Ask Uncle Bill

Being Rich Can Be A Hassle

Saw this article on line.  http://biz.yahoo.com/special/luxury083106_article1.html

Here are the highlights, or lowlights, depending on your perspective.  Seems a couple of researchers (shouldn't they have something better to do?) researched private jet owners and found they have an average income of $9.2 million and a net worth within bragging rights of $100 million.

They spend $30,000 a year on alcohol which is a lot of beer no matter what anybody says.  Essential travel, whatever that is, takes up $98,000 a year.  Hotels and restaurants eat up (sorry) $157,000 a year and spas cost over $100,000.

It gets worse.  $147,000 on watches, $117,000 on clothes, etc. etc. etc.

How can you spend anything near that on watches and clothes? 

One interesting statistic is that the average ultra rich person (how can a ultra rich person be average?) is 57 years old.  I better get going.

Enough to want to make you a communist or a socialist or a Democrat.  No justice, no peace.  Up against the wall.

Well, not really.  I could care less about these people.  And somebody has to keep those watch and alcohol people in business.  I could care less about these people but I am not going to try and stop them or tax them or have them give to charity (most probably do) because social engineering through taxes doesn't work.  The prime example is the luxury tax.  Can't remember exactly which president came up with this disaster but I am leaning heavily toward Jimmy Carter.  Somebody got the bright idea to tax yachts and luxury cars priced above some level.  Yep, the yacht people went out of business and the car sales went in the tank. 

Do I care about the yacht industry?  Not really but a surprising number of people lost their jobs and some south Florida communities really got clobbered. 

The real reason I am not going to go too hard on these folks is that they pay the taxes in this country along, of course, with most people with fairly good paying jobs.  A statistic I remember from somewhere is that 5% of the population pays 55% of the taxes.  That means a lot of people are not paying taxes which means they have no desire for tax reform.  I am in favor of tax reform so if everybody paid taxes then they would be mad as well so we would get tax reform but we won't so we are stuck with this insidious systm that no one understands.

OK, here is the real reason I don't care about these people.  I don't want that much money.  What a hassle.  Money will not buy happiness (there's an original thought) but it will get rid of a lot of problems.  But too much money brings it own problems so I will be a Goldilocks here and tell you to strive for just enough but not too much.

When A Bubble Isn't A Bubble--Maybe

The last contrarian topic for this week is the REAL ESTATE BUBBLE.  As my investment advisor points out, correctly, a bubble is not a bubble if everyone recognizes it as a bubble.  The real estate bubble has been the most reported bubble, before the bubble burst anyway, on the planet.  Historical bubbles were seen as the new way of doing things, the new paridigm, and seen as bubbles only after they burst.  For historical reference please see The South Sea Bubble, the Tulip Bubble and the Dot.com Bubble.  All were viewed as bubbles ONLY after they burst.

So the real estate bubble is not a bubble.  It may be overpriced real estate and the prices will probably come down some but a collapse to zero, taking the rest of the economy with it, is not likely. 

Here is why the real estate market may decline some but not burst downwards.

--the economy is doing well.  The biggest drag on real estate prices is a bum economy.

--interest rates drive prices.  Higher rates mean lower prices and vice versa.  Rates have gone up some but not much.  (It is unfortunate that people buy what they can afford.  That is not as stupid as it sounds as the car industry is based on the concept.  Basically, the car salesman is trying to figure out how much car can you afford.  The same goes for houses--the interest rate goes down so you can afford more house.  Unfortunately, the price goes up taking away the advantage of the lower rate.  Finance can be cruel as well as easy.)

--supply is not going up.  Not sure I buy that one.  Here in Texas they are building houses like crazy.  Because we have more supply, the prices have not gotten totally out of whack.  Now in San Francisco, they aren't adding any more land so there are no more houses being built.  Same in New York or the north shore of Chicago.  But the invisible hand works and it works this way--people are moving.  The state of California and the northeast have negative migration meaning more people moving out than moving in.  That should impact supply and demand.  The supply stays the same but the demand (new buyers) goes down.

But one big caveat here--I have been totally wrong on California real estate for going on 30 years.  I thought my sister was nuts when she bought a house--she has made a fortune. 

But, so what, you say?  As newbies in the career world you have to live some place.  To figure out how to buy a house for 30% off anytime or anyplace, go see category 9 and figure out your strategy.

