Marketplace - American Public Media

Subscribe to Marketplace - American Public Media feed
Updated: 56 min 44 sec ago

Behind the scenes at a budget hedge-fund start-up

Wed, 2015-03-11 13:03

"Hedge fund manager." The words might conjure up an image of a gray-haired man in a tailored suit, standing in a room full of dark wood, making billions of dollars by boldly gambling with other billionaires' money. But add to that Howard Wang, a 29-year-old in sweatpants, sitting at a desk next to his bed, scrolling through hundreds of ticker symbols on a spreadsheet.

"Every single one is a position that we hold," he says. "For example, Apple. And Amazon."

The spreadsheet represents millions of dollars in stocks, bonds, commodities, futures and currencies from every corner of the world, invested according to algorithms created and calibrated by Wang and his partner Robert Wu — both alums of the high-flying Bridgewater hedge fund — and run out of Wang's apartment. 

"That is literally the hedge fund," says Wang of the positions on his computer screen. 

"Hedge fund is like the nickname," says Steve Nadel, a lawyer at Seward & Kissel who helps set up hedge funds. "I think you could just as easily call it a 'private investor fund' in that it's privately offered and you don't advertise to bring in investors."

Hedge funds are no longer distinguished by a "hedging" strategy, but by their legal and regulatory status. They employ one of two exemptions to minimize oversight and regulation in exchange for being open to only the wealthiest individual or institutional investors.

Traditionally, hedge-fund managers have also shared a method of charging those investors: A management fee of two cents of every dollar invested, and a performance fee of 20 cents of every dollar gained.

But that's changed since the financial crisis. 

"You go back to pre-2008, about every hedge fund had a management fee around 2 percent," says Nadel. "Right now the rate is around 1.7 percent."

Wang's fund, Convoy Investments, is going even lower, to 1.25 percent and discounts for early investors.

"And no performance fees," Wang says. 

Does it pay the rent? 

"Yeah," he says. "I mean, of course, it depends on how much money we're managing. Right now, it does not pay the rent. For the last few years, I've been basically working out of my own savings." 

This thrifty approach is meant to appeal to investors fed up not just with hedge funds' high fees, but the lackluster returns many have been getting in exchange.

"When speaking about returns, one word that I've heard a lot is, you know, mediocre," says Melissa Santaniello, founder of the Alignment of Interests Association, a group of several hundred hedge fund investors. Last year, her group put out a kind of aspirational "Hedge Fund Investing Principles." Among the suggestions were ways of making fees drop in years when returns are lousy. "It's just aligning their interests. It's just making it a bit more fair," she says.

Last year, while individual hedge funds performed well, the average hedge fund made just one or two percent; simply investing in the S&P 500 would have returned 11.4 percent. California's massive pension fund, CalPERS, cuts its hedge fund investments entirely, citing high costs among other factors. And more hedge funds have simply shut down than any year since 2009.

The drumbeat of news adds to an argument advanced by Simon Lack, author of The Hedge Fund Mirage, that the industry has gotten too big to reliably deliver on its promises. In the 1990s, he says hedge funds as a class were a good investment, but as the industry has ballooned to nearly $3 trillion, the number of potential profit-making opportunities hasn't kept up.

"Below $1 trillion in assets hedge funds were able to generate reasonably good returns, and as they went above a trillion dollars, that turned out to be too much money for the available opportunity set," says Lack. 

Since 2002, Lack finds that a standard, boring portfolio of cheap index funds, made up of 60 percent stocks and 40 percent bonds, beat hedge funds not just over the 13-year period, but every single year. That's before, during and after the financial crisis, in good stock market years as well as the bad years when hedge funds are thought to be a particularly valuable form of portfolio diversification. 

"It really sort of undercuts the whole rationale for having hedge funds in the portfolio," says Lack. "I mean, if they're always going to underperform — always — what's the point?"

But for Howard Wang, bad news for hedge funds is reinforcement to his pitch. In a Skype call with a potential investor in Louisiana, he sounds less like a hedge-fund manager than an index fund rep, as he repeats a number of seemingly self-deprecating claims: He will not be a genius manager who beats the market day to day. He will not be making predictions about the future. Instead, his strategy is mostly passive, mostly automated, and mostly transparent. 

