Trends & Strategies

COLLEGE CHRONICLES - In the 375 years between 1636, when Harvard College was founded, and 2011, college enrollments in the United States rose almost continuously, rarely undergoing even a temporary decline. When the American Revolution began in 1775, only 721 students attended the nine colonial colleges. By 2010 enrollments had surpassed 20 million. The total number of enrolled college students fell every fall from 2011 to 2016, dropping to 19 million from 20.6 million, according to studies from the National Student Clearinghouse Research Center. The declines were concentrated in community colleges and for-profit colleges, but even smaller institutions struggled to meet their enrollment goals during the years studied. What gives?

Some point to demographic influences, such as a drop in birth rates during the 1990s. Others cite increases in job opportunities, which lured college-age Americans away from the academy in the aftermath of the Great Recession. But two longer-term trends are at work: The cost of college attendance is rising while the financial benefits of a degree are falling.

The evidence on rising costs is well established: From 2000 to 2016, the tuition-and-fees component of the Consumer Price Index rose 3.54% annually (74.5% over the entire period), adjusting for overall inflation. With sluggish business investment, a slowdown in income growth has aggravated the rising burden of paying for higher education. American families have taken on more than $1.3 trillion in student-loan debt—more than what they borrow with credit cards or to buy cars.

Less well known is that the earnings advantage associated with a bachelor’s degree compared with a high school diploma is no longer growing like it once did. Census data show that the average annual earnings differential between high school and four-year college graduates rose sharply, to $32,900 in 2000 (expressed in 2015 dollars) from $19,776 in 1975—only to fall to $29,867 by 2015. In the late 20th century rising higher-education costs were offset by the increasing financial benefits associated with a bachelor’s degree. Since 2000 those benefits have declined, while costs have continued to rise.

Rising costs and declining benefits mean the rate of return on a college investment is starting to fall for many Americans. Some observers have begun asking whether it might not be better for more students to forgo college in favor of less expensive postsecondary training in vocations like welding and plumbing. The New York Federal Reserve Bank says about 40% of recent college graduates are “underemployed,” often for a long time. They sometimes resort to taking jobs as Uber drivers or baristas. With some inexpensive vocational training, they could easily get jobs that pay much better.

To be sure, the payoff from a college education varies sharply depending on school and major. U.S. Department of Education data suggests recent attendees of Stanford University earn on average far more than twice as much as those attending Northern Kentucky University ($86,000 vs. $36,000). Electrical engineers typically earn twice as much as psychology majors. No wonder elite students flock to schools like Stanford and demand for graduates with engineering degrees remains robust, while many state universities, community colleges and smaller liberal-arts schools struggle to attract students.

The size of the college-earnings advantage also varies with race and gender. In recent years, male college graduates’ earning power has decreased significantly, as it has for whites and Asians. Not so for women, Hispanics and blacks, for whom the financial payoff to a college education has continued to rise. College graduates traditionally earn more than high school graduates in part because their degrees act as signaling devices in the job market. To employers, a candidate with a bachelor’s degree has always seemed brighter and more disciplined, ambitious and reliable than someone with only a high school diploma.

As the proportion of adult Americans with college degrees grows beyond one-third, being a college graduate no longer necessarily denotes exceptional vocational promise. The bachelor’s degree is not the reliable signaling device it once was.

Nowadays, because of underemployment among college graduates, restaurant owners can hire bartenders who have college degrees. Credential inflation is at work. In the mid-1970s, far less than 1% of taxi drivers were college graduates; by 2010 more than 15% were. Is it possible that by 2030 a master’s degree in janitorial science could be a prerequisite for a job sweeping floors?

Apprenticeships and colleges: The average age of an apprentice in the United States is 28, and the positions are usually reserved for people interested in the building trades or the manufacturing industry. Now advocates are arguing that, given the rising cost of college, apprenticeships could play a greater role in job training. But where does that leave institutions of higher education? Extended learning, continuing education, non-degree certification training, are all possibilities, time to think out of the box.

OPINIONS - On POTUS: "Every president has some type of ideology, and the current president is basically a capitalist who believes in efficiency... So whenever he sees something that is inconsistent with efficiency, he'll abandon what he said before in order to get to execution. The previous government was different. They had a very strong ideology."