But you may want to reconsider that move to San Francisco after looking at this stuff. 

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=653672&mls=mls_ca_ba&cKey=p33kpq63&source=CAREIL

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=652096&mls=mls_ca_ba&cKey=371r355f&source=CAREIL

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=650110&mls=mls_ca_ba&cKey=14wjtrcn&source=CAREIL

When Bad News Is Good News--Kind Of--Oil Prices

Being a contrarian has at least one beneficial side effect--you tend to try and find good news in bad news.  As a French philosopher (whose name escapes me) said, "To those that feel, life is a tragedy.  To those that think, life is a comedy."  Oh, those crazy French.  A bit harsh but there is some truth in it.

So on to oil prices and why high prices are good, or at least not a tragedy.

First, prices aren't all that high historically speaking.  Inflation adjusted, the high was in 1979 which was a pretty miserable year all the way around.  If you can guess who was president then you win a prize.

Secondly, due to conservation and other things our energy use as a percentage of GDP is now 2.5% versus 4.5% in 1979.  That is a huge drop.  The 'other thing' is primarily a shift from a manufacturing economy to a service economy.  Technology and financial services are not energy intensive like manufacturing.  So outsourcing and a shift away from manufacturing is actually a good thing.  A good thing if you consider energy but not necessarily a good thing if you are an autoworker.  See yesterday's post for that discussion.  But the fact is that our energy use is not a big a deal as it was 30 years ago.

So why are oil prices high?  Because of demand around the world.  Those manufacturing jobs we switched away from are now in China and India and they are using oil to make our products.  Also, there is a fear factor in prices due to terrorism and the fact that God, as one old oil man told me once, put oil in dangerous places.  Hugo Chavez comes to mind.  There is also a fear factor due to natural disasters which seems appropriate on this the anniversary of Hurricane Katrina.  But count your blessings.  If Hurricane Rita had hit Houston the situation would be much worse.

Oil prices are also high because there is not a lot of supply out there.  There will be but this takes time.  Exploration takes awhile but it is going on.  Just look at the horizon here in Texas and there are rigs all over the place.  When the price becomes attractive it attracts supply which will eventually have a downward impact on prices.  Also, we have a lot of oil offshore and in Alaska but that is a political football which for now I will punt.

So oil prices are good mainly because it means economic growth is strong which means you have a job.  It doesn't make you feel real good to fill up your car but imagine trying to fill it up if you have no money because you have no job.

Finally, the real reason that high prices are good.  It makes us think of alternatives.  I'm not talking about buying a Prius.  If you do that you are just showing off.  The savings from the gas will never make up the premium paid to buy this billboard from Toyota.  Buy a gas Honda or Toyota and enjoy the savings without paying the premium.  But back to alternatives.

As most readers know we are planning a new house and here is what I'm considering--solar hot water, solar electricity, energy efficient windows, foam insulation, geothermal heat pumps, wind power.  That last time we looked at stuff like that was 1979.  But this time I'm going to do it.   

Economics--The Dismal Science Part Two--The Trade Deficit

Deficits aren't all bad, part two.

The next one is the Trade Deficit which a lot of people, mostly politicians, pick up as bad because we are outsourcing our jobs.  That is true--an autoworker in Detroit is going to get outsourced to an autoworker in Seoul.  That is economic reality as harsh as it may sound.  And autoworkers have, as we used to say in the risk management business, long tails.  They stick around a long time and get a lot of benefits that cost a lot of money and they get paid if they don't work and go into a job bank.  I'm not knocking the autoworker--if the union can get the deal, ok.  But the 'invisible hand' of economics will do it's job and eventually GM and Ford will go away or form an 'alliance' or go bankrupt.  As one economist said,  "GM has been trying to go broke for a long time."

The autoworker's kids are more likely to be working at HP or an oil company or McDonalds and not flipping hamburgers.  They are probably management. 

But before we get into a big argument about job sourcing, let's look at some facts or, as they say, empirical evidence.  Do you want to live in an economy that has a trade surplus or a trade deficit?  You can pick to live in either the UK and the US or Japan and Germany.  This is for economic reasons only--a preference for sushi or beer is not allowed.  Economically, I pick the US and the UK.  And both countries have run trade deficits for the last 25 years.  Germany and Japan have been in a trade surplus mode for the last 25 years.  GDP growth in the UK and the US has been about double that of Japan and Germany.

