Mish's Global Economic Trend Analysis

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• University of Oregon President Begs Legislators for $800 Million and Says "We are Not Asking for More Money"
• Saturday Listening and Reading: Bill Fleckenstein, Art Cashin, Ben Davies, Hugh Hendry
• 250,000 Stimulus Jobs Set to Vanish; Firing Bureaucrats in NY Easier Said than Done; Seeking Jobs "Nobody Else Wants to Do"

University of Oregon President Begs Legislators for $800 Million and Says "We are Not Asking for More Money" Posted: 02 Oct 2010 09:12 PM PDT The liar-whiner of the week award goes to University of Oregon President Richard Lariviere who wants the state to float $800 Million in bonds because "We have to do something." Please consider University of Oregon President Richard Lariviere asks legislators for $800 million in bond money. An impassioned University of Oregon President Richard Lariviere made his pitch before legislators today for funding his university with $800 million in state-issued bonds. If the university does not find a new way to raise money, tuition will keep climbing an average 7.5 percent per year, as it has for the past 38 years, he said. That means annual tuition will hit $17,000 by 2020, he said, a price tag that will squeeze out middle class students. Mish Comment: The reality is tuition is already outrageous and the key reason is absurd salaries to administrators and staff. "It is not fair," he told a legislative work panel reviewing a variety of proposals to overhaul the state's higher education system. "We have to do something." Mish Comment: The university of Oregon, like all universities churns out thousands of students a year, at an absurd cost to the students, many of whom graduate 10's of thousands of dollars in debt, with no realistic job opportunities and no way to pay off that debt. Yes, this is grossly unfair. The reason it happens is the staff is grossly overpaid with absurd pension benefits on top of it all. The cure is not to float bonds, but to slash pension benefits and salaries of the teachers, adminsitrators, and staff. Lariviere's controversial funding plan, which he says has never been tried anywhere in the country, will be introduced as a bill in the 2011 Legislature, said Sen. Mark Hass, D-Beaverton, co-chairman of the work group, which met at Portland Community College. "This is one of the most significant proposals in higher education we have had in decades," Hass said. Mish Comment: Controversial is not the right word, "idiotic" is the right word. The state absolutely cannot afford to go $800 million into debt on a chance the idea will work out. Lariviere said he also wants the university, now governed by the State Board of Higher Education, to have its own 15-member governing board appointed by the governor. In exchange for more independence, the university would agree to meet performance goals set by the Legislature on freshman retention, college completion and other measures. Mish Comment: Excuse me for asking the obvious question, but why should the state have to exchange anything for performance goals? Why shouldn't the state cold turkey flat out mandate goals on retention and completion? The plan would be a bargain for the state, the president argued, because its annual obligation to the university would remain $63 million a year and not increase for 30 years. "We are not asking for more money, " Lariviere said. Mish Comment: The missing word in the sentence is "yet". The assumed rate of return on investments and donations guarantees the university would be back asking for more money. The university in turn would match the $800 million with private donations and put the entire $1.6 billion into its endowment, which would be invested by the university's foundation. The university would then draw 4 percent to 4.5 percent of the fund each year for its operations. The foundation projects it could on average reap a 9 percent return on the endowment, which would grow to $6.9 billion in 30 years. Mish Comment: I have a better idea. Given the university feels it can raise $800 million and earn 9% on it, the university should do just that, and taxpayers should do nothing. The reality is Lariviere is promising $800 million in donations when he has no idea how much will come in. Moreover, rate of return assumptions of 9% a year with 10-Year treasuries yielding 2.5% is downright absurd. I would not be surprised to negative rates of return over the next 10 years. The long-term average is about 6%. However, the economy is smack in the midst of Schumpeterian Depression with no end in sight. Please see Creative Destruction for more about the theory behind Schumpeterian Depressions. Bob Davies, president of Eastern Oregon University, said Lariviere's plan is creative and has merit, but questions remain about how it would affect the rest of the university system. He agreed with Lariviere on one point. "We have got to do something different." Mish Comment: Bob Davies wants his hand in the taxpayer's pocket as well. However, if Lariviere and Davies really want to do something different, why don't they slash pension benefits and salaries of overpaid faculty and staff? No such proposals are on the table for the simple reason Lariviere is looking out for the best interests of administrators and teachers, not the best interest of the kids. Choice Comments From The Oregonian Oregon000 writes: According to the Oregonian, their new AD is earning a pretty penny. We would be surprised to learn how much money all the university fat cats are earning. "Mullens, introduced July 15 to replace former football coach-turned-athletic director Mike Bellotti, will earn a base salary of $450,000 and deferred compensation of $50,000. Athletic and academic incentives could add up to $150,000 annually." Let's look at the rate at which the salaries for administrators, coaches, professors has increased vs. inflation. The poor students are funding a lavish lifestyle for many of them. Jacjsonstew asks: What cuts has OU made so far? Gnuut writes: "The foundation projects it could on average reap a 9 percent return on the endowment, which would grow to $6.9 billion in 30 years. " The same estimates that put PERS in the ditch. Won't these clowns ever learn that their lies don't sell any more? JojoValley writes: We, the tax payers, will not gladly pay you $1.9 billion tomorrow for $800 million today. Since when is floating a loan the way to pay annual expenses? It is however a great way to delay cutting back on the growth of salary expense per full time equivalent at U of O. Private sector jobs are disappearing and deflating as the supply of workers rises. But government jobs in any sector, education, police, prisons, etc. just keep getting more expensive. Will the last taxpayer left please turn out the lights? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Saturday Listening and Reading: Bill Fleckenstein, Art Cashin, Ben Davies, Hugh Hendry Posted: 02 Oct 2010 10:55 AM PDT Eric King has had a great list of guest interviews recently. Please see King World News Broadcast for a list. Ben Davies discussed currency frictions and how that might eventually lead to war. Also see Hinde Capital's Ben Davies: Currency Interventions Mark End Of Dollar Era And First Step Toward War on Business Insider. Bill Fleckenstein talked about how reckless and arrogant policies by Greenspan and Bernanke are contributing to strength in gold and silver. Art Cashin discussed the comments from the Walmart CEO regarding extremely significant and stronger sales at the beginning of the month. Meaning customers were coming into the store at 11 pm and shopping to get necessities like baby formula and other staples but shopping long enough for the government assistance cards to become activated at midnight and beyond. Hugh Hendry looks for a big deflation event to happen ahead of currency debauchery. Hendry is also very bearish on China and thinks that China is due for a fall in terms of GDP. Zero Hedge discusses the Eric King interview with Hugh Hendry in Interview With King World News: "If Inflation Is A Monetary Phenomenon, Hyperinflation Is A Political Phenomenon" In general, I side with Hendry. All King interviews are lengthy, discussing topics in detail. Please give one or more of them a play. The interview with Hendry is particularly interesting. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