"I'm basically just the guy who's going out and executing on this strategy for you," he says. 

It's a modest pitch, but it works with this investor. He agrees to invest $500,000, putting Wang's fund at around $18 million. It's a small fund, and the discounted fees that he and his partner earns are made smaller still by auditors, lawyers and taxes.

"It may come out to be maybe 40k per person that we can take home, 30k," Wang says. 

Not exactly what you think of as a "hedge-fund manager" salary. 

"Right, right," he agrees. "But we're OK with that."

He says it's worth it to run a hedge fund of his own, and to run it a little bit differently.

In Atlanta housing recovery, the neighborhood matters

Wed, 2015-03-11 12:34

Robin O'Neil owns a four-bedroom home in what looks like a little piece of suburban paradise: the Chapel Lake subdivision in DeKalb County, east of Atlanta. The large yellow house has a generous lawn, a patio and even a little sunroom. But O'Neil, who works in real estate, says her home is worth less than when she bought it in 1997. Still, she has faith that her neighborhood, and her home, will bounce back.

The recession and the housing crash hit Atlanta hard, but since 2012 recovery has seemed imminent. Is it?

Dan Immergluck, a professor of city and regional planning at Georgia Tech, decided to investigate how and whether greater Atlanta housing was recovering. He used home price estimates from Zillow and compared three-bedroom houses in every zip code in the metro region. Home prices in zip codes Immergluck calls "the favored half" had rebounded to where they were at the market's peak. In other zip codes, homes are still worth only about half of what they were in 2001.

Immergluck found that one of the primary differences between neighborhoods that have recovered fully and those that have recovered only partially is their racial demographics. Majority-African-American and Hispanic zip codes are recovering more slowly than majority-white zip codes with similar housing stock. 

Immergluck says the nature of the housing crash might explain the uneven recovery. In the years before the housing bubble burst, minorities were more likely to have had subprime loans and were more likely to have lost their houses. In some neighborhoods, the result was large swaths of homes lost to foreclosure, depressing the value of houses around them.

Others see more endemic and worrying factors. Dorothy Brown, a professor at Emory University's School of Law, cites studies which show that, even before the housing crash, homes in predominantly African-American neighborhoods were likely to be valued at lower prices than similar homes in majority-white neighborhoods. Brown's advice to those seeking to buy homes is not beware, but be smart. Make sure, she advises, that you don't expect your net worth to come solely from your home.

In Chicago, police misconduct has a hefty price tag

Wed, 2015-03-11 11:34

The White House has been looking at problems with local law enforcement. Not only did the Justice Department issue its report on Ferguson, Missouri, but a presidential task force on 21st Century Policing issued a report in March. 

In addition to the social costs, police misconduct costs money.  One watchdog group found that Chicago paid out more than half a billion dollars over a 10-year period. How does the tab get so high?

Start with laywers:  Scandalously bad policing is Jon Loevy’s bread-and-butter. He runs a for-profit law firm in Chicago, with 25 attorneys, built on big wins in police misconduct cases.

"We like to say it’s a non-depletable good — injustice," he says. "You know, there’s a million cases out there where people have their rights violated, or wrongfully convicted, or falsely arrested."

What’s tough is winning those cases, which can take years and lots of upfront investment.

"This is not for the faint of heart," says Loevy. "Because you don’t get paid unless you win."  

So, having lawyers who are willing and able to take those cases on — and win them — is one variable.

Another is how a city responds to lawsuits. For years, the city of Chicago had a not-quite-official “no-settlements” policy, which is a strategy that may scare away some potential plaintiffs. However, it also means defending cases that are clear losers.  

That gets expensive, says Lou Reiter, a law-enforcement consultant and former deputy chief of the Los Angeles police department. Juries will award more in damages than lawyers would settle for. "Then, the attorney gets reasonable fees on top of that," says Reiter. "And many times that’s much more than the actual jury verdict." 

He consulted with the plaintiff's attorneys on an infamous Chicago case, in which an off-duty cop beat up a bartender in front of a security camera. The video went viral, and the city refused to settle. The jury awarded the woman $850,000, and the court gave her attorneys more than twice that amount.

Reiter thinks the city could have saved itself a lot of money. "Initially, they probably could have settled that for maybe two, three hundred thousand dollars," he says.

