College Spotlight: The University of Richmond

Hey Everyone,

I hope the summer is going well for you and all of you rising seniors and juniors are making plans to visit colleges this summer, as you know, I feel it is the only way to truly know if the school is a right fit for you. I am currently in Williamsburg, Virginia in the middle of a 7-college tour. Yesterday, I saw the University of Virginia and the University of Richmond. Later today, I will be going down the street to check out the College of William and Mary, then I am off to Elon, UNC, Wake Forest, and Davidson to round out my trip. I will pick a few schools to blog about during this trip, so please check out the blog over the next couple of weeks, and if you have twitter, follow the Xavier Guidance Twitter account for live updates and pictures from my trip @XHSGuidance.

Overall Information
Today, I want to spotlight, the University of Richmond, located in Richmond, Virginia. Richmond is home to incredible academics, the Spiders as their mascot, and my wife's alma mater...so you know it is a great place! This is a selective, small, suburban school, set on a country club-like campus six miles from downtown Richmond. UR was founded in 1830 and educates about 3,000 students from 47 states and 70 countries from around the world. They have very small class sizes of about 15, with 0 teacher assistants. If you ever get to the campus, you will see why 87% of all students to choose to live on campus all four years and the school boasts a 94% retention rate, which is very high! When I had the opportunity to walk around campus, I truly felt I was in a supportive environment where everyone at the school cares about each individual student's success. Everyone from professors to maintenance staff to students welcomed me with a big smile as I walked the campus. Not to my surprise, UR was recently ranked the 7th happiest campus in the country...not too shabby! As I said before, the campus is incredible, and honestly is in my top 5 most beautiful colleges I have seen.

For its student population, the school grounds are very spacious, with a ton of meticulously maintained lawns throughout campus with old stone buildings with a few bell towers on some of the buildings. There is also a very big pond right on campus, which is a perfect place to hang out with friends, or study before the big exam. Richmond also has all of the big sports in the Division 1, A-10 conference, including basketball and football. If you want to venture off of the paradise of a campus, students are only two hours from Virginia beach, two hours from the Blue Ridge Mountains, and two hours from Washington DC. In 2012 Richmond was also ranked the best river city in the US. Although Richmond is definitely not New York City, it does well for itself as it hosts over 900 restaurants, 25 museums, and six Fortune 500 companies.

Academic Information
At Richmond, students will always receive personal attention from their professors in whichever major they choose to pursue, and they have a lot of them. Over 70% of students choose to declare a major in the School of Arts and Science, which houses majors in arts, humanities, natural sciences, and social sciences. Their other very popular and extremely competitive school is the Robbins School of Business. If you are considering business, and are looking at schools south of New York, the University of Richmond must be on your map! The business school houses the number 1 program for international business, according to Bloomberg and overall it is ranked the number 16 undergraduate business program in the nation. Students have a ton of opportunities here, including managing their own investment fund, and their career opportunities are endless. Finally, their other main undergraduate school is the Jepson School of Leadership. Richmond was the first college to have a school of leadership (1992) and over 30 colleges across the country have modeled their leadership school after Richmond's including Stanford. In this school, students gain an interdisciplinary perspective, learn theory and practice of leadership, and 240 hours are required of students to participate in internships and service-learning opportunities. Also, which I love, students do not declare a major until the end of their sophomore year, giving them a ton of time to figure out which major is right for them. Richmond also offers and array of graduate programs including a Law School, and MBA program. The academic opportunities are obviously terrific and abundant, but outcomes are most important and here are a few for you:

• UR is a top 15 college producer of Fulbright Scholars among liberal arts universities
• 80% acceptance rate into medical school
• 89% acceptance rate into law school
• 96% successful placement rate after six months of graduation in either a job or graduate school
• Ranked #6 best career services according to the Princeton Review
• Internships available in all majors
• More than 300 students participate in summer research
• Ranked #3 best science lab facilities by the Princeton Review
• Second year of The Richmond Guarantee: all students receive (if they want) up to $4,000 in funding for a summer research opportunity of an internship. This covers anything from travel, to lodging to equipment, etc.

Admissions Information
As I said, Richmond is a very competitive school to get into. It has a 30% acceptance rate, with this past year having 9,921 applications, and 3,156 acceptances. The following is a summary of their admissions information:

• 39% of students come through Early Decision, 61% through Regular Decision
• UR is need blind through their admissions process
• Middle 50% include GPA: 3.54-3.94, SAT: 1320-1450, ACT: 30-33
• Class of 2018 has 816 incoming freshmen
• 1 in 4 students are students of color
• Total cost of attendance is about $58,000
• 67% of students receive financial aid, with the average aid package of $43,000
• 45 students each year are awarded a Richmond Scholar, which is a full ride, and there is no application necessary for this award.

I know this is a lot of information, but I do hope it is helpful. I really do feel like this is a special place, and is a school that should be on the map for many students. Remember to check out the blog later this week for my next college stop, and as always, happy searching!

-Joseph D. Korfmacher, MA

AAfCW 2015 Volunteer Update #13

This is the thirteenth weekly update by the Audubon Alliance for Coastal Waterbirds (AAfCW) for the 2015 season. Today's update includes reports of Piping Plover, American Oystercatcher, Least Tern and Common Tern from June 22 through 4:00 p.m. on June 29 with sightings of birds by volunteers and staff spanning that period.

Informational updates:

Fireworks displays for the 4th will be in full swing beginning this week. As of now we are only requesting volunteers for specific help at Sandy/Morse Points on the evening of Friday, July 3, with a rain date of Sunday, July 5. CT DEEP's Rebecca Foster will be on site to coordinate. We would love to have several volunteers join us. Volunteers should aim to be at the Sandy Point parking lot by 6:30. Volunteer roles would be to educate the public and be an extra set of eyes and ears for the police officer who should be enforcing the closure of Sandy Point to protect the birds. AAfCW staff will also be on hand. The area should be cordoned off as it usually is. The event will begin at 9:15. Even if you can only join us until then that would be a terrific help.

If the worst case happens and you find a dead chick anywhere during this busy weekend...

