Finally! Public Pensions Exposed

Thank you, Craig Karmin, for your June 24, 2009 WSJ article, "Group Shines Light on Hefty Government Pensions."

http://online.wsj.com/article/SB124580096328044597.html

Pension funds provide guaranteed payouts, so even though public funds lost a collective $1 trillion last year, their retirees' monthly checks are unchanged. And the funds' solvency is ultimately backed by taxpayers.

By the way, apparently, the California School Employees Association, a union, represents 230,000 public employees. And that's just one union. No wonder public sector unions have so much power in Sacramento.

Gov. Sanford Confesses to Affair

I used to really like Gov. Sanford. I wrote about him previously here. He admitted today that he cheated on his wife with a woman in Argentina. Ironically, one excerpt from an earlier speech he made mentions judging others based on their actions:

[T]he Bible says, “Let your light so shine before men that they may see your good works and give glory to your Father that’s in heaven.“ Hopefully, by the way in which you act. The way in which you make decisions.

Two Republicans have been outed as morally deficient in less than a week (than other man is Nevada's John Ensign). Maybe this is God's way of forcing the Republican Party to stop catering to the religious right and to convince them to return to old-time republican principles: small government, low inflation, personal humility, and anti-unnecessary wars. Or, maybe it's just karma for spending millions of taxpayer dollars going after Bill Clinton.

I hate to smile at anyone's misfortune, but I did manage a chuckle at one of the names given to this scandal: "Don't Cry for Me, Argentina." By the way, Jenny Sanford has issued her own statement. Click here to read her heartfelt words. I predict she'll hold public office someday in South Carolina.

Random Thoughts

1. Whatever happened to Gorillaz, the innovative band that did the catchy "Feel Good Inc."? I loved their single, and I haven't heard anything quite like it since.

2. I went food shopping today. I always try to find the discounted items, but the grocery stores are getting tricky. I saw one discount of 9 cents--hardly a reason to favor a particular brand over another. Many of the discounts I saw were less than thirty cents. If this keeps up, I am going to have to save lots of coupons and go shopping only when I have lots of coupons.

One item that stores seem to consistently discount is ice cream. If you go in the middle of the week, sometimes you will save 50%. For a big ice cream fan like myself, this is sweet indeed.

Jack and Suzy Welch and Grand Canyon Education, Inc. (LOPE)

A seekingalpha.com reader, Catcuffs01, corrected an egregious mistake in this article. Someone also left me a message about my mistake. Thank you. Mr. Welch's new online MBA program is run by Grand Canyon Education, Inc. (LOPE), not the Apollo Group, Inc. (APOL). Here is my response to the astute reader:

Catcuffs01: you are absolutely right. Welch is lending his name to Chancellor University System LLC, not the Apollo Group. He was, however, impressed by the Apollo Group. The WSJ article said that "Mr. Welch says he was initially skeptical of online education, but has been impressed by the Apollo Group Inc.'s University of Phoenix."

Mr. Welch actually lent his name to Grand Canyon Education, Inc. (LOPE). I'd never heard of LOPE before, so my brain jumped to the only online company I know about, which is the University of Phoenix. Thank you for correcting me.

Revised article below:




I've been waiting for an excuse to put up these pictures. The WSJ just had an article on Welch and his new online MBA program. Here is one excerpt:

When he first approached Mr. Welch at the party, Mr. Clifford says the two men argued about the merits of online education. "We were yelling at each other," Mr. Clifford says. Mr. Welch confirms the incident. Mr. Welch invited Mr. Clifford to see him the next day, and Mr. Clifford says he has "hounded" the former CEO ever since.

Seems like an interesting meeting, no? While Welch is going with Grand Canyon Education (LOPE), the largest online education provider is the Apollo Group. The Apollo Group (APOL), which runs the University of Phoenix and other campuses, has a volatile stock. In the past six years, it has gone as low as $33/share to as high as $95/share.

