Wednesday, November 23, 2016
Want to Stop Fake News Websites? Go Where The Money Is: Google AdSense & Content Recommendation Widgets
Jim Weber - Published on November 21, 2016
Since the Presidential election two weeks ago, there has been an enormous amount of consternation and hand-wringing over highly-profitable websites that make up completely fake political news stories that spread like wildfire on the Internet.
Buzzfeed, Daily Dot, The New York Times and The Washington Post have recently done feature stories on fake news sites like WorldPoliticus.com, BVANews.com, LibertyWritersNews.com, ABCNews.com.co and 70News.Wordpress.com (a Wordpress.com domain name apparently isn't enough of a tip-off that this isn't a legitimate news source) that are making tens of thousands of dollars per month by focusing on fake stories that accomplish two things:
#1: Make potential readers mad enough to click the headline
and
#2: Share said fake news with their friends
So far, the focus has been on stopping fake news stories from going viral via crackdowns by Facebook's news algorithm and Google search, and also taking more individual responsibility for what you read and share, which CNN's Brian Stelter dubbed, "Refuse to be confused."
While that's certainly an admirable call to action, fake and salacious news will always be irresponsibly spread — just look at the tabloid industry. These fake news websites will just keep making shit up as long as there's money to be had. So I think infamous criminal Willie Sutton had a better idea: "Go where the money is."
If we want fake news to stop misinforming the public, the most efficient way to do that is stop them from making a small fortune off feeding us bullshit. And the best way to do that is to report every website you find that peddles fake news to the people paying them.
While Google and Facebook have both said they are banning fake news websites from their advertising platforms, both companies are famously opaque about how they plan to execute their plans and most publishers don't make any money off Facebook.
The two biggest sources of income for fake news websites are:
#1: Google's display advertising network, Google AdSense
#2: Content Recommendation Widgets such as Outbrain & Taboola
AdSense's biggest problem is that anyone can run AdSense ads on their website without any sort of screening process. Google instead tries to police fake news by catching you in the act of lying and retroactively punishing you by holding revenue you've "earned." Of course, if they've already cut you a check for the previous month's fake news, Google and their advertisers are shit out of luck.
Content recommendation widgets even worse. Long known as the taint of the Internet with salacious, misleading and/or flat-out fake news shown below articles on almost every website in the form of, "Top 10 X Scandals at Y (#7 Will Shock You!)", they too couldn't care less how accurate the information in your article is as long as the money is pouring in and they can reasonably claim ignorance over the misinformation being spread.
Saturday, November 12, 2016
The Man Who Studies The Spread of Ignorance
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| The tactics of big tobacco to obscure the facts of smoking’s harmful effects led Robert Proctor to create a new word (Credit: Getty Images) |
By Georgina Kenyon - 6 January 2016
How do people or companies with vested interests spread ignorance and obfuscate knowledge? Georgina Kenyon finds there is a term which defines this phenomenon.
In 1979, a secret memo from the tobacco industry was revealed to the public. Called the Smoking and Health Proposal, and written a decade earlier by the Brown & Williamson tobacco company, it revealed many of the tactics employed by big tobacco to counter “anti-cigarette forces”.
In one of the paper’s most revealing sections, it looks at how to market cigarettes to the mass public: “Doubt is our product since it is the best means of competing with the ‘body of fact’ that exists in the mind of the general public. It is also the means of establishing a controversy.”
This revelation piqued the interest of Robert Proctor, a science historian from Stanford University, who started delving into the practices of tobacco firms and how they had spread confusion about whether smoking caused cancer.
Proctor had found that the cigarette industry did not want consumers to know the harms of its product, and it spent billions obscuring the facts of the health effects of smoking. This search led him to create a word for the study of deliberate propagation of ignorance: agnotology.
It comes from agnosis, the neoclassical Greek word for ignorance or ‘not knowing’, and ontology, the branch of metaphysics which deals with the nature of being. Agnotology is the study of wilful acts to spread confusion and deceit, usually to sell a product or win favour.
“I was exploring how powerful industries could promote ignorance to sell their wares. Ignorance is power… and agnotology is about the deliberate creation of ignorance.
“In looking into agnotology, I discovered the secret world of classified science, and thought historians should be giving this more attention.”
The 1969 memo and the tactics used by the tobacco industry became the perfect example of agnotology, Proctor says. “Ignorance is not just the not-yet-known, it’s also a political ploy, a deliberate creation by powerful agents who want you ‘not to know’.”
To help him in his search, Proctor enlisted the help of UC Berkeley linguist Iain Boal, and together they came up with the term – the neologism was coined in 1995, although much of Proctor’s analysis of the phenomenon had occurred in the previous decades.
Balancing act
Agnotology is as important today as it was back when Proctor studied the tobacco industry’s obfuscation of facts about cancer and smoking. For example, politically motivated doubt was sown over US President Barack Obama’s nationality for many months by opponents until he revealed his birth certificate in 2011. In another case, some political commentators in Australia attempted to stoke panic by likening the country’s credit rating to that of Greece, despite readily available public information from ratings agencies showing the two economies are very different.