Step 1.  DON'T DISTURB THE SITE - only if the person who stepped on the chick is present and belligerent so that you feel unsafe - CALL 911 - otherwise

Step 2. Call Law Enforcement  - DEEP 24hr Emergency Dispatcher 860-424-3333, USFWS Agent Tom Ricardi cell 860-280-4894 or USFWS officer Doug Beaudreau cell 401-354-9329 (or all 3 if you get no response).

Step 3. Take a breath and fill out the Incident Observation Report. There are a lot of things to look around at to report on for this form, so take your time, it may be needed for the future. Try to keep other beach-goers away from the area if Law Enforcement is coming so that the scene remains as you found it. If you have a camera - take photos. If Law Enforcement is NOT coming ask them how you should proceed, especially if there is a dead chick, otherwise DON'T TOUCH or PICK UP the chick - and don't let others touch it.

Overall this holiday weekend we could use some extra help monitoring at plover and tern beaches, especially Bluff Point, Milford beaches, Long Beach, Pleasure Beach and Sandy/Morse Points. CT DEEP is particularly interested in chick counts as chick survival during the holiday weekend is problematic given all the beach parties and crowds. Any additional presence on the beach educating people about the birds and getting us information on chick survival would be wonderful. 

Lastly, please join us for a Pleasure Beach trail clean-up day on Sunday, July 5, from 9am-2pm at Pleasure Beach in Bridgeport! You will be helping to build the first nature trail on Pleasure Beach, allowing thousands of visitors to better enjoy the bountiful wildlife and beautiful plants the unique habitat holds. Getting to Pleasure Beach is easy with free parking at the water taxi pier, 144 Seaview Avenue, Bridgeport. The water taxi will bring visitors to and from Pleasure Beach, and is also free. Many of the species on Pleasure Beach are rare or threatened, including our Piping Plovers. Thank you so much to everyone who has stepped up to help monitor them at this critical time, and thank you to everyone who can join us at Pleasure Beach for the trail clean-up day on July 5.

Thank you for any assistance in any of these areas during the extremely busy upcoming week!

Survey and monitoring updates:

Piping Plover
19 adults, 13 fledglings at Sandy/Morse Points on 6/22
12 adults, 15 fledglings, 2 nests at Sandy/Morse Points on 6/23
4 pairs, 2 adults, 20 fledglings, 1 nest at Sandy/Morse Points on 6/23
9 adults, 13 fledglings, 1 nest at Sandy/Morse Points on 6/23
4 adults, 6 hatchlings at Long Beach on 6/23
6 pairs, 6 fledglings, 1 nest at Bluff Point on 6/23
1 adult, 1 fledgling at East Broadway Milford on 6/24
1 pair, 4 hatchlings at Pleasure Beach on 6/24
1 pair, 4 hatchlings at Pleasure Beach on 6/24
1 pair, 2 adults at Long Beach on 6/24
1 pair, 1 nest at Menunketesuck Island on 6/25
5 adults, 8 fledglings at Sandy/Morse Points on 6/25
1 adult, 1 fledgling at East Broadway Milford on 6/25
16 adults, 7 hatchlings, 4 fledglings at Milford Point on 6/25
1 pair, 2 adults, 5 hatchlings, 1 nest at Long Beach on 6/25
1 pair, 4 hatchlings at Pleasure Beach on 6/25
1 pair, 1 fledgling at East Broadway Milford on 6/26
7 adults, 6 fledglings at Long Beach on 6/26
3 pairs, 3 nests at Sandy Point Island on 6/26
1 pair, 1 fledgling at East Broadway Milford on 6/27
2 pairs, 7 hatchlings at Hammonasset on 6/27
2 pairs, 2 hatchlings, 2 fledglings at Cedar Island on 6/27
2 pairs, 4 adults, 6 hatchlings, 2 fledglings at Long Beach on 6/28

American Oystercatcher
2 adults at Sandy/Morse Points on 6/22
1 adult at Sixpenny Island on 6/22
1 adult at Ram Island on 6/22
1 pair, 1 nest at Bluff Point on 6/23
3 adults at Sandy/Morse Points on 6/23
3 pairs at Sandy/Morse Points on 6/23
3 adults at Sandy/Morse Points on 6/23
1 pair, 4 adults at Long Beach on 6/23
1 pair at Sandy/Morse Points on 6/23
1 adult at Great Captain's Island on 6/24
1 adult at Griswold Island on 6/24
1 adult at South Brother on 6/24
7 adults at Stratford Point on 6/24
1 pair, 1 adult at Long Beach on 6/24
3 pairs, 1 nest at Milford Point on 6/24
1 pair, 1 nest at Bluff Point on 6/25
1 pair, 1 nest at Hammonasset on 6/25
3 pairs, 1 nest at Sandy/Morse Points on 6/25
3 pairs, 4 adults, 1 nest at Milford Point on 6/25
5 pairs, 2 fledglings at Menunketesuck Island on 6/25
2 adults at Sandy/Morse Points on 6/25
5 adults at Long Beach on 6/26
10 pairs, 1 adult, 13 fledglings, 1 nest at Sandy Point Island on 6/26
1 pair, 1 nest at Hammonasset on 6/27
1 pair at Long Beach on 6/28

Least Tern
6 pairs, 12 adults at Sandy/Morse Points on 6/22
1 pair, 1 nest at Sasco Hill Beach on 6/22
45 adults at Sandy/Morse Points on 6/23
20 pairs at Sandy/Morse Points on 6/23
30 adults at Sandy/Morse Points on 6/23
60 adults, 20 nests at Sandy/Morse Points on 6/23
3 adults at Stratford Point on 6/23
1 pair at Bluff Point on 6/23
6 adults at Stratford Point on 6/24
118 adults, 86 nests, 6 hatchlings at Menunketesuck Island on 6/25
25 adults at Sandy/Morse Points on 6/25
30 adults at Milford Point on 6/25
2 adults at Stratford Point on 6/25
2 adults at Long Beach on 6/25
1 adult at Long Beach on 6/26
2 adults at Hammonasset on 6/27
1 adult at Cedar Island on 6/27

Common Tern
5 adults at Stratford Point on 6/23
1 pair at Great Captain's Island on 6/24
2 adults at Milford Point on 6/24
3 adults at Stratford Point on 6/24
4 adults at Stratford Point on 6/25
24 adults at Sandy Point Island on 6/26
3 adults at Hammonasset on 6/27

This concludes update #13 through 6/29/15 as of 5:00 p.m.

