Dollar UP.  Everything else DOWN.  Sound familiar!

Forget Facebook – this is the real financial story.

There has not been a lot of green on many screens of late, except for one castoff – the buck.  Call it what you will – the best house in a bad neighborhood, the flight to safety – fact is that when the scales tip towards deflation, the greenback shines.

Since QE2 wrapped up, the dollar has rallied like crazy.  Whatever monetization been has done since has not been enough to keep the buck down.

As you can see from the chart, it is almost deflation time – we’re close to a major breakout:

The buck nears a breakout. (Source: StockCharts.com)

Sure, the dollar is overbought of late.  But since 2008, when it’s rolled, it has really rolled, so I wouldn’t get in the way of this freight train.

It was interesting to see gold finally have an up day today.  One day does not a trend make, of course, but it will be interesting to see if gold is able to decouple from the other falling assets sooner rather than later.

From the archives: Deflation Investing Strategies

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King Dollar: “I’m Back, and So Is Deflation!” is an article from: The Contrary Investing Report

John Hussman expresses deep concern about stocks at current valuation levels in his latest (excellent) piece.  Contrary to what’s reported in mainstream financial media, stocks are actually quite expensive by all historical standards he says.

Present market risks involve a confluence of factors. First, valuations remain unusually rich. Though prospective returns are better than at the 2000 and 2007 peaks, valuations remain more elevated than at any point prior to the late-1990’s bubble, save for the period before the 1929 plunge. Notably, valuations only seem “reasonable” on the basis of “forward operating earnings” if one ignores the fact that profit margins are 50-70% above historical norms, and are dependent on unsustainably large fiscal deficits and depressed household saving in order for that to continue (seeToo Little to Lock In).

Further reading: John Hussman – Dancing at the Edge of a Cliff

He has a great chart in there that will scare you out of any US index funds you may be holding.

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John Hussman: Risk/Reward Profile in Stocks Could Hardly Be More Negative is an article from: The Contrary Investing Report

As the US dollar rallies furiously, it’s counterpart Down Under continues to get slammed. Are these currency moves getting a bit overdone?  Chris Gaffney weighs in…

Data Show US Economy is Improving

by Chris Gaffney, EverBank

Good day. The dollar continued to benefit from the troubles in Europe yesterday, adding to its weekly gains. The dollar index, which tracks the major currencies versus the U.S. dollar, is up 1.86% in the past five days as investors seek the shelter of the U.S. Treasury market.

I was talking to Mike last night, preparing for this morning’s Pfennig, and we agreed that all of this dollar buying is starting to look a bit overdone. At some point, the markets will figure they have “priced in” the Greek exit and will again start to trade on fundamentals.

Speaking of economic fundamentals, we got a ton of data released in the U.S. yesterday, and most of the numbers surprised on the upside. Housing starts and industrial production exceeded forecasts in April. Starts rose 717,000 versus an adjusted 699,000 in March. With the adjustment to last month’s numbers, the percentage gain in housing starts was 2.6% versus an expected 4.7% increase, but the numbers were still positive, which is all the markets focused on.

Building permits, a number that is a bit more forward-looking, were a bit mixed. Last month’s permit number was increased to 769,000, making April’s number of 715,000 look worse. April’s permit number was 7% lower than the March number versus expectations of a 4.5% drop. All in all, the housing numbers show a bit of an improvement in this very important sector of the U.S. economy.

My mortgage guy (I have my mortgage with EverBank, of course!) contacted me yesterday to let me know rates had dropped enough to make refinancing a good option for me. As I mentioned in the opening paragraph, much of the “safe haven” flows back into the U.S. dollar have been funneled into the U.S. Treasury markets.

This fresh round of bond buying has pushed interest rates down, which is obviously helping to support the housing market. The average rate on a 30-year fixed mortgage fell to an all-time low of 3.83% last week, and the average 15-year rate dropped to an all-time low also, according to Freddie Mac.

Another report released yesterday showed industrial production climbed 1.1%, the most since December 2010. The industrial production number was propelled by gains in auto sales, which were the strongest in four years. Half of the gain in factory output in April was due to a 3.9% surge in vehicle sales, according to today’s data. Utility use also increased during April, climbing the most in two years.