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| The spread of ignorance is as relevant today as it was when Proctor coined his term (Credit: Thinkstock) |
“This ‘balance routine’ has allowed the cigarette men, or climate deniers today, to claim that there are two sides to every story, that ‘experts disagree’ – creating a false picture of the truth, hence ignorance.”
For example, says Proctor, many of the studies linking carcinogens in tobacco were conducted in mice initially, and the tobacco industry responded by saying that studies into mice did not mean that people were at risk, despite adverse health outcomes in many smokers.
A new era of ignorance
“We live in a world of radical ignorance, and the marvel is that any kind of truth cuts through the noise,” says Proctor. Even though knowledge is ‘accessible’, it does not mean it is accessed, he warns.
“Although for most things this is trivial – like, for example, the boiling point of mercury – but for bigger questions of political and philosophical import, the knowledge people have often comes from faith or tradition, or propaganda, more than anywhere else.”
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| When people do not understand a concept or fact, they are prey for special interest groups who work hard to create confusion (Credit: Thinkstock) |
Consider climate change as an example. “The fight is not just over the existence of climate change, it’s over whether God has created the Earth for us to exploit, whether government has the right to regulate industry, whether environmentalists should be empowered, and so on. It’s not just about the facts, it’s about what is imagined to flow from and into such facts,” says Proctor.
Making up our own minds
Another academic studying ignorance is David Dunning, from Cornell University. Dunning warns that the internet is helping propagate ignorance – it is a place where everyone has a chance to be their own expert, he says, which makes them prey for powerful interests wishing to deliberately spread ignorance.
"While some smart people will profit from all the information now just a click away, many will be misled into a false sense of expertise. My worry is not that we are losing the ability to make up our own minds, but that it’s becoming too easy to do so. We should consult with others much more than we imagine. Other people may be imperfect as well, but often their opinions go a long way toward correcting our own imperfections, as our own imperfect expertise helps to correct their errors,” warns Dunning.
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| US presidential candidate Donald Trump's solutions that are either unworkable or unconstitutional are an example of agnotology, says Dunning (Credit: Getty Images) |
“Donald Trump is the obvious current example in the US, suggesting easy solutions to followers that are either unworkable or unconstitutional,” says Dunning.
So while agnotology may have had its origins in the heyday of the tobacco industry, today the need for both a word and the study of human ignorance is as strong as ever.
Agnotology is the study of wilful acts to spread confusion and deceit, usually to sell a product or win favour
We live in a world of radical ignorance – Robert Proctor
My worry is not that we are losing the ability to make up our own minds, but that it’s becoming too easy to do so – David Dunning
The Case Against Democracy
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| Voter ignorance has worried political philosophers since Plato.ILLUSTRATION BY YAREK WASZUL |
By Caleb Crain
If most voters are uninformed, who should make decisions about the public’s welfare?
Roughly a third of American voters think that the Marxist slogan “From each according to his ability to each according to his need” appears in the Constitution. About as many are incapable of naming even one of the three branches of the United States government. Fewer than a quarter know who their senators are, and only half are aware that their state has two of them.
Democracy is other people, and the ignorance of the many has long galled the few, especially the few who consider themselves intellectuals. Plato, one of the earliest to see democracy as a problem, saw its typical citizen as shiftless and flighty:
Sometimes he drinks heavily while listening to the flute; at other times, he drinks only water and is on a diet; sometimes he goes in for physical training; at other times, he’s idle and neglects everything; and sometimes he even occupies himself with what he takes to be philosophy.It would be much safer, Plato thought, to entrust power to carefully educated guardians. To keep their minds pure of distractions—such as family, money, and the inherent pleasures of naughtiness—he proposed housing them in a eugenically supervised free-love compound where they could be taught to fear the touch of gold and prevented from reading any literature in which the characters have speaking parts, which might lead them to forget themselves. The scheme was so byzantine and cockamamie that many suspect Plato couldn’t have been serious; Hobbes, for one, called the idea “useless.”
A more practical suggestion came from J. S. Mill, in the nineteenth century: give extra votes to citizens with university degrees or intellectually demanding jobs. (In fact, in Mill’s day, select universities had had their own constituencies for centuries, allowing someone with a degree from, say, Oxford to vote both in his university constituency and wherever he lived. The system wasn’t abolished until 1950.) Mill’s larger project—at a time when no more than nine per cent of British adults could vote—was for the franchise to expand and to include women. But he worried that new voters would lack knowledge and judgment, and fixed on supplementary votes as a defense against ignorance.
In the United States, élites who feared the ignorance of poor immigrants tried to restrict ballots. In 1855, Connecticut introduced the first literacy test for American voters. Although a New York Democrat protested, in 1868, that “if a man is ignorant, he needs the ballot for his protection all the more,” in the next half century the tests spread to almost all parts of the country. They helped racists in the South circumvent the Fifteenth Amendment and disenfranchise blacks, and even in immigrant-rich New York a 1921 law required new voters to take a test if they couldn’t prove that they had an eighth-grade education. About fifteen per cent flunked. Voter literacy tests weren’t permanently outlawed by Congress until 1975, years after the civil-rights movement had discredited them.
