When I think back

On all the crap I learned in high school

It’s a wonder

I can think at all.

– Paul Simon, (Kodachrome)

Bill Bonner

YOUGHAL, IRELAND – Would Abraham Lincoln have been a better president if he had a college degree?

How about Cornelius Vanderbilt?

Or Jesus Christ?

More Education

In a recent survey, Americans favored more education spending over all other categories of the federal budget. Spend enough of other people’s money on their little Jimmy, people must believe, and he’ll turn into Einstein, Erasmus, and Elvis, all rolled into one.

But where’s the evidence? Imagine that you had studied under one of the greatest economists of the 20th century, Paul Samuelson, a Nobel Memorial Prize winner.

Or another Nobel-winner, Paul Krugman. You might as well have studied surgery under the Boston Slasher or ethics under Heinrich Himmler.

Neither Samuelson nor Krugman ever understood how an economy worked.

Studies show that people with more education earn more money. But this is entirely misleading. People with private jets earn more money, too, but that doesn’t mean that you will get richer if you buy a Gulfstream.

Still, a lot of people think school is worth the money.

Here’s the LA Times:

Of the many outrageous allegations revealed by federal prosecutors in the college cheating scandal, one stands out.

Someone paid $6.5 million to get his or her children into elite schools. But the identity of that parent – and details about which schools were involved – remains a mystery nearly two weeks after authorities in Boston filed the charges against dozens of wealthy individuals.

Even parents who aren’t crazy seem willing to spend a lot. Here’s a recent post on a private chat line:

My college, Trinity in Hartford, Connecticut, is similar to Wesleyan, Williams, Amherst, etc.

Here is what is costs, as reported by the college president:

“After projecting next year’s income from the endowment and gifts, we’ve determined that providing an outstanding Trinity education will require a 3.75 percent increase in our comprehensive fee.

Here is the breakdown of the comprehensive fee for 2019–20:

Tuition & General Fee: $58,620
Room: $9,960
Board: $5,340
Student Activities Fee: $430
Total: $74,350”

Holy mackerel!

Slave to Debt

What do you get for that kind of money? We don’t know. But if you pay for four years of college at that rate, you’ve spent about $300,000. That would be enough to buy a decent house. And that would spare you about $1,500 in monthly mortgage payments.

If, on the other hand, you go to college, you are almost always condemned to debt slavery.

You begin with college debt. Then, you have to get a mortgage and an auto loan. And then, you need to get a job to pay your bills. As you grow older, your wages tend to increase; but so do your expenses. And there’s the federal debt, too – now growing twice as fast as GDP. You can almost never break free.

How much better it would have been to take that $300,000 and use it to start a business… or learn a trade… or simply give yourself a grubstake, so you don’t have to borrow.

In some cases, of course, going to school is a practical and/or required way to enter a trade. There are not many self-taught doctors… or nuclear engineers. If you’re going to practice rocket surgery, in other words, you’re probably going to need a diploma.

But most of the work done by most of the people doesn’t require any college at all. A smart, motivated person can do well with only rudimentary reading and writing skills. It’s grit and gumption that pay off; not college degrees.

Besides, you can find out almost anything you want to know online.

At least, that is the way it should be… and would be… in a win-win, free economy. Remember, capitalism is “what happens” when nobody points a gun at your head.

Make Things Happen

You can make things happen in your own life. You can make a door. Or a pie. Or a business. But you can’t make an economy. That involves thousands or millions of people, going about their own business, with their own plans and own projects.

And the more you interfere with the private economy, the more wealth (time and resources) you destroy. And here comes presidential candidate, Elizabeth Warren with a bazooka. The Boston Globe:

Senator Elizabeth Warren unveiled a sweeping plan Monday to forgive massive amounts of student loan debt for middle-class Americans as she tries to appeal to the young voters expected to play a major role in the 2020 campaign.

The Democratic presidential candidate from Massachusetts also called for free tuition at state colleges and universities as another way to relieve the higher education costs that have financially crippled many millennials.

“College shouldn’t just be a privilege for those who can afford to take on the significant expenses associated with higher education,” she wrote in a Medium post that announced the plan.