So a trade deficit is good?  Well, again, the empirical evidence says that it is all not bad.

Where does the money go?  We buy goods from China, say, and we pay for it.  That's the current account deficit of which the trade deficit is part.  And then the money comes back into the US and the UK as a capital account surplus.

Huh?  The Chinese and everybody else send the money back to buy bonds and stocks and sometimes, US companies.

This is often painted as a great trap and the Chinese and everybody else are setting us up and they will pull out all their money at the same time and we collapse.  That's pretty smart.  Or another viewpoint is that they like us and want to invest here so we can run up credit card debt buying their stuff.  Maybe.

I don't think either one is correct.  People invest THEIR money where they believe they will get the highest return.  If everybody decided to pull their money out tomorrow where would they put it?  Switzerland?  I don't think so.

Foreign investors invest here because they get higher returns here because of our economy, our infrastructure and, most importantly, our innovation.  As long as we innovate we will attract capital and the deficit will not matter.  Put in trade restrictions or stunt innovation in some way (I don't really know how but somebody will think of something) and watch out.

Conspiracy theorists can jump all over this but it is the way the world works.  When you trade with somebody, you have a partner.  When you don't, you have an enemy.

Deficit Doesn't Necessarily Mean Dumb

Back to Fisher.  Ok, deficits are bad, maybe--deficits in bank accounts, deficits in grades, deficits in general.  The giants of all deficits is the government deficit.  And the politicians, some of them, wail against deficits while they vote for more spending, especially in their districts. 

First, here is how deficits occur.  Federal income (taxes) is offset by Federal spending.  If spending is greater than income then you have a deficit.  And that is bad.  Maybe. 

In some of my categories I have railed against debt.  But not all debt.  If you get a job that pays 20% more than your old one but you need a car to get there then borrow the money at 5% or 6% and buy a Civic.  Don't buy a Hummer and say it is a good financial move.  If you can buy a house and fix it up and make a profit, go for it.  If the government has to borrow money to make sure a B-52 can get up in the air, I'm all for it since my son is in it.  Debt is not bad if the purpose is good.  If the purpose is to borrow money on a credit card to buy lunch, I'm against it.  Take your lunch. 

Back to the facts.  Fisher says that deficits are not bad, at least not bad for the stock market.  They did a bit of historical analysis and the stock market performs better after a borrowing binge than a surplus binge.  They tracked surpluses and what the market did 12 months and 36 months after the high of the surplus.  Did the same for deficits.  The stock market was up an average of 3.5% 12 months after a surplus peak and 4.2% after 36 months.  After a deficit peak, the markets were up 22% after 12 months and 35.7% after 36 months.  Coincidence?  Maybe.  But I don't think so because deficits spur spending that spurs production that spurs profits that spurs stock gains.  A simplistic analysis but hey...

Then you hear on the news and in the papers that the DEFICIT is a record.  Depends on how you measure records.  In absolute dollar terms, yes, no question.  But Fisher and most economists and finance people look at it as a percentage.  Percentage of what?  Gross National Product.  If you think of the US as a company then the debt is financing the company.  How much debt is being used.  As a percentage of GNP, the deficit is 2.3%.  Is that a lot?  Not really.  The deficit in 1975 was 6% and that period was a mess.  And got worse.  Believe me, you don't want to go there.  So the deficit is not out of control if viewed as a percentage of what it buys.

So what is the optimal percentage of GNP?  Well, the percentage was last 2.3% ( same as today) in 1950 and the '50's (economically speaking) were gangbusters.  Also, the deficit was pretty high in the Reagan years as he pumped up the pressure on the Russkies and we know what happened to them.  Also, know what happened to the stock market which took off like a rocket.  Till we had surpluses in the late 90's that led to...the biggest crash since the Great Depression.  This is not to say go hog wild for deficits.  Check out Argentina or Brazil for that school of finance.  But a certain level of debt is good for companies as well as countries.

Why?  Because there is an optimal level of debt vs equity in countries as well as companies.  I will not go into the finance theory on this but most companies have about 65% debt and 35% equity.  Just how it works.  Any less and you are vulnerable.  I went to work for a company and the first thing I looked at was the debt/equity ratio.  Not enough debt.  We got taken over in less than a year.

That goes for countries as well.  Too much equity (taxes) is bad because it takes money out of the pockets of the citizens.  Too much debt is bad as well because the lenders will say Hold It after a while and then you can't borrow any more.  You're stuck.  So watch the deficit as % of GNP.  Right now we are ok.

