This past Wednesday, during my Investments class, I mentioned that some 401k plans have expensive and limited alternatives. I suggested someone should startup a firm that provides 401k plans at a lower cost with a wide range of investment choices including ETFs. I think Google News is listening to the microphone on my phone (which was set to “do not disturb” during class of course).

The linked article popped up on my Google News page. The article describes how Betterment is doing as I suggested. The issue of customer service still needs to be addressed in the context of robe-advisors like Betterment. I suspect it will in time.

-Dr. Moore

http://www.investmentnews.com/article/20150911/FREE/150919985/betterment-to-become-first-major-robo-adviser-to-offer-401-k-plans

I teach finance. Is it time to look at marijuana stocks? Also, I’ve seen students perform my poorly on my exams when high. True story. Save the herb until after the exam.

http://www.thedenverchannel.com/news/health/college-students-choosing-pot-over-cigarettes-study-finds-1-in-17-smoking-pot-almost-daily?google_editors_picks=true

The robo-advisor space is really heating up. Those taking my FIN101 class (based on my book Corporate Finance 4e) get a taste of the fundamentals behind robo-advising. Those in my FIN135 Investments class (based on my book Investments 2e) will “feast” even more. 🙂

-Dr. Moore

http://www.etfstrategy.co.uk/blackrock-to-acquire-robo-adviser-futureadvisor-00998/

Finally some good news! I was born and raised in an impoverished area myself (Chicago, IL / Gary, IN). I am very thankful for having a mother and father that remained on my case about reading, writing, arithmetic, and discipline. I even thanked my mother for coming to school and beating me in front of class (true story, but the thanks didn’t come until I was much older! My mom loved me just the same).

Not everyone I grew up with had that encouragement. In fact, many did not. Abusive parents, alcoholic parents, drug addict parents, and parents no where to be seen or heard were all too common in my neighborhood. Some of my peers made it out against incredible odds, others are in prison, others are dead.

So, here we have a barber in Iowa encouraging disadvantaged youth to read by offering a free haircut in exchange. To follow suit, perhaps this semester I’ll give a $10 rebate on my book for anyone that earns an A ($5 for B, $1 for a C, anything below that you need to retake the class and pay $$$ anyway). Maybe then students will read the book. 🙂

http://www.bulletinleader.com/iowa-barber-gives-kids-free-haircuts-in-exchange-for-reading-to-him/30224/

Yesterday evening I walked to the local coffee shop (Temple) to find enlightenment. Well, okay, they have a drink called “enlightenment” which is green tea, steamed soy milk, and honey. The beverage cost $5.00, plus $0.75 for tip bringing the total to $5.75. There was only one visible employee at the time. I observed her make the drink, handle the cash register, and check tables outside.

Later that evening I had a conversation with a friend about Starbucks price increases. He mentioned that after raising prices three times he went out and bought his own coffee machine. I am not sure if he meant three times this year alone. At a minimum, Starbucks raises prices every year from what I gather from Google searches. On one hand I hear the argument that SBUX (and businesses in general) must raise prices to cover wage, rent, and other cost increases. On the other hand, wasn’t there more than one person working at Temple before?

The price of coffee is down nearly 50% over the past year. True, coffee is probably a small percentage of a vente caramel latte. Nevertheless, I encourage consumers to establish the right view of price increases. If you are told price increases are necessary to cover costs, feel free to ask which costs: labor preparing your product, executive bonuses, both, or neither? Didn’t the business sign a 5 or 10 year lease?

I haven’t even scratched the surface on executive compensation or the executive to laborer pay ratio over time. Everyone should have a pretty good sense that the ratio of executive pay to average worker has done nothing but increase the past several decades. Nevertheless, in line with my recommendation to “minimize high margin exposure” in my Cadence of Finance presentation, I am going on a stroll this morning. I’m going to stop by Temple, Peets, McDonald’s, and Insight[1] to see the price of a plain cup of coffee and a cappuccino. I’ll repeat periodically when I am bored and report back to you.

Meanwhile, I am drinking my own green tea (Gen Ma chai actually) at home now. It cost me $0.17 plus hot water and “labor.”

http://www.fool.com/investing/general/2015/07/20/why-starbucks-corporation-raised-prices-again.aspx

[1] Oddly enough, I can’t think of a Starbuck’s in my immediate walking area. This is surprising. Perhaps I just missed it due to ubiquity.

