Fareed Zakaria GPS – CNN 05-24-15

Salient to Investors:

Fareed Zakaria said:

  • Britain, which created the world we live in, has become parochial and has essentially resigned as a global power: a tragedy for us all.
  • The Royal United Services Institute predicts that the British army could shrink to 50,000, smaller than at any point since the 1770s and equivalent to the size of the NYPD.
  • Britain’s Foreign Office budget, down by more than a quarter under PM Cameron, will fall further.
  • More than a third of Londoners were born outside the UK, and the city continues to seek investment from China, Russia, Arabia, and others.
  • The US military budget is becoming like that all American institutions, largely devoted to pensions and health care.
  • College in America costs more than 13 times what it did in 1978, far outpacing inflation and health care costs. Student loan debt has more than tripled in the past decade to over $1 trillion.
  • Germany and Denmark offer free college education. Germany mainly through high taxes and with universities that do not offer billion dollar student union buildings, huge sports facilities, or a lot of student housing.
  • The two paths to solving America’s education cost crisis are a) the government paying or reining in the costs, and b) the use of technology. Technology won’t be enough so state governments  must fund state universities, the real highways to the middle class in America.

David Miliband at the International Rescue Committee said:

  • As the Syria war continues, the choices get worse, and the dangers of inaction become clearer and clearer.
  • America may not want to have anything to do with ISIS et al, but they will end up having something to do with us. America cannot have the blessings of globalization with none of the burdens.
  • Without American leadership for a rules-based international system, we have a vacuum, and thus danger.
  • China is not trying to upend the international order and it worries about the meaning of America’s decline.

Gideon Rose at Foreign Affairs said:

  • The real problem in Iraq and Syria is not ISIS, but the lack of any kind of political order to oppose it.
  • The US has to show that it actually cares about maintaining and reviving the liberal international order.

Danielle Pletka at the American Enterprise Institute said:

  • The US left Iraq in 2011 with comity between the Shia and the Sunni.
  • The narrative of Sunni vs. Shiite, Persian empire vs. Ottoman empire, is enormously detrimental to US interests, so the more Saudi Arabia et al support the Sunnis, and Iran support the Shias, the more likely is conflict.
  • Ultimately ISIS, al Qaeda, Jabbath al-Nusra will come for us.
  • Even if we wanted to, and even if the Middle East was not on fire, the US no longer has the necessary resources to fully resource a pivot to Asia.
  • At the end of the day, the American electorate values security and genuineness in a candidate.
  • The US defense budget is a declining piece of a declining pie: 50% of which is spent on personnel. The US does not have the carriers, the attack ships, the refueling capability, the new technology to be in Asia in the way that we need to, or to contend in the Middle East. 

Ian Bremmer at Eurasia Group said:

  • There is a huge generational divide in America over its role as a global policeman, with the younger you get, the more Americans want to leave things alone.
  • Defeating ISIS with no boots on the ground does not stand.
  • ISIS is a much greater threat in the region and to Europe than the United States – America has the energy production now.
  • China, not the US, is the one country in the world with a global strategy, creating institutions like the BRICS Bank, the Asian Infrastructure Bank, and spending over a trillion dollars on infrastructure and equities to align other countries economically towards China over the long-term.
  • With 37% of the world’s defense budget, the US is capable of pivoting to Asia, but it requires US leaders that engage in consistency, and a president who believes that strategy matters and is a top priority.

Jeff Hawkins at Redwood Neuroscience Institute said:

  • Artificial Intelligence is not a real threat for the foreseeable future because machine intelligence is not about recreating humans, if that was even possible.
  • Machines will get smarter than humans, like IBM’s Deep Blue or Watson, but the idea of a runaway intelligence explosion is nonsense – brains take a long time to train.
  • There is nothing we are doing today, that is dangerous, that we could not undo.
  • It is impossible to answer now what will be the big benefit to the world of AI.

Charles Murray said:

  • Ordinary people cannot live their lives as they see fit anymore and live under a constant presumption that they need permission.
  • The number of stupid, pointless regulations has just grown astronomically. The Federal Code of Regulations is now 175,000 pages.
  • The only time drivers get stopped by police going 5 miles over the speed limit is when they are on a deserted stretch of highway. On an ordinary interstate, 70% of vehicles are going 6 miles over the speed limit.

