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Thursday, October 30, 2014 8:53 PM


Looking for a Good Education at a Low Price, Perhaps Free? Head to Europe


On June 7, 2014 I wrote Looking to Drastically Reduce College Costs? Study Abroad!

Yesterday, a writer for the Washington Post expressed the same opinion.

Please consider 7 countries where Americans can study at universities, in English, for free (or almost free).

Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they've done the opposite.

The country's universities have been tuition-free since the beginning of October, when Lower Saxony became the last state to scrap the fees. Tuition rates were always low in Germany, but now the German government fully funds the education of its citizens -- and even of foreigners.

What might interest potential university students in the United States is that Germany offers some programs in English -- and it's not the only country. Let's take a look at the surprising -- and very cheap -- alternatives to pricey American college degrees.

Germany

Americans can earn a German undergraduate or graduate degree without speaking a word of German and without having to pay a single dollar of tuition fees: About 900 undergraduate or graduate degrees are offered exclusively in English, with courses ranging from engineering to social sciences.

Finland

This northern European country charges no tuition fees, and it offers a large number of university programs in English. However, the Finnish government amiably reminds interested foreigners that they "are expected to independently cover all everyday living expenses." In other words: Finland will finance your education, but not your afternoon coffee break.

France

There are at least 76 English-language undergraduate programs in France, but many are offered by private universities and are expensive. Many more graduate-level courses, however, are designed for English-speaking students, and one out of every three French doctoral degrees is awarded to a foreign student. "It is no longer needed to be fluent in French to study in France," according to the government agency Campus France.

Sweden

This Scandinavian country is among the world's wealthiest, and its beautiful landscape beckons. It also offers some of the world's most cost-efficient college degrees. More than 300 listed programs in 35 universities are taught in English. However, only Ph.D programs are tuition-free.

Norway

Norwegian universities do not charge tuition fees for international students. The Norwegian higher education system is similar to the one in the United States: Class sizes are small and professors are easily approachable. Many Norwegian universities offer programs taught in English.

Slovenia

About 150 English programs are available, and foreign nationals only pay an insignificant registration fee when they enroll.

Brazil

Some Brazilian courses are taught in English, and state universities charge only minor registration fees. Times Higher Education ranks two Brazilian universities among the world's top 400: the University of Sao Paulo and the State University of Campinas. However, Brazil might be better suited for exchange students seeking a cultural experience rather than a degree.
That excellent information (more in the above link) is from Washington Post foreign affairs writer Rick Noack.

I believe it's near-crazy to pay $30,000 (or far more) in the US for what can be had in Europe for free.

Eventually costs will crash in the US for the simple reason, they must. Online education ensures that outcome.

For details, please see Future of Education is At Hand: Online, Accredited, Affordable, Useful

Here's my more recent followup post: Teaching Revolution: Online, Accredited, Free; Start Learning Now!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

2:14 PM


Earnings Cheating Season: Is Your Favorite Company Cooking the Books?


In his latest Global Strategy Report, Albert Edwards at Societe Generale discusses "earnings season" which he calls "cheating season".

We have always found that swings in analyst earnings expectations mirror the economic cycle quite well, but because of the weekly frequency, swings in analyst earnings optimism often act as a timely leading indicator for the economic cycle. If that is still the case, the recent data for the US should be worrying. Despite the soothing Q3 headline earnings reports as US companies ‘game’ the system, all is not well once you look into the ‘MUC’ (Manipulated Underperforms Conservative).

Remember the so-called Fed model? We were told that the extraordinarily high PEs were justified by low bond yields. The
key plank of the Ice Age theory was that this positive correlation would break down and that equities would de-rate in absolute and relative terms compared to government bonds thereby inverting the close positive correlation between bond and equity yields.

What this also means is that in an Ice Age world, the equity cycle will more closely correlate with economic and profits cycles. Most correlation analysis finds virtually no post-war relationship between economic growth and the stock market.

But, this does not hold true during the Ice Age. Indeed, we knew from Japan that the equity market would start to track the economic and earnings cycle closely.

In the Ice Age, equity investors need to pay close attention to economic and earnings cycles and not be comforted by lower bond yields. If that is the case equity investors should be getting nervous NOW as earnings optimism starts to fall away sharply.

Earnings Upgrades vs. Downgrades as Percentage of Changes



We have long believed that the US reporting season should in fact be called the US cheating season as companies game the market to ramp earnings down ahead of company announcements only to beat analysts estimates by 1¢ on the day!

Apparently companies believe the feel-good news headlines of a earnings beat will offset the negative impact of downward guidance ahead of the report. In fact the evidence suggests otherwise: my colleague Andrew Lapthorne has shown that those companies that engage in earnings manipulation underperform those that do not. He developed a very useful MUC Score, Manipulated Underperforms Conservative.

(An update of the MUC is being delayed while Andrew works on an update of a more comprehensive earnings quality score, formally called the cheating, or C-score. Developed by my former colleague James Montier, Andrew changed the name as companies got mighty shirty when they appeared on this list!)

I rely on Andrew for this timely weekly data which he highlights every Monday in the Global Equity Market Arithmetic.

