The True Battle For College Tuition. Compromises, alternatives and brutalities.

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It’s quite funny how tuition has been able to resist the laws of physics within the past years of recession. Unlike the mortgage industry where it took a nice dive south in 2008, tuition has been able to resist this urge and continues its leap. In fact for public schools the annual increase has been 6.5% each year for the past decade. However certain policies both fiscal and monetary are out there, but how much do they even help?  If they don’t help at all I sure as heck would like to know of some alternative options to college that might provide more of a benefit in securing a financially secure future. While the public is told that colleges are a promising step to securing a financial future, the cost of tuition seems to act as a stump towards finishing the end of that promise. This stump hurts many aspects of society, mainly the middle class American dream. An important value that has become more demanded but less available to the public with some more than others.

After considering some numbers on this chart, it might seem that coming out of college in debt would most likely put the average college student few tens of thousands in debt and for some, many tens of thousands.

Considering that the average tuition for college graduates is around $45,000, it would seem that is very possible to manage the debts out of college. For loans taken after 2013, Obama’s new policy that fixes loan payments to 10% of monthly income will be able to ease the stress of paying back the loans. Unfortunately, this only covers federal loan debt, which is helpful considering that federal loans take up 90% of the student loan market. Yet, only around 1.5 million are even eligible to use President Obama’s “Pay as you Earn…” plan. This is because in order to qualify for the policy, a borrower must have an outstanding federal debt in comparison to their family size. This obviously helps the lower socio-economic borrowers, but this leaves a wide gap towards the rest of the “middle* (middle class is no longer middle class)” class borrowers –borrowers whom are actually the most worst off in terms of college loans. Because federal aid is limited to those who are in more well off financial situations, borrowers in this category must resort to private lenders, primarily like those of Sallie Mae.

Sallie Mae “also offers reduced monthly payments, extended repayment schedules, and likely some less-advertised hardship programs. In their letter to the CFPB, they also state that they are in favor of rehabilitation programs for private loans that can help borrowers recover from default.”

Yet after looking at the so many videos, blogs and comments , it’s obvious that Sallie Mae doesn’t have a practical way of helping borrowers. For that reason, it’s common to hear stories of loan debt from Sallie Mae being doubled and paying monthly rates of over 1500.

Tiffany, a borrower who has suffered the much too common problem comments,

“I’ve spoken to their reps many times and it seems they can never help or answer any of my questions. I asked them how much of what I do pay actually goes to the primary loan and how much goes to interest. that rep couldn’t answer me. Just said I don’t know and I’m sure your loans will go down. (they haven’t) they have actually almost doubled ($25,000) now ($45,000). I am now searching for outside help and hoping to get someone involved because it doesn’t seem right to do all these programs and the sum of the loan never [goes] down.”

Responses like these are all over loan assistance forums, blogs and YouTube.

What it comes down to is whether these loans are affordable to the borrower in a way that takes into consideration the most important factors of the economy. Is the borrower entering a sound financial market in the coming years? Will the economy shape up and provide enough quality jobs to sustain borrowers in their repayments? Are interest rates comparable to these factors?

Interest Payment
11.875% $197.92               $392.92 72 $33,753.19

Fixed Payment
12.375% $25.00 $414.73 96 $40,434.05

Deferred Payment
12.875% $0.00 $410.66 108 $44,185.09

 


These are all questions that answer themselves but have not been replied by the government or the institutions themselves. Obviously, with the current average salary of $45,000, repaying $30,000 would take over 15 years IF the income to ratio payment plan was available to use. One can only expect a borrower from Sallie Mae who is unable to use an income ratio payment plan to be in a much more difficult situation to say the least.This is the repayment plan for $20,000 loan. Why should a loan increase over double the amount when deferred? The deeper question is: Why would someone take out such a loan with the imposed risk of destroying oneself financially?

It’s about time that not only private lenders like Sallie Mae change their lending practices, but also borrowers become more responsible consumers by taking a stand against predatory lenders. But in reality this requires students to look towards other alternatives and sadly there are no real alternatives that provide such assistance. That means a lot of students would have to stop going to school and the future of college students would drastically drop in numbers.

Of course this adds the benefit of pushing for reform in creating alternatives to the whole post-secondary educational system, but the time that it would sacrifice would be much to dire for a single generation to make this move. Therefore, the only plausible solution would be for reform, like any sustainable reform, to happen slowly. This will act as yet another barrier to allowing current college debt holders from being able to pay their debts off.