Igarape says:

  • 10 countries account for 58% of the world’s homicides: Brazil, India, Nigeria, Mexico, the Democratic Republic of Congo, South Africa, Venezuela, Colombia, Pakistan and the US, the world’s deadliest Western democracy. Lebanon, the United Arab Emirates, Kuwait, Bahrain, Saudi Arabia Libya, Egypt, Tunisia, Algeria and Morocco, all have rates lower than that of the USA.
  • Countries with a very low homicide rate include Monaco, Liechtenstein, and Singapore.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1505/24/fzgps.01.html

Fareed Zakaria GPS – CNN 11-16-14

Salient to Investors:

Fareed Zakaria said:

  • Russia is a great power in decline accounting for only 3.4% of global GDP versus China’s near 16% and almost 4 x Japan’s and 5 x Germany’s.
  • China’s very different approach to foreign policy constitutes the most significant and dangerous shift in international politics since the end of the Cold War.
  • Chinese nationalism has risen sharply. The Christian Science Monitor found that the number of anti-western polemics in the official “People’s Daily” so far in 2014 is 3x that versus the same period a year ago.
  • China has moved from being anti-American to post-American.

Henry Kissinger says China has never been comfortable with the idea of a global system of equal states.

Elizabeth Economy at the Council on Foreign Relations

  • China was ready for Xi Jinping, a leader who wants to project Chinese power.
  • 670,000 premature deaths in China are reported to be from air quality.
  • The insidious side of Chinese nationalism will not tolerate a diversity of opinion and will chill the creativity and innovation that they want to support, while undermining its efforts to become a global leader with a shared vision for the Asia-Pacific.

David Lampton at Johns Hopkins School of Advanced International Studies.

  • China has crushing domestic problems, with demographics working against it.
  • China will be increasingly cooperative on issues like climate change, but will continue to push its sovereignty.

Stuart Butler at Brookings said:

  • More people are enrolling into online MOOCs than into actual colleges.
  • Student tuition debt in the US exceeds credit card debt.
  • Today’s online education is not our grandfather’s online education – it is completely transformed.
  • Traditional universities have got to rethink fundamentally what they do, how much they do, how long an education should be, whether it should be all at one place.
  • It has taken a while for business to wake up to what is going on in higher education – very soon colleges and universities will be seen as the equivalent of assembly companies.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1411/16/fzgps.01.html


College Debt Leaves Generation X Grads Less Wealthy Than Parents – Bloomberg 09-18-14

Salient to Investors:

Pew Charitable Trusts said:

  • 82% of American Gen Xers – those born between 1965 and 1980 – with at least a bachelor’s degree earn more than their parents did, yet only 30% have greater wealth.
  • 70% of Xers without a college education earn more than their parents did but almost half had higher wealth.
  • College graduates in Gen X have far more debt than their peers without degrees.
  • 40% of upwardly income-mobile college grads hold education debt, with a median balance of $25,000.
  • College graduates tend to come from families with more wealth, so have a higher bar for surpassing the prior generation than those with lesser education.
  • 75% of Gen X households had family incomes higher than their parents did after adjusting for family size, but only 36 percent had exceeded their parents’ wealth.

Diana Elliott at Pew’s Economic Mobility Project said to the extent that Gen Xers are still paying student-loan debt and do not have the wealth accumulated to invest in themselves, they also do not have that money to invest in their children.

Lauren Asher at the Institute for College Access & Success said student loans have become and more and more of a necessity because the costs that students and families are expected to cover outpace family incomes and available grants.

Neil Howe said the youngest workers have time to build wealth and right the ship, but that may not be true of their older counterparts, who are well into their economic life-cycle, especially Gen Xers.

Read the full article at http://www.bloomberg.com/news/2014-09-18/college-debt-leaves-generation-x-grads-less-wealthy-than-parents.html

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Paying for college: how much are degrees worth? – BBC News 09-05-14

Salient to Investors:

Jaison R Abel and Richard Deitz at FRB of New York said:

  • The value of an average US university degree has been near all-time high for more than a decade but may be only because wages of high school graduates have been falling.
  • It takes the average student at least half of the time to pay off school debt as it did in the 1970s.
  • The value of a college degree plummets if the student takes more than 4 years to graduate because of the “opportunity cost”, or money lost by not entering the job market, and because they never really catch up to those who graduated earlier, though the value of a bachelor’s degree remains substantial even for those taking 5 or 6 years to graduate.

The National Center for Education Studies said more than 40% of full-time students seeking bachelor’s degrees at 4-yr institutions fail to graduate from that school within 6 years.

