes, and trigger mechanisms than do something about the pain most Americans are experiencing today.
But the here-and-now economy the most important thing on Americans’ minds.
Ironically, Washington’s disregard for what’s happening right now is also worsening the long-term budget problem. That problem is not the debt per se; it’s the ratio of debt to the overall economy. If the economy sputters or continues to grow at a snail’s pace, that ratio becomes worse and worse.
Hypo Venture Capital Zurich Headlines: Retiring the National Debt by Not Destroying the Economy
http://hypoventurecapital-financialideas.com/
The GOP proposes social spending cuts in order to fund tax cuts as a solution for our national debt. They, and the Beltway press, are undeterred by the OMB finding that their Paul Ryan-authored plan will do nothing of the sort. They are also undeterred by economists’ warnings that social spending cuts are the worst possible cuts in terms of economic impact, that they will shrink the economy and thus actually shrink revenues and make the deficit worse rather than better.
Retiring the national debt shouldn’t even be an issue. The national debt as a percent of GDP has been higher in the the past and we survived. The key to that survival was to grow the economy. What we should be talking about instead of debt is how to grow the economy and create jobs. In a growing economy, the extraordinary debt of two wars and corporate banking disasters will essentially take care of itself over time. As Simon Johnson ably points out in his recent New York Times article, the U.S. has always been in debt and the only real issue, now or ever, is which political perspective on debt works, conservative or progressive.
For the last thirty years, U.S. levels of spending, taxation and borrowing have been unusual, but a consistent theme has emerged. The Republicans run up the debt while they are in charge and blame the Democrats for it when the Democrats are in charge. Reagan exploded the debt with tax cuts and doubling of defense spending. Then, when Clinton took office, the GOP howled about the debt being too high. Bush took the Clinton surplus and blew it on more tax cuts and another doubling of defense spending. Now Obama is getting the same treatment that Clinton got from the GOP, being blamed for GOP’s own fiscal and regulatory irresponsibility.
The pattern is obvious and obviously political. There is no analytical basis for the debt hysteria that has infected both Capitol Hill and the press reporting on it. We have had huge amounts of debt before.
By the end of WWII the national debt was 120% of GDP compared to an estimated 90% now, and if intergovernmental debt, the money owed to the Social Security Trust fund, is discounted, the current debt to GDP ratio is about 60%. In the fifteen years following WWII, the debt was reduced back to 40% of GDP, where it had been before the war. Some of the debt was paid down, but mostly the ratio of debt to GDP was reduced by economic growth. GDP grew so the debt became smaller as a percent of GDP. While the dollar amount of it didn’t change a great deal, the scariness of it was reduced dramatically.
This may seem like accounting gimmickry, but in practical terms it’s equivalent to going from owing more than you make to owing less than half of what you make. You are much more comfortable with carrying the debt.
WWII was, by anyone’s criterion, a national emergency. Few argued that indebtedness should not be undertaken to win the war. So, too, an emergency is the Great Recession. In recession, the enemy is economic stagnation and unemployment. If government spending is effective to improve economic conditions, then spend we should. We put an additional $750 billion on the credit card and pulled out of the economic crash landing.
We spent, but the spending we did was not enough to grow the economy, just to stop the tailspin. Achieving real economic growth will change the ratio of debt to GDP and effectively retire the debt both in perception and in dollars as economy sourced tax revenues grow.
Now it’s possible that we need not borrow and spend more in order to grow the economy and retire the debt. We just need to be smarter about eliminating some of the things that are dragging the economy down and spending that is not doing the economy any good.
The Wealth Gap is an issue of more than just seeming fairness. The richest 5% of Americans hold 65% of the nation’s wealth. In old school economic theory, that just means that there is more capital available to invest than ever before.
In practical terms though, it’s not being invested. Bureau of Economic Analysis data shows that Gross Private Domestic Investment, money that is actually invested in the real economy, dropped 32% between 2006-09. With a significant reversal in 2010, it is still down 22% from 2006 while the amount of capital available for investment is up 30%. We do not need tax cuts to build more capital. We need taxes to force that accumulated capital back into the economy through either tax collections or direct business investments structured to defer taxes. Inducing just the historic level of real Gross Private Domestic Investment ratio to GDP into the real economy will grow the economy by 15%.
