Postcards: How Did This Happen?

They're at it again... buying votes and ignoring the underlying problems. But they're politicians, and they know better, right? Don't get mad... don't try to get even. Just get equal on inflation. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: How Did This Happen?]( They're at it again... buying votes and ignoring the underlying problems. But they're politicians, and they know better, right? Don't get mad... don't try to get even. Just get equal on inflation. [Garrett {NAME}]( Apr 8   [READ IN APP](   Market Update: It’s a pretty muted day as markets remain on edge ahead of this week’s release of the Consumer Price Index. Not a lot is happening, but it is good to see that volatility is currently dropping. The Russell 2000 is back in positive territory after a slight move above its 20-day moving average. The markets are playing the deviation band game today on extremely low volumes. Relative volume on the S&P 500 SPDR ETF (SPY) was at just 50% at 1:45 pm. Notably, it has been a positive day for real estate and utilities, both interest-rate-sensitive sectors that could face notable swings based on the CPI and PPI readings this week. We’re still being cautious, especially after last Thursday’s decline. --------------------------------------------------------------- Dear Fellow Expat: Last night, I shot a video with a question at the end: “Are you better off than you were four years ago?” As I noted, I took a substantial hammer post-COVID. Over the last few weeks, I feel I’ve finally come out of that tunnel. There were plenty of bad habits and too much worrying about things I could not control. I will still cover these issues because they impact our money and national fiscal situation, and we can exploit them accordingly. But I’m done consulting on these issues because no matter how hard I push… the damn stone just won’t move. What’s the story today? Same old, same old. Subscribe now Questionable Value There’s a new student loan forgiveness program. Writes CNBC: More than 25 million federal student borrowers owe more than they originally borrowed, according to the Biden administration. It estimates that, if its new plan is enacted as proposed, borrowers will get up to $20,000 of unpaid interest on their federal student debt forgiven, regardless of their income. I paid mine off, but that’s not my grievance. My grievance is that this forgiveness program maintains the status quo. The program is designed to tackle “runaway interest” - again charged by… checks notes… That’s right… the government. This new plan doesn’t address why schools get away with increasing tuition costs and a lousy product in general. Or why we have $1.63 trillion in student debt (a figure that has surged over the last 14 years) in the first place Sure, administrative expenses have exploded over the last few years, with some situations where a major university has more administrators than freshmen. But more importantly, this doesn’t address that the government is the only game in town regarding undergraduate student loans. The government took over the student loan industry with the passage of the Affordable Healthcare Act of 2010 (and, golly, didn’t healthcare get more affordable with all that public policy?) This is a nation that will arrest you for having a beer at 18, force you to sign up for military service, and… Will offer you $150,000 in student loans with no collateral or consulting into how you plan to repay it. Even if they just sent students an email that said, “Study finance or engineering,” it would go a long way. But they don’t… because this is a racket. Worse, it’s also a perverted version of indentured servitude, and it happens right in front of us. So, now they will forgive the loans and hope to gain votes in the process. Who qualifies? Well, leave it to CNBC not to ask questions… The highlighted emphasis is mine. Who wants to tell them? What university - today - can’t be legally presented as one of “questionable value?” Especially based on many of the degrees offered that offer minimal financial upside. STEM vs. Liberal Arts In the aggregate, the return on investment (ROI) of a college degree is strong. But you must drill down into the individual majors to understand what’s wrong here. You need to know what majors to pursue. In 2022, I did a deep dive into the issue of ROI using data from the Foundation for Research on Equal Opportunity (FREOPP) for Luckbox magazine. I discovered a few disturbing things at my alma mater, Northwestern University, and Dartmouth University. For example, a Dartmouth mathematics degree provides a lifetime ROI of $2.68 million when adjusted for completion of the degree and underlying spending. A computer science degree returns $2.11 million. An economics degree offers $1.8 million. Political science, engineering, physics, and philosophy (likely feeding into law