What about the Children?  I am so sick of this.  We are passing on a huge debt to our children.  Good, the ungrateful little brats.  Actually we are not.  First, again, it is not so huge as a percentge.  Secondily, nobody rings a bell and says pay up.  If the debt does not get too large as percentage of GNP and the economy can service the debt, then the debt will never be called and our Children will be ok.

That's a lot of finance.  If somebody has a better answer to the Deficit, let me know.

Investment Advice and Advisors

As some readers will remember, I have an investment advisor.  You don't need one.  I do.  Why?  Because I'm older.  You young 'uns can live through just about any economic disaster but I can't.  Not that I haven't.  My philosophy when the market was going up was It Will Go Higher so I just held on to my stocks.  When the market went down I would admit it was too late to sell so might as well hang on.  Plus there were tax considerations.  So I did what I do best--nothing.

The crash of 2001 was a bit of a wake up call.  A market that goes down 60% will do that.  So one day I looked through the rubble, analysed the portfolio and said This Makes No Sense.  Went looking for advice and, boy, did I find it.  Every shoe salesman on the planet is now in financial planning.  Their credentials are not very good and most work for large firms that do nice, color pie charts that always come down to 60% equities, 35% bonds and 5% cash with the allocations becoming more conservative as I head to the old folks home.  Hell, I can do that.

I was looking for somebody that would save me from myself, somebody that would get me off the tracks as the train came out of the tunnel.  I found him.  Well, at least, he says he will.  I want somebody that is objective enough to say Hey, this market is way over bought (sold) and will take action without incurring a bunch of tax costs.  Tax costs can be avoided with the use of puts and calls and options and black magic but I did my time in foreign exchange and that was enough fun for me.  The guy I found (actually he found me as I got a bunch of junk from him over the years since I subscribe to Forbes) is Ken Fisher and he is a columnist for Forbes. 

Met his guys, poked at it, turned it over, talked to other investment advisors that bad mouthed the group (every group puts down the other, it's a measure of degree-Fisher came out pretty good) and looked around again.  And found nobody, except Fisher, that said they would get me out of the market if they thought it was out of control.  Vanguard won't and Fidelity won't which is good because you, being young you, should be in the market.  Me, I've got to protect some capital.

So went with Fisher Investments.  Figured he was in Forbes and if Steven Forbes fired him then time to look at firing him as well.  So far Forbes hasn't.

Also, Fisher is kind of a show off, a bit of a bomb thrower.  He tends to go against the tide and is, thus, a contrarian.  So am I so I enjoy his stuff.  When I don't agree with it I will reconsider.  But by then it will probably be too late. 

Fisher likes to poke holes in conventional thought and this is what we will discuss because it is fun to look at the news and get all excited and then, sit back, and say "Does this really matter?"

Fisher sends out quarterly reports on CD's and host lunches twice a year.  Since my computer had to be replaced after the book blew it to pieces I can now listen to the quarterly reports.  Just got one and they went after a few things that show up bad in the press all the time that really may be good for you, the investor.

The topics are-

Why budget deficits are good for the market and you

Same for trades deficits

High oil prices will make you rich

Is there a real estate bubble?

I was going to do budgets today but I have to go find a house framer so will do it tomorrow.

   

Selling Out

Promised to do a few posts on contrarian investment advice but a big deal popped yesterday in the multimedia world.  Have to keep this short as I think the Wall Street Journal is going to want to do a cover on this.

I'm proud (well, maybe proud isn't the right word) to announce that a large multi-national financial institution has concluded, after lengthy negotiations, a major advertising relationship with...ME.  (At this point, the crowd goes nuts with cheering and yelling.)

Here's the background--I got an e-mail, totally unsolicited, from a lady named Erica.  Seems Erica works for a company that does advertising for that large, multi-national financial institution.  (Note to all direct mail and telephone sales execs out there--If you are dealing with males, name all your female representatives Erica.  Even if they are Lindas or Pams, have them be Ericas at work.  To any male out there, Erica means Viking princess.  And men love fantasies about Viking princesses.) 

Anyway, Erica wanted to know if I was open to letting that large multi-national  advertise on my site.  Initally, I thought no but Erica and that Viking princess thing took over and I put up the good fight but after about 30 seconds, I folded.  Sure, why not?