Legal fees, including payments to the city's own outside counsel, amounted to about a quarter of the city's $521 million police-misconduct tab, as tallied by the Better Government Association.

The city of Chicago didn’t comment for this story, but plaintiffs’ lawyers say Chicago’s policy has shifted since Rahm Emanuel became mayor in 2011.

"They've really moved to nip some of these cases in the bud," says Andrew Schroeder, a reporter for the BGA. "If they identify a case where they were clearly in the wrong, they are trying to settle that early on, before it results in an expensive judgment."

Chicago is not alone in facing these expenses. The Ramparts police scandal alone cost Los Angeles an estimated $125 million.

The "Blurred Lines" case could have a chilling effect

Wed, 2015-03-11 11:13

Borrowing, sampling, covering and other appropriation are commonplace among musicians, but an LA jury ruled Monday that Robin Thicke and Pharrell Williams took things too far with their monster hit "Blurred Lines." The court ruled the pair's track was a little too inspired by Marvin Gaye's "Got to Give it Up," and awarded Gaye's family about $7.4 million for copyright infringement.

The verdict could put artists more on notice when appropriating other tracks, says George Washington University Law Professor Robert Brauneis, who helps us unpack the complexities of the case.

Listen to the full conversation in the audio player above.

Apple saves on rent thanks to long iPhone lines

Wed, 2015-03-11 10:01
31

All 31 banks subjected to the Federal Reserve's stress tests passed the first round last week, showing they can continue to lend even amid economic collapse. But the second round of results, due Wednesday, might not go quite as well for all the banks.

21,944.66 points

That's where the Dow Jones Industrial average would have sat Tuesday, in theory, if Apple had joined in 2008 instead of Bank of America, Bloomberg reported. In reality, Apple joined this week, displacing AT&T and B of A left in 2013.

Courtesy:Bloomberg 2 percent per square foot

Speaking of Apple, that's the portion of sales its retail stores pay for space in American malls, the Wall Street Journal reported. Compare that to the up to 15 percent other retailers typically pay per square foot. Apple has reportedly negotiated for lower rent because of their stores' massive draw.

$10 billion

That's how much General Motors is giving back to shareholders in dividends and stock buyback, quelling a potential spat with activist investors. But the move could mean GM will lose some ground as it attempts to keep wages down during negotiations with the autoworkers union this summer.

20

The number of deaths tied to film or TV production from 2010 to 2014, doubling the previous five years. An LA Times investigation found the uptick is tied in part to reality TV production and the drive to create thrilling footage

$7.3 million

The damages an LA jury ordered "Blurred Lines" co-writers Robin Thicke and Pharrell Williams to pay Marvin Gaye's family for infringing on Gaye's "Got to Give it Up" copyright with the 2013 megahit. Quartz joins the flurry of "soundalike" lists with a playlist, so you can decide for yourself who's a copycat and who's not.

Ahead of labor talks, GM puts pressure on itself

Wed, 2015-03-11 09:54

GM announced this week it’ll give shareholders $5 billion in dividends and a $5 billion stock buyback. That’s good news for investors, and for GM, which managed to avoid a major clash with hedge fund interests on the board.

Times are good for automakers like GM.  But when the company opens negotiations with the United Autoworkers Union this summer, it’s going to try to keep a lid on wages, says Kristin Dziczek, director of the Industry and Labor Group at the Center for Automotive Research.

The union will think, "If they had the kind of money that they had to pay out for this stock play, they’ve got money to fund what the union is looking for,” she says.

Some workers haven’t had a raise in more than eight years. And Dziczek says the UAW says the ones who did still aren’t earning enough.

Ross Eisenbrey, vice-president of the Economic Policy Institute, says GM can increase share prices at the risk of everything else, or take the long view: investing in new equipment and the workforce. He says GM has to balance all of those things against a desire to reward shareholders. 

Apple's invented a new way to make 18-karat gold

Wed, 2015-03-11 08:51

This final note on the way out, in which we mix popular culture, high tech and metallurgy.

The folks at Slate have been poring over Apple's patent applications for that Apple Watch you may have heard so much about. It turns out, Apple's invented a new way to make 18-karat gold for it's top-of-the-line watches.

