Mish's Global Economic Trend Analysis

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• Seton Hall to lower tuition rate by $21K matching Rutgers; Cost of College Education will Crash; Moronic Educators Object to Lower Costs
• Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight
• China Loan Shark Market Crashes; Scores of Chinese Business Owners Unable to Pay Black Market Loans Commit Suicide or Disappear
• Enron-i-sation of Europe; Is the Euro "Beyond Rescue"?

Seton Hall to lower tuition rate by $21K matching Rutgers; Cost of College Education will Crash; Moronic Educators Object to Lower Costs Posted: 29 Sep 2011 04:23 PM PDT I have been waiting for and expecting news headlines just like this one: Seton Hall will lower tuition rate by $21K to match Rutgers for some incoming freshmen Getting good grades and high SAT scores could save some Seton Hall University freshmen more than $21,000 a year in tuition costs under an unusual new program that could pit the Catholic school against Rutgers University for some of the state's top students. Starting next fall, Seton Hall will match Rutgers' tuition — which is currently $10,104 a year for most in-state undergraduates — if freshmen score at least 1,200 on the combined reading and math sections of their SAT tests and graduate in the top 10 percent of their high school class. Other students on the South Orange campus will continue to pay Seton Hall's regular annual tuition rate, which is currently $31,440 before room, board and other fees are added. Expect Plans to Spread Drew University in Madison rejected the plan as a publicity stunt. However, I expect such plans to spread. I also expect more competition from online classes. If Congress really wants to do something about the high cost of education, it would: Cancel student loan programs End support for the University of Phoenix and all for-profit universities Accredit more online universities End collective bargaining of public unions Cost of College Education will Crash Within a Decade The cost of college education would sink like a rock with those four structural improvements. Interestingly, even with piss poor government policies, places like Seton Hal, prices have collapsed for some students. Right now the opening toss applies to 10% of the students. Next year it may be 25% of students and offered at more universities. For those who have kids in grade school, I would not advise programs that lock in today's rates if paid in advance. The cost of college education will crash within a decade, simply because it has to. Moreover, the free market would lower costs sooner and far more dramatically, if only given the chance. Wages are not supportive of current education costs. Addendum: I wrote the above quoting the New Jersey Start Ledger article written yesterday. I received two emails just now pointing to additional articles in the Wall Street Journal and New York Daily News. Please consider the Journal Article Seton Hall Cuts Cost For High Achievers Seton Hall University will radically restructure its tuition for next year, slashing costs by more than 60% for all incoming students who have achieved a set of academic standards in high school, officials announced on Wednesday. Some national education experts expressed concerns that the plan could accelerate a national trend: a shift in the focus of financial aid toward merit-based scholarships rather than awards based on need. "There's only so much money, and at the end of the day every college needs to make decisions about who they'll subsidize," said Patrick Callan, the president of the National Center for Public Policy and Higher Education. The proposal raised concerns among some education experts, who said that schools are moving further away from the original intent behind subsidizing higher education: to help people attend college who couldn't afford it otherwise. "When you just flat out across the board knock the price down for high-achieving students, you're going to be subsidizing a lot of students who don't really need the money," said Mr. Callan. This form of subsidization "tends to help the institution attract the freshman class that it wants to raise the academic profile, raise the U.S. News rating," he said. "It doesn't have much to do with providing opportunity to people who wouldn't have it." "It becomes, from a budget point of view, a race to the bottom," said Jerome Sullivan, the executive director of the American Association of Collegiate Registrars and Admissions Officers. "Someone else will do the same thing only they'll do it $50 better. And then someone else will do it $100 better." The ultimate result, he said, is that "the budget gets ravished because revenue begins to disappear and in the end it's low-income families as well as the institution that lose out." Failure of Subsidies One of the reasons college education is so high is because union activists and socialists want to send everyone to college whether they are qualified or not. When that drove up costs, government "aid" programs were invented, not for the benefit of students, but rather for the benefit of educators. Students became debt slaves in the process. The education mess has gotten bigger and more costly ever since programs were put in place to subsidize students, many of whom did not belong in college in the first place, but rather a trade school or apprentice program. Moronic Thinking of Jerome Sullivan Note the moronic thinking of Jerome Sullivan. He is actually complaining about costs of education dropping, complaining price wars will hurt low-income families. The fact of the matter is the more prices drop, the more people can afford to go to college. 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.

Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight Posted: 29 Sep 2011 11:22 AM PDT link if above video does not play: http://www.youtube.com/watch?v=QNq9MOc5CBY 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.