Well, one reason why not is that I don't like sites cluttered with banner advertising and pop ups and stuff.  I want a dignified site filled with wisdom and class which is why I have a picture of a dog on the front.  Actually I really do dislike all that advertising but, hey, this is just one and if I don't like it, I cancel.  Right?  Well, not really.  The contract is for a year.  Guess Erica assumes I will be around for a year.  Hope she is right.

Ok, stuck for a year but that is ok.

As far as the fee--well, some things are confidential.  Actually, confidential because I don't know what I should get and if I put it in here and everybody starts laughing, well then I know I did not get  a very good deal.  So there.  But if anybody wants to spill the beans and let me know what they charge on their sites, I sure would like to know.  But for now, I'm not saying.  Looking stupid is not one of the things I enjoy in life.

So that's the mega merger for today.  Don't know when I will hear from Erica next but assume soon and then the dollars start rolling in.  As a friend of mine once said about a deal,  "We're talking tens of dollars here."

Contrarian finance tomorrow.

 

My Kind of Survey

Told you so.  Told you University of Texas should be ranked higher and it is---NUMBER ONE party school. 

What is interesting is the Bottom Ten party schools.  And they are:

1. Brigham Young

2. Wheaton College

3. College of the Ozarks

4. Grove City College

5. Naval Academy

6. Coast Guard Academy

7. Air Force Academy

8. Queens College

9. Wellesley College

10. Calvin College

Not sure about Brigham Young.  My only experience with the school was following Jim McMahon, the one eyed ex-Chicago Bears quarterback who took them to their lone Super Bowl in 1985.  Jim showed up at training camp in a limo, in a tuxedo, drinking a beer.  That guy had to know where the parties were.

Wellesley at number 9?  Didn't Hillary go there?  My sister was going to but our dad put the stopper to that one--too much money.  Probably saved my sister from four dreadful years.   

Ok, enough about school.  Back to finance and making money. 

Take a look at this http://finance.yahoo.com/columnist/article/yourlife/8168.  The title is "Do I Hear Cannons?"  The theory is not to buy stocks when everybody else is but buy them when no one is buying them.  In my category on investments, my quote is similar--Buy when there is blood in the streets.  Which was actually said by a Rothschild but let's not quibble.

This article is by Ben Stein--late of "Ferris Bueller's Day Off" and the great TV show "Win Ben Stein's Money." 

Read the article but the theory is summed up here.

Buy at the Bottom

"But," I thought as I sat in my little seat, my head reeling, "this makes no sense at all."

In fact, their advice was precisely opposite to the truth: The exact time to buy is when stocks are low -- when there's fear in the market and sellers are flocking to sell.

That's when you get the same stock -- or the same basket of stocks if, like me, you buy and/or hold ETFs or mutual funds and variable annuities -- with the same long-term prospects at a bargain price. When everyone else hates the XYZ Widget Company because of rockets flying over Israel and Lebanon, it's still the same company, but you get it at a discount.

Eventually, the fear will go out of the market. Economic conditions will right themselves. There will be a ceasefire in the Middle East (alas, probably only a temporary one) and stocks will rally. It may take awhile, but it always happens. And then the buying opportunity is nowhere near as good.

Another way of summing it up is the concept of sales.  When there is a sale at Best Buy or Macys, people flock there.  They don't flock to the stock market when the bottom falls out.  They should but they don't.  Well, not all don't.  The smart ones jump in and buy. 

In the 2001 collapse, a collapse that scared the heck out of me, I was talking to a financial planner who had just got off the phone with a client who ordered him to sell his stocks--all of them.  Why did the client want to sell?  Because the stocks were going to zero.  Yes, zero.  The planner moaned that the client was basically saying the US economy, all of it, was worth less than the stapler on his desk.

Of course, the client was wrong and lost his shirt.  Bet that made for some interesting conversation around the dinner table. 

You don't have to worry about this if you are investing on a regular basis.  But read the article anyway to make yourself feel better.

In the next couple of days we will look at a few more "bad things" that may actually be good for you, you and your wallet.

Rankings

As mentioned last week US News and World Report has come out with their listings.  I know they are wrong.  They have to be because my alma mater, the University of Illinois, came out ahead (41) of the University of Texas (47).  I've seen both and I'll take Austin anytime, anyplace, anywhere.  And doesn't a number 1 football team count for anything?