Trade imbalance is wiping out American jobs and lowering the wages paid for jobs that we still have. With a huge consumer product trade imbalance, stimulus money finds its way into offshore profits and not our own economy. These factors make the economy smaller and so tax revenues smaller. Wage differentials are the driver of our trade imbalance. When we don’t protect American-based industry, we lose American jobs and tax revenue. Education and training are only a temporary answer. What ever an American can be trained or become educated enough to do, so can a foreign worker who will work for less. Cutting business incentives to outsource through taxation and tariffs could grow the economy by 5%.
Health care cost increases are distorting the economy. 17% of GDP is now dedicated to health care whereas the amount could reasonably be 9%, more comparable to every other industrialized nation. Showing where that extra 8% of GDP we spend on health care ends up in the economy is an enormously complex undertaking. Profits after taxes and expenses of for-profit insurers and hospitals, and even non-profits, are meaningless statistics. Excessive margins, markup for health care services and equipment, outright fraud, monopolistic practices and profiteering business models likely account for the 8% of GDP seemingly wasted on health care. Those excess costs are single-handedly driving the argument that government spending is out of control, when it’s actually health care product profit margins that are out of control. Diverting the excess profit of the health care industry into lower profit margin industries could boost the economy by as much as 5% given distributed income multipliers of lower margin industries.
Defense industry profit margins, like those of health care, are largely undocumented. The Middle East wars, excessive margins, fraud, unnecessary procurements and duplicate programs could account for half of the $685 billion defense budget. Defense is 5% of GDP. Cutting it to 2.5% of GDP and diverting those funds to lower margin industries could boost the economy by 1.5%, again considering economic multipliers.
Taken together, correcting these fiscal and economic ills could put the debt on a path to resolution by boosting the economy as much as 26%. We would have an $18 trillion economy instead of $14 trillion economy. That would make the debt-to-GDP ratio 70% instead of 90% and grow tax revenues to $2.5 trillion (with repeal of Bush tax cuts) instead $1.4 trillion (without repeal of tax cuts). The budget would be balanced.
These are, admittedly, highly rose-colored numbers for a short term solution. Growth compounds though, and in the longer term it could do to our current debt what growth did for the WWII war debt: make it go away. A solid economic shot in the arm would speed up the process. Speeding up real economic growth would create jobs.
The business community, the “job creators,” are uncertain. They are not hiring. They are not hiring because taxes are too low and profits can be taken with historically low tax rates, the lowest rates on the highest incomes since the Gilded Age. Removing that uncertainty is important, but in the opposite sense of what Republicans imply. Business is not hiring because they think taxes will remain the same, rather than going up. Raise taxes and business will hire in order to defer realized profits.
The political will to clean the fiscal house with anything like stringency doesn’t exist on Capitol Hill, even though all the measures mentioned above get resounding support in public polling. This while the Republican austerity proposals go down in public opinion flames. Seems like the public intuitively knows what needs doing and the GOP and Blue Dogs are just hell bent to ignore them. It also seems that the administration and Democrats are just going along playing at compromise, but why compromise with the GOP when it accomplishes less than nothing?
The GOP proposes social spending cuts in order to fund tax cuts as a solution for our national debt. They, and the Beltway press, are undeterred by the OMB finding that their Paul Ryan-authored plan will do nothing of the sort. They are also undeterred by economists’ warnings that social spending cuts are the worst possible cuts in terms of economic impact, that they will shrink the economy and thus actually shrink revenues and make the deficit worse rather than better.
Retiring the national debt shouldn’t even be an issue. The national debt as a percent of GDP has been higher in the the past and we survived. The key to that survival was to grow the economy. What we should be talking about instead of debt is how to grow the economy and create jobs. In a growing economy, the extraordinary debt of two wars and corporate banking disasters will essentially take care of itself over time. As Simon Johnson ably points out in his recent New York Times article, the U.S. has always been in debt and the only real issue, now or ever, is which political perspective on debt works, conservative or progressive.
