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Bubble in Higher Education: When Will It Pop?

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Bubble in Higher Education: When Will It Pop?

Bubble in Higher Education: When Will It Pop?

The Chart of the Week is a weekly feature in Visual Capitalist on Fridays.

The soaring bull market in higher education has been flying high for some time.

Many factors combined to make it the perfect storm: the demographic rise of the millennials, easy money from the Fed, the “Chivas Regal” effect in pricing strategy that many colleges and universities adopted, and the US government virtually taking over the market for student loans.

It’s a vicious circle as colleges raise prices, students take out easy loans, and the institutions raise prices again. However, it all seems to be coming to a head as several factors begin to show the chinks in the armor.

First, the US Federal Government now holds close to 45% of its total financial assets in student debt. This does not include things like land or the any of the Fed’s assets, but it is still extremely significant. Pre-crisis, it was only about one-third of those levels at about 15%.

The main reason for this increase is that the government seems to be the only organization backing student loans. Before the Financial Crisis in 2007, the government only owned $100 billion of student debt – now it owns over $800 billion.

Next, the delinquency rate has risen rapidly over the last decade. Even the St. Louis Federal Reserve branch is becoming concerned with this. In their research article from April 2015, they write: “A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.”

The problem is that real wages aren’t increasing, and many youth are left unemployed or with low paying jobs. With an average debt load just short of $30,000, it is no wonder that graduates are still struggling.

Lastly, colleges are starting to run into problems making ends meet and often institutions are going bankrupt. Particularly at risk are for-profit colleges with low prestige, as well as liberal arts colleges. Corinthian Colleges agreed to sell or close 107 campuses, leaving 72,000 students in the dust. Sweet Briar College has been in a potential bankruptcy saga for months. Even Louisiana State University is in the middle of drawing up its bankruptcy plan.

In the end, it may be technology may be what truly blindsides schools and students. The cost of an online degree (or even self-education) is a fraction of the cost, and colleges and universities are becoming less relevant every day. Big names such as Peter Thiel and James Altucher have been outspoken skeptics of higher education for years.

This college frat party could be coming to an end soon. The question is: who will end up paying for the kegs?

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Markets

40 Stock Market Terms That Every Beginner Should Know

Getting a grasp on the market can be a daunting task for new investors, but this infographic is an easy first step to help in understanding stock market terms.

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40 Stock Market Terms That Every Beginner Should Know

Understanding the stock market can be a daunting task for any new investor.

Not only are there many concepts and technical terms to decipher, but nearly everybody will try to give you conflicting pieces of advice.

For example, if a stock in your portfolio falls in price, should you be accumulating additional shares at a lower price or should you be strategically cutting your losses?

Some experts will tell you one thing, while others will tell you precisely the opposite.

A Place to Start: Terminology

Before you drift into the many debates that the investing pundits are weighing in on, perhaps the most proactive step for a beginner is to simply learn to talk the same language as the pros.

Today’s infographic comes to us from StocksToTrade.com, and it covers the most important stock market terms that every new investor should know and understand. It’s enough to get any beginner on the same playing field, so they can start toying with the more nuanced or complex concepts in the investing universe.

While we don’t agree with the exact definitions of all of the terms, the list is adequate enough to get any new investor off the ground. It covers basic order terms like “bid”, “ask”, and “volume”, but it also goes into concepts like “authorized shares”, “secondary offerings”, “yield”, and a security’s “moving average”.

What’s Next?

Already got a handle on 40 of the most important stock market terms?

Visual Capitalist has a ton of other powerful visual resources for new investors, or anyone else hungry to learn about how markets work:

Crush the above resources, and you’ll be market savvy in no time!

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Gold

A Brief History of Jewelry Through the Ages

Jewelry has been coveted for centuries by many different cultures. Here’s a look at the history of jewelry, and how it’s evolved into a $348B industry.

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Jewelry has been an integral aspect of human civilization for centuries, but it was the discovery and subsequent spread of precious metals and gemstones which really changed the game.

In today’s infographic from Menē, we visualize how the uses and symbolism of jewelry have evolved across time and space to become the industry we’re familiar with today.

Antique, Yet Ageless

There isn’t a single corner of the world that’s untouched by the influence of jewelry.

  • Ancient Egypt
    Gold accompanied the affluent into the afterlife – the famous 1922 discovery of King Tutankhamun’s tomb was filled to the brim with gold jewelry.
  • Ancient Greece and Rome
    Jewelry was used practically, and as a protection against evil. The gold olive wreath design was highly popular during this time.
  • Mesopotamia
    Both men and women in the Sumer civilization wore intricate pieces of jewelry, incorporating bright gems like agate, jasper, or lapis lazuli.
  • Meso-America
    The aristocracy in Aztec culture wore gold jewelry with gemstones to demonstrate their rank. The jewelry also doubled up as godly sacrifices.
  • Ancient India
    The Mughal Empire introduced the combination of gemstones with gold and silver. Today, pure gold jewelry is often gifted to new brides for financial security.
  • Ancient China
    Both rich and poor wore jade jewelry for its durable and protective properties. Pure gold jewelry is making a fashion comeback, doubling as a form of investment.

Modern Jewelry: At a Crossroads

Today, jewelry is at once the very same and vastly different from what it used to be.

The industry is worth upwards of $348 billion per year, and it’s not hard to see why. As an alternative asset, jewelry has grown 138% in value over the last decade – only outperformed by classic cars, rare coins, and fine wine.

However, perceptions of jewelry vastly differ. It’s not a stretch to say that Western jewelry buyers are enamored with diamonds, given their enduring association with special occasions – but it’s interesting to note how that ideal was fabricated.

The Invention of Diamonds

The De Beers Group is well known for making diamonds great again. In the early 1900s, the company had already monopolized the diamond trade and stabilized the market, but they faced the challenge of marketing diamonds to consumers at all income levels.

The average American considered diamonds an extravagance, preferring to spend money on cars and appliances instead. The concept of engagement rings existed, but weren’t widely adopted. The #1 slogan of the century – “A Diamond is Forever” – transformed all that.

Even as more companies like Tiffany and Co and Cartier entered the playing field, De Beers had set a successful industry standard. But there’s a catch – diamonds are actually:

  • Not all that rare in nature
  • Intrinsically low in value
  • Easily replicated in a lab
  • Decreasing in sales

Despite these caveats, the popularity of diamonds illustrate how Western consumers do not approach jewelry in the same way as Eastern economies, where its function as a store of wealth persists.

The Eastern Gold Standard

In Eastern economies, jewelry often takes the form of pure gold. The reasons behind this difference are surprisingly pragmatic: gold is considered a secure and innate store of wealth that maintains its purchasing value over decades, allowing families to pass wealth from generation to generation.

The rich history of the precious metal has made it a sought-after commodity for centuries, and China and India drive more than half of global gold jewelry demand every year:

YearShare of Demand (India + China)Total Global Jewelry Demand (tonnes)
201457%2510 tonnes
201558%2426 tonnes
201655%2068 tonnes
201757%2201 tonnes
201858%2200 tonnes

Source: Gold Hub – Values have been rounded up to the nearest tonne.

Why are Eastern cultures so attracted to the properties of pure gold?

Part 2 of this series will show why gold is the world’s most incredible metal, and why it’s coveted by billions of people.

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