Girl Pregnancy Pact Gloucester MA High School: School Subsidizes Teen Pregnancy (Savers Are from Mars. Debtors Are from Venus. Episode 6)

School Subsidizes Teen Pregnancy

Media Reports Miss the Main Point on Spike in Teen Pregnancies

A large number of high-school girls intentionally got pregnant or were happy to get pregnant at Gloucester High School in Gloucester, Massachusetts.

Earlier reports of a formal group "pact" to get pregnant are now disputed to be a post-pregnancy pledge for the teen mothers to somehow support each other, although the point about the girls' enthusiasm to get pregnant appears undisputed:

"But at a press conference today, Gloucester Mayor Carolyn Kirk emerged from a closed-door meeting with city, school and health officials to say that there had been no independent confirmation of any teen pregnancy pact. She also said that the principal, who was not present at the meeting, is now "foggy in his memory" of how he heard about the pact.

[Gloucester High School, principal Dr. Joseph ] Sullivan has not spoken publicly about the teen pregnancies since he told TIME earlier this month that several girls repeatedly requested pregnancy tests at the school clinic and that some had reacted to positive test results with high fives and plans for baby showers. Pathways for Children CEO Sue Todd, whose organization runs the school's on-site daycare center, told TIME on June 13 that its social worker had heard of the girls' plan to get pregnant as early as last fall. She noted that some of the girls involved had been identified as being at risk of becoming teen mothers as early as sixth grade, when they began to request pregnancy tests in middle school." (TIME)

Various reports blame the depressed, working-class, blue-collar, fishing economy or a poor, anti-social home-life:

""What we've seen is the girls fit a certain profile," Todd said. "They're socially isolated, and they don't have the support of their families."

The Real Point

People with no job prospects and no family support should be trying to INCREASE income and DECREASE outgo. Teen, single, diploma-less mothers are DECREASING their income potential and INCREASING their outgo expenses.

The schools apparently utterly failed to teach math, logic, or home economics.

The schools apparently do manage to teach and subsidize teen pregnancy (according to public radio and other reports):

• The school(s) teaches sex to children: School-district health coordinator Ann-Marie Jordan blamed budget "cutbacks" for stopping sex education after the 9th grade, leaving 'only' the years of sex taught in middle school and freshman year: Exactly how many YEARS does it take to figure out? One pair of unfixed neighborhood dogs or cats should do it.
• The school(s) conducts "health surveys" that ask children to describe their sex lives: Behavioral experts know that people are more likely to do something when you make them discuss, imagine, and visualize doing it.
• The school(s) provides/conducts pregnancy tests on children: Children can see grown-ups' tacit acceptance and expectation of teen sex (and usually failing tests in school is bad).
• The school(s) provides a FREE in-school daycare center for teen mothers: "The high school has done perhaps too good a job of embracing young mothers. Sex-ed classes end freshman year at Gloucester, where teen parents are encouraged to take their children to a free on-site day-care center. Strollers mingle seamlessly in school hallways among cheerleaders and junior ROTC. "We're proud to help the mothers stay in school," says Sue Todd, CEO of Pathways for Children, which runs the day-care center." (TIME)

Gee, can anyone think of where the girls got the idea to get pregnant?

The school is one step away from providing wine coolers and a Jacuzzi.

"Experts" continue to miss the point:

"Dr. Joanne Cox, director of the Young Parents program at Children's Hospital in Boston, said that in-school programs for birth control are shown to be effective, as is education. Upon hearing of the situation in Gloucester, she said that considering birth control distribution in school would be wise. "When 10 are pregnant — that's the time to have the political courage to do it," she said. She added that the lack of easily available birth control — which, she said, pediatricians are often hesitant to prescribe — is "probably the No. 1 reason" for an increase in pregnancies." (Gloucester Daily Times)

1. Basic economics: Subsidize something and you get more of it.

2. Birth control is useless when the girls WANT to get pregnant, which is the reported case with the Gloucester girls.

Maybe there would be fewer teen pregnancies if the schools spent less time and money teaching and subsidizing sex -- and instead spent more time and money teaching math, logic, and economics.

You Owe 9 Trillion Dollars

Congratulations, the United States gross national debt now exceeds $9 trillion.