Worry about voters’ intelligence lingers, however. Mill’s proposal, in particular, remains “actually fairly formidable,” according to David Estlund, a political philosopher at Brown. His 2008 book, “Democratic Authority,” tried to construct a philosophical justification for democracy, a feat that he thought could be achieved only by balancing two propositions: democratic procedures tend to make correct policy decisions, and democratic procedures are fair in the eyes of reasonable observers. Fairness alone didn’t seem to be enough. If it were, Estlund wrote, “why not flip a coin?” It must be that we value democracy for tending to get things right more often than not, which democracy seems to do by making use of the information in our votes. Indeed, although this year we seem to be living through a rough patch, democracy does have a fairly good track record. The economist and philosopher Amartya Sen has made the case that democracies never have famines, and other scholars believe that they almost never go to war with one another, rarely murder their own populations, nearly always have peaceful transitions of government, and respect human rights more consistently than other regimes do.
Still, democracy is far from perfect—“the worst form of government except all those other forms that have been tried from time to time,” as Churchill famously said. So, if we value its power to make good decisions, why not try a system that’s a little less fair but makes good decisions even more often? Jamming the stub of the Greek word for “knowledge” into the Greek word for “rule,” Estlund coined the word “epistocracy,” meaning “government by the knowledgeable.” It’s an idea that “advocates of democracy, and other enemies of despotism, will want to resist,” he wrote, and he counted himself among the resisters. As a purely philosophical matter, however, he saw only three valid objections.
First, one could deny that truth was a suitable standard for measuring political judgment. This sounds extreme, but it’s a fairly common move in political philosophy. After all, in debates over contentious issues, such as when human life begins or whether human activity is warming the planet, appeals to the truth tend to be incendiary. Truth “peremptorily claims to be acknowledged and precludes debate,” Hannah Arendt pointed out in this magazine, in 1967, “and debate constitutes the very essence of political life.” Estlund wasn’t a relativist, however; he agreed that politicians should refrain from appealing to absolute truth, but he didn’t think a political theorist could avoid doing so.
The second argument against epistocracy would be to deny that some citizens know more about good government than others. Estlund simply didn’t find this plausible (maybe a political philosopher is professionally disinclined to). The third and final option: deny that knowing more imparts political authority. As Estlund put it, “You might be right, but who made you boss?”
It’s a very good question, and Estlund rested his defense of democracy on it, but he felt obliged to look for holes in his argument. He had a sneaking suspicion that a polity ruled by educated voters probably would perform better than a democracy, and he thought that some of the resulting inequities could be remedied. If historically disadvantaged groups, such as African-Americans or women, turned out to be underrepresented in an epistocratic system, those who made the grade could be given additional votes, in compensation.
By the end of Estlund’s analysis, there were only two practical arguments against epistocracy left standing. The first was the possibility that an epistocracy’s method of screening voters might be biased in a way that couldn’t readily be identified and therefore couldn’t be corrected for. The second was that universal suffrage is so established in our minds as a default that giving the knowledgeable power over the ignorant will always feel more unjust than giving those in the majority power over those in the minority. As defenses of democracy go, these are even less rousing than Churchill’s shruggie.
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| “Yours was the blue Prius with the two stoners passed out in back, right?” |
Brennan has a bright, pugilistic style, and he takes a sportsman’s pleasure in upsetting pieties and demolishing weak logic. Voting rights may happen to signify human dignity to us, he writes, but corpse-eating once signified respect for the dead among the Fore tribe of Papua New Guinea. To him, our faith in the ennobling power of political debate is no more well grounded than the supposition that college fraternities build character.
Brennan draws ample evidence of the average American voter’s cluelessness from the legal scholar Ilya Somin’s “Democracy and Political Ignorance” (2013), which shows that American voters have remained ignorant despite decades of rising education levels. Some economists have argued that ill-informed voters, far from being lazy or self-sabotaging, should be seen as rational actors. If the odds that your vote will be decisive are minuscule—Brennan writes that “you are more likely to win Powerball a few times in a row”—then learning about politics isn’t worth even a few minutes of your time. In “The Myth of the Rational Voter” (2007), the economist Bryan Caplan suggested that ignorance may even be gratifying to voters. “Some beliefs are more emotionally appealing,” Caplan observed, so if your vote isn’t likely to do anything why not indulge yourself in what you want to believe, whether or not it’s true? Caplan argues that it’s only because of the worthlessness of an individual vote that so many voters look beyond their narrow self-interest: in the polling booth, the warm, fuzzy feeling of altruism can be had cheap.
Viewed that way, voting might seem like a form of pure self-expression. Not even, says Brennan: it’s multiple choice, so hardly expressive. “If you’re upset, write a poem,” Brennan counselled in an earlier book, “The Ethics of Voting” (2011). He was equally unimpressed by the argument that it’s one’s duty to vote. “It would be bad if no one farmed,” he wrote, “but that does not imply that everyone should farm.” In fact, he suspected, the imperative to vote might be even weaker than the imperative to farm. After all, by not voting you do your neighbor a good turn. “If I do not vote, your vote counts more,” Brennan wrote.
