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: Saturday, April 6, 2013

Job Growth Slows to a Trickle (page A1): Employers added fewer jobs in March than in any month in almost a year, a dark cloud after several months of slowly improving conditions in labor markets. Just 88,000 jobs were created last month, far below February’s 268,000 gain. The unemployment rate, derived from a separate survey, dropped to a four-year low of 7.6%. But the decline was prompted by nearly a half-million workers leaving the job market, not job growth.

Tiger Woods Is No. 1 Again, But Golf Hardly Missed Him (page A1): When the career of golf’s top player and biggest star was in free fall in 2010, the brain trust of professional golf in the U.S. gathered in their Florida headquarters to contemplate life after Tiger Woods. Huddling with consultants from their Austin, Texas, advertising firm, senior executives at the PGA Tour tried to figure out how to persuade fans, sponsors and television networks to stay invested in a sport whose biggest draw had been disgraced. The golf world looked like it was about to go through a difficult generational transition. “Every 10 to 15 years you have a passing of the baton from one face to the other,” says Ty Votaw, the tour’s executive vice president. “We were about at that 15-year mark with Tiger.” There was one problem, though—there wasn’t any obvious candidate ready to grab the torch from Mr. Woods, and the consensus among sports-industry executives was that professional golf was headed for trouble. Defying predictions, the post-Tiger collapse never happened, thanks to the rise of a flashy new crop of players. By nearly every measure, professional golf became richer, more competitive and more stable while Mr. Woods was dealing with the sex scandal and injuries that sent his career careening off course.

Shape Up or Pay Up: Firms Put in New Health Penalties (page A1): Are you a man with a waist measuring 40 inches or more? If you want to work at Michelin North America Inc., that spare tire could cost you. Employees at the tire maker who have high blood pressure or certain size waistlines may have to pay as much as $1,000 more for health-care coverage starting next year. As they fight rising health-care costs and poor results from voluntary wellness programs, companies across America are penalizing workers for a range of conditions, including high blood pressure and thick waistlines. They are also demanding that employees share personal-health information, such as body-mass index, weight and blood-sugar level, or face higher premiums or deductibles. Corporate leaders say they can’t lower health-care costs without changing workers’ habits, and they cite the findings of behavioral economists showing that people respond more effectively to potential losses, such as penalties, than expected gains, such as rewards.

Warning: Smoking Is Hazardous to Your Employment (page A10): Companies aren’t just singling out overweight employees. Staffers who smoke are under fire too. In small but growing numbers, employers in recent years have been refusing to hire smokers, arguing that coaxing tobacco users to quit with free cessation programs or cash incentives hasn’t worked. Some medical experts back the bans, saying the end result of reducing smoking is worth it. But other health-care experts say the policy crosses an ethical line by singling out poorer and less educated groups who, federal data shows, smoke more often. In all, about four out of 10 employers reward or penalize employees based on tobacco use. But hiring bans, which are legal in 21 states, are gaining traction, with about 4% adopting the policy and an additional 2% planning to do so next year, according to a recent study by the National Business Group on Health and consulting firm Towers Watson.

The Golf Shot Heard Round the Academic World (page A11): One day in the summer of 2010, Barry Mills, the president of Bowdoin College, a respected liberal-arts school in Brunswick, Maine, met investor and philanthropist Thomas Klingenstein for a round of golf about an hour north of campus. College presidents spend many of their waking hours talking to potential donors. In this case, the two men spoke about college life—especially “diversity”—and the conversation made such an impression on President Mills that he cited it weeks later in his convocation address to Bowdoin’s freshman class. That’s where the dispute begins. In his address, President Mills described the golf outing and said he had been interrupted in the middle of a swing by a fellow golfer’s announcement: “I would never support Bowdoin—you are a ridiculous liberal school that brings all the wrong students to campus for all the wrong reasons,” said the other golfer, in Mr. Mills’s telling. During Mr. Mills’s next swing, he recalled, the man blasted Bowdoin’s “misplaced and misguided diversity efforts.” At the end of the round, the college president told the students, “I walked off the course in despair.” Word of the speech soon got to Mr. Klingenstein. Even though he hadn’t been named in the Mills account, Mr. Klingenstein took to the pages of the Claremont Review of Books to call it nonsense: “He didn’t like my views, so he turned me into a backswing interrupting, Bowdoin-hating boor who wants to return to the segregated days of Jim Crow.” The real story, wrote Mr. Klingenstein, was that “I explained my disapproval of ‘diversity’ as it generally has been implemented on college campuses: too much celebration of racial and ethnic difference,” coupled with “not enough celebration of our common American identity.”

