The Costs and How To Pay For College

College Data states that for the 2012-2013 school year the average cost for tuition and fees was $29,056 at private colleges, $8,655 for state residents at public colleges, and $21,706 for out-of-state residents attending public universities. We have seen states vote to raise tuition even when student loan debt is becoming a problem and when many students and parents are struggling financially.  Yet, some of these increases are due, in part, to funding cutbacks from state legislatures but some argue that the over-availability of loans is another reason for an increase in college costs.

While funding for education is another conversation altogether, students are being encouraged to look at financial aid from scholarships and grants, as federal aid from FAFSA may no longer meet the all of the needs of an average college student.  While the tuition and fees are one consideration, subsequent costs like books, food, or housing can bump up a student’s overall costs even if they are living on-campus in university housing.

Many a problem solver simply throw out the golden nugget of advice to “get a job” and work while in school, which isn’t a bad idea in the least, but in some college towns jobs may not always be plentiful, let alone going to offer students pay that can help them put a dent in their tuition bill or simply meet costs of living after paying their tuition.  Also, some students don’t get enough aid to pay for their basic tuition and fees, so piling on housing and book costs, among other things, can leave students seeking multiple jobs, relying on their parents if they are in a position to help, or for the majority, borrowing a student loan is the route they take.

However, proper planning is vital when it comes to paying for college, and when done correctly, it can, at worst, minimize the amount of debt a student carries after graduation and at best eliminate the need to borrow altogether.  Yet, many students are of the mind that borrowing can’t be avoided and this can be true for some, but alternatives like payment plans, offered by most colleges, can help students to stretch out their tuition and fee payments over months, and for working students or cash-strapped parents, this can make paying these increasing costs easier to bear without turning to debt.

If Loans Are Necessary, Then What?

It’s been reported that student loan profits are expected to hit $51 billion this year, which has many wondering where the disconnect is occurring.  Are colleges simply too expensive?  Are rates on student loans too high?  Many would argue that it’s a combination of these factors, among other things, that have rocketed student debt to a level where you’d be hard-pressed to find a college graduate who isn’t carrying this type of debt.

While there have been proposals to reduce student loan rates and ongoing fights to stop rates from increasing, student loan rates and refinance rates are something that potentially can add fuel to the fire as a higher rate on a loan or loans can lead to an increased cost burden, or if a monthly payment is manageable, it could still be decades before some students are able to escape their college loans.

Borrowing is a necessary evil for some, but it needs to be remembered that student loans need to be looked at from all angles.  Borrowers and parents must look at the rates of the loans, whether they are federal or private, repayment options, if interest will accrue while a student is in school, and if there are any ways to have their loans forgiven after graduation, as is the case with some educators.

Also, the hard decision of opting for a more affordable college must be made sometimes as the common rule of “don’t borrow more student debt than you plan to earn in the first year of your post-college job” isn’t something students can always abide by.  Private schools, and some public institutions, can quickly inflate a student loan bill, and while a degree from certain universities can carry a great deal of prestige, it doesn’t guarantee a job that can allow for easy repayment of student debt, nor are some degrees worth the cost of attendance.

 In cases where a heavy reliance on student loans may be necessary, financially sound students are looking at other universities that can not only offer a quality education but will not leave them swimming in a sea of student debt payment for years after they leave college.

Long-Term Consequences of Student Debt

Reports of many men and women either bypassing or delaying college are not uncommon today as many feel going into the workforce to build up a savings, which may allow them to attend college one day, is the best option in the current state of higher education. Stories about the burdens of student debt are easy to find, but some graduates are seeing friends or family who have avoided college come out ahead in terms of their financial standing.

Graduates are delaying the purchase of cars, homes, or smaller items simply because of the student loan bill that is due each month, and as many fight their interest and principal on these loans, it can be disheartening to look back a question whether it was even worth it to pursue an education.   Understandably, few college degrees lead to a six-figure income or a life of luxury, and for some that’s not even the point.  The problem is that pursuit of an education is becoming a large financial commitment, like signing a mortgage, for many young men and women today, and the players, be they state governments, the federal government, or colleges themselves are being urged to correct the underlying issues related to funding and costs.  This will require more importance being placed on education, but it’s believed that in the long run students who are able to attend college without shouldering debt may remain in school or start school earlier, since debt isn’t an issue, and offering a quality education and allowing graduates to begin a career/start life in the “real world” without the ball and chain of student debt can benefit businesses, economies, and obviously the lives of these graduates.