Brennan calls people who don’t bother to learn about politics hobbits, and he thinks it for the best if they stay home on Election Day. A second group of people enjoy political news as a recreation, following it with the partisan devotion of sports fans, and Brennan calls them hooligans. Third in his bestiary are vulcans, who investigate politics with scientific objectivity, respect opposing points of view, and carefully adjust their opinions to the facts, which they seek out diligently. It’s vulcans, presumably, who Brennan hopes will someday rule over us, but he doesn’t present compelling evidence that they really exist. In fact, one study he cites shows that even people with excellent math skills tend not to draw on them if doing so risks undermining a cherished political belief. This shouldn’t come as a surprise. In recent memory, sophisticated experts have been confident about many proposals that turned out to be disastrous—invading Iraq, having a single European currency, grinding subprime mortgages into the sausage known as collateralized debt obligations, and so on.
How would an epistocracy actually work? Brennan is reluctant to get specific, which is understandable. It was the details of utopia that gave Plato so much trouble, and by not going into them Brennan avoids stepping on the rake that thwacked Plato between the eyes. He sketches some options—extra votes for degree holders, a council of epistocrats with veto power, a qualifying exam for voters—but he doesn’t spend much time considering what could go wrong. The idea of a voter exam, for example, was dismissed by Brennan himself in “The Ethics of Voting” as “ripe for abuse and institutional capture.” There’s no mention in his new book of any measures that he would put in place to prevent such dangers.
Without more details, it’s difficult to assess Brennan’s proposal. Suppose I claim that pixies always make selfless, enlightened political decisions and that therefore we should entrust our government to pixies. If I can’t really say how we’ll identify the pixies or harness their sagacity, and if I also disclose evidence that pixies may be just as error-prone as hobbits and hooligans, you’d be justified in having doubts.
While we’re on the subject of vulcans and pixies, we might as well mention that there’s an elephant in the room. Knowledge about politics, Brennan reports, is higher in people who have more education and higher income, live in the West, belong to the Republican Party, and are middle-aged; it’s lower among blacks and women. “Most poor black women, as of right now at least, would fail even a mild voter qualification exam,” he admits, but he’s undeterred, insisting that their disenfranchisement would be merely incidental to his epistocratic plan—a completely different matter, he maintains, from the literacy tests of America’s past, which were administered with the intention of disenfranchising blacks and ethnic whites.
That’s an awfully fine distinction. Bear in mind that, during the current Presidential race, it looks as though the votes of blacks and women will serve as a bulwark against the most reckless demagogue in living memory, whom white men with a college degree have been favoring by a margin of forty-seven per cent to thirty-five per cent. Moreover, though political scientists mostly agree that voters are altruistic, something doesn’t tally: Brennan concedes that historically disadvantaged groups such as blacks and women seem to gain political leverage once they get the franchise.
Like many people I know, I’ve spent recent months staying up late, reading polls in terror. The flawed and faulty nature of democracy has become a vivid companion. But is democracy really failing, or is it just trying to say something?
Political scientists have long hoped to find an “invisible hand” in politics comparable to the one that Adam Smith described in economics. Voter ignorance wouldn’t matter much if a democracy were able to weave individual votes into collective political wisdom, the way a market weaves the self-interested buy-and-sell decisions of individual actors into a prudent collective allocation of resources. But, as Brennan reports, the mathematical models that have been proposed work only if voter ignorance has no shape of its own—if, for example, voters err on the side of liberalism as often as they err on the side of conservatism, leaving decisions in the hands of a politically knowledgeable minority in the center. Unfortunately, voter ignorance does seem to have a shape. The political scientist Scott Althaus has calculated that a voter with more knowledge of politics will, on balance, be less eager to go to war, less punitive about crime, more tolerant on social issues, less accepting of government control of the economy, and more willing to accept taxes in order to reduce the federal deficit. And Caplan calculates that a voter ignorant of economics will tend to be more pessimistic, more suspicious of market competition and of rises in productivity, and more wary of foreign trade and immigration.
It’s possible, though, that democracy works even though political scientists have failed to find a tidy equation to explain it. It could be that voters take a cognitive shortcut, letting broad-brush markers like party affiliation stand in for a close study of candidates’ qualifications and policy stances. Brennan doubts that voters understand party stereotypes well enough to do even this, but surely a shortcut needn’t be perfect to be helpful. Voters may also rely on the simple heuristic of throwing out incumbents who have made them unhappy, a technique that in political science goes by the polite name of “retrospective voting.” Brennan argues that voters don’t know enough to do this, either. To impose full accountability, he writes, voters would need to know “who the incumbent bastards are, what they did, what they could have done, what happened when the bastards did what they did, and whether the challengers are likely to be any better than the incumbent bastards.” Most don’t know all this, of course. Somin points out that voters have punished incumbents for droughts and shark attacks and rewarded them for recent sports victories. Caplan dismisses retrospective voting, quoting a pair of scholars who call it “no more rational than killing the pharaoh when the Nile does not flood.”
But even if retrospective voting is sloppy, and works to the chagrin of the occasional pharaoh, that doesn’t necessarily make it valueless. It might, for instance, tend to improve elected officials’ policy decisions. Maybe all it takes is for a politician to worry that she could be the unlucky chump who gets punished for something she actually did. Caplan notes that a politician clever enough to worry about his constituents’ future happiness as well as their present gratification might be motivated to give them better policies than they know to ask for. In such a case, he predicts, voters will feel a perennial dissatisfaction, stemming from the tendency of their canniest and most long-lasting politicians to be cavalier about campaign promises. Sound familiar?