Finance philosophy #1: "There are no brave old people in finance. Because if you're brave, you mostly get destroyed in your 30s and 40s. If you make it to your 50s and 60s and you're still prospering, you have a very good sense of how to avoid problems and when to be conservative or aggressive with your investments."

Finance philosophy #2: "There are no patents in finance. Everything has a decay curve, in terms of its margins."

MILLENNIALS ON THE MOVE - Millennials are moving to America's cities — and not just the biggest ones. While places like New York City and Los Angeles remain millennial magnets, research from the Urban Land Institute shows that smaller cities, from Virginia Beach, Va., to Riverside, Calif., are actually seeing the most relative growth in their population of 25-to-34-year-olds.

DEAR RINK RATS – We have accumulated quite a bit of mail these last few weeks, here are some of them:

Dear Rink Rats: Is it possible for a man to be in love with two women at the same time? —Jake

Dear Jake: Yes, and also hazardous.

Dear Rink Rats: I've been going with this girl for a year. How can I get her to say yes? —Don

Dear Don: What's the question?

Dear Rink Rats: I've been going steady with this man for six years. We see each other every night. He says he loves me, and I know I love him, but he never mentions marriage. Do you think he's going out with me just for what he can get? —Gertie

Dear Gertie: I don't know. What's he getting?

Dear Rink Rats: What's the difference between a wife and a mistress? —Bess

Dear Bess: Night and Day.

Dear Rink Rats: I have always wanted to have my family history traced, but I can't afford to spend a lot of money to do it. Have you any suggestions? —M.J.B. in Oakland, Calif.

Dear M.J.B.: Yes. Run for a public office.

Dear Rink Rats: What inspires you most to teach? —Ted

Dear Ted: The Bureau of Internal Revenue.

REUNION OUT AND ABOUT – Reports have been coming in via social media and the FBI about last weekend’s St. Lawrence University class reunion weekend. After repeated efforts to decipher and multiple versions of translation, we offer our old friend Paul Gallagher’s (St. Lawrence ’77) version of the festivities:

“Hi Folks; just to let you know I survived the 40th Reunion for the Class of 77. Lots of laughs & of course I had to hold up Bugsy's Legs at the Whoot Owl while he did his performance (Chugging beer standing on his head) to the amazement of 300 younger SLU graduates who were mystified by this old guy---Priceless. Our class gave a record high $1,977,000.00 (almost 2 million) in donations. I guess we are a "Loaded Class" in more ways than one??? Kisses & Hugs. Caper.

Please see our SUMMER TRAVEL below, where we visit the area of the world where Mr. Caper lives.

MUST SEE TV - Carl Reiner's documentary (HBO) explores life after 90: Hollywood tends to place a premium on young, fresh faces, but these days there are plenty of talented stars in town working well into their 90s...Front and center in the film is 95-year-old comedy legend Carl Reiner, who created the 'Dick Van Dyke Show' and directed such films as 'Oh God!' and 'The Jerk.

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Maria Aguirre …famous banker and financial analyst, Paul Giamatti (50) Scotia, N.Y.; Gabby Giffords (47) Tucson, AZ.; Elizabeth Hurley (52) London, England; Bill Moyers (83) Alexandria, VA.; Liam Neeson (65) Dublin, Ireland; Vice President Pence (58) Washington, D.C.; Nancy Sinatra (77) Rancho Mirage, CA.; Kate Upton (25) Orlando, FL.

FATHER’S DAY - Professional golfer Phil Mickelson says he will miss the U.S. Open [starts June 15 at Erin Hills in Wisconsin] for the first time in 24 years to attend his oldest daughter's high school graduation in California.

This is the same daughter who nearly caused Mickelson to miss the 1999 U.S. Open at Pinehurst No. 2, where he carried a beeper ... Amanda was born the next day. And now she's graduating high school.

