Thursday, June 6, 2013
Warning: This post involves a lot of math but you don't have to be good at math to follow and understand the points being presented.. Besides, we did all the adding and multiplying for you..
Its Thursday.. let's see how the market is doing..
Down 30pts to 14,930 as of 2:15p..
Its amazing how artificially over-inflated that stock market is... Back on March 2nd, 2009 which was the official bottom, the market closed at 6,628.. Then QE1 began..
So take 14,930 minus 6,628...
So as of this writing, the stock market has been inflated by 8,302 pts..
That's your 'recovery'...
But let's move beyond all those mumbo-jumbo numbers and focus the rest of this posting on what matters-- people
Last week we addressed what are known as 'Millennials'; young people between 16-30 who are suffering through a 16% unemployment for their age demographic.
Today let's talk about Generation 'X'..
These are the people now in their mid-30's to late 40's.. Wonder how this continual recession-depression is affecting them..
" A Pew Charitable Trust study, titled "Retirement Security Across Generations," examined the savings behavior of five age groups before the Great Recession hit and found that Gen Xers - the group of Americans following the baby boomers that range in age from 38 to 47 - fared especially poorly during the recent economic down swing.
As a result, their retirement years will likely be more tarnished than golden.
The study found that between 2007 and 2010, Gen Xers lost nearly half of their overall net worth, an average of about $33,000, and also had higher levels of debt than previous generations."
That's not good is it..
"A large part of the reason their debt is so high is because of student loans and credit card debt..."
That same destructive ball and chain thrust upon Generation 'Y' and the Millennials.. The problem no one wants to address or fix because its such a vital part of the US economy.
Whatever number you want... It's just... well you Are going to pay back the loans and We the banks and the US government Are going to profit off your living, breathing existence from the time you sign those student loan papers at the innocent age of 18...
We could have picked many Universities to provide examples of how much tuition has dramatically increased, especially within the last 10-20 years but we chose University of Pennsylvania because its a private Ivy League school; the type of University you want to attend if you wish to go far in life...
This is for the entire school year.. not a semester.
By 1970, tuition was $2,370 with an add'l General Fee of $200
In 10 years, tuition rose a total of $1,120...
By 1980, tuition was $6,000 which included General Fees
Now this is the time we really start to see tuition spikes both at Penn and virtually all Colleges and Universities across the nation..
By 1985, tuition is $9,525 with an add'l General Fee of $825 and by 1990, tuition at Penn for a full calendar year cost $13,420 with an add'l $1,500 in fees...
In that 10 year window of the 1980's, tuition rose by $7,420.
So let's stop a moment... why such a spike during the 80's?
In the past, interest rates were set by the individual states. This also applied to credit cards.. Once laws were changed so that the lender's base state was the interest rate to be applied to All US states, it opened the doors to greater lending..
And with loans so easy to come by, there's absolutely No incentive for colleges to curb their tuition spikes.. Whatever they charge, people will take out necessary loans to pay.. They'll never be a shortage of prospective students..
In 1995, tuition at Penn cost $17,974 with an add'l $1,800 in fees, and by the close of the decade in 2000, tuition for undergrads cost $22,682 with an add'l $2,300 in fees...
So to refresh thus far:
1960 -- $ 1,250 + $100 fees
1970 -- $ 2,370 + $200 fees
1980 -- $ 6,000 including fees
1990 -- $13,420 + $1,500 fees
2000 -- $22,682 + $2,300 fees
Those attending Penn this upcoming calendar year 2013-14 will be shelling out $40,574 plus an add'l $4,750 in fees...
That totals $45,200 est.. it doesn't count room/board or books..
And that is One year!
Four years at Penn will cost $200,000 for tuition (we're modestly adding tuition hikes each year and textbooks into this amount) To keep things super simple, let's say the student lives locally and doesn't have to pay for room and board.
Right now, student loans' interest rate is 3.4%
So using an amortization calculator...
Yes, that's a little under two-grand every Month!
Let's say they have 20 years to repay.. That would be $1,149.67/mo.
If a student had 40 years to repay it, which is unheard of, the monthly payment based on 3.4% is still over $750/month!
This is why the economy is horrible.. and why it will continue getting worse and worse...
And if these debts have to be written off the books.. over $1 Trillion in loans to this point, the taxpayers will foot the bill..
And young people can not buy cars and homes and furnishings, etc with this debt load on their shoulders.. And working post-graduation at Sports Authority or Best Buy just isn't going to hack it...
But..hey.. that stock market's looking good isn't it??