When the Founding Fathers designed the federal system, not paying too much attention to voters was a feature, not a bug. “There are particular moments in public affairs,” Madison warned, “when the people, stimulated by some irregular passion, or some illicit advantage, or misled by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be the most ready to lament and condemn.” Brennan, for all his cleverness, sometimes seems to be struggling to reinvent the “representative” part of “representative democracy,” writing as if voters need to know enough about policy to be able to make intelligent decisions themselves, when, in most modern democracies, voters usually delegate that task. It’s when they don’t, as in California’s ballot initiatives or the recent British referendum on whether to leave the European Union, that disaster is especially likely to strike. The economist Joseph Schumpeter didn’t think democracy could even function if voters paid too much attention to what their representatives did between elections. “Electorates normally do not control their political leaders in any way except by refusing to reelect them,” he wrote, in “Capitalism, Socialism and Democracy” (1942). The rest of the time, he thought, they should refrain from “political back-seat driving.”
Why do we vote, and is there a reason to do it or a duty to do it well? It’s been said that voting enables one to take an equal part in the building of one’s political habitat. Brennan thinks that such participation is worthless if what you value about participation is the chance to influence an election’s outcome; odds are, you won’t. Yet he has previously written that participation can be meaningful even when its practical effect is nil, as when a parent whose spouse willingly handles all child care still feels compelled to help out. Brennan claims that no comparable duty to take part exists with voting, because other kinds of good actions can take voting’s place. He believes, in other words, that voting is part of a larger market in civic virtue, the way that farming is part of a larger market in food, and he goes so far as to suggest that a businessman who sells food and clothing to Martin Luther King, Jr., is making a genuine contribution to civic virtue, even though he makes it indirectly. This doesn’t seem persuasive, in part because it dilutes the meaning of civic virtue too much, and in part because it implies that a businessman who sells a cheeseburger to J. Edgar Hoover is committing civic evil.
More than once, Brennan compares uninformed voting to air pollution. It’s a compelling analogy: in both cases, the conscientiousness of the enlightened few is no match for the negligence of the many, and the cost of shirking duty is spread too widely to keep any one malefactor in line. Your commute by bicycle probably isn’t going to make the city’s air any cleaner, and even if you read up on candidates for civil-court judge on Patch.com, it may still be the crook who gets elected. But though the incentive for duty may be weakened, it’s not clear that the duty itself is lightened. The whole point of democracy is that the number of people who participate in an election is proportional to the number of people who will have to live intimately with an election’s outcome. It’s worth noting, too, that if judicious voting is like clean air then it can’t also be like farming. Clean air is a commons, an instance of market failure, dependent on government protection for its existence; farming is part of a market.
But maybe voting is neither commons nor market. Perhaps, instead, it’s combat. Relatively gentle, of course. Rather than rifles and bayonets, essentially there’s just a show of hands. But the nature of the duty may be similar, because what Brennan’s model omits is that sometimes, in an election, democracy itself is in danger. If a soldier were to calculate his personal value to the campaign that his army is engaged in, he could easily conclude that the cost of showing up at the front isn’t worth it, even if he factors in the chance of being caught and punished for desertion. The trouble is that it’s impossible to know in advance of a battle which side will prevail, let alone by how great a margin, especially if morale itself is a variable. The lack of certainty about the future makes a hash of merely prudential calculation. It’s said that most soldiers worry more about letting down the fellow-soldiers in their unit than about allegiance to an entity as abstract as the nation, and maybe voters, too, feel their duty most acutely toward friends and family who share their idea of where the country needs to go. ♦
Caleb Crain is the author of “Necessary Errors.”
This article appears in other versions of the November 7, 2016, issue, with the headline “None of the Above.”
Friday, October 21, 2016
Who’s scary now?
The bond market is transformed: fewer vigilantes; more forced buyers
JAMES CARVILLE, political adviser to Bill Clinton, the former president, famously said that he wanted to be reincarnated as the bond market so he could “intimidate everybody”. He was frustrated by the administration’s inability to push through an economic stimulus for fear of spooking investors and pushing bond yields higher.
More than 20 years later, the world looks very different. Many developed countries have been running budget deficits ever since the global financial crisis of 2008; their government debt-to-GDP ratios are far higher than they were in the early 1990s. Yet the bond market looks about as intimidating as a chihuahua in a handbag; in general, yields are close to historic lows.
In the 1990s “bond-market vigilantes” sold their holdings when they feared that countries were pursuing irresponsible fiscal or monetary policies. In Britain even fear of a “hard Brexit” is only now being reflected in rising gilt yields—and they are still below the (very low) levels seen before the vote to leave the EU in June. Even developing countries with big budget deficits can borrow easily. This week, for example, Saudi Arabia tapped the markets for the first time, raising $17.5 billion—the largest-ever emerging-market bond issue.