It's complicated, and I'm not a scientist, but Apple plans to use something called, "metal matrix composite." 

To put it another way, Apple is combining gold with durable materials that don't have much mass, but take up lots of space. That gives it wonderful qualities like lightness and scratch-resistance (normal gold is somewhat soft and prone to damage). And by mass, the final product is still 75 percent gold. But when it's poured into a mold to make an Apple Watch Edition's shell, the other, not-so-precious ingredients take up most of the room. Apple gets to use less gold per cubic centimeter and still call it 18-karat. It gets to stretch its gold out further than, say, Rolex would, to make a watch this size and shape.  

It's still actual 18-karat gold technically, but it lets the company — and this is a quote from its patent filing — use "as little gold as possible."

Police fees shore up budgets in many towns

Wed, 2015-03-11 08:50

Thomas Jackson, the police chief in Ferguson, Missouri, resigned Wednesday, exactly one week after a scathing report from the Department of Justice criticized the city's use of law enforcement as a revenue generation tool.

Ferguson City Manager John Shaw stepped down on Tuesday.

Last Wednesday, Attorney General Eric Holder said Ferguson officials pressured police to generate revenue through aggressive tactics and ticketing. City officials exerted "overriding pressure," Holder said, using "law enforcement not as a public service, but as a tool for raising revenue."

Beth Colgan, a law professor at UCLA who has been studying the issue of municipalities and their use of fees, says there's evidence that a lot of local governments are using law enforcement and court fines to shore up budgets.

"If you look at the criminal and civil codes in any county or state," says Colgan, "as a general matter, the use of fines, and fees, and costs, is something that's pervasive around the country."

In Chicago, for instance, red light cameras reportedly generate $70 million in fines every year. There is now debate between mayoral candidates about whether those cameras should remain, and if not, how to replace that revenue.

The tiny town of Randolph, Missouri, got into trouble a few years ago when the state learned the town's budget came almost exclusively from highway traffic fines.

Knowing whether local governments' reliance on fines has become a national problem or not is difficult, says Brian Jackson, because of a lack of empirical research examining the issue nationwide.

Jackson, who heads the safety and justice program at the Rand Corporation, says there is no question that fines and fees became prominent revenue sources for many local governments, especially after the financial crisis. 

"As a business model, funding through fine revenue does reduce the amount of taxes that have to be levied to pay for public safety, because it's another funding stream," Jackson said. 

But while many municipalities are relying on fines and fees from law enforcement, few have considered the potential implications, Jackson says. 

"The problem here is one of incentives," he said. "The question comes down to how much is too much, and at what point does that start distorting the decisions of individual officers," or their superiors. 

The bigger question, he says, is whether voters are willing to fund services their local governments provide through taxes instead of fines and fees.

How does the strong dollar affect U.S. consumers?

Wed, 2015-03-11 08:49

The ol’ dollar just isn’t what it used to be. It's actually worth quite a bit more.

The value of the dollar has been rising steadily compared to other currencies. On Wednesday, the value of a euro fell to $1.05 -- below $1.06 for the first time since 2003. Tuesday, the dollar hit its highest value against the Japanese yen in nearly eight years.

What does that mean for U.S. consumers?

For Bill Kendrick of Davis, California, it means cheaper supplies for his 1983 Atari computer. He has his eye on a cartridge that’s 20 percent cheaper than a similar one he bought several years ago, thanks to a better exchange rate.

American retailers who buy goods abroad will see a similar discount, but they might choose to pocket the savings instead of passing them along to their customers, says Dan Morris of TIAA-CREF Asset Management.

Now would also be a good time to vacation in Europe, says Boris Schlossberg at BK Asset Management. He said he has been surprised by the speed at which the dollar is rising, but he cautions that what goes up will eventually come back down. Today’s discounts won’t last forever.

Japan struggles to build a new electricity network

Wed, 2015-03-11 08:48

Four years after the earthquake and nuclear plant meltdown, Japan has gone cold turkey on nuclear energy. For now, zero reactors are currently in operation.

Solar energy has sought to fill some of that void. Thanks to subsidies and affordable, efficient solar panels, Japan’s solar market has grown tenfold in the last two years. Then, utilities controlling the grid pushed back, and refused to take additional solar energy.

