Teachers Face License Loss (page A4): Many states have begun to link teachers’ pay to their effectiveness in the classroom. On Friday, Tennessee joined a handful that are taking the idea further: pull the license of teachers whose students consistently fail to improve. “This is not about taking away teacher licenses, but about making sure our students have the best classroom teachers,” said Kevin Huffman, the state’s education commissioner. Over the past three years, many states have started linking teacher evaluations to test-score improvements and other measures of student performance. But only Rhode Island, Louisiana and Delaware have tied some teaching-license renewals to these evaluations, according to Sandi Jacobs of the National Council on Teacher Quality, a research and advocacy group that supports grading teachers on classroom effectiveness. In many states, teachers renew their licenses after completing a number of professional development course-credit hours, or by earning a master’s degree. But research has shown that, for the most part, neither boosts teacher effectiveness as measured by growth in student achievement, said Jane Hannaway, director of the National Center for Analysis of Longitudinal Data in Education Research, a federally funded nonpartisan research center. Under the new policy in Tennessee, teachers must show they are boosting student achievement or they would lose their teaching license. For a third of K-12 educators, the measuring stick would be the standardized state exams given to students. The remaining teachers, such as those in art or physical education, would be judged on other measures, such as portfolios of student work.
What We Lose If We Give Up Privacy (page A13): What is privacy? Why should we want to hold onto it? Why is it important, necessary, precious? Is it just some prissy relic of the pretechnological past? We talk about this now because of Edward Snowden, the National Security Agency revelations, and new fears that we are operating, all of us, within what has become or is becoming a massive surveillance state. They log your calls here, they can listen in, they can read your emails. They keep the data in mammoth machines that contain a huge collection of information about you and yours. This of course is in pursuit of a laudable goal, security in the age of terror. Is it excessive? It certainly appears to be. Does that matter? Yes. Among other reasons: The end of the expectation that citizens’ communications are and will remain private will probably change us as a people, and a country.
The Match That Changed the Game Forever (page A14): There’s no mystery why the U.S. Golf Association chose The Country Club in Brookline, Mass., as the venue for this week’s U.S. Amateur. That’s where Francis Ouimet, an unheralded 20-year-old amateur, won the U.S. Open 100 years ago next month. Somewhat inconveniently, Friday’s amateur action left four players standing, none from the U.S. (two from Australia, one each from England and Canada). But Ouimet’s victory, only the second by an American in America’s own championship, became a legend almost before his final putt—on the 18th hole of a playoff against the two leading British professionals of the day—found the bottom of the cup. Some people and events in sports have had transformative impact far beyond the action on the field. Jackie Robinson’s first season in baseball. The televised 1958 NFL championship game, in which the Baltimore Colts behind Johnny Unitas beat the New York Giants. That game set pro football on the path to becoming America’s favorite living room sport. Ouimet’s victory at Brookline similarly introduced golf to the American mass market, in an era before even radio. “Ouimet World’s Golf Champion,” trumpeted the New York Times in one of at least eight stories it ran about the playoff by the next day. “Remarkable Golf Feat,” the sub-headlines scrolled on. “Splendid Display of Nerve…Big Gallery Makes Demonstration at Finish.” Golf wasn’t even that popular in 1913. The U.S. had only 300,000 to 400,000 players, most of them new because golf itself was still relatively new here. Bobby Jones later recalled that reading about Ouimet’s victory, in Atlanta where he lived, was the first time he’d ever seen the game covered in a newspaper. Within a decade, more than 2 million were playing the game. Ouimet’s triumph is remebered today, largely from Mark Frost’s masterful retelling in his 2002 book, “The Greatest Game Ever Played.” But it’s striking how quickly the newspapers of the day metamorphosed what was, after all, just a few good rounds by a talented amateur, into a nationally celebrated civic event. The themes were irresistible. First were the two men Ouimet beat in the playoff, Harry Vardon and Ted Ray. They were on a barnstorming tour of the States, to show the upstart Yanks what real golf looked like. In fact, the U.S. Open had been postponed to September from June to accommodate their schedule, with the assumption that one or the other would win. Vardon, 43 years old, was considered the best golfer in the world. He was a five-time British Open champion (he would later win another) and was said to have won 14 tournaments in a row in Europe. Ray, 36, had won the previous year’s British Open. To an America still insecure about its place in the world, the triumph of a humble immigrant’s son over golf’s reigning British overlords was magnificent comeuppance.