“We need to fundamentally change the broken system that created the crisis in the first place,” Warren wrote in the Medium post.

There is a phony solution to every problem. Ms. Warren has found one of them.

Regards,

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Bill

MARKET INSIGHT: THE SNAPBACK RALLY SUCKS INVESTORS BACK IN

By Joe Withrow, Head of Research, Bonner & Partners

Investors have become overly complacent this month…

That’s the story of today’s chart, as we check back in on the CBOE S&P 500 Volatility Index, or VIX. Known as Wall Street’s “fear gauge,” the VIX tracks investors’ expectations of how dramatic the S&P 500’s price swings will be over the next 30 days.

A rising VIX suggests that investors expect stock prices to be volatile in the coming days. And a falling VIX suggests that investors see relatively calm times ahead.

Chart

As you can see in the chart above, the VIX has fallen to 12.1 – a 66% drop from its December 2018 peak.

And now, the VIX is right back where it was before the S&P 500 plunged last October… when stocks fell nearly 20% in just under three months.

This suggests that investors have become too complacent, once again. The snapback rally we have been warning about all year has sucked them back in.

But that’s just human nature when it comes to investing.

As the VIX chart clearly shows, investors fear volatility the most after the stock market has already tanked. That’s why the VIX topped out above 36 on December 24 of last year – the very day the S&P 500 bottomed and began its recent rally.

Likewise, investors are the most complacent at the top of the market. That’s why the VIX last dropped to these levels on October 3 of last year… when the S&P 500 was only five points off its all-time high.

This is just another sign that investors should be cautious right now.

– Joe Withrow

FEATURED READS

Why America’s Elderly Are Forgoing Retirement
As our editor highlighted last week, stimulus, in all its forms, is fraud. The working man always ends up footing the bill. It’s no wonder more people are working longer… a recent statistic shows a college-educated professional must amass over $1-$2 million to retire (fairly) comfortably. The retirement math is beginning to look ugly…

Bubble? What Bubble?
The Fed has abandoned any pretense of sensible monetary policy. After hiking the federal funds rate to a measly 2.5%, U.S. stocks sold off hard at the end of 2018. The Federal Reserve has now turned dovish. And at least some of the Fed policy makers are worried that they could be pumping up a big, fat, ugly bubble.

The “Domino Effect” Will Shoot These Stocks Higher
Regular readers know Bill is bearish on U.S. stocks. But, former Cantor Fitzgerald partner, Jason Bodner, is much more bullish. In fact, he believes big institutional investors have been plowing into stocks at a breakneck speed… and that well-positioned investors will see big gains ahead…

MAILBAG

Today, more readers chime in on last Thursday’s Diary, “Our Trip to Soviet Russia: A Cornucopia of Disaster”…

Thanks for your column and personal observations on Soviet Russia’s communist economy. In the early 1970s, I visited communist China and saw what communism/socialism does for a nation, so I can affirm your observations. It was shocking. I think that promoting first-hand observations of totalitarianism and socialism might be more effective than pushing free enterprise at our younger “progressives.”

By personally illustrating the disasters created by socialists, rather than trying to promote and defend capitalism, the progressive socialists would have to either respond defensively to the information with ignorant excuses or defend the indefensible. Free enterprise would and should be the default conclusion as to how to address the damages done by socialism. Thanks again for your graphic descriptions of your visits.

– Douglas L.

Just got done reading your essay, “A Cornucopia of Disaster”… What a concise explanation of the end results of central planning, whether it is our Federal Reserve or the Communist Party/KGB. The fatal conceit yields the same ultimate disasters… Please write more for helping the uninformed masses of millennials who have just discovered the allure of socialism and a sprinkling of elder fools like “Crazy Uncle Bernie.”

If you will read about life in Russia, you’ll find a government apartment building where tenants have to wait in line for their first-of-the-day trip to the public bathrooms… and in their government apartment at 6 a.m. on comes the party propaganda program… If you turn it off you get a knock on your door and a party member gives you a gulag trip threat.

– John H.

IN CASE YOU MISSED IT…

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