For the last thirty years, U.S. levels of spending, taxation and borrowing have been unusual, but a consistent theme has emerged. The Republicans run up the debt while they are in charge and blame the Democrats for it when the Democrats are in charge. Reagan exploded the debt with tax cuts and doubling of defense spending. Then, when Clinton took office, the GOP howled about the debt being too high. Bush took the Clinton surplus and blew it on more tax cuts and another doubling of defense spending. Now Obama is getting the same treatment that Clinton got from the GOP, being blamed for GOP’s own fiscal and regulatory irresponsibility.
The pattern is obvious and obviously political. There is no analytical basis for the debt hysteria that has infected both Capitol Hill and the press reporting on it. We have had huge amounts of debt before.
By the end of WWII the national debt was 120% of GDP compared to an estimated 90% now, and if intergovernmental debt, the money owed to the Social Security Trust fund, is discounted, the current debt to GDP ratio is about 60%. In the fifteen years following WWII, the debt was reduced back to 40% of GDP, where it had been before the war. Some of the debt was paid down, but mostly the ratio of debt to GDP was reduced by economic growth. GDP grew so the debt became smaller as a percent of GDP. While the dollar amount of it didn’t change a great deal, the scariness of it was reduced dramatically.
This may seem like accounting gimmickry, but in practical terms it’s equivalent to going from owing more than you make to owing less than half of what you make. You are much more comfortable with carrying the debt.
WWII was, by anyone’s criterion, a national emergency. Few argued that indebtedness should not be undertaken to win the war. So, too, an emergency is the Great Recession. In recession, the enemy is economic stagnation and unemployment. If government spending is effective to improve economic conditions, then spend we should. We put an additional $750 billion on the credit card and pulled out of the economic crash landing.
We spent, but the spending we did was not enough to grow the economy, just to stop the tailspin. Achieving real economic growth will change the ratio of debt to GDP and effectively retire the debt both in perception and in dollars as economy sourced tax revenues grow.
Now it’s possible that we need not borrow and spend more in order to grow the economy and retire the debt. We just need to be smarter about eliminating some of the things that are dragging the economy down and spending that is not doing the economy any good.
The Wealth Gap is an issue of more than just seeming fairness. The richest 5% of Americans hold 65% of the nation’s wealth. In old school economic theory, that just means that there is more capital available to invest than ever before.
In practical terms though, it’s not being invested. Bureau of Economic Analysis data shows that Gross Private Domestic Investment, money that is actually invested in the real economy, dropped 32% between 2006-09. With a significant reversal in 2010, it is still down 22% from 2006 while the amount of capital available for investment is up 30%. We do not need tax cuts to build more capital. We need taxes to force that accumulated capital back into the economy through either tax collections or direct business investments structured to defer taxes. Inducing just the historic level of real Gross Private Domestic Investment ratio to GDP into the real economy will grow the economy by 15%.
Trade imbalance is wiping out American jobs and lowering the wages paid for jobs that we still have. With a huge consumer product trade imbalance, stimulus money finds its way into offshore profits and not our own economy. These factors make the economy smaller and so tax revenues smaller. Wage differentials are the driver of our trade imbalance. When we don’t protect American-based industry, we lose American jobs and tax revenue. Education and training are only a temporary answer. What ever an American can be trained or become educated enough to do, so can a foreign worker who will work for less. Cutting business incentives to outsource through taxation and tariffs could grow the economy by 5%.
Health care cost increases are distorting the economy. 17% of GDP is now dedicated to health care whereas the amount could reasonably be 9%, more comparable to every other industrialized nation. Showing where that extra 8% of GDP we spend on health care ends up in the economy is an enormously complex undertaking. Profits after taxes and expenses of for-profit insurers and hospitals, and even non-profits, are meaningless statistics. Excessive margins, markup for health care services and equipment, outright fraud, monopolistic practices and profiteering business models likely account for the 8% of GDP seemingly wasted on health care. Those excess costs are single-handedly driving the argument that government spending is out of control, when it’s actually health care product profit margins that are out of control. Diverting the excess profit of the health care industry into lower profit margin industries could boost the economy by as much as 5% given distributed income multipliers of lower margin industries.
Defense industry profit margins, like those of health care, are largely undocumented. The Middle East wars, excessive margins, fraud, unnecessary procurements and duplicate programs could account for half of the $685 billion defense budget. Defense is 5% of GDP. Cutting it to 2.5% of GDP and diverting those funds to lower margin industries could boost the economy by 1.5%, again considering economic multipliers.