A Greek default does not rise to the level of a systemic risk

Greece is out of money, and its current government and economic policies are not supportive of a lasting solution. All the money it's borrowed has been wasted, flushed down the statist drain, in order to support Greece and its citizens in a style they can't afford. What's happening now is like musical chairs: when the Greek music stops (coming soon), someone (e.g., the EU, ECB and IMF) is going to have to record the loss on their balance sheet. The question is not whether Greece will default, but how it will do it and who will pay the eventual price.

Meanwhile, despite the strong likelihood that Greece will not find a lasting solution in the coming days, financial markets are not displaying any signs of distress. To be sure, there is lots of worry out there, but markets are still quite liquid and functioning normally. This makes sense, because a Greek default is not an earth-shattering event that comes out of the blue. It's been a long time coming, and Greece is a very small cog in the global financial markets.

The chart above shows 2-yr swap spreads in the U.S. and Eurozone. At current levels, swap spreads are well with the zone of normality. As such, they are saying that financial markets are liquid, and systemic risk is low. If a Greek default were a serious threat the stability of the Eurozone financial system and economy, swap spreads would be much higher—like they were when the PIIGS crisis reached a peak in late 2011.

The chart above shows the Vix index, a barometer of the market's level of fear, uncertainty and doubt. It's jumped up from 12 to almost 20 in the past six days, and that's telling us that markets are worried that something might go wrong. But if this were a really serious worry, the Vix would be a lot higher than it is today.

Putting the two together, it's obvious that markets are nervous, but it's comforting that there is virtually no sign that an unpleasant resolution to the Greek crisis presents any threat to financial markets or even the Eurozone economy.

If anything, a painful resolution to the Greek crisis would be a reminder to other countries that unproductive economies with bloated and inefficient governments are unsustainable and ultimately very painful for everyone. The best solution for Greece would be to grow its way out of debt, by reducing the size of its government and adopting pro-growth economic policies.

UPDATE: I refer you to a good post of mine from several years ago: "Greek Myths." It discusses in more detail why a Greek default and/or a Grexit do not spell doom for either Greece or the Eurozone.

Going the extra yard

Yesterday I got a chance to go metal detecting at a popular tourist beach in Palm Beach county Florida. 
This place is hit hard by many beach and water hunters, yesterday I saw several people already metal detecting when I arrived. 
The skies were getting darker and I knew I was probably going to have to leave the beach when a thunder storm rolled onshore. 
My strategy was to search an area at the tourist beach that is hunted the least, an obvious turn around area. 
Often beach and water hunters use the same turn around markers at tourist beaches, lifeguard towers, fishing piers or just the end of a line of sun beds laid out on the beach. 
What is the point of going past the crowded area, right? 
After entering the water with my Minelab Excalibur,  just a few yards past one of those obvious turn around points I started to recover coins and jewelry. 
I found a silver ring in the first 10 minutes which is always a good sign. A heavy platinum ring was recovered not far away from the silver ring and before leaving I recovered an 18K gold ring. 
All the coins in the area, also told me that other beach and water hunters did not like to detect very far past the crowded area at this beach. 
My platinum and gold rings were not found because I was following other people using inferior equipment or metal detecting techniques, just bad search patterns. 
Not all pople using the beach like to be in crowded areas at the beach, some people like to relax away from crowded sections of the beach. 
They lose jewelry and that jewelry stays in the area until an enterprising beach or water hunter goes the extra yard with their metal detector. 
When you have competition at the beach for jewelry and coins, you have to sometimes search or cover areas you probably would prefer not to.
Sometimes other hunters in the area squeeze you into searching an area you would rather not be at. In my case yesterday, two people were already searching the area I would have chosen to search first. 
Searching the less crowded section of a tourist beach might not seem like a good idea, but they are often the less heavily searched areas at tourist beaches with obvious turn around points or empty spaces between busier stretches of the beach. 

Healthy consumers

As a postscript to my post earlier this weekend (Healthy households), I offer updated versions of the following charts that illustrate the dramatic improvement in consumer finances since the Great Recession:

The 2008 financial crisis and deep recession taught consumers that having a lot of credit card debt was not a smart thing to do. Credit card debt outstanding now is about the same as it was 12 years ago, despite the fact that personal incomes have increased over 60% since 2003. As a percent of personal income, credit card debt was 7.4% in 2003, and it fell continuously to a low of 4.5% today.

By eschewing credit card debt, consumers have become much less likely to be delinquent on their credit card debt payments. Delinquency rates are as low as they have ever been since data was first collected in 1991.

With lower delinquency rates, it is not surprising that credit card companies wrote off only 3% of their outstanding loan balances in the first quarter of this year. That was the lowest chargeoff rate since 1985.

Today's consumer is a lot smarter, and a lot more careful with taking on debt. This reinforces the theme that I've been emphasizing for years: the Great Recession was so traumatic that its memory still lingers, making this the most risk-averse recovery in modern history. Risk aversion has been one of the hallmarks of this recovery, and that is one of the reasons why the recovery has been so tepid. It is also a good reason not to fear another recession: optimism is in short supply. The time to be worried is when everyone is optimistic and taking on lots of risk.

Relative price "inequality" continues

In light of the persistent media focus on income and wealth inequality, which has surged since the publication of Thomas Piketty's Capital in the Twenty-First Century, and about which I and many others have written in protest, I can't help but highlight an under-appreciated and continuously growing gap between the prices of durable goods and all other things under the economic sun. The chart says it all:

The data for this chart comes from the BEA's calculation of the price deflators for Services, Non-durable, and Durable Goods. Prior to 1995 there were times when some prices grew more or less than others, but post-1995 is the first time since the Depression that the prices of some things fell continuously while others rose.

The likely culprit for two decades of persistent deflation in the durable goods sector? China comes to mind, along with huge leaps in technological progress. In the process of industrializing and modernizing its economy, China figured out how to make things much cheaper than anyone else in the world by using Western capital and technology to greatly enhance the productivity of hundreds of millions of its workers that were formerly vastly underutilized.

Is this a bad thing? Well, let's think about it.