schools) all generate more than $1 million in lifetime ROI. But several other degrees at Dartmouth should come with a Surgeon General’s warning based on the ROI and impact on one’s financial health. Cooper’s data suggests a lifetime ROI for Fine and Studio Arts at negative -$172,362. A degree in cultural, ethnic, minority, gender, or group studies: negative $-107,391. Students can sign up for almost any major of choice, yet it remains questionable if they ever receive financial guidance on their investment. Of course, Dartmouth isn’t alone in the vast disconnect between ROIs in STEM and liberal arts degrees. Take Northwestern University (note: number of Luckbox employees are alums). According to FREOPP, the ROI of an industrial engineering degree at Northwestern is $1.49 million. By comparison, the ROI of a degree from the Medill School of Journalism is about $686,000. For Ethnic, Cultural Minority, Gender, and Group studies, it’s negative -$276,685. And for someone in the theater and drama program – where Seinfeld’s Julia Louis-Dreyfus attended – the ROI is negative -$522,273. Let’s be honest: That’s a half-million dollar wager - a bet that you’ll be discovered as the next major star in film or television. But we know the odds suggest that such a degree will lead to bartending, working at Starbucks, or outright abandoning the profession to pursue higher pay. This Explains A Lot If You’re Non-Partisan The core issue here is that the government got involved… because everyone should have a right to college. Just like the government got involved in the housing market because everyone should have a right to own a house… Just like the government effectively took over 25% of the U.S. economy a decade ago because everyone has a right to health insurance… Now, the debate on whether these things are rights, I’ll leave to the voters… But in each case, costs went up, moral hazard increased, and quality… well… you be the judge. I’ll argue that quality went down in all three cases. After these results, we still haven’t discussed the macroeconomic issue and the fiscal impact of these decisions at the government level. Instead, the media personalizes “loan debt” to a few people so we feel good about this fiscal decision. They ignore that this is essentially a bandaid to distract us. I highlight the "Bennett Hypothesis." For everyone in the back, the Bennett Hypothesis again suggests that increasing government subsidies for student tuition can lead colleges to raise tuition costs. That theory, named after former Education Secretary William J. Bennett, implies that well-intentioned aid could inadvertently make college more expensive rather than more accessible. Did that happen? You be the judge. In 2017, A. Robinson, Ph.D., noted that college tuition]( has drastically outpaced inflation levels over the last half-century. For example, between 1978 (the first time we tracked tuition as its own CPI metric) and Q3 2017, college tuition increased by 1,335%. The CPI was 293%, medical costs 704%, and home construction 511%. (This is just a reminder that the things that matter go up due to monetary inflation, while technology is largely deflationary.) I need to do a deeper dive into this data, but I naturally assume that prices are much higher when adding in the last seven years. [Source: Jenna A. Robinson, Ph.D.]( “How Did This Happen?” I’ll leave you with this… A New York Times columnist - who calls himself a money expert - wrote this article last week. It had this headline. The story highlights that Vanderbilt is spending $119,000 per student. How did this happen? Well, there is one administrator for every two students at the school - that’s a start. That’s never mentioned, though in the piece. What else isn’t mentioned? There is zero mention of U.S. student lending practices, the lack of consulting with students on majors and related ROIs… or the "Bennett Hypothesis." This is an expert on college tuition and author of two books on the subject. And he doesn’t even mention these financial drivers of tuition costs. HOW DID THIS HAPPEN? The Investor’s Takeaway The lesson here is if we don’t address the underlying issues—government subsidies combined with the Fed’s inflation targeting—then the cost of things that matter will continue to rise. I’m talking about food, housing, energy, education, and other things that matter. So, if you’re an investor - trying to navigate this decade, be sure to take a playbook from the 1970s and tackle the types of investments that will absorb this inflation and provide a solid combination of price appreciation and inflation hedge against the inevitable. Turn this crisis into an opportunity. Our Model Portfolio strategy taps into these sectors, emphasizing reversion potential for even greater gains. Stay positive, Garrett {NAME} Secretary of Defense   Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()