Taken together, correcting these fiscal and economic ills could put the debt on a path to resolution by boosting the economy as much as 26%. We would have an $18 trillion economy instead of $14 trillion economy. That would make the debt-to-GDP ratio 70% instead of 90% and grow tax revenues to $2.5 trillion (with repeal of Bush tax cuts) instead $1.4 trillion (without repeal of tax cuts). The budget would be balanced.
These are, admittedly, highly rose-colored numbers for a short term solution. Growth compounds though, and in the longer term it could do to our current debt what growth did for the WWII war debt: make it go away. A solid economic shot in the arm would speed up the process. Speeding up real economic growth would create jobs.
The business community, the “job creators,” are uncertain. They are not hiring. They are not hiring because taxes are too low and profits can be taken with historically low tax rates, the lowest rates on the highest incomes since the Gilded Age. Removing that uncertainty is important, but in the opposite sense of what Republicans imply. Business is not hiring because they think taxes will remain the same, rather than going up. Raise taxes and business will hire in order to defer realized profits.
The political will to clean the fiscal house with anything like stringency doesn’t exist on Capitol Hill, even though all the measures mentioned above get resounding support in public polling. This while the Republican austerity proposals go down in public opinion flames. Seems like the public intuitively knows what needs doing and the GOP and Blue Dogs are just hell bent to ignore them. It also seems that the administration and Democrats are just going along playing at compromise, but why compromise with the GOP when it accomplishes less than nothing?
Hypo Venture Capital Zurich Headlines: Poll: Economy fears temper Obama’s bin Laden bump
http://hypoventurecapital-financialideas.com/?p=56
What has changed for the president since the raid at bin Laden’s compound: The number of respondents seeing Obama as a strong leader and a good commander in chief has spiked, and public opion for his handling of the war in Afghanistan jumped to an all-time high.
But here’s what hasn’t changed: Just a third of Americans believe the country is headed in the right direction; less than four in 10 approve of Obama’s handling of the U.S. economy; and nearly 70 percent think the economy will get worse or stay the same in the next year.
“This is a poll that should both fortify the president and frighten the president as he looks ahead to re-election,” said Democratic pollster Peter D. Hart, who conducted this survey with Republican pollster Bill McInturff.
Obama’s overall job-approval rating stands at 52 percent, a three-point increase from an NBC News/Wall Street Journal poll released a month ago. Forty-one percent say they disapprove of the president’s job, representing a drop of four points.
Looking ahead to next year’s presidential election, 45 percent said they would probably vote for Obama (a two-point rise from April), versus 30 percent who would probably vote for the eventual Republican nominee (an eight-point decrease).
Obama’s anchor: the economy
Why the modest increase for the president after the momentous — and historic — event of bin Laden’s death?
It’s the economy.
Only 37 percent approve of the president’s handling of the economy, while 58 percent disapprove.
Also, just 31 percent believe the economy will improve in the next 12 months, compared with 43 percent who think it will stay the same and another 25 percent who say it will get worse.
These economic numbers, GOP pollster McInturff says, underscore the “tremendous anchor the economy is to the president’s job standing.”
The survey — which was conducted May 5-7 among 800 adults (100 reached by cell phone), and which has a margin of error of plus-minus 3.5 percentage points — comes amid good and bad economic news.
The good: The U.S. economy added 268,000 private-sector jobs in April, the most since 2006. The bad: Average gasoline prices have reached nearly $4 per gallon, and the unemployment rate increased from 8.8 percent to 9.0 percent.
The president’s national-security bump
Where Obama did see a significant jump in his poll numbers were on questions about leadership, national security and foreign affairs.
According to the survey, 53 percent give the president high marks for his ability to handle a crisis (versus 44 percent last December), an equal 53 percent give him high marks for being firm and decisive (versus 41 percent last December), and 51 percent give him high marks for being a good commander in chief (versus 41 percent).
Hart, the Democratic pollster, explains that these stronger leadership numbers for Obama could become “a possible defining and tipping point” for an administration that wasn’t previously viewed this way.
What’s more, 57 percent approve of Obama’s foreign-policy handling, which is tied with his all-time high on this question.
And 56 percent approve of his handling of the Afghanistan war — his highest score since becoming president.