APOL's main issue is credibility. College degrees, at the end of the day, are just pieces of paper. No one will pay tens of thousands of dollars for a piece of paper unless it will lead to a good job and/or higher lifetime earnings. Thus, the real value of most college degrees lies in their ability to connect students to a loyal alumni network. The longer an institution has been around, the higher the value of its degree, because the school will usually have more alumni. Size doesn't necessary matter--little-known, selective Carleton College probably has a stronger network than the much larger UC Riverside.

In contrast to many top tier colleges, the University of Phoenix and other Apollo campuses have not yet established a vast, loyal alumni network. (Readers, please correct me if I am wrong--I'd love to hear about companies that focus on hiring University of Phoenix or Grand Canyon Education grads.) Many Apollo graduates attend night school or may not be particularly loyal to any of Apollo's various universities. Getting an online degree may be faster and more convenient, but numerous factors, including no nationally-recognized sports teams, may impede a strong Apollo alumni network.

The addition of Jack Welch improves online education's credibility, but it is still unclear how Apollo's and Grand Canyon Education's various educational institutions plan to create lasting loyalty. I can think of plenty of famous Harvard, Stanford, Santa Clara (Steve Nash, Gavin Newsom, etc.), and UC Davis graduates (Urijah Faber, Jackie Speier, etc.), but no famous University of Phoenix or Grand Canyon Education grads. (Note: I did a quick online search. Apparently, Shaq and Lisa Leslie have received degrees from the University of Phoenix. It's interesting that Apollo hasn't successfully used their celebrity status as a marketing device.)

I wish Apollo and Grand Canyon Education much success in the future. Our established universities need competition; otherwise, they will keep increasing tuition above the rate of inflation. Apollo and LOPE are like new charter schools trying to gain credibility in a world of established private and public schools. If they succeed, everyone but the establishment benefits. As an investor, however, it may be wise to wait until the companies establish larger and stronger alumni networks before jumping in.

Disclosure: I have no shares in APOL or LOPE.

Kaveh Alipour

Another government-inflicted murder happens in Iran:

http://online.wsj.com/article/SB124571865270639351.html

Apparently, Kaveh Alipour was non-political and was just waiting at an intersection:

He had been alone. Neighbors and relatives think that he got trapped in the crossfire. He wasn't politically active and hadn't taken part in the turmoil that has rocked Iran for over a week, they said.

This might be the work of the Basij, a volunteer paramilitary force that's similar to Germany's former SS. A significant percentage of Basij are allowed to have firearms, and I think the Iranian government has supplied more of them with weapons since the uprising.

I remember being in Iran many years ago. I was a teenager, and it was a hot day. I lifted my shirt and exposed my chest to the slight breeze. My friend worriedly told me not to do that. Under Islamic law, both men and women must dress modestly when outside the home. I realized later my friend might have been concerned about the Basij bothering us.

Financial Morass

And the hits keep on coming. From The Atlantic (July/August 2009):

Operation Iraqi Freedom now ranks second only to World War II as the most expensive conflict in U.S. history. Transforming Iraq has cost roughly $1 trillion, with the meter still running and the job unfinished. Transforming Afghanistan, by any measure an even more daunting task, is likely to cost as much or more. That’s money we don’t have.

I agree with Colin Powell--we broke Iraq, and we have to fix it--but that doesn't mean I like the idea and expense of American troops in Iraq. I can't tell you how many times I wish Americans had demanded clear evidence of an actual threat before invading Iraq. Did we really allow only 19 men/terrorists to pollute our view of the world's 1.3 billion Muslims? Otherwise, how else did we get to the point where so many Americans irrationally viewed Muslims and Arabs as threats and therefore deserving of war and undeserving of sovereignty?

On a more somber note, estimated 100,000 Iraqis have died from violence since the 2003 invasion. Since 2003, over 4,000 Americans have died in Iraq.

From Iran (June 2009)

Conversation between someone from Iran and myself on June 2009, during mass protests against Ahmadinejad's re-election:

Me: what do you think is going to happen?

Iranian resident: not sure, but maybe Khmene'ei will [be] replaced with some one else

we're so scared. we don't [feel] safe in street

Me: Have you heard of Neda?

Iranian resident: yes,

I saw the film about her

she is one of 20 persons that [were] killed