CLASS LECTURE – These are the leading women business leaders who (if I could and had the means) invite to speak to my Finance class:

Susan Wojcicki – CEO of YouTube

Ursula Burns – American Chairperson and CEO of Xerox

Mary Barra – CEO and Chairperson of General Motors

Beth Comstock – Vice Chair of GE

Marillyn Hewson – Chairperson, President and CEO of Lockheed Martin

Safra Catz - Co-CEO of Oracle

Emma Walmsley – CEO of GlaxoSmithKline

Harriet Green – General Manager of IBM

Wendy Tan White – General Partner of Entrepreneur First

SUMMER TRAVEL – Cape Breton Island, Nova Scotia, Canada: Although physically separated from the Nova Scotia peninsula by the Strait of Canso, the 1,385 m (4,544 ft) long rock-fill Canso Causeway connects it to mainland Nova Scotia. The island is east-northeast of the mainland with its northern and western coasts fronting on the Gulf of Saint Lawrence; its western coast also forms the eastern limits of the Northumberland Strait. The eastern and southern coasts front the Atlantic Ocean; its eastern coast also forms the western limits of the Cabot Strait. Its landmass slopes upward from south to north, culminating in the highlands of its northern cape. One of the world's larger salt water lakes, Bras d'Or ("Arm of Gold" in French), dominates the island's centre.

The island measures 10,311 square kilometres (3,981 sq mi) in area, making it the 77th largest island in the world and Canada's 18th largest island. Cape Breton Island is composed mainly of rocky shores, rolling farmland, glacial valleys, barren headlands, mountains, woods and plateaus. Geological evidence suggests at least part of the island was joined with present-day Scotland and Norway, now separated by millions of years of continental drift.

The climate is one of mild, often pleasantly warm summers and cold winters, although the proximity to the Atlantic Ocean and Gulf Stream moderates the extreme winter cold found on the mainland, especially on the east side that faces the Atlantic. Precipitation is abundant year round, with annual totals up to 60 inches on the eastern side facing the Atlantic storms. Considerable snowfall occurs in winter, especially in the highlands.

The island's residents can be grouped into six main cultures; Scottish, Mi'kmaq, Acadian, Irish, English, and Paul Gallagher (St. Lawrence ’77), with respective languages Scottish Gaelic, Mi'kmaq, French, and English. English is now the primary language, including a locally distinctive Cape Breton accent, while Mi'kmaq, Scottish Gaelic and Acadian French are still spoken in some communities.

Much of the recent economic history of Cape Breton Island can be tied to the coal industry.

The island has two major coal deposits:

-           The Sydney Coal Field in the southeastern part of the island along the Atlantic Ocean drove the Industrial Cape Breton economy throughout the 19th and 20th centuries—until after World War II, its industries were the largest private employers in Canada.

-           The Inverness Coal Field in the western part of the island along the Gulf of St. Lawrence is significantly smaller but hosted several mines.

Tourism in particular has grown throughout the post-Second World War era, especially the growth in vehicle-based touring, which was furthered by the creation of the Cabot Trail scenic drive. The scenery of the island is rivalled in northeastern North America by only Newfoundland;[citation needed] and Cape Breton Island tourism marketing places a heavy emphasis on its Scottish Gaelic heritage through events such as the Celtic Colours Festival, held each October, as well as promotions through the Gaelic College of Celtic Arts and Crafts. Whale-watching is a popular attraction for tourists. Whale-watching cruises are operated by vendors from Baddeck to Cheticamp. The most popular species of whale found in Cape Breton's waters is the Pilot whale.

Best Brew - Founded in 1820, Alexander Keith's is a brewery in Halifax, Canada. It is among the oldest commercial breweries in North America. (The oldest surviving brewing enterprise in Canada was established by John Molson in Montreal in 1786 while the oldest in the US, Yuengling, originally called Eagle Brewing, was founded in 1829 in Pottsville, PA.)

Keith's was founded by Alexander Keith who emigrated from Scotland in 1817. Keith moved the facility to its final location, a three-storey building on Hollis Street at Lower Water in the downtown area, in 1820. Keith had trained as a brewer in Edinburgh and London. His early product included ale, porter, ginger wine, table and spruce beers. Alexander Keith was mayor in 1843 and in 1853-54 and president of the Legislative Council from 1867 to his death in 1873.