China Loan Shark Market Crashes; Scores of Chinese Business Owners Unable to Pay Black Market Loans Commit Suicide or Disappear Posted: 29 Sep 2011 09:30 AM PDT Here is an interesting email from reader "Kevin" regarding the crashing loan-shark market in China. Hello Mish I am a long time reader and want to bring to your attention on a new development in China: private business owners are disappearing or jumping off buildings because they can no longer pay off black market shark loans. According to national new paper Economics Information (part of state media Xinhua), on 9/22, Hu Fulin, owner of the biggest eyeglass manufacture of the city of Wenzhou disappeared, leaving behind 2 billion RMB debt. On 9/25, 3 more business owners in Wenzhou disappeared (owners of copper, steel and shoe manufacture). On 9/27, owner of "Zhengdeli", a shoe manufacture jumped off of a 22 story building and killed himself. Since April this year 29 private business owners have disappeared, all of them had over 100 million RMB businesses. 11 of the 29 owned shoe manufacturing businesses. An analyst from China Investment (China's Sovereign investment fund) pointed out that it's because they are squeezed by a rapid increase of component and labor costs. A rising RMB is also a reason why many export oriented companies are hit. In August, Zhou Dewen, President of Wenzhou Small-Medium Business Development Association said the profit margin of Small-Medium businesses in Wenzhou has dropped to under 5% and absent of policy changes, 40% of businesses in Wenzhou will go out of business by next Spring Festival (late Jan 2012) The complete article is here (in Chinese): http://www.jjckb.cn/2011-09/29/content_334954.htm. Another article http://finance.sina.com.cn/roll/20110929/005910558780.shtml (titled: China's Shark Loans Crashing; "Grey Finance" Brewing the Chinese Crisis) states that most of those owners have borrowed "private" loans (typically 70% of all loans), with MONTHLY interest rate ranging from 3% to 10%. About 89% of families/individuals and 59% of companies in Wenzhou participated in such "private loan" schemes. In Erdos (the ghost city you blogged many times), such "private loans" are more than 200 billion RMB with annual interest rate over 60%. Now they are crashing, causing rampant unfinished real estate projects in Erdos. Note that Wenzhou is one of riches cities in China (No. 3 in disposable income per capita), and is considered the "Birthplace of China's Private Economy". Wenzhou people are among the first that got in trades, manufacturing, export, and in recent years real estate investment/speculation. The Wenzhou economy is considered the "weathercock" of Chinese economy. Loan Shark Credit Crisis Brewing Courtesy of Google Translate please consider Gray Chinese-style financial credit crisis brewing area "Economic Information Daily" correspondent from the multi-confirmed the day before and then there were two causes of Wenzhou City, inability to repay loan sharks and jumping events. According to informed sources, the two business owners are the local shoe factory owner, debt of millions. Since April this year, Wenzhou, missing more than 80 business owners, the company closed, the event staff pay talks, since September alone, there are up to 25 cases. A local lender told reporters, "At present, only the flight of capital Longwan area estimated to have 100 million or more, many SMEs liabilities, the banks accounted for 30%, accounting for 70% civil usury." Crazy expansion of private lending market chaos Some sharks can reach up to 180% per annum. ... "many companies debt snowball, private lending market has not been given attention now has about 25% local to 30% of companies in trouble, some in the suspension or semi-shutdown state, but by the end of this class companies are more likely accounted for 40% to 50%. " Financial Earthquake Triggered by Loan Shark Business Also courtesy of Google Translate, please consider loan-sharking business owners who jumped to escape September 22, Wenzhou, Zhejiang Jiang Xintai largest optical company chairman Hu Fulin liabilities 2 billion fled, triggering a major earthquake Wenzhou business. Wenzhou Zhou German SME Development Association president, said Hu Fulin liabilities involving nearly ten thousand people, dozens of companies, including upstream and downstream Nobuyasu and creditors, the incident is still fermenting, the impact will be further expanded. Hu Fulin fled after the September 25 Wenzhou enterprises have three big boss fled; afternoon of September 27, Wenzhou shoe boss is profit because of debt problems from Wenzhou Shun Building, 22 Floor, Jin jumped to death. The translations are choppy, but the ideas very easy to spot. $SSEC - Shanghai Exchange -Daily Chart click on chart for sharper image China is down another 1% (not reflected in the above chart), to 2368 as of 2:00 AM Thursday. It closed at 2365. click on chart for sharper image The Shanghai stock market depicts a credit bubble that collapsed in 2008, partially rebounded, and is sinking once again. China did not decouple from the global economy, nor is there any reason to believe it will, or should. China's debt bubble, housing bubble, and copper Ponzi financing schemes are collapsing. Copper Ponzi Scheme: See Ponzi Financing Involving Copper Trade Gone Wild In China for details of a copper financing scheme now gone bust. Shark Loans: See Ponzi "Shark Loans" Fuel China's Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin for details on how loan shark operations fueled China's real estate bubble. Ghost Cities: I have done many stories on China's ghost cities, most recently World's Biggest Property Bubble: China's Ghost Cities Revisited; 64 Million Vacant Properties Property Loans Halted: Property Loans Halted in China's 2nd and 3rd-Tier Cities; Is China's Spectacular Real Estate Bubble About to Pop? All of these schemes are starting to unravel in a major way. 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.