Consider this quick and dirty analysis: The deflator for Services is a decent proxy for real wages, since the service sector of the economy is far larger than the manufacturing sector and the major component of services is labor. As proof, I note that real personal income over the same period as the chart rose by 73%, only slightly more than the 66% rose in the prices of services. Now compare the 66% rise in the price of services to the 32% decline in the price of durable goods. That huge and "unequal" gap means that a unit of work today for the average person buys him or her 2.44 times as much in the way of durable goods as it did in 1995. Put another way, the prices of durable goods on average have declined some 60% relative to incomes.

While grossly "unfair" to US businesses individuals engaged in the manufacture of durable goods, this huge, unequal and growing gap in prices has been the biggest boon in history to nearly everyone else. Thanks to this rising inequality, just about everyone you see on the streets today carries a smartphone, a device capable of feats that were unimaginable two decades ago, and which can be bought for about two week's worth of work at the prevailing minimum wage. Meanwhile, thanks to its export earnings, China today is importing roughly 15 times as much from the US as it did two decades ago.

Inequality of wealth and prices is everywhere these days, and thank goodness. Andy Kessler in today's WSJ reminds us that great inequalities of wealth almost necessarily spring from great advances in technology, manufacturing, services and general productivity.

A company’s profits are the minimum value of the work it does for you and for society. Google, to take another example, generates huge profits. CEO Larry Page has an estimated net worth of $30 billion. But Google offers you a valuable service, and society benefits to the tune of trillions, yes trillions, of dollars in commerce that happens thanks to Google searches, mail and maps. Similarly, an iPhone 6 is worth a heck of a lot more than $600; you can hail a car, trade stocks, call your mom, all without being chained to a desk. 

Everyone should stop focusing on an entrepreneur’s wealth and instead focus on the value the customers gained from his products. I can’t dig for oil, let alone frack, but I am happy to pay Exxon a premium for my high-test gas. Collectively, we are richer because of Exxon. So inequality is not a bug of capitalism; it’s a feature.

Piers and jewelry hunting

I have found a lot of jewelry and coins around piers, or more importantly just a few yards past piers.  A few yards past the fishing pier in this photo, I found two Spanish silver reales from the late 1600s. 

Local tales of Spanish treasure coins found on the beach near the pier after winter storms turned out to be true. 
Many beach and water hunters use fishing piers as turn around points, or they avoid metal detecting around fishing piers because of the high amount of discarded fishing tackle in the area. 
I love metal detecting around fishing piers, it is very surprising how much gold jewelry you can find in an area that is often off limits to sunbathers and swimmers during normal beach hours. 
Under the pier has always been an attractive place for courting couples to hang out at night, in the day time people like to wade or snorkel around around the pier pilings. 
This would explain all the gold jewelry you can find under a pier, if you do not mind working hard for it. 
Yes you will find a lot of lead fishing weights and corroding ferrous objects, but you will find gold and silver if you put your time in around a pier.  
I have heard of so many great finds recovered around piers in Florida, but I still see many beach and water hunters just turning around at piers and walking back in the direction they came from. 
Twice this year, strangers chatting to me on the beach have told me that their friends had lost jewelry close to a fishing pier. 
I wonder how many people fishing off the pier lose earrings, rings, chains and watches while casting or reeling in fish. 
The older the pier, the more likely you are to recover old coins and jewelry after coastal storms hit the area. 
Think about all those people back in the day, dropping coins on the pier and seeing them fall between the wooden planks. 
One of my favorite pier find stories happened a few years ago when I recovered an old 1730 Spanish silver two reale mounted in a 14K gold bezel.   
The custom pendant was found a few yards past a popular fishing pier in south Florida. I was following another beach hunter who predictably turned around at the pier, he took his headphones off and told me the morning was a washout as he headed off the beach.
I went a few yards past where the chap had turned around and returned home with a really nice treasure coin pendant. 
Next time you think about turning around at a pier, think about what great find may be waiting for you just a few yards past the pier. 

Pleasure Beach Trail Clean-up

Please join us for a Pleasure Beach trail clean-up day on Sunday, July 5, from 9am-2pm at Pleasure Beach in Bridgeport! You will be helping to build the first nature trail on Pleasure Beach, allowing thousands of visitors to better enjoy the bountiful wildlife and beautiful plants the unique habitat holds. Getting to Pleasure Beach is easy with free parking at the water taxi pier, 144 Seaview Avenue, Bridgeport. The water taxi will bring visitors to and from Pleasure Beach, and is also free.

Many of the species on Pleasure Beach are rare or threatened, including our Piping Plovers. Once again today we successfully found the mom, dad and all four hatchlings! Thank you so much to everyone who has stepped up to help monitor them at this critical time, and thank you to everyone who can join us at Pleasure Beach for the trail clean-up day on July 5. See a flyer for the event in PDF form here: http://rtpi.org/wp-content/uploads/2015/06/Pleasure-beach-trail-cleanup-flyer.pdf

The Fed's game plan: it's all about the demand for money

It's no secret that the Fed will begin raising short-term interest rates before too long. However, the method they will use has never been tried before, so there naturally exists a degree of confusion and uncertainty surrounding the future course of monetary policy and how it will affect the economy. The purpose of this post is to simplify the issue in the hope that leads to better understanding. 

As I've argued in numerous posts over the past 5-6 years, the most important driver of monetary policy from late 2008 until recently has been unusually strong money demand. As I see it, the Fed was almost compelled to resort to Quantitative Easing in order to satisfy the world's demand for money and near-money substitutes. QE was not about pumping money into the economy, it was all about satisfying the economy's demand for liquidity. QE was erroneously billed as "stimulative," since printing money in excess of what's needed only stimulates inflation. Instead, QE was designed to accommodate intense demand for money, without which the economy might well have stumbled.

It all started when financial markets teetered on the edge of the abyss in the third quarter of 2008. The problem was that the world suddenly wanted a lot more money and money substitutes (e.g., cash, bank savings deposits, T-bills) than were available. Debt that made sense when housing prices were rising suddenly became suspect as prices collapsed. Too many people tried to rush for the exits, but the financial system lacked the necessary liquidity to allow so many to sell so much. Even before the meltdown that followed the collapse of Lehman, demand for T-bills was so intense that the Fed all but exhausted its holdings of T-bills by mid-2008 in an attempt to increase their supply on the market.  