You owe $30k. Your baby owes $30k. Your family of 4 owes $120k.

Your government put you in all this debt to make you richer, in case you were wondering why your life has felt so easy and virtually cost-free all these years.

Remember that when choosing a presidential candidate.

Why stop at $9 trillion?

Should the federal government make us all even richer by borrowing $18 trillion (so a family of 4 owes $240k) and leverage-investing it in the stock market for a higher return?

After all, Ben Stein recommended that you stay in debt to get rich: Payoff Mortgage v. Invest Stocks: Housing Myths Part 12

Ron Paul Sets Financial Record for Presidential Candidate

Amusing Theme Yields Impressive Funds for Presidential Candidate Ron Paul

Air Force veteran, Congressman, and obstetrician Dr. Ron Paul is one of the most interesting presidential candidates for the 2008 election. Ron Paul inspires energetic loyalty and outperforms other alleged "frontrunners" in some respects. Paul's supporters ("Paulites") spontaneously organized an earnest if humorously named "Guy Fawkes Day" "money bomb" of 1-day fundraising yesterday which apparently set a record:

From Baltimore Sun:

It is people voting for someone other than the establishment, odds be damned.

Paul already had raised a stunning $5 million in the last quarter, and he has set a goal of $12 million for this final quarter of the year. And, according to his campaign Web-site, Paul raised more than $3.1 million in 19 hours on Monday, marking the single largest fundraising effort of the 2008 election cycle.

As of 4 pm, the campaign maintained, it had raised $2.7 million, surpassing the record for the largest online presidential primary fundraising effort in a single day, and by 6:30 pm, the campaign said it had surpassed Republican Mitt Romney’s $3.1 million record for single-day fundraising this year. This morning, the Web-haul was reported at $3.8 million-plus.

Commenters asserted that the final tally was $4.2 million.

(Update 11/13/07: CNN reported Ron Paul's 1-day total as $4.38 million.)

Ben Bernanke on South Park?

Gangrene on the Greenback: The Falling US Dollar

If South Park did Ben Bernanke and Federal Reserve monetary policy:

Bernanke's Zimbabwe Plan for the US Economy

Fed Raids Your Paycheck and Bank Account To Bailout Banks, Wall Steet, and Mortgage Delinquents

Canada Forces US Federal Reserve To Raise Interest Rates?

Here is a Saturday Night Live (SNL) Golords spoof of foreign frustration with "Easy Al" Greenspan's loose US monetary policy in 1998:

(Warning: violence and sexual content)

Except for a 25 basis points (bps) hike on March 25, 1997, the Fed only held or lowered the Fed-funds benchmark interest rate for over 4 years after Februart 1, 1995 and until June 30, 1999 while the stock market bubbled. The Fed dropped 75bps in September-October-November 1998 to 4.75% (deja vu now?).

See more Fed spoofs:
Ben Bernanke Music Video
Alan Greenspan: Fun with Financial Armageddon and Famous Movies

Alan Greenspan: Fun with Financial Armageddon and Famous Movies

Which movie best explains Alan Greenspan's tenure as Chairman of the United States Federal Reserve?

Comment on these and post your own choices.

-------------------------------------------

Dr. Greenspan: Or How I Learned To Stop Worrying and Love the Bubble

---

Greenspan: The Man with the Golden ARM

(ARM=Adjustable Rate Mortgage)

See more Fed spoofs:
Canada Forces US Federal Reserve To Raise Interest Rates?
Ben Bernanke Music Video
-

Greenspan Needs YOU to Bail HIM Out?

Brother, Can You Spare a Trillion?

Greenspan Needs YOU to Bail HIM Out?

Americans’ Net Worth in the Federal Reserve’s Survey of Consumer Finances (SCF)

What if a Quarter of Your Wealth Were Imaginary?

Net worth is a favorite topic in the buck-o-sphere (personal finance blog-o-sphere) and many people pounce on a government or media report to see how they stack up against their fellow Americans. You need to understand the source of the information and know how to read economic and financial reports correctly.

The Federal Reserve’s triennial Survey of Consumer Finances (SCF) and specifically its net worth numbers provide good examples on what to watch.

