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Falling Stock Markets? Blame China.

| Fri Aug. 21, 2015 11:18 AM EDT

Over at Wonkblog, Ylan Mui writes about the plummeting stock market:

Is this the beginning of “Rate Rage”?

You could be forgiven for thinking so, judging by all the blame that’s been heaped on the Federal Reserve for the selloff in stock markets over the past three days. The blue-chip Dow Jones Industrial Average has plunged 500 points, and the broader Standard & Poor’s 500-stock index erased its gains for the year. Markets Friday morning were already beginning to edge down.

We must read wildly different stuff. I haven't noticed anyone blaming the Fed for falling stock markets. The headlines have all been like this one in the Wall Street Journal: markets are dropping because investors are afraid that China is about to go belly up. As Mui points out, the Fed's actions have been widely anticipated, and the timing of the market drop doesn't really match up with anything new from the Fed anyway. It does match up with investors finally getting nervous after weeks of increasingly bad news from China.

In any case, this is yet another reason the Fed might want to rethink a rate rise later this year. The global economy is not looking especially robust at the moment, with Europe barely growing and China possibly entering a serious slowdown. We don't really need to add to these problems.

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Hobby Drones: Not As Cute As You Think

Why a sky clogged with unregulated remote-control aircraft might not be such a great idea.

| Fri Aug. 21, 2015 10:40 AM EDT

Somebody at the FAA leaked several hundred rogue-drone reports to the Washington Post's Craig Whitlock:

Before last year, close encounters with rogue drones were unheard of. But as a result of a sales boom, small, largely unregulated remote-control aircraft are clogging U.S. airspace, snarling air traffic and giving the FAA fits.

Pilots have reported a surge in close calls with drones: nearly 700 incidents so far this year, according to FAA statistics, about triple the number recorded for all of 2014. The agency has acknowledged growing concern about the problem and its inability to do much to tame it.

And we saw something similar a few weeks ago, when private drones interfered with firefighting in California.

This is the reason I'm more skeptical about a laissez faire attitude toward drones than many people. Once they're out there, they're out there, and all the new regulations in the world won't put the genie back in the bottle. Conversely, if you regulate them more tightly and ease up slowly as the consequences become clearer, we can avoid things like drones bringing down a 747 about to land at LaGuardia.

Nobody likes the idea of the government getting in the way of cool new technology. I get that. But governments regulate driverless cars for an obvious reason: they're dangerous. Drones probably ought to be more tightly regulated for the same reason. When one person in 10,000 owned one, they seemed harmless. When one person in a hundred owns one, it suddenly becomes clear that a sky full of hobby drones might not be such a great idea. When the day comes that everyone has one, it will be too late.

This is true of a lot of things. When they're rare, they seem harmless. And they are! But you need to think about what happens when they get cheap and ubiquitous. In the case of drones, we might not like what we get.

Word of the Day: Trumpery

| Fri Aug. 21, 2015 8:30 AM EDT

This may be the greatest, classiest entry in any dictionary ever. Yes, it's real.

This Chart Will Make You Even More Pissed Off About Your Ballooning Student Debt

These universities spend more on investment managers than scholarships.

| Fri Aug. 21, 2015 6:00 AM EDT
Many universities spend way more managing their investment portfolios than they do helping students with tuition.

For the tens of thousands of college students who are taking out another year's worth of debt in preparation for the start of classes, here's a rage-inducing data point: Many universities spend way more managing their investment portfolios than they do assisting students with tuition.

A New York Times op-ed published Wednesday by Victor Fleischer, a law professor at the University of San Diego, lays out this disparity. Fleischer cited Yale University, which paid its fund managers nearly $743 million in 2014 but gave out just $170 million in scholarships. He also noted that many universities, large and small, public and private, show the same imbalance in spending. "We've lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university's endowment," he writes. "The private-equity folks get cash; students take out loans."

Fleischer provided Mother Jones with more of his data, which is gleaned from tax forms, financial statements, and annual reports. Here's how the numbers shake out at Harvard, Yale, Stanford, and Princeton. On average, these four wealthy, elite universities spend 70 percent more on managing their investment portfolios than they do on tuition assistance. (Complete scholarship data for 2014 was not available, and some investment management fees are estimated.)