Now you can choose whether or not to include your SAT scores when applying. This is called an “innovation in the admissions process.” I don’t like texting but let me text this: WTF?

I am a bit uneasy assigning greater weight to high school grades given a known grade inflation problem. It appears that schools are mirroring the approach of submissive parents: Oh, that is difficult for you? You don’t want to do it? Okay, you don’t have to do it. I’ll make it easier for you.

Perhaps GWU knows something I don’t. Perhaps the removal of SAT/ACT requirements will translate into a larger pool of motivated students who graduate as highly productive workers. Or maybe GWU is acquiescing to self-destructive “make it easier” pressure thereby jeopardizing the long-term success of this country. Time will tell.

http://www.usatoday.com/story/news/nation-now/2015/07/28/george-washington-university-sat-act-admission-requirements/30775327/

Over 30 years ago, when I was about 11, I graded high school math tests for my father in Chicago. My father taught the “underperforming” group. Most failed at simple addition and subtraction of single and two digit numbers. At the time, at age 11, I did not pay much attention to my father’s struggle with administrative pressure to pass those students in spite of their lack of understanding.

Fast forward 30 years. Now I am teaching college juniors, seniors, and MBA students. I see MBA students submit reports with sentences such as “Acme corporation is has a lot of debt.” At one point, while teaching a junior-level finance class a student asked me how did I go from 30/90 to 1/3. Like my father, I feel the pressure to assign higher grades. The predominant messages I hear from administration are messages of “graduation rates” and “on-time graduation.”

As a professor I am faced with an unfortunate choice: inflate grades to obtain higher teacher evaluation scores or maintain rigor to obtain below average evaluations. My students know my choice. 🙂

The story is the same today as it was 30 years ago at my father’s high school. What was “just pass those high school students who can’t add or subtract” 30 years ago has been sugar-coated today as “increase graduation rates” and “maintain on-time graduation.” These messages appear to be at odds with the message of putting quality of the education first and foremost even if it takes longer to graduate. This applies to both primary and secondary education.

Finally, I agree with the article’s suggestion to involve industry in curriculum development. Universities should produce productive workers and not just “on-time graduates.” Ideally, universities produce on-time graduates that are also productive workers. Unfortunately, with a portion of junior level finance students unable to solve for “c” in 24-c=18 (another true story), you can’t have both on-time and productive. Let’s choose to spend a little more time and get this right rather than push people out the door unprepared.

Disclaimer: These are simply my opinions based on direct experience. No one has a monopoly on the truth.

http://www.forbes.com/sites/johnebersole/2014/08/06/is-higher-ed-in-the-u-s-really-that-bad/

Those who know me know I have quite a pen collection and enjoy using them. However, students cringe whenever I “dazzle” them with cursive during instruction. Truth be told, my print is less illegible than my cursive. I chose those words carefully. For some time I operated under the belief that cursive was better for the brain. After reading this article I see a new, yet familiar, conclusion reached by academics: results are mixed.

So, cursive is good. Print is good. As to which is better? Beauty is in the eye of the beholder. In either case, writing is good for your brain. I encourage readers of this blog to write a letter (pen, paper, envelop, stamp) to someone. It is good for your brain.

-Dr. Moore

http://www.npr.org/sections/ed/2014/03/25/294212825/kids-these-days-can-type-but-cant-write-cursive-is-that-bad

Something to read before you download that next app..

http://www.mercurynews.com/michelle-quinn/ci_28433203/quinn-where-is-san-francisco-based-tech-boom

I was minding my own business looking for executive salary to bonus numbers and stumbled across the Economic Policy Institute page on CEO pay. Did you know that the ratio of CEO-to-worker compensation has increased from 20.0 in 1965 to 295.9 in 2013? Where did the middle class go? Are CEO’s that much more productive now? Are workers that much less productive now? What will happen if this trend continues?

Lots of questions, Marx and Schumpeter have some answers. Hopefully we do something to revive the middle class before either of those gentlemen are proven correct.

-Dr. Moore

http://www.epi.org/publication/ceo-pay-continues-to-rise/