Return on College

 

OregonLet’s say you’re giving your niece or grandson some advice on which major to select in college.  Do you tell them to get an art degree, or take courses in social sciences?  Or should they focus on business and finance?

The decision should not ignore their natural abilities and interests, of course.  But if they’re looking for the best return on their tuition dollar, then they might consider spending their time in the computer sciences and math buildings.

This information comes from a report published by PayScale.com, which helps people manage their careers and figure out what they’re worth on the job market.  PayScale’s research team tracked the median salary for people who completed its salary survey online.  They then compared the 20-year earnings of people following different careers with what was earned, on average, by competing workers with a high school diploma but no college degree.  Then they subtracted the cost of 4 years of college tuition, to arrive at a return on investment figure—the additional money the degree provided.  Advanced degrees like law and medicine were excluded; the survey focused on bachelors degrees.

The results were striking.  Business and finance majors came away with a respectable $331,345 average ROI over 20 years, but they actually finished a distant third on the list, just ahead of sales, marketing and public relations ($318,212).  The highest ranking majors, by this metric, were computer and math, whose degree-holders saw a net return on their tuition investment of $584,339 over the 20 years after graduation.  These nerdy individuals nosed out the architecture and engineering graduates, whose average ROI came to $561,475.

Life, physical and social sciences majors fared somewhat less well, earning almost exactly $250,000 more than their high school diploma competition.  Graduates with an arts, design, entertainment and related degree came in last in the survey; they are expected to make a little over $125,000 as a result of their college training.

Interestingly, the PayScale website also tracks the average return on tuition investment for different colleges.  Graduates of Harvey Mudd College in Claremont, CA can expect to earn nearly $1 million over the 20 years after graduation, with a typical starting salary north of $75,000—with a 4-year college investment of $237,700.  Numbers 2-10 on the rankings include the California Institute of Technology ($901,400 earnings, $221,600 cost); The Stevens Institute of Technology in Hoboken, NJ ($841,000; $232,000), the Colorado School of Mines in Golden, CO ($831,000; $112,000); Babson College in Wellesley, MA ($812,800; $230,200); Stanford University ($809,000; $233,300); the Massachusetts Institute of Technology ($798,500; $224,500); Georgia Institute of Technology ($796,300; $86,700); Princeton University ($795,700; $217,300); and the Virginia Military Institute ($767,300; $95,700).

You can look up your own alma mater here: http://www.payscale.com/college-roi/

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

Source:

http://www.payscale.com/college-roi/

http://www.bloomberg.com/news/articles/2015-03-05/the-career-with-the-biggest-financial-payoff?hootPostID=293b20e2f9470947cb0facdcea7f70ea

 

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Lower Oil, Less Looking For It

gasYou already know that oil prices are lower than they have been in a long time, in part because U.S. oil production is higher than it has ever been, and still climbing steeply.  But you have to wonder how long these conditions will last, since lower oil prices make it less economical for oilfield services companies to drill.

The accompanying chart, courtesy of the oilfield services company Baker Hughes, may be the most dramatic illustration of economic reality you will see this month.  It shows how the U.S. has increased the millions of barrels of oil per day that we’re pumping out of U.S. soil in the past four years.  Looking at the orange line rising ever-more-steeply, you wonder whether oil prices will ever go back up to previous levels.

But then you see the purple line, which tracks the number of active oil rigs that are out there looking for new sources of oil.  The last quarter of 2014 and the first few months of this year have created a dramatic bear market for drilling rigs in action.  In just two fiscal quarters, the number of rigs in the field has dropped almost by half, and there is no sign that the trend is slowing down.

What does that mean?  Nothing in the short term, since the orange line represents existing production.  But longer-term, you have to expect that fewer active rigs will mean fewer wells and, at the very least, a leveling out of that orange line.  Oil prices may be down today, but that doesn’t mean supplies will outrun demand forever.  Enjoy the low gas prices while you can.

