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In This Issue
Student Loans
History Speaks
Chart of the Month
Asset Class Returns
Market Commentary
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IHA MonthlyTop
May 2013
InnerHarbor Advisors, LLC is a private Financial Planning firm based in New York City founded by Michael J. Keating and John O'Meara. 
Financial Planning Video Highlight
The Value, and the Cost, of a College Diploma
History Speaks
St. Scholastica Day Riots
Rising education costs and tighter government budgets have resulted in tuition hikes all over the world in recent years. As a consequence we have seen student riots from Britain to Quebec. Back in 1355, on St. Scholastica Day (February 10) Oxford University
A sign at the site of the original tavern - now a bank, perhaps appropriate for the times
experienced a deadly riot as a result of a much more serious offense - cheap ale served by the local tavern. Two students got into an altercation with the proprietor of the Swindlestock Tavern over the quality of the drinks they were served. The mayor of the town asked the university chancellor to arrest the students and not only was his request refused but a mob of two hundred students then beat up the mayor. Well, that really got the locals riled up and they poured into town to battle the students. By the time the riot was over, 60 students and professors and 30 locals had died. The dispute eventually resulted in a judicial settlement in favor of the university. Thereafter, every St. Scholastica Day, the mayor and councilors on Oxford had to walk publicly through the streets to pay the university a fine of one penny per academic killed. A tradition that continued until 1825 when the mayor refuse to take part.
Chart of the Month
Education Costs Have Skyrocketed
From, a chart showing the rise in prices in various sectors of the economy over the last 20 years. Tuition prices have, by far, risen the most.
Asset Class Returns
Through April 30th, 2013

Returns assume dividend reinvestment and do not include any types of management fees, transaction costs or expenses. 





May Commentary


It has been just over four years since Ben Bernanke instituted the first round of quantitative easing in the United States. Chairman Bernanke was imitating the Japanese who had first instituted the policy in the early 2000's in an effort to fight deflation. Coming full circle, Japan's Prime Minister, Shinzo Abe, and his economic team have now re-embraced quantitative easing. In the period since Mr. Abe was elected in September of last year, the Japanese stock market is up significantly.



And the Japanese didn't just embrace the policy, it is a bear hug! The Bank of Japan announced an asset purchase program that, relative to the size of their economy, is 60% larger than what the Fed has done here. Of course pushing that much money into the economy tends to devalue your currency which has happened to the Japanese Yen.



In many ways, Japan has been the forerunner of the U.S. and Europe, with an asset and property bubble-then-burst leading to years of slow growth and low inflation. So it will be interesting to see if Japan continues to be the 'canary in the mineshaft' going forward. Japan faces many of the same risks that other developed nations do but they are a few years further along, for one they owe a massive amount of money via issuance of government debt. 

Secondly, Japan faces significant demographic challenges - an aging population, low birthrate and a cultural opposition to immigration. These factors combined make it difficult for us to comprehend just how they are going to pay these debts in the future.


Japanese Demographics

We think that watching the Japanese economy will be your most useful economic guide over the next few months. If their experiments continue to be successful expect significant pressure around the world, particularly in Europe, to continue or expand loose money policies. On the other hand, if their policies begin to backfire - above target inflation in Japan, knock-on currency devaluations, a government debt crisis - it will force a reexamination of these policies, particularly in the U.S.



Please 'reply' to this email with thoughts and ideas. Feedback is appreciated.

Thank you for reading.





InnerHarbor Advisors, LLC
420 Lexington Ave, NYC 10170
Managing Partners:
John O'Meara, CFP, M.S.    
Michael J. Keating, CFP

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