If one was looking to find a solution in today’s market, one would have to focus on a career that is in demand and provides a secure return. Two of those jobs are nursing and teaching. Since baby boomers are now retiring a great number of those jobs are becoming increasingly in demand. These jobs even if requiring a large sum of debt are secure

This could create a major shift in the workforce where middle class Americans are fighting more for a secure workplace rather than their dream job. These attitudes already exist primarily in majors like pre-med, engineering and accounting but a severe shift into these jobs could create a problem of supply and demand in future generations. As of now, they remain as a credible option for securing a life as a middle class American and more importantly getting the bang for the buck.It’s unfortunate that the solution to the economic market requires overlooking the value of the educational institution and instead considering the conditions of the job market. It completely debases the goal of universities of spreading diversity, education and promising a future. Money is spread too far thin in America and economic security is only available in the holes in which it leaks. As nursing and teaching jobs are being widely pursued after, it is evident that more and more students are becoming aware of this fact.enough to pay off debts and provide a financially secure future.

Given that there are so many fields of careers in each of those industries that are increasing and decreasing at different paces, the prospect of the job market varies with holes that are both hidden and publicly evident. So looking for those things is important in order to really make a conscious decision in the future path of a post-secondary education. Within all these holes of mysteries and wonders the only way to really find a secure route towards careers, ones like public relations, journalism, business, philosophy etc. , institutions have to provide resources that cater to these fields –things like specific training and hands-on (internships) that give a more practical and applicable tool to the student.

The company, Coursera does this exact thing. Founded by Andrew NG, Coursera is a site that offers the “world’s best courses, for free.” This is an example of a tuition return at its finest. Free tuition and specific helpful resources. This helps employers as well as it locates them with specialized workers whose educational background can be used more accurately and in sync with what they are looking for. This also does tuition cost a service as an institution like Coursera has all the ability to compete with universities if they were to be recognized by employers. I hope sarcasm is ringing its bells, because a zero cost tuition could equate to a complete reform of the tuition market.

Naveed, an environmental engineer explains that Coursera is in a way

“recycling information within the educational system.”

Within all this commotion and episodic dialogue there is a piece of thought I hope to shed light on. The importance of college tuition has become emphasized more than ever in the past decade and yet it’s also the worst time to get one. Maybe in a couple years when alternative forms of education are properly institutionalized, one can expect to find a secure job without carrying a load of debt. As stated, this takes time and a lot of effort considering that colleges would not like to see their tuition costs diminish. But another important aspect to also consider is innovation. The great country of USA has been excelling in innovation, but education has yet to reap its benefits. But with technological advancements already taking place in companies like Coursera maybe one day Coursera might be referred to instead as an institution rather than a company or site.

An economy is only as good as the families that profit from it. And while, this may be the worst time in this article to get sensitive, protecting and nurturing families has always been the end goal of having a good economy. The economy should never discriminate against class, race or ethnicity but unfortunately that is not the case. With tuition costs expected to increase, society can only expect to continue redlining certain audiences of the public.

Certain audiences would fall under immigrants, minorities –first generation college students who are only beginning to transition into post-secondary system. The time is more important than ever for a revolution for integration to occur but that is difficult to do when private lenders like Sallie Mae thrive from these very people. There is obviously a lot of sewage that drains from college tuition, but the problems leak far deeper than publicly acknowledged and it is important time to begin looking into these matters.

Otherwise we are headed into a catastrophe that could yield devastating systemic blow to the educational system, financial system and government. Based on the history of America’s economic and political system, it’s now more than ever that the cost of education is hurting the economy more than ever.

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References

 

http://pnpi.newamerica.net/sites/newamerica.net/files/program_pages/attachments/college%20published%20tuition%20and%20fees%20chart%20year.png

http://aspanational.files.wordpress.com/2011/12/collegestuition.jpg

http://xmiragestat.files.wordpress.com/2014/04/higher-education-increase.gif

http://www.nytimes.com/2012/07/17/education/consortium-of-colleges-takes-online-education-to-new-level.html?pagewanted=all&_r=0

http://www.clearpointcreditcounselingsolutions.org/how-to-pay-off-private-student-loans-from-sallie-mae-and-other-lenders/

Money, Markets and Money, Money, Money

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Money. Just saying it feels good. It rolls so smoothly off the tongue that come close to the “-ey”, you just want to scream “monAYYYYYYY.” It’s why this class has been my favorite class. I love telling people

“Yeup, my class has got the word money in it. I know, pretty cool.”

