The Wall Street Journal: Saturday, August 24, 2013

CEO Exit Sets Microsoft on New Path (page A1): In announcing his sudden retirement Friday after more than three decades at Microsoft Corp., Chief Executive Steve Ballmer will leave his successor with the enormous task of reviving one of the world’s largest technology companies that finds itself beset by competitors on all fronts. Mr. Ballmer, 57 years old, along with his college buddy and Microsoft founder Bill Gates, built the company into a profit machine whose Windows operating system will still power nearly all the 305 million personal computers expected to be sold globally this year, according to research firm Gartner Inc. But it will run just 15% of all computing devices, if PCs, smartphones, tablet computers and other gadgets connected to the Internet are lumped together, given the rise of rivals such as Apple Inc. and Google Inc. Investors cheered the news of Mr. Ballmer’s departure, sending Microsoft shares up 7% to $34.75 on the Nasdaq Stock Market. Microsoft remains a behemoth financially. It generated nearly $78 billion in revenue in the year ended June 30—an average pace of $150,000 worth of sales every minute. The company’s fat profit, amounting to $21.86 billion last year, remains the envy of most industries. Under Mr. Ballmer’s watch, the company succeeded in limiting many threats, including the open software standard called Linux that Mr. Ballmer once described as a “cancer.” He also helped Microsoft recover from the shock of the U.S. government’s effort to break the company apart. But Microsoft generates nearly all of its profit from a trio of products—Windows, Microsoft Office and related software to run companies’ back-end computing gear—that are deeply dependent on the sales of Windows-powered PCs. Other products, such as the Xbox videogame machine and the Bing search engine, are either unprofitable or only marginally so.

The Real Reason College Costs So Much (page A9): Another school year beckons, which means it’s time for President Obama to go on another college retreat. “He loves college tours,” says Ohio University’s Richard Vedder, who directs the Center for College Affordability and Productivity. “Colleges are an escape from reality. Believe me, I’ve lived in one for half a century. It’s like living in Disneyland. They’re these little isolated enclaves of nonreality.” Mr. Vedder, age 72, has taught college economics since 1965 and published papers on the likes of Scandinavian migration, racial disparities in unemployment and tax reform. Over the last decade he’s made himself America’s foremost expert on the economics of higher education, which he distilled in his 2004 book “Going Broke by Degree: Why College Costs Too Much.” His analysis isn’t the same as President Obama’s. College costs have continued to explode despite 50 years of ostensibly benevolent government interventions, according to Mr. Vedder, and the president’s new plan could exacerbate the trend. By Mr. Vedder’s lights, the cost conundrum started with the Higher Education Act of 1965, a Great Society program that created federal scholarships and low-interest loans aimed at making college more accessible. In 1964, federal student aid was a mere $231 million. By 1981, the feds were spending $7 billion on loans alone, an amount that doubled during the 1980s and nearly tripled in each of the following two decades, and is about $105 billion today. Taxpayers now stand behind nearly $1 trillion in student loans. Meanwhile, grants have increased to $49 billion from $6.4 billion in 1981. By expanding eligibility and boosting the maximum Pell Grant by $500 to $5,350, the 2009 stimulus bill accelerated higher ed’s evolution into a middle-class entitlement. Fewer than 2% of Pell Grant recipients came from families making between $60,000 and $80,000 a year in 2007. Now roughly 18% do. This growth in subsidies, Mr. Vedder argues, has fueled rising prices: “It gives every incentive and every opportunity for colleges to raise their fees.”

Enter the Post-Ballmer World (page B1): Microsoft Corp.’s Steve Ballmer tried new operating systems, new gadgets and new management structures. But the times caught up with a man who helped build one of the greatest companies of the 20th century. Mr. Ballmer’s surprise retirement announcement Friday follows years of criticism about the waning growth and stagnant stock price of Microsoft, a force in the personal-computer era whose power was once so great that U.S. regulators sought to break up the company. PC sales—the lifeblood of Microsoft’s business—are on a steady decline. Business and casual users alike are switching to devices and services offered by Apple Inc. and Google Inc. Investors cheered the news, pushing Microsoft shares up 7%, or $2.36, to $34.75, in 4 p.m. trading Friday on the Nasdaq Stock Market. Microsoft’s offerings to customers “are downright confusing,” said Daniel Gasparro, an IT consultant who recently managed Microsoft software purchases for clients including Washington, D.C. law firm Patton Boggs LLP. “When you’re spread too thin, you’re not good at anything.” Mr. Ballmer, who took the reins from Chairman Bill Gates in January 2000, has responded to the changes by recently overhauling the company’s Windows software to be used with touch commands and introducing a Microsoft-designed tablet computer called Surface. More broadly, Mr. Ballmer has attempted in the past year to remake the company’s overarching strategy to become a provider of devices and services rather than emphasizing software sales. A management structure announced in July that abandons autonomous product groups is expected to speed the transition. But the shifts haven’t yet helped reignite the company’s growth, though its longtime businesses continue to produce healthy profits. Its stock hasn’t shown significant gains since the crash following the Internet bubble, which had taken its share price to a high of $58.03.