Such was the shortage of money in late 2008 that the dollar soared, commodity prices collapsed, and the prices of TIPS and Treasuries signaled impending deflation on a massive scale, as the charts above show.

The increase in the demand for money can also be seen in the chart above, which measures the ratio of M2 (cash, demand deposits, retail savings accounts) to nominal GDP. Think of it as the amount of cash and cash equivalents that the average person wants to hold relative to his annual income. Between the end of 2007 and today, that ratio has jumped by over 30%. It's as if collectively we wanted to stuff almost $3 trillion under the mattress for a rainy day. The shock of the 2008 financial collapse and the deep recession that accompanied it resulted in years of risk aversion.

The most important policy change that QE brought with it was the Fed's decision to pay interest on bank reserves (IOR). Prior to that, bank reserves paid no interest, but banks were compelled to own them in order to collateralize their deposit base (our fractional reserve banking system required banks to hold about $1 in reservers for every $10 in deposits). This meant that reserves were a deadweight asset, so banks always tried to minimize their holdings of reserves. With QE, the Fed had to encourage banks to hold reserves, and IOR was the key to doing that.

Controlling and limiting the supply of reserves was the Fed's primary policy tool prior to QE. The Federal Open Market Committee controlled the supply of reserves indirectly, by targeting the interest rate that banks paid each other to borrow or lend the relatively fixed supply of reserves in existence. If the interest rate on the Fed funds market slipped below the FOMC's target, then the FOMC would deduce that reserves were in over-supply, and they would sell bonds in order to reduce the supply of reserves. If the Fed funds rate exceeded the FOMC's target, they would buy bonds in order to alleviate the shortage of reserves. (The Fed can only buy bonds from participating banks, and it can only pay for them by crediting the banks' reserve account at the Fed.) If the Fed wanted to ease monetary conditions, it would lower the funds rate target, and sell bonds to add reserves in order to make reserves more plentiful. By targeting the Fed funds rate and indirectly the supply of bank reserves, the Fed was thereby able to control the money supply and in turn inflation.

But paying interest on reserves changed everything. Suddenly banks viewed reserves as functionally equivalent to T-bills: a very safe, short-term, very liquid, and interest-bearing asset. If the world wanted tons of safe "money," the Fed now had the means to deliver what the world wanted. With QE, the Fed effectively transmogrified trillions of notes and bonds into T-bill equivalents. IOR allowed the Fed to create virtually unlimited supplies of the "money" that the world so desperately wanted—without being inflationary. Inflation, as Milton Friedman taught us, only happens when the supply of money exceeds the demand for it. QE was not about artificially pumping up the supply of money, it was about providing the money that the world wanted.

Banks have taken in almost $4 trillion of savings deposits since late 2008, and instead of lending all that money to the private sector, they lent most of it to the Fed, receiving bank reserves in exchange. (In practice, banks used their deposit inflows to purchase notes and bonds which they then sold to the Fed, which the Fed paid for with bank reserves.) Banks were very reluctant to lend to the private sector, but they loved lending to the Fed, since that involved zero risk. 

Today we know that all of the above is true, because the Fed has purchased some $3 trillion of notes and bonds yet inflation has remained relatively low and stable. The Fed supplied just enough money to satisfy the world's demand for money, so it wasn't inflationary. 

So now we look ahead to the unwinding of all this. Since a huge demand for money is what led to QE, the reversal of QE will (or at least should) be led by a reduction in the world's demand for money. If and when the banking system's desire to hold trillions of excess reserves declines, the Fed is going to have to reduce the supply of reserves—by selling its holdings of Treasuries and MBS, or allowing them to mature—and/or take steps to increase banks' desire to hold those reserves—by raising the interest rate it pays on reserves. As the Fed has told us, they will almost certainly do both, with an initial emphasis on raising the interest paid on excess reserves (IOER). If they don't, then the supply of money will exceed the demand for it, and higher inflation will ensue. Given that banks currently hold about $2.5 trillion of excess reserves, they have a virtually unlimited ability to increase their lending activities. 

There's already mounting evidence that banks have returned to the lending business with gusto—which implies that the demand for money is declining and risk aversion is receding. As the chart above shows, bank lending to small and medium-sized businesses has been increasing at strong double-digit rates since early last year. Over the same period, total bank credit has increased by more than $1.1 trillion, and is growing at a 7-8% annual pace. Prior to the beginning of last year, it took almost six years for bank credit to increase by $1 trillion. From the end of 2007 to the end of 2013, it was a time of strong money demand and pervasive risk aversion. For the past 18 months, the tide has begun to turn: money demand is down and risk aversion is receding.

When banks lend more and the private sector borrows more, that is by definition a decline in the demand for money, and it goes hand in hand with a decline in risk aversion. As banks realize that lending to the private sector produces risk-adjusted returns that exceed the IOER (now a mere 0.25%), their desire to sit on mountains of excess reserves that could be used to collateralize more lending is going to decline and lending is going to accelerate further. Raising IOER makes bank reserves more attractive, offsetting banks' growing lack of interest in sitting on excess reserves.

The Fed is going to have to react to the decline in money demand which is already underway, no question. They are going to have to slowly drain reserves from the system, and they are going to have to raise the interest they pay on reserves. But it needn't be scary.

Raising interest rates a few notches at this point is not equivalent to "tightening" monetary policy. It's more like easing off the accelerator, having reached the speed limit. As the chart above suggests, "tightening" monetary policy involves increasing real interest rates. Every recession in the past 50 years has been preceded by a significant rise in real short-term interest rates and a flattening or inversion of the real and nominal yield curves. We're still years away from that happening, and real short-term interest rates (the red line in the chart) are still negative.

The Fed can raise rates by hundreds of basis points without damaging the economy or threatening the health of financial markets, because higher rates will be a natural response to a stronger economy and a decline in the demand for money. If they don't they risk a potentially painful increase in inflation.

AAfCW 2015 Volunteer Update #12

This is the twelfth weekly update by the Audubon Alliance for Coastal Waterbirds (AAfCW) for the 2015 season. Today's update includes reports of Piping Plover, American Oystercatcher, Least Tern and Common Tern from June 15 through 4:00 p.m. on June 22 with sightings of birds by volunteers and staff spanning that period.