But in all seriousness, my understanding of money was naïve to say the least, before I took this class. I never understood the real value of money –only that I had to spend it wisely and have a lot of it. So, it wasn’t until after taking this class, JOUR 469 (or 467), I finally began to understand the real value of it.

It’s quite funny when I think about the fact that it was on my first day of class I learned that all the value (gold) that money(US) once had, was gone. I wondered how in the world this country could run on money with imaginary value. My professor explained that if you close your eyes, click your feet and just pretend –voila, it actually began to make some sense.

I started by becoming very conscious of money. Knowing where all these imaginary dollars went — grocery stores, Starbucks, liquor shops and Panda Express. I thought that if the Treasury lost the value of the dollar, then I might as well make my own value for it. So I did. But I always came to the same conclusion: that money was merely a form of exchange to receive some beneficial service. Also, that I could never have enough of it, because I was (and am) always running out of it.

Money then began to sink its feet deeper into my mind and put me deeper into desperation. In distress, I thought to myself: why should money hold so much power over our daily lives? The truth as I came to see it, was that every single person was on the borderline of being in debt. A single dollar had the capability of being the tip of the ice berg into debt while also being the single source out of it.

We all have the ability to live within our means, but it’s the option of being abundantly wealthy that drives our motivations and inspirations into the heavens or drags it into hell. And that’s what I mean by being borderline in debt: money holds more value than gold or imagination; it holds our decency as people.

If out of a blue day a coffee shop decided to raise its price for a small coffee by a dollar, you best believe people are going to be upset. Not just because they have to give more for that same cup of coffee, but because now they receive a little less for $3. Yes, Mr. Treasurer needs to back the dollar, but Jerry isn’t worried about that. He’s worried about his job, his family and his survival.

Now imagine in sequence all the people in the world who can’t afford clean food and water, the people who are hundreds of thousands of dollars in debt and then those who can’t afford to get educated. For them debt is something their born into and it only continues to grow as they resort to harder ways to become wealthy.

Now imagine myself. A guy, who at one point knew just as much as nothing about money, but is lucky and fortunate to get an educated understanding this money driven world a.k.a. globalization. . I’ve landed quite a handsome debt in dollars, but it holds no bearing on the infinite value of living in a world that relies on money. Which is why education should be above all else and never to be restricted or exploited by the role of money. Money if imaginary only relies on the will of the people and therefore assumes the responsibility of empowering the people, not the other way around. If we are to continue living in this world controlled by money, then education should be at the very least free, accessible and without debt.

Through all the pain for a bigger gain, for a wider eye and a better mind, I’ve enjoyed this class thoroughly.

Thanks,

The Cost of Tuition is for What?

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Every year the cost of tuition goes higher and higher and yet I have personally never understood why tuition is high as it is (USC). My mama always told me to get the bang out of the buck and always figured that his made the most absolute sense, –so shouldn’t universities, institutions handling millions of dollars, be doing the same? Maybe that’s just the uneducated and confused, yet hopeful and concerned citizen talking in me. But, man wouldn’t that be nice.

Take my school for example. We have a cafeteria, two libraries, five parking lots, 23,653 employees, million dollar club fund raisers, $35 million donation from Dr. Dre –etc.. Now some of those things listed do make a profit and some don’t, but regardless I believe that USC has all the possibility and even responsibility to utilize these things in a way that runs the school as efficiently as possible. Obviously USC has to pay the 23,653 employees so they pay those who work for the school and allow them to feed their families, pay the bills etc.. Or maybe, NOT.

Featherbedding. It’s a word I just learned today. It means having more employees than needed. Without a doubt, this school has killed a lot of birds (). But it’s not just employees –it’s facilities, programs and organizations that are funded by the university. Who gives the university $40,000 each year? Me, damn it. Am I being crass? Well, I’m sorry if I feel that my money should be used more efficiently to provide me with a return more comparable to what the leaders of the institutions are receiving. The leaders are people who I refer to as the teachers, the administration, USG, counselors, –the utmost needed people to protect and serve the ideals of an efficient institution.