Inside Comcast’s $30 Billion TV Bet (page B1): Cameras popped as celebrities stepped out of tinted-window vehicles at a Manhattan ballroom where E! cable network was hosting an event for advertisers. Kim Kardashian preened on the red carpet while Ryan Seacrest chatted with fans. But Steve Burke, the CEO of E’s parent, NBCUniversal, was decidedly not in a partying mood. “I want to kill myself,” he said before ducking into an elevator. “They tried to get me to do the red carpet, but I said ‘no’,” he laughed. When the doors opened, a woman asked him to pose for a picture with the Olympian swimmer Ryan Lochte. “You’re a good sport to put up with all of these suits,” he told Mr. Lochte, leaning in for the photo. In the two years since Comcast Corp. bought NBCUniversal, Mr. Burke has shown a zeal for shaking things up with little sentimentality, weeding out some of the company’s most well-known personalities in the process. A straight-talking Harvard Business School graduate, Mr. Burke belongs to a new generation of media chieftains—including Time Warner Inc.’s Jeff Bewkes and Viacom Inc.’s Philippe Dauman—who are more enamored with the bottom line than with Hollywood glamour. He refrains from hanging out in the news rooms and indulging stars—hallmarks of his predecessor Jeff Zucker. Warren Buffett, who made him a director on his board at Berkshire Hathaway, describes him as “a personable guy, but not flamboyant.” Mr. Burke is the man in charge of pulling off a colossal wager. With Comcast’s two-stage, $30 billion deal completed in March, the cable giant is betting that its distribution business, combined with a content company, can create outsize benefits. That logic, of course, runs counter to the trend of big U.S. media companies breaking themselves into smaller pieces. Time Warner Inc. spun off its cable operations in 2009 after failed bids to happily marry its content and distribution arms; Viacom Inc. carved out its CBS broadcast television and radio business into a separate company in 2005. Mr. Burke argues that the Comcast model is different, and that the company he took over from General Electric Co. was “very broken.” “You don’t get a chance to buy a company like NBCUniversal unless it’s not doing well,” he said in his first major interview, sitting in an office notable only for its multiple television screens and many framed family photos. “We started from the premise there is a lot of opportunity here.”

Intern’s Death Scrutinized (page B2): Bank of America Merrill Lynch has appointed a committee of senior officials to investigate the circumstances surrounding the death of a summer intern in London, the bank said. The bank’s statement said the “formal senior working group” would “review all aspects of this tragedy” and “listen to employees at all levels” as more information becomes available. The group at the investment-banking division of Bank of America Corp. will be looking at, among other things, whether its interns and other junior employees are encouraged to work overly long hours or are pushed into unhealthily competitive environments as they vie for a limited number of jobs, said a person familiar with the situation. Moritz Erhardt, who was 21 years old, died on Aug. 15, just before completing his internship with the bank’s investment-banking group. While his cause of death is unknown, it has become a cause célèbre in the U.K., generating widespread media coverage. Like other Bank of America interns, Mr. Erhardt was rotating through the division, working on a variety of projects. Long working hours were the norm, as is often the case at investment banks in London, according to a person familiar with the matter. Interns at investment banks often work between 60 to 80 hours a week, said Scott Rostan, founder of Training the Street Inc., which provides financial-training courses for new Wall Street employees.

Friday’s Markets: Microsoft Helps Pull Stocks Up (page B5): U.S. stocks ended the week on a bright note, as a drop in Treasury yields and a rally in Microsoft helped divert investors’ attention away from recent concerns over Federal Reserve policy. It was an eventful week for stocks, if not an active one in terms of volume. Stocks slumped early in the week, with blue chips experiencing the longest losing streak in over a year and Treasury yields jumping to two-year highs, amid increasing worries that an improving economy would prompt the Fed to start slowing the flow of liquidity by tapering bond purchases as early as September. The market started rebounding on Thursday, as investors shook off technical issues that forced trading halts in all Nasdaq Stock Market-listed for three hours that afternoon. The Dow Jones Industrial Average rose 46.77 points, or 0.3%, to 15010.51 on Friday. The Dow still posted a third-straight weekly loss, the longest such stretch since November 2012. The S&P 500-stock index gained 6.54 points, or 0.4%, at 1663.50, and the Nasdaq Composite Index advanced 19.09 points, or 0.5%, to 3657.79. The S&P 500 and Nasdaq posted weekly gains.