The Final Two: Louisville and … (page A14): The Final Four pits basketball royalty (Louisville Cardinals) against literal hayseeds (Wichita State), and a slick, young offensive machine (Michigan) against a gear-stopping wrench (Syracuse). Here is how the two semifinals could play out.

Friday’s Markets: Stocks Rattled by Ugly Jobs Report (page B5): Friday’s disappointing U.S. jobs report is the latest crack in a shaky global recovery—and a test of will for investors looking to climb aboard a rally that has pushed stock benchmarks to new highs. For weeks, investors have been growing confident about global economic prospects and looking for a pullback as a chance to pile into the stock rally. But with just 88,000 new jobs added to the U.S. economy in March, investors on Friday instead faced a new debate over whether the global recovery can power through a season that has proved volatile in the past four years. But Friday’s trading suggested some investors are taking advantage of the weakness to pick up stocks. After falling as many as 172 points just after the opening bell, the Dow Jones Industrial Average erased much of its losses to finish down 40.86 points, or 0.3%, at 14565.25.

Selling in May: One Market-Timing Strategy That Works (page B7): Investors should strongly consider cutting their stock exposure this coming May Day and parking the proceeds in cash until Halloween. That advice comes courtesy of a famous piece of Wall Street folklore that is known by the adage “sell in May and go away.” Unlike most of the other stories investors tell, however, the historical evidence in favor of this one is surprisingly strong. And deeper drilling into the data suggests there are ways to tweak the approach so that you don’t have to dump stocks entirely to capture some of the benefit. You might also know of the “sell in May” pattern by its other name, the “Halloween indicator.” Both refer to the pronounced tendency for the stock market, on average, to turn in its best returns between Halloween and May Day—referred to loosely as the “winter” months. The stock market’s average return during the other half of the year, the “summer” months, is far lower. Over the past 50 years, the Dow on average has produced a gain of 7.5% during the winter months and lost 0.1% during the summer months.

The Case for Spending It (page B8): Many investors worry about running out of money in retirement. Maybe their focus should be on making the most of their later years instead. With the Dow Jones Industrial Average and the Standard & Poor’s 500-stock index hitting new highs, many couples might now be feeling wealthier—and be wrestling even more with their choices. Should they seize the day or keep scrimping? Managing the balance between living in the moment and saving for the future is always a challenge, but it becomes even more so as we move toward retirement, recognizing that the time left for both is ticking away. If we guess wrong, the consequences could be severe. Yet, on the flip side, says Michael Finke, professor of personal financial planning at Texas Tech University in Lubbock, most savers will die leaving behind vacations that weren’t taken or family gatherings that were missed.

Pay Off That Mortgage Now! (page B8): Want to beat the Treasury market? Pay off your mortgage. Repaying a mortgage early offers, in essence, a risk-free return in the form of the interest saved. Nowadays anyone with a mortgage of 4% or 5% can earn more by repaying the loan than by investing in bonds, which have been rallying for most of the past three decades. Repaying a mortgage also offers flexibility. If interest rates rise, investors can stop paying extra toward a mortgage and devote that money to higher-yielding instruments.

New Options for Private Student-Loan Borrowers (page B9): Two of the nation’s largest providers of private student loans are taking steps to ease terms for some borrowers. SLM Corp., also known as Sallie Mae, this past week began accepting applications for loans that allow recent college graduates to make interest-only payments for a year instead of paying both interest and principal. Also, Discover Financial Services recently said it won’t charge borrowers with new student loans a penalty when they pay their bills late or their loan payment is returned. The announcements come as outstanding student-loan debt approaches $1 trillion and many recent graduates struggle to find jobs and repay their loans.