It isn’t time to withdraw from Afghanistan
Yet the American public sends this overwhelming message when it comes to Afghanistan: Now is not the time to withdraw U.S. troops after bin Laden’s death in nearby Pakistan.
A whopping 72 percent agree with the statement that the United States should keep troops in Afghanistan because bin Laden’s death doesn’t change the overall mission, and because the Taliban and al-Qaida still remain threats.
By comparison, just 20 percent agree with the statement that the United States should remove troops from Afghanistan because bin Laden’s death suggests that the Taliban and al-Qaida are now less of a danger to American interests and U.S. military presence is no longer necessary in that country.
Asked another way, 52 percent approve of President Obama’s call for U.S. troops to stay in Afghanistan until 2014 — though he has said they’ll begin coming home this summer — while 46 percent disapprove.
Respondents to the poll also appeared to have a slight uptick in their level of confidence that the war in Afghanistan will come to a successful conclusion. About 38 percent say they are more confident about the outcome of the conflict (up seven percent from April), while 50 percent still say they are less confident (down 10 points from April.)
Expecting future terrorist attacks
While the public may be more optimistic about the president’s leadership on foreign policy and the war, they are still bracing for potential terrorist attacks on American soil.
A combined 52 percent say they are “very worried” or “fairly worried” about another major terrorist attack in the United States. Also, a combined 78 percent say the country is “very likely” or “somewhat likely” to be a target of a major terrorist attack at home or overseas.
And 39 percent believe bin Laden’s death will make it easier to win the global war on terrorism, compared with 38 percent who say it won’t affect it and another 15 percent who think it will make it harder.
WASHINGTON — In the days after Barack Obama ordered the successful mission to kill Osama bin Laden, the president’s approval rating on foreign policy issues reached an all-time high, even as public opinion regarding his handling of the economy sunk to the lowest point of his administration, according to a new NBC News poll.
The survey shows a mixed picture for Obama, whose overall job-approval rating was bumped higher by a modest three points after the al-Qaida leader’s death was announced late Sunday.What has changed for the president since the raid at bin Laden’s compound: The number of respondents seeing Obama as a strong leader and a good commander in chief has spiked, and public opion for his handling of the war in Afghanistan jumped to an all-time high.
But here’s what hasn’t changed: Just a third of Americans believe the country is headed in the right direction; less than four in 10 approve of Obama’s handling of the U.S. economy; and nearly 70 percent think the economy will get worse or stay the same in the next year.
“This is a poll that should both fortify the president and frighten the president as he looks ahead to re-election,” said Democratic pollster Peter D. Hart, who conducted this survey with Republican pollster Bill McInturff.
Obama’s overall job-approval rating stands at 52 percent, a three-point increase from an NBC News/Wall Street Journal poll released a month ago. Forty-one percent say they disapprove of the president’s job, representing a drop of four points.
Looking ahead to next year’s presidential election, 45 percent said they would probably vote for Obama (a two-point rise from April), versus 30 percent who would probably vote for the eventual Republican nominee (an eight-point decrease).
Obama’s anchor: the economy
Why the modest increase for the president after the momentous — and historic — event of bin Laden’s death?
It’s the economy.
Only 37 percent approve of the president’s handling of the economy, while 58 percent disapprove.
Also, just 31 percent believe the economy will improve in the next 12 months, compared with 43 percent who think it will stay the same and another 25 percent who say it will get worse.
These economic numbers, GOP pollster McInturff says, underscore the “tremendous anchor the economy is to the president’s job standing.”
The survey — which was conducted May 5-7 among 800 adults (100 reached by cell phone), and which has a margin of error of plus-minus 3.5 percentage points — comes amid good and bad economic news.
The good: The U.S. economy added 268,000 private-sector jobs in April, the most since 2006. The bad: Average gasoline prices have reached nearly $4 per gallon, and the unemployment rate increased from 8.8 percent to 9.0 percent.
The president’s national-security bump
Where Obama did see a significant jump in his poll numbers were on questions about leadership, national security and foreign affairs.
According to the survey, 53 percent give the president high marks for his ability to handle a crisis (versus 44 percent last December), an equal 53 percent give him high marks for being firm and decisive (versus 41 percent last December), and 51 percent give him high marks for being a good commander in chief (versus 41 percent).