Investors Embark on a European Tour (page B7): Things are starting to come together for the continent that almost fell apart. The economy in the 17-member euro zone is growing again—slowly—after contracting for more than a year. Signs of revival are showing up in data on business activity and consumer confidence. As in the U.S., central bankers’ extraordinary commitment to injecting cheap money into their economies has so far helped avert disaster. The euro zone hasn’t splintered, as some feared, and no country has dropped the common currency. As worries ease, markets are up from Ireland to Italy. Benchmark national indexes in the U.K., France and Germany have climbed at least 10% this year. The pan-European Stoxx Europe 600—akin to the S&P 500 in the U.S.—is up 19% in the 13 months since Mario Draghi said the European Central Bank, which he heads, was “willing to do whatever it takes to preserve the euro.” Investors planning their own grand investing tour of Europe’s stocks should know there still are discounts available. But as many a shopper in the markets of London, Paris or Rome will agree, it can pay to be choosy. For instance, many fund managers see more near-term upside in consumer goods and banks than in European utilities or energy firms. There are several options for investors. Low-cost index funds, such as the Vanguard FTSE Europe exchange-traded fund—which charges 0.12% in fees, or $12 for every $10,000 invested—offer broad exposure that includes many of the region’s global heavyweights. There also are actively managed, Europe-focused funds run by stock pickers who try to beat benchmark indexes, and global funds that feature a hefty dose of European exposure. In addition, many European companies issue American depositary receipts that trade like shares on U.S. exchanges. Some firms only trade on home-country exchanges, which U.S. investors can access through brokers or international accounts, though this typically involves taking on currency risk and navigating complicated tax rules.

Lofty Profit Margins Hint at Pain to Come for U.S. Shares (page B7): Profit margins at near-record levels—watch out below! If you are wondering what might prove to be the stock market’s Achilles’ heel, look no further than its dependency on near-record corporate profit margins. Any sizable decline would almost certainly translate into big losses for the stock market. Given the current high levels, such a retreat seems likely. Investors therefore may want to begin building up a healthy cash position to take advantage of lower prices in coming years. U.S. corporations, on average, currently report a profit of 9.3 cents for every dollar of sales, according to U.S. Commerce Department data—a profit margin of 9.3%. It has gotten only slightly higher than this over the past six decades: In the fourth quarter of 2011, it was 10%. The average since 1952 is 5.9%. Profit margins in the past have exhibited a strong historical tendency to “revert to the mean,” according to James Montier, a visiting fellow at the U.K.’s University of Durham and a member of the asset-allocation team at Boston-based GMO, an investment firm with $108 billion under management. That is, above-average levels in the past have tended to quickly fall, just as below-average levels in the past have soon risen. Consider all occasions since the early 1950s in which the profit margin rose to at least 6.9% or fell to at least 4.9%—one percentage point away from its historical mean, in other words. On average, it was back at its mean in just 4.8 years.

Microsoft: Hitting Ballmer Out of the Park (page B14): Merely by announcing his retirement, Steve Ballmer can more than pay for it. Shares in Microsoft leapt more than 7% Friday when the software giant announced its chief executive will retire within 12 months. Owning 333 million shares of Microsoft, Mr. Ballmer’s personal net worth increased by about $800 million on the news. Microsoft needs a change in leadership. This is a company that, after establishing its dominance in the personal-computing market 30 years ago, whiffed badly on two of the next three computing megatrends: the Internet and mobile. Former CEO Bill Gates deserves blame for missing the Internet. Blowing it in mobile is Mr. Ballmer’s error, having taken the reins in 2000. And that is arguably more dangerous to Microsoft’s long-term financial outlook, because one of the company’s largest businesses is writing software that powers computers, most successfully in PCs and servers.

Tell Harvard What You Think (page C3): This spring, with little fanfare, the folks behind the Common Application—the main application form for almost 500 of the nation’s top colleges and universities—announced a big change: the personal statement, the form’s core essay, has been extended from 500 to 650 words long. I thought: That’ll be $13,000. Several years ago, on a high floor in a midtown Manhattan office, a father offered me $10,000 to write his son’s personal statement. Apparently he had misunderstood what was meant by “independent college applications adviser.” The publishing industry may be in a tailspin, but in some places, writers can still earn $20 a word. Thanks to the Common Application’s changes (and not including inflation), that’s $13,000 a kid. Though I had other “day jobs,” for 15 years I worked discreetly as a college-applications adviser in cities from Los Angeles to London. I never wrote a student’s essay, but I was practicing a dark art: such tutoring privileges the elite whose parents can afford it and profits from a miserable process. The grim statistics of the college admissions race (last year Harvard reported a 5.79% acceptance rate), fueled by an obsession with trophy schools, have warped what might be a powerful threshold for adolescents. At the very moment when teenagers are invited to offer what they’ve learned and who they’ve become, their voices are hijacked by well-meaning adults who think kids can’t possibly be allowed to risk answering these questions on their own. In my years handling applications to elite schools, from Harvard to Haverford, Davidson to Dickinson and everything in between, I was often surprised by where students did gain acceptance. But in every case it was a student who wrote a fabulously independent essay. Not necessarily hyper-sophisticated. But true. My students always asked me, What should I write about? I’d answer: You are a student of the world. What is it that moves you? What incites you, enrages you? The first-person pronoun is a mighty tool. Use it.