There are technical trade-offs, says engineering professor Massoud Amin at the University of Minnesota, that can cause brownouts and blackouts.

There are fixes, a complex assortment of solutions often referred to as a smart grid. But that requires an enormous investment, that Paul Scalise of the University of Duisberg-Essen in Germany says raises a fundamental question: Who pays for it?

This is a clean-energy issue that doesn’t just face Japan. Germany, Spain, Australia and California all confront questions of grid reliability and upgrade. While it may be in the interests of some utilities to resist change — and hold off direct competitors in the power generation space — inaction in the case of Japan comes with its own trade-off: the environment. Without nuclear energy, the country increasingly relies on imported fossil fuels.

Why sales of packaged or processed foods are declining

Wed, 2015-03-11 08:00

Packaged food manufacturers are grappling with some big shifts in consumption trends. Sales of some of the top brands at General Mills, Kraft and the Campbell Soup Company have been slumping. 

As Campbell’s chief executive Denise Morrison recently acknowledged at a conference, many Americans are turning away from foods whose ingredients aren't "fresh" or "natural."

“And along with this, as all of you know, comes a mounting distrust of so-called “Big Food”, the large food companies and legacy brands that millions of consumers have relied on for so long,” she told a room full of food industry analysts.

One of the people presenting a challenge for food companies is 23 year-old Nick Neylon. He says the pejorative phrase “Big Food” is part of his vocabulary.

“I would also use a term like evil and the devil and Lucifer,” he says.

I found Neylon stirring a pot of homemade polenta at a Minneapolis event called "Eat for Equity." People raise money for charities while sharing a big, healthy meal. A mushroom and fennel ragout filled the air with a rich, tomatoey scent. Neylon says that's his kind of grub. He avoids packaged and fast foods.

Nick Neylon dresses a salad at a Minneapolis event called “Eat for Equity.” 

Annie Baxter/Marketplace

“If someone else made it, don't eat it,” he says. “Generally you'll be happier if you cook all your food from scratch.”

Neylon's age may have something to do with his eating habits. Food and beverage analyst Darren Seifer with the NPD Group says the millennial generation is making a shift towards fresh fruits, vegetables, and meats. Seifer traces the change to the Great Recession — young people ate out less often because they were broke. And instead of cracking open, say, a can of Chef Boyardee, some learned how to cook.

“A lot of it has to do with how millennials got used to their kitchens sooner than we expected them to,” he says.

Food analyst Alexia Howard at Bernstein says women are playing a big role, too.

“Over the last several decades, really since the Second World War, heavily processed or packaged foods — more convenient foods — were embraced by moms-at-home and women wanting to get into the workforce,” she says.

But Howard says a few years ago, sales of products like Jell-O and TV dinners declined noticeably. Her theory: Moms were spending more time on the internet reading about what goes into food and got turned off by additives and preservatives.

Heidi Stark, who's 37, is a case in point.

“When you start reading what's actually in the packages, no one wants it,” she says.

Stark says gut problems prompted her to start eating super healthy over the past year. Now she plans out her menu and buys lots of fresh fruits, veggies and meat. On a recent trip to Lakewinds Food Co-op in Minneapolis, she bought the ingredients for a recipe involving pork chops, apples and shallots.

“That sounds gross!” her seven year-old son Anderson complained.

But his mom says he’ll eat it anyway.

Packaged food companies are trying to woo back consumers like Heidi Stark with some fresh products — like baby carrots from the Campbell Soup Company or protein-packed items, like a Kraft snack pack with meat, cheese and nuts. Some are also appealing to the growing interest in simple, organic ingredients — think General Mills' acquisition of Annie's, which makes organic macaroni and cheese.

Stock analyst Alexia Howard says even if these products sell well, they're still a small part of the companies' overall business.

“The margins on these new products are a lot lower,” she says. “The growth in these new products, rapid though it is, they're starting from a much smaller base than the bigger, established brands.”

While these big food companies struggle to meet the needs of millennials and moms who want fresher foods, Howard says we could see more cost-cutting — and even consolidation.

Quiz: How effective are Teach for America teachers?