That disparity is even more glaring when you consider the tax benefits fund managers derive from working with universities. Fleischer notes that investors typically pay their fund managers about 20 percent of their investment profits. That money, called carried interest, is taxed at a lower rate for fund managers, who can claim it as capital gains instead of income.

Some universities justify the high management fees by arguing that they ensure top financial performance for their endowments. It's true that these portfolios have done quite well: Harvard's endowment is nearly $36 billion, and Yale's is more than $25 billion, a 50 percent increase since 2009. But, writes Fleischer, a little less endowment hoarding and a little more spending, both on financial aid and other educational goals, would still allow universities' money to grow generously while eliminating the hefty tuition increases that force students to take on burdensome debt.

Fleischer proposes that when Congress moves to reauthorize the Higher Education Act this term, lawmakers should require universities with assets greater than $100 million to spend 8 percent of their endowment each year. Even doing that, universities would likely continue to get exponentially richer. As he notes, the average endowment has grown 9.2 percent annually for the past 20 years (after accounting for 4 percent annual spending), a more than respectable rate of return.

Elite schools do offer need-blind admission and some of the best financial aid for low-income students. But for many students, tuition increases still mean more loans: On paper, many middle-class students often don't qualify for large scholarships, but their families also can't afford more than $50,000 in annual tuition. More generous allocation of endowments could help to roll back that trend while also funding more teaching and research. As Fleischer writes in the Times, "Only fund managers would be worse off."

Carly Fiorina Plans to Run America Via Smartphone

| Thu Aug. 20, 2015 10:50 PM EDT

Soon we will all be Trumpists. Trumpets? Trumpettes? Trumpies?

Ahem. Anyway, at a town hall today a veteran told Carly Fiorina that he was having trouble getting a doctor’s appointment through Veterans Affairs:

“Listen to that story,” Fiorina said. “How long has [VA] been a problem? Decades. How long have politicians been talking about it? Decades.”

Fiorina said she would gather 10 or 12 veterans in a room, including the gentleman from the third row, and ask what they want. Fiorina would then vet this plan via telephone poll, asking Americans to “press one for yes on your smartphone, two for no.”

“You know how to solve these problems,” she said, “so I’m going to ask you.”

Until now, I had been willing cut Fiorina a little bit of slack over running HP into the ground. I figured other people shared some of the blame too.

Now I'm not so sure. Is this the razor-sharp leadership savvy she's been bragging about? Just ask a bunch of vets what they want? Press one for yes and two for no? That's how she's going to whip the VA into shape? Somebody just shoot me now.

POSTSCRIPT: Do you think that Fiorina (a) thought this up on the spur of the moment, or (b) gamed this out with her consultants and was just waiting for the right time to use it? And which is scarier?

Have We Reached Peak Internet Annoyance Yet?

| Thu Aug. 20, 2015 9:14 PM EDT

I have some horrible news about the search for ALS cures:

The breakthrough research unravels the mystery about a protein called TDP-43....In a study of the protein in mice cells....Johns Hopkins scientists detail how TDP-43 — which is supposed to decode DNA — breaks down and become "sticky."...When the researchers inserted a special protein designed to mimic TDP-43 into the neurons, the cells came back to life and returned to normal. That's sparked fervent interest that the treatment could possibly be used to slow down or even halt the disease.

It's a big step for the 15,000 Americans living with ALS, which currently has no cure, usually ends up killing people two to five years after they are diagnosed.

Oh wait. That's great news. Here's the horrible news:

One year ago....the Ice Bucket Challenge had become the viral campaign everyone was talking about — an online effort to raise awareness and funds for amyotrophic lateral sclerosis, better known as ALS or Lou Gehrig's disease....More than $220 million in donations later, scientists at Johns Hopkins are claiming a major breakthrough in ALS research and are partly crediting the success to the massive influx of public interest.

