Analysis of Articles by Roben Farzad, Rachel King, and Dexter Roberts - Essay Example

The paper "Beware of ETFs on Steroids, China Forgets Inflation and Goes for Growth, Social Networkers Bet on Education as Next Frontier" is a bright example of a literature review of the articles from the website www.businessweek.com on social science. The first article is Roben Farzad’s ‘Beware of ETFs on Steroids’ (Farzad). This article considers exchange-traded mutual funds and a number of concerns about the tools traders use to play the market. In these regards, traders have implemented ETFs as a means of magnifying the daily returns of the indexes they follow.

A recent trend in ETFs has been supersizing, which critics argue is adding to market volatility and scaring off investors. The chairman of BlackRock, Laurence Fink, referred to these ETFs as toxic and compares them to the financial crisis that collapsed the United States economy. The main understanding is that these ETFs seek to gain greater returns by using options and derivatives in addition to the securities in the fund. The main argument against these ETFs is that they adversely affect the market because they lump together many stocks that are similar but still different; it’s believed that this means that investors no longer have to make fifty decisions and as such greater market volatility occurs through such purchasing.

These ETFs that implement derivatives have gained scrutiny from the Securities Exchange Commission. Currently, this commission has deferred approval of new ETFs that are heavily reliant on derivatives. Other critics note that these securities strongly influence market prices more so than accurate information and valuations and as such, they are unhealthy for a functional stock exchange. Still, others contend these beliefs are overstated and credit such ETF derivatives as greatly contributing to company profits.

Another article considered is Dexter Robert’s ‘China Forgets Inflation and Goes for Growth’ (Roberts). The Chinese currency has experienced a large degree of inflation in recent months. The Chinese government had been fighting against this inflation, but recently has shifted its attention from the attention to stopping the faltering economy. Within this context of understanding, the central bank will cut reserve requirements for banks and in upcoming months makes nearly $55 billion available for lending.

There are a number of elements that have contributed to China’s faltering economy. While the United States economic recession contributed to these measures, more recently the European Sovereign Debt Crisis has hurt China as Europe is the main destination for Chinese manufacturing exports. In addition to faltering manufacturing, Chinese real estate has suffered as developers fear an increase in construction-related prices. While the Chinese government greatly contributed to developing infrastructure in recent years many of the funds they released found their way to private financial firms who charge high percentage rates on loans.

These reform changes are understood to carry with them a number of trade-offs. Most prominently, the renewal of easy credit policies could limit China’s desire to develop a more balanced economy. Currently, the country is largely dependent on foreign exports and manufacturing. Instead, the Chinese government is attempting to place greater emphasis on telecoms, utilities, banking, and insurance. Still, these measures will have to wait as China work to restart its economic growth through encouraging manufacturing.

The final article considered is Rachel King’s ‘Social Networkers Bet on Education as Next Frontier’ (King). This article considers the future of social networking in terms of two entrepreneurs – Reid Hoffman and Matt Cohler. These individuals have a strong history of innovation in social networking development. They have recently invested $15 million in Edmondo, an “a free learning site for teachers and students that claims almost 5 million registered users” (King).

The individuals claim that the site will remain free for teachers and students and no advertisements will be included. Still, connections are made between these and the lack of advertisements during the early days of Facebook. The two entrepreneurs refer to Edmondo as the educational graph for learning. The site functions to allow teachers to post educational content, including videos, as well as assign and grade homework. Currently, it’s recognized that the company is in need of substantial further development, but they have several years to achieve this development without having to worry about generating revenue.

While such a process appears highly risky, the article notes the experienced nature of these entrepreneurs. It indicates that their commitment to this platform points to a possible innovative shift in the future of social networking where schools will increasingly adopt forms of social media in classroom environments. If true, these early investments could prove highly successful in future business and educational climates.