Wed, 2015-03-11 07:45

Mathematica Policy Research examined the effectiveness of Teach for America teachers after the nonprofit received a $50 million federal grant in 2010 to put more of its teachers in classrooms.

var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "how-effective-are-teach-for-america-teachers", placeholder: "pd_1426088761" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed'));

PODCAST: Farm bill comes up short

Wed, 2015-03-11 07:27

The dollar is on a 12-year high driven by the potential for high interest rates, but what does that mean for the markets? We check in with Payden & Rygel chief economist Jeffrey Cleveland. Next, GM announced this week it’ll give shareholders $5 billion in dividends and a $5 billion stock buyback. That’s good news for investors, and for GM, which managed to avoid a major clash with hedge fund interests on the board. But when the company opens negotiations with the United Autoworkers Union this summer, it could be tough to argue for keeping a lid on wages. Finally, Washington lobbyists and think tank-types are tearing apart the Farm Bill, trying to figure out how far Congress was off in budgeting for the subsidies that were ushered in by the subsidies it ushered in.

Big change to farm subsidies

Wed, 2015-03-11 06:41

Washington lobbyists and think tank-types are tearing apart the Farm Bill, trying to figure out how far Congress was off in budgeting for the subsidies the new bill ushered in.

“For major crops like corn we would expect payments to be double what they expected: $6.5 billion" says Vince Smith, an economist at the American Enterprise Institute and Montana State University.   

Farmers used to get the same, direct payment every year. Now they’re offered a choice of two subsidies. One kicks in when their revenues per acre drop, the other is tied to crop prices. If the price of, say, corn, falls below a target the government makes up the difference. 

But critics like say the targets were set too high. They say prices are falling more than Congress expected, and don’t have to fall much, for the subsidies to kick in.

“They look like a safety net even though they’re more like a trampoline, when you really stop and think about it,” says Scott Faber of the Environmental Working Group, or EWG.

Plenty of people in Washington have been thinking about it.  But the nation's capital can be something of a bubble.  I wanted to break through the bubble, and hear from someone who’s actually living with the new subsidies I head to Robb Ewoldt’s farm, in Eastern Iowa. 

I meet him in his repair shop.

“We grow corn and soy beans.  We grow alfalfa grass, alfalfa hay and kids,” he says, laughing. (Ewoldt is a father of two.)

He thinks taxpayers will actually save money under the new subsidy system. Before, he got a government payment even if he was selling his corn at record prices. 

“I think this will be a little bit more fair for the taxpayer because the money’s going to come when we are in pretty tough shape," he says. "When we need it.”

Ewoldt says most farmers are independent. They don’t like taking the subsidies, but they need them to get through the tough times, he says.

Drones have still got a long way to go

Wed, 2015-03-11 05:30

Could drones solve some of Africa’s infrastructure problems? Afrotech, a Swiss company, seems to think so.

Transporting smaller cargo through the skies via drones, for instance, could be cheaper than investing in railways or roads right away.  So starting next year the company will test cargo drones that can carry small packages across 50 miles.

The idea isn’t that unusual, says Matthew Wall, a technology and business reporter for BBC who's covering Afrotech. “There are already these quadcopter drones ... These are these helicopter-style drones which can carry small packages.”

They can also be programmed to pick up small packages, he added.

But, it would take a while for this to happen over long distances. For one, we don’t have the battery technology to power drones for more than 50 miles. And the drones themselves aren’t strong or light enough to transport most cargo.

“That’s going to take some ten years at least I think before we see these things across the skies,” said Wall.

Banks prepare for round two of stress tests

Wed, 2015-03-11 03:01

Each year, the Federal Reserve puts the nation’s biggest banks through stress tests. It wants to make sure they can keep lending even in scenarios where home prices plummet and unemployment spikes. Thirty-one banks passed a round of tests last week. 

“The results last week were purely quantitative. How the banks do under each of the scenarios,” says Karen Petrou, managing director with Federal Financial Analytics.

The next round takes a more qualitative look at the individual banks and their capital planning—how they plan to distribute capital to shareholders through, say, dividends, and whether that leaves them with enough of a capital buffer to cover potential losses.

Petrou says some banks might fail this time.

“The Fed looks at the bank and says no, your mortgage loans are a lot riskier than other bank mortgage loans and you should know that,” Petrou says.

The Fed could tell those banks to keep more capital on hand. Duke University law professor Lawrence Baxter says that could mean share buybacks and dividends are forbidden. Stock repurchases benefit stockholders, because they increase the value of an individual share, but they cut into capital.