Weekend Confidential: An Interview with Edward Frenkel (page C11): The words love and math aren’t usually uttered in the same breath. But mathematician Edward Frenkel is on a mission to change that, uniting the terms in both his recent film, “The Rites of Love and Math,” and upcoming book, “Love and Math.” Both are attempts to bridge the gap between his passion for math and the popular appetite for it. “You say the word ‘math’ and people shut down,” says Mr. Frenkel, sitting outdoors in New York’s Bryant Park. In his book, to be published in October, the tenured professor at the University of California at Berkeley argues that the boring way that math is traditionally taught in schools has led to a widespread ignorance that may have even been responsible for the recession. “It’s like teaching an art class where they only tell you how to paint a fence but they never show you Picasso,” he says of elementary school math classes. “People say, ‘I’m bad at math,’ but what they’re really saying is ‘I was bad at painting the fence.’ ” Love is a different story, though. “People might think they hate math but everyone loves love,” he says. “I want to put more love into math.” And Mr. Frenkel, a youthful, puckish 45-year-old with a slight Russian accent and a flair for fitted shirts and tailored jeans, hopes to be math’s next leading man. With YouTube videos of his lectures at UC Berkeley viewed by hundreds of thousands of people—”and that’s even the most boring stuff,” he adds—Mr. Frenkel does indeed talk about math adoringly. “It is this great connector,” he says. “Nobody can take it away from us.” What he means is that while the philosopher Pythagoras lived over 2,000 years ago, his theorem still exists today; it holds true across cultures, time and space. “How many things have the same endurance?” he asks. Mathematical formulas “have a quality of inevitability.”

Suites Get Even Sweeter (page D1): Over the past few years, the world’s fanciest hotels have been introducing a new generation of incredibly posh suites. These signatures spaces have eye-widening views and couture furnishings, and they are immense—in many instances, bigger than the average American home, which is about 2,200 square feet, according to the U.S. Census. In tourist magnets like New York, Paris, London and Dubai, the suites can be priced at tens of thousands of dollars a night. “These are for people who don’t pay their own bills,” said Steven Carvell, associate dean for academic affairs at the Cornell University School of Hotel Administration. “They have people who pay their bills for them.” Some of these super-suites are the crowning glories of new, haute hotels hoping to make a splash; others are being carved out of existing space by properties seeking to raise their profiles in the luxury market. And plenty are remakes of older suites that had faded and grown dated over the years.

Juicing, A to Z (page D7): “A juice bar on every corner” could be the unofficial slogan of the Obama era. In New York, the trend hit critical mass in the last year or so, but long before that, there was Melvin Major, Jr. “When I got into juicing 23, 24 years ago, it was kale, collards, chard,” he said of the prevailing circa-1990 approach. “I couldn’t do all-green—it was too hard-core. I wanted a great taste.” Today, at Melvin’s Juice Box in SoHo, Mr. Major serves the Jamaican Green, a lively kale, apple, lemon, ginger and celery blend with terrific body and a mineral finish. To describe a juice in this way—as one might a wine—is beginning to make sense now that more chefs are getting into the game. At long last, juice is having its epicurean moment. The new wave runs to refined combinations like beet, blood orange, fennel and shiso leaf—aka the Zest for Life, at Creative Juice in New York. (The juice’s creator, chef Michael Romano, said, “I’d serve it with a meal, something like roasted venison.”) Or elegantly spare sips like a honeydew, cilantro and lime mix at Moon Juice in Venice, Calif. Owner Amanda Chantal Bacon, a veteran of top restaurant kitchens, said, “I didn’t want to distract from the honeydew. The lime just polishes it a bit.” Up the beach in Santa Monica, Matthew Kenney of the acclaimed raw-vegan restaurant M.A.K.E. spikes his citrusy Spice-C with jalapeño. “You’re getting superpowered nutrition; you should feel it,” he said. “It’s a dynamic mouth experience.” Mixologists are expanding the repertoire of ingredients still further. In Portland, Ore., Lydia Reissmueller of TenderBAR is in the process of launching her own juice company. Her Succotash Smash of squash, tomato and sweet pepper gets its exotic herbal note from Mexican epazote. Among serious home juicers, cold-pressing—a slow process said to extract a more nutrient-rich juice—is the prevailing orthodoxy. But for those just starting out, Matt Shook of JuiceLand in Austin, Texas, recommends the easy-to-use Breville Juice Fountain (models start at $100), a centrifugal machine that pulverizes produce and spins to separate juice and pulp. The 26 fruits, vegetables, herbs and spices featured here are another great place to start. Use them in the recipes below, or just go with whatever tastes good to you. Delicious is the new hard-core.

2013_08_24_cmyk_NA_04To Tokyo with Gadget Love (page D11): Rest and relaxation in Waikiki. A boys’ night out in Vegas. Gadget shopping in Tokyo. Most guys might choose the first two escapes, but I’ve been going to Tokyo every year for the past decade to seek out the newest gizmos—products that haven’t yet made it to the west or are simply too niche to ever be imported. In my travels, I’ve found tiny wooden speakers hand-carved out of rare Japanese cedar, silicone keyboards that roll up like a burrito and a Gameboy cartridge filled with 500 games that were never released stateside. Some of the gadgets are brilliant solutions to urgent nerd problems; others will leave you dumbfounded. Don’t let the sillier products deter you, though. For every bewildering gadget you’ll find, a dozen more will be worth taking home. And, luckily for tech-obsessed tourists, getting around is easy: Most of the key stops are in the Akihabara neighborhood, on the Japan Railway’s Yamanote line. Here are five of my favorite spots, as well as a few of the curios that I found on my latest trip. While you can buy some of these products online, there’s no substitute for making an actual pilgrimage.