Just this morning many major media publications pointed out that the Dow Jones Industrial Average is getting very close to an all time high.  It is often true that a quick pullback is needed to gain momentum to blast through any type of overhead resistance.  It may very well be the case that it takes Black Friday sales in 2012 to get this market to new highs.  This is not necessarily a bad thing because no market can go straight up.

There have been recent news articles illustrating the change of the consumer over the last few years.  Some of these publications have even stated that Cyber Monday might outpace Black Friday in terms of total sales.  This has yet to be determined but brick and mortar retailers may need to adjust their business strategy very soon.  Some of the old fashioned brick and mortar retailers like WalMart, Walgreens and Target have adapted and they are now offering almost every single product through their web entity.

Coming out of the recession some retailers have seen their stock price accelerate higher by more than 200%.  Remember the lows set in March 2009 were the lowest we have seen in decades so the gains may be overstated with the recovery.  That being said, there are still many niche retailers that have reached out to their audience and they are seeing impressive month over month and quarter over quarter sales gains.  Some of these retailers include Lululemon, Michael Kors and Autozone.

Some analysts feel as if the number of cars sold in a month is a strong indicator of the overall economy.  When many people are looking for Craigslist used cars they are not going to be spending as much money.  Rather than spending tens of thousands of dollars these individuals are looking to spend under $1500.  With a large percentage of the population looking to avoid making a new car purchase it stands to reason that the economy is not in good shape.

Moving forward into October and September 2012 some analysts will be looking at retail sales.  Car sales slow down a little bit as Americans start to look for electronics, furniture and appliances.  Some of the time these purchases are made as Christmas gifts.  There have already been some Black Friday sales opportunities released which means retailers will be pushing lower prices very hard.

Although Ford and GM are greatly struggling in Europe they are looking solid in the United States.  If the big three automakers can turn things around and get to new multi year highs when it comes to sales this could do a lot for the psychology of the United States consumer.  Some of the metrics that will be released in the next few weeks will help to propel the Dow Jones Industrial Average to a new all time high or a new multi month low.

Photo by dave_mcmt via Flickr

Auto Parts and Dollar Stores Struggle on June 27th

On Wednesday, June 27th, 2012 some of the retail leaders from earlier in the year had a difficult day.  Dollar Tree traded down almost 4% after the stock performed a two for one split.  Unlike Autozone and O’Reilly, Dollar Tree is still well above its 50 day moving average.  The stock tested its 20 day moving average but this important short term indicator held as support today.  Many people who are struggling with finances continue to shop at these low cost retailers but a better economy could hurt profits of these companies.

In the last several years Visa secured credit cards have become quite popular as Americans are looking for better financial options.  It seems to be the case that there is a place for the high end retailer and the low end retailer.  Any retailer that is stuck somewhere in the middle is truly struggling in 2012.  It could be the case that some of these “middle men” see stellar gains over the next few months as they have lagged much of the last two years.

S&P 500 Finishes Day Up 0.9%

Even though retail names lagged all day the overall S&P 500 performed quite well.  The S&P 500 outpaced both the tech heavy NASDAQ and the Dow Jones Industrial Average.  The S&P is currently right below its 50 day moving average.  It is important to note that the 50 day moving average is moving lower.  If there is a strong move higher in heavy volume over the next few days the major index might get back into a strong bull market technical pattern.

Energy and utility stocks performed very well on Wednesday, June 27th.  Both sectors were up about 1.25%.  Even though there was a move higher in energy stocks the XLE is still below its 50 day and 200 day moving average.  It will take several positive days to get the energy stocks back above the 200 day moving average.  There are several areas of resistance coming up so positive news will be needed.

Major Retail Names Dip Below 50 Day Moving Averages

The 50 day moving average is often looked at as a short term market indicator.  If a stock is expected to move higher in the near term it is sitting above its 50 day moving average.  This means that the 50 DMA is also moving higher.  Any time the 50 DMA is moving higher investors are excited to see support increasing.  This will allow short term investors to place stop loss points below this popular support level so they can save money.

Photo by time_anchor via Flickr

It is important for all investors to recognize stock prices often move quickly.  Some of the more popular retail names Autozone, Tractor Supply Company and Ulta are still moving below their 50 day moving averages.  All three of these names led retail stocks higher in the first few months of the year but this has simply not been the case since May 1st.  On the first trading day of May 2012 stocks started to move lower and many of them have not recovered to a level above their 50 day moving average.