CA - 2014-3-10 Oil Rigs Chart

 

 

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

Source:

http://www.bloomberg.com/news/articles/2015-03-06/oil-rigs-get-slammed-for-the-13th-week

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Is Good News Really Bad News

 

download

You may have read last week that the U.S. stock market took a tumble based on what would seem like really good news: that the U.S. unemployment rate is falling faster than anybody expected. If you’re scratching your head, you’re not alone.

First, let’s focus on the good news and what it may mean. At the beginning of 2015, there were 3 million more Americans at work than the year before. The unemployment rate had fallen to 5.5%—a level that economists at the International Monetary Fund had projected that the U.S. wouldn’t achieve until 2018 at the earliest.

Then came the U.S. Bureau of Labor Statistics report for February, which showed a seasonally-adjusted increase of 295,000 jobs (nonfarm payroll employment), well ahead of projections. As you can see from the chart, America has not only pulled out of the long unemployment slump triggered by the Great Recession; it is now creating jobs faster than at any time since 2000, roughly equal to the go-go economy of the late 1990s. The government report noted that there are 1.7 million fewer unemployed persons today than there were at this time last year. More importantly, perhaps, there are 1.1 million fewer people in the “long-term unemployed” category, which is now down to 2.7 million overall.

CA - 2015-3-7 Jobs ChartHow can this be considered bad news for U.S. stocks? There are three possible explanations. First, the labor markets may be creeping toward that place where businesses have to compete for talent and pay their workers higher wages. When payrolls go up, it eats into corporate profits. There is little direct evidence this is happening yet—overall, wages are up just 2% in the past year, roughly even with inflation. But there are reports that small business employers have more unfilled job openings than at any time since April 2006. Meanwhile, the average workweek is inching up, which suggests that companies need people at their desks longer than they did before.

If the unemployment rate hits 5.4%—which could happen this Spring—then our economy will have reached what Federal Reserve economists consider to be “full employment.” This, of course, does not mean what those words actually say; it is a coded way of saying that the balance of negotiating power will have started to shift from employers to workers.

Reason number two is bond rates. While stocks were tumbling last week, bond yields were moving in the opposite direction in what was described as the biggest one-day selloff since November 2013. The yields on 10-year Treasuries rose from 2.11% to 2.239% in a single day. As bonds become more competitive with stocks, demand for stocks goes down—and so do stock prices. Interestingly, the stocks with the highest dividends tended to be the biggest losers in the selloff, suggesting that some investors who were temporarily relying on stocks for income are shifting back to bonds.

But perhaps the biggest reason for the market’s angst is concern about the next move by Federal Reserve Board. Fed chairperson Janet Yellen has made it clear that the health of the U.S. labor market will factor into her decision on when to finally allow short-term interest rates to rise. The good unemployment news could accelerate that schedule; at the worst, it probably confirms the current unofficial timetable of graduated rise beginning in June. For the impact that would have, go back to reason number two.

How credible are these three concerns? Should we be worried? It’s helpful to remember that higher employment means more money in the pockets of consumers, which can trigger a virtuous circle of more spending, more corporate revenues, a healthier economy. We’ve learned from past experience that the stock market is easily spooked by shadows and headlines, by good news as well as bad news. Bond rates are still pretty low compared with historical numbers, and the possible threat of higher payrolls is not exactly the same as seeing them show up in the actual workforce. (Remember those 2.7 million long-term unemployed workers still searching for any kind of a paycheck.)

Short-term traders, who measure their investment horizon on the second hand of their watch, can panic if they want to. Those of us who measure our investment horizon with a calendar should be celebrating another milestone in the U.S. economy’s long and fitful recovery.