Don’t Let the Tech out of the Bag (page D12): Two bags keep your iPad, iPhone and other essential gear at the ready, here are two backbacks: the Osprey Pixel Port and Cocoon SLIM.

 

The Wall Street Journal: Monday, August 5, 2013

Veto of Apple Ruling Likely to Upend Big Patent Battles (page A1): The Obama administration’s decision to overturn an international trade ruling against Apple Inc.—the first such veto in more than 25 years—promises to upend long-running battles over intellectual property in the smartphone market and change the strategies some of the world’s biggest technology companies use to defend their inventions. Increasingly, those companies have been using patents to try to hobble rivals in a mobile-device market expected to top $400 billion this year. In 2012, the number of patent cases filed in the U.S. jumped nearly 30% from a year earlier to 5,189, according to consulting firm PricewaterhouseCoopers. Apple and Samsung Electronics Co., in particular, have been engaged since April 2011 in patent fights throughout the world. In the case that provoked Saturday’s veto, the U.S. International Trade Commission in early June ruled that sales of some older iPhones and iPads should be banned because Apple infringed a Samsung patent.

Murky Data Complicate China’s Policy Choices (page A2): As China’s growth slows toward a 20-year low, economists are calling for consumers to shoulder more of the burden of supporting the world’s No. 2 economy. But the country’s leaders are increasingly saying Chinese consumers aren’t shirking their responsibility—they’re just undercounted. “The official data severely understates household consumption,” argued People’s Bank of China Deputy Governor Yi Gang, speaking at a meeting of top government and private economists from China and the U.S. in April. Mr. Yi also played down the role of China’s low interest rates—long seen as depressing consumption—in contributing to the imbalances, according to those present at the meeting. Low household consumption—in 2012 it accounted for 35.7% of China’s gross domestic product, compared with close to 70% in the U.S.—is widely seen as a key barrier to sustainable growth. With consumption’s share of GDP falling, according to the official data, China is driven to rely on investment, often in redundant infrastructure or ill-conceived factory projects, as a way to support the economy.

Where Hackers and Spooks Mingle (page A4): Even during the summer of Edward Snowden, the hackers and the spooks can get along. For proof, look no further than two of the computer-security community’s biggest annual conferences, Black Hat and Def Con, held over the past week at two resorts here. They’re a cross between science fairs and spring break for techies and employees of three-letter federal agencies. More than 7,500 people attended Black Hat, which featured a vendor hall filled with corporate envoys from Microsoft Corp. and Dell Inc. Some 15,000 attended Def Con, which is more geared toward independent hackers and has a smiley-face-and-crossbones logo. Despite widespread unease among attendees over revelations from former National Security Agency contractor Mr. Snowden about the government’s electronic eavesdropping programs, there were plenty of signs of comity between hackers and the feds, as they’re called. Three weeks ago, Jeff Moss, the founder of both conferences and the current head of Def Con, suggested in a blog post that given the Snowden affair, the two sides may “need some time apart.” Mr. Moss later elaborated that he couldn’t block the feds from attending his conference but felt they should re-evaluate how they presented themselves if they came. And come they did. In a backroom at the Rio casino’s convention center, Defense Department types and cybercops quietly swapped trinkets for Def Con swag, including conference shot glasses and coffee mugs. Among other things, conference organizers scored a patch from the Federal Bureau of Investigation and an NSA challenge coin, a kind of military insignia. (One trinket remained elusive to the hackers: NSA drinking accessories. “I’ve never seen an NSA shot glass,” said Nico Sell, a conference organizer and co-founder of Wickr, an encrypted iPhone messaging app.)

China Considers One-Child Policy Shift (page A14): Chinese authorities are considering measures to change the country’s one-child policy by allowing some families to have a second child, the official Xinhua News Agency reported late Friday, citing an official with the national family planning agency. “Our commission is organizing research on the size, quality, structure and distribution of the population so that we can propose plans to improve the [one-child] policy,” Mao Qun’an, director of the propaganda office at the National Health and Family Planning Commission, told Xinhua. “We’ll have to move cautiously and coordinate between current situations and long-term objectives,” said Mr. Mao, without elaborating. Beijing is under pressure to ease its grip on child birth in response to calls for more personal freedom in an increasingly affluent society. Such a move is also aimed at offsetting the financial effects of an aging society and addressing potential labor shortages in the years ahead. The nation’s working population declined for the first time in decades last year due to the nation’s tight controls on child birth.