In addition, we got the capacity utilization numbers for April, which increased to 79.2%, the highest since April 2008. Chuck always watches this number closely, as it is a very good indication of whether businesses are using all of their production facilities. A rise of this number above 80 is typically an indication that the economy is “running on all cylinders.” We are not quite there, but certainly getting closer!

The combination of an uptick in housing and auto sales was great news for the U.S. economy, and would typically have led to a surge in the equity markets, as these are two of the most important pillars of the U.S. economy. But the stock markets were down here in the U.S., as investors continued to worry about the eurozone crisis.

Data released in Europe yesterday showed inflation slowed last month, and exports dropped in March as the region’s fiscal crisis undermined the economy. The eurozone crisis was also on the minds of the Fed policymakers during their last meeting.

Minutes from the FOMC meeting at the end of April showed members were worried about a loss of momentum in global growth caused by the European crisis. The members of the FOMC “indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.” The minutes also pointed out the “fiscal cliff” that the U.S. economy is approaching at year-end, as U.S. lawmakers have to agree on a budget before automatic spending cuts kick in.

We will get a few more pieces of data released this morning, including the weekly jobs numbers and leading indicators. The jobs data are expected to show another 365,000 increase in weekly claims, a bit lower than last week’s 367,000 increase. The numbers of jobless claims have been steadily drifting lower since peaking in March 2009.

I spent a lot of ink this morning on the data releases here in the U.S., so I better move back to the currency markets, which have been dominated by events in Europe. The big news yesterday was an announcement by the ECB that they would temporarily stop lending to some Greek banks in order to limit its risk. ECB President Mario Draghi signaled the ECB would not compromise on key principles in order to keep Greece in the euro (EUR). The ECB said it will push the responsibility for keeping the Greek banks liquid back onto the Greek central bank until they have sufficiently boosted their capital. The announcement was meant as a warning shot for the other peripheral eurozone banks, but lending will probably resume shortly. “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the ECB said in an emailed statement.

Draghi fired another shot at Greek leaders with his first acknowledgment that Greece could leave the monetary union. He said while the bank’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet.” As I mentioned yesterday, the Greeks will go back to the polls on June 17 in what many are now seeing as a vote to exit or remain in the euro.

Chancellor Angela Merkel hosted the new French President Francois Hollande on the day of his inauguration. That just amazes me that the new French president would travel to Berlin on his first day in office. It definitely shows you exactly where the seat of power in Europe is located. I also think it is a sign that Hollande will be much more inclined to cooperate with his German neighbors than some of his election rhetoric indicated. And it wasn’t an easy trip for Hollande to make, as his plane was struck by lightning, forcing a return to Paris to board a second flight to the German capitol.

During the press conference at the end of their meeting, Merkel and Hollande sounded as if they would get along and work together to solve the Greek crisis. Hollande definitely looks like a better partner for Merkel than the last French president, and the two look like they have already started down the path of compromise concerning Greece. The European leaders said they would consider measures to spur economic growth in Greece as long as voters there committed to the austerity demanded to stay in the euro. Hollande affirmed at the closing of his visit that “we have a common task” to accomplish. “Greece can stay in the euro area,” and “Greek citizens will be voting on exactly that.”

Chuck sent me a note yesterday morning suggesting the Australian dollar (AUD) may be oversold: “A charts friend of mine sent me a note indicating the Aussie dollar is showing oversold on the RSI readings. RSI stands for relative strength index, and my research shows that the A$ has reached current RSI levels four times since 2010 and each time, A$ has bounced off these levels. So… maybe the sun will begin to shine in the A$ again soon.”

I watched the Aussie dollar continue to slide after reading Chuck’s email and thought his chartist friend had probably misread something. But as I turned on the screens this morning, I saw both the AUD and NZD have turned around and begun to move higher. These two currencies were helped by Asian stock markets, which headed for their first advance in seven days. A feeling that the U.S. Fed could introduce another round of stimulus also helped buoy these commodity-based currencies.

To recap: The U.S. data released yesterday indicated the economy is still in a “recovery” mode. An increase in housing starts and industrial production showed two of the most important pillars of the U.S. economy, housing and the automobile industry, had stabilized. Another release showed capacity utilization increased to get close to 80. The crisis in Europe continues, as some Greek banks were “cut off” by the ECB. The new French president traveled to Germany, and from the look of things, the leaders are going to show a united front in their battle to save the euro. And finally, the AUD and NZD look like they are oversold, according to the charts.

