Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are the eight most fascinating ones I read this week.
1. One way to pay the student loans
Years ago, a crack team of MIT math nerds mastered card-counting and made a fortune in Vegas. Now a new generation has cracked the lottery, writes Time:
Several years ago, while doing research for a school project, a group of MIT students realized that, for a few days every three months or so, the most reliably lucrative lottery game in the country was Massachusetts' Cash WinFall, because of a quirk in the way a jackpot was broken down into smaller prizes if there was no big winner. The math whizzes quickly discovered that buying about $100,000 in Cash WinFall tickets on those days would virtually guarantee success. Buying $600,000 worth of tickets would bring a 15%–20% return on investment, according to the New York Daily News.
When the jackpot rose to $2 million, the students bought in, dividing the prize money among group members. But they didn't stop there; they were so successful in their caper that they were eventually able to quit their day jobs and bring in investors to front the money they needed to purchase the requisite number of lottery tickets. Several other syndicates sprang up to capitalize on the Cash WinFall loopholes, but the MIT group remained one of the most successful and innovative. By 2005, the group had earned almost $8 million with its system, according to an investigation by the Boston Globe. By 2010, it had figured out how to win the entire jackpot in a single drawing.
2. Feel-good Bernanke
The tiny nation of Bhutan forgoes gross domestic product, or GDP, for a measure of "gross national happiness" that gauges how content people are with their lives beyond the size of their paychecks. Fed chairman Ben Bernanke focused on the theme in a recent speech:
I define "happiness" as a short-term state of awareness that depends on a person's perceptions of one's immediate reality, as well as on immediate external circumstances and outcomes. By "life satisfaction" I mean a longer-term state of contentment and well-being that results from a person's experiences over time. Surveys and experimental studies have made progress in identifying the determinants of happiness and life satisfaction. Interestingly, income and wealth do contribute to self-reported happiness, but the relationship is more complex and context-dependent than standard utility theory would suggest. Other important contributors to individuals' life satisfaction are a strong sense of support from belonging to a family or core group and a broader community, a sense of control over one's life, a feeling of confidence or optimism about the future, and an ability to adapt to changing circumstances.
3. First, fire all the bad bankers
Banks like Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , and even Goldman Sachs (NYSE: GS ) nearly destroyed themselves and took the economy down with them. Jesse Eisinger of ProPublica wonders why we will still pay attention to their leaders and swoon over their wisdom:
What's a guy gotta do around here to lose a little credibility?
Our society wasn't always this way. In Edith Wharton's novel "The Age of Innocence," set in the 1870s, the arriviste Julius Beaufort's bank fails (it appears not to be fraud, just recklessness). Mr. Beaufort is banished from New York society for a generation.
After the crash of 1929 and the Great Depression, major Wall Street figures populated prisons, not presidential advisory panels. The head of the New York Stock Exchange, Richard Whitney, who hailed from one of the most patrician families in America, went to Sing Sing for embezzlement.
In 1936, Roosevelt gave his famous speech listing reckless banking and speculation among the "enemies of peace." These enemies hated him and he asserted, "I welcome their hatred."
4. Millions and millions suffering
We hear a lot about the budget deficit, and sometimes the moral deficit plaguing the country. Jonathan Chait of New York Magazine gives a worthy rant about our jobs deficit:
In the years since the collapse of 2008, the existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis. To those directly affected, the economic crisis is an emergency, a life-altering disaster the damage from which will endure for years. But most of those in a position to address it simply have not seen it in such terms. History will record that the economic elite has viewed the economic crisis from a perspective of detached complacency.
5. Back to even
The jobs market is still a mess, but the finance blog Calculated Risk shows real GDP is back to an all-time high. The rebound from the past recession was nearly as fast as previous declines:
6. No perspective
The U.K. Department for Business, Innovation and Skills published a report (link opens PDF) on the growing sense of short-termism in both business and market investing:
Short-termism can also manifest itself in hyperactivity. Hyperactive individuals fail to give sustained attention to tasks while demanding the attention of others for themselves. In the corporate sector, hyperactivity can be seen in frequent internal reorganisation, corporate strategies designed around extensive mergers and acquisitions, and financial reengineering which may preoccupy senior management but have little relevance to the capabilities of the underlying business.
7. Already a problem
The "fiscal cliff," a combination of tax hikes and spending cuts almost certain to send the economy back into recession, is due to hit in January unless Congress agrees on a solution. The New York Times shows businesses aren't waiting until then. They're already cutting back:
Hubbell, a maker of electrical products, has canceled several million dollars' worth of equipment orders and delayed long-planned factory upgrades in the last few months, said Timothy H. Powers, the company's chief executive. It has also held off hiring workers for about 100 positions that would otherwise have been filled, he said.
"The fiscal cliff is the primary driver of uncertainty, and a person in my position is going to make a decision to postpone hiring and investments," Mr. Powers said. "We can see it in our order patterns, and customers are delaying. We don't have to get to the edge of the cliff before the damage is done."
8. On the mend
One thing America has going for it is an epic (and underappreciated) boom in natural gas production. The Economist gave one example of it materializing into real, tangible economic growth:
In 2009 Dow Chemical [ (NYSE: DOW ) ] announced plans to close an ethylene "cracker" (as the facilities that crack gas molecules are called) on the banks of the Mississippi just outside New Orleans. Last year it announced that the plant would be reactivated. Now blue-helmeted construction workers, some of roughly 2,500 contractors, crawl over the scaffolding that covers its two towering boilers and rusted red funnels, labouring to get the cracker back into full production by the end of this year. It will eventually employ 40 Dow workers and 20 contractors full-time. The reopening is "a huge morale-booster for employees and for the community," says Laura Ambrose, the site manager.
Dow recently announced that it would build a brand-new ethylene cracker in Freeport, Texas, one of several dozen expansions or new facilities along the Gulf coast. Most of the new output will be turned into more refined products at other Dow plants in North America and, eventually, Latin America as well, making its own useful contribution to the trade balance.
Bonus: Read NPR's great profile of the man in charge of putting a rover on the surface of Mars this week.
Enjoy your weekend.