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years. Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Sources:

http://www.bls.gov/news.release/empsit.nr0.htm

http://www.reuters.com/article/2015/03/06/us-usa-economy-idUSKBN0M20E620150306

http://www.economist.com/blogs/freeexchange/2015/03/americas-jobs-report?fsrc=scn/tw/te/bl/thewinningstreakcontinues

http://www.bls.gov/news.release/empsit.nr0.htm

http://blogs.wsj.com/economics/2015/03/06/economists-react-to-the-february-jobs-report-full-employment/

http://www.nasdaq.com/article/stocks-tumble-as-dollar-bond-yields-soar-on-us-jobs-report-20150306-00624

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This Week In Confirmation Bias: Faber – “Stocks are the Most Expensive, Well, Ever”

Faber Stocks Expensive

From Meb Faber:

I jabber a lot about valuation metrics here, and I mentioned this one on Twitter the other day. Its doesn’t need much explanation – the median stock in the S&P 500 is the most expensive it has even been (for as long as we have data). That’s never a good sign!

If your favorite valuation indicator is not at “the highest ever” , many valuation indicators and now at “the highest ever except 2000″. That’s not good company unless you are a short seller.

- See more at: http://mebfaber.com/2015/03/13/stocks-are-the-most-expensive-since-the-1960s/#sthash.fG4wlNNm.dpuf

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IRS Phone Scam – Don’t Fall For It

IRS Phone ScamI finally got the call…the IRS Phone Scam call that is.

I saw a number from Washington, D.C. on my mobile and decided not to answer it, the voicemail that was left made it clear I was in a lot of trouble with the IRS and I need to call them back right away. Fortunately I’m pretty skeptical and up on the latest scams as well as actual IRS procedures, so I knew the voicemail was part of a fraud.

I reported the call, but I have a recording and a transcript that I thought you might be interested in hearing:

Audio

Transcript:

“This is officer Alex Watson calling from the Legal Department off Internal Revenue Service. This is in reference to a criminal lawsuit file against you. Your case number is CH94436. The moment you receive this message I need you or your retained attorney off records to return the call. The issue at hand is extremely time sensitive. My phone number is 202-795-1580. Do not-this(?) this message and do return the call. Now if you don’t return the call and I don’t hear from your attorney either then the only thing I can do is wish you a good luck as the situation unfolds on you.”

For more information on this scam, goto the following website: http://www.treasury.gov/tigta/press/press_tigta-2015-01_home.htm

Scott Dauenhauer, CFP, MPAS, AIF

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Secrets of the Wirehouse: (Not So) Hidden Profit Centers

Broker-Dealers do not have client interests in mind, it’s just not possible given where they are their income. This articles details some of those profit centers and how they use them (hint: very little transparency).

3 Hidden Broker-Dealer Profit Centers Exposed

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Risk Tolerance Pioneer Retires

Geoff Davey
An industry great has decided to retire. What follows is the press release. I’m sad to see Geoff retire, but happy for him. Few in this industry can be called “pioneers”, Geoff is one of them.

Press Release: Finametrica

Geoff Davey turned 70 earlier this year and has resigned as a director and employee of FinaMetrica. He remains a significant shareholder.

Accordingly, Nicki Potts has been promoted to be FinaMetrica’s Chief Operating Officer and FinaMetrica’s Co-founder, Paul Resnik, has added marketing to his role in the development of international sales. Nicki has been with FinaMetrica for 12 years, during which time she has come to know and run all aspects of the business.

Geoff founded FinaMetrica in 1998 with Paul Resnik. He was responsible for the development of FinaMetrica’s intellectual property. I don’t know of any other individual anywhere in the world, who has devoted so much of his intellectual, commercial and emotional resources to the understanding and development of good financial advice as Geoff.

Geoff’s work is permanently embedded in the world’s financial services industry through the use of FinaMetrica’s tests and methodologies. He has achieved something that many of us can only aspire to; he has improved outcomes for many thousands of investors and their advisors around the world. The FinaMetrica system is now used by 5,500 advisors in 23 countries in seven languages. To date, more than 770,000 tests have been completed.

We congratulate Geoff on his ‘baby’ that has been FinaMetrica and raise our glasses in a toast to an iconic industry thinker and achiever.

We wish him a rich, happy and well-deserved retirement.

If you have any questions please contact me at andrew.macdonald@finametrica.com.

FinaMetrica remains committed to providing quality, comprehensive and useable risk profiling tools to the financial advisory market place.

Sincerely,

Andrew Macdonald

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