Time Lag

A report that comes out today might have no current data and instead be based on data from a few years ago. The 2003 SCF report used 1998-2001 data. The 2006 SCF report used 2001-2004 data. Most people will not see 2007 data until the 2009 SCF report.

Forgetting this point can lead to faulty decisions. One blogger recently linked to a 2003 article and compared his/her 2007 net worth to 2001 data.

Real (Inflation-Adjusted) V. Nominal Dollars

The SCF adjusts for inflation but its tables are not labeled as “real” dollars, making it too easy for the casual reader to assume nominal (un-adjusted) dollars. Further, the SCF uses a “current methods” adjusted CPI which assumes less of an inflation bite than the official CPI does.

How Do They Get People’s Financial Information?

The SCF is a survey, not a census. Like much government data, the results depend on “Gallup poll” types of problems such as sampling error, weighting, refusal to participate, and similar issues. The survey firm NORC conducts the survey of approximately 4,000 families to estimate the United States (a statistically significant sample). The accuracy of the Federal Reserve’s SCF depends upon the accuracy of Joe Sixpack’s financial self-knowledge when questioned by NORC.

Whose Net Worth?

The SCF’s “family” is technically the Primary Economic Unit (PEU) of a household. The SCF uses an unusual definition of “family” that includes single-person households. The PEU is a hybrid between other government definitions of family and households. The average US family is a bit over 3 persons and the average household is a bit under 3 persons.

“Age” is the age of “head” of “family” and the age of others in the PEU can vary from that, so 2 “40-year-old” households might have very different average ages (is the spouse 30 or 50?) and therefore have had different amounts of time to accumulate wealth.

What Counts?

The medians of many assets and debts are “conditional medians” that exclude zero to show a typical holding of a family that possesses the item in question (e.g., the median debt of debtors, not the median debt of everyone including debt-free people, which would lower the figure considerably).

The SCF counts a 401k but it ignores a defined-benefit pension (by the way, the proper absence of a defined-benefit pension from “net worth” is another reason why net worth is for measuring current wealth and is not very good at estimating future wealth). The SCF also ignores Social Security. The SCF appears to ignore tax liabilities.

Paper Profits

Net worth includes volatile asset prices (stocks, real estate) that can bubble or crash. Median unrealized capital gains ("paper profits") accounted for about 25-30% of median net worth for all but the youngest age group (under 35) in 2004 (before the 2005-2006 housing bubble apogee). Remember that about a quarter of median net worth is not real yet.

The only bad part about learning all this is that you might get upset more often when you see how other people misuse the SCF and similar statistics.

Should Bernanke Resign?

Should Ben Bernanke Resign? Who Should Be the New Federal Reserve Chair?

Destroy Your Retirement Nestegg with Happy Thoughts

Magic Numbers:
Pick One . . . Whichever One Makes You Happy

My recent article about investing vs. paying off your mortgage, Never Prepay Mortgage? Housing Myths Part 1, has a bigger lesson for the subprime mortgage and Collateralized Debt Obligation (CDO) mess.

“Prove” anything by picking the magic number.

My article noted how a 2001 Fool.com article predicted a 12% annual return on investment (ROI) for an S&P500 fund but in early 2007 the 10-year average was only 7.7% (even using "Bull's Math" (optimistic Wall Street math)).

The second mistake is forgetting what an average is.

The problem for your retirement nest-egg is that a return to 12% annually does not fix the predicament. To average 12% after a decade of 8%, you need the next decade to provide over 16%. However, we are coming due for a recession (cycles are inevitable) and a steady 16% for a decade seems unlikely. Moreover, if a coming particular year does “only” 12%, you need another year at 20% to average a 16% decade to make up for the first decade’s 8%. If the S&P500 returns a modest 8% in a future recession, we might need the S&P500 later to return 25% simply to average 12% in the 21st Century.

“Experts” apparently made this mistake in financing the housing bubble.

Experts at an early-2006 conference on home-equity-loan securitization assumed a worst-case scenario of +3% asset (home) appreciation per year. It seems as if they assumed the worst stress-test condition to be the long-term trend rate of residential real estate appreciation, barely treading water with inflation (if we continue 2-3% core inflation).

The bigger they are, the harder they fall.