White Hats vs. Black Hats (page A11): In the language of computer hacking, the good guys are “white hats,” who identify weaknesses in systems so they can be fixed. “Black hats” are the ones who take advantage of weaknesses in systems. In the debate about how intelligence agencies use phone and Internet data to prevent terrorism, it’s clear who wears which hat. Last week, Bradley Manning, the Army private who leaked 700,000 confidential State Department and other government documents, was found guilty of espionage. His claim that he did it to “cause society to reconsider the need to engage in counterterrorism” was not a defense. Former National Security Agency contractor Edward Snowden, who likewise took advantage of his security clearance to leak confidential information, is evading charges by getting asylum in Russia—quite a choice for someone who claims to be concerned about privacy and the rule of law. Perhaps Julian Assange of WikiLeaks, holed up in the Ecuadorean Embassy in London, will have Mr. Snowden on the television show he hosts for Vladimir Putin’s Russia Today channel. The Obama administration is belatedly fighting back, led by the usually publicity-shy NSA director, Keith Alexander, an Army four-star general. He spoke at the annual Black Hat USA conference of security professionals last week to tamp down hysteria sparked by Mr. Snowden’s misleading claims. “What you are hearing,” Gen. Alexander said, ‘Well, they could'” monitor all email and listen in on all phone calls. “The fact is, they don’t.” The much-publicized Prism program, for example, is simply the means by which Internet companies comply with court orders. “Industry doesn’t dump stuff to us and say, ‘Here are some interesting facts,’ ” Gen. Alexander said. “They are compelled by court order to comply.” The Fourth Amendment permits authorities to obtain records such as the metadata registering which computers or cellphones have been in touch with others. But the Constitution forbids access to the content of emails or phone calls without a warrant based on reasonable suspicion. Gen. Alexander disclosed that of the 54 terrorist-related activities identified through this program, 42 were disrupted. In one case, an intercepted email from a terrorist in Pakistan foiled a 2009 plot to bomb the New York City subways. “What if the 42 of 54 were executed?” Gen. Alexander asked. “What would that have meant to our civil liberties and privacy?”

Tell the Baseball Druggies: Strike One, You’re Out (page A11): Fay Vincent, a former commissioner of Major League Baseball, believes big league baseball needs a new drug policy: One violation and you’re out.

The Myth of America’s Inferior Broadband (page A13): A key claim made by advocates for regulating the U.S. broadband industry is that the U.S. is falling behind Europe in Internet speeds and prices. But this assertion—and by implication, the case for regulation—has been hobbled by recent developments that prove that U.S. broadband is a major success. The truth is that while America’s broadband network has improved dramatically, Europe’s has fallen far behind in quality and cost. The facts are startling. The Internet company Akamai, which produces international speed rankings, has the U.S. currently at No. 9, up from No. 22 in 2009—faster than in France, Germany and Britain. A recent report by the Information Technology and Innovation Foundation notes that the U.S. has the second-lowest entry-level broadband prices (behind Israel) in the Organization for Economic Cooperation and Development, despite ranking No. 27 among OECD countries in population density, a key driver of cost.

‘Mainstreaming’ Special-Ed Students Needs Debate (page A13): Americans tend to be a vocal people, sharing their views about almost any issue in the public sphere loudly and frequently. Yet on the question of how to provide special-education services to students who need them—while not compromising the interests of children who don’t—many parents of regular-education students have opted out of any public discourse. Nationwide, about 60% of students with disabilities spend at least 80% of their instructional time in regular classrooms. Many parents of other children in public schools understand that when teachers focus on students who need more attention, their kids may get shortchanged. Yet most parents opt out of any discussion and don’t complain. The special-education system in the U.S. is highly regulated by law, expensive, and sometimes marked by litigiousness. Those working to reform the system are almost exclusively people with a direct stake in it—including school representatives, parents of students with disabilities, advocates, lawyers, special educators, academics and government officials. Since members of the general public and parents of regular-education students (who account for 86% of students) rarely weigh in, the interests of regular-education school-age students are not sufficiently explored. It’s time to think about what we are doing, rather than simply to continue with the current broken system. That’s the only way to help all students succeed.

Free Speech a Test for Twitter (page B1): Twitter Inc.’s growing ambitions are making it harder to carry the Internet’s free-speech banner. Chief Executive Dick Costolo promotes Twitter as a protector of more than 200 million people who broadcast their lives, be it love for a new pop song or Tahrir Square protests. But increasingly, freewheeling tweets are clashing with divergent global laws and standards in markets where Twitter is spreading its wings. “You have to abide by the rule of law in the countries in which you operate,” the 49-year-old Mr. Costolo said in an interview at Twitter’s San Francisco headquarters. Defending free expression “gets more challenging for us as a company as we become an ever-growing global company, and have a presence and offices and people on the ground around the world.” In recent weeks, Twitter has found itself labeled a censor, an enabler of hate speech and a tool of Big Brother.

Future of Cable May Not Include TV (page B1): Predicting that transmission of TV will move to the Internet eventually, Cablevision Systems Corp. Chief Executive James Dolan says “there could come a day” when his company stops offering television service, making broadband its primary offering. His comments may be the first public acknowledgment by a cable CEO of the possibility of such a shift, long speculated about by analysts. It comes amid growing tensions between cable operators and channel owners over rising programming costs, highlighted Friday night when Time Warner Cable Inc. dropped CBS from its channel lineup in major markets such as New York and Los Angeles. If cable operators drop TV service, charging only for broadband, channel owners would have to sell directly to the public or through Web outlets.

