Monday, 21 January 2013 19:00

How To Profit From The Impending Bursting Of The Education Bubble, pt 3: As Bad As Harvard Endowment Funds -0.05% ROI? The Levered Harvard Diploma! Featured

The college endowment investment results have rolled in, and if Harvard were to get a grade for the year it would probably receive an "F" as reported by the NY Times:

"Harvard reported a 0.05 percent loss and a drop in its endowment of over $1 billion in the same period, even as a simple Standard & Poor’s 500-stock index fund gained about 5.5 percent. Harvard’s endowment decline is more than the entire endowments of roughly 90 percent of all colleges and universities.

Ironically enough, if one were to calculate the ROI of a Harvard undergraduate diploma, the number is remarkably similar at about 0.05%. See the graph below...

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These returns have been calculated by our proprietary College/University ROI Analysis Engine. At the bottom of this post you can find a link to a simplified beta of this engine, which will be freely available to blog subscribers, and will be available via smart phone app and over the web as well.  This app has morphed into an incredibly comprehensive and capable piece of knowledge kit - so much so that it had to be materially simplified just to post a portion of it on the web! 

There are many concepts used in the model that may be new to the Sheeple type. For instance...

Economic Return on Investment (eROI)

Introducing a reality-based method of valuing an education - the "Economic Return on Investment". You see, unlike many  other investments, the education is  a completely hands on, active experience. You cannot simply dump money into a fund and walk away. You must manage it, and  your labor (or how the market actually values your labor) is actually part and parcel of the return on investment .

Thus, it would be highly unrealistic to exclude the economic cash flows stemming from your attempts to pay debt service (assuming debt was used) in calculating  ROI. Since said debt is truly full recourse, its service must be factored in, and as such so should all of the practical variables that affect said servicing. Think of the net return on stock investments.

Click to expand...

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This episode of the Keiser Report was one of the (if not the) most viral episodes ever. What was so interesting and controversial? A topic that damn sure hit home, that's what. Click here for the full episode.

When factoring in reality, many diplomas really don't look so appetizing considering the time, labor, effort, risk and expense in attaining them and fruitful employment related to the diploma afterward. Let's mark some top ivy league (remember, this is the so-called creme de la creme) diplomas to market, as well as the lowly disrespected for-profit online schools, trade schools and city universities. Oh yeah! I forgot to mention that I threw in an internship with a tech company for good measure. Let's add this quip in for the sake of argument (Yahoo Finance):

A few reports circulating this week have pointed to some fortunate Facebook software engineering interns who are set to bring home an average monthly salary of $6,225, according to, a careers site that provides data on salaries (based on employee generated content). That works out to a yearly salary of $74,700. For comparison, median household income from 2006 to 2010 was nearly $52,000, according to the latest Census data. (The average monthly pay for all Facebook interns, according to the site, is around $5,800.)

Jealous yet? There’s more. A few anonymous Facebook interns posted further details, with one second-year student saying he/she was offered $5,400 a month and a $1,000 housing stipend. Another computer science graduate student said they got $6,800 a month with a $1,000 housing stipend, negotiated up from $6,600. (Some Quora commenters noted intern salaries correspond to the number of years of college you’ve completed.) Facebook software engineers make an average of $111,452 a year, according to Glassdoor.

... So how do interns at the social-networking giant fare compared with their counterparts at other firms? Glassdoor released a report last month listing intern salaries at 20 top-rated companies (rated by current and former interns). Here are some highlights (figures are average monthly salary):

Software engineering intern, Google: $6,463 
Research intern, Microsoft: $6,746
Software development engineer intern, Microsoft: $5,539
Intern, Cisco: $4,017
Software development engineer intern, Amazon: $5,552
Graduate technical intern, Intel: $5,681
Intern, IBM: $3,935

As we know, majoring in computer science is a smart move. Finance and accounting offers lucrative job opportunities as well:

Tax intern, Ernst & Young: $4,136
Advisory intern, PricewaterhouseCoopers: $4,702
Audit intern, Deloitte: $3,822
Business analyst intern, Target: $2,785

Click to enlarge...

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As you can see, a 2yr unpaid internship that yields a nominal salary growing at 3% per annum beats a levered ivy league diploma (salaries were sourced from the respective schools graduate statements and surveys). Debt can be a bitch, as can the time value of money and opportunity costs. For those who may not understand how this works, just think about starting school today with student loans and not breaking even until 2045 - that's right, the year 2045! Debt slaves - one and all!!!

Click to expand!!!

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Of course, the major that you are pursuing has an awful lot to do with the value of the diploma, as does the current business environment and the point in the economic cycle. We will explore that in detail in my next post on this topic.

The YouTube videos that I have made on this topic are also of interest. Check out the comments left for this illustrative video titled "The (Mis)Education Bubble 101".
  • I have been far more successful and far more diversified in my skill set with out a degree. Companies take my physical real world experience of 15 years in the technology sector over a long list of graduates every time.. In the past 10 years, I've been without work for about 2 weeks, and that was due to a longer job transition. I transition jobs about every 3yrs to further broaden my experience in developing areas of technology.. Working without a degree has made me more competitive.

  • 2001lextalionis 10 hours ago

    I think to a certain degree it is relatively easy to access debt for purposes of education.

    Conversely if one is operating under the assumption that I have 90K saved up because I didn't go to school is somewhat flawed. Most folks have little or no savings so the math comparison of school versus stocks/internship is somewhat lacking in my view.

    Comparing debt free internship with zero capital to invest v 200K BA yields a far more interesting decision matrix

  • What about these for-profit online institutions like the Apollo Group? The founders of these companies barely made it past high school, yet are responsible for leeching billions of dollars each year in the form of FAFSA loans (our tax dollars). They specifically target the single mother demographic, and will admit them without even having so much as a valid GED. Have you ever heard of Ashford University? They just lost there accreditation, and over 100,000 of their graduates still owe thousands

  • justjacqueline2004 8 hours ago

    This type of education cost a huge amount of time and even worse,you start out by not knowing what you don't know,particularly in the sciences.

  • Qomowale 12 hours ago

    the current "(mis)education system" is a racket & a joke! ppl, think outside the box & educate urselves as much as possible, 'cuz the system intends 2 enslave all of us. what passes as education is really indoctrination & fiscal slavery based on a wicked interest-driven, fractional pimp game. go Reggie Middleton & Max Keiser! good luck trying 2 wake up the sheeple.

  • mrzack888 12 hours ago

    that's limited. real education like Reggie Middleton described has hands on and has pragmatical real world value.

 Click here to access the early beta version of the BoomBustBlog College/University ROI Analysis Engine. The next post on this topic will go through the model in illustrous detail and present the next iterative version of the beta for all to play with, as well as instructions on how to get the most out of it. It will enable you to value any diploma from any school, complete with ROI, NPV of funds invested, and time to break-even. 
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