The glaring error is assuming that the price basement will be the historic average, rather than the lower numbers that created the average. +1 and -1 average to 0. It is mathematically impossible for every year to be either average (0) or above average (+1). Some years must be below average (-1) to make the average. If you then had a few years at +10 (far above average), you cannot assume that your future floor will be 0 (the average) because now you need a few years at -10 (far below average) to return the average to 0.

The big problem ahead

Standard & Poor's (S&P) and Moody's are reducing the ratings of mortgage securities, which is like telling a new owner, after the purchase, that his/her "6-pack" of soda only has 5 cans, his/her "30mpg" car only gets 20mpg, or his/her "3-bedroom" house only has 2 bedrooms.

The valuation errors contributed to the housing bubble by (1) overestimating the profit in home-mortgage sales, (2) thus overselling the financing product, (3) thus causing the inflation of too many dollars chasing too few assets (the home, necessary to cash the profit on the home-mortgage product), (4) thus contributing to the asset bubble, (5) but also underestimating the risk, (6) thus underdiscounting/overpricing securitized debt/CDOs, (7) thus sticking buyers/investors with insolvent lemons, (8) and the double whammy of evaporating home equity and evaporating securities equity creates yet to be seen ripples in pension/retirements funds, consumer spending, employment, Federal Reserve monetary policy, stock market performance (+25% or -10% for the S&P500?), and the economy writ large.

See also: Beware Vanguard 500 Faulty Logic & False Performance Measures for Investments

Is the American Dream Dead? Debunking the Pew Charitable Trusts' Economic Mobility Project

The recent Pew Charitable Trusts Economic Mobility Project’s claim that the American Dream "may well be shifting" (about sons not doing as well as their fathers) has been spreading through the mainstream media like a rash and Flexo at Consumerism Commentary asked me to explain my skepticism so here is my quick impression:

It is always a good idea to go to the original report and check the “methodology” section, often buried in the footnotes, to see how the report created the results.

We start with Pew’s own numbers:

Real Income of Men Age 30-39

1964 $31,097
1974 $40,210
1984 Missing
1994 $32,801
2004 $35,010

• The “falling behind” media headlines highlight the 2004 v. 1974 comparison but comparing 2 isolated data points is notoriously dangerous and you can see even from the short chronology above that the long-term trend shows an increase while 1974 is an “outlier” (aberration that deviates from the trend). The 1994 figure is also lower than 1974 even though during the 1990s the media told us ad nauseum how the 1990s was the greatest economy in history. The 2004 figure is higher than the 1994 figure so why isn’t the current decade greater than the greatest?
• The “falling behind” media headlines highlight the comparison to a 1974 baseline but 1970s baselines are frequently misleading. If you ever want to “prove” decline, the 1970s is a good place to shop because of a peculiar set of economic convergences at that time. The numbers often appear to show the 1970s as a worker’s paradise even though this was the Archie Bunker decade of stagflation, an energy crisis, price controls, gas rationing, and a high Misery Index.
• The report calculates income oddly, considering the topic of economic progress. The report’s idea of “income” excludes non-cash employer-provided benefits such as health insurance and retirement benefits but it does count government welfare checks. In other words, if your dad collected a lot of welfare, the report counts that as doing well. In Pew’s world, being on the dole is better than having health insurance or a pension.

The report has much more to question (a 30-year generation instead of a 20-year generation, the international comparisons, etc.) so feel free to see for yourself and post comments.

Mortgage Foreclosures: Subprime and Job Loss Not the Real Reasons

As usual, the mainstream media manage to be several years late to the housing bubble story—and still get the story wrong.

The better than average Investor’s Business Daily helpfully mentioned that job loss might better explain recent foreclosures but even they missed the main point.

The borrower’s bad behavior is the main reason for the borrower’s bad situation.

Bad loan terms and job loss problems are only symptoms of the borrower’s bad behavior:

• If you chose bad loan terms of 50% interest but you only borrowed $1, it is unwise but not dangerous.
• If you lost your job a year later but only owed $1 and change, it is annoying but not catastrophic.

The true problem is overconsumption, buying a $500k house on a $250k budget.

Buy a $125k house on a $250k budget and adjustable rates or job loss will not mean foreclosure.