How Machiavelli Saved My Family (page C1): Newly married, my husband, Eric, and I moved to a new home with our kids. Now we would start trying to blend our families. From the beginning, it was total chaos. There were endless chores, to say nothing of the logistics of caring for four kids under 8 (two from our previous marriages and two we’d had together). At the same time, I had just started a new full-time job writing legal briefs from home, and I was trying to finish a dissertation for my Ph.D. in history. All of which meant that I was trapped inside for days at a time with my kids, whose constant bickering was driving me nuts. Like millions of other modern moms, I tried to change them by yelling and nagging. This, of course, only made their behavior worse. After one especially trying day, I stomped off to my home office. Too exhausted to work, I sat at my desk and stared at a dusty shelf of books. And there I saw it: an old copy of “The Prince.” I opened the book and began reading. Machiavelli’s name is synonymous with duplicity, deceit and the cunning, ruthless use of power. But the more I read, the more excited I became. Machiavelli never wrote the infamous phrase often associated with him: “the ends justify the means.” His methods weren’t about acquiring power for its own sake. He saw power as a tool for securing the safety and stability of the state. He wanted to show princes how to ensure the happiness and well-being of their subjects. A stable and safe home? Full of happy and prosperous subjects? It sounded like a worthy goal, not just for a prince but for a parent too. Maybe I could use Machiavelli’s rules to help me reclaim my own kingdom. Being permissive and nice hadn’t worked with my children. Begging, bartering, harassing and even politely asking hadn’t worked either. But perhaps a pragmatic, tough-minded Machiavellian strategy would. With “The Prince” in hand, I set out to become a full-fledged Machiavellian mom. I was soon following several of the great political adviser’s key maxims.

  • ‘Nothing wastes so rapidly as liberality, for even whilst you exercise it you lose the power to do so, and so become either poor or despised or, in avoiding poverty, rapacious and hated.’
  • ‘A Captain ought…[to] endeavor with every art to divide the forces of the enemy, either by making him suspicious of his men…or by giving him cause…to separate his forces and, because of this, become weaker.’
  • ‘Those princes who have done great things have held good faith of little account, and have known how to circumvent the intellect of men by craft, and in the end have overcome those who have relied on their word.’
  • ‘A prince, so long as he keeps his subjects united and loyal…will be more merciful than those who, through too much mercy, allow disorders to arise.’
  • ‘In the actions of all men, and especially of princes…one judges by the result

Great Scientist ≠ Good at Math (page C2): For many young people who aspire to be scientists, the great bugbear is mathematics. Without advanced math, how can you do serious work in the sciences? Well, I have a professional secret to share: Many of the most successful scientists in the world today are mathematically no more than semiliterate. Exceptional mathematical fluency is required in only a few disciplines, such as particle physics, astrophysics and information theory. Far more important throughout the rest of science is the ability to form concepts, during which the researcher conjures images and processes by intuition.

Daniel Akst: Week In Ideas (page C4):

  • Stamp of Good Health: Imagine a sensor stamped onto the skin that can monitor vital health functions.
  • Memory- Are Tests Best?: Online learning is booming. Now researchers have found a way to get students to pay more attention, take more notes and retain more of what’s presented: constant testing.
  • Race – The Happiness Gap Shrinks: Two-fifths of the gap in happiness between blacks and whites has closed since the early 1970s, even though black income gains compared with whites’ during the period have been modest, two economists write.
  • Health – Dollars for Pounds: In the workplace, group-based financial rewards are vastly more effective than paying individuals to lose weight, a paper reports. But the difference in outcomes may derive from the higher payments some group members received.
For Innovation, Dodge the Prefontal Police (page C4): Quick—what can you do with Kleenex? Easy, blow your nose. But what can you do with Kleenex that no one has ever done before? That’s not so easy. Finally a bright idea pops up out of the blue—you could draw a face on it, put a string around the top and make it into a cute little Halloween ghost! Why is thinking outside of the Kleenex box so hard? A study published in February suggests that our much-lauded prefrontal brain mechanisms for control and focus may actually make it more difficult to think innovatively. The comedian Emo Philips said that he thought his brain was the most fascinating organ in his body—until he realized who was telling him this. Perhaps for similar reasons, the control system of the brain, which includes areas like the left lateral prefrontal cortex, gets particularly good press. It’s like the brain’s chief executive officer, responsible for long-term planning, focusing, monitoring and distraction-squelching (and apparently PR too). But there may be a down side to those “executive functions.” Shutting down prefrontal control may actually help people get to unusual ideas like the Kleenex ghost. However, it isn’t quite right to say that losing control makes you more creative. Centuries before neuroscience, the philosopher John Locke distinguished two human faculties, wit and judgment. Wit allows you to think up wild new ideas, but judgment tells you which ideas are actually worth keeping. Other neuroscience studies have found that the prefrontal system re-engages when you have to decide whether an unlikely answer is actually the right one. Yes—you could turn that Kleenex into an adorable little Halloween ghost. But would that be the aesthetically responsible thing to do? Our prefrontal control systems are the sensible parents of our inner 3-year-olds. They keep us from folly, even at the cost of reining in our wit.

