The Independent Investor: Should College Be Free?
Recently, New York became the first state to offer a tuition-free college education to middle-class students at two- and four-year public colleges. Tennessee, Oregon and the city of San Francisco have also given similar benefits to students attending community colleges in their states. It's about time.
The headline of this column was taken from a series of articles I first published six years ago. At the time, I argued that the benefits of a college education today were about equivalent to the worth of a high school degree back in the 1940s and 1950s. Back then, graduating from high school opened the door to a good job, while creating a population of largely, law-abiding citizens (and guaranteed educated cannon fodder for the country's military in time of war).
Back in the day, when Thomas Jefferson first suggested creating a public school system, he and others like him argued that a free and common education would create good citizens, unite society and prevent crime and poverty. It took decades before that concept became law but, once implemented, it worked as the founders expected.
However, as society changed, a high school education was no longer sufficient. The computer age ushered in different educational demands and skill sets that students could only acquire in a higher-education environment. For all intents and purposes, college (and vocational schools) has replaced high school as the entrance ticket to the "American Dream." As such, I reasoned that since public high school education is free in the United States, why then should Americans pay for college?
Under the New York legislation, tuition will be free for residents who earn up to a specific income cap, which will be phased in over the first three years. Families who earn less than $100,000 a year would qualify for free tuition. Over the next two years that income level will rise to $110,000 in 2018 and $125,000 in 2019. The other tuition-free initiatives in Oregon, Tennessee and San Francisco have made tuition free for residents at all community colleges, regardless of income.
New Yorkers are required to take 30 credits a year, although students who encounter hardships can pause and restart the program or take fewer credits per semester. College will still cost money. The cost of fees and room and board, for example, are still the student's responsibility and could cost as much as $14,000 a year.
In announcing the program, its author, Gov. Andrew Cuomo, said "Today, college is what high school was — it should always be an option even if you can't afford it."
State officials estimate the program will cost $163 million in the first year with 200,000 students' eligible for the new program. Now, Rhode Island is considering a similar law that would make two years of public college tuition-free.
Criticism of the program largely centers on the cost. Higher education has gotten so expensive through the years that some form of government assistance already picks up the tab for half of the nation's education costs through a maze of loans, credits and whatnot. It appears that government has recognized that "pricing out" education for a growing portion of the population might not be such a good idea.
Others question the worth of a college education if it is free. What is the incentive to excel, to find a good job afterward if you pay nothing for it? They argue that so many young people today "hide out" in college, majoring in the easiest subjects possible (regardless of job market demand), while partying half the night and every weekend.
They have a point. My suggestion: while tuition may be free, to receive it you must excel in the entrance exams and have maintained good grades in a variety of subjects in high school, if you don't, than pay your own freight. What are your suggestions?
|Write a comment - 0 Comments|
The Independent Investor: Tense Times in Trumpland
The geopolitical landscape is heating up. U.S. relations with Syria, North Korea, China and Russia are in turmoil as the Trump administration flexes its military muscle. None of it bodes well for the stock market.
War cries and wealth are like water and oil. They don't mix well. For investors, there are far too many unknowns, especially when U.S. warships are steaming toward the Korean Peninsula. In Syria, American troops were spotted alongside Jordanian Special Forces troops along the border, despite our president's assurances that boots on the ground are out of the question. Actually, that isn't quite true, since U.S. Special Forces have been operating alongside our Syrian allies for some time.
Then there is Secretary of State Rex Tillerson's visit to Moscow. This diplomatic venture is a followup to last week's U.S. surprise tomahawking of one of Syria's airbases. Tillerson will be using America's new-found, willingness to use military might in order to further our diplomatic ends. In this case, to convince Putin to sever ties with Syrian dictator Bashar-al-Assad.
In hindsight, all that media speculation about President Trump's cozy relationship with Vladimir Putin seems somewhat far-fetched, given that Tillerson (who was also thought to be buddies with Vlad) is reported to be pursuing a hardline against Putin's failure to reign in its client state.
On yet another front, it appears President Trump has had enough grief from the "Fat-Boy" — chubby Kim Jong-un, grandson of the nation's founder, Kim II-sung, In a duel of tweets, the dictator warned of "catastrophic consequences" from any U.S. military action, while "The Donald" warned that "North Korea is looking for trouble" and that we would "solve the problem" with or without Chinese help.
Both sides have backed up these words with firepower. The U.S. response, in the form of an aircraft carrier and three guided-missile destroyers, is heading for North Korea while China has amassed 150,000 troops on its border with North Korea. In addition, Chinese medical and backup units have been stationed on the Yalu River in support of the People's Liberation Army.
Most military strategists believe that April 15 might be the day when things could heat up. It is the 105th anniversary of Kim Long-un's grand pappy. It could be an auspicious date too for "the Fat-boy" to brandish the puppet state's military might.
