The World Cup: What happens when the crowds go home?

The World Cup is the the world's greatest sporting event.

For an entire month, people from every corner of the globe are riveted by these world class athletes and the magic they perform with their feet, their head and a ball. This is why Steve Nash of the Phoenix Suns heads to New York City every summer to play in the city's many soccer leagues and why people everywhere are cramming into bars, clubs, stadiums and pubic squares at insane hours to cheer for their national or adopted favorite team.

Goals are infrequent. They are hard earned, generally by the creative and brilliant work of many. As a result they are more valued than even the home run which has been almost commonplace through a combination of weight training and chemicals

I love the competition, the international camaraderie and the brilliance of athletes like Messi, Park Ji-Sung, Rooney and Howard. But in a country as poor and unequal as South Africa, it is hard to justify the costs of hosting the games. Once they are over and the cheering stops, South Africa will be left with enormous debts in addition to its overwhelming social and economic problems.

This is the first World Cup played on African Soil. But the claims that it is an "African" event ring hollow. In reality it is a sanitized spectacle run by and for multinational corporations and global elites.

Whether the administrators and sponsors like it or not, the games are highlighting the gulf between the haves and the have-nots.

Take, for example, Royal Bafokeng Stadium, where England and the US met on Saturday night. It cost $82 million to build, and its recently refurbished stands are hosting business executives from some of the world's biggest corporations. While they live it up at the World Cup, in the surrounding 29 villages that make up the tiny Bafokeng kingdom within South Africa, most live in abject poverty despite the region's platinum wealth.

South African sociologist Chris Bowman writes in the Harvard Business Review:

Relying on tax subsidies, the South African organizers have built five world-class stadiums, renovated two existing football stadiums and a further three rugby stadiums, and made additional significant infrastructure changes — all at a cost in excess of 30 billion South African rand, double what was predicted in 2006.

This is in a country where poverty is extreme: The Gini coefficient of income inequality, a metric on a zero-to-one scale with higher numbers representing greater disparity, has risen from 0.66 in 1993 to 0.70 in 2008 (the U.S., for comparison, is at 0.45). Racial apartheid has been replaced by class apartheid and unemployment hovers around 40%.

Scarce public resources have been diverted from much-needed public projects to a spectacle that generates significant revenue — but mainly for FIFA, football's governing body, and big corporations. In presenting FIFA with a "risk-free opportunity on African soil," to quote their bid, the South African organizers structured the tournament so as to allow FIFA to generate vast profits through marketing and broadcasting rights.

The result: The 2010 World Cup is already proving lucrative for FIFA — Jerome Valcke, the organization's secretary general, recently announced that income has increased by 50% since the last event.

But the economic benefits for South Africans will be very slim. In fact, many citizens — indeed, many Africans of all nationalities — will be excluded, due to expensive tickets and a complicated ticketing system. Though less than 10% of the South African population has internet access, tickets were initially sold online. Local traders have been barred from selling food, beverages, and soccer merchandise outside the stadiums. Local factories were not even awarded the contract to produce the official mascot, Zakumi — instead, the work went to a factory in Shanghai.

The 2010 World Cup has gotten off to splendid start with large enthusiastic crowds and stirring performances. With favorites like Brazil and the Ivory Coast yet to play and stars like Kaka and Ronaldo working their magic, these games, despite the controversy over the ball and the noise of the vuvuzelas,, are meeting the expectations of football fans everywhere.

The games have also generated enormous enthusiasm among South Africans who are justifiably proud of hosting the event on African soil for the first time. But after the games are over and the money is counted, very little will flow back to the South African communities that need it the most.

Why do Glenn Beck and the right wing hate football?

Dave Zirin writes:

Every World Cup, it arrives like clockwork. As sure as the ultimate soccer spectacle brings guaranteed adrenaline and agony to fans across the United States, it also drives the right-wing noise machine utterly insane.

“It doesn’t matter how you try to sell it to us,” yipped the Prom King of new right, Glenn Beck.

“It doesn’t matter how many celebrities you get, it doesn’t matter how many bars open early, it doesn’t matter how many beer commercials they run, we don’t want the World Cup, we don’t like the World Cup, we don’t like soccer, we want nothing to do with it.”

Beck’s wingnut godfather, G. Gordon Liddy also said on his radio program, “Whatever happened to American exceptionalism? This game … originated with the South American Indians and instead of a ball, they used to use the head, the decapitated head, of an enemy warrior.”