The thing here is Jerry, that man Nikias, President of USC, takes home at least a million dollars and that’s where I’d like to be, see? That’s why I’m paying this school (Sallie Mae* actually) and I will not feel apologetic for not willing to pay for services, programs and organizations that I have no interest in and provide no benefit. Would you do that? See the problem here, is USC along with many other schools have become less transparent in connecting tuition (investment) to returns. Tuition now includes payment for school concerts, construction, celebrity appearances etc.. And frankly, I could care less for all of that, but god allows for differences and so I’m sure there are people who love seeing Jason Derulo and Diplo, which is … fine. But tuition, like any other transaction, should only be to pay for the service—the education, and all those who service directly to provide it.

If you’re getting the picture Jerry, what I’m wondering is, why can’t universities do away with all of that and simplify their financial obligations towards a way that makes everyone happy? Happy means lower tuition, more savings –oh, I do pray that’s what Walmart had in mind.

“Tuition is expensive, school is hectic and the future is a blurring. So let’s simplify the picture and look at it one frame at a time.”

– Willis Parker

Sallie Mae* – A formerly government sponsored enterprise that that assists in the furthering of college debt

Cutting government loans as a solution to the rising tuition and college debt?

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The college debt bubble has gotten everyone a little mad and crazed up. So if the government, the largest lender of college loans were to exit college loans what would happen?

This might cause less people to attend college and make paying for college harder on the ones continuing to attend. This would lead to some compounding effects such as; less people enrolling into 4-year universities;  an increase in enrollment of technical/trade schooling,; lowered tuition prices … which doesn’t sound too bad considering the 1.2 trillion dollars of college loan debt and the $30,000 average debt of college graduates.

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Making the decision to go to trade school seems easier now considering that economists describe nurses and teachers as having the most economically sound and guaranteed post-secondary educational investment.

Without government loans I would not be attending a 4-year university. If everyone in my situation were to drop out of school, there would be a severe decline in number of students and future enrollment. With less people attending 4-year universities, schools would not make enough profit to finance their institutional payments (paying teachers, programs, faculty ). This could be a big problem for schools if all of a sudden they were only making half of what they made last year. Even wealthy schools like USC could be hurt considering that if they wanted to keep me and everyone in my boat, they would have to loan each of us  $40,000 a year.

Even if USC had the amount of capital to fund every student’s tuition, it wouldn’t happen without USC programs, teachers and its financial sector taking a hard hit. So maybe USC might give higher grants or just as equally effective, lower their tuition price so to retain as much students as possible. If this were to happen we could  all go back to class with a smile while USC survives the event with a cut in their tuition-based income.

But, what would it mean for students that are entering college next year? Well, there will be less students making the decision to pursue private education over a cheaper tuition. Public schools would get overcrowded and the Department of Education would have to provide greater funds. Which sort of sounds OK. Considering that in 2013 alone the Department of Education made $41 billion dollars from college loans which is enough to pay for 3 million students to attend the public schools that have an average public university tuition price of $13,000. Regardless of that rather pointless hypothetical, there is still no doubt that this would cause private schools like USC to lower their tuition. Then UCLA would have to lower their tuition in order to remain equally as financially attractive as before.

… which might get me thinking about going to school again.

If such an event were to occur, an economist might describe this as a free(er)-market of institutions that are dealing with a shorter number of demand (lower number of enrolled students) and therefore dealing with an abundance of universities that are competing to be the cheaper university. Of course, rankings and brand name universities would allow certain schools to retain some leverage.

Did I just solve the answer to college debt? Nope, probably just my debt. But damn when you are facing $75,000 in debt by graduation you’ll be looking at any solution as the right solution.

… Which brings me to my next thought.

What if the government were to bail out all of our debt just like they did for Wall St.? I should end it here but NO.

The department of education would still have their $41 billion profit from 2013 and Sallie Mae would still have its $900 million. No student would be in debt and could begin to afford buying houses. The public would spend more allowing more circulation of money. This would raise interest rates, but that would make going to college more risky. Maybe colleges might lower tuition to even out the risk. Or…

 

Fast Facts for Future (Monetizing) YouTubers

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“How hard is it to really make it into the YouTube business?” I thought to myself.