While all this is going on the markets have grown increasingly restive. The threat of war is normally a time when investors seek safety. Safe-haven plays such as gold, U.S. Treasury bonds and the U.S. dollar benefit from these concerns. They have done so this week. About the only good thing that can be said for these tense times is that they don't last too long.
If tension escalates, stocks usually fall fast over the course of a few days. If, as has happened in the past, geopolitical events resolve themselves, markets recoup their losses in an equally short time. Since the new administration appears to be trying to remove two thorns in our side simultaneously, the chances of further tension seem high. My advice is not to panic. Hang in there and remember that this too shall pass.
|Write a comment - 0 Comments|
@theMarket: Uncertainty Descends Upon the Markets
Pick your poison — U.S.-Syrian strife, weak employment numbers, China-U.S. relations — those are just some of the issues investors had to contend with this week. Despite these potential roadblocks, the averages hung in there, losing little ground as the week closed.
There was even more bad news, if you include the latest minutes of the Federal Reserve Bank's FOMC meeting. There was much discussion among the members and a chorus of assent to begin the delicate task of reducing the Fed's $4.5 trillion balance sheet later this year. Recall that the Fed bought mountains of U.S. Treasury bonds over the last eight years in an effort to keep interest rates low (and stimulate the growth of the economy).
Now the bankers feel it may be time to start selling those bonds back into the market.
They reason that the economy and the gains in employment are strong enough to weather such a move. Since this effort would be in addition to the two or three rate hikes already planned for later this year, investors are worried that even higher rates could provide an obstacle to further stock-market gains.
I remind readers that it is the path of interest rates this year, and not the success or failure of the Trump agenda that will worry me most. And speaking of the Trump agenda, Paul Ryan, the speaker of the House, cautioned investors (just before taking a two week recess) that cutting taxes may take longer than expected. That did not play well on Wall Street either.
As the week's uncertainty continued to build, President Trump's meeting on Thursday and Friday with his Chinese counterpart, Xi Jinping, had everyone biting their nails. Would there be a trade war? Would China agree to reign in their client state, North Korea? Of course, in predictable fashion, the psycho who runs that country, Kim Jong Un, chose this week to shoot missiles into the sea off the coast of Japan.
And just when Wall Street thought tensions could not get any higher, "The Donald" drops 59 Tomahawk missiles on top of a Syrian airbase in retaliation for the gassing of innocent people by that country's resident psycho, Bashar al-Assad. This U.S. strike took place in the middle of Trump's state dinner with Premier Xi. Talk about drama!
Overnight, stock index futures took a drubbing, but regained almost all of their losses by the time the markets opened in the U.S. on Friday morning. But then, the non-farms payroll report was released. Only 98,000 jobs were added in the month of March, while economists' estimates were in the 175,000 jobs gained vicinity. That took the wind out of the bull's sails once again.
Yet, here we sit with only minor declines on the day once again. That tells me two things.
That the pullback I predicted several weeks ago is still working its way through the markets.
That is a good thing. We could still drop another 2-3 percent from here. All-in, I have been expecting a 5-6 percent decline. To date, we have only experienced about half of that.
Number two, it bolsters my belief that the market's shallow decline will be followed by more upside. The markets have had every excuse to "crater" this week, but each time they fell, buyers appeared. There has been no panic, no sell-at-any-cost price orders that might indicate a more serious decline.
Both the bulls and the bears are hoping for more downside right now. The bears want to be vindicated in their belief that the markets are overvalued and overdue for a correction. My sense is that even the bears only want to make a little money, close their shorts, and then "go long" stocks. The bulls simply want to add to their existing positions, preferably at a cheaper price.
|Write a comment - 0 Comments|
The Independent Investor: Don't Let Romance Blind You to Finances
Don't let romance blind you to the financial downside of living together. Unmarried couples need as much, if not more, financial and estate planning than those who are married. Without it, one or both partners may lose everything they have committed to the relationship. Here is a primer on what steps you should take.
Over 6.7 million unmarried couples are co-habitating in America at last count. Over 90 percent of them are heterosexual, in case you're wondering. As such, these couples, regardless of sexual orientation or length of the relationship, are considered and classified as unrelated individuals in the eyes of the law.
And the rights of unmarried couples are different depending on your state. Not all states, for example, recognize common-law marriages. As a result, without legal safeguards, the children you are raising, the assets you have mutually accumulated, and the house that you share can easily be taken from the surviving partner. The law will assume that any property and the care of surviving children should pass to your next of kin. Even your stated wishes of what you would want to happen in the event of your death or disability may not be followed.
OK, now that I have your attention, the first rule is to protect your estate. Your estate is everything and anything you own, or have contributed to before your death. Next, there needs to be documents established for situations that may be short of death but that still safeguard your rights. This would include what happens to you and/or your partner in the event of disability or illness, which might require someone else to make medical and financial decisions for you.
