Today’s FT has a story on the relatively weak corporate governance practiced by tech companies. Jeff Ubben of ValueAct criticized Eric Schmidt’s 2011 payout of over $100 million from Google, and features such as the dual share class (used by Google and other tech companies) were also highlighted. Public shareholders can only buy shares with weaker voting rights (or in the case of Google’s most recent share class, no voting rights at all).

David Einhorn of Greenlight Capital warned of another tech bubble and has identified a group of stocks that he believes could lose up to 90% of their value. It’s an intriguing thought – and who’s in the basket? Candidates would surely have to include Facebook (FB), Amazon (AMZN) and LinkedIn (LKDN), currently priced at forward P/Es of 38, 77 and 71 respectively.

I don’t really see where the problem is. These stocks are just not attractively priced for a long term investor. So presumably the discerning buyer simply looks elsewhere. Traders, those who buy stocks for excitement, and active managers who hold them just so as to avoid underperforming a benchmark of which they’re part will all find reasons to hold these and other companies like them. The thing is though, Google and others don’t need your money. If a basic function of finance is to channel savings from savers to productive types of capital formation, these names don’t do it.

Google, for example, generated $13BN in operating cashflow last year and invested most of that in marketable securities. They don’t need to access the capital markets to finance capital investments. FB has for the last three years generated operating cashflow well in excess of its capex.

These companies and others have gone public and issued equity simply to monetize the wealth created by the founders. The dual share class really says to those new second-class investors that they’ll make money as long as it suits the first-class owners to allow that to happen. It’s an oddly Communist way to operate in a capitalist system, the equivalent of saying, “we don’t need your money, but if you insist we’ll let you in on terms that we ourselves would never accept.”

It shouldn’t be hard to pass on such opportunities. There are many stocks to choose from. Leave such excitement for others.

Last weekend’s Economist examined the pay-off for students of the investment they make in various degrees. It’s the kind of unsentimental return analysis that needs to take place far more often. Not surprisingly, Engineering graduates enjoy anywhere from $500,000 of additional lifetime earnings to over $1 million (depending on the school from which they graduate). At the other end of the scale an arts graduate from a state school in Kentucky is, after paying for college, worse off than a high school graduate.

No doubt some will quarrel with the numbers, but the toxic combination of plentiful financing for students and tuition inflation that bears no relationship to the economy at large has resulted in debt burdens for thousands of young people that are disproportionate to their ability to pay them off. Making it almost impossible to default on college debt served the admirable public policy purpose of making loans more available, but it’s also resulted in young people taking on mortgage-sized obligations before they were old enough to buy a beer (though who could blame many for making up for lost time as they contemplate their finances?).

It’s a sobering thought when one discusses such issues with the children of friends – I had one such conversation very recently, and the best advice I could offer was to seek a renegotiation of existing debt. In fact, the true villains in this sorry spectacle must be the colleges themselves who have allowed their expenses to rise uncontrollably while their young and generally poorly informed customers sought higher education on virtually any terms available without regard to the return on investment. Institutions of higher education seek to educate, except on the basic economics of whether their young charges are investing their time and money wisely. Surely every applicant for a college loan should receive a disclosure of salary ranges for graduates in their chosen major and years required for repayment?

In my book Bonds Are Not Forever; The Crisis Facing Fixed Income Investors I highlighted the sharp growth in tuition debt and noted how unsustainable it was. It shouldn’t be surprising if over time it becomes a political issue that eventually leads to the inevitable discussion of a Federally-funded bailout of some type. When I researched the issue in 2012-13, tuition debt outstanding was $1 trillion. It’s still growing. It’s another section of the population that is poorly equipped to handle higher interest rates, and shows why “low for a long time” is a pretty good description of the Fed’s intentions for policy rates.