Well, it seems pretty simple and many would agree that it indeed seems actually quite simple. There are mommy bloggers, food bloggers, comedian bloggers, make-up bloggers, pranksters, pick up artist videos, political videos, social commentary videos and the list goes on and on. These users make an income off YouTube by explicitly allowing YouTube to place advertisements in their videos and in exchange the user receives a 55/45 cut from ad revenues. With reaching over 1 million users being “YouTube Partners,” users that are actually monetizing, there has been a significant rise in partnerships since 2008 when it only had 30,000 and the number of videos watched has increased from 3 billion in 2011 to 6 billion in 2013

“So with the demand rapidly increasing

Picture by website TheMainStreetAnalyst

, how is the YouTube Economy looking?”

Well you can look to Amazon and see that YouTube Strategies 2014 has become the #1 Book at Amazon for Marketing, and that’s not even the punch line. Between 2012 and 2014 the number of YouTube partners increased from 30,000 to 1,000,000. It seems then, that with the increasing number of partnerships and interest that there is more people trying to get a piece of YouTube’s pie. The money.

But the pie can only feed so much. Especially cause the pie won’t be able to feed all the new kids coming down the block.

While the number of users entering into partnership are increasing (through a click of a button), the supply of ad revenue, mama’s apple green pie, has yet to keep up.

“Advertisers paid an estimated $4 billion for YouTube ads in 2012, up 60 percent from 2011,” according to RBC Capital Markets stock analyst Mark Mahaney. However, according to an article by Todd Juenger who takes a critical look on the future of online video advertising, he suspects that an increase in advertising revenue will begin to halt. This turns out to be true, considering that YouTube only brought in 5.5 billion this year according to a Forbes article. That is 25% decrease from the previous year’s growth

Given, the users in 2012 should be very grateful since there were almost seven times fewer partners in 2012 compared to today. Unbeknown, the lucrative and prosperous year of 2012 would also mark the eventual and continual downfall of future earnings ahead.

In the early year of 2012, YouTube decided to restructure their revenue-sharing program to allow more users to enter into a partnership by making the process of entering into a partnership much easier. Now with just a click of a button users are able to immediately become paid partners of YouTube while before that users had to apply and go through a lengthy process to get their permission.

What resulted was similar to your mother allowing all your friends and friends of friends and neighbors and those baked high schoolers from Dazed and Confused to hop over into your yard to have a piece of her seemingly insufficient pie.

Though there is an increase in partnerships there is an increasing plateau of ad revenue — which hurts current partners as they now deal with increasingly more competitors for a limited amount of money.

Basically the number of visitors are rising daily and so are the number of visitors that choose to become partners. Which is a really good thing for YouTube. But the only variable that poses a problem in this YouTube economical equation is they haven’t been able to increase the annual amount of ad revenue. But with YouTube’s increasing number of visitors and the progression of online video viewing the advertisers realize that it’s not a matter of if, but a matter of when.

So to answer the question: The pie of money got official in 2012, but ever since it hasn’t gotten any bigger. But more kids are coming for a slice and they are all aware of what that means. Smaller slices –even for the bigger kids usually are the ones to get bigger portions.

So what’s it looking like for the future?

Since the new program, YouTube has failed to keep up in finding more advertising sponsors to match its increasing number of partners –causing the difference in ratio between number of users and amount of ad revenue to become higher and higher. Therefore, the rate of how much partners get per view is continually dropping as other partners are competing for their views.

In a research analysis by TubeMogul it explains that the rates for the most lucrative pre-roll video ads have dropped from an average of $9.35 per 1,000 views in June of 2012 to $6.33 in April of 2013.

Some might say that is pretty bad, particularly the older ones who used to be making $25 per 1 thousand views in 2010 according to an article by Online Video Marketing Site, Will Video for Food. Unfortunately, veterans will continue to struggle in maintaining their income, because this opens doors for entering newcomers as they give advertisers the ability to look into a more diverse pool of sponsorships. With a more diverse and mediated population, the demand for the most popular videos will decrease as advertisers look to sponsor cheaper partners.

In 2012 a significant portion of ad-revenue sponsorships mainly went to the partners who were the most popularly viewed. However since then, 1/3 of the ad sponsorships left the most popular channels and headed towards the diversified partners (lower tier in popularity but newer and trendy) according to the research firm TubeMogul.

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One reason is because with the increasing number of monetizing users there is less of a need to put advertisements in the popular videos. Instead an advertiser can choose to distribute its advertisements to cheaper and trendier channels. Meaning, this allows sponsors to meet their criteria by putting their advertisements in several videos rather than one for cheaper.

While some advertisers and partners are able to see this as a moment of opportunity, most advertisers believe that a majority of the content on YouTube lacks production quality and have therefore lost the incentive to invest further.