Chris Gaffney
for The Daily Reckoning

Data Show US Economy is Improving originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled “What Causes Gas Price to Increase?“.

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Is the Dollar Rally a Bit Overdone? is an article from: The Contrary Investing Report

As energy expert Marin Katusa weighed in earlier in the week, it’s going to get ugly in the natural gas sector, as companies are going to be forced to write down their reserves to reflect the ugly realities of $2 natty.  So which natural gas stocks should you look to sell…or even short?  Marin weighs in again…

Which Stocks Will Lose the Most in the Coming Energy Bloodbath

By Marin Katusa, Chief Energy Investment Strategist, Casey Research

Earlier this week, I made a prediction that should scare a lot of investors.

I predicted a massive loss in market valuation for some of North America’s largest energy producers. You might own some of these names yourself.

I’ll share some specific names with you in a moment… But before we cover them, it’s important you know the dynamics that will drive them lower.

I covered the first dynamic yesterday. It’s called “reserve write-downs.”

As you probably know, the price of natural gas has collapsed more than 60% over the past 12 months. Energy firms that carry billions of dollars of reserves on their books based on the “old” prices (around $4 per MMBtu) will have to “write-down” the value of those reserves to reflect the new prices (below $2 per MMBtu).

Natural gas reserves that were “economically recoverable” – and thus, extremely valuable – when natural gas traded for more than $4 per MMBtu back in 2010 are going to be worth much, much less… now that natural gas is below $2 per MMBtu.

The second dynamic involves “hedging.”

Hedging is when one party agrees to sell a commodity to another party at a particular price in the future. This strategy helps commodity producers and consumers know in advance what their price of a given commodity will be. It gives both parties a greater ability to plan for the future.

For example, a farmer might agree to sell his corn for $6 per bushel before he even harvests it. Or an oil producer might agree to sell his production for $100 per barrel. This gives the farmer and the oilman the certainty they need to run their budgets. Even if the prices of their given commodities fall, both the farmer and the oilman are protected from price declines. They’ve “hedged” their production.

Hedged natural gas contracts have protected many producers from the full wrath of today’s rock-bottom prices. They’ve been able to sell their production at relatively high prices… even while the spot price collapsed.

But… for a lot of producers, these higher-priced hedges are about to expire.

Encana, Canada’s largest natural gas company, is a good example. The company had prudently hedged lots of the gas it sold over the last six months. This means it was still realizing $4 or $5 per MMBtu on its sales. Now, those hedges are expiring… and the new hedges are at much lower prices. Encana’s cash flow and its economically recoverable reserves are going to plunge.

Encana isn’t the only natural gas company in this situation.

In recent months, the second-largest natural gas producer in the U.S., Chesapeake Energy, removed most of its gas hedges for 2012 and 2013 based on the belief that prices are at or near a bottom.

Such a move, known as going “naked to the strip,” marks a major turnaround for a company that was one of the best and most active hedgers in the sector. Now, Chesapeake has no protection if gas prices continue to slide. It’s a risky scenario seeing as prices are currently below production costs in most U.S. gas basins.

For investors, the fact that many North American gas producers are seeing their high-priced hedges expire makes it more important than ever to understand a company’s cash flow picture going forward.

An investor must ask the following questions…

• What percentage of production remains hedged and at what price?

• How much will a company have to sell at or near the spot price?

• What is the company’s average cost of production?

• Is the loss of high hedges about to send the company into the red?

These are the questions you need to ask… But be warned: you won’t find very many producers with pretty short- and medium-term cash flow pictures.I expect natural gas prices to remain between $1.50 and $2 per MMBtu for the next 12 months.

Those prices will render a lot of production uneconomic. They will force companies to massively write down the value of their reserves. Cash flows will plummet. Shares in gas producers, while down a lot over the past year, will fall more than 25%.

The bloodbath in natural gas stocks is about to get worse.

Regards,

Marin Katusa

P.S. As I mentioned yesterday, I believe the decline in these stocks will crush even some of the biggest energy names in North America. In the coming weeks and months, I plan to show readers of my Casey Energy Report how to make large, safe gains from the situation. I’m confident there’s not another person in the industry who has done as much research – and found as many ways to profit from this idea – as me.

