Sunday, 29 April 2012

FS UPCOMING EVENT

Semester Wrap Up: Financial Jeopardy

Date: Thursday, May 3rd, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society as we wrap up another great semester with a friendly (but competitive) game of Financial Jeopardy. Bring some friends and form a team to compete with the E-board’s winning team from last year. Winners get a prize!

Finance Society

Starbucks Ready for Huge Growth



Oh Starbucks. There's always those people who make fun of Starbucks lovers saying, "I'd never pay 5 bucks for a cup of coffee!" and, "What does a 'tall' even mean?" But despite these critics of one of the largest coffee brand in the world, there exists millions of people willing to dish out those 5 dollars because it is the little things in life that one truly appreciates. Starbucks has created its culture to do just that and please tired customers in the morning with sweet and energetic drinks.

Furthermore, many of the large corporations we hear about all the time, Apple and Starbucks being two of them, have begun realizing potential in Chinese markets. With recent expansion into China, Starbucks has been able to tap into a new market of millions of people. It plans on opening 400 new stores in the China/Asia Pacific region, which doesn't include what is already existing there. Even if, for example, 10% of China is willing to pay for a Starbucks cup, that's already over 100 million new people. Besides expansion into China, Starbucks also started diversifying to gain market power by selling juice, liquor, and its newest success the K-Cup.

Other signs of long term growth are apparent as well. Starbucks has given optimistic guidance towards its third quarter results, saying that its Tazo Tea will generate billions in revenue and the K-Cups will add close to 3 to 5 cents of earnings per share due to increased demand of them. It opened a total of 176 stores the past quarter for a grand total of 17420 stores worldwide. They reported income from China/Asia Pacific of only 69.5 million, but because of the new addition to stores, this number is likely to increase by several hundred million going into the next year. Also, the fact that they are able to pay dividends, which may be small, indicates that they are financially set for the near future.

And the last reason I believe Starbucks will grow is because now we can all buy Starbucks at Disney theme parks! It aims to open 6 new stores that will blend into Disney's themes and be noticeable to vacationers near the entrance of the park. Food prices at amusement parks are already overpriced, and since Starbucks is notorious for expensive coffee, we can only imagine how much a cup of joe will cost in Disney. Coupled with the price will be high demand from many tired parents from the previous day's adventures in Disney. If Starbucks becomes successful in Disney theme parks, it can then look to expand into other theme parks across the nation and even worldwide.


By Kunal Agrawal

Saturday, 28 April 2012

Spain's Downgrade... Too Much or Not Enough?


Spain’s unemployment rate has reached an 18-year high of 24.4% as announced this Friday. This is up from the 22.9% reported last quarter and close to the highest level on record. The distribution of this rate is even more appalling, as more than half of those under 25 years old are unemployed. As a reflection of these dim economic times across the pond, Spain’s credit rating was downgraded to BBB+ on Thursday. What is ludicrous about this, however, is the fact that Spain’s debt is still considered investment grade despite all the structural issues it faces and an unemployment rate higher than the US unemployment rate going into the Great Depression, which maxed out at 21-22%.

This brings into question, once again, the accuracy and credibility of ratings agencies. In 2009 Moody’s issued a report stating that “Investor fears over Greek government liquidity was misplaced” six months before the country started seeking a bailout. Even more absurd were the ratings agencies AAA ratings of the debt that caused the subprime mortgage crisis just a few years ago. Last but not least concerning was the S&P’s $2 trillion miscalculation of US debt before downgrading it last August.

While politicians often criticize ratings agencies for jumping the gun on downgrading government bonds, back in 2008 they were much too late to downgrade the CDO’s responsible for the crisis. The problem is the conflict of interest these agencies face when rating sovereign or corporate debt and other securities. It can cost anywhere from $1500 to $2.5 million to be rated, so agencies have a strong incentive to give their clients the ratings they want versus the ratings they deserve.

Solving this problem is no simple task, however as Aditya Chakrabortty argues, “The obvious solution would be to take this public service into public hands. Let's have a ratings agency run by the UN, funded by pooled contributions from both lenders and borrowers ... Let's make the ratings business a utility, rather than a semi-cartel that intimidates elected politicians and rakes in excess profits. It's time to break up the bullying double-act." While the logistics and feasibility of this may take years to figure out, it’s a worthwhile solution to consider for our own good as future investors if no one else’s. 