The problem lies in the growing number of partnerships.

While the growth of partnerships continues, there is also growing number of non-quality videos that are still able to get money for its views. Therefore, there this creates a higher demand for quality videos which in turn raises the rates for advertisers who want to sponsor those videos.

Some advertisers do not like the idea of having to settle for “non-quality” sponsorships and therefore have chosen to abandon their investment all together.

Here’s what it looks like for a veteran and a newbie according to an article by the site BusinessWeek.com.

Veterans of the YouTube business, brothers Vijay and Antonius Nazareth, a popular channel, saw a 50% decline in their earnings in early 2013. They were retaining the same number of views but their income has continually dropped.

Another popular channel by Hannah Hart, a newer experienced partner, who runs the very successful My Drunk Kitchen, said that her earnings began to decline since mid-2012 –which is right when the new revenue program launched.

So, what veterans and newcomers are doing in response is resorting to a new strategies proposed by “content networks.”

Content networks are companies that take a cut of their client’s advertising revenue in exchange for covering the costs of production, looking for direct sponsors and securing higher ad rates. Content networks have become a very popular way for up-and-coming users and is generally directed towards newcomers although many veterans have resorted to them in response to the changing economy. Big content networks that are able to achieve over 2 billion views a month with up to 5,000 contracted partners can combat against the dropping ad rates. On top of that, content networks have the ability to negotiate a price directly with ad sponsors themselves, which helps more with easing the drop in monetization rates.

Machinima for example achieved over 2.2 billion views in March of 2013 with its 6,500 partnerships and has been able to maintain their rates by directly negotiating with sponsors. Since they specialize in videos for male gamers between the ages of 18-34, whom of which are consistently the top 2 largest audience, Machinima has been able to partially combat against the dropping ad rates for certain users.

A very important and favored alternative to solving this issue is: capping the entry of new partnerships by (re) re-structuring the revenue sharing program, whether it’s by returning the program to its former procedure of application processing or by halting partnerships completely. But this would be very difficult to do. Particularly, because it would be taking a step back from what YouTube had set out to do in the first place –which is to make more money. Regardless of the ad rates for partners, the increased number of ad-revenue increased YouTube’s profits and will therefore continue to allow users to enter partnerships.

Don’t worry the future of YouTube will stay bright as long as it is continues its track in becoming the primary media outlet of the world. But until then, if you are thinking about making a career in YouTube, think twice (I personally still want to). But I think it’s important to keep in mind a common saying by one of YouTube’s most successful partners, Jason Calacnis who explains of YouTube,

“It’s a good place to get started, but not a good place to run a business. Why would you ever give your partner 100% of your ownership?”

 

Insights of a part time real estate agent

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A private Realtor, a restaurant owner and a market owner (former state farm branch owner as well); these are things that describe the professional affairs of Gopal Sood, an experienced worker to say the least. Though I originally planned to investigate on the economic status of his very delicious 23rd Street Café, upon discovering that Gopal was also a Realtor I was urged to interview Gopal the Realtor. Considering how the housing market has diminished so much since 2007 the opportunity to know more about the real estate industry was a chance I could not miss.

Let’s go back before 2007 before the crash of the housing market.  At this time I always heard from friends and relatives talking about how great it must be to work as a Realtor. One of friends’ mothers even told me at elementary school how great it was being a Realtor during a career day event. I believed her when I saw her rolling out of the school parking lot in a convertible Jaguar. It was also likely at this time Gopal felt the same. I asked him how his business was at this time.

“You wouldn’t even believe it now; I was closing 10 to 15 houses … a month.”

Considering how little I knew about the business, I figured that was a lot.

I asked him how it was now.

“Maybe one or two”

The housing market essentially crashed in 2008 and combining the edges of my memory I remembered how frequently the term housing market came about within conversations about the recession. So I asked the next question off my list: What economic data do you think impacts your business the most? He said the economy itself is the data that gives him the most information. Not really sure what that meant, I asked instead: What happened?

He explained that because the banks are unwilling to give out loans it is harder for people to buy homes and since current homes prices are so low people are unwilling to put their homes in the market as well. This leads to less, almost none, real estate inventory making it very difficult for the real estate industry.

