July 8, 2014

Happy birthday, United States of America! U.S. stock markets gave Americans plenty of reason to celebrate over the Fourth of July weekend. The Dow Jones Industrials Average earned ‘oohs’ and ‘ahhs’ from investors and pundits as it shot above 17,000 last week. The Telegraph observed, however, market highs sometimes cause investors to engage in emotional behaviors like anchoring, which is assigning random meaning to numbers or milestones. The online publication suggested that some investors have decided that the Dow surpassing 17,000 means that the market is overvalued and thus they should sell even though they have no specific evidence to support their hunch. On the other hand, other experts told MarketWatch.com that they expect the new high to spark buying rather than selling particularly if herd instincts are set off. Herding describes a situation in which investors gravitate toward specific investments because everyone else is doing it. Bond markets, as they have throughout much of 2014, continued to confound investors and analysts.

According to Barron’s, last week’s strong jobs report, which is credited with pushing stock markets to new highs, may have given investors a déjà vu moment to when 10-year Treasury yields rose and then settled back down. The bond market had responded to the Labor Department’s May report in almost the same way. Strong domestic economic news pushed rates higher and then they retreated. Foreign demand for U.S. Treasuries was thought to be the reason rates pulled back.

Also, during the second quarter, the Federal Reserve reconfirmed the ongoing need for accommodative monetary policy. The Fed stated that there is no immediate need to tighten monetary policy by raising interest rates.

The Changing Face of Education

Harvard does it. MIT does it. University of Chicago and Stanford do it. It doesn’t cost a fortune either. In fact, it’s often free. The world’s best colleges and universities (along with organizations like The World Bank, Museum of Modern Art (MoMA), and National Geographic) are offering massive open online courses (MOOCs) as well as interactive online classes. The offerings are available to anyone with Internet access anywhere in the world. As The Economist tells it, rising costs, changing labor markets, and disruptive technology are conspiring to overthrow higher education as we know it, and the revolution could send colleges and universities down a path previously taken by print newspapers. The success of online education is uncertain, however. It’s held back, in part, by lack of a formal system of accreditation, although some universities have begun to accept MOOC credits toward their degrees.

“Traditional universities have a few trump cards. As well as teaching, examining, and certification, college education creates social capital. Students learn how to debate, present themselves, make contacts… The answer may be to combine the two… Students could spend an introductory year learning via a MOOC, followed by two years attending university and a final year starting part-time work while finishing their studies online. This sort of blended learning might prove more attractive than a four-year online degree.”

Needless to say, the revolution in education could have significant implications for parents and students who are contemplating the costs of higher education as well as workers who need to develop new skills to find places in the labor force.

Weekly Focus

“Education is not the filling of a pail, but the lighting of a fire.” –William Butler Yeats, Irish poet

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