"Without it, we wouldn't have been able to come out with the studies as quickly as we did," said Philip Wong, a professor at Johns Hopkins who led the research team...."The money came at a critical time when we needed it," Wong said.

Crap. I guess this means we can no longer mock annoying internet memes that claim to be for a good cause. Or worse: annoying internet memes will become a staple of charitable fundraising.

But maybe it's not really so bad. After all, there has to be some kind of limit to annoying internet memes. There are just so many people in the world and so many hours in the day. And if we have indeed reached peak annoyance, the ALS meme added nothing to the total. It merely sucked it away from some other potential annoyance that never took off. It's sort of like an energy conservation law, except for annoying internet memes.

But....what if we haven't reached peak annoyance yet? And how would we know? As a wise man once told me, no matter how bad things get, they can always get worse.

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The Drought Is Making California Sink—And Climate Change Makes the Drought Worse

So say two new studies.

| Thu Aug. 20, 2015 6:04 PM EDT
Between May 2014 and January 2015, parts of the Central Valley sank by as much as 13 inches.

The policymakers tasked with overseeing California's ever-stressed water supply got two pieces of rough news this week.

• The Central Valley is sinking—really fast. A new satellite analysis from NASA found that vast swaths of the state's most important growing region—a massive national supplier of vegetables, fruit, and nuts nationwide—is dropping as farmers tap underground aquifers to compensate for lack of water from the state's irrigation projects. Subsidence, as the phenomenon is known, damages crucial infrastructure like aqueducts, train tracks, bridges, roads, and flood-control structures. As a June 2015 Center for Investigate Reporting article showed, no state agency keeps track of the financial cost exacted by repairing the ravages of subsidence, but the price tag is likely already in the tens of millions of dollars. Some of the most severe subsidence, NASA found, occurred along the California Aqueduct, damaging a network of canals, pipelines, and tunnels that carries water collected from the Sierra Nevada Mountains to the southern Central Valley's farms. Subsidence also permanently reduces the underground aquifers' water storage capacity, NASA adds.

• Climate change is making the whole situation worse. In addition to an epochal drought—driven mainly by lack of winter snows in the Sierra Nevada mountains, the engine of California's water system—the state is also experiencing historically warm temperatures. And while climate change  isn't likely the main factor behind the precipitation drop, it does likely drive the current heat wave. This year, California and much of the western US have endured record-high temperatures, the National Oceanic and Atmospheric Administration reports.

NOAA

Hot weather, of course, compounds the impact of droughts: It accelerates the loss of water stored in soil, vegetation, aqueducts, and reservoirs, a process known as evapotranspiration. In a just-published paper, researchers from Columbia University and the University of Idaho looked at temperature and precipitation data gathered between 1901 and 2014 and compared them to climate change models. They concluded that California's recent dearth of precipitation can be explained mainly by natural variability, but that that climate change-induced evapotranspiration has contributed dramatically to the drought's severity. Think of it like this: Lack of precipitation has severely limited new water coming into California, and climate change has hindered the landscape's ability to hold onto what little water is available. Over all, increased evapotranspiration is responsible for as much as 27 percent of the state's current water shortage, they calculated. Worse, going forward, "anthropogenic warming has substantially increased the overall likelihood of extreme California droughts," they concluded.

2 Brothers Inspired by Donald Trump Allegedly Attack Homeless Hispanic Man

“Donald Trump was right, all these illegals need to be deported."

| Thu Aug. 20, 2015 3:18 PM EDT

Boston police believe two brothers are responsible for a brutal attack Wednesday evening that left a homeless Hispanic man with a broken nose and covered in urine. One of the men, 38-year-old Scott Leader, told police he was inspired by presidential candidate Donald Trump's message on immigration. 

"Donald Trump was right, all these illegals need to be deported," Leader allegedly told cops when he was arrested with his brother, 30-year-old Steve Leader.

The Boston Globe reported that a witness saw the brothers beating the 58-year-old victim with a pole three or four times as he attempted to defend himself.