Still a bit confused I looked up information on the housing market trend in the local area. In all of Los Angeles, between 2007 and 2009, the recession led the house market price to drop almost 25%. It is only since the beginning of 2012 that the prices of homes are slowly beginning to increase. Currently the average price of homes has recovered about 40% of the amount it lost from the recession. So, even though prices of homes are cheap, it is difficult to buy a home because loans are not being given by the bank.

It was at this time I remembered from my Economics class how the recession occurred when banks met a higher than expected rate of foreclosures after eagerly giving out loans to people who were unable to pay the mortgage. So essentially, because of the recession banks are unwilling to give loans to home buyers.

He adds, “Unless you have a job that is what’s called recession proof. Even I, an owner of several businesses would not be able to get a loan for a house.”

That may be why he does not do any marketing whatsoever. All he has is his card and word of mouth (which is the same for his restaurant).

Curious to know more about the condition of his real estate business, Gold Star Realty, I asked him more on the current affairs of his business. What he told me was surprising.

The majority of his clients are attorneys. He enlightened me that because the yield on interest rates for savings accounts dropped so low, people have grouped together to collectively buy a house with the purpose of gaining a higher yield in their investments. It’s no wonder why as soon as a house becomes available, it is almost instantly bought.

But like I questioned earlier, how can it be possible that the housing market is bad if home prices and loan interest rates are so low? Banks are unwilling to give loans to people who do not have recession proof jobs; so, it would be likely that it is the practitioner professionals who the only ones making these investments.  But, this is untrue.

The number of individuals and families that enter this collective contract allows middle-class earning investors to afford the purchase of properties in places such as Beverly Hills.

“The last house I sold was in Beverly Hills and it sold for $1.3 million. I met with the attorney and he brought it all — in cash.”

The obvious assumption is that the middle class people have continued their real estate investments by collectively purchasing a house with on-hand cash, since they are unable to get a loan from banks.

“What many will do is buy a house, and then flip it so they can sell it for a higher price. That’s what I do”

Gopal truly is a man of experience. His real estate company is housed in a small suite in San Fernando Valley and uses it only during the rare moments he is with a client. He pays zero dollars for marketing and relies purely on the word of mouth. Nonetheless, this strategy was able to benefit him very well before the crash of the housing market. Luckily the crash of the housing market did not put his business in debt due to his realty business being self-run. Today his realty business survives through the rare occasions he is able to come across an open house as well as through his other businesses.

“People say to me all the time after seeing my car that my business must be doing great. But that’s not true. I got that car back when I was selling all those homes”

 

Rice and Cigarette Index

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Rice and cigarettes. The first one I enjoy, but the second not so much. Well actually that’s not true; I enjoy both, but truly do want to stub my nicotine addiction. Rice has always been an integral food product in my life. Growing up, I ate bowls after bowls without ever thinking twice about how much rice was available. It wasn’t until a bit over a year ago my mother cautioned me to not eat so much rice. Apparently, rice now became a financial concern within my mother’s grocery budget. This shook me, but I ignored it. It wasn’t a problem doing so since my mother never brought it up again.

 

Looking back on that incident, I compared the price of rice through the years and noticed that there was a steep increase from a consistent average from (US Long Grain) 2007-2012 at 550/ pound to almost 610 a pound at 2013. This explains why my mother was concerned over the price of our rice. Since then, the price has remained in the 600’s averaging around 600.

Now for cigarettes (not proud of this, but). I remember the first time I bought a pack in my sophomore year at high school. It was under 5 bucks for a pack of reds. Since 2011, I’ve been a pack-a-day guy with a minimum wage job. But, if a person has asked me for a cigarette, I would give it to him. There was this universal smoker’s code of giving a cigarette in order to feel better about asking someone when I was in the same situation. I was at peace with this code within that time, but it wasn’t until the past year when I abandoned this karmatic practice. Why? Well, cigarettes have constantly been increasing in price and there came a point when my usual pack of cigarettes jumped 2 dollars within a year. That was it. I didn’t stop smoking but I did stop sharing my smokes with others.  Looking at a cigarette price index, it is evident that this change in price was due to a combination of increased spending on advertising for cigarettes as well as the actions of health organizations to minimize the use of cigarettes. Health organizations convinced government to raise taxes by 10% in order to reduce cigarette consumption.

 

I am not the only one guilty of breaking this code. Many of my smoking peers and strangers have been resilient in their effort to bum their cigarettes as they too have noticed the sharp increase in cigarettes. It is almost as if the new code is to never ask to bum a cigarette.