Hagwon Hogwash

Recently, the Korean government has decided to crack down on hagwons (local cram schools) that are "overcharging" students. Apparently, the Ministry of Education has developed a system to calculate "appropriate" fees using data on teacher salaries, revenue, and other expenditures.

To be honest, I don't understand why the Ministry of Education has any jurisdiction or right to control private education. This is why it's called private education and not public. Harvard University currently charges $47,215 a year. Should the U.S. Department of Education force Harvard to charge "appropriate" fees? I guarantee you if the enrollment at Harvard decreased, the university would lower tuition fees.

This is the same with hagwons. If the fees become so high that students stop attending, they will naturally lower the tuition. In addition, smart hagwon owners may decide to lower fees to wipe out the competition. This is the free market at work.

If the government decided to close all hagwons, students would go overseas in droves. In addition, cunning hagwon owners would set up shop in nearby countries where the Korean government has no control. In fact, I met a Korean hagwon owner in the Philippines. This is capitalism at work.

When public schools fail to satisfy the educational needs and requirements of students, private schools will rise. Businesses always emerge to fullfill a need. This year, the Korean government will spend 38.7 trillion won on education. Wow! (The U.S. spent 56 trillion won.) Perhaps the Ministry of Education should try to find ways to improve public education, spending, and management. Then, there would be no reason for hagwons to exist.

What do you think?

We all need more Energy

Recently, the price of a barrel of crude oil as plummeted. It's around $70 a barrel as I write this. This is a huge drop from where we were in the summer, when prices peaked at around $147 a barrel.

Unfortunately, this drop in oil prices means:

1. Alternative energy is dead. People are creatures of habit, when oil is cheap, there is no need to switch to other forms of energy. In addition, alternative forms of energy become cost prohibitive when gas is affordable.

2. When gas prices are cheap, people will drive more. When oil was at $147 a barrel, the parking lot at HUFS was almost empty. Now, it's full again.

3. Oil consumption will continue to rise. Based on my last post about crude oil, in 5 years crude oil demand may reach 94 million barrels a day.

This is more than the world can produce.

4. OPEC will reduce production. (They will do it later this month.) It's nice when you can dictate world oil prices.

Therefore, I'm bullish on energy stocks. Most of these stocks pay a 3-4% dividend. Patience is a virtue, but getting paid while you wait is even better.

Let's see if people around the world start buying gas guzzling SUVs again. Finally, I still see plenty of cars on the road.

Some Great Scenes

One of my favorite sitcoms is "Taxi." There are few characters funnier than Jim (a guy who drank too much and used too many narcotics). He's taking a driving exam here:



I also used to watch a lot of "I Love Lucy." No. I'm not 59 years old. This is one of my favorite scenes. She is working at a candy factory.


Here's a classic scene from one of the last great sitcoms - Seinfeld. Jerry's girlfriend is deaf, but she can read lips.

There are very few sitcoms on television nowadays. It's a shame. Has our society become so serious that we no longer enjoy comedies?

News mp3 files

I'm going to make it easy for my students to download some mp3 files.

60 Minutes - House of Cards mp3 files

Warren Buffett's Opinion

Warren Buffett thinks people should be buying U.S. stocks now.

This has only happened 3 times in history. On Nov. 1, 1974, he said: "Now is the time to invest and get rich." On August 6, 1979 he told people: "Those awaiting for a better time for equity investing are likely to maintain that posture until well into the next bull market." Finally, on November 22, 1999 he stated: "Investors in stocks these days are expecting too much." Historically, it seems Buffett is about 3-6 months early on his predictions.

Here's his article:

Buy American. I Am.

By WARREN E. BUFFETT

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

End.

No money? That's one of the first mistakes of every investor. They put all their money in at once. Investing gurus always leave cash available for opportunities in the future.

On Track

For students past and present that studied this video, I've uploaded all of the mp3 files. You can download all of them at http://andyteach.googlepages.com/ontrack.

The key to using these mp3 files is to listen and try to mimic or imitate the speakers. You can do this alone, but you can't do it in the library. You have to practice speaking if you want to improve your speaking!

So, listen for a few seconds and repeat it out loud.

Enjoy!

Is Sarah Palin a Moron?

Decide for yourself.  

Bill Maher definitely thinks so.