S&P 500 Dips 1.6% Even Though New Home Sales Increased

New Home Sales increased to a two year high but this did not propel the overall stock market higher.  The S&P 500 ended the day down 1.6% even though home sales were positive.  This is something that is very confusing to many but investors must understand that the market predicts future economic growth, not past performance.  New Home Sales report the number of homes sold last month.  Investors want to see a positive outlook for the number of home that will be sold in the coming months.

Rather than trying to predict home sales or the overall direction of the market many hard working Americans have created an investment plan to simply invest the same amount each and every month.  This is very apparent with the popularity of a 401(k).  Individuals simply take a percentage of their paycheck and sink it into a mutual fund or stock portfolio.  This takes all the guess work out of picking stocks on a specific date.

Dril Quip Finds Support at 20 Day Moving Average

Dril Quip (DRQ) has struggled to find new highs in June 2012.  Since the beginning of May this stock has dropped from $76 a share all the way to $58.  A recent move higher pushed DRQ to its 200 day moving average but it the 200 dma was a strong resistance level.  In fact, the 200 dma was the highest point of the week ($66 a share).  It will be very interesting to see if DRQ can bounce off its 20 day moving average and move back up to the 200 dma.  It is a very interesting time for this stock as the 20, 50 and 200 day moving average are within a few percentage points.

Photo by nestor galina via Flickr

Short term investors are looking for a bounce off the 20 day moving average while long term investors would love to see the stock move through its 200 day moving average with some conviction.  Until heavy volume comes in it will likely be the case that the stock will stabilize between the 20 and 200 day moving average.  When looking at the chart of this stock it is quite evident that we will see some movement with conviction in the very near future.

Oil and energy stocks have not lead the stock market for quite some time.  There is a good chance we could see sector rotation into some of the more popular names but the XLE will need to be well above its 200 day moving average before there is any chance that this sector will lead all stocks higher.

Current 10 Year Treasury Rate Yield Moves Above 20 Day Moving Average

Most technical analysts agree the 20 day moving average is one of the best indicators of short term movements in stocks and bonds.  The 10 year yield recently pushed above its 20 day moving average and is slightly below its 50 day moving average.  The current 10 year treasury rate yield is at 1.67% and the 50 day moving average is 1.77%.  Note that the 50 day moving average is moving down so it will hit 1.75% over the next few days.

Since 1971 the 10 year yield has helped to move average 30 year fixed rate.  This strong correlation has remained even though the Federal Reserve Bank has done everything possible to keep interest rates at historic lows.  With this being true most expect to see 30 year fixed rates moving up to around 3.75% in the very near future.  This is still very low when looking at a multi decade chart of fixed home loan rates.

Financial Stocks End June 22nd Week Unchanged

After some ups and downs on the stock market last week the XLF finished unchanged.  There were several days in which financial stocks lead the market but the strong move lower on Thursday took away most gains.  Some banks have worked very hard to get back to pre credit crisis profits levels.  Very strong banks are avoided unsecured installment loans for bad credit borrowers as the default rate is very high.  The interest earned on these types of loans is quite impressive but a large percentage of borrowers will end up never paying this interest.

Photo by Tony Webster via Flickr

Borrowers often seek secured credit cards as a way to avoid installment loans or payday loans.  Big banks like Wells Fargo, Bank of America and Chase continue to avoid offering any type of very bad credit loan.  This does not mean that some of the local community banks are not going to jump into installment loans quickly.  There are a few very bad credit lenders that are doing very well as they force borrowers to put up some type of collateral.  It will be interesting to see where bank profits come from in the near future.

No Sales and Deals Needed

Just yesterday RWB Press mentioned the JCPenney pricing model and how it was not working.  By not having weekly sales and deals customers are getting frustrated as they are not saving as much money as they desire.  TJX Companies has stores that do not offer weekly sales and deals but they offer rock bottom prices on all of their merchandise.  It is not uncommon to find a $450 Michael Kors handbag for $220.  This pricing model has worked for quite some time for TJX Companies and they do not have to color coat their deals like JCPenney.