Vigilantes have become vastly outnumbered by bondholders with no real interest in maximising the return on their portfolios. Central banks have been the biggest factor in the market’s transformation. After the crisis, they turned to quantitative easing (QE), ie, expanding their balance-sheets by creating new money in order to buy assets. The collective balance-sheets of the six most active (the Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank, Bank of England and People’s Bank of China) have grown from around $3 trillion in 2002 to more than $18 trillion today, according to Pimco, a fund-management group. These central banks want to lower bond yields—indeed, the Bank of Japan intends to keep the ten-year Japanese bond yield at around 0%. Instead of acting as vigilantes patrolling profligate politicians, central banks have become their accomplices.
Then there are pension funds and insurance companies, which buy government bonds to match their long-term liabilities. Neither group has an incentive to sell bonds if yields fall; indeed, they may need to buy more because, when interest rates are low, the present value of their discounted future liabilities rises. Banks, too, play an important role. They have been encouraged to buy government bonds as a “liquidity reserve” to avoid the kind of funding problems they had in the 2008 crisis. They also use them as the collateral for short-term borrowing.
Yielding to none
With so many forced buyers, trillions of dollars-worth of government bonds are trading on negative yields. “When you have so many price-insensitive buyers, the price-discovery role of the market doesn’t work any more,” says Kit Juckes, a strategist at Société Générale, a French bank.
For much of the 20th century, bonds were the assets of choice for investors wanting a decent income. No longer. Government bonds now seem to be a home for the rainy-day money of institutional investors. The rules say government bonds are safe, making it virtually compulsory to own them. “It’s about the return of capital, not the return on capital,” says Joachim Fels, Pimco’s chief economist.
If central banks are willing buyers of an asset, that asset is as good as cash for most investors. So like cash, government bonds generate a very low return. Always true of the shortest-dated bonds, to be repaid in a few weeks or months, this now applies to a much broader range; two-year debt yields are negative in Germany and Japan and below 1% in America. Open-market operations, in which central banks buy and sell securities, used to focus on debt maturing in less than three months; now they cover bond yields at much longer maturities.
This new-style bond market has created a problem for those who run mutual funds or who manage private wealth—and who do care about the return. Large parts of the bond market no longer offer the rewards they used to. As each year begins, polls show that fund managers think bond yields are bound to rise (and prices to fall); each year they are surprised as yields stay low. “When your old-fashioned pricing model doesn’t work, how do you decide when the asset is cheap?” asks Mr Juckes.
In practice, such investors have been forced to take more risk in search of a higher return. They have bought corporate bonds and emerging-market debt. And in the government-bond markets they have bought higher-yielding longer-term debt.
A key measure of risk is duration; the number of years investors would take to earn back their money. In Europe the average duration of government debt has increased from six to seven years since 2008, according to Salman Ahmed of Lombard Odier, a fund-management group. That doesn’t sound much. But the longer the duration of a portfolio, the more exposed it is to a rise in bond yields. Mr Ahmed reckons that a half-a-percentage-point rise in yields “would create significant and damaging mark-to-market losses”.
Another change in the bond markets exacerbates the problem: liquidity has deteriorated. There have been some sudden jumps in yields in recent years—the “taper tantrum” in 2013, when the Fed started to reduce its QE programme; and a surge in German bond yields in 2015, for example.
Banks may hold bonds for liquidity purposes. But because they are required to put capital aside to reflect the risk of holding corporate debt, they have become less keen to own them for market-making, or trading. Before 2008, bond dealers had inventories worth more than 2% of the corporate-bond market; now their inventories are only a tenth of the size, in relative terms (see chart).
So should a large number of bond investors decide to sell their positions in risky debt, buyers will be scarce; prices may move very quickly. Yet it is not difficult to imagine reasons for a sell-off. If the Fed decides to push up interest rates more quickly than the markets expect, bond yields could rise across the globe. The same could happen if central banks in Europe and Japan decided they no longer wanted to buy government debt: such fears this month nudged up yields in Europe. Or investors might start to fret about the amount of credit risk they have taken. In the emerging markets, for example, more than half of corporate bonds are ranked as “speculative” or “junk”, and the default rate has been steadily rising.
In short, as Mr Juckes puts it, the bond market is “brittle”. It is priced for a world of slow growth and low inflation, leaving no margin for error if things change. The most intimidating thing about the modern bond market now is the risk that they do.
Tuesday, September 13, 2016
Making babies without eggs may be possible, say scientists
By James Gallagher Health and science reporter, BBC News website
Scientists say early experiments suggest it may one day be possible to make babies without using eggs.
They have succeeded in creating healthy baby mice by tricking sperm into believing they were fertilising normal eggs.
The findings in Nature Communications, could, in the distant future, mean women can be removed from the baby-making process, say the researchers.
For now, the work helps to explain some of the details of fertilisation.
End of mum and dad?
The University of Bath scientists started with an unfertilised egg in their experiments.
They used chemicals to trick it into becoming a pseudo-embryo.
These "fake" embryos share much in common with ordinary cells, such as skin cells, in the way they divide and control their DNA.
The researchers reasoned that if injecting sperm into mouse pseudo-embryos could produce healthy babies, then it might one day be possible to achieve a similar result in humans using cells that are not from eggs.
In the mouse experiments, the odds of achieving a successful pregnancy was one in four.