You can get all of my research, including my favorite ways to trade the coming energy decline, by coming onboard as a subscriber. Click here to learn more.

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Which Nat Gas Stocks Should You Short for Write Down Season? is an article from: The Contrary Investing Report

If you’ve been waiting for the correction in silver to play through, these are interesting levels to consider punting at.  This will be the fourth time in fourteen months that silver has tested support at $26 – and the previous three times, it’s held.

Thus far, Toto would be proud – silver’s held the line at $26. (Source: StockCharts.com)

As I unfortunately don’t have access to a futures account at the moment (“Hi my name is Brett, I’ve been clean from futures trading for 12 months…”) – I went searching for other trade vehicles that could provide some real juice.  Too bad the chart does not look at enticing for our favorite “call option on a call option”, producer Silver Wheaton.

Lower highs and lower lows for SLW the last 12 months – not a pretty chart. (Source: StockCharts.com)

With the markets getting pummeled day after day, it appears that the deflation bird has once again cawed its way from the dead into the pole position.  It’ll be interesting to see if gold and/or silver wake up a bit, on anticipation that Bernanke will start to reach for the CTRL + P command (hat tip Dr. Evil for the hilarious analogy).

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Silver Nears Solid Support Levels – Good Punting Opp? is an article from: The Contrary Investing Report

If you’ve always wished you could get fleeced by a Goldman banker, here’s your chance.  Buy some Facebook shares tomorrow – and take the other side of the trade from Golden Slacks!

Shocking, I know – Goldman got a special deal on FB shares on the secondary market a year ago, when FB carried a $50 billion valuation.  Now that it’s going tomorrow in the $100-125 billion range, GS is (probably wisely) dumping half its stake.

Bloomberg reports on Goldman’s latest public swindle (though I don’t blame Goldman on this one – it’s not their fault the public is willing to pay 100 times earnings for FB).

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While the Public Rushes to Buy Facebook, Goldman Unloads FB is an article from: The Contrary Investing Report

Software, as you probably know, is a great business. Zero marginal cost, no inventory to monitor, and no goods to physically ship.

The key to selling business software is finding an easy act to follow. Microsoft (MSFT) Excel was successful because there were no personal spreadsheet applications at the time. QuickBooks gained massive market share because Excel wasn’t equipped to handle small business accounting. Oracle’s massive growth in the 1980s and ’90s occurred because it was selling databases to big companies that didn’t have any, but desperately needed them.

We have a saying in our office that when selling small business software, the best thing to replace is Excel, or pen and paper. You don’t want to be tasked with trying to replace another software system, because odds are that, even if the system is bad, it is probably “good enough” to do the job it needs to do. People will complain about software all day long, but getting them to switch to another product – from something they know, to something they don’t know – is a very difficult chore.

The analogy in the enterprise is that you want to replace mainframes. Which is exactly what Guidewire Software (GWRE) does.

Insurance: Mainframe Computing’s Final Frontier

When it comes to adopting new technology, managers of insurance companies must be among the slowest. Most of the industry is still running mainframes!

Please read the rest of our Guidewire analysis at Seeking Alpha.

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A Growth Software Company With Utility-Like Revenue Stability – Guidewire is an article from: The Contrary Investing Report

Jim Rogers joined the original money honey Maria Bartiromo today on CNBC’s closing bell for a solid ten-minute interview (link and embed below).

• He views the current decline as a normal correction (said it could go all the way to $1200 and still be within the confines of a normal correction).
• Has recently hedged his positions in gold and silver.  Still owns other commodities, including agriculture.
• Owns US dollar due to its status as a perceived safe haven (he says it is not actually a safe haven).
• Believe JP Morgan and friends are liquidating positions like crazy at the moment.
• Thinks finance is “finished” after a great 30 years – says stock market volume is not going to come back (and recommended that Maria become a farmer, or at least learn how to drive a tractor).
• Says he owns no American equities, and is short equities around the world (believes 2013 and 2014 are going to be real messes).
• Admitted he was short calls on a “large American bank” when this JP Morgan news came out (ha!)

Here’s the full interview on CNBC.