“The view is that if they don't maintain sufficient capital to deal with these adverse circumstances, the rest of us are exposed,” he says.

Social and emotional learning emerges at SXSWedu

Wed, 2015-03-11 02:08

Marketplace reporter Adriene Hill has been in Austin this week, covering SXSWedu with the LearningCurve team. She spoke with Tech's Ben Johnson about the emergence of social and emotional learning as a trend at this year’s event.

Hunter Gehlbach, associate professor at Harvard Graduate School of Education, says "human skills" are a trending topic at SXSWedu because, “at our core, we are fundamentally social creatures," he says.

"So if students are preoccupied with this fundamental need that they don’t feel like they belong, that they’re being bullied, those kinds of things, there’s no way that they’re going to pay attention to what’s going on in the classroom," Gehlbach says.

More research is finding that strengthening social and emotional skills can help kids learn. The focus stems from digital citizenship, and a desire to encourage kids to take a step back from their constantly connected, tech-infused, app-filled world.

Mindfulness instructor and former teacher Erin Sharaf says social and emotional learning can look different depending on how students learn best:

“It might look like students sitting on the floor doing postures that look like yoga; it might look like a bell ringing and their task right now is just to listen to the bell. It might look like eating a raisin, and really being fully present with that raisin, and actually noticing what it tastes like instead of thinking about the math lesson that they have to do next or the fight that they had at home before they came into the classroom,” she says.

Erin Sharef / Hunter Gehlbach

But there are applications of technology in this social and emotional space as well. Gelhbach brings up a virtual reality project in the works that allows kids to experience multiple perspectives of a bullying situation, and says tech is helping researchers like him get better data — and use it in better ways — to help show these social skills can improve learning.

The tricky business behind fake Hollywood money

Tue, 2015-03-10 09:32

Greg Bilson Jr. runs a company called Independent Studio Services or ISS. They make props for pretty much every movie and television show you’ve seen in the last 40 years, including 90210, CSI, and Indiana Jones.

One of ISS’s specialties? Prop money.

That made ISS the ideal company to work on Rush Hour 2. The premise of the movie is that two police offices, played by Jackie Chan and Chris Tucker, chase a counterfeiter known for producing high grade counterfeit money. To prepare for the climax of the film, ISS created a billion dollars of fake money.

Bilson says, “it was fourteen pallet loads of $100 bills, stacked four feet high, solid.” That’s a lot of money, all of which was to be blown up in a casino.

The scene went well but as thousands of these fake bills rained down, many extras grabbed a few of these bills and kept them as souvenirs. Some of those extras tried to spend the money.

The federal authorities weren't too pleased about this. Secret service agents swarmed the set, shut down production, confiscated all the bills that were left, and then they paid Bilson a visit at ISS. He was essentially blamed for counterfeiting.

“Most people would look at this bill and kind of laugh” says Bilson. “It is a very bad picture of Ben Franklin, who we named ‘Franken,’ it says, ‘Motion picture use only’ on 15 different places, it [says], ‘In dog we trust.’ There are many many things that are different from the real bill, but it’s still not within the parameters of legal.”

Bilson has to operate under the counterfeit detection act of 1992. Essentially what this law says is that bills must be either 75% smaller than or 150% larger than the size of a real bill and one color, one side.

And that puts Greg Bilson and other prop builders in Hollywood in a tough spot. They have to skirt the line between these strict counterfeiting laws and producers' demands for this incredibly realistic money. And sometimes, these prop builders have trouble finding that sweet spot in the middle.

“Movie producers and films and TV shows are kind of wanting us to break the law all the time. So we have to keep within those parameters, or do it in a manner that is legal.”

Like other prop masters, Bilson isn't trying to dupe the public. He’s just doing his job.

Read the full story on Pricenomics.

Janet Yellen needs to work on her brand

Tue, 2015-03-10 09:29

According to an NBC News/Wall Street Journal poll that came out on Monday, just 14 percent of Americans know who Janet Yellen is and have an opinion about her, good or bad.

The rest of us don't know, or aren't sure, whether she's the most powerful person in the global economy.

So ... I quit.

(Just kidding.)

Pages