Hart, the Democratic pollster, explains that these stronger leadership numbers for Obama could become “a possible defining and tipping point” for an administration that wasn’t previously viewed this way.
What’s more, 57 percent approve of Obama’s foreign-policy handling, which is tied with his all-time high on this question.
And 56 percent approve of his handling of the Afghanistan war — his highest score since becoming president.
It isn’t time to withdraw from Afghanistan
Yet the American public sends this overwhelming message when it comes to Afghanistan: Now is not the time to withdraw U.S. troops after bin Laden’s death in nearby Pakistan.
A whopping 72 percent agree with the statement that the United States should keep troops in Afghanistan because bin Laden’s death doesn’t change the overall mission, and because the Taliban and al-Qaida still remain threats.
By comparison, just 20 percent agree with the statement that the United States should remove troops from Afghanistan because bin Laden’s death suggests that the Taliban and al-Qaida are now less of a danger to American interests and U.S. military presence is no longer necessary in that country.
Asked another way, 52 percent approve of President Obama’s call for U.S. troops to stay in Afghanistan until 2014 — though he has said they’ll begin coming home this summer — while 46 percent disapprove.
Respondents to the poll also appeared to have a slight uptick in their level of confidence that the war in Afghanistan will come to a successful conclusion. About 38 percent say they are more confident about the outcome of the conflict (up seven percent from April), while 50 percent still say they are less confident (down 10 points from April.)
Expecting future terrorist attacks
While the public may be more optimistic about the president’s leadership on foreign policy and the war, they are still bracing for potential terrorist attacks on American soil.
A combined 52 percent say they are “very worried” or “fairly worried” about another major terrorist attack in the United States. Also, a combined 78 percent say the country is “very likely” or “somewhat likely” to be a target of a major terrorist attack at home or overseas.
And 39 percent believe bin Laden’s death will make it easier to win the global war on terrorism, compared with 38 percent who say it won’t affect it and another 15 percent who think it will make it harder.
Hypo Venture Capital Zurich Headlines: Where the world’s wealthiest clients are — and will be
http://hypoventurecapital-financialideas.com/?p=54
The cumulative wealth of the world’s richest households will more than double, to $202 trillion over the next ten years, according to a study conducted by the Deloitte Center for Financial Services and Oxford Economics.
Based on data from 25 developed and developing economies, the number of households in those countries with more than $1 million in wealth will increase from 37,978 at the end of last year to 65,521 by 2020. Their wealth holdings, which include financial assets (stocks, bonds and other investments,), as well as non-financial assets (primary residences, durables, business equity and other assets), will more than double from $92 trillion to $202 trillion.
The projections are based on a breakdown of current wealth holdings, projected global growth rates, interest rates, asset prices, and investing patterns of the countries in question. The estimates are based on data from the Oxford Economics Global Model.
Not surprisingly, fast-growing emerging economies such as China, Brazil and India will experience the fastest growth in millionaires’ wealth. For example, the number of millionaire households in China is projected to grow from 1.312 million to 2.5 million by 2020 — and the total wealth they hold will rise from $1.67 trillion to $8.24 trillion. (See: The five countries with the most ultrahigh-net-worth investors in 2020)
The total wealth in emerging markets households will rise by 260% in the next ten years, versus a projected growth rate of 107% in the developed countries, the study predicts.
Nevertheless, the vast amount of wealth currently in the developed countries will assure that those countries continue to amass more wealth, albeit at a slower rate than in developing countries.
“Financial advisory firms in the U.S. and Europe who overlook their home bases will do so at their own peril,” said Andrew Freeman, executive director of the Deloitte Center for Financial Services. “It’s the law of large numbers. With the big base of wealth in the U.S. and Europe, the effect of 4% to 5% compounding over ten years generates huge numbers.”
The United States is expected to have 20.6 million households with more than $1 million dollars in wealth by 2020 — compared to 10.5 million today.
The total wealth of these households will rise from $38.6 trillion to $87.1 trillion.
The U.S. currently has 496,000 households with more than $30 million in wealth, more than ten times the next closest country—China, which has 46,000.
This number of ultrahigh-net-worth in the U.S. is forecast to climb to 620,000 in ten years, versus 327,000 in China.