Informational updates:

Once again, we are looking for extra help to monitor the pair of Piping Plovers on Pleasure Beach in Bridgeport and their four hatchlings that are only a few days old. As of today all four hatchlings are healthy and doing well with mom and dad. This is an especially sensitive area, being so remote, and with beachgoers visiting the site now via the water taxi from the dock at 91 Seaview Avenue in Bridgeport. You can do the same for monitoring with the parking lot available there. The City has been great in working with us and helping to educate people on and protect the birds. Our WildLife Guards program, which trains, mentors, and employs ten local high schools students and two crew leaders to monitor nesting birds and engage visitors, families, and friends about Pleasure Beach and its wildlife, will not start until July 1. If anyone could provide extra monitoring coverage for us until then we would greatly appreciate it, thank you!

Survey and monitoring updates:

Piping Plover
10 adults, 10 hatchlings at Sandy/Morse Points on 6/15
2 pairs, 1 adult, 6 hatchlings at Long Beach on 6/16
14 adults, 3 hatchlings, 2 nests at Sandy/Morse Points on 6/16
1 pair, 1 hatchling at East Broadway Milford on 6/16
15 adults, 10 hatchlings at Sandy/Morse Points on 6/17
2 pairs, 7 adults, 7 hatchlings at Sandy/Morse Points on 6/17
2 pairs, 6 hatchlings at Long Beach on 6/17
1 pair, 2 adults, 3 hatchlings at Griswold Point on 6/17
2 pairs, 2 nests at Hammonasset on 6/18
2 pairs, 4 fledglings, 1 nest at Cedar Island on 6/18
1 pair, 1 hatchling at East Broadway Milford on 6/18
3 pairs, 3 adults, 4 hatchlings, 1 nest at Long Beach on 6/18
1 pair, 1 nest at Pleasure Beach on 6/18
14 adults, 12 hatchlings, 2 nests at Milford Point on 6/18
6 pairs, 3 hatchlings, 5 fledglings, 1 nest at Bluff Point on 6/19
2 pairs, 1 adult, 1 hatchling, 1 nest at Hammonasset on 6/20
3 pairs, 3 adults, 6 hatchlings, 2 nests at Griswold Point on 6/21
1 pair, 4 hatchlings at Pleasure Beach on 6/22

American Oystercatcher
4 adults at Sandy/Morse Points on 6/15
5 adults, 1 nest at Long Beach on 6/16
1 adult at Silver Sands State Park on 6/16
4 adults at Sandy/Morse Points on 6/16
1 pair, 1 hatchling at Green Island on 6/16
3 pairs, 1 nest at Hammonasset on 6/16
3 pairs at Goose Island on 6/16
7 adults at Sandy/Morse Points on 6/17
1 pair, 1 nest at Long Beach on 6/17
1 pair at Canfield Island on 6/17
4 adults at Sandy/Morse Points on 6/17
1 pair, 1 nest at Hammonasset on 6/18
1 pair, 2 hatchlings at Lewis Island, Thimbles on 6/18
3 adults at Thimble Islands on 6/18
1 pair, 1 nest at Long Beach on 6/18
2 pairs at Pleasure Beach on 6/18
1 pair, 1 nest at Bluff Point on 6/19
1 pair, 1 adult at Hammonasset on 6/20
1 adult at Griswold Point on 6/21
1 pair at Stratford Point on 6/22

Least Tern
24 adults at Sandy/Morse Points on 6/15
4 adults at Long Beach on 6/16
30 adults, 5 nests at Sandy/Morse Points on 6/16
1 pair at Green Island on 6/16
2 pair at Hammonasset on 6/16
2 pairs, 18 adults, 1 nest at Sandy/Morse Points on 6/17
3 adults at Long Beach on 6/17
30 adults at Sandy/Morse Points on 6/17
1 pair at Cedar Island on 6/18
60 adults at Milford Point on 6/18
1 pair at Bluff Point on 6/19
3 adults at Hammonasset on 6/20
15 adults at Griswold Point on 6/21

Common Tern
3 adults at Sandy/Morse Points on 6/16
3 adults at Green Island on 6/16
3 adults at Hammonasset on 6/16
1 pair at Hammonasset on 6/18
1 pair at Cedar Island on 6/18
1 pair, 1 adult at Thimble Islands on 6/18
3 adults at Milford Point on 6/18
2 adults at Hammonasset on 6/20

This concludes update #12 through 6/22/15 as of 5:00 p.m.

Healthy households

In the first quarter of this year, the financial burdens of U.S. households were as low as they have been since the numbers were first tallied in 1980, according to data recently released by the Fed. It's a natural response to the near-death experiences of many individuals during the 2008 financial crisis: most everyone wanted to shore up their finances by saving more and paying down debt.

Earlier this month I highlighted the fact that the wealth of U.S. households reached new all-time highs in the first quarter, and that was due in large part to the healing processes that began in the wake of the financial crisis. It's all part of the same story: risk aversion surged in the wake of the financial crisis, and this resulted in a big increase in the demand for money, which in turn shows up in a big reduction in the leverage of the household sector.

Here are some charts that tell the tale:

U.S. households' financial burdens (required payments on debt, homeowner's insurance, and property tax as a percent of disposable (after-tax) income) have been a relatively low 15% for the past two years. The reduction in debt burdens has come chiefly from reduced debt relative to income, and lower interest rates.

As a result of smaller debt burdens, increased savings and rising equity and home prices, household leverage (total liabilities as a percent of total assets) has dropped by 30%, from a high of 22% in 2009 to the current 15%. Household leverage today is about the same as it was in 1990. In a sense, we've rolled back some 25 years of debt accumulation.

If we have a problem today, it is not "too much debt." On the contrary, the private sector has plenty of capacity to take on more debt. Our public sector, of course, has gobs of the stuff, but at least the deficit has shrunk to a manageable size—for now. At about 74%, federal debt relative to GDP is large, but not terribly large, and is relatively stable.