This isn't the first time the Leader brothers have been charged with a crime. After the attacks on September 11, Scott Leader was convicted with a hate crime after he assaulted a Muslim man and called him a "terrorist."

When Trump heard about the assault, he told the Globe, "It would be a shame…I will say that people who are following me are very passionate. They love this country and they want this country to be great again. They are passionate."

Trump, who is currently leading the GOP presidential field, set the tone for his campaign in June when he said that Mexican immigrants were criminals and rapists. 

Since launching his bid, Trump has continued to issue offensive comments about Latin American immigrants. Earlier this week, he offered a glimpse at his immigration plan, which promotes mass deportations and an end to birthright citizenship.

Donald Trump's Top 10 Liberal Heresies

For starters, he thinks affirmative action is okay

| Thu Aug. 20, 2015 3:04 PM EDT

Right now, Donald Trump appeals primarily to voters who are just plain angry and want a president who's willing to call a spade a spade. Still, these voters are also conservatives. They like Trump's stand on immigration and political correctness and taking away all the oil from ISIS. But what are they going to do when they find out that Trump has an awful lot of liberal views? I'm not talking about stuff he said years ago and has since changed his mind about. I'm talking about views he's advocated in the past couple of months. Off the top of my head, here are Trump's top 10 liberal heresies:

  1. He thinks affirmative action is okay.
  2. He would fund Planned Parenthood except for abortion. (This is current federal policy, though Trump doesn't seem to know it.)
  3. He supports a progressive income tax. He does not favor a flat tax.
  4. He doesn't believe you should be able to fire someone just for being gay.
  5. He doesn't want to cut Social Security or Medicare.
  6. He's in favor of a ban on assault weapons.
  7. He invited Bill and Hillary Clinton to his wedding.
  8. He doesn't "fully" believe in supply-side economics.
  9. He wants to "lead from behind" on Ukraine. Trump believes that Germany should take the lead on Ukraine.
  10. He hates the Iran deal, but he wouldn't abrogate it after taking office.

Even one or two of these would sink any other Republican candidate. But 10? Even if Trump's appeal is mostly based on bluster and affinity politics, how long can he last before his fans begin to wonder just how conservative he really is?

Sorry, Donald, You Can't Count Retirees As "Unemployed"

| Thu Aug. 20, 2015 1:44 PM EDT

In his interview with Sean Hannity last week, Donald Trump said the unemployment rate wasn't 5.3 percent, as the Bureau of Labor Statistics says. "That's phony math," he told Hannity. "If you add it up, it's probably 40 percent, if you really think about it."

Was this just a one-off comment because he was trying to bond with Hannity? Or was it another budding Trump meme? Today, in an interview with Time, Trump doubled down:

Don’t forget in the meantime we have a real unemployment rate that’s probably 21%. It’s not 6. It’s not 5.2 and 5.5. Our real unemployment rate—in fact, I saw a chart the other day, our real unemployment—because you have ninety million people that aren’t working. Ninety-three million to be exact.

If you start adding it up, our real unemployment rate is 42%.

Trump saw a chart! Here it is, if you're interested. I like charts too, so I guess that's OK. And Trump is right about one thing: roughly 93 million people (42 percent of the adult population) aren't employed. But why aren't they employed? Let's check out another chart for the answer. I don't think I've ever created a pie chart before, but that seems appropriate for a Donald Trump post, don't you think? In fact, let's make it a 3-D pie chart.

As you can see, there are indeed about 93 million people who aren't working. The vast majority of them, however, are retirees, the disabled, full-time students, and folks who have no interest in working (stay-at-home parents, etc.). There are about 8 million unemployed, and about 8 million more who are underemployed or would like to work but have given up trying to find a job. If you add up those two categories you get the U6 unemployment rate, currently at 10.7 percent.

You can make a case for using U6 as your preferred metric of unemployment. But counting retirees? Or students? Or the disabled? Or parents taking care of children? Sorry, but no.

POSTSCRIPT: I threw together the numbers in the chart pretty quickly. They're all in the ballpark of being accurate, but could be off by a little bit. Frankly, a more detailed dive just didn't seem worth it.