- Vivien Sung

Blankfein to Stay at Goldman



            Goldman Sachs chairman and chief executive, Lloyd Blankfein has insisted that he has no plans to relinquish any of his current positions.  Appearing for the first time on a television interview in two years, he denied any speculation on abdication. Goldman has faced many recent charges for fraud, insider trading, and other scandals in the aftermath of the financial crisis.
On February 24, Goldman Sachs was notified that the charges could include its involvement in the disclosures made as an underwriter of about $1.3 billion of sup-prime mortgages. 
            This would be the second time that the investment bank faces the SEC for fraud charges.  Previously in 2010, the Securities and Exchange Commission filed a lawsuit against Goldman for securities fraud during the financial crisis.  The firm was accused of hiring John Paulson, a former executive member and hedge fund manager, to hand select the worst subprime to sell to investors and then bet that they would fail.  These bonds were packaged under the name ABACUS 2007-AC1.  Paulson and Goldman would then short on these options, secretly betting against their investors.  An analogy to this would be if one specifically sold cars with the least reliable brakes and then bought insurance on them.  In the end, Goldman paid $550 million in settlements and admitted to omitting disclosures and misleading investors. 
            However, out of the $12.9 billion worth of bonds Goldman underwrote in 2006, the SEC has not specifically defined which specific bonds the charges relate to.  The SEC has been faulted before for failing to clearly identify the exact reason for investigations.  With other budge bracket firms also facing charges for similar activities and the upcoming trial of an insider trading case involving Goldman director, the SEC has a lot of cases on its hands.  Currently, Goldman is filing an appeal to the SEC in defense of the charges.       
In the eyes of investors and the public, the firm immorally and deliberately lied to buyers in what was nothing less than thievery.  However, using these short sales, Goldman Sachs managed to cut losses during the recent financial crisis and keep the firm alive.  In terms of benefitting the company, the creators of these deals were absolute geniuses who saved their company from potentially sharing the same fate as Bear Sterns and Lehman Brothers during the worst economic crisis since the Great Depression.  In this case, the individuals responsible treated their professional duties and the enticement of money with more priority than the well-being of their clients.  This brings up the fundamental question of whether or not businesses should focus solely on maximizing profits for shareholders and disregard the common good of society.  Although the SEC has tightened its regulations since the crisis, the ineffective discipline of the major contributors to the recession reveal that the banks still have massive leverages over the government.  Wealth has become such a driving force in our society that, to many individuals, contractual obligations to companies have more of an influence in our lives than moral obligations.

-Jesse Chai

Burgernomics—the Mighty McDonald’s BIG MAC




So we all know about the Big Mac Index, which is based on the theory of purchasing-power parity and states that exchange rates should adjust until equilibrium—the market exchange rates that would equalize the price of an American Big Mac with an English Big Mac and a Chinese Big Mac.
Recently, another bright economist has come up with an intelligent way of comparing real wages across the world using McDonald’s Big Mac as well.  Orley C. Ashenfelter of Princeton University calculates real wages as how much of a Big Mac could an hour of work can buy.  He then flips the ratio over and compares the number of minutes a McDonald’s employee must work in order to earn enough to buy a Big Mac across countries. 

In his paper published by the National Bureau of Economic Research, Ashenfelter concludes that after his own preliminary analysis of the decade long project, “Wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000 – 2007, but with much less progress since the Great Recession.”

As we might expect, workers in less developed countries would have to work longer in order to earn a Big Mac.  For example, in 2011, a Chinese worker in McDonald’s  would have to work 85 minutes to afford a Big Mac, while an American worker only needs to spend 27 minutes. 

This measure has two major strengths.  The first one is, of course, the creativity underlying this measure.  We do not always need hundreds of simultaneous equations to solve an economic question.  By properly constructing measures that change over time, we can always use innovative and interesting methods to test the effects of public policies or economic shocks around the world.  Moreover, a lot of the past and current measurements only allow comparisons of wage rates within the same country, and today much emphasis has shifted to constructing measurements that would also permit cross country comparisons.  This MacWage measurement appears to solve the problem in a nice and intelligent way.  

Think Big and Be Innovative!

(P.S. If you are wondering what Maharaja Mac is, it is THE Big Mac in India!)

