Prepping for the big kindergarten entrance exam (7/18/14)

U.S. markets were higher today, as investors focused on encouraging earnings results instead of growing turmoil overseas. The same couldn’t be said for global markets, where most of the major indices posted losses.

The Dow gained 123 points, with x of its 30 components advancing; the S&P 500 Index rose 20; and the Nasdaq climbed 68. Advancers led decliners by nine to two on the NYSE and eleven to three on the Nasdaq. The prices of Treasuries weakened. Gold futures fell $7.50 to close at $1,309.40 an ounce, and the price of crude oil slid $0.06 to settle at $103.13 a barrel.

For the week, the Dow was up 0.9%, the S&P 500 Index added 0.5%, and the Nasdaq was increased by 0.3%. 

In Earnings News:

-       Google’s second-quarter earnings beat expectations and increased 22% to $16 billion or $6.08 a share. Those results exclude the Motorola Mobility business that will be sold to Lenovo Group. The company’s growth was driven by higher advertising revenue and increasing sales of apps through the Google Play store. Google also announced that its Chief Business Officer Nikesh Arora was leaving to join Japan’s SoftBank Corp., parent company of Sprint. Google’s shares (GOOG) rose 3%.

-       General Electric announced earnings of $3.55 billion or 35 cents a share, an increase of 13% over last year. The company is refining its strategy by divesting its NBCUniversal media unit and spinning off its retail finance business, Synchrony Financial, while at the same time adding to its energy and industrial portfolios. General Electric (GE) fell 0.5%.

-       Shares of semiconductor maker Advanced Micro Devices (AMD) dropped 16% after the company’s earnings missed expectations. The company is struggling in the post-PC era and posted losses of $36 million or five cents a share.

-       IBM posted better-than-expected earnings of $4.1 billion or $4.12 a share, but revenue fell for the ninth-straight quarter. The company continues to cut costs and shift its focus to big data and cloud computing to stem falling sales. The stock (IBM) added 0.01%.

In Other Business News:

-       U.S. drug maker AbbVie will purchase Dublin-based Shire Pharmaceuticals for $54 billion. AbbVie is the latest U.S. company to purchase a foreign competitor in order to lower its tax rate, a practice known as tax inversion. When the deal is completed, Shire shareholders will hold 25% of the new company, and AbbVie will control the rest. AbbVie’s stock (ABBV) increased 2%. 

-       Consumer sentiment fell to a four-month low in July, according to preliminary data from Thompson Reuters and the University of Michigan. July’s reading came in at 81.3, down from June’s final number of 82.5 and lower than the 83 level expected by economists.

-       The Conference Board’s leading economic index rose by 0.3% to 102.2 in June, signaling a potential uptick in the economy in the second half of the year.

-       Amazon.com officially announced a new service today called Kindle Unlimited. For $9.99 a month, subscribers will have unlimited access to over 600,000 Kindle books and thousands of audiobooks. Analysts expect the service may add up to $1billion in top-line growth. Amazon’s shares (AMZN) were up 1%.

***** 

A few days ago, we tweeted a link to a Wall Street Journal article that posed the question “Are you more financially literate than a 15-year-old?”. Readers could test their basic financial knowledge with five questions from a questionnaire developed by the Organization For Economic Cooperation. For the most part, Journal readers scored well, except for the final question, which only 58% of readers answered correctly. Commenters blamed the poor results on the poor wording of the question. I think the poor results are just because adults tend to overcomplicate and overthink things. At least, that’s what my kids tell me.

It seems like as a society, we like to take tests to learn more about ourselves (or maybe make us feel better about ourselves). In this case, I was relieved to confirm that after working in the financial industry for 18 years, I am more financially literate than a 15-year-old. Whew. 

But I wonder if we’ll ever get to the point where we take too many tests. We have standardized tests for med school, law school, grad school, college, grade school, and even kindergarten. 

In fact, for a number of years now, private schools in New York City have been assessing preschoolers with an IQ test, and a cottage industry has popped up to help four-year-olds cram for the tests. There were concerns that parents were spending too much on test prep and that the results of the IQ test were subjective, so this fall, some schools are rolling out a new iPad-based test that is intended to be more objective. However, the new “Admission Assessment for Beginning Learners” stresses math and literacy skills, which I would think would be even more susceptible to test prep overkill. My poor kids. They barely knew their ABCs by kindergarten. Their futures might be in jeopardy.

I took a quiz with sample questions from the test, and after overthinking the first question (stupid adult brain), I passed with flying colors. Whew. But am I really smarter than my five-year-old? Considering how he manipulates me day in and day out, I can’t confidently say that I am.