Monday, June 13, 2011

Morning Update/ Market Thread 6/13 - Living in a College Educated Fantasy Edition…

Good Morning,

Equity futures are slightly higher prior to the opening bell this morning. The dollar is off a little, bonds are also lower, gold and silver are basically flat, while most food commodities are higher with corn continuing higher after its breakout last week.

There’s no significant economic data today, however, the rest of the week is very busy with manufacturing data, inflation data, housing data, TIC data, “Consumer” Sentiment, and “Leading” Indicators.

Of course the data, even in its fantasy form, has been hardly positive of late… and that’s before QE2 actually is over. And we’ve had six straight down weeks in the market. Note in the weekly chart below that the SPX broke well below the May down channel and closed the week below the bottom of the weekly Bollingers:

The market is definitely oversold on a daily basis, but not quite yet on a weekly basis. The truth is that the selling so far has been pretty mild and orderly. Sentiment is turning bearish which means that the trend could reverse soon. But with macroeconomic debt saturation and QE fuel running low, I believe deflationary forces will exert themselves rapidly without more soon – there needs to be more fuel to send the bubble even higher and so far that’s not on the horizon. Still, there’s certainly enough fuel sloshing around the globe that anything can happen, and several market technicians believe there’s still another rally leg left that may even reach new highs – we’ll see. The technical target to watch if the descent continues is DOW 11,613… a daily close below that level would produce a major DOW Theory non-confirmation because the Transports reached new all-time highs and the Industrials have not.

The article that leaves me most inflamed from the weekend actually comes from CNN regarding the surging costs of college tuition. Here in Washington State the Governor just signed legislation that deregulates state college price controls and allows colleges like the University of Washington to raise tuitions as they see fit… and still receive state taxpayer money. The University of Washington’s immediate response? Jack tuition costs 20% for next year!

As if creating a monopoly on books isn’t enough. Perhaps they need more money to hire the best coaches for the football team and to cater to potential athletes. Perhaps they need to renovate the Roman Coliseum, errr, I mean Husky Stadium (again)? But here’s what has me so hot under the collar and I know that no mainstream reporter will touch… The University of Washington is sitting on well over a billion (!!!!) dollars in endowment money. Hmmm… what could a university do with a billion dollars in terms of education? Why would they sit on that much cash? WHO benefits from them sitting on that much cash? And… isn’t taking taxpayer subsidies while jacking tuition really just subsidizing that endowment? Robbing Peter to make Paul rich off of Wall Street trading and management fees? Hmmm, perhaps Nate’s onto something there… Meanwhile, here’s the mainstream explaining how you are caught in the middle-class squeeze, your productive efforts effectively using the college education mantra to fuel more profits on Wall Street:

Surging college costs price out middle class

NEW YORK (CNNMoney) -- What do you get when college costs skyrocket but incomes barely budge? Yet another blow to the middle class.

"As the out-of-pocket costs of a college education go up faster than incomes, it's pricing low and medium income families out of a college education," said Mark Kantrowitz, publisher of financial aid sites and

The numbers confirm what most middle class families already know -- college is becoming so expensive, it's starting to hold them back.

The crux of the problem: Tuition and fees at public universities, according to the College Board, have surged almost 130% over the last 20 years -- while middle class incomes have stagnated.

Tuition: In 1988, the average tuition and fees for a four-year public university rang in at about $2,800, adjusted for inflation. By 2008, that number had climbed about 130% to roughly $6,500 a year -- and that doesn't include books or room and board.

Income: If incomes had kept up with surging college costs, the typical American would be earning $77,000 a year. But in reality, it's nowhere near that.

In 2008 -- the latest data available -- the median income was $33,000. That means if you adjust for inflation, Americans in the middle actually earned $400 less than they did in 1988. (Read: How the middle class became the underclass).

Financial aid: Meanwhile, the amount of federal aid available to individual students has also failed to keep up. Since 1992, the maximum available through government-subsidized student loans has remained at $23,000 for a four-year degree.

"There does seem to be this growing disparity between income and the cost of higher education," said Justin Draeger, president of the National Association of Student Financial Aid Administrators. "At the same time, there's been a fundamental shift, moving away from public subsidization, to individuals bearing more of the cost of higher education."

Facing that disparity, it's no wonder then that two other trends have emerged: Families are taking on unprecedented levels of debt or downgrading their child's education from a four-year, to a two-year, degree to cut costs.

Student debt is often viewed as a good kind of debt, because a college education seems to promise a better future.

College grads, after all, have much lower unemployment rates than high school grads. And they earn $1 million more over their lifetimes, according to a much-quoted figure from the Labor Department . (Read: Is a college degree really worth $1 million?)

But even in this case, too much of a good thing can still be bad.

About two thirds of students graduating with four-year degrees recently did so with loans hanging over their heads, and their average bill comes in at a whopping $23,186, according to

Of those, Kantrowitz estimates that about half will still be repaying their loans in 20 years -- the traditional student loan period. And for many, that may very well mean they won't be able to buy a home, save for retirement or fund the next generation's education.

"They could still be paying back their own student loans, when their children are in college," he said.

I love articles about college in the mainstream that talk in single sentences, the irony is priceless.

The bottom line is that Americans are being fleeced in a huge way. Government has been completely captured by those who control the production of money and college has become just another avenue to drive profits and to indebt the public. Again, this is insidious, as people don’t realize that assuming “good debt” for college is actually trading their future productive efforts for an education that is now fully bubble priced.

The solution? It’s the same as for all the other impossible math – you must take back the power of money creation and detangle the special interests from government. While you’re doing that if you want economic prosperity you also must correct the debt saturated condition. That is the only way meaningful change is going to happen, but since it means regaining control of the production of money, it will require a battle that evidently the public is not yet ready to face.

The radiation from Fukushima is still pouring into the environment. Below, Arnie Gunderson discusses hot particles in Japan and those that have made it to the West Coast of the United States - beware if you're eating food and experience a metallic taste:

Hot Particles From Japan to Seattle Virtually Undetectable when Inhaled or Swallowed

With all the disinformation and left/right “solutions” that the mainstream and conflicted politicians use to box us in with, it’s obvious that the majority have their minds captured as well. I sure hope that we won’t always have to be, living in a fantasy…