This morning I perused the front page of the Financial Times the old-fashioned way (i.e. by physically holding the newspaper in my hands rather than visiting the website) over breakfast in a NY hotel following a client dinner last night. I was struck by the juxtaposition of two articles. One was: ” ‘Fragile Five’ Fall Short of Taper Threat” discussed the exposure some BRIC countries and others have to a too rapid tapering of the Fed’s policy of QE. We all remember how last Summer’s mere mention of tapering by Ben Bernanke was felt disproportionately in the Emerging Markets.

Incongruously facing this article was: “Christine Lagarde warns of growing threat of deflation.” Clearly, deflation and too-rapid tapering are unlikely to occur at the same time, which just goes to show that even the FT sometimes practices that well used journalistic trick of warning of every danger (including the possibility of no danger) so as to be able to claim foresight when one of the forecasts takes place. The FT’s website, with its far more mobile layout, doesn’t position these stories side by side, but it did highlight for me the many concerns that still confront equity markets.

On a related topic, we’ve noted recently some persistent underperformance of low volatility stocks versus the S&P500. Over the past couple of months Consumer Staples stocks (as reflected by the ETF XLP, for example) are flat while the market itself is up 5%. It’s been a similar story for SPLV. The logical corollary is that high beta, more volatile stocks have been outperforming the averages, in a sign that active managers are increasing their market risk. I’ll stop short of making the obvious prediction that the market must, therefore, be vulnerable to a sell-off, because the data doesn’t necessarily say that. Such outperformance of one sector versus another can persist for quite some time, although ultimately mean reversion occurs and the process reverses itself. We just haven’t identified any reliable tool with which to predict the timing of a reversal. However, if we were journalists this story would be titled, “Outperformance of High Beta Stocks Signals Market Reversal” and, unburdened by the need to deploy capital in response to our opinions, we would eventually be proven right.

I was struck today by an article in the New York Times (“On Jammed Jets, Sardines Turn on One Another”). As airlines pack more people onto planes, the flying experience (as least in Economy Class) becomes ever worse. This was hardly news to anyone who has flown domestically in the U.S. in recent years. Airlines have generally found that, in a market where tickets are bought online and the cheapest fare wins, charging more for better quality is not a winning strategy. Everybody knows that flying commercially in the U.S. has become worse. Seats are smaller with less legroom; food quality has fallen; needed security has trapped us all in terminals that are shopping malls such is the extra time needed to be processed. In short, the quality of flying has gone down.

The statisticians at the Bureau of Labor Statistics (BLS) would not agree. Why should we care what they think? Because this is where the Consumer Price Index (CPI) is calculated. Because products and services are routinely offered in different shapes and formats, simple month-to-month price comparisons don’t capture the complete picture. A jar of peanuts formerly 16 oz but now 18 oz has, if sold at the same price clearly experienced a price drop. So has a new, faster ipad if sold for the price of last year’s. Generally quality improves, and where it does the BLS registers a price decrease which is part of their methodology. But as I discovered when researching my recent book, Bonds Are Not Forever; The Crisis Facing Fixed Income Investors, airfares have mysteriously not registered a quality decrease, although there’s little doubt that’s what happened. Since 2000 the only change the BLS has recorded to the quality of flying is an improvement, due to easier cancellation terms.

In effect, the BLS has miscounted airline fare inflation, in that (for example) an unchanged price with lower quality is just as much of a price increase as if quality was unchanged but the price raised. The problem is that it’s hard to objectively measure how much the quality of flying has deteriorated.

Now it’s not hard to find conspiracy theorists who are convinced the government is deliberately understating inflation so as to curb its spending on all kinds of inflation-linked programs starting with Social Security. Clearly, the Federal government benefits from understated inflation. I am not among those who believe there is intentional manipulation of the statistics going on. It would be impossible to keep secret. But I do think that the inflation statistics produced do not measure what people think they are measuring. Growing your savings pot, or your income, at inflation (after taxes, naturally) isn’t going to maintain your standard of living, as this one simple example shows. Inflation figures have their place, but they’re not that helpful to the average saver.