This week, he notes that “despite being in the US reporting season, which typically delivers manufactured surprises and therefore an improvement in US earnings momentum, we have been surprised by the complete lack of a bounce in upgrades versus downgrades. Not only has there been zero bounce, but next year's expectations continue to be downgraded with 65% of all estimate changes to 2015 currently coming through as downgrades. Meanwhile European earnings momentum has also collapsed. Hardly an inspiring environment for pushing equities further upwards.”

US Earnings Momentum



European Earnings Momentum



[Mish Note: For further discussion please see Equities Bounce Back Strongly Despite Awful Earnings Momentum by Andrew Lapthorne].

We need to be watching this weaker than expected earnings optimism data closely. Certainly the front page chart shows the apex of weakness globally is in the US and it is entirely plausible that the deflationary winds blowing around the world are washing up on US shores with the situation worsened still by the stronger dollar. A sharp decline in EPS optimism since 2009 has been consistent with previous hiatuses in financial markets. In other words, there may be more to the recent flash-crash than just one weak retail sales datum a deeper malaise surrounding weak profits may be driving events.
Is Your Favorite Company Cooking the Books?

In addition to his own excellent analysis, Albert linked to Montier's C-Score: Are your favourite stocks cooking the books?.

To help decide, Montier came up with six questions. The answer is binary: yes or no.

  1. Is there a growing divergence between net income and operating cash-flow? Management has less flexibility to alter cash flow, whereas earnings can be stuffed for all sorts of "funnies".
  2. Are Days Sales Outstanding (DSO) increasing? If so (i.e. accounts receivable are growing faster than sales), this may be a sign of channel stuffing.
  3. Are days sales of inventory (DSI) increasing? If so, this may suggest slowing sales, not a good sign.
  4. Are other current assets increasing vs. revenues? As some CFOs know that DSO and/or DSI are usually closely watched, they may use this catch-all line item to help hide things they don't want investors to focus upon.
  5. Are there declines in depreciation relative to gross property plant and equipment? This guards against firms altering their estimate of useful asset life to beat earnings targets.
  6. Is total asset growth high? Some firms are serial acquirers and use their acquisitions to distort their earnings. While this may be justified in some circumstance, generally it has been shown that high asset growth firms underperform.

Does It Work?
As a shorting tool, Montier suggests using the C-Score in combination with some measure of over-valuation. This was on the basis that high-flying and generally more expensive stocks that are tempted to alter their earnings in order to maintain their high growth status. He used a threshold price to sales ratio of 2 and found that this drove the absolute return down to -4% in both the US and Europe!
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

11:28 AM


Ebola "Turning Point" and Perspective


Last Week the Huffington Post reported Ebola.com Sells For More Than $200,000 -- Including 19,000 Shares Of Cannabis Sativa Stock.

Two Las Vegas entrepreneurs attempting to sell the rights to Ebola.com succeeded in selling to the highest bidder -- literally.

Chris Hood and Jon Schultz paid $13,500 for the rights to Ebola.com back in 2008 and have just sold it to a company called Weed Growth Fund.

The terms of sale call for Hood and Schultz to get $50,000 in cash and 19,192 shares of Cannabis Sativa, Inc., a company run by former New Mexico governor Gary Johnson that hopes to market legal cannabis products throughout the world.

The stock is currently trading under the CBDS ticker symbol at $8.55 share, which means the value of the shares sold to Hood and Schultz is $164,091.
Add it up and they received $214,091. That's quite a profit, but the sellers made even more on LasVegasRealEstate.com and PayDayLoans.Com.

There is certainly a lot of attention on the disease. But what are the real risks?

The following chart of number of ebola cases and the country of origin from The Guardian will add a much needed perspective.

Ebola Cases



Turning Point

Admittedly the disease is very scary. About 70% of the people who contract the disease die from it. But according to  Dr Jeremy Farrar of Wellcome Trust and as reported by The Guardian in Ebola ‘May Have Reached Turning Point’
The Ebola epidemic in west Africa may have reached a turning point, according to the director of the Wellcome Trust, which is funding an unprecedented series of fast-tracked trials of vaccines and drugs against the disease.

Writing in the Guardian, Dr Jeremy Farrar says that although there are several bleak months ahead, “it is finally becoming possible to see some light. In the past 10 days, the international community has belatedly begun to take the actions necessary to start turning Ebola’s tide.

“The progress made is preliminary and uncertain; even if ultimately successful it will not reduce mortality or stop transmission for some time. We are not close to seeing the beginning of the end of the epidemic but [several] developments offer hope that we may have reached the end of the beginning.”

Farrar’s comments come as the World Health Organisation confirmed that the number of Ebola cases in Liberia has started to decline, with fewer burials and some empty hospital beds. But the WHO warned against any assumption that the outbreak there was ending.

“I’m terrified that the information will be misinterpreted,” said Dr Bruce Aylward, assistant director-general in charge of the Ebola operational response. “This is like saying your pet tiger is under control. This is a very, very dangerous disease. Any transmission change could result in many, many more deaths.”

“The danger is that instead of a trend that takes us down to zero, we end up with an oscillating pattern,” he said. Getting to zero will involve grindingly hard work, identifying every Ebola case and tracing all the contacts. Without that effort, Ebola will remain at a lower but still dangerous level.
Balanced Risk Assessment 

Dr Jeremy Farrar does a good job of expressing cautious optimism,  yet mentioning the risks without the customary fearmongering and hype we have seen in other articles.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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