When Is A Default Not A Default?

AboveTheLaw (ATL) had a post today entitled "The Student Loan Bubble: Only Stupid People Will Be Surprised When It Bursts".  The post derives from this Huffington Post article that details the massive and sudden increase in student loan debt from from 440 B to 550 B since 2008 - a 25% increase over three years.  I would also be really remiss if I did not point out that LawSchoolTuitionBubble (LSTB) has been calling attention to this for some time and his most recent post on it suggests that the total numbers may be even greater.

Overvaluing a Law Degree

Matt over at The Law School Tuition Bubble does a good job with research and analysis.  In a recent post entitled "Another Day, Another Study Overvaluing A Law Degree" he reviews a publication entitled "The College Payoff" from Georgetown University's Center on Education and Workforce.  Georgetown suggests that with a law degree your lifetime earnings will be 4,032,000 - far in excess of the lifetime earnings of those with a bachelor's degree (2,268,000) and an associate's degree (1,727,000).

What Do College Students Really Want - And Can They Get It From Law School? - Part 2

In the previous post, we discussed how most college students really deep down want a personal balance of four things - 1) Money, 2) Job Security, 3) Appealing Job, and 4) Free Time.  College students often become potential law students when they come to the belief that "working as a lawyer" is a way to achieve these four factors - and law school is the modality to obtain the state of "working as a lawyer."  However, the potential law student's evaluation of the balance of the four factors is often flawed because they are typically only able to get solid data with regard to the Money factor and the students often fill in self-serving "soft data" for the rest of the factors to justify the hard data Money analysis.  We are going to take a look at each of the four factors that students really want and then compare them to what law school and a career as a lawyer can actually provide at this time.  In this post, we will look at the Money factor.

Best and Worst States To Make A Living

MoneyRates has a pair of interesting articles - the 10 best states to make a living - and - the 10 worst states to make a living. To calculate the lists, they took into account the following and then calculated an adjusted-average income for each state:

• Average state wages
• State unemployment rate
• State tax rate
• State cost of living

Guess which state is the best to make a living?

"Right-Sizing" Law School Admissions

As reported in the Wall Street Journal, and on the ABA site, applications to law school have dropped 11.5% - to the lowest level since 2001. There's also a post over at Jobless Juris Doctor.  But what does this mean for the future?

Increasing Return on Education Dollars

Paul Krugman's article in Sunday's New York Times is generating a lot of talk.  Krugman points out that a lot of jobs considered "white collar" are subject to automation and are currently being outsourced.  From this point he extrapolates that "education is not the answer", but instead the answer is to give more bargaining power to unions.  

Over at Restoring Dignity To The Law, J-Dog emphasizes that although increasing education may have led to a better life 40 years ago, the same may not hold true now.  He also mentions that education has shrinking economic returns.  Over at Law School Tuition Bubble, Matt also references the article.

Is Krugman right?  Should we just encourage our kids to be janitor with strong unions instead of going to college?  More below.

Public Unions And Competition

Most people are aware that the Wisconsin Governor has taken on the Wisconsin public unions.  The Governor wants to take away the rights of unions representing government employees to ask for more than the rate of inflation as an increase in salary.  Also, they would have to pay more for their health insurance and more toward their pensions.  Finally, government jobs would no longer be able to force anyone who gets hired to automatically join the union and pay union dues.  The Wisconsin situation raises a whole host of issues and there is a lot of misinformation on both sides.  Let's take a closer look below.

Getting A Good Deal Buying A New Car - Part 3 of 3

In Part 1 of this series, I revealed that my wife and I decided to get a new car and decided to engage in a competitive bidding process with several local dealers.  In Part 2 of this series, I described how the bidding process worked out in practice.  In this final Part, I'll tell you about something that blew my mind about the purchasing process, as well as some last-minute pressure from dealers and some bottom line thoughts!

One Way To Get A Good Deal Buying A New Car - Part 2 of 3

In Part 1 of this series, I revealed that my wife and I decided to get a new car and that I had sent a request for a quote to nine local dealers using Yahoo Auto - and asked a salesman who worked with us for a quote.  I told everyone that it would be a competitve bidding proceed - and it was!  Here's how it turned out!

One Way To Get A Good Deal Buying A New Car - Part 1 of 3

A few years ago, after 10+ years in practice, I finally bought my first new car.  Previously, I had only driven used cars in order to save money, but this new car was primarily for my wife and she was more concerned with a potential breakdown then I typically am.  She was especially interested in a Honda that was known for reliability.  I agreed to buy the new car, but I wanted to get the best deal that I could in the shortest amount of time - remember! every hour spent on the car purchase is an hour less billing/another hour longer you will have to work.  Also, I didn't feel too badly about buying this model new because this model of Honda typically holds its value well - as I checked on Kelley Blue Book.  I'll relate my experience below as one way a busy lawyer can try to get a good price with a minimal investment of time.

"Restoring" The Middle Class - Promise or Threat?

It's pretty well known that the middle class is shrinking in this country.  Usually, when politicians cite the shrinking middle class, they are implying that most people are getting poorer - possibly that the "elite" are somehow actively campaigning to drain the middle class to turn more Americans into wage slaves.  Both parties seem to use this rhetoric - Democrats use the shrinking middle class to justify additional spending on social programs.  Republicans use the shrinking middle class to justify stances on taxes and immigration.