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Jim Rogers on Gold, JP Morgan, US Stocks & More – CNBC Interview is an article from: The Contrary Investing Report

When investors are running for the pound, you know things are getting wacky in Europe!  Our currency guy Chris Gaffney checks in on the latest from Europe in today’s Daily Pfennig…

Pound Sterling as a Safe Haven?

by Chris Gaffney, EverBank

Good day. And welcome to another week. Chuck is headed out to Las Vegas today, to speak at the MoneyShow. With the travel and difference in time zones, he thought it would be best if we picked up the Pfennig for him this week, so I’ll be sharing my thoughts on the currency markets with you this week (hopefully, with a little help from Mike Meyers).

The euro (EUR) hasn’t gotten any help from the Greeks lately, and the currency markets continued to move out of “risk” positions and back into safe havens on Friday.

I spent a good bit of time this weekend reading up on the Greek political situation, and stole the “Achilles’ heel” phrase from this week’s Economist magazine. I thought that description was perfect for the Greek vote, as the euro has stumbled because of the recent uncertainty in Greece.

Greek leaders have been unable to form a unified government, and there is a real possibility that the Greeks will be heading back to the polls for another vote. As Chuck reported last week, European leaders have approved the next round of bailout funds for Greece, but with the continued leadership vacuum, I have to think this could be the final payment.

If they have another election, the markets will certainly see it as a referendum on whether the Greeks want to stay in the euro. A vote for the same anti-austerity parties would certainly put pressure on European leaders to rethink Greece’s membership in the single currency.

We have heard warnings over the “end of the euro” almost since it began trading, and I never put much credence in those who felt the euro wouldn’t last. But I do think the euro will evolve with the markets, and a Greek departure is a real possibility.

I think the euro will actually be stronger without Greece, like the buffalo herd that is being chased by a pack of wolves. The exit of one, or even two, of the weakest members will actually make the remaining group stronger. But the exit could get ugly in the short term, which is exactly what Chuck warned all of us about in his “currency projections” for 2012.

The euro also weakened after a report released this morning showed industrial production in the euro region contracted in March. German manufacturing was the one bright spot, but gains in Germany couldn’t overcome slower production in Spain and France. Industrial production slipped 0.3% from February, versus forecasts of a 0.4% gain. From a year earlier, production declined 2.2%.

The Greek political uncertainty weighed on the euro Friday, and today’s poor production report continued to push the euro lower, sending it near the lows for the year. The uncertainty in Europe has investors moving out of anything that can be associated with “risk,” which means the higher-yielding currencies got sold.

Looking at the currency screens this morning, the only currencies that are appreciating versus the U.S. dollar over the past month are the British pound (GBP) and the Japanese yen (JPY). I expected to see the yen at the top of the list, as the Japanese currency is seen as a “traditional safe haven.” But the pound sterling was a bit of a surprise.

The pound is being sought out by investors who are looking for shelter from the turmoil on the European mainland. The sterling has appreciated 3.6% this year, a surprise move considering the poor economic fundamentals in the U.K. The Bank of England has been flooding the financial markets with sterling in an attempt to boost the economy, so the appreciation in the face of all of this liquidity is even more impressive. But is the recent appreciation in the pound sterling justified? I hardly think so. The U.K. economy fell into its second recession in the first quarter, the first double dip since 1975. U.K. output is almost 4% lower than the peak in 2008, and unemployment is close to a 16-year high, at 8.3%.

Perhaps currency investors are just looking for political stability, which the U.K. can provide in contrast with the European turmoil and the U.S. elections. Prime Minister David Cameron is sticking to the austerity programs he instituted after his election two years ago, stating that deficit reduction is needed to keep interest rates low. The S&P rating service has affirmed Britain’s AAA rating and stable outlook, a confirmation of Cameron’s calls for further fiscal tightening.

The more traditional safe haven of the Swiss franc (CHF) hasn’t seen a big rise, as the Swiss National Bank has kept its promise to keep its value tied to the falling euro. So currency traders have turned to the pound sterling for shelter from the European economic storm. As Chuck pointed out last week, the U.K. is winning in the “ugly contest” in Europe, but I would certainly think there are some prettier places to park cash (the Nordic currencies are a prime example).

