Data Dive

This morning in Stockholm, Anglo-American John O’Keefe and Norwegian couple May‐Britt Moser and Edvard I. Moser won the 2014 Nobel Prize in Physiology or Medicine for their work in discovering the cells that comprise the brain’s inner GPS, making it possible for us to orient ourselves in space.

In 1971 O’Keefe discovered “place cells” which became active whenever a rat was in the same place in a room. The Mosers’ 2005 discovery of “grid cells” that complimented O’Keefe’s work helped us understand how humans know where they’ve been, where they are, and where they’re going.

As this Reuters graphic shows, the Mosers become the 12th and 13th Norwegians to receive a Nobel, while the dual-citizen O’Keefe’s win marks the 100th time a Nobel has been awarded to a Briton, and the 255th time for an American—more than the next three countries combined.

The Nobel’s GPS, it seems, may be predisposed to find its way to the U.S.

Microsoft’s announcement of Windows 10 this week drew derision for the company’s seemingly tenuous grasp of the concept of counting, but that could be the least of its worries.

The Seattle software giant envisions their new OS, due out next year, as being a single solution to serve all computing needs. “Windows 10 adapts to the devices customers are using, from Xbox to PCs and phones to tablets and tiny gadgets,” said Terry Myerson, Microsoft’s head of operating systems.

Windows is still the operating system of choice for 90 percent of the world’s personal computers, but these Reuters’ graphics show that the rise of smartphones and tablets means that PCs now represent only 14 percent of the computing device market, with tablets sales projected to overtake PCs by 2015. And although Microsoft doubled its share of the tablet market in 2013, that amounted to a mere 2.1 percent of sales; Windows Phones comprised just 2.5 percent of those sold last quarter.

The jump from Windows 8 to Windows 10 seems odd, but Microsoft’s real problem with numbers lies in the dwindling number of devices that run its software.

For all the outrage about the NFL’s domestic violence problem, television ratings for the league are up almost across the board. Don’t viewers care about players’ off-field behavior?

To an extent, NFL fans are willing to turn a blind eye to the league’s problems because, well, they just plain love watching football. But part of the disconnect also lies in Americans’ actual attitudes about corporal punishment—behavior which led to Minnesota Vikings running back Adrian Peterson being suspended for allegedly beating his 4-year-old son with a switch.

The results of a Reuters/Ipsos poll released yesterday show that better than two-thirds of respondents believe that spanking children is OK . Better than one-third of those polled think that corporal punishment is acceptable at school—”as long as it isn’t excessive.”

Although the prevalence of hitting children is declining—fewer than half of respondents admitted to doling out corporal punishment, even though more than three-quarters reported receiving it as a child—general disapproval of the practice isn’t as widespread as one might think.

The NFL is thriving, and part of the reason appears to be that Americans’ views about corporal punishment are more permissive than a vocal minority might like to admit.

The revelation that doctors in Dallas yesterday diagnosed the first case of Ebola on U.S. soil sent a shudder of fear through the American public. But how grave is the danger?

Historically, Ebola outbreaks have been fairly well contained, but the latest outbreak, which began back on March 22 and has killed more than 3,000 people, was by June already the worst since the virus was discovered in 1976.

As this Reuters map shows, the U.S. is one of a number of countries with direct flights from the infected area, which in theory provides ample opportunity for the virus to spread far beyond West Africa.

Fortunately, unlike airborne diseases, Ebola can only be spread through contact with bodily fluids—although this means all fluids, including seemingly innocuous liquids like sweat and tears. The method of transmission should limit the virus’s ability to spread quickly without detection.

Dr. Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention, told NBC that a seven-person CDC team is working with the infected man’s family to get a full picture of those who might have been exposed in the time between when the man arrived in Dallas on Sept. 20 and when he was isolated eight days later.

Symptoms of Ebola can take between two and 21 days to emerge, so the next couple of weeks will be key. As things stand, if the CDC’s identification and containment efforts in Dallas are successful, we should be in good shape.

Officials are optimistic. “It is certainly possible someone who had contact with this individual could develop Ebola in the coming weeks,” Frieden told a press conference. “I have no doubt we will stop this in its tracks in the United States.” Given that doctors already missed their first opportunity to isolate the infected patient by sending him home with antibiotics, let’s hope that Frieden’s confidence isn’t misplaced.

David Kotok, Cumberland Advisors

A healthy dose of fear has re-entered financial markets in the final three months of the year. The Chicago Board Options Exchange VIX, a widely tracked measure of market volatility, rose to a two-month high on Wednesday.

Varying news reports offered threats from the Ebola virus and a stagnating European economy as tangential reasons. Perhaps another point is many investors view the U.S. Federal Reserve’s pending decision to raise interest rates as a rumbling train far off in the distance that they now hear headed their way. Closer to the horizon are headlines that can no longer lean on “Fed easing” to explain away rising asset prices and a rising stock market.

“We are in a new period of volatility and it's been developing for the last two or three months,” David Kotok, chairman and chief investment officer of investment advisory firm Cumberland Advisors told the Global Markets Forum on Wednesday. “When you suppress all interest rates to zero you dampen volatility and you distort asset pricing. Now the outlook for interest rates is changing so we are restoring volatility.”

The changes, he said, are evident in a rising U.S. dollar, falling commodity prices and the spread between the high yield and U.S. bond markets.

“These are examples of how things change when you return to more normal volatility and extract and stop monetary stimulus,” Kotok said.

Kotok, GMF moderator Jeanine Prezioso and Reuters Fed reporter Jonathan Spicer chat about bull and bear markets

Now comes a waiting game and a test of investors’ mettle to sift through the weeds as Fed policy moves closer to no longer supporting stock prices. The best stock pickers will resign themselves to flushing out those hit by a stronger dollar, those with exposure to commodities, as one example. The result of a stronger dollar on corporate earnings begin to show when companies report third quarter earnings, but more so in end-of-year earnings, Kotok said.