Dear Lord, where do we begin? First of all, I always find it amusing when folks like Beck say, “We don’t like soccer” when it is by far the most popular youth sport in the United States. It’s like saying, “You know what else American kids hate? Ice cream!”

Young people love soccer not because of some kind of commie-nazi plot conjured by Saul Alinsky to sap us of our precious juices, but because it’s – heaven forefend - fun.

Among adults, the sport is also growing because people from Latin America, Africa, and the West Indies have brought their love of the beautiful game to an increasingly multicultural United States. As sports journalist Simon Kuper wrote very adroitly in his book Soccer Against the Enemy, “When we say Americans don’t play soccer we are thinking of the big white people who live in the suburbs. Tens of millions of Hispanic Americans [and other nationalities] do play, and watch and read about soccer.” In other words, Beck rejects soccer because his idealized “real America” - in all its monochromatic glory – rejects it as well. To be clear, I know a lot of folks who can’t stand soccer. It’s simply a matter of taste. But for Beck it’s a lot more than, “Gee. It’s kind of boring.” Instead it’s, “Look out whitey! Felipe Melo’s gonna get your mama!”

As for Liddy, let’s be clear. There is not in fact hard anthropological evidence that early soccer games were played with a human head. Interestingly, though, there is an oft-told legend that the sport took root in England in the 8th century because the King’s army playfully kicked around the detached cranium of the conquered Prince of Denmark. Notice that this tall-tale is about Europe not “South American Indians”. I think we’re seeing a theme here.

But maybe this isn’t just sports as avatar for their racism and imperial arrogance. Maybe their hysteria lies in something far more shallow. Maybe the real reason they lose their collective minds is simply because the USA tends to get their asses handed to them each and every World Cup.

After all, as G. Gordon asked, “Whatever happened to American exceptionalism?” When it comes to the World Cup, the exceptional is found elsewhere. Could Beck, Liddy, and company just have soccer-envy? Is it possible that if the USA was favored to win the World Cup, Beck himself would be in the streets with his own solid gold vuvuzela? I feel that to ask the question is to answer it. In fact, this is as good a reason as any to hope for a mighty run by the US team. It would be high comedy to see Beck and Friends caught in a vice between their patriotic fervor and their nativist fear.

[Dave Zirin is the author of the forthcoming “Bad Sports: How Owners are Ruining the Games we Love” (Scribner) Receive his column every week by emailing dave@edgeofsports.com. Contact him at edgeofsports@gmail.com.]

Hedge funds target for-profit colleges

According to Hedgetracker.com :

Hedge funds have been circling for new carrion to devour in the next economic slowdown and have found a big fat target in the for-profit educational sector. The industry is ripe for the taking. For two decades, for-profit schools have lured gullible students with inflated promises of impressive sounding degrees which they pay exorbitant tuition to obtain.

In education's version of the subprime crisis, creative financial aid departments obtain government loans to finance the entire program. There are now over 2 million attending these institutions, accounting for 10% of all higher education in the US, and the profits that have poured in have been absolutely massive.

Early investors rode the IPO train all the way to the bank. The problem arises when few students ever achieve these laudable goals. According to government statistics, 55% of US college students obtain a degree within six years. At the University of Phoenix, with 400,000 students, the largest for-profit university, only 18% meet this deadline, only 6% at some campuses, and a mere 4% of online students. Dropouts end up defaulting on loans that can amount to as much as $100,000 for incomplete bachelor's degrees and up to $200,000 for advanced degrees.

It now looks like the gravy train is about to end. Secretary of Education Arne Duncan has promised a crack down on the industry, bringing in more regulation and prosecutions of deceptive marketing practices, where degree programs are sold like time shares. The leading accreditation organizations are also having second thoughts about the for-profits, where 95% of the instructors are part time and tenure is unknown. Complaints are rife about shoddy teaching standards and missing doctorates.

The government has funded $750 billion in student loans, and while 10% of public University loans go unpaid, the default rate at for-profit schools is thought to be as high as 50%. Starve these schools of subsidized government funding, and their shares are history. (emphasis is mine)

Take a look at the top listed for-profit universities of Apollo (APOL), Capella Education (CPLA), and DeVry (DV).

According to HedgeTracker, top hedge fund holders of Apollo as of 3/31/10 include Chase Coleman’s Tiger Global Management with 6,754,212 shares / $414mm, Lee Ainslie’s Maverick Capital with 5,683,992 shares / $348mm, Ricky Sandler’s Eminence Capital with 1,844,891 shares / $113mm, and John Paulson’s Paulson & Co. with 1,600,000 shares / $98mm.