Friday’s Markets: Worries on Fed Move Pound Stocks, Bonds (page B4): U.S. stocks declined Friday, with a late-day selloff sending the Dow average to its biggest weekly slide in more than a year. The Dow Jones Industrial Average fell 30.72 points, or 0.2%, to 15081.47, reversing gains in the last half-hour of the session. The move followed steeper declines earlier in the week, adding up to a 2.2% drop for the benchmark, the biggest since June 2012. The S&P 500 dropped 5.49 points, or 0.3%, to 1655.83. The Nasdaq Composite Index ticked down 3.34 points, or 0.1%, to 3602.78.
Stocks Test Technical Level (page B4): Here we go again. After big back-to-back declines, the S&P 500 on Friday finished below its 50-day moving average—a key technical level. The stock index ended little changed, but how it reacts around this support area could have broad implications for the rally in the days and weeks ahead. The 50-day average has previously acted as a key gauge for the market’s near-term trend. The S&P 500 pulled back to this level six prior times this year. In all but one, it proved to be a buying opportunity as the market immediately bounced back. The S&P 500 fell 5.49 points, or 0.3%, to 1655.83 on Friday. The 50-day moving average sits at 1657.39, according to FactSet. But now, some technical analysts are warning about tougher times ahead.
‘Bye’ to Uncle Sam? (page B7): Here is a sign that life is getting complicated for U.S. taxpayers with assets abroad: More of them are deciding they are better off cutting official ties with America. In the first half of 2013, 1,809 people renounced their American citizenship or permanent-resident status, according to a tally by Andrew Mitchel, a tax lawyer who tracks U.S. data. At that pace, the 2013 total would double the previous high of 1,781 renunciations in 2011. Daniel Kuettel, a Colorado native who lives near Zurich, says he gave up his U.S. citizenship in October because he feared he wouldn’t be able to get a mortgage now that some Swiss banks are cutting ties with American clients. “It was a really difficult decision. I had to think about what was best for me and my family, to reduce the risk,” says Mr. Kuettel, a 41-year-old software developer. He says his income was below the limit the U.S. allows overseas taxpayers to exempt and he owed no U.S. taxes. The increase in renunciations is one sign that ordinary Americans who have lived and worked abroad for years, as well as green-card holders in the U.S. and overseas, believe they are at growing risk because of the intensifying government pursuit of undeclared foreign assets.
Price-to-Earnings Ratio Aren’t Always What They Seem (page B7): “The stock market is overvalued.” “The stock market is undervalued.” Which one of these statements is true? Both are, thanks to quirks of the most popular way of measuring a stock’s valuation: the price/earnings ratio. While no one disagrees about what the “P” is when calculating the ratio, there is no consensus on how to define earnings-per-share. One of the biggest points of dispute: whether to use analysts’ earnings estimates for the coming year or reported company earnings from the previous 12 months. Comparing ratios calculated in these two ways is little better than comparing apples to oranges, according to Cliff Asness, managing partner at AQR Capital Management, an investment firm with $84 billion of assets under management. In an email, he went so far as to say that those who compare P/Es in this way are engaging in a “sleight of hand,” though he allowed that many may “not be aware of the mistake they are making.” Consider the S&P 500’s current P/E based on trailing earnings. For the four quarters through June 30, the index’s earnings per share amounted to $91.13, according to S&P Dow Jones Indices. That translates into a P/E ratio of 18.2, which is higher than 79% of comparable readings since 1871, according to a database maintained by Yale University professor Robert Shiller. Many bulls try to wriggle out from this bearish sign by focusing on estimated earnings. According to FactSet Data Systems, the consensus forecast from Wall Street analysts is that earnings from companies in the S&P 500 will be $122.01 a share next year, which translates into a P/E ratio of 13.6. That is 6% less than the 14.5 median of historical P/Es in Mr. Shiller’s database.