Enron-i-sation of Europe; Is the Euro "Beyond Rescue"? Posted: 29 Sep 2011 01:21 AM PDT Steen Steen Jakobsen, chief economist for Saxo bank in Denmark discusses the Enron-i-sation of Europe in an Email "Macro Brief" The Enron-i-sation of Europe: Finding solutions through SPV's speak for themselves. Apart from the inability to being implemented (if German constitutional court is heard) it's also a slippery road towards permanent aid. Hiding debt in more and more obscure vehicles is similar to Enron having 1000s of SPV hiding the "real issue". Debt is debt. It needs to be paid back or someone needs to take a loss! New financial tax: This is major game changer – this is in my opinion the beginning of the end for Europe – the "new new" in this scenario is that G-20/EU seems to have found an academic documentation that the tax may not need be applied "universally" – they mention domestic taxes in India(not freely trading market) and UK. The suggested (not confirmed) level of taxes are 0.1 pc on shares and bonds (1 mio. EUR equals "tax" of 1.000 EUR) and 0.01 on derivatives or 1.4 pips on each side of EURUSD! This is MASSIVE tax……. And as such shows that my Maximum Intervention concept is now operating a top speed. Banks are now meeting around Europe to move their operation outside the EU. We are no longer doing two steps forward, three steps back, but one step forward and ten back. Furthermore the so called "Plan" for saving Europe is not reality. All my sources confirm, again and again, this is a desperate attempt to find the right path through this mess. The people in the know, realize there are no longer any good solutions only pain. The pain from here is either 2-5 years of recession or 10-15 years. Enron-i-sation & tax makes this week the new low in solidarity, rationality and solution seeking. Cash is king – and cash in UK, Switzerland, Singapore, and US even more King-ish. I remain EXTREMELY bearish on this. Notes on SPVs Investopedia describes the Special Purpose Vehicle/Entity - SPV/SPE What Does Special Purpose Vehicle/Entity - SPV/SPE Mean? 1. Also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt. 2. A subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments. Also called a "derivatives product company." Thanks to Enron, SPVs/SPEs are household words. Euro is "Practically Dead, Beyond Rescue" Bloomberg reports Euro Is Beyond Rescue in Debt Crisis, Szalay-Berzeviczy Says The euro is "practically dead" and Europe faces a financial earthquake from a Greek default, according to Attila Szalay-Berzeviczy, global head of securities services at Italy's biggest lender UniCredit SpA. (UCG) "The euro is beyond rescue," Szalay-Berzeviczy said in an opinion piece for index.hu., a Hungarian news portal, which he signed as former chairman of the Budapest Stock Exchange. "The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece's spirits." "It's one scenario among many, one which may lead to the breakup of the euro area via a banking crisis," he said in the interview. "This can still be averted. It primarily depends on the Germans, and secondly on European citizens, especially on how much the Greek population can tolerate." Szalay-Berzeviczy's "are his own personal view and do not reflect the position of the company," Claudia Bresgen, a spokeswoman at UniCredit in Munich, Germany, said by e-mail. "Beyond Rescue" and "This can still be averted" are logical opposites. Nonetheless, it's interesting to see such blunt comments from high places at major lenders, even if those comments "do not reflect the position of the company". For more on the twisted mess in Europe, please consider these recent posts Growing Isolation in Germany as Merkel's Allies Abandon Her; Polls Show 75% of Germans Oppose More Bailouts; Clock Ran Out of Time Merkel Prepares Market for Bigger Haircuts; Split opens Over Greek Bail-Out Terms; Needs vs. Fantasies Europe Plans to Tax Stock and Bond Transactions .1%, Derivatives .01% Despite US Objections; Expect More Crashes Should it Pass European Stocks Climb Most in 16 Months; Pimco's El-Erian Says "Europe Finally Gets It"; El-Erian is Wrong in Multiple Ways Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers I struggle to see how the Eurozone can survive intact. No currency union without a fiscal union has ever survived and the German court ruled out a fiscal union without a new constitution and popular referendum. Good luck with that given 75% of Germans oppose more bailouts. See the above articles for details. 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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