Sep 9 2014

The price of learning from expensive books: The cost of educational books has soared by 150 percent since 2000 while the cost of recreational books has fallen.

There are many reasons why college costs are soaring even well beyond the regular rate of inflation.  Schools are adding immense amenities to attract students.  Student debt backed by the government allows schools to push prices higher since students simply go into deeper debt with little analysis on ability to pay at a later date.  Similar to hospital charging outrageous prices for a standard Aspirin, book publishers realize that they can get away with charging more for textbooks as well.  Any college student can tell you that the cost of a college text can eat deep into your budget.  Many science books cost hundreds of dollars.  Publishers quickly realized years ago that savvy students could photocopy and pass books around.  The way around this?  Requiring students to purchase access codes in conjunction with the book virtually forced students to always pay market prices for access to course content.  So it should come as no surprise to you that since 2000, the cost of educational books has soared while the cost of recreational books has actually fallen.

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Sep 5 2014

The return of the stock market bubble: In a world with clear risk, investors are acting as if the market is completely risk free.

Some investors tend to believe the stock market is a perfect and balanced barometer of the underlying economy.  Even with the recent bubbles in technology stocks and real estate, some still have this misguided assumption that stock values are always priced right.  Most of the movement in the market is being driven by institutional investors since roughly half of Americans own absolutely no stocks outright.  It should be rather obvious to those that read a few newspapers outside of the country that there are some major risk factors hitting the world right now: the Ebola outbreak, the conflict between Ukraine and Russia, and the Middle East.  You also have anemic economic growth in Europe.  In the US 92 million Americans have dropped out of the labor force.  Yet somehow, the stock market is making new highs.  Why?  A large part of profits have come from firing workers, slashing wages, cutting benefits, and using cheap QE funding to juice up stocks.  The market cares only about profits, not long-term sustainability.  Yet if you were looking at the volatility index you would think that there was absolutely no risk in the current market.  This market is looking very bubbly.

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Sep 1 2014

Student debt becoming a larger albatross for economic growth: $1.2 trillion in student debt is outstanding and many college graduates working in jobs that don’t require their degree.

There was a time when going to college made sense in every feasible way. It made sense professionally, economically, and many college graduates have a wonderful time in the process of completing their degrees. Most would argue that learning is vital in growing and moving forward. Yet students need to ask whether their return on investment is really worth it? Many people go to college in a compulsory fashion. This is simply the next step after high school. This was an easy decision to make during a time when the costs of going to college were affordable. Today, many schools charge $40,000 and $50,000 per year for a basic undergraduate degree. That is problematic. A large number of recent graduates are now working in positions that don’t require their specific field of study. In other words, they are employed in a field different from their undergraduate degree but still carry forward with mounds of debt. The total student debt market is now well over $1.2 trillion. It might be worth it to take a course in Student Debt 101.

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Aug 29 2014

A day of reckoning has arrived to retiring Americans: 63 percent of Americans that start working by the age of 25 will be dependent on Social Security, relatives, or charity by the time they hit 65.

The notion of retirement is a fairly new one outside of wealthy circles. For most of civilized history, people worked until they died. Not a glamorous way to go but that is simply the course of human history. Only until recently with the emergence of the middle class was there a general semblance that retirement may be accessible to all. However looking at actual figures reflects a very different picture. It is hard to get a perfect balance sheet as to where older Americans stand today since there are many differing resources floating out in the market. Yet one thing is consistent and that is, older Americans are entering into a major day of reckoning with not enough. Older Americans are woefully unprepared for what lies ahead in retirement. Many are basically at the mercy of Social Security, family, or charity. Not exactly the retirement paradise Wall Street started pitching to the masses starting early in the 1980s. The reason this has gone on for so long is the political system is co-opted by big money. Over this period of time real substantive reforms could have occurred. Instead a generation has passed and many have nothing to show for it even with the stock market at record highs.

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Aug 23 2014

New definition of retirement = work until you die: Half of Americans have little to no savings for what will likely be a long and drawn out retirement.

The ideal vision of retirement is one of constant leisure supported by a sizable nest egg. Building a nest egg takes decades of discipline and careful planning. Unfortunately, many Americans did not adequately prepare and combined with the casino like financial system, many have been washed out of the system. Many retiring baby boomers are going to use Social Security as their primary crutch for retirement income. The Social Security system was never designed to be the primary target for retirement income yet this is what we are facing. The problem of course is that Americans simply do not have much sizable wealth in stocks and bonds. While the majority of Americans own houses, most own very little to no stocks. This is why the current record in the stock market means little in the face of an imminent retirement. Also, the one vehicle to build net worth in housing is largely locking out young future buyers thanks to massive buying from Wall Street and big investors nearly guaranteeing another retirement disaster after this one. One crisis at a time. So why will so many Americans be in dire financial situations as they enter their golden years?

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Aug 20 2014

China’s housing correction is now in full swing: Big developers begin to slash prices with sales falling more than 10 percent.

It was bound to happen. The housing correction in China is now here. It is interesting to hear the various perspectives from people and how China is absolutely different to the point of never being open to property bubbles. The same arguments were made during the Japanese real estate bubble as well. Well apparently the laws of math apply to most countries around the world and unfold on their own timelines. The typical price for a new home in China fell yet again for a third straight month with property developers cutting prices. The government has intervened to quell the fires of a bubble but at this point, it is already too late. The correction will occur. The bigger question will be how deep will the correction be? When bubbles occur, entire systems are built around the inflated prices as if they were only set to stay high. They rarely factor in a reversal. Perceptions will drive future home purchases and do people want to buy an asset that suddenly is starting to fall? The argument goes that many people put massive down payments in China so therefore, things will be okay. Okay in what respect? Instead of using money that is borrowed, people are using their own hard cash. So the burden is shifted to the public versus banks. As we know, many in China will funnel in life savings into a property just to purchase. In many respects, this will likely make buyers more cautious and impact sales harder. I’m not sure this is reason enough to justify permanently high prices and the current correction is a symptom of this perception.

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Aug 17 2014

The trend for part-time work sweeping the world: Part-time work dominating jobs in the United States, Canada, and Japan.

The employment statistics do a good job concealing the true nature of the workforce. The unemployment rate has dropped dramatically since the recession ended largely because millions of Americans are now no longer considered part of the workforce. This is an easy way to boost the employment rate without actually creating new jobs. Another trend that seems to be growing around the world is that of part-time work. Part-time work and low wage labor go hand and hand. Part-time workers usually are not afforded the same benefits as those working full-time. They are also brought on with a just in time attitude and are treated as such when no longer needed. Part-time work has been growing before the recession and continues to do so today. In Canada, part-time work has been the dominant sector of employment growth. Low wage labor and part-time work go together like peas in a pod. Is this a trend we should be concerned about?

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