“We expect some downward guidance from companies that are seriously impacted by changes in the currency markets,” he told the GMF.

Kotok’s Cumberland has positioned itself in large cap stocks, which he says in his new book From Bear to Bull with ETFs  investors should seek out during bear markets while investing in small cap stocks in a bull run. The small cap Russell 2000 Index hit a five-month low on Wednesday.

Kotok in the Global Markets Forum

“I am overweight large caps in my managed portfolios right now.”  Kotok said. “We are underweight small and midcaps, we have been for awhile. I have no way to know if we are in a corrective phase or if the bull market ended. But it's apparent that we have one of the two underway.”

Among other trades, Kotok looks at the VIX every day as well as the quarterly release of estimates of future interest rates assembled by the members of the Federal Open Market Committee.

“Look at the option markets which show the price of real money bets on the future of interest rates. They tell you every minute of every day what sophisticated investors collectively think an interest rate will be and when it will be there. That is a high frequency indicator that deserves continuous attention.”

Click here for the full transcript from the GMF interview: RTRS_David_Kotok_01102014

It seems the political unrest in Hong Kong isn’t just a headache for the Chinese. Uncertainty about Hong Kong’s pro-democracy demonstrations caused U.S. stocks to fall yesterday, following the lead of their Asian and European counterparts, while the same unease pushed U.S. bond rates higher.

Just-released U.S. home price data for July also failed to meet expectations, with prices increasing 6.7 percent over July, 2013, figures — short of the 7.5 percent rise that analysts had predicted.

As this Reuters graphic shows, each of the 20 markets that comprise the composite showed year-over-year home price increases, but at a decelerating cumulative rate.

Happily, despite turmoil in Hong Kong, Ukraine and the Middle East, housing is an outlier, and the general U.S. economy is proving increasingly robust. Let’s hope the trend continues.

So much for “one country, two systems”. Residents of Hong Kong, always wary of Beijing’s promise to grant certain concessions to capitalism and democracy after Britain handed over the region to China in 1997, have taken to the streets for the fourth straight night, with tens of thousands of demonstrators filling the streets of the city’s central business district. Why the protests and how high are the stakes?

Dubbed the “Umbrella Revolution” after the large number of protesters carrying them to protect against the sun and, somewhat less successfully, the sting of tear gas, the demonstrations aim to pressure China to hold fully democratic elections for Hong Kong’s legislature in 2017 and to prompt the current executive, Leung Chun-ying, to step down.

The protests are expected to escalate in anticipation of China’s National Day holiday on Oct. 1, but—so far at least—the central government appears unswayed: “Hong Kong is China’s Hong Kong,” said Hua Chunying, Chinese Foreign Minister told a news briefing in Beijing.

A Reuters graphic looks at how public opinion has changed since the handover. Polls conducted by the University of Hong Kong show ebbing confidence in China’s “one country, two systems” philosophy and Hong Kong’s future in general, and more than 50 percent of respondents are either “quite distrustful” or “very distrustful” of the Beijing central government. Doesn’t sound like the protesters will be leaving the streets anytime soon.

Almost 3,000 West Africans have died from the current outbreak of Ebola virus, and on Tuesday, the U.S. Centers for Disease Control and Prevention warned that by January between 550,000 and 1.4 million people could be infected if nothing is done.

But the outbreak, which began in Guinea in March before spreading to Liberia, Sierra Leone, Nigeria and Senegal, is only part of the terrifying picture. Last week, fear of Ebola caused locals to kill eight members of an Ebola education team, sick people are avoiding clinics, and the World Health Organization says that 208 of the 373 infected healthcare workers in the region have died from the virus.

As a result, ”the health services of West Africa have to a very large degree broken down,” according to Jeremy Farrar, director of the Wellcome Trust international health charity.

Experts predict a quadrupling in deaths caused by malaria, next year, and the collapse of immunization programs means that children are at a higher risk of diphtheria, polio and tuberculosis. Not to mention the impact to things like childbirth, diabetes and mental health.

So it’s a race against time. According to WHO director of strategy Dr. Christopher Dye, “If control efforts are only partly successful, Ebola viral disease in the human population could become ‘a permanent feature of life in West Africa.’”

This Reuters interactive graphic (click here for the interactive version for more info) shows the affected areas with up-to-date data on the number of cases and deaths; let’s hope the world community can staunch the flow before Ebola and the associated collateral damage become widespread humanitarian disasters.

Click image to see an interactive version of this graphic.

Yesterday’s beheading of French tourist Herve Gourdel by an Algerian group prompted France to consider an expanded role in the anti-Islamic State air strikes that began this week.

The Arab League, the European Union and NATO all back action against the group, and the U.S.-led coalition boasts over 50 member states, but who is really doing the heavy lifting?

The Republican establishment continues to hammer away at Obamacare, questioning the effectiveness of the law and the accuracy of the administration’s data about it. Yesterday, reality television star and professional troll Donald Trump tweeted that “ObamaCare is not working and has missed all targets.”

But do the data support this? Even the administration’s revised enrollment numbers for those who have paid their premiums beat the White House goal, and the U.S. Department of Health and Human Services expects a 25 percent bump in the number of insurers offering coverage next year, which could help keep premiums affordable.

Electioneering aside, the Affordable Care Act aims to expand coverage, and as this Reuters graphic shows, the rate of people without insurance recently dipped to 13.4 percent. That’s lower than the 14.5 percent poverty rate—a first for U.S. numbers, according to Reuters data. Certainly doesn’t sound like a negative trend.