I went to the web site of the magazine.  A side note here--there are three news magazines in the US and US News and World Report is the smallest so I place them in bottom tier of their group.  Dead last in my ranking system.

But back to the web site.  After a cursory look I couldn't find any information on how they determine their ranking.  Mentioned this to a friend and somehow he did but I didn't so this is from memory. 

Endowments--seems a lot of weight is given to alumni giving.  This is naturally going to rank the private schools higher since most alumni of public schools give nothing, I mean nothing, to their schools.  I mean, what are taxpayers for?  I went to two public universities--the University of Illinois and the University of Vienna.  Haven't heard a word from them in 30 years.  Went to Stanford and Northwestern for a bunch of bad seminars and my mailbox is clogged with junk from them.  If alumni giving is a criteria, this ranking is a joke.

Class size--who cares?  At large universities, the professor gives a lecture to 200 students and then you meet with teaching assistants to discuss the lecture.  This probably drives the 'class size' criteria right off the charts.  But the classes I remember were the large lecture halls with the best professors.  So what if you're sitting with 200 other people?  These guys were good.  I'd rather get first hand information from a great professor surrounded by 200 people than some mediocre professor in a class of 25.

Location--Univerisity of Illinois or University of Texas.  Location wise and night life wise, UT wins.  Hook 'em.  I assume some of these editors visited the sites but maybe not.

Cost--obviously a factor to parents but apparently not to editors since private schools OCCUPIED the top 20 spots.  Not 50% or 80% but 100%.  How stupid is that?

Financial Aid--we've been through this.  If you want to graduate with $150,000 in student debt to attend a top 20 school, go ahead.  Not me.

Admissions--public schools are under different pressures than private schools.  In Texas the courts knocked down breaks for minorities so the legislature came up with letting the top 10% graduates of ANY high school automatic acceptance to any state school.  That has to drag down SAT scores.  This is something Stanford and any private school doesn't have to worry about.

Freshman Retention Rate--who cares?  Just because you stuck around that means you had a great experience?  Illinois, when I went, would always over admit because they knew that X% were going to quit or flunk out.  In fact, they tried to flunk you out early because they knew you were going to flunk out eventually if you were leaning that way.  Freshman rhetoric was designed to make you quit.

Student body--and that academic buzzword, diversity.  Hey, the University of Illinois was founded to serve the people of Illinois just as Texas is for Texans, Iowa for Iowans and so on.  Stanford gets people from all over so their 'diversity' rating by definition is going to be higher which I guess is good in the ranking biz.

Enough.  Because here is the real reason these rankings don't mean anything.  An example--Rice University is ranked number 20 in the top 20 of the US News and World Report Rankings.  The Times Higher Education Supplement (Times as in the London Times, the most prestigious newpaper in the universe) ranked Rice at NUMBER 150.  Did these guys even go to the same place?  How does one publication rank a place Number 20 and another publication Number 150?  I don't know and I don't care because these rankings don't mean a thing.

What matters is what you get out of your college experience--good or bad. 

The absolute single best bit of advice I ever got, I got from the University of Illinois.  Freshman week and I went to see my counselor.  Had my course catalog, three ring binder, ready to go over my courses with my wise sage.  Walked in and they guy was yelling into the phone with a picture of Chairman Mao (this was the Sixties) behind his desk.  Took one look at me with a what the hell do want look and hung up.  I started to say something, he held up his hand to stop me and said " I got to go.  You figure it out.  You're on your own."  And with that he was gone, probably to blow up some building somewhere since he was the head of the local SDS chapter.  For those not in the know, SDS was the Weathermen who were the biggest bunch of left wing bad guys in sixties.  Don't know what happened to him, probably in jail or dead.  But I took his advice--from then on I was on my own and I figured it out.

Don't think that was a criteria for US News and World Report but I owe Illinois for that one. 

Stanford or ? 2

Got a few responses--pretty good, too.  One said the weather was better.  Can't prove that by me.  When I went to Stanford the first two weeks were 100 plus with no air conditioning in the stupid dorm they had out there.  Mark Twain said the coldest winter he ever spent was a summer in San Francisco.  The hottest summer I ever spent was two weeks in Palo Alto.

Another response was more jobs.  Illinois is basically a feeder school for the Chicago area so think the job thing is pretty much a push.