~Sophie Tam

Wednesday, 25 April 2012

The Correlation between Humor and Success



How correlated are humor and success? It’s hard to imagine that anyone believes that exhibiting humorous and genial qualities act disadvantageously. In fact, in the business field, being humorous works to one’s advantage. It’s more enjoyable to talk to someone who can slip in a few jokes and be funny than someone who is always uptight and formal. Being respectful and serious can be important too, but it can sometimes come off as boring. Where conversing and networking is important, being funny can make the conversation lighter and more enjoyable, thus opening opportunities that may have never been created otherwise. Formal studies show that being funny can make others perceive you as more enjoyable and thus approachable. Michelle Gielan, expert in positive psychology and cofounder of the Institute for Applied Positive Research, explains that more dopamine is released when something makes us smile to reinforce creativity, productivity, and engagement. In an analysis of 225 academic studies, happy employees were found to have 31% higher productivity and 37% higher sale. Successful humor also improves personal and group productivity, and facilitates trust.

But this is all under the assumption that humor is successful. It’s crucial to say the right jokes at the right time and make sure no one is offended. Even if it does not necessarily offend anyone, a wrong joke can draw negative perceptions. It’s also important to consider what line of work you are in, for being funny may not be appropriate at all. For instance, humor is perhaps even desired in the advertising, media, or entertainment industry. But in fields related to medicine, finance, or engineering, squeezing in attempts to lighten the mood can be difficult. It’s all about saying the right things at the right moments. 

Chris Kim

Google Introduces GDrive


Earlier today, Google launched the long anticipated cloud storage platform that awards its users 5 gigabytes of free online data storage. Users can upload files in any format whenever, wherever they want. The unique thing about GDrive as an online storage service is that it’s part of the Google App Suite. The network effect of all Google users will essentially give GDrive leverage in not only getting the loyal Google users but also new users who might just want to try out this new service for its being part of Google. The way GDrive works is that it will operate as if it was a local file system. When users click the “save file” dialog box on Chrome OS, the system automatically leads the file to Google Drive. This feature is quite similar to the already existing Google Doc function (as a matter of fact it looks the same), but in switching to a new storage service, Google is aiming to better provide the transfer of files between all sorts of online applications.

--Rong Pang

Obama for the students, students for Obama


                As NYU students, we all know how painful our tuition is. Some of us have parents who have sold their first born (if not, an arm and a leg) for our education.  Others will simply have tens of thousands of dollars of student loans post-graduation. What’s worse is that our situation is not improving, as the US government plans on DOUBLING student loan interest rates from 3.4% to 6.8% on July 1st, 2012. Statistics show that student loans are the second largest source of consumer debt, more than credit card debt and only behind home mortgages. The average student debt is over $25,000 and some even have over $100,000. The picture seems bleak, to say the least.
But fear not, Sternies, because we are fortunate to have a president that is extremely pro-education, as he reminded us with his 2011 State of the Union address. He is trying to convince congress to grant him a one-year reprieve, most likely to discuss the matter further before making such a critical change. It is clear that he does not want to make the choice of attending college restricted by financial insecurities, something he sees as trivial.
However, as the 2012 presidential election approaches, one might wonder if Obama is doing this because he cares about our wellbeing or if he just wants the college votes. The way I see it, it does not matter. His expression of concern and the fact that he is actually taking action is enough to win my, and undoubtedly every other NYUer’s, vote.  Moreover, as a country that has made higher education increasingly necessary for finding a job, he will grab many parents’ votes as they would do anything to make their children’s college decision as financially painless as possible. While some may argue Obama should be focusing on other issues such as political instability in other countries or taxes, I think that directing his attention towards students should definitely be high on the list. After all, we are the future of tomorrow.


Tuesday, 24 April 2012

A Story For My Students -- Learning to Deal with the Unexpected

There are many times in teaching that a teacher needs to explain things to students. In many college classes, they are young people with limited experience. Occasionally, they simply don’t understand, especially when things are not as they have experienced them in the past. Part of my job as a teacher is to explain things beyond my subject matter.

There are stories that can sometimes help them come to a better understanding. I often have students come to my office after I return a test. They are upset that they didn’t make the grade they had wanted or expected. It is common for me to hear something like “I cannot tell you how hard I studied. In fact, I studied with Mr. A and Ms. B and I knew just as much as they did. We worked every question from class 8 times apiece. Yet, they made a 95 and I made an 83. What am I supposed to do?”