All of the above mentioned hedge funds, except Tiger Global, made HedgeTracker’s Top Hedge Fund list of 2009.

Top hedge fund holders of Capella Education include Jim Simons’ Renaissance Technologies with 366,425 shares / $34mm and Maverick Capital with 209,669 shares / $19mm.Top hedge fund holders of DeVry include Ken Griffin’s Citadel Investment Group with 421,284 shares / $27mm and Ravi Kaza’s Seasons Capital Management with 305,223 shares / $20mm.

For Detailed Investor Profiles on these Investors, click below:
Citadel Investment Group
Maverick Capital
Renaissance Technologies Corporation
Seasons Capital Management
Tiger Global Management

Related People: Brandon Haley; Becket Wolf; Charles Wyly; Chase Coleman; David Grossman; David Hensle; Derek Kaufman; Evan Wyly; Feroz Dewan; Jeff Runnfeldt; Jim Simons; Julian Robertson; Kaveh Alamouti; Kenneth Griffin; Lee S. Ainslie; Mark Stainton; Neeraj Chandra; Ravi Kaza; Ryan Garino; Sam Wyly; Steve Weller


Related Entities: Citadel Alternative Asset Management; Citadel Equity Fund; Citadel Kensington; Citadel Wellington; Equiduct; Maverick Capital Long LP; Maverick Fund USA; Maverick Levered Partners; Medallion; New Castle Re; Nova; Renaissance Institutional Equities Funds; Seasons Aggressive Fund; Seasons Core Fund; Seasons Institutional Core Fund LP; Seasons Leveraged Core; Sowood Capital*; Tiger Global Funds; Tiger Management Corporation; Tiger Management Corporation*; Tiger Technology LP

Summer in the City: Journal Sentinel is wrong about the minimum wage and youth employment

High school and college students are having a tough time finding summer jobs.

The unemployment rate for the 16-to-24 age group reached a record 19.6 percent in April, double the national average of unemployment. For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression.”

According to a recent article by Karen Herzog in the Milwaukee Journal Sentinel, however, this precipitous decline in youth employment is a byproduct of the Wisconsin Legislature's decision to raise the minimum wage to $7.50 an hour.

Herzog presents a few anecdotes from employers to substantiate her claim. But she fails to square her analysis with any recognition that the record rate of youth unemployment is a national problem that predates Wisconsin’s minimum wage increase.

In June 2009 before the minimum wage increase in July 2009 the Bureau of Labor Statistics reported that employment rates among the nation’s teens (16-19 year olds), especially boys, had reached historic lows. During June, the employment rate (seasonally adjusted) of all 16-19 year olds in the nation was estimated to be only 29.2%, meaning that only 29 of every 100 youth ages 16-19 were employed in any type of job in this month..

Over the October-November 2007 to November-December 2009 period, the number of employed teens in the U.S. declined by nearly 25% while the number of employed 20- 24 year olds fell by nearly 11%.

Job loss in relative terms (-25%) among the nation’s teens in the Great Recession is greater than it was for all workers in the Great Depression of the 1930’s (1929-1933). The employment losses for young workers far exceeded those of all other age groups. In fact, the June 2009 employment rate of teens was the lowest ever recorded in the 62 years of employment data that are available from the monthly Current Population Survey dating back to 1948.

Herzog presumably ignores this reality because to acknowledge it would undermine her contention that Wisconsin’s minimum wage increase is the cause of high youth unemployment. Or if she acknowledged it, she would have to make the absurd argument that fear of an increase in Wisconsin’s minimum wage to $7.50 caused employers in every state, several of whom have a higher minimum wage than Wisconsin, to cut back on youth employment..

Attributing high youth unemployment to Wisconsin’s minimum wage increase ignores recent research that indicates that incremental increases in the minimum wage do not undermine employment. Studies of states that actually raised the minimum wage in the early 1990s by economists David Card and Alan Kreuger found no increase in unemployment.

A more recent study by Jeff Chapman that reviewed the experience in all twelve states that had raised their minimum above the federal minimum during this decade concluded:"Despite very strong evidence to the contrary, those opposed to minimum wage hikes continue to claim that such policies have and will eliminate jobs. ...the facts clearly show that the benefits of such increases outweigh any potential costs.”

Youth unemployment is a national problem. It is likely to remain a serious problem without a federal youth jobs program. Blaming it on incremental increases in the minimum wage is inaccurate. It may encourage policy makers to attempt to reduce the minimum wage, but it won't help young people find jobs or earn income.

