I subscribe to and receive email reports from the National Inflation Association. Recently I viewed the video they created on the “College Conspiracy”. It can be viewed at their site but the information that follows comes from one of their email newsletters.
I find the results of the surveys done by various media sources rather interesting and somewhat saddening. That a young person is encouraged to attend college and get a degree, only to end up with thousands of dollars of debt and a job that barely pays them enough to live day to day, never mind pay back the mountain of debt they incurred! Read the comments below and draw your own conclusions!
On Thursday's cover of the New York Times, Catherine Rampell wrote an article entitled 'Many With New College Degree Find the Job Market Humbling'. According to the New York Times article, only 56% of college graduates in 2010 were able to get a job by this spring, compared to 90% of the graduates in years 2006 and 2007. Only half of those finding a job, found a job where their degree was required. The median starting salary for college graduates last year was $27,000, down 10% from the $30,000 starting income in years 2006 to 2008.
One of NIA's expert guests in 'College Conspiracy' was Brian Mackey, a national recruitment manager for GEI Consultants. He said in our movie that 60% of college graduates are now being employed in low skill jobs where their college degree wasn't even required. NIA's research has uncovered that 70% of high school graduates have been successful at getting these exact same jobs without even needing a college degree. Mackey also pointed out in 'College Conspiracy' that 20% all new waiter and waitress positions are being filled by college graduates. The New York Times article added to Mackey's point, reporting in their cover story that college graduates aged 25 to 34 working in the food service industry at bars and restaurants increased 17% in 2009 over 2008.
Bloomberg aired a live television segment on Thursday, 'Is a 4-Year College Degree Worth the Cost?' and cited a poll that shows 57% of U.S. adults say college is not worth the price with 75% of U.S. adults saying college is unaffordable. Bloomberg had on a guest Alexis Ohanian, co-founder of Reddit.com, who said, "there are plenty of students out there who would really benefit from just avoiding a lot of the college stuff and just trying to create something". NIA agrees with Ohanian that the experience of trying to create a job in the real world will do most Americans a lot more good than getting deeply into debt to attend college. Ohanian says that his company and other firms in Silicon Valley hire employees based entirely on their experience and past accomplishments and not a college degree.
NBC News anchor Brian Williams came out with a report Thursday night about the college bubble in a segment entitled, 'Education Nation'. Williams reported many of the basic facts from 'College Conspiracy' including that student loans are one of the few types of debts you can't get rid of in bankruptcy and that total student loan debt is now above $800 billion and exceeds credit card debt. NBC News spoke to one prospective student who has chosen to attend a community college rather than the prestigious $50,000 per year school she was accepted to, saying, "I don't want to graduate with a bachelor's degree with $80,000 worth of debt."
Thursday, May 26, 2011
Wednesday, May 18, 2011
Rates of Return on Investments: Don’t be Fooled!
First, if you look up rates of return, you will see that many fund managers use an arithmetic return average and not a compound or geometric return calculation. So, the formula that is used is something like this:
Return (–) Original Capital (/) Original Capital (x) 100% = Rate of Return.
The formula for multiple years is simply, the rate of return for the first year + rate of return for second year + rate of return for the third year (and so on) (/) number of years.
Plug in the numbers and here it is:
200,000 – 100,000 / 100,000 x 100% = 100% or
more realistically… using numbers that make are more in line with what one could hope for…
110,000 – 100,000 / 100,000 x 100% = 10% return on investment
So, let’s do a multi-year calculation with the initial investment of $100,000. Say it grew to $200,000 at the end of year one; a 100% return. At the end of year two, the account has only $100,000; a gain of -50%. At the end of year three, value is at $200,000; a 100% gain for that year. In year four, the account shows a value of $100,000; once again a gain of -50%. You and I would say, you have no gain over the four year period. But… a money manager would say that the average rate of return was 25%! As the title of this post says, “don’t be fooled”!!!
If we use a geometric or compounded calculations, we would realize we had a “0%” gain. And if we consider that four years have passed and calculate inflation factors, we clearly are in a worse position than we were four years earlier!
If you are in a mutual fund that is not performing very well or considering investing in a fund, do not let yourself be fooled by money manager’s average rates of return!
Before you invest any more of your hard earned money, watch this 2 minute video!
Thursday, May 05, 2011
Mortgage Rates Moving Lower Once Again!
Well, another ride on the economic rollercoaster is leading to lower mortgage rates once again. But for how long is anyone's guess. One might say that it is a result of slow growth or slower than expected growth, the continued employment concerns, the end of QE2 or the lack of home sales, just to name a few. It could be one of those reasons or all of the above. As I said, anyone's guess!
So, as I have indicated in the past, home prices are still very low and interest rates are back down in the 4.5% to 4.75% for a thirty year fixed rate loan and good credit! So, if you are looking to purchase, stop thinking about it and DO IT! The market analysis will always tell you that you will rarely buy at the lowest and rarely sell at the absolute highest prices in the stock market. Why should you expect it to be different in the houseing market? I believe that it is about as good as it gets!