The U.S. government has borrowed tons of money at historically low interest rates, and has been skewing the maturity of its debt longer for several years now—as any rational borrower would have, in order to "lock in" low rates. If interest rates rise, Treasury will look like a genius, while private sector owners of all that debt will look like fools. One reason that short-term interest rates are still close to zero (3-mo. T-bill yields are essentially zero as I write this) is that bond fund managers are very much aware of the risk of rising rates, and are hedging their portfolios by stocking up on cash and cash equivalents. (Very low short-term rates are prima facie evidence of very strong demand for short-term securities.) But they can only do so much, since holding zero-yielding cash means giving up lots of extra yield while waiting for interest rates to rise, and the timing of that rise is still very much up in the air. I've been wrong on this for years, but that doesn't deter me from continuing to think that yields are more likely to rise by more than expected, than to fall further.

Mackies AND a Parmenter For Sale

Even in the midst of all the Kidman tour chaos (and more on that soon, we have CDs, LPs and DVDs finally!) we manage to bring you some superb wave sliding equipment. Fresh off the plane, Mackie sidecuts and they are going to be complete rockets- EPS, 5 box system and so clean. The pictured 6'6" has sold but there's another one coming and the 6' is available- $850. As a bonus, this stunner of a Parmenter widow maker was also collected while blasting through Central California. Beautiful old school diamond tail, pretty thick and with glassed on side bites and a really stunning tint. It's a super good deal at $800, and this shape works so well from a few feet to overhead, it's a seriously good addition to any real quiver. Email info @ foamandfunction.com for details on any of these....

Tide charts and beach reports

If you base your beach or water hunting plans, or follow any of the things mentioned in this post title you are always going to be one step behind other beach and water hunters who go metal detecting regardless of the tides or beach conditions. 

A question I am often asked is, when is the best time to go metal detecting at the beach.

Another question is where do you find the most jewelry and coins at the beach, the answers to those questions are anytime and any place. 

The less beach or water hunting restrictions you place on yourself, the more jewelry and coins you will find at the beach. 

I doubt I would have found any of the jewelry and coins in this photo if I only went metal detecting at low tide or relied on other peoples beach reports before going beach or water hunting.  

Randomly lost coins and jewelry at the beach are just that, randomly lost coins and jewelry. 

The things you are searching for with your metal detector at the beach could be lost almost anywhere and at anytime. 

They are not always deep targets and not always shallow targets, simply randomly lost objects that end up settling in different layers of sand. 

So why would a beach or water hunter only go metal detecting at low tide, or sit around waiting until someone tells them they have a better chance of recovering stuff. 

I have recovered several really nice and expensive diamond rings this year, ask me what the beach conditions were like or what time was low tide when I recovered the rings and I could not tell you. 

Tide times and beach conditions are what they are when I arrive at a beach to metal detect, not the reason why I go to a beach to metal detect.

Tide charts and sanded in beach reports are two things that insure other people with metal detectors stay at home instead of going metal detecting. 

Pleasure Beach Monitoring

Good evening all,

Late last night or early this morning the pair of Piping Plovers on Pleasure Beach in Bridgeport hatched four young ones! This is an especially sensitive area, being so remote, and with beachgoers visiting the site now via the water taxi from the dock at 91 Seaview Avenue in Bridgeport. The City has been great in working with us and helping to educate people on and protect the birds. Our WildLife Guards program, which trains, mentors, and employs ten local high schools students and two crew leaders to monitor nesting birds and engage visitors, families, and friends about Pleasure Beach and its wildlife, will not start until July 1. If anyone could provide extra monitoring coverage for us until then we would greatly appreciate it!

Thank you in advance!

Consumer price inflation is still running almost 2%

Two months ago, I noted that 2% inflation is alive and well, and it's still the case:

The prevailing inflation meme is that it is dangerously low, and for years central banks have been trying very hard—without much success—to get it to rise. The reality—at least in the U.S.—is that the underlying "core" rate of consumer inflation has been running at close to 2% for over a decade. Energy prices have been the principal cause of variations from this trend.

Here are some charts to prove the point:

The "core" rate of CPI inflation has been far less volatile than the total rate of CPI inflation. The first of the above two charts show the year over year change in the CPI and the CPI Core indices. The second focuses on the 6-mo. annualized change in these same indices. The total rate of CPI inflation was about zero over the past six months, but it grew at a much more rapid 3.18% (annualized) rate over the past three months. In other words, the overall CPI is quickly "catching up" to the CPI Core and CPI ex-energy rate of inflation, and all are covering at something in the range of 1.8-2.0%.

The chart above shows the 10-yr annualized change in the Core CPI. By this measure, the Core CPI has been running very close to 2%, on average, for the past 14 years.

The CPI ex-energy has also been running very close to 2%, on average, for the past 12 years, as the charts above show. Over the past 10 years, the annualized rate of inflation by this measure has been 1.99%. Over the past year, it was 1.71%.

This last chart looks at the long-term trends of the CPI ex-energy. In the past decade it has been relatively low and stable, much as it was in the first half of the 1960s.

As the chart above shows, inflation as measured by the CPI and the PCE deflator has been almost the same. Over the past 20 and 30 years, inflation according to the CPI has tended to register about 40-50 bps higher per year than the PCE deflator. Thus, if the CPI continues to run at just under 2%, the PCE deflator (and its core version) will very likely run about 1.5% per year. There is nothing scary or worrisome about either of those numbers.

UPDATE: The bond market is currently priced to this same conclusion: consumer price inflation is very likely to be just under 2% for the foreseeable future.

The bond market currently is priced to the expectation that the CPI will average 1.72% over the next 5 years.

The prices of 10-yr TIPS and 10-yr Treasuries reveals that the market expects the CPI to average 1.91% over the next 10 years.