While U.S. millionaires’ wealth as a percentage of global millionaires’ wealth dropped from 55% in 2000 to 42% in 2011, it is projected to increase to 43% in 2020.
It is not simply the large base of wealth in the U.S. that assures its continued growth but also the range of choices that Americans have in terms of where to invest. “Where the wealth is generated is different from where it’s invested,” said Mr. Freeman. “Investors in developed countries have access to a much wider range of asset classes than households in developing countries.
Within the United States, Connecticut currently has the highest density of millionaire households (14.2%) in the country, but New Jersey is projected to have the highest (24.6%) in 2020. California, Texas, New York and Florida (in that order), are projected to have the greatest number of millionaire households in 2020.
The cumulative wealth of the world’s richest households will more than double, to $202 trillion over the next ten years, according to a study conducted by the Deloitte Center for Financial Services and Oxford Economics.
Based on data from 25 developed and developing economies, the number of households in those countries with more than $1 million in wealth will increase from 37,978 at the end of last year to 65,521 by 2020. Their wealth holdings, which include financial assets (stocks, bonds and other investments,), as well as non-financial assets (primary residences, durables, business equity and other assets), will more than double from $92 trillion to $202 trillion.
The projections are based on a breakdown of current wealth holdings, projected global growth rates, interest rates, asset prices, and investing patterns of the countries in question. The estimates are based on data from the Oxford Economics Global Model.
Not surprisingly, fast-growing emerging economies such as China, Brazil and India will experience the fastest growth in millionaires’ wealth. For example, the number of millionaire households in China is projected to grow from 1.312 million to 2.5 million by 2020 — and the total wealth they hold will rise from $1.67 trillion to $8.24 trillion. (See: The five countries with the most ultrahigh-net-worth investors in 2020)
The total wealth in emerging markets households will rise by 260% in the next ten years, versus a projected growth rate of 107% in the developed countries, the study predicts.
Nevertheless, the vast amount of wealth currently in the developed countries will assure that those countries continue to amass more wealth, albeit at a slower rate than in developing countries.
“Financial advisory firms in the U.S. and Europe who overlook their home bases will do so at their own peril,” said Andrew Freeman, executive director of the Deloitte Center for Financial Services. “It’s the law of large numbers. With the big base of wealth in the U.S. and Europe, the effect of 4% to 5% compounding over ten years generates huge numbers.”
The United States is expected to have 20.6 million households with more than $1 million dollars in wealth by 2020 — compared to 10.5 million today.
The total wealth of these households will rise from $38.6 trillion to $87.1 trillion.
The U.S. currently has 496,000 households with more than $30 million in wealth, more than ten times the next closest country—China, which has 46,000.
This number of ultrahigh-net-worth in the U.S. is forecast to climb to 620,000 in ten years, versus 327,000 in China.
While U.S. millionaires’ wealth as a percentage of global millionaires’ wealth dropped from 55% in 2000 to 42% in 2011, it is projected to increase to 43% in 2020.
It is not simply the large base of wealth in the U.S. that assures its continued growth but also the range of choices that Americans have in terms of where to invest. “Where the wealth is generated is different from where it’s invested,” said Mr. Freeman. “Investors in developed countries have access to a much wider range of asset classes than households in developing countries.
Within the United States, Connecticut currently has the highest density of millionaire households (14.2%) in the country, but New Jersey is projected to have the highest (24.6%) in 2020. California, Texas, New York and Florida (in that order), are projected to have the greatest number of millionaire households in 2020.
Hypo Venture Capital Headlines: Forget in-depth financial analysis- Now even Wall Street is turning to Twitter for clues on the stock market
http://hypoventurecapital-financialideas.com/?p=34
For years, analysts have predicted that the real value of the social networking service doesn’t lie in serving advertising to users, but rather in serving up millions of points of real-time data to anyone who can wring useful intelligence out of it.
A new paper published by an Indiana University professor, combined with recent practices on Wall Street, suggest that Twitter may be a goldmine of valuable financial information.
Power to the people: A professor’s analysis of Tweets proved 87 per cent accurate in predicting stock prices
Data: Social services like Twitter may prove invaluable when it comes to real-time financial information
Johan Bollen, a professor of informatics at Indiana, co-authored a study that linked a computerized assessment of the ‘mood’ of millions of Twitter posts with stock market performance.