Photo by RetailByRyan95 via Flickr

Although Memorial Day, Labor Day, July 4th and Black Friday bring huge sales and deals at most major retailers stores like Marshalls, TJ Maxx and Home Goods do not take part in these events.  In all reality, there is no reason for these stores to do this as they all ready have the best prices around.  It is very difficult for customers to find any better deals than the ones offered at these locations.  This is the reason this retailer has hit an all time high of $43.48 while JCPenney is at yearly lows under $25 a share.

Low Cost Retailers Continue to Produce Record Profits

WalMart, Dollar Tree, Dollar General and TJX Companies have all reported record earnings in the last several quarters.  This comes as no surprise as there are several analysts who feel as if there are two places to make money in the current retail environment.  Retailers should be a speciality retailer like Lululemon or Micheal Kors or a discount retailer.  If a retailer is stuck somewhere in the middle they are struggling greatly.  If investors need a visual to see this at play they can simply look at the stock price of Walgreens, JCPenney or Sears Holdings over the last few years.  These stocks hover at break even while names like Lululemon and Dollar Tree are up over 250% since the credit crisis bottom.

Lululemon Athletica Bounces Off 200 DMA

In a similar pattern to the overall stock market, Lululemon bounced off its 200 day moving average and has moved significantly higher in the last three days.  On Tuesday, June 19th, 2012 LULU is up over 2.5% heading into the final hour of trading.  The 200 day moving average has been a very strong support line for Lululemon over the years.  During its current bull run that started in March of 2009 at around $2 a share the stock has tested its 200 day moving average six times and each time the result is a very strong move higher.

Photo by sushi_zume via Flickr

The past does not predict the future but this stock seems to perform best when under pressure.  The company has reported that supply cannot meet demand for their yoga products.  This is the problem that all retailers would love to have.  Lululemon has also done a very good job of making certain that growth is slow and steady.  They are not a retailer that opens hundreds of new stores in an area each and ever year.  In fact, most Lululemon locations started out as solely weekend locations.  This helps the company reduce real estate costs.

Michael Kors Surges 6% to Test 50 Day Moving Average

Michael Kors has been a very hot stock since it IPO’d in December of 2011.  In fact, the stock doubled in less than five months before the recent decline.  Almost every single retail name took a beating during the months of May and early June.  In mid June some of these names started to get a bid and have moved higher.  On June 19th, Michael Kors is having one of its best days since the recent decline.  At one point, the stock was up almost 7% in the middle of the trading day.

The 50 day moving average is still above the current price so it will be interesting to see if this serves as a point of resistance.  If the stock can break the 50 day moving average in strong volume there is a good chance the 50 day moving average will quickly turn to a support level.  With major July 4th sales events coming up it will be interesting to see how these two names perform in the summer months.

JCPenney Stock Down 31% Year to Date

Since the beginning of 2012 most retail stocks have pushed higher.  In fact, stocks like Ulta, Family Dollar and Dollar Tree are up over 25%.  During this same time frame JCPenney is down 31%.  This is one of the main reasons Michael Francis is no longer the brand manager at this major retailer.  In the last 10 years most retailers have pushed weekly sales and deals through a sales ad.  This sales ad often comes out on Sunday and it offers unique price points for one full week.

JCPenney was adamant that they were going to break this retail model.  JCPenney color coated their pricing with red, white and blue tags.   Each tag signified a different pricing pattern but none of these prices were week long sales.  The company attempted to offer everyday prices, month long prices and clearance.  Unfortunately, this only confused customers as they had no idea which prices were the best.  Retailers like Best Buy, Target and Walgreens clearly state sale prices with big signs and a sales ad.

Google Search trends have shown that more and more Americans are looking for sales and deals.  This is something that JCPenney did not consider when creating this pricing strategy.  During major holiday events such as Memorial Day, Labor Day and Black Friday customers want to see a one day or one weekend offer.  JCPenney did not do this on Memorial Day and the stock prices clearly depicts how customers felt about this.

Retail Stocks ETF Near All Time High

The Retail ETF (RTH) is nearing an all time high of $42.50 in the middle of June 2012.  There are several low cost retailers that have seen their stock hit an all time high in recent weeks.  Some of these names include Dollar Tree, Family Dollar and Ulta.  All of these companies have a one week sales ad that JCPenney was looking to avoid.  In fact, Ulta has seen their stock price rise almost 70% in the last year because of the great coupons and specials they offer.  There is very little argument to be made that JCPenney will need to go back to the weekly sales and deals strategy that almost all retailers are currently using.