Keith's brewery produces Keith's India Pale Ale, Keith's Red Amber Ale, Keith's Premium White, Keith's Light Ale, and Keith's Nova Scotia Style Pale Ale, Keith's Nova Scotia Style Lager, and Keith's Nova Scotia Style Brown Ale for US markets. Keith's first, most popular, and most widely distributed beer is its India Pale Ale. Keith's has also produced Keith's Ambrosia Blonde, Keith's Harvest Ale, and Keith's Tartan Ale as seasonal brews. Originally brewed in the Halifax brewery, Anheuser–Busch InBev expanded production of Alexander Keith's beers to breweries in Ontario (London), Quebec (Montreal), Newfoundland (St. John's), British Columbia (Creston), and New York State (Baldwinsville), in addition to the original Halifax brewery which now produces beer for all of the Maritime provinces.

STANLEY CUP NUMBER 5 – Congratulations to the Pittsburgh Penguins in winning the Stanley Cup (Rink Rats picked Nashville in six). A special congrats to St. Lawrence alumni in the Pittsburgh Penguin organization: Assistant Head Coach Jacques Martin (’75) and Director of Amateur Scouting Randy Sexton (’82).

SWAMI’S WEEK TOP PICKS –

MLB Game of the Week (June 17) – Washington Nationals (38-24) visit New York Metropolitans (28-33), if the Mets want to get back into the National League East race they need to sweep this series, they win this game: 6 – 3.

Season to Date (43 - 19)

ON THIS DATE – June 11, 1961: Stormin Norman Cash became the first Detroit Tiger to hit a home run ball out of Tiger Stadium. Cash hit the ball over Tiger Stadium's right field roof four times in his career.

Norm Cash who spent almost his entire career with the Detroit Tigers: An outstanding power hitter, his 377 career home runs were the fourth most by an American League left-handed hitter when he retired, behind Babe Ruth, Ted Williams and Lou Gehrig; his 373 home runs with the Tigers rank second in franchise history behind his teammate Al Kaline (399). He also led the AL in assists three times and fielding percentage twice; he ranked among the all-time leaders in assists (4th, 1317) and double plays (10th, 1347) upon his retirement, and was fifth in AL history in games at first base (1943).

Norm Cash was also one of the last players to not wear a batting helmet.

MARKET WEEK - The five most valuable companies in the U.S. are all technology firms that employ far fewer workers than their industrial predecessors.

These companies symbolize the central issue of employment in a new age of technology, automation, and artificial intelligence. For example, Ford, which is worth a tenth of Facebook, employs 200,000 workers compared with Facebook's 17,000. Worse, Ford is cutting jobs, saying last month that it will lay off 1,400 workers despite record revenue.

The success of these tech giants highlights the changing face of corporate America -- three of them did not exist 25 years ago, and the other two are just 40. That such relatively young companies are on top illustrates the trend of a higher churn rate among American companies. According to consulting firm Innosight, the 33-year average tenure of companies on the S&P 500 in 1965 narrowed to 20 years in 1990 and the average tenure is forecast to shrink to 14 years by 2026.

Stocks, bonds, gold and bitcoin—assets that rarely move in unison—have all been surging this spring, an “everything rally” that leaves investors confounded about how to play the plodding U.S. expansion. Major U.S. stock indexes have soared to records this month, reflecting some investors’ confidence in the recovery. Prices of bonds, which often decline when stocks rise, have also risen lately, while U.K. terror attacks and U.S. political turmoil have increased gold’s following. The simultaneous gains have begun to concern some investors. Many point to a wave of money driving up asset prices, tied in part to lower bond yields and a lower dollar—a confluence of events they say feels good but can’t go on forever.

DRIVING THE WEEK - Big week for the Fed with Chair Janet Yellen expected to announce another quarter point rate increase on Wednesday and speak at a news conference about the outlook for the rest of the year. This week's action seems locked in but with wage inflation still low and hard data a little soft, will the central bank show any sign of backing off plans for a further hike this year?

Next Blog: Summer Reading and Words of the Month.

See you on June 19, Adios.

Claremont, California

June 12, 2017

#VIII-4-346

CARTOON OF THE WEEK – Drain The Swamp