Dr Tony Perry, one of the researchers, told the BBC News website: "This is the first time that anyone has been able to show that anything other than an egg can combine with a sperm in this way to give rise to offspring.
"It overturns nearly 200 years of thinking."
Those baby mice were healthy, had a normal life expectancy and had healthy pups of their own.
Fertilisation
The goal of the researchers is to understand the exact mechanisms of fertilisation because what happens when a sperm fuses with an egg is still a bit of a mystery.
For example, the egg completely strips the sperm's DNA of all its chemical clothing and re-dresses it.
That stops the sperm behaving like a sperm and makes it act like an embryo, but how the "costume change" takes place is not clear.
Removing the need for an egg could have a wider impact on society.
Dr Perry said: "One possibility, in the distant future, is that it might be possible that ordinary cells in the body can be combined with a sperm so that an embryo is formed."
In other words, two men could have a child, with one donating an ordinary cell and the other, sperm.
Or one man could have his own child using his own cells and sperm - with that child being more like a non-identical twin than a clone.
Dr Perry stressed that such scenarios were still "speculative and fanciful" at this stage.
Earlier this year in China, scientists were able to make sperm from stem cells and then fertilise an egg to produce healthy mice.
Dr Perry suggested that combining the two fields of research may eventually do without the need for sperm and eggs altogether.
Prof Robin Lovell-Badge, from the Francis Crick Institute, commented: "I'm not surprised that the authors are excited about this.
"I think it is a very interesting paper, and a technical tour de force and I am sure it will tell us something important about reprogramming at these early steps of development that are relevant to both fertilisation and single cell nuclear transfer [cloning].
"And, perhaps more broadly, about reprogramming of cell fate in other situations.
"It doesn't yet tell us how, but the paper gives a number of clear pointers."
Monday, September 5, 2016
Bypassing the Grape but Enjoying Its Fruits
CAMERON HUGHES sees nothing romantic about being a winemaker. Having a rolling vineyard to call his own? Taking that first sip of a homegrown pinot noir? He can live without it, thanks — and he does, even as he has become a prominent name in the California wine industry.
Mr. Hughes, who started by selling wine out of the back of his Volvo station wagon in 2002, is a wine négociant, or wine merchant. He does not own a vineyard or a winery. Instead, from offices in San Francisco and Calistoga, Calif., he outsources all the labor that goes into making a bottle of wine — growing the grapes, crushing and fermenting them, and other steps in the process — to others.
“All we do is bring the barrels,” Mr. Hughes said.
Actually, he does a bit more than that. During the worldwide wine glut of the recent recession, his company, Cameron Hughes Wine, flourished as he bought up excess wine from wineries, repackaged it under his own label and sold it at a discount.
One of the first wines he ever sold was a syrah from the Lodi region of California that had a retail price of $28. Mr. Hughes sold it at Costco for $8.99 under his generic-sounding Lot series — it was Lot 1. (Per nondisclosure agreements he has with sellers, he does not reveal where his so-called bulk wines come from, but merely describes their aromas, flavors and area of origin.)
Initially, Mr. Hughes said, he “stood in Costco doing my carnival barking act” as he tried to sell his wines to customers. “You’d hear me on the other side of the store, talking about wine. I had store managers come over and be like, ‘Dude, you’ve got to tone it down.’ ”
Mr. Hughes has stormed in on a profession that many consider sacred and has imbued it with some capitalistic swagger — not unlike Fred Franzia, the vintner behind Trader Joe’s discount wine, Charles Shaw, a k a Two Buck Chuck.
Négociants like Mr. Hughes are much more common in Europe. In the United States, “most people want to have a vineyard,” said Liz Thach, a professor of management and wine business at Sonoma State University. “The soil, the terroir, they want to have the whole thing. We have more than 7,000 wineries in the U.S. and most of them are very small and run by people who want to have a small, family business and the pride that goes into that.”
It is notoriously difficult to make a profit on a vineyard, and some wealthy owners pour money into tending grapes knowing full well that they may lose money for years. Winemaking is “a labor of love for many, many people,” Mr. Hughes said. “And it is for us, too, but we figured out how to make a buck, too.”
Most of his bucks were made buying and selling bulk wine, but these days, Mr. Hughes puts most of his resources behind actually making wine — or, rather, having others make it for him.
![]() |
| The Lot series are among the offerings. Credit Peter DaSilva for The New York Times |
“We outsource the work, but we oversee it very closely,” Mr. Hughes said. “We visit these vineyards numerous times. We have our viticulturist traveling the state right now, visiting all the vineyards. When the time comes for crushing and fermenting, our winemakers are there as well, getting daily lab updates.”
In other instances, Mr. Hughes might come in just after wine has been fermented, assemble various blends and then send them to the barrel to age.
Either way, the low-overhead nature of his business means that his wines, sold in places as diverse as Sam’s Club, boutique wine shops and on the Internet, are 50 percent to 70 percent cheaper, he said, than they would be under their winery’s label.
So how did he enter this idiosyncratic profession? “Purely by accident,” he says.
After starting out as a cellar rat — a low-level winery employee — at Corbett Canyon, a popular inexpensive wine label, he decided that he didn’t want to be a wine producer, and went into wine sales and marketing instead. A few years later, when he was working for a French wine importing company, he first heard about négociants.