Know Thy Quantified Self (page D15):When Geoff Bartakovics, CEO of the food-and-drink e-newsletter Tasting Table, decided he wanted to bulk up his “skinny-guy” physique, he approached the challenge the same way he would a business decision: with gobs of data. Along with implementing a workout regimen, he started using a high-tech scale called the Fitbit Aria to keep tabs on his weight and body mass index; he tracked his physical activity with the Jawbone UP, a popular motion-sensing bracelet; and, at his trainer’s urging, he ordered an Omegawave, a clinical-grade ECG monitor that tells him how strenuous of a workout he should undertake on any given day. Mr. Bartakovics isn’t unique in his data-driven approach; he’s a fairly typical member of the “Quantified Self” movement, which has been growing at a steady clip since the term was popularized by writer Gary Wolf back in 2007. (The term might be new, but the practice is not; Benjamin Franklin famously charted his life for decades.) Quantified Selfers now organize meetups in over 80 cities around the world. No matter what gadget you use, the basic approach is the same. Here are five key steps to ensure you get the most traction with your trackers.

  1. Zero in on a goal
  2. Find the tool
  3. Establish a baseline
  4. Make incremental change
  5. Aggregate the data

The Wall Street Journal: Wednesday, August 29, 2012

European Firms Go Afar for Funds (page A1): Companies in Southern Europe are going hat in hand around the world in search of funding as local bank lending dwindles, with many of them raising money by tapping assets in healthier regions such as Latin America and the U.S. Many European companies rely more than their U.S. counterparts on bank loans, usually from institutions in their home countries. Lately, they are finding local banks want to lend less and charge more.

The Jury Has Spoken: Think Different (page A13): Apple didn’t need last week’s verdict in the Samsung patent fight. Microsoft needed it. Microsoft troubled itself to design a smartphone operating system that does everything a smartphone must without being an iPhone knockoff. Microsoft may genuinely have believed there’s a better way than Apple’s of organizing a user’s interaction with a mobile device. Microsoft may have concluded there was no future in merely making another Apple knockoff…

In Defense of the Living, Breathing Professor (page A13):  Most of us in higher education take the long view about the value of what we do. Sure, students graduate with plenty of facts in their heads. But the transmission of information is merely the starting point, a critical tool through which we engage the higher faculties of the mind. What really matters is the set of deeper abilities—to write effectively, argue persuasively, solve problems creatively, adapt and learn independently—that students develop while in college and use for the rest of their lives.

Take Those Two Weeks Off – Or Else (page A15): The Federal Deposit Insurance Corp. has recommended for many years that commercial banks introduce mandatory, two-week vacations for employees as a safeguard against fraud.  This wise idea has since spread to investment banks and their trading desks. Europe’s banking authorities recommended that banks require their traders to take two-week holidays, during which their colleagues would take over their books and ensure everything was correct. The Securities and Exchange Commission issued a statement in February saying that it, too, supported the two-week vacation idea. Why would you not want to take at least two weeks off??

Microsoft’s Mobile Moment: WIll Consumers Buy In? (page B1): This ties in with the editorial above. The technology industry is buzzing that Microsoft Corp. could emerge a winner after Apple Inc.’s big patent suit victory. But there’s a catch: Consumers must be convinced they want what Microsoft is selling.

Baseball Strikes Rich Deal (page B3): I must admit, baseball is probably my favorite professional sport, and it’s nice to see ESPN giving it such a boost.

Google Reinstates Controversial Music App (page B7): More than a year after Google Inc. removed the controversial Grooveshark music-streaming service from its app store for Android smartphones, the app was quietly reinstated Tuesday afternoon, despite ongoing copyright infringement lawsuits against the company.

Costlier Food Puts Restaurants in Bind (page B8): Restaurant chains are in a pickle, caught between soaring ingredient costs and fears that raising prices will turn off their budget-conscious customers, who generally remain pessimistic about the economy.

Fund Managers Seek Their Inner Ad Men (page C1): Hedge funds are beginning to explore marketing strategies ahead of a planned relaxation of a ban on advertising.

Cheap Debt Fuels Volkswagen’s Performance (page C14): Volkswagen’s performance has been remarkable, and it now has 24% of the European market, more than its next two competitors Peugeot and Renault combined. But Volkswagen also has a secret weapon: cheap financing.

A Worksheet for Math-Phobic Parents (page D1): I know thinking of having your own kids one day is the last thing on your mind, but it’s always helpful to do a little planning, particularly with respect to children’s education.