No, the real answer is that Stanford has a better golf course.  Actually, Illinois has two golf courses but they don't match up to Stanford.  I mean, c'mon, Tiger Woods went to Stanford.  I doubt he even looked at Illinois.

The point is that I am not a big fan of going to a 'name' school.  As pointed out yesterday there is one big advantage to a name school but if you don't have the smarts on the job, you're going to be out of a job no matter where you got your MBA.  If you have the money and the smarts, go for it but if not, don't worry because THEY ALL TEACH THE SAME THING.

For example,  me, again.  I am now twenty years out of Illinois MBA school and doing pretty well when my boss calls me in and says I'm going to the executive program at Harvard.  Dammit, Harvard doesn't even have a golf course.  Eight weeks and no golf in the middle of the summer.  Well, ok, one does have to make sacrifices for the career.  Then there was some political shennigans which I never understood or cared about because my boss, called me in and said "How about Stanford?"  No, not that, never.    

Well, ok.  My sister lives just down the road, she had an extra van that could carry lots of golf clubs, and the weather supposedly was better.  Plus, I even had a reason for going--I wanted to see if a big name school was "better" than everything else.  So off to be a Cardinal.  (Stanfordites are not the Stanford Cardinals, they are the Stanford Cardinal which makes no sense to me.  They used to be the Stanford Indians but PC got in the way so they are Cardinal.  Which still may not be politically correct if you are a Catholic or a bird.)

There was another reason for wanting to go.  The tech boom was in full swing and there was the New Paridigm.  I don't think I spelled that right but you don't hear about it now because it blew up with the tech boom implosion but back then it was hot.  So off to see the Wizard of Stanford and sit at the feet of the tech gods.

Got there and what a let down.  The dorm was a dump, an un-air conditioned dump, the business school looked like it was designed by Communist Party architects, and there were 200 guys and 12 women.  Business women.  We won't go anywhere with this but you get the picture.  The highlight was checking out the golf course.  Note:  There has since been the construction of the Charles Schwab center to house all future attendees.  I don't care, I was in a dump.  It was so bad that some of the foreign 'students', who had more money than all of us, actually stayed the whole two months in hotels.   

Then we got the class schedule.  Accounting--ok.  Finance--ok.  Marketing--ok.  Organizational Behavior --code for Human Resources, a reluctant ok.  Business Law--ok.  Operations--oh, oh.  But at least no Statistics.  But except for Statistics the classes looked pretty familar since they were all the classes I took at Illinois.  But, of course, the world has changed and I will learn all new stuff.

Nope.  New stuff same as the old stuff.  Accounting was taught by Charles Horngren, now retired, but the GUY in accounting.  Nice enough guy but a Gross Margin is still a Gross Margin and a debit is still...you get the picture.  Business Law was not as good as at Illinois--had a great professor there that was hilarious.  The guy at Stanford was ok.  Finance.  Ok, has to be a bunch of new stuff.  Nope.  Discounted Cash Flow--the same thing I learned and applied twenty years ago.  Finance was a little bit different in that they were really pushing Leverage which is debt instead of equity and really helped when the whole economy went in the dumpster four years later.  Leveraged buyouts--been there, done that. 

Finally, Marketing.  Marketing was different.  The marketing professor called in his wife who was some marketing VP at Sun and some poor innocent from, I think, General Mills.  The General Mills guy started babbling about test marketing, focus groups, gradual rollouts, IRR's and DCF's and I couldn't get enough.  Made me miss the old days at Quaker.  Then the professor cut the poor guy off at the knees.  There was blood in the aisles. 

His wife (I think there was a case here for conflict of interest but I let it go) went on a rant about getting the product out there first and nationwide, no worldwide.  Then she said, even if it didn't work.  What?  Her point was be first and then fix it.  I was schocked but, hey, I'm from Illinois.  What do I know?  I looked around in disbelief but my fellow students just nodded heads, no protests.  Obviously, the guy from General Mills was vindicated a few years later and I doubt if that lady works at Sun anymore.

The point?  Things don't change much.  That includes professors.  The Stanford people were good.  Good, not great.  Worth the price?  It was to me because I wasn't paying for it.  And I got to play a lot of golf.

But if you are paying for it and you want the best deal and you want to learn and not just say you went to Stanford or Harvard, I would check out the alternatives before coughing up the big bucks and heading to Cambridge or Palo Alto.  But that is just me.

Monday, a note on College Rankings.  I hate that stuff.