There is another side to this that comes to mind. When the bonds are rallying to cause rates to go lower, equities are usually headed south too. Well, that brings us to another round of volatilty in the market and the need for additional intestinal fortitude! Had enough market volatilty?? Read the executive report found here.
So, as I have indicated in the past, home prices are still very low and interest rates are back down in the 4.5% to 4.75% for a thirty year fixed rate loan and good credit! So, if you are looking to purchase, stop thinking about it and DO IT! The market analysis will always tell you that you will rarely buy at the lowest and rarely sell at the absolute highest prices in the stock market. Why should you expect it to be different in the houseing market? I believe that it is about as good as it gets!
There is another side to this that comes to mind. When the bonds are rallying to cause rates to go lower, equities are usually headed south too. Well, that brings us to another round of volatilty in the market and the need for additional intestinal fortitude! Had enough market volatilty?? Read the executive report found here.
Tuesday, May 03, 2011
Another Reason to End the Fed
The article that follows is copied from the Mises Institute web site. You can find the article and web page at http://mises.org/daily/5255/Another-Reason-to-End-the-Fed. The article speaks for itself; no need for commentary from me!
Another Reason to End the Fed
Mises Daily: Tuesday, May 03, 2011 by Mark Brandly
In his first press conference as chairman of the Federal Reserve, Ben Bernanke discussed rising gasoline prices, blaming higher demand from emerging economies and Mideast oil-supply disruptions as the cause of the zooming prices. Bernanke did not mention the US government's role in the higher energy prices,[1] and he explicitly absolved the Federal Reserve of any blame.
According to Bernanke, "there's not much the Federal Reserve can do about gas prices, per se, at least not without derailing growth entirely, which is certainly not the right way to go. After all, the Fed can't create more oil. We don't control the growth rates of emerging market economies." (Here is a transcript and a video of Bernanke's press conference and here is a video of his remarks about gasoline.)
Bernanke's deceitfulness is appalling, although not unexpected. He knows that Federal Reserve monetary policy plays a significant role in gasoline prices. Expansionary monetary policy leads to more dollars being available in world currency markets and weakens the dollar. The weaker dollar results in higher import prices. More than half of the oil consumed in the United States comes from foreign producers, and because oil is the main input needed to produce gasoline, higher oil prices mean higher gasoline prices.
In the last decade, the Federal Reserve has engaged in almost-unprecedented easy monetary policies. The broadest measure of the money supply is called M3. According to estimates at Shadowstats.com, until the financial collapse of 2008, M3 was continuously increasing at a rate anywhere from 5 to 15 percent annually. This money creation by the Federal Reserve led to the unsustainable boom of the Bush years and the economic meltdown that we have experienced in the last three years.
In addition, this rapid monetary expansion led to the decline of the dollar in currency markets.[2] The value of the dollar peaked in the summer of 2001. From June 2001 to the end of March 2011, the dollar depreciated 40 percent relative to the euro, from €1.18/$1 to €.704/$1. During this period, the US spot price of oil increased 348 percent in terms of dollars (from $23.38 to $104.64 per barrel). But in terms of euros, those same oil prices only increased 167 percent (from €27.59 to €73.67 euros per barrel). If the dollar had held steady relative to the euro at the exchange rate of 1.18 euros per dollar, then the US spot price for oil at the end of March would have been $62.42 per barrel.
Consider the impact that this has had on gasoline prices. To make the calculations easy, let's say that the current price of gasoline is $4 per gallon. Oil costs are 68 percent of the price of gasoline. That means that oil costs make up $2.72 of the $4 gasoline price. The dollar's depreciation relative to the euro in the last decade was 40 percent; and 40 percent of $2.72 is $1.09.
Therefore, if the dollar had held steady with the euro, we would be paying roughly $2.91 for a gallon of gasoline that now costs us $4. Gasoline prices would be 27 percent lower today if the dollar had held its value relative to the euro over the last decade. It's true that there is little the Federal Reserve can do to bring oil and gasoline prices down. Federal Reserve policies have already weakened the dollar leading to higher oil prices, and this damage cannot be undone. However, over a long period of time, the Federal Reserve has had a major impact on energy prices. And things are going to get worse. Due to the Federal Reserve's bank bailouts and quantitative-easing policies, we should anticipate much higher gasoline prices.
Barack Obama and his attorney general blame high gasoline prices on oil speculators. The chairman of the Federal Reserve blames supply disruptions and the growing economies of the world. We see this all the time. Elected officials and other agents of the state never accept any blame for the destruction created by their policies. Others are always at fault. In this case, however, we can clearly see that the Federal Reserve bears much of the responsibility for the economic damage of high gasoline prices. We can add high oil and gasoline prices to our long list of reasons why we should end the Fed.
Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute. Send him mail. See Mark Brandly's article archives.