Searching sand bars at tourist beaches

Yesterday I found several pieces of gold and silver jewelry at a local tourist beach that was pretty sanded in. 
The upper beach was too busy to detect, the lower beach was sanded in badly so I hit the best looking spot which turned out to be the water. 
I figured after about a week of 3 to 4 foot waves with people jumping up into the waves,  there had to be a few pieces of jewelry shaken loose. 
The beach I chose to search was my third choice, I walked on and straight off the first two beaches because I did not see any sand bars. 
Unlike many full time beach and water hunters in Florida, I only had a couple of hours to metal detect, so I needed to maximize my chances of recovering jewelry. 
I took my pulse induction SDC 2300 because I knew I was not going to be digging much trash and I like its sensitivity to small gold.  
Around sand bars you are more likely to find rings, chains and ear rings.  
I was only metal detecting in knee deep water, where people would have walked up onto the slope of the sand bar and got hit by waves on the previous high tide. 
This is often a place that is ignored at low tide by water hunters wanting to get out as deep as possible, or beach hunters searching in a straight line along the lower beach. 
Part of being able to read the beach is knowing what the beach probably looked like on the previous high tide. 
Where would people in the water have been standing or swimming? 
I look at things differently to other beach or water hunters, by always putting all my search efforts into trying to recover jewelry lost on previous high tides. 
I never get carried away by seeing a crowd of people on the beach or in the water and thinking I have to search for jewelry that crowd may have lost. 
In my opinion, you are far more likely to recover jewelry lost in previously crowded areas than stumble across jewelry lost within the last couple of hours. 
The jewelry I recovered yesterday was probably washed over the sand bar recently, it had not sunk out of detection range and my water reading hunch was spot on. 
I have recovered many expensive gold rings on very shallow sand bars,  people love to lay on sand bars  in only a few inches of water.  
Once those hands slide into the sand, the suction of the sand and water can ruin the moment as rings are easily lost on a sand bar. 

Least Terns & MBTA

Here is one of those birds that would have been extirpated if not for the Migratory Bird Treaty Act – the Least Tern (Sternula antillarum). One of the focal species of the Audubon Alliance for Coastal Waterbirds, Least Terns were a target of the millinery (hat-making) trade and market hunting nearly wiped them out. Besides such a direct threat these birds must also be legally protected from harm via unaware beachgoers and unfortunately the select few who still wish to ignorantly hurt them in some way if we want them to make it through the 21st century.

These photos show courtship in progress followed by subsequent copulation and a bird inspecting the nesting area. While we do not have as many Least Terns present as we may like on the Connecticut coast this year due to the mobile nature of their breeding grounds, we hope to have success with those that have joined us in 2015.

College Spotlight: Trinity College

General Information

The second school from my New England college tour was Trinity College located in Hartford, CT. Trinity College is located about 2 hours from New York City, set on top of the city of Hartford on a ridiculously beautiful 100-acre campus. Trinity is also in the NESCAC athletics conference, often referred to as the "baby ivies". It is a liberal arts and sciences college, but it does house an engineering school with multiple majors. There are just about 2,300 undergraduate students, which makes in an ideal size for students looking for an intimate, but not too small college. The student to faculty ratio is 10:1, the average class size is 19 students, and over 50% of their students complete at least one internship during their time at Trinity. The majority of students come from Massachusetts, Connecticut, and New York, but they have a growing number of international students, which is at about 11% right now. Their main academic buildings surround an enormous square lawn, that screams college, and actually makes you want to lay on a blanket and study...or throw the frisbee. Interesting enough, although it is named Trinity College, and was founded by the Episcopalian order, today, the college no longer has any religious affiliation. Students who attend Trinity College will be living a nice life during their time on campus, with perks such as free laundry, a movie theater on campus, and dining services that include an "innovation kitchen". This is one part of the dining hall that is on a 28-day cycle throughout the year, where they will not repeat the same menu option. Finally, it is extremely important at Trinity for the faculty to push their students to think independently and to allow them to mix and match majors. It is common for their students to major in both biology and art, or politics and engineering. There is a ton of freedom on campus and in the classrooms, and students are pushed through their comfort zones throughout their time enrolled at Trinity. With a retention rate of 90%, you know students are happy at Trinity College, and hopefully more students continue to check it out.

Academic Information

Trinity is primarily a liberal arts and sciences college housing dozens of diverse and interesting majors and minors from economics to physics to political science. A few of their most popular departments are Urban and Global Studies and a Human Rights Program, and they also offer many study away programs that stretch from New York to China. Also, it is very important to know that Trinity College has an Engineering Program as well that offers 4 concentrations in Mechanical, Electrical, Computer, and Bio-Medical engineering. Finally, students interested in theater and dance will find great programs in Trinity's InterArts Program.  Students are encouraged to try various classes, minors, and majors, and students do not need to decide on their major until the end of sophomore year. They also make it very easy for students to transfer majors during their time at school, without losing many credits.

Admissions Information

Trinity College is a very selective institution with just about 33% applicants accepted each year. Their middle 50% for the SAT is 1730-2020, ACT is 26-30, and they are looking for around a 90 GPA. Trinity is considered a "test flexible school" in that they accept either the SAT, ACT, or two subject tests to be considered for admission. They offer Regular Decision, and Early Decision, which may be an easier way to get in (only do this is you love the school!), because just about 58% of students who applied Early Decision, were accepted to Trinity this past year. When applying, it is also important to know that they are need aware, meaning they will take your financials into consideration during the admission process. Once, accepted, they do offer 100% in need based aid, which most families will need, since the total cost of attendance at Trinity College is $63,970 per year. Finally, there are 8-10 Presidential Scholarships given out each year to the top incoming freshmen, which covers the total cost of attendance for all four years.

Final Thought: Trinity College is a college you should check out if you are looking for a small, liberal arts school, that is away from home, but not too far. Students will receive extremely personal attention from faculty, will have access to a beautiful campus that offers pretty much anything you could want, and you are close in proximity to the city of Hartford, and only two hours from NYC. Enjoy the pictures, and as always, happy searching!

Joseph D. Korfmacher, MA

Strong building permits trump soft housing starts

May housing starts were much weaker than expected (1036K vs. 1090K), but building permits were 16% above expectations, and homebuilders' sentiment was comfortably strong. Two positives easily outweigh the starts negative, expecially given the volatile nature of this series. 

On balance, the housing market is still in good shape and likely to continue improving. Building permits were very strong, as the chart above shows. Builders are closer to the reality of the housing market than most of us, and today's releases suggest they are expecting conditions to improve.

I have yet to see anything which points to a recession or a slowdown serious enough to warrant paying the high price of safety (i.e., cash still yields almost nothing, while yields on competing investments are much higher).

coastal table for summer

Playing around with some cool and beachy summer table settings.

Coastal plates and blue and white napkins are from Home Goods.

Round raffia placemats are from Ikea.

The rest is vintage.

ciao! Fabiana