I guess this is on my mind because one of my students told me this afternoon that the 83 he got on a recent test was the first grade he had received in college under 98.

To the student, the facts are clear. He or she did the same work as Mr. A and Ms. B and they made significantly higher scores on the test. At this point, the world doesn’t make sense.

Here’s one story that I sometimes use in cases like this. “Assume you have two tightrope walkers. They both can walk a tightrope. It is a mechanical skill and they both can do it. But, for whatever reason, the first person is just more comfortable. Maybe, the first one practices more carefully. Maybe, the first one thinks more about the mechanics of tightrope walking. Maybe, the first one sits in his room at night and thinks of what odd things can happen and then dreams up a proper response. Or, maybe, tightrope walking just comes more naturally to the first person. Everyone has different abilities in life.

“So, both people are high up on the tightrope one afternoon and they both look great. Suddenly, a very unexpected and very harsh wind blows up. What happens?”

The student realizes the expected answer. “The first person hangs on and the second person falls off.”

And, my response is: “Yeah, exactly. As long as things go as expected, they both do fine. It is the ability to react to the unexpected that usually makes a difference in life between great and adequate and the same is true on tests.

“My guess is that if I had asked exactly the questions on that test that you expected, then Mr. A, Ms. B, and you would have all done great. Doing great when you are faced with the expected is not a big challenge.

“However, I want you to learn how to react to the unexpected. To me, that’s what will make you different out there in the real world. I suspect that you were not as well prepared for the unexpected as I wanted you to be. That is where you probably need to get better in the future. First, of course, you have to be able to do the expected. That goes without saying. Everyone knows that. But, then, if you really want to be great, you need to move on to the unexpected. You need to sit in a dark room (or you need to converse with Mr. A and Ms. B) and think about what unexpected things could happen on the test. If you never grow to the point where you can start dealing with the unexpected, then you are never going to flourish the way I want you to. And, you are capable of doing this. I’m not asking for the impossible. You can’t just be satisfied with being able to do the expected. It takes growth; it takes time. But you are capable.”

Does the story help the student? Sometimes, it does. Not always but certainly for some it makes sense and it pushes them to break through to a more in-depth understanding. I think too much of our school system (from kindergarten on) is geared toward teaching students how to face the expected. That’s fine and certainly necessary. But I don’t think any of our students are going to cure the ills of our world by limiting themselves to figuring out how to face the expected.

If they don’t catch on by themselves, sometimes a story can help.

Monday, 23 April 2012

Event Recap: General Catalyst Partners

Last Thursday, we invited Jon Teo from General Catalyst Partners to provide a general overview of the Venture Capital industry, speak about his past investments and experiences, and provide insight about how to enter to the industry. The event was a pure Q&A sessions, and Jon fielded all questions extremely well. One of the more interesting points of discussion was the ideal skillset for entering the VC industry and whether our traditional business school education places us at a substantial disadvantage. There are many who claim that engineers (such as Jon) are much better suited to work in Venture Capital due to the fact the industry gravitates toward companies who innovate primarily on a technological level; therefore, individuals with in depth knowledge of programming and web-based products are better suited to pass judgement on such firms. In addition, valuation and corporate finance skills found in banking, P/E, and the hedge fund industries isn't to core competency of an analyst. That being said, Jon expressed that business school students are not necessarily at a disadvantage. The main requisite for VC is creativity, an attribute not constrained to any specific type of education.

Surprise in the French Presidential Election


The French Presidential Election will proceed to a second round after both Francois Hollande and Nicolas Sarkozy failed to win 50 percent of the vote on Sunday. Hollande took 28.6 percent of the vote, while Sarkozy achieved 27.1 percent. However the day belonged to anti-immigrant, anti-euro advocate Marine Le Pen of the National Front party, who achieved a strong 18.1 percent of the vote. Le Pen’s performance highlights the French people’s frustration with the political elite and economic problems in the world’s fifth largest economy and Eurozone’s second largest economy. The unemployment rate, at nearly 10 percent, is a 12-year high and the country lost its AAA credit rating for the first time in January. After the vote the euro declined to $1.32 against the dollar while 10-year bond yields rose 5 basis points over fears that France could undergo further radicalization. Sarkozy, the first incumbent not to win in the first round since 1958 must gain the support of the more radical right in order to win, while Hollande must make up for a generally poor showing for the left where communist Jean-Luc Melenchon only gained 11.1 percent of the vote. Surveys predict that Hollande will beat out Sarkozy by a 56 percent to 44 percent margin in the next round, scheduled to take place on May 6. Investors hope for a strong showing by one of the candidates to avoid risking further destabilization in the Eurozone.