Old-School Ad Execs Sweat As Data Geeks Flex Muscle (page B1): Once home to creative types in the mold of Don Draper and “Mad Men,” Madison Avenue is increasingly a bastion of geeks: computer programmers, data heads and quantitative analysts. People “with traditional backgrounds aren’t getting hired,” said Amy Hoover, president of Talent Zoo, an Atlanta-based company that operates an online job site specializing in the ad business. Last month’s merger agreement between New York-based Omnicom Group Inc. and Paris-based Publicis Groupe SA only intensified the nervousness. The two ad giants, whose combined stock-market value totaled $35.1 billion, touted their marriage as driven in part by the rise of big data and digital advertising. Some employees are fretting about possible job cuts, though the two companies have said their deal wasn’t about that. “This wasn’t done just so we could go in and cut jobs,” said John Wren, Omnicom’s chief executive, in an interview last week. Even so, with all the talk about the importance of data to Omnicom and Publicis, the “creative people can’t help but feel left out,” said Mike Sheehan, chairman of Hill Holliday, a Boston-based ad agency owned by Interpublic Group of Cos. Mr. Sheehan, whose parent company is itself now the subject of takeover speculation, dislikes the new emphasis. “Algorithms cannot give people goose bumps, and algorithms cannot tell a story,” said Mr. Sheehan. They “cannot give you that nugget of insight that differentiates brands and products,” he added, “That is only performed by human beings that can tell stories and can understand consumer behavior instinctively.” The trend toward digital advertising has been under way for about a decade. This year digital ad spending in the U.S. is expected to grow nearly 14% to $41.9 billion, or about 25% of total ad spending, according to eMarketer.

As Commercialism Grows on Twitter, a Small Resistance Movement Forms (page B2): When a fellow who uses the Twitter handle DudeHugs sends out a message to his 10,000 followers that reads, “Loving this all-natural Sierra Mist…RT if u have ever touched or seen a dog,” he isn’t trying to promote the soft-drink brand or trying to appeal to dog lovers. A part of a burgeoning Twitter subculture known as Weird Twitter, he is speaking in a purposefully nonsensical code that is meant to satirize the growing presence of corporate brands and marketers on the popular social network. In the minds of some early adopters and fans, Twitter—now with 200 million active monthly users—is a victim of its success, and they are seeking ways to subvert the corporate vibe. Twitter generates some of its revenue by selling advertisements that sometimes appear as “promoted tweets” in the Twitter feeds of targeted users. When Twitter users engage with promoted tweets by replying or retweeting them, Twitter charges the brand behind the promoted tweet. For some people and corporations, this can be a powerful tool in building brand awareness and in driving commerce. For others, it detracts from what they see as Twitter’s main value—an engine that organically can propel ideas, concepts and products into a larger marketplace.

Sports: Heard on the Field (page B6):

  • Tiger Woods
  • Mark Cuban
  • Missy Franklin

Loud on the Sidelines, Quiet on Twitter (page B6): The nation’s top college-football coaches have suffered plenty of headaches from social media. But for men who have reputations as control freaks, they are surprisingly hands-off when it comes to Twitter surveillance. Most coaches whose teams are ranked in the top-25 preseason coaches poll follow fewer than 100 people on Twitter.

Europe Stocks Gain Allure as Crisis Eases (page C1): The thaw in Europe’s long crisis could warm up its stock market. Faint glimmers of economic life on the continent are luring investors who have been keen on European companies’ promise but spooked by the region’s debt crisis and its poor outlook for growth. Fresh survey data suggest the 17-country euro zone may be edging out of a long recession, even if just barely.

New Rules of the Road: State Farm and other insurers are compiling data on driver behavior: State Farm Is There: As You Drive (page C1): As soon as Ed Scharlau of Austin, Texas, pulls out of his driveway in his Ford Expedition, a computer starts keeping score. It keeps track of how fast he accelerates, how abruptly he brakes and how far he drives. The prize if he scores high enough: a substantial discount on his car insurance. “This is a step in the right direction,” the 74-year-old former manufacturing executive said. “How I drive should affect my insurance premium.” Mr. Scharlau is on the leading edge of a revolutionary shift in how insurers price car insurance, one that has tantalized the $167 billion industry for more than a decade. But what many insurers see as a smart application of Big Data, some customers and privacy advocates view as a worrisome encroachment by Big Brother. The idea is to use small telematic devices—in Mr. Scharlau’s case, one that plugs into his Expedition’s diagnostic port—to compile and analyze data on driver behavior. The programs are voluntary, and better drivers qualify for discounts. In general, insurers say those who fall short aren’t charged higher rates, but instead pay no more than what they already are paying, based on conventional pricing methods. The insurers embracing telematics are gambling that the incentive of discounts and data-based feedback will produce better drivers, and thus fewer claims—and higher profits. With efforts generally in early stages, it is too early to know if this is true. For customers, this “usage-based insurance” is pitched as a can’t-lose—at least for those who can stomach the privacy concerns.