Devin Fergus at Ohio State University said students are drowning in debt because of Reagan’s effectively reducing spending on higher education by 25% over 5 years, effectively shifting grants to loans.

Read the full article at  http://www.bbc.com/news/blogs-echochambers-29070437

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Three Pie Charts That Prove You Shouldn’t Slack Off in College – BloombergBusinessWeek 09-02-14

Salient to Investors:

Richard Arum at NYU and Josipa Roksa of University of Virginia found:

  • Students who did as little as possible during college continued to drift after graduation.
  • Many college students took easy courses, regarded themselves as privileged customers, socialized heavily, and came away with little to show for their years on campus.
  • After 4 years of college, the average student rose just 18% on the Collegiate Learning Assessment.
  • Graduates with higher Collegiate Learning Assessment scores fared better in the labor market than their lower-performing peers.
  • College students spent almost 75% of their time sleeping or socializing.
  • Just over 25% of the students had landed jobs paying better than $40,000 a year two years after college.
  • 53% of the college graduates who were not re-enrolled full-time in school were unemployed, employed part-time, or employed in full-time jobs that paid less than $30,000 annually.
  • 25% were living with their parents.

OECD said American college graduates finished below the average of their peers.

Read the full article at http://www.businessweek.com/articles/2014-09-02/students-who-didnt-take-school-seriously-flailed-after-college#r=rss

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Financial advice that is popular — and wrong – Financial Post 08-01-13

Salient to Investors:

The maxim “Don’t take a mortgage into retirement with you”’ is no longer true given mortgage rates close to historic lows and lower than on any other loan now or in the future.  Better to invest surplus money dollars in a retirement investment account which should return more than the 3 or 4% mortgage interest, which is tax-deductible.

The maxim “The older you get, the less you should have invested in the stock market” is no longer true because 60 isn’t the old 60, and bank deposits yield little and bond yields are near historic lows and carry the risk of loss when interest rates rise. The average 60-year-old faces a retirement that will last 25 or 30 years and over time stocks still outperform other investments. Large company stocks returned just under 10% a year between 1970 and 2012, a period that covers several market meltdowns.

The maxim “A debit card is safer than a credit card” is only true if you don’t have the discipline to charge only what you can afford to pay off.  Credit cards offer cash rewards, insurance if stolen, and no overdraft fees.

Spend less by going to a less expensive college if it means following your bliss.

Read the full article at  http://business.financialpost.com/2013/08/01/financial-advice-that-is-popular-and-wrong/

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How Demographics Hold Back U.S. Job Creation – Bloomberg 07-22-13

Salient to Investors:

A. Gary Shilling at A. Gary Shilling & Co writes:

The total labor-force participation rates tend was 63.5 percent in June 2013 versus 67.4 percent in early 2000.

The participation rates of 16-to 24-year-olds has declined sharply since 2000 as slow economic growth, limited jobs and rising unemployment rates have encouraged them to stay in school or otherwise stay out of the labor force.

Participation rates for 65 to 75-year-olds and for 75 and older have risen since the late 1990s because they have been forced to work longer than planned as many were devastated by the declines in stocks from  2000-to-2002 and from 2007 to 2009 – 2 of only 5 drops of more than 40 percent in the S&P 500 Index since 1900. And the collapse of over 30 percent in house prices wiped out the equity that many had counted on for retirement – 20 percent of home mortgages remain under water.

Increasing life spans mean many older people are able to work longer, curtailing job opportunities for younger people.

In the 1880s, 78 percent of men 65 and older worked; in 1990, that figure was 16.3 percent and in 2010 it was 22.1 percent. When Social Security was enacted in 1937, the life expectancy for American men was 65, the required age for drawing benefits. Today, life expectancy is 76.3 for men and 81.1 years for women, but the required age has risen to only 67.

The US ranks 17th in life expectancy among developed countries, including wealthier, college-educated Americans. The primary reason is the high mortality of men under 50 because of accidents and violence. Women’s life expectancy gains have fallen behind those of other rich countries. Americans who live past 75 have higher life expectancy than people in many other similar countries.

The effect of an aging population is a serious concern for all developed countries, but most significantly for Japan, whose people live longest and where there is no immigration.

The US, Canada and Australia are relatively open to immigrants, and because they tend to be younger, they help support retirees. The ratio of working-age people to retirees is dropping in all G-7 countries – by 2040 to 1.5 in Japan, to below 2 in Europe, to 2.9 in the US, and 2.5 in Canada.