The report by the Northeastern University's Center for Labor Market Studies concluded:

The severe teen joblessness problem is a year-round problem not confined to the summer. A job stimulus program for teens is needed that will create jobs for youth in the public and nonprofit sectors and provide economic incentives through wage subsidies for private for profit employers to hire teens….The time for comprehensive and sustained policy actions on a wide variety of fronts to get our youth to work is now.”

Investor says for-profit colleges are morally bankrupt and socially destructive

By Andy Kroll

Steve Eisman, the outspoken investor whose huge wager against the subprime mortgage market was chronicled by author Michael Lewis in his bestselling book The Big Short, has set sights on a new target: for-profit colleges of the kind of you might see advertised on daytime TV and at bus stops. Think ITT Educational Services, Corinthian Colleges, or Education Management Corporation.

In a speech titled "Subprime Goes to College," delivered Wednesday at the Ira Sohn Investment Research Conference, Eisman blasted the for-profit education industry, likening these companies to the seamy mortgage brokers who peddled explosive subprime loans over the past two decades. "Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong," Eisman said. "The for-profit education industry has proven equal to the task." (All of Eisman's remarks come from a copy of his prepared remarks...)

Eisman, a blunt, no-frills portfolio manager at FrontPoint Financial Services Fund, a Morgan Stanley subsidiary, became an overnight sensation as one of the main characters in Lewis' latest. After witnessing the first wave of subprime madness in the 1990s, Eisman grew skeptical of the industry as a whole, Lewis writes. Then, when subprime surged again in the 2000s, he put his knowledge to work. Needless to say, he's a lot richer than he was two years ago.

The for-profit education sector has soared over the past decade, making companies like ITT and Apollo Group into heavyweights. Driving much of the growth, Eisman explained, was the sector's easy access to federally guaranteed debt through Title IV student loans. In 2009, he said, for-profit educators raked in almost one-quarter of the $89 billion in available Title IV loans and grants, despite having only 10 percent of the nation's postsecondary students.

Eisman attributes the industry's success to a Bush administration that stripped away regulations and increased the private sector's access to public funds. "The government, the students, and the taxpayer bear all the risk and the for-profit industry reaps all the rewards," Eisman said. "This is similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper." (Calls to several for-profit colleges, including ITT and Corinthian, were not immediately returned.)

Another similarity between subprime lending and for-profit education is this, Eisman said: Both push low-income Americans into something they can't afford—in the schools' case, pricey programs that leave the students heavily in debt; what's more, the degrees they get mean little in the real world: "With billboards lining the poorest neighborhoods in America and recruiters trolling casinos and homeless shelters—and I mean that literally—the for-profits have become increasingly adept at pitching the dream of a better life and higher earnings to the most vulnerable."

Eisman went on to cite the industry's dropout rates of 50-plus percent as another sign of poor quality; the numbers are likely understated, he added, given that the industry reports them voluntarily. "How good could the product be if dropout rates are so stratospheric?" he asked. "Default rates are already starting to skyrocket. It's just like subprime—which grew at any cost and kept weakening its underwriting standards to grow."

How does this kind of industry even stay in business? That, Eisman asserted, has much to do with accreditation. There are two main tiers of college accreditation: national and regional—the latter being the more valuable. (Big schools like Yale and the University of Michigan are regionally accredited.) As Pulitzer Prize-winner Dan Golden has reported, for-profit colleges with the weaker national accreditation have started acquiring financially troubled colleges for their regional accreditation. In a Bloomberg report, Golden cites ITT's acquisition of New Hampshire-based Daniel Webster College in June 2009 for $20 million, a purchase that could ultimately reap $1 billion or more for ITT.

Eisman saved the ugliest part for last: As he sees it, the industry's era of massive profits—ITT is more profitable on a margin basis than Apple, he notes—are about to end, thanks to new government regulations in the pipeline. He predicts big hits to the per-share earnings of Apollo Group, ITT, Corinthian Colleges, Education Management Corporation, and the Washington Post Company—which owns and relies on Kaplan for profitability. For ITT and Corinthian, Eisman foresees 2010 losses of nearly 40 to 50 percent. Regarding EDMC, he noted in his prepared remarks that the company's 2010 fiscal estimate is "massively negative."

Eisman ended with a warning:

Are we going to do this all over again? We just loaded up one generation of Americans with mortgage debt they can’t afford to pay back. Are we going to load up a new generation with student loan debt they can never afford to pay back? The industry is now 25 percent of Title IV money on its way to 40 percent. If its growth is stopped now and it is policed, the problem can be stopped. It is my hope that this administration sees the nature of the problem and begins to act now. If the gainful employment rule goes through as is, then this is only the beginning of the policing of this industry.

