Monthly Archives: July 2015

The World is Going to University

GateJuly 27, 2015

With school just around the corner education has been on my mind.  Back-to-school drives, summer job and internships ending, tuition payments due and college visitation trips are rumbling through my head.  I have two children in college and one 24 months away from going to college.  With school age children you are always thinking “are my children making the right decisions to prepare for tomorrow”.  My dad, his dad and my dad’s grandfather always said the same thing to their children – “I’ll raise you, feed you, put a roof over your head and provide you with a good education, but the rest is up to you.”  It was simple Midwestern thinking.

With our world’s global economy evolving, the race for getting an education is growing immensely.  Today, more and more money is being spent on higher education than ever before.  The share of the student-age population at university grew from 14% in 1992 to 32% in 2012.  In that same period the number of countries with a ratio of more than 50% rose from 5 to 54 countries, proof the world is modernizing and seeking higher learning.  It has been said that once a country’s GDP per person rises above $3,000 the demand for education escalates.  As noted in the chart below university enrollment is growing faster than demand for a car.

econIn fact, it was recently reported in the Economist that OECD countries spend 1.6% of GDP on higher education, compared with 1.3% back in 2000.  In contrast, America spends 2.7% of its GDP on higher education.  All of this appetite for advancement is understandable in our “knowledge economy” – the requirement for a decent job and an entry ticket to the middle class.

America was an early leader in advanced learning back in the 18th and 19th century and still leads the world in creating a mass higher education.  Higher education in America started to spread from the elite to the masses in the 19th century with the establishment of land-grant universities in 1862 and 1890, but the biggest boost came in 1944 with the GI bill that paid servicemen to go to college.  The Times Higher Education ranks global universities across teaching, research, knowledge transfer and international outlook using 13 performance indicators.  In 2014-2015 28 of the Top 50 universities were US based institutions.  Second in line was England with 7, Continental Europe with 4, Canada with 3, China with 2 and Japan with 1 university ranked in THE’s Top 50.  I suspect Japan’s low figures are primarily due to the country’s focus on rebuilding its economic engine after WW2 and corporate development on low-cost manufacturing in the 60s and 70s.  Today, China is playing catch-up, investing vast amounts into their universities and trying to woo accomplished professors and scholars away from the global brand universities.

Getting a shot at a higher education is tough if you can’t see.  For some time I’ve been focused with my Atlanta Lions Club on vision screening Atlanta’s low-income kids for low visual acuity.  8-10% of preschool age children nationwide (3-6 years) suffer from poor vision health.  At our Lion screenings we are finding in certain populations of Hispanic and African American demographics that the figures are sadly, double the national rates.  Imagine trying to learn and not being able to see the blackboard.  Helping bring the world into focus in the youngest ages is a challenge Lions are greatly passionate about so that our younger children can have a fair shot at a good education.  Otherwise, these low-income children risk being disenfranchised from the work force due to a lack of education.  The good news is the medical solution for a child with poor vision is an eye exam and a pair of glasses.

Job training and the demand for higher education are the drivers moving our world economy forward.  In thirty years I can imagine a much smarter, better educated world than the world I was born into in the 60s.

Gary Martin


Investment Returns and the Plateau de Beille

The penultimate stage of the 2015 Tour de France will finish on the gruelling l’Alpe d’Huez

The penultimate stage of the 2015 Tour de France will finish on the gruelling l’Alpe d’Huez

July 20, 2015

About this time every year my attention gets split between two of my favorite passions: cycling and finance. Finance is always interesting (sometimes too much so) while cycling is much more seasonal. Interest in cycling is high right now because the Tour de France, arguably the greatest event in all of professional cycling, is currently under way. The Tour de France is a heroic event that has been taking place every summer since 1903 with only a couple of exceptions due to military conflict in the region. As an avid cyclist, I’ve been watching the Tour for many years. Like Warren Buffet’s annual letter to shareholders, the Tour is something I look forward to with great anticipation and don’t want to miss. Over the years I’ve come to realize the Tour offers some compelling insights for investors as well as cyclists.

Before we get to the insights for investors, let’s start with a little background on the Tour. The race takes place every July. It lasts over three weeks and covers more than 2,200 miles in 21 timed stages. 22 teams compete, each with nine riders, for a total of 198 cyclists at the start of the Tour. The Tour is incredibly difficult. It is not uncommon for 10% to 20% of the cyclists to abandon the Tour at some point during the race. It’s a grueling event often in inclement weather over varied terrain from flat and windy sunflower fields to rugged mountain passes in the Alps and Pyrenees. Speeds on mountain descents can exceed 65 miles an hour. With so many cyclists racing so closely together, crashes are a constant danger. The cyclist’s uniform is called a kit and is made out of material similar to a swimsuit. Their helmets are made out of about 8 ounces of Styrofoam. It doesn’t sound like much crash protection until you consider the old days when they wore no helmet at all.

By now you might be wondering what all this has to do with finance and investing. Actually quite a lot when we dig beneath the surface.

plateauLike riding a successful Tour, managing a successful investment portfolio is a long-term strategic endeavor. In the Tour, the top contenders know it is a grueling three weeks to the finish so they have to manage their resources wisely. The sprinters may dominate the flat stages, but the ultimate outcome is most often decided in the mountains. The mountains are by far the most difficult. They present greater risks but also greater opportunity. The mountains expose strength as well as weakness. The mountains are where the winners tend to emerge.

The same is often true with investing. Like sprinters on a flat stage, some investments may race ahead for a period of time. Technology stocks in the late 90’s or mortgage backed securities in the early 2000’s would be good examples. But when the road turns up and the going gets most difficult, those investments are often the first to fall behind and are rarely in contention for the podium.

spJust like in cycling, financial stress creates opportunity, exposes weakness, and provides an environment for winning strategies to shine. In finance as in cycling, winning strategies do not occur by accident. They are the result of familiar components: hard work and perseverance, many years of experience, a strong supporting team who can execute strategy and tactics, a high level of professional skill, and perhaps a modicum of luck.

If you get an opportunity this week I hope you’ll take the chance to tune in to the Tour. It’s a wonderful pageant, steeped in more than a hundred years of tradition. The television coverage offers stunning images of the French countryside. While you enjoy the scenery, we hope you’ll rest confident in the knowledge that you have a competent team of financial professionals following time-tested strategies to manage your investments for the long haul.

As always, we welcome your questions and comments, and we remain grateful for the trust you have placed in us.

Mike Masters