Another Reason to End the Fed
Mises Daily: Tuesday, May 03, 2011 by Mark Brandly
In his first press conference as chairman of the Federal Reserve, Ben Bernanke discussed rising gasoline prices, blaming higher demand from emerging economies and Mideast oil-supply disruptions as the cause of the zooming prices. Bernanke did not mention the US government's role in the higher energy prices,[1] and he explicitly absolved the Federal Reserve of any blame.
According to Bernanke, "there's not much the Federal Reserve can do about gas prices, per se, at least not without derailing growth entirely, which is certainly not the right way to go. After all, the Fed can't create more oil. We don't control the growth rates of emerging market economies." (Here is a transcript and a video of Bernanke's press conference and here is a video of his remarks about gasoline.)
Bernanke's deceitfulness is appalling, although not unexpected. He knows that Federal Reserve monetary policy plays a significant role in gasoline prices. Expansionary monetary policy leads to more dollars being available in world currency markets and weakens the dollar. The weaker dollar results in higher import prices. More than half of the oil consumed in the United States comes from foreign producers, and because oil is the main input needed to produce gasoline, higher oil prices mean higher gasoline prices.
In the last decade, the Federal Reserve has engaged in almost-unprecedented easy monetary policies. The broadest measure of the money supply is called M3. According to estimates at Shadowstats.com, until the financial collapse of 2008, M3 was continuously increasing at a rate anywhere from 5 to 15 percent annually. This money creation by the Federal Reserve led to the unsustainable boom of the Bush years and the economic meltdown that we have experienced in the last three years.
In addition, this rapid monetary expansion led to the decline of the dollar in currency markets.[2] The value of the dollar peaked in the summer of 2001. From June 2001 to the end of March 2011, the dollar depreciated 40 percent relative to the euro, from €1.18/$1 to €.704/$1. During this period, the US spot price of oil increased 348 percent in terms of dollars (from $23.38 to $104.64 per barrel). But in terms of euros, those same oil prices only increased 167 percent (from €27.59 to €73.67 euros per barrel). If the dollar had held steady relative to the euro at the exchange rate of 1.18 euros per dollar, then the US spot price for oil at the end of March would have been $62.42 per barrel.
Consider the impact that this has had on gasoline prices. To make the calculations easy, let's say that the current price of gasoline is $4 per gallon. Oil costs are 68 percent of the price of gasoline. That means that oil costs make up $2.72 of the $4 gasoline price. The dollar's depreciation relative to the euro in the last decade was 40 percent; and 40 percent of $2.72 is $1.09.
Therefore, if the dollar had held steady with the euro, we would be paying roughly $2.91 for a gallon of gasoline that now costs us $4. Gasoline prices would be 27 percent lower today if the dollar had held its value relative to the euro over the last decade. It's true that there is little the Federal Reserve can do to bring oil and gasoline prices down. Federal Reserve policies have already weakened the dollar leading to higher oil prices, and this damage cannot be undone. However, over a long period of time, the Federal Reserve has had a major impact on energy prices. And things are going to get worse. Due to the Federal Reserve's bank bailouts and quantitative-easing policies, we should anticipate much higher gasoline prices.
Barack Obama and his attorney general blame high gasoline prices on oil speculators. The chairman of the Federal Reserve blames supply disruptions and the growing economies of the world. We see this all the time. Elected officials and other agents of the state never accept any blame for the destruction created by their policies. Others are always at fault. In this case, however, we can clearly see that the Federal Reserve bears much of the responsibility for the economic damage of high gasoline prices. We can add high oil and gasoline prices to our long list of reasons why we should end the Fed.
Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute. Send him mail. See Mark Brandly's article archives.
Monday, May 02, 2011
War on Terror Doesn't End today. Neither Does Market Volatility!
I have listened to a lot of news today and have been asked if I think the death of Bin Laden will effect oil prices. I can say that I did hear one expert suggest that nothing has really changed in the oil markets. However, that expert suggests that if the Libian leadership is outsted, oil prices could become more bearish, meaning prices will drop. In short, oil may drop some and might be enough to see some relief at the gas pumps, but I do not think a stronger dollar will result. Other countires that have already begun to tighten on monetary policy would have to stop tightening in order for the dollar to rally and that is probably a long shot.
There are too many other factors to consider, such as employment, manufacturing, housing, banking, etc. that need to improve before we can really see a stronger currency and a stronger economy. So, more of the same in the markets. Be prepared for the volatility and if you are getting close to retirement, protect your assets! Watch our Tuesday evening Online seminar about banking and lean more about how to protect your finances.
There are too many other factors to consider, such as employment, manufacturing, housing, banking, etc. that need to improve before we can really see a stronger currency and a stronger economy. So, more of the same in the markets. Be prepared for the volatility and if you are getting close to retirement, protect your assets! Watch our Tuesday evening Online seminar about banking and lean more about how to protect your finances.
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