The issue has become intensely politicized, but let's take a look at some fundamental data and we may see something really interesting going on!

Which Is Better - Stimulus or Austerity?

Here's an interesting article comparing the ongoing responses to the fiscal crisis that started in 2008 - both the European response and the American response.  The American response has primarily been one of stimulus - the government is taking on additional debt to provide a stimulus to the public sector.  Conversely, the European response has primarily been one of austerity - cutting government workers and programs and raising taxes.  Let's take a look at the likely outcomes of these policies - and how these may impact your investments in the future.

Game On!

Wow.  The Presidential Commission on Reducing the Public Debt released its draft proposal today and it really puts a lot of options on the table.  Here's a New York Times article summarizing some aspects of the plan.  This could be the start of a very large discussion that changes the fundamental operating parameters of tax-and-spend government.  Or else it could be a flash in the pan like President Bush's bi-partisan, blue-ribbon tax panel in 2005.

Will the new proposal actually be the catalyst for serious change - or will it operate much like the Bush panel - proposing great, practical ideas that are really for the best long term interest of the country, but get summarily ignored because politicians don't want to risk telling voters that they will actually have to pay for the benefits that they are getting?  Let's take a look below.

The Bubble in Bonds Part 1 - Appreciating Risk In Bonds

We know all about the bubble in stocks in 2000 and the more recent housing bubble, but many people don't seem to recognize that we are in a huge bond bubble right now.  However, a few people seem to be catching on - see this post and this article.  The bubble in bonds can be really dangerous because many people seem to associate "bonds" with "safety" and fail to appreciate that there is a huge difference in risk between bonds - even bonds issued by the same issuer just having different maturities.  In this series, we will discuss 1) some ways people fail to appreciate risk, 2) how to invest more safely in bonds, and 3) other bond-like instruments to consider that may be safer than bonds.  Part 1 of this series starts below.

Solo Practice - Even With SPU's Help, It's Still A Long Shot

We recently saw the founding of Solo Practice University (SPU) - their intent is to provide training for solo practitioners.  There have been a number of posts back and forth between SPU and a number of bloggers (first, second) that are recent grads with regard to whether SPU is providing a beneficial service or is creating a false impression of viability of the career of a solo practitioner.  Additionally, the blog of the founder of SPU has hosted a lively discussion.

Is solo practice a viable, realistic option for a new law grad?  We will examine this question below.

Considering Inflation On "Equal" Investments

In response to my recent post entitled 5 Reasons Why Extra Cash Should Go To Retirement ASAP, one insightful commenter had this to say:

I think that to be fair, you need to take inflation into account when you assume rates of return and amounts of investment.  In terms of real dollars, saving $2000 at age 25 is very different from saving $2000 at age 50.

And 8% in real returns strikes me as pretty unrealistic.

These are certainly legitimate comments!  Let's take a look at the impact of inflation and what return we might expect.

Some Financial Suggestions To Help New Associates

In my recent post Why $145K Is Often Not Enough To Max Your 401k, I tried to outline the typical expenses (based on cost of living information from Bankrate and my experiences and interviews with associates) of an associate living an average professional lifestyle while making top dollar - and to show some general parameters of how quickly the associate's compensation was eaten up by taxes, living expenses, and loan payments.  My goal was not to suggest that it was impossible for the associate to pay off their loans and max their 401k, but to give potential associates some hard numbers that might temper their expectations about how far their salaries will actually go.  In other words, even associates making top dollar are going to have to live reasonably frugally if they want to pay off their loans and max their 401k - they are not going to be able to afford $145K of toys.

Fortunately, a few associates that are more frugal than most stepped up and gave some great suggestions about how new attorneys can economize and plan their financial reality in order to make paying off their loans a reality.  I like the idea that someone might read their suggestions and use them to their own advantage.  Below I will summarize their suggestions, as well as some of my own.  Also, if you have any great suggestions, please share them in the comments or e-mail me.

Regulation Of the Law School Loan Market Is Needed

As reported on Above The Law, and the National Law Journal, the ABA is lobbying President Obama to allow law students to convert their private student loans to federal student loans.  As federal student loans, the loans will be eligible for a hardship deferrment of up to three years.  That's a great benefit to law students struggling to find a job, but it doesn't solve the problem and a more extensive reform is needed.  More after the break.

Law.com Article On Where Salaries Are Headed

There's a good article today at Law.com about the direction that associate salaries are headed in the near future.  (Update: It's also on ATL.) Interestingly, the article mentions that 55% of the participants in a recent online seminar viewed the salary cuts as only tempory - that might be a ray of hope.  However, the consultants were adamant that even further cuts would be necessary.  See how much and some other interesting nuggets after the fold.

WSJ Article - Americans Feel Increasingly Disheartened

In an absolutely excellent article in today's Wall Street Journal, Peggy Noonan nails a trend that I have felt growing for some time now, but have not previously been able to but words to.  It's an important trend that impacts lawyers and will impact the amount of legal work available (and thus employment opportunities) in the future.  More after the jump.