-Ashish Sathe

Sunday, 22 April 2012

FS UPCOMING EVENTS

Professor Series: Ed Melnick - Statistics in Finance

Date: Thursday, April 26th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Come and check out Finance Society's last Professor Series event of the Year as Professor Ed Melnick discusses the growing role of Statistics in Finance. Melnick is a Professor of Statistics and the former Chair of the Department of Statistics at Stern. He will be discussing the vital role probability plays within the world of Finance and some of his research. Professor Melnick is a great lecturer and this is definitely an event you don't want to miss!

Finance Society

Wall Street Tour

Date: Friday, April 27th, 2012
Time: 1:30 pm
Location: Meet at Stern

Take a tour of the Wall Street area with Finance Society on Friday, April 27th. We'll be visiting spots such as Trinity Church, the grave of Alexander Hamilton, the NYSE, the Wall Street Bull, the Federal Reserve and various other financial centers of downtown NY. Limited spots are available for this tour so make sure to RSVP by this Wednesday at noon! We will be meeting at Stern at 1:15pm while the tour is scheduled to begin at 1:30pm and run for a little under 2 hours. Attendance will be confirmed a few days before the tour.

Finance Society

Saturday, 21 April 2012

Disney in Danger of Falling Behind Major Studios

Rich Ross, the Chairman of the film unit at Wald Disney Co. resigned after the company’s devastating $200 million loss on John Carter, a figure rumored to be the biggest ever for a single movie. And because of Ross’s resignation, Disney CEO Robert Iger’s franchise-focused film release strategy is placed in even further doubt.

This year, Disney has cut its number of film releases in half to only 12 because of this strategy of releasing fewer, larger-budget, and what they speculate to be extremely popular, films that have the potential to become long-lived, consumer franchises. Essentially, Disney is betting big on every single movie they come up with. The strategy seemed promising at first, as most of these big-budget movies are built around marketable characters from Pixar and Marvel, except that it failed spectacularly with John Carter, which led to a quarterly operating loss of $120 million for the studio, the first since Ross succeeded Dick Cook as Chairman back in October 2009.

Currently, Disney ranks seventh among studios, with domestic ticket sales of $186.7 million as of April 15. This number and ranking puts Disney the last among major studios and also behind Lions Gate, a rising star in Hollywood with the biggest hit of 2012 so far, The Hunger Games.

With Marvel’s Avengers making its debut on May 4 worldwide, Disney is expected to regain some strength in the competitive industry of media and entertainment as this movie is expected to be among 2012’s top-grossing pictures with an estimated $370 million in domestic ticket sales alone. Further down the line, Disney is set to release Pixar’s Brave in late June. Let’s hope these franchise-focused films can help put Disney back in the run for being the leader among the Hollywood studios.

Jennifer Zhang

Intelligent Fraud


An intelligent internet fraud was uncovered by SEC on Friday. A pair of British brothers marketed Marl, a fictitious “stock-picking robot,” and earned $1.2 million from 75,000 investors buying newsletters and home “robot software” used to access Marl’s stock picks. Since “Marl” did not really perform analyses, the Hunters were earning at least $1.87 million from stock promoters. What makes this incident more interesting is that the brothers are now 21 years old only, and they started the alleged scheme in 2007, which means they were just 16 years old.

The brothers made creative claims on their websites. According to the complaints received by SEC, the website pronounced that Marl could pick out distinct trading patters “in split second timing” and could process 1,986,832 mathematical calculations per second. Therefore, trading according Marl’s picks could earn investors 34% a week.

In fact, Marl’s picks did skyrocket in price once the newsletters were out. Since Marl picked penny stocks that often had a low trading volume, the robot’s choice would experience a surge in price before it fell back to earth.