But if nothing is done, then we are on the cusp of a new social disaster.

Not all experts on the for-profit education foresee such an ominous future. Trace Urdan, a managing director at Signal Hill who analyzes the industry, told Mother Jones earlier this week that pending regulation from Washington could indeed complicate the future for for-profit colleges. He added, however, that "if you're short on the industry right now, you think there's a game-over scenario on the way"—something Urdan himself doesn't necessarily see happening.

Should the Education Department strongly crack down on for-profit schools, Urdan said he predicted losses of 8 to 12 percent—far less than Eisman's 40 to 50 percent projection.

Andy Kroll is a reporter at Mother Jones. For more of his stories, click here. Email him with tips and insights at akroll (at) motherjones (dot) com.

Weak job growth in May. Threat of double dip recession grows

431,000 net new jobs were created in May. But almost all of them, a whopping 411,000, were temporary U.S. Census jobs.

Private employers added only 41,000 new jobs in May, the lowest total since the start of the year.

Overall, the unemployment rate dropped to 9.7 percent, down from 9.9 in April., according to a report released this morning by the U.S. Department of Labor.

AFL-CIO President Richard Trumka said the low number of private-sector jobs is further evidence the recovery is still fragile.

"The Economic Recovery Act saved us from a second Great Depression, but it was not sufficient to power strong and sustained job growth, and its effects are expected to wane in coming months."

He called on Congress to do more to create jobs and sustain the recovery.

Most immediately, Congress must move quickly to extend unemployment benefits, restore health care benefits for the unemployed and provide aid to states to maintain jobs and vital services.

State and local governments shedded, 22,000 jobs in May. Without further action to offset state budget shortfalls, these job losses will undermine temporary gains from federal spending.

The underemployment figure, which includes those who are too discouraged to look for work or are working part-time out of economic necessity, dropped to 16.6 percent in May, from 17.1 percent in April-some 27 million U.S. workers without jobs or full-time work.

Wile temporary federal government jobs are rising because of the Census, permanent local government jobs are going away. State budget cuts could lead to as many as 900,000 jobs lost in 2010. And Congress decided last week to do nothing about that, cutting money in a jobs bill for the states to balance their Medicaid budgets.

Economists say monthly job creation must be 350,000 or more just to begin to make a dent in the unemployment rate.

The number of long-term unemployed workers continues to grow. In May, some 6.8 million U.S. workers were out of a job for 27 weeks or longer, up from 4 million a year ago. In May, 46 percent of unemployed workers had been without a job for 27 weeks or more.

The long-term jobless figures clearly show how important it is that Congress extend unemployment insurance (UI). Late last week, the House voted to extend unemployment benefits to millions of long-term unemployed workers who have been jobless longer than 26 weeks. But the Senate failed to vote on the measure before going on recess, meaning up to 1.2 million workers will have lost their unemployment insurance by the time the Senate returns from vacation.

Speaking earlier this week at Carnegie-Mellon University in Pittsburgh, Pa., President Obama said it is critical lawmakers extend unemployment insurance for several more months so that Americans who’ve been laid off through no fault of their own get the support they need to provide for their families and can maintain their health insurance until they’re rehired.

Extending unemployment benefits will not only support individual workers who have been unable to find jobs, but it will also stimulate the economy and help create more jobs. The money sent out in the form of unemployment insurance is quickly returned to the community, effectively supporting local economies. The median unemployed person has almost no cushion-only about $250 in liquid savings-at the time of job loss, resulting in a sharp drop in spending on essentials including food. Jesse Rothstein, chief economist for the U.S. Department of Labor summed up the nation’s jobless situation:

If you give money to someone who is unemployed, they are going to spend it the next day.

In his statement, Trumka adds:

America’s workers have paid far more than their fare share for the economic crisis - they’ve paid with their jobs, with their homes and with billions of dollars to Wall Street.

Today’s challenge is jobs. Unless Congress addresses this challenge with the focus and energy they brought to rescuing our banks, not only will a generation of workers be doomed to unemployment and the recovery itself put at risk, but dealing with our long-term fiscal problem will be all the more difficult.

The self-employed desperation of the unemployed can't be wished away

Former Secretary of Labor Robert Reich points out that there is world of difference and a lot of hurt between entrepreneurial zeal and self-employed desperation.

The column is linked.