Sunday, April 15, 2012

Review of Barron's -- Dated 16 April

Our weekends have resumed their normal track now.  Saturday Italian class, then buy Barron's.

The Cover Story ("What a Drag!") is about the newly recognized problem of the now huge student debts.  Student loans now are greater than ALL auto loans and are also greater than credit card debt.  The total student loan debt has apparently topped $1 trillion.  [I see this word "trillion" everywhere now]

Author Jonathan R. Laing points the finger at higher tuition as the biggest part of the problem.  He provides a handy graph that shows how tuition has gone MUCH MORE than housing, energy and health care in every year since 1990.  Those of you with children in college, or with a recent graduate (that's us) or with a child soon to go will understand the pain of high tuition.

There are other bad actors in the student debt mess, prominent among them are the for-profit schools (ITT Education, Corinthian, DeVry, Apollo Group and many others).

Right next to his graph of tuition vs. other components of inflation, he provides another handy graph showing the exponential looking rise of tuition from 1996 (approximately $80 billion) to end of 2010 total of $900 billion.

The terms for student loans are harsh.  If they default, they are virtually excluded from the credit economy writes Laing.  No credit cards, no auto loans.  Many students with debt don't even graduate...  Students who leave with big loans are reluctant to fully participate in the "consumer economy" because these loans are not easy to shake off.

And with a bad economy for new graduates, there is a large chunk of our society not living the lives they were expecting.  Some are suing their colleges claiming they made overly-rosy promises about how useful their degrees would be in finding a good job (I do not have a problem with suing arrogant universities).

This is a real problem.  But, it is not in the same league as our larger and bigger debts.  Subprime mortgages are $2.5 trillion for example.


On the next page after the Cover Story finishes, Bill Alpert closely examines ("Clever Is as Clever Does") one of the above mentioned for-profit schools: ITT Educational Services.

It seems that for-profit educational institutions like ITT Tech have had multiple run-ins with regulators and it also seems like a kind-of sleazy business.  Alpert provides a graph showing cost ($) per educational credit.  From a high of $646 (Corinthian, ticker COCO) to a low of $200 (average two-year public college).


The bearish Alan Abelson is back, and tossing bombs at all the R Team candidates!  He mentions that if you did not like the fairly ugly political process in getting Mitt to be the likely nominee, well, you ain't seen nothing yet.  He predicts the general (Romney vs. Obama) will be "really, really ugly."  I would agree.

Abelson then goes on to write about how the gold miners and gold itself.  He mentions a savvy investment pro Alan Newman as predicting a Dow:gold ratio of 5-to-1 (12,000 Dow, $2500 gold).  Newman likes gold, as he sees that the BRICs will likely buy more than they have, so the price of gold is likely to continue upward, and the miners will finally catch a break.

Abelson then looked at the two week drop in the markets (Spain, Google's selfish stock split and other scattered weakness in the economy).  He is not ready to make a bearish call yet, but will not surprise him of the markets continue to head down.


Kopin Tan ("Streetwise") writes that observers see weak earnings growth ahead.

"Sell in April and go away!"

-- Robert Mix


"He Said":

"What drags our entire economy down is when...the gap those at the very, very top and everyone else keeps growing wider and wider and wider and wider."

-- President Obama, promoting his "Buffett Rule"

For me, it is even harder to read his drivel than to listen to it.  ZH-style grade:  - 1


Joanne Kaufman writes a short piece on how colors are back in women's fashion.  And sales have jumped nicely (up 8.5%, better than the expected 4.9%).


Andrew Bary writes a nice bullish piece on Seagate Technology, now sporting a P/E of 4.3 and throwing off a 3.8% dividend yield.  It's cheap says Bary!  Storage is not going away, yes there are some risks, but hard drives are still a lot cheaper than flash drives.  Might be worth a look.


"D. C. Current" author Jim McTague writes that parts of the US Government are finally looking harder at HFT, the May 6, 2010 Flash Crash and related robot-trading topics.

I think McTague calls this issue correctly: no real change is coming in regulating HFT...  So, yes.  Another Flash Crash sure could happen.  Now.  In the future.


Barrons' "Europe Guy" Jonathan Buck writes that France is likely to vote for Socialist Francois Hollande.  Hollande has favors an astonishing 75% tax rate on those making over $1 million euros.  That could spark an exodus of wealthy people to London, Frankfurt and Zurich...  Hollande is looking to raise lots of other taxes as well.  Nothing about spending cuts.

"... bad for business, and even worse for the French economy."


Tiernan Ray ("Technology Week") writes of the plight of Sony.  Sony, so dominant when I was young, cannot seem to get its mojo back.  He writes of various hook-up possibilities, but the clock is ticking for Sony...


Alexander Eule ("Our Gadget of the Week") wirtes up two interesting new "Cloud" programs.  The first is Dropbox, which gives anyone 2 gigabytes of cloud-storage for free!  The icon would appear on your screen as just another storage drive.  Drop dead simple it seems.  I am going to have to check that out, I will advise my readers is my experience with Dropbox is good.

Eule also writes that GoodReader works with iPad and is a polished document-viewer and editor.  Highlight text, write summaries of .pdf's , etc.  He likes it.


Mark Veverka ("Plugged-In") writes of his interest in some buzz about Facebook turning over its Bing search engine to Facebook...  This would likely help both Facebook and Microsoft in their battle with Google.


Economist Gene Epstein interviews Charles Calomiris, a professor of financial institutions at Columbia about the big flaws in Dodd-Frank.

Calomiris contends that the partial repeal of Glass-Steagall had little to do with the financial and housing crises.

And that Dodd-Frank is doing next to nothing to strengthen our financial system.  A waste of time and resources.

A nice and dense interview for those interested.


In the Market Week section, Vito J. Racanelli takes a look at a sector of interest to me: makers of natural gas fueled engines for trucks.  Small company Westport Innovations (WPRT) makes such a system and has joined up with Cummins (CMI) in a JV of some type.  The problem is that Cummins and Navistar have plans of their own for NatGas engines...

Racanelli also provides a graph showing the HUGE outperformance of the "Sell in May and go away" notion. $100 invested in 1945 each October and sold in April would yield a return of $9000!  BUYING in May and selling in September yields $99, a one dollar loss...  Hmm....

"Commodities Corner" author Leslie Josephs says coffee prices are likely to go up, and explains her reasons why.

The Classifieds have some interesting looking items.  Two estates are up for sale.  A North Dakota farmer is seeking individuals interested in investing in farmland (, I will look into that and report back.

In the "144 Filings" I note that insiders have sold LARGE amounts of Apple (almost $48 million), LinkedIn ($46 million -- Red Flag here) and TD Ameritrade ($30 million).

Finally, the Mighty Peruvian Sol took a break in its rise in value vs. the US dollar, it slipped a modest 0.02%.

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