250,000 Stimulus Jobs Set to Vanish; Firing Bureaucrats in NY Easier Said than Done; Seeking Jobs "Nobody Else Wants to Do" Posted: 02 Oct 2010 12:44 AM PDT Stimulus is running out and states will cut employees whether they want to or not. Some job seekers on Craigslist are willing to do anything. In New York, "fine print" has delayed many needed cutbacks. When Stimulus Runs Out CNN Money discusses the Latest unemployed: Stimulus-subsidized workers Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end. About a quarter of a million people in 37 states were placed in short-term jobs thanks to a $5 billion boost to the Temporary Assistance for Needy Families program, according to the Center on Budget and Policy Priorities. States used about $1 billion to provide subsidized employment, with the remaining funds going to cash grants, food programs, housing assistance and other aid. With the program expiring, many of the adults have been told not to report to work anymore. And it won't be easy for them to find a new position at time when the unemployment rate continues to hover at 9.6% "They are just joining the millions of other people looking for permanent work," said Elizabeth Lower-Basch, senior policy analyst at the Center for Law and Social Policy, an advocacy group known as CLASP. 1,200 NASA workers to be laid off CNN Reports 1,200 NASA workers to be laid off More than 1,200 NASA workers will be laid off Friday, despite Congress passing a $19 billion budget for the space agency two days earlier. Lori Garver, NASA's deputy administrator, said Thursday she didn't believe the bill would affect planned layoffs, "certainly not for tomorrow." Thursday was the last day for laid-off employees to report to their workstations. Shuttle workers on their last day were to receive their final paperwork. Many of the departing workers have worked on the shuttle program since its beginning in the early 1980s. Tough to Get Rid of Unwanted Bureaucrats The Times Union reports State layoffs offering trial by fine print Word of impending layoffs sent shock waves and more than a little anger throughout the state work force Friday after Gov. David Paterson told state agencies they could lay off up to 2,000 people by the end of the year in order to achieve savings targets. But if and when people actually start getting pink slips, the process is likely to cause a lot of headaches and maybe a bit of head scratching too. That's because the layoff process for public employees in New York is so complicated, convoluted and potentially case-specific that it will likely take a large cadre of lawyers, civil service experts and others to manage. "The big print giveth and the little print taketh away," said Harvey Randall, a Capitol Region lawyer who serves as a consultant on public-sector layoff issues. Randall co-authored a book on the various rules and procedures that govern layoffs. It runs more than 600 pages, which should disavow anyone of the idea that layoffs are a simple matter. Generally, state and most public-sector layoffs are done by reverse order of seniority and that's true with the state. But it's important to realize that the seniority is generally limited to job titles within what is known as a "layoff unit." Some of the units can run across state agency lines. For example, a clerk in the Department of Environmental Conservation could conceivably "bump" or displace a less-senior person in, say the Department of Health, although that depends on the labor contract and precise job title involved. Also, job titles from which people are being laid off generally have to be abolished, but that doesn't stop cross-agency bumping. For example, if a printer's job is being eliminated in one agency, that printer might be able to go across town and bump a less-senior printer somewhere else. It gets even more complicated in agencies involved in direct care such as the Department of Corrections or Office for People With Developmental Disabilities, where layoffs can proceed based on facilities. Even then, people targeted for layoff would generally have the option to bump someone in another facility such as a prison or home for the disabled, but it could be halfway across the state. The rules are preposterous, but arcane rules or not budget cuts, including layoffs are going to happen. Willing to Do Anything, Including Scooping Poop Some people are willing to do nearly anything. This ad in Craigslist (I corrected numerous typos) is proof enough. Please consider Poop Pick up (Cape Cod) Date: 2010-09-30, 9:53AM EDT If you are tired of picking up after your dog, then this add is for you! I am willing to come to your house and clean your yard of all the dog crap, and haul it away! I can also walk the dog/dogs at a time that is best for you. I can also clean/hall trash yard debris etc. If you have a basement that needs cleaning/organization, give me a call! I am basically looking for those jobs that nobody else wants to do. No job is too big or small! Expect to see more ads like that as benefits expire and the last remnants of various stimulus packages fade into distant memory. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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