Such an agreement is commonly known as a domestic partnership agreement. Think of it as similar to a pre-nuptial agreement.
"Where is the romance in that?" might be your first reaction. "I will sound like a money-grubbing, so-and-so if I broach this with my partner."
Granted, it isn't a discussion normally accompanied by candlelight and soft music, but every relationship needs to be anchored in reality. The facts are that every unmarried couple should, at a minimum, discuss and implement a domestic partnership document as well as develop an understanding on expense sharing and individual insurance for household effects.
Next in line would be homeowner's insurance, unless the unmarried couple jointly own their home. That's because homeowner's insurance doesn't automatically cover both of you. If one person owns the residence, the other should at least purchase rental insurance to protect his or her belongings.
Finally, if both partners believe they are in a long-term, committed relationship, estate planning is a must. A married couple has at least an implied estate plan. The IRS and the courts have already established and safeguarded the rights of a married surviving spouse in the event of death. No such regulations exist for an unmarried couple. As such, everything needs to be documented in legal form.
At a minimum, there are at least 10 documents and/or provisions that an unmarried couple should at least consider: a domestic partnership agreement, a health care proxy, a will and/or living trust, durable power of attorney, beneficiaries (especially designations on retirement accounts), properly titled property, life insurance, funeral wishes, welfare and custody of any children.
All of the above may sound complicated and/or not worth the effort. You would be right, as long as you never break-up with your partner, or if you never die, but if you feel that either one could happen to you sometime in the future then heed my advice.
|Write a comment - 0 Comments|
@theMarket: New Quarter, New Market
As traders and institutions put to bed the first quarter, several concerns loom large in the weeks ahead. How things play out over that time period will have important implications for the averages, given that they are not far from their all-time, historical highs.
What will the Fed do in May? Will Washington pursue tax cuts and if so, will there be opposition? What will first quarter earnings look like and how will markets react to all of the above? Let's look in my crystal ball, shall we?
Wall Street analysts expect corporate earnings to be higher by as much as 10-11 percent. That would be a big change from the recent past, where dismal guidance and feeble results have been the name of the game. If the numbers match or beat expectations, that could be good for stocks.
Next up, the central bank, what are its intentions between now and June? The betting is that there is little chance that the Fed will raise rates again between now and then. If so, chalk up another positive for the markets.
Then there is the Washington wild card where all sorts of things could go right or wrong, depending on a fractured Republican party and a mercurial administration. Last week's debacle, centered on the belly flop that was the House's attempt to "repeal and replace" Obamacare has set people thinking and worrying about the future.
I'm thinking that we may still need a few more days/weeks of consolidation before markets begin to climb. We have already brushed my first downside target for the S&P 500 Index at 2,323. Many times markets will re-test the lows before traders are satisfied that "the bottom is in," so don't be surprised if that occurs. As I have written before, this congestion is a good thing.
It's about time some sanity returned to the markets. Investors were way too optimistic about the extent and timing of Donald Trump's campaign promises. By the price action, one would have expected that all the things Trump promised would be delivered in his first 100 days. No never mind that he never said that, or event hinted that would occur.
Remember, however, that the short-term swings in the stock market are no longer controlled by human "thinkers and doers." While the "thinkers" appear gone forever, the "doers" are still around — in the form of superfast computers and algorithmic software programs. These robots account for over seventy percent of the daily volume spewing out thousands of buy and sell orders at the simple mention of a word or topic.
"Trump tweets health-care reform" or "House fails to pass" is all that is necessary to tack on (or off) a percentage or more of value in any stock, index or market, anywhere in the world. In the last quarter, an avalanche of such comments kept the robots spewing out orders, the majority of which were buys. No never mind that little in substance was accomplished during that period.
Part of the problem lies with the president's method of communicating with the public. Neither Wall Street nor Main Street is familiar with this sort of governance. In the past, when the leader of the largest most powerful nation on earth, said something publically, it was taken as gospel. The assumption was that mountains of research, discussions and thought crafted every word and punctuation mark of a President's words.
As such, we could all rely on those words as sacrosanct. It was the way policy could be telegraphed not only to American citizens but to the world at large. In the case of investors, it sometimes signaled a change in direction that could be acted upon with the surety that, good or bad, that whatever the change, it was here to stay.
That is not how things are done under this president. Yet, few seem to recognize this. In my opinion, President Trump's tweets should be taken for what they are: simple "High Fives," messages meant to keep us in the loop, more hopes and dreams, than signed and sealed policy statements. It will also take time for our newbie president and a Congress that hasn't been in the majority since 2007, to figure that out as well. At some point, but not necessarily at the same time, traders and investors will hopefully stop reacting to tweets and wait instead for more substantive actions before pulling the trigger. Time and patience are the key words here.
|Write a comment - 0 Comments|