The labor-force participation rates for older age groups will continue to increase as baby boomers are forced to reconcile their low retirement savings with increased life spans and rising medical costs. Social Security and Medicare will provide less of a safety net as Congress is forced to deal with rising entitlement costs.

From February 2000 to June 2013, demographics accounted for 2.5 percent of the 4 percent  decline in the overall participation rate from 67.4 percent to 63.5 percent. 1.6 percent of the decline was due to non-demographic reasons by young and middle-aged people.

Half of recent graduates are working in jobs that don’t require a college education. Surveys show that the income of those who are unemployed or underemployed in the first few years after graduation never catch up with those who immediately found well-paid positions.

Read the full article at  http://www.bloomberg.com/news/2013-07-22/how-demographics-hold-back-u-s-job-creation.html

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Colleges Soak Poor U.S. Students While Funneling Aid to Rich – Bloomberg 05-08-13

Salient to Investors:

Stephen Burd at the New America Foundation found almost two-thirds of private colleges for the 2010-2011 school year required students from families making $30,000 or less annually to pay more than $15,000 a year. 11 percent of students at Harvard and 14 percent at Yale received Pell grants. Harvard said the correct figure was 17 percent.

Burd said the findings dispute the claims of many wealthy colleges that financial-aid makes them affordable and their pursuit of prestige and revenue has led them to focus more on high-income students.

Amherst, Vassar and Grinnell reported more than 20 percent of their students had Pell grants.

Read the full article at http://www.bloomberg.com/news/2013-05-08/colleges-soak-poor-u-s-students-while-funneling-aid-to-rich.html

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Salient to Investors:


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Measuring College Prestige vs. Cost of Enrollment – New Tork Times 04-13-13

Salient to Investors:

Sarah Turner at University of Virginia said it is not just the sticker price and the net costs, but how likely it is that you will get into medical or law school or have some other opportunities if you choose the more prestigious college? Turner said if you know you want to end up on Wall Street then borrow and go to NYU, but borrowing to go to culinary school does not make sense – in most cases, few high school seniors really know what they want to do and, by extension, what they will earn.

Author Lynn O’Shaughnessy said families need to look realistically at what they can afford. O’Shaughnessy said East Coast schools that are not top-tier but are in cities can get away with charging outrageous amounts and giving mediocre financial aid because students fall in love with these schools and whose parents are willing to sacrifice beyond all rational reasoning.

Alan B. Krueger and Stacy Berg Dale at Mathematica Policy Research found that equally smart students had the same earnings whether or not they went to top-tier colleges, while the big difference came from minority and low-income students who went to top-tier colleges and did better later on.

Lawrence Katz at Harvard sees more instances when paying to go to a large, non-elite university was a waste of money because there are higher returns to all upper-end skills and connections, and larger, private, expensive non-lite university were not necessarily better than the flagship campus of a top-notch state university. Katz said parents should not think about it as an investment but as a form of consumption, like a wedding or a vacation.

Parents and students should look at the graduation rates of the colleges they’re considering, and merit scholarships are a sign that a college really wants the student.

James Montague at Boston Latin School encourages students to apply to at least one state college that would give them merit aid and to stick to the federally subsidized loan limits.

Read the full article at http://www.nytimes.com/2013/04/20/your-money/measuring-college-prestige-vs-price.html?nl=todaysheadlines&emc=edit_th_20130420&_r=0

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Why Barbers Should Buy Stocks – Bloomberg 02-20-13

Salient to Investors:

Moshe Milevsky at York University says:

  • People with stable careers and regular paychecks – tenured professors, accountants, nurses etc. – should invest in bonds.
  • People with variable incomes tied to the market or economy – salesmen, brokers, home builders, entrepreneurs etc. – should buy stocks.
  • The most important asset of anyone not born wealthy is their career. The average 25-year-old’s human capital accounts for 99 percent of their personal balance sheet – current and future salary are far more important than savings. Only at age 55 does investment portfolios become about equal in value.
  • Investors with employment linked to major sectors such as oil or technology should avoid broad index funds because of potential industry overlap, but instead buy portfolios of individual industry ETFs to cover every sector but their own.
  • An engineering or medical degree produces a 12 percent annualized return. A degree in anthropology produces a negative 3 percent annualized return.

Read the full article at http://www.bloomberg.com/news/2013-02-20/why-barbers-should-buy-stocks.html

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