Shiny Chromecast May Dim Cable’s Picture (page C6): Even a simple innovation can sometimes help tip the scales toward revolution. Google, along with technology peers like Intel, Apple and Microsoft, is vying to shape the future of TV. Its latest gambit: the introduction of Chromecast, a $35 device that plugs into a TV and allows users to view content from mobile devices or computers on the big screen. On its own, Chromecast won’t suddenly upend the bundled-TV business model. For now, only Internet content and video from YouTube, Netflix and the Google Play store can be watched via the device. And it doesn’t include sports or live programming. Still, Chromecast offers a window into Google’s vision of making the Internet a platform for TV. And its efforts could accelerate a shift toward Internet video already under way, especially among viewers most coveted by advertisers.

Bond Investors, You’ve Been Warned (page R1): It’s one of the biggest fears of bond investors today: What will happen if interest rates take off and bond prices plunge? It’s time to stop worrying and start acting. There are steps investors can take to minimize the damage of rising rates, while still enjoying the advantages that bonds bring to a portfolio. Here are some questions to help investors get a handle on how much their bond portfolio may be at risk, and how to reduce that risk—including a shift to bond funds that may actually do well amid rising rates.

Life, Death—and Money (page R4): Here are some pointers from advisers on how to handle the financial impact of a serious illness.

  • Make time to talk about money
  • Be strategic in liquidating assets
  • Be conservative for the near term
  • Invest for your family’s future
  • Take care of housekeeping

How to Raise an Investor (page R4): Here are some tips from financial professionals to parents on how to teach their children about investing.

  • Start the conversations early
  • Have them invest in companies they understand
  • Teach them about inflation before they start investing
  • Let them take the wheel – within limits
  • Be ready to step in, and always reinforce go

Available: Another Data Point on ETFs* (page R5): Investors in exchange-traded funds know they can use a fund’s ticker symbol to check the price before buying or selling. But each ETF also has a similar ticker symbol that is less well known and sometimes hard to find. It’s one that investors can use to learn the approximate per-share value of a fund’s holdings, as calculated at 15-second intervals throughout the trading day. This second ticker may provide helpful information about the reasonableness of an ETF’s market price—if that price differs greatly from the value of the fund’s holdings, it may be wise to hold off on a trade. Or the second ticker may just be confusing. It all depends on market conditions and the type of securities a fund holds, which can render the extra information “not so useful,” says Samuel Lee, an ETF analyst for Morningstar Inc. ETF shares are traded all day long, at prices that are set by the market and can vary from the value of the underlying holdings. Investors can get an idea of that variance by checking the second ticker, which is known most commonly as the INAV, for indicative net asset value. It is also sometimes called the IIV, for intraday indicative value, or IOPV, for indicative optimized portfolio value. Generally, the INAV ticker is the ETF ticker with “.IV” added at the end. While the INAV ticker is provided to investors by every ETF sponsor, INAV figures can only be found on a few websites, including Yahoo Inc.’s finance.yahoo.com and the reuters.com site of the Reuters Group unit of Thomson Reuters. But INAV is imperfect. So should ETF investors even care about INAV? The utility of INAV was hotly debated recently by the editors at IndexUniverse, which closely watches the ins and outs of the ETF market—resulting in no consensus. But some investment pros find INAV useful.

Coupons Without the Scissors (page R7): When you hear people talk about coupon clipping—that is, in an investment context—they typically mean they are collecting the interest payments from bonds. Coupon clipping refers back to a time when these fixed-income securities came printed with coupons on them. To receive the interest payments, the bondholder would clip off each coupon as its payment came due and redeem it for cash. These days bond interest payments are handled electronically, so there is no need for anyone to actually get the scissors out. Still, coupons—or bonds’ fixed interest payments—can matter a great deal for investors. When Wall Street analysts and traders determine the value of a bond, they look at the so-called present value of future coupons as well as at the value of the principal. In simple terms, bonds that are otherwise alike but with different coupon rates are worth different amounts. Smaller coupons are worth less than bigger coupons, other things being the same. Some bonds that were first issued many years ago can have big coupons, reflecting the higher interest rates and higher cost of borrowing in those days. If you hold one of those bonds, you generally won’t be able to reinvest the interest payments at as high a rate. But at the same time, those bonds can be worth more when they are sold because of their high coupons.

Multiple Accounts? Think Holistically.. (page R8): For some people, saving for retirement is relatively simple: They have a 401(k). They invest in a target-date mutual fund or an assortment of low-cost index funds. Done. For others, it isn’t that simple. They may not like the investment options in their employer’s plan, so they also invest in an individual retirement account or Roth IRA, or both. Perhaps they have money in an old employer’s 401(k), or a spouse contributing to a separate workplace-savings plan. Maybe they also have a taxable account for long-term savings. There’s nothing wrong with juggling multiple retirement accounts. The problem is that most people don’t juggle them well. The key is to manage these various assets holistically, financial advisers say. That means applying your asset-allocation plan—what percentage of your money you want in stocks, bonds and alternative investments—across all of your and your spouse’s retirement savings.