Annuities Call for Caution (page B8): Conservative savers are flocking to an insurance product with a controversial past: fixed indexed annuities. For investors seeking steady retirement income—typically drawn to products such as certificates of deposit and safe-haven bonds—these annuities can make sense. But be aware: They are complex, and they vary in quality and security. Fixed annuities are a type of savings contract with a tax-deferred interest component. “Indexed” versions link the annual interest to a stock-market benchmark, most commonly the S&P 500. Insurers promise to protect buyers against market losses but cap the upside gain they pay. They also typically exclude dividends from the calculation of payouts. Some buyers have been lured by the stock-market rally, which has sent the S&P 500 up 16% this year. Low interest rates, meanwhile, have cut the appeal of traditional annuities. The rap on indexed annuities is that consumers could overestimate the upside. While the stock-market link is part of the pitch, the product is more like a juiced-up bank CD. Insurers back the contracts mostly with bonds, and use options on market indexes to boost returns. Many contracts sold recently capped the annual upside at about 4% to 5%, according to advisers.
Still Hope for Bond Funds (page B9): Many investors are fleeing bond funds. Those who have stuck around this long might be better off staying put. Investors yanked more money out of bond funds in June than they put in, removing $68 billion—the first monthly net outflow in nearly two years, according to investment researcher Morningstar. They took out another $8 billion in July. Sharply rising yields have pushed down prices, which move in the opposite direction, spurring the exodus amid signs of an improving economy and speculation the Federal Reserve will soon shrink its bond-buying stimulus program. Nervous municipal-bond investors still are weighing the fallout from Detroit’s July bankruptcy filing. The yield on 10-year Treasurys climbed from below 1.7% in early May to above 2.8% Friday. Investors who got out before rates spiked and prices dropped likely dodged some losses. But not everyone is bailing. Before giving up, bond investors should consider that rates could well go back down. Furthermore, bonds offer protection to long-term investors by diversifying a portfolio.
Value Seen in Europe (page B9): With rising rates looming over U.S. Treasurys, now might be a good time for bond investors to go bargain hunting in Europe, financial advisers say. Since May, Federal Reserve officials have indicated that they might begin to scale back the central bank’s huge bond-buying program. That has caused Treasury yields to soar and prices to drop. However, European leaders are leaning in the opposite direction. Just this month, Mario Draghi, head of the European Central Bank, said that rates in the euro zone are likely to stay at historically low levels for the foreseeable future. That means European bonds don’t face the same risk of rising rates as Treasurys, says John Sajdak, head of fixed income at Chicago-based MainStreet Advisors, which manages $2 billion. “With no immediate threat of inflation and slow economic growth in Europe, investors don’t need to be as worried about a big surge in yields,” he says.
In Defense of Football (page C1): It’s a rough, sometimes dangerous sport, but critics exaggerate football’s risks, writes Max Boot—and fail to see what America’s beloved game contributes to the lives of young players and their communities.