When the importer went bust not long thereafter, Mr. Hughes saw a place for himself in the wine world. “I bought 500 cases of Napa Valley cabernet, I had a guy bottle it up for me, and I sold it out of the back of my Volvo station wagon.”
After struggling to the point that he teetered on the edge of bankruptcy, he said, he got his big break in 2004, when he persuaded Costco to start selling his Lot series.
Because both he and the origins of his wine were unknowns, building trust among customers was its own kind of labor. At Costco in San Francisco, where Mr. Hughes would stand for hours personally selling his wine, “They’re like, ‘I’ve never heard of it,’ and they’d walk on by,” he recalled.“I used to tell people, ‘If you don’t like it, I’ll come wash your car for you.’ You just did whatever it took to get people to try it.”
PROFESSOR THACH said she admired Mr. Hughes’s “heady vision.”
“He worked really hard to get Costco to pay attention to him, and when they did, it put him on the map,” she said.
Over the years, Mr. Hughes has built up his business “one foxhole at a time,” as he puts it — in 2011, he sold 80 different Lot wines, compared with three his first year.
And never once did he have to wash a car.
Saturday, September 3, 2016
The Hidden Scars All Refugees Carry
By VIET THANH NGUYEN SEPT. 2, 2016
Many people have characterized my novel, “The Sympathizer,” as an immigrant story, and me as an immigrant. No. My novel is a war story and I am not an immigrant. I am a refugee who, like many others, has never ceased being a refugee in some corner of my mind.
Immigrants are more reassuring than refugees because there is an endpoint to their story; however they arrive, whether they are documented or not, their desires for a new life can be absorbed into the American dream or into the European narrative of civilization.
By contrast, refugees are the zombies of the world, the undead who rise from dying states to march or swim toward our borders in endless waves. An estimated 60 million such stateless people exist, 1 in every 122 people alive today. If they formed their own country, it would be the world’s 24th largest — bigger than South Africa, Spain, Iraq or Canada.
My memories of becoming a refugee are fragments of a dream, hallucinatory and unreliable. Soldiers bouncing me on their knees, a tank rumbling through the streets, a crowded barge of desperate people fleeing Vietnam.
I have no guarantee these images are true. They date from the early 1970s, when I lived in the country synonymous with war. I wonder if the fact that I cannot stand the taste of milk today has to do with being a 4-year-old boy on that barge, sipping from milk a stranger shared with my family.
Perhaps this is how history becomes imprinted in the body, how fear becomes a reflex, how memory becomes a matter of taste and feeling.
My real memories began soon after we arrived at the refugee camp in Fort Indiantown Gap, Pa., in the summer of 1975. Only those refugees with sponsors could leave the camp. But no sponsor would take our family of four, so my parents went to one home, my 10-year-old brother went to another and I went to a third. My separation from my parents lasted only a few months, but it felt much longer. This forced separation, what my childhood self experienced as abandonment, remains an invisible brand stamped between my shoulder blades.
A few years later we moved across the country. My parents, merchants in their homeland, had no desire to do the menial work expected of them in Harrisburg, Pa., where we had settled.
Instead, they opened a grocery store in a depressed area of downtown San Jose, working 12- to 14-hour days, seven days a week, except for Christmas Day, Easter and New Year’s Day. They became successful, at the cost of being shot in an armed robbery.
Today, when many Americans think of Vietnamese-Americans as a success story, we forget that the majority of Americans in 1975 did not want to accept Vietnamese refugees. (A sign hung in the window of a store near my parents’ grocery: “Another American forced out of business by the Vietnamese.”) For a country that prides itself on the American dream, refugees are simply un-American, despite the fact that some of the original English settlers of this country, the Puritans, were religious refugees.
Today, Syrian refugees face a similar reaction. To some Europeans, these refugees seem un-European for reasons of culture, religion and language. And in Europe and the United States, the attacks in Paris, Brussels, San Bernardino, Calif., and Orlando, Fla., have people fearing that Syrian refugees could be Islamic radicals, forgetting that those refugees are some of the first victims of the Islamic State.
Because those judgments have been rendered on many who have been cast out or who have fled, it is important for those of us who were refugees to remind the world of what our experiences mean.
I was — I am — the lucky kind of refugee who was carried along by his parents and who had no memory of the crossing. For people like my parents and the Syrians today, their voyages across land and sea are far more perilous than the ones undertaken by astronauts or Christopher Columbus. To those watching news reports, the refugees may be threatening or pitiful, but in reality, they are nothing less than heroic.
They will remain scarred by their history. It is understandable that some do not want to speak of their scars and might want to pretend that they are not refugees. It is more glamorous to be an exile, more comprehensible to be an immigrant, more desirable to be an expatriate. The need to belong can change refugees themselves both consciously and unconsciously, as has happened to me and others.
A Vietnamese colleague of mine once jokingly referred to his journey from “refugee to bourgeoisie.” When I told him I, too, was a refugee, he stopped joking and said, “You don’t look like one.”
He was right. We can be invisible even to one another. But it is precisely because I do not look like a refugee that I have to proclaim being one, even when those of us who were refugees would rather forget that there was a time when the world thought us to be less than human.
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