The Australian dollar (AUD) dropped below parity for the first time this year, a pretty dramatic move from a high of $1.0856 at the end of February. The “breaking of the buck” is a pretty big psychological move, and will probably send the Aussie dollar even lower. The commodity currencies all got sold as investors exited “risk trades.” The carry trade continues to be a popular investment strategy, but volatility in the markets can cause losses for these trades, so the renewed European crisis caused investors to sell the high-yielding currencies and move back into the relative shelter of the U.S. dollar and Japanese yen.

The Australian dollar continued to slide in spite of a report that showed the nation’s housing market is improving. Home approvals unexpectedly rose in March, the first positive move in three months. The number of loans granted to build or buy houses increased 0.3% in March versus the Bloomberg median estimate of a 2% decline.

The Aussie dollar, New Zealand dollar (NZD), and South African rand (ZAR) are all dependent on demand for commodities, and most of that demand now comes from China. Demand for the commodity currencies was boosted a bit after China lowered reserve requirements for banks in an effort to stimulate their economy. The PBOC also turned their currency around again, letting it slip vs. the U.S. dollar. China has held off lowering interest rates, choosing instead to reduce reserve requirements and lower the value of their currency. The 50-basis point move, effective May 18, will inject about 400 billion renminbi of liquidity into the banking system, according to estimates by ANZ.

The two moves by China indicate the Chinese policymakers are concerned about the recent slowdown in the global economy. Chinese leaders are looking to boost their economy after a batch of disappointing economic data was released last week. Two separate reports showed China’s industrial production and retail sales grew less than forecast. The industrial output in China increased 9.3% in April, the least since May of 2009. Estimates of Chinese growth have been steadily lowered, down from lofty double digits to the current estimate for 7.5% growth in the second quarter. China’s growth rate slowed to 8.1% in the first quarter from close to 12% just two years ago.

The Chinese economy continues to be the engine of global growth, so any further adjustments to growth projections can have dramatic effects on the currency markets. Many in the markets are wanting to see the Chinese become even more aggressive in their attempts to stimulate growth, and if growth slips below 7.5%, I think we will definitely see more aggressive moves. The 7.5% level has been widely discussed as being the level of growth necessary to maintain harmony in the Chinese economy. A lower level of growth risks social upheaval by Chinese workers who have come to depend on these higher rates of growth.

And a report out of India showed inflation in the world’s second-most-populous nation accelerated in April. The benchmark wholesale price index rose 7.23% from a year earlier, after climbing 6.89% in March. Higher inflation will definitely limit the room for further rate cuts by the Reserve bank. The RBI slashed the benchmark interest rate 50 basis points last month, and further rate cuts were expected in June. But the recent rise in inflation has cut these expectations and should actually help put a floor under the Indian rupee.

To recap: Greek political uncertainty continues to push the euro lower, with a Greek exit from the euro a definite possibility. The pound sterling is being sought out as a “safe haven” currency, taking the place of the Swiss franc, which is tied to the euro. The Australian dollar fell below parity for the first time this year as risk trades got reversed. The Chinese renminbi turned around and headed lower again after the PBOC lowered the reference rate. And a report out of India showed inflation unexpectedly accelerated in April.

Chris Gaffney
for The Daily Reckoning

Pound Sterling as a Safe Haven? originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled “What Causes Gas Price to Increase?“.

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Pound Sterling Replaces Swiss Franc as Europe’s Safe Haven (?) is an article from: The Contrary Investing Report

Fantastic job by Mark Cuban in his latest blog post, as he takes college education out to the woodshed.  He predicts a meltdown in college education, along with the financing of it, drawing interesting parallels with the housing bubble.

It’s just a matter o time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. STudents will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.

And it can’t happen fast enough.

Read Mark Cuban’s fantastic rant on traditional college education here.

More on questioning the ROI of higher education:

• Bill Bonner: Misguided by Higher Education
• Peter Thiel on why he’s paying talented students to leave school

Also I recall Jim Rogers mentioning over the past year that he’d short the Ivies or similar elite institutions, but can’t find the exact piece.  Rogers went to Yale, but as you can guess is not a fan of those in ivory towers, preferring those that travel and go see the world with their own eyes.

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Mark Cuban Lays Smack Down on College Education, Predicts Meltdown is an article from: The Contrary Investing Report