Our Unique Obsession With Rover and Fluffy (page C2): Recently, an almost literal case of lifeboat ethics occurred. On Aug. 4, Graham and Sheryl Anley, while yachting off the coast of South Africa, hit a reef, capsizing their boat. As the boat threatened to sink and they scrambled to get off, Sheryl’s safety line snagged on something, trapping her there. Instead of freeing his wife and getting her to shore, Graham grabbed Rosie, their Jack Russell terrier. (One media account reported that Sheryl had insisted that the dog go first). With Rosie safe and sound, Graham returned for Sheryl. All are doing fine. It’s a great story, but it doesn’t strike me as especially newsworthy. News is supposed to be about something fairly unique, and recent research suggests that, in the right circumstances, lots of people also would have grabbed their Rosie first. We have strange relationships with our pets, something examined in a wonderful book by the psychologist Hal Herzog, “Some We Love, Some We Hate, Some We Eat: Why It’s So Hard to Think Straight About Animals.” We lavish our pets with adoration and better health care than billions of people receive. We speak to pets with the same high-pitched voices that we use for babies (though when addressing pets, we typically don’t repeat and emphasize key words as we do with babies, in the hope of boosting their language acquisition). As a grotesque example of our feelings about pets, the Nazis had strict laws that guaranteed the humane treatment of the pets of Jews being shipped to death camps. A recent paper by Richard Topolski at George Regents University and colleagues, published in the journal Anthrozoös, demonstrates this human involvement with pets to a startling extent. Participants in the study were told a hypothetical scenario in which a bus is hurtling out of control, bearing down on a dog and a human. Which do you save? With responses from more than 500 people, the answer was that it depended: What kind of human and what kind of dog? Everyone would save a sibling, grandparent or close friend rather than a strange dog. But when people considered their own dog versus people less connected with them—a distant cousin or a hometown stranger—votes in favor of saving the dog came rolling in. And an astonishing 40% of respondents, including 46% of women, voted to save their dog over a foreign tourist. This makes Parisians’ treatment of American tourists look good in comparison.
Whatever Happened to August? (page C3): It’s the month when the summer nights have a consistent, delicious crispness to them unknown at any other time of the year. It’s when the corn is sweet, the plums are purple and pungent, the baseball pennant races are mature, the ocean temperatures are warm. It is the very best month of the year. And we have ruined it. Not so long ago—well within the memory of half the American population—August was the vacation month. It was a time, much anticipated and much appreciated, of leisure, languor, lassitude and lingering at the beach well into suppertime. Unlike July, it had no holiday disruption, no grocery-store rush, no rituals, no reason to hurry, except maybe to get to the ice-cream stand before closing time, and even that was flexible, depending upon the length of the line. Hardly anyone got married, and no one went to class. Congress barely met, and then it departed for most of the month, a great relief to them and an even bigger one for the nation. It was an idyll of idleness, a time of pure ease—and now it’s gone. We’ve made August a horror of back-to-school and blinding activity, a time when offices are open late and summer camps close early. August it is now no more special than June (part work and school, part holiday season), without Flag Day or Bunker Hill Day, or a sunburned version of March, without much threat of snow. What we’ve done to August has made it the cruelest month: infuriating work and inescapable school obligations amid intoxicating weather. Summer is a lot shorter than it used to be.
The Bad-Boy Entrepreneur (page C4): What does it take to be a successful entrepreneur? The signs are obvious in future moguls’ teenage years: brains, confidence—and illicit activities. Those are the surprising findings of a new working paper by economists at the University of California at Berkeley and the London School of Economics. The researchers argue that merely being self-employed isn’t a particularly good indicator of entrepreneurship, in the sense of taking big risks and mobilizing capital to create new goods and services. As the Harvard economist Edward Glaeser has observed, lumping the self-employed into a single category makes “little distinction between Michael Bloomberg and a hot-dog vendor.” But things looked very different when the professors sorted the self-employed into those who were incorporated and those who were not, with the researchers regarding the former as the genuine entrepreneurs. While the self-employed in general earned less than the salaried, the incorporated made more money and were more likely to make a killing. Relying on the 1973 National Longitudinal Survey of Youth and data from the Current Population Survey, the economists found that those who incorporated had higher aptitude-test scores as teens. As teens, they also engaged in more rule-breaking activities, including stealing, using marijuana and alcohol, drug dealing, violence and gambling. Indeed, their index of illicit activities was almost three times that of teens who went on to become salaried workers. Despite these dubious youthful pursuits, the incorporated tended to come from stable, well-educated families with high incomes in 1979. These entrepreneurs were much more likely to be white, male and well-educated than were salaried workers or the unincorporated self-employed. In other words, incorporated entrepreneurs may be likelier to cross home plate with the winning run, but they’re also likelier to have been born on third base.
Dan Ariely: Ask Ariely (page C12): The behavioral economist answers readers’ questions on losing weight, society’s attitude toward exercise and smoking.
- the secret weapon of European dieters
- exercise as a good excuse to escape work
- employer incentives to quit smoking