Several aspects of discussion come up from this story. First, the anonymity on the internet allows unethical behaviors like lying to the investors. Second, investors should clearly understand the background, prospects, and drivers to prices before investing. It is important that they do not blindly follow any one of the millions newsletters that claim to bring definite profits. Third, if we believe in the efficient market hypothesis, the equilibrium stock prices in general should reflect the fundamental value of the stocks. As we can see from the fluctuations of the prices of Marl’s picks, they rise due to the irrational behaviors of investors, and then fall back to the original prices, which are their fundamental value, because investors realize that the stocks themselves do not worth the trading price.


~Sophie Tam

Wednesday, 18 April 2012

FS UPCOMING EVENTS

General Catalyst: Introduction to Venture Capital

Date: Thursday, April 19th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as we welcome Managing Director Jonathan Teo from General Catalyst Partners. General Catalyst is a private equity/venture capital firm based in Cambridge, MA. They specialize in venture capital and growth equity investments in Clean Energy, Consumer & New Media/Internet, and Software/System Services. Jonathan Teo, head of their New York office, will come in to introduce what venture capital is, speak about the work he does, and discuss some of General Catalyst's investment strategies. Read more about the firm at www.generalcatalyst.com, and be sure to join us for this exciting event!

Finance Society

Bloomberg Assessment Test

Date: Friday, April 20th, 2012
Time: 12:00 pm - 3:00 pm
Location: Tisch 200

Join Finance Society and Bloomberg Institute this Friday and take the Bloomberg Assessment Test (BAT). The BAT is a standardized exam for students to demonstrate a mastery of business-related concepts. The BAT also allows students the opportunity to gain exposure to global employers. Bloomberg Institute maintains an anonymous database of BAT performance and showcases these results to over 20,000 global employers. Be sure to register for the exam at www.TakeTheBAT.com by this Thursday.

Finance Society

Tuesday, 17 April 2012

Benson Stings the Competition


Four days ago, the New Orleans Hornets were bought by Tom Benson, the owner of the NFL New Orleans Saints, for a deal valued at a reported $338 million. The troubled basketball team has been in administration by the NBA for over a year now due to an unsustainable business model, and so this new deal seems to be bringing some new life back into a team that saw its star player, Chris Paul, leave for the L.A Clippers earlier this season.
The problem now becomes what Benson can due as owner to leverage his team back into playoff contention like last year, when the Hornets almost bested the Lakers. The financials do not bode well for Benson. Benson paid a 19% premium for a team that has run three years of consecutive losses. In addition, his current fortune, estimated at about $1.1 billion according to USA Today puts his investment into the Hornets at about 25% of net worth; even if he was able to finance a large portion of the deal with debt, a question remains whether Benson can shore up enough assets to purchase new talent to offset the loss of Paul. The Hornets sit at the bottom of the West Coast standings with only six games left in the regular season. With this year being a lost cause, Benson at least has time until next season to develop a plan of attack for the future. Don't count the Hornet outs in the next few years to come.

-Aureen Sarker (Photo Credit: Yahoo Sports)

Event Recap: Contrarian Investing


This past Thursday we invited Steven Jon Kaplan, author of the newsletter truecontrarian.com, a popular investment strategy newsletter with over 600 subscribers (some of them actually came to the event!). Mr. Kaplan focused his discussion on the history and progression of technical analysis, and why he believes technical analysis is obsolete in todays financial markets. After his presentation, Finance Society members had the opportunity to engage in discussion with not just Mr. Kaplan but his subscribers as well. We heard some great discussion about investment strategies, Apple and Facebook, and the recent economic crises. Thanks to all those who attended the event and we hope to see you at our event with General Catalyst Partners this Thursday.

PERSONAL NOTE FROM JOE

This blog went over 50,000 views a few days ago. Obviously, no one would have ever heard of this blog over the past 27 months if it weren’t for people like you who have spread the word. First, I want to thank you from the bottom of my heart. I cannot tell you how very much I appreciate your helping out by telling other people about my writings.

Second, I’d like to ask you for a very personal favor. The second edition of my Financial Accounting textbook that I wrote with C. J. Skender (of UNC) came out today. (Today!!!!) I feel like I just experienced the birth of another child. I thought the first edition was good but I honestly think the second edition is great. It approaches the introduction of financial accounting differently because it is written in a Socratic