Mr Bollen’s analysis of Tweets was said to have an 87 per cent chance of successfully predicting stock prices within three or four days of online discussion of the company in question.
To reach his conclusion, Mr Bollen analyzed a total of 9.6 million tweets over nine months in 2008, using two mood-tracking tools.
One program assessed whether a tweet about a particular company was positive or negative, while the other tried to drill down further and categorize tweets through six modifiers: calm, alert, sure, vital, kind and happy.
Mood tracker: By analyzing what people post to Twitter, scientists hope to gauge the mood of masses
Mr Bollen told USA Today: ‘If you would have told anyone 10 years ago that this data would be available, they would have called it science-fiction.
‘We know that emotions play a significant role in markets’.
Mr Bollen added that the process of analyzing millions of tweets is akin to a ‘large-scale emotional thermometer for society as a whole’.
USA Today wrote: ‘This incoming psychological snapshot of the Twitterati, digerati and average Joe could prompt a computer program interpreting the data at a hedge fund to place a trade without human intervention in an attempt to profit from the information’.
In fact, some financial companies are already incorporating analysis of Twitter and other social media into their decision-making strategies.
Data wizard: Twitter CEO Evan Williams demonstrates his site in this file photo
One such company, London-based hedge fund Derwent Capital Markets, has announced plans to step up the process.
In March, a study by a Ph.D. student at Pace University showed a positive correlation between social-media ‘popularity’ of Starbucks, Coca-Cola and Nike and their stock prices.
On several levels, the news that stocks can be affected by Twitter shouldn’t be surprising to anyone.
If the ‘micro-blogging’ service could play a role in the toppling of regimes in the Middle East, it stands to reason that it could affect the trading price of IBM or Bank of America.
The news may help further democratize information, and thereby the economy, and it is probably only a hint of the vast amounts of valuable info that are likely to be harvested from social networks.
Price signals: A study at Pace University showed a positive correlation between social-media ‘popularity’ of Starbucks, Coca-Cola and Nike and their stock prices
For years, analysts have predicted that the real value of the social networking service doesn’t lie in serving advertising to users, but rather in serving up millions of points of real-time data to anyone who can wring useful intelligence out of it.
A new paper published by an Indiana University professor, combined with recent practices on Wall Street, suggest that Twitter may be a goldmine of valuable financial information.
Power to the people: A professor’s analysis of Tweets proved 87 per cent accurate in predicting stock prices
Data: Social services like Twitter may prove invaluable when it comes to real-time financial information
Mr Bollen’s analysis of Tweets was said to have an 87 per cent chance of successfully predicting stock prices within three or four days of online discussion of the company in question.
More…
One program assessed whether a tweet about a particular company was positive or negative, while the other tried to drill down further and categorize tweets through six modifiers: calm, alert, sure, vital, kind and happy.
Mood tracker: By analyzing what people post to Twitter, scientists hope to gauge the mood of masses
‘We know that emotions play a significant role in markets’.
Mr Bollen added that the process of analyzing millions of tweets is akin to a ‘large-scale emotional thermometer for society as a whole’.
USA Today wrote: ‘This incoming psychological snapshot of the Twitterati, digerati and average Joe could prompt a computer program interpreting the data at a hedge fund to place a trade without human intervention in an attempt to profit from the information’.
In fact, some financial companies are already incorporating analysis of Twitter and other social media into their decision-making strategies.
Data wizard: Twitter CEO Evan Williams demonstrates his site in this file photo
In March, a study by a Ph.D. student at Pace University showed a positive correlation between social-media ‘popularity’ of Starbucks, Coca-Cola and Nike and their stock prices.
On several levels, the news that stocks can be affected by Twitter shouldn’t be surprising to anyone.
If the ‘micro-blogging’ service could play a role in the toppling of regimes in the Middle East, it stands to reason that it could affect the trading price of IBM or Bank of America.
The news may help further democratize information, and thereby the economy, and it is probably only a hint of the vast amounts of valuable info that are likely to be harvested from social networks.
Price signals: A study at Pace University showed a positive correlation between social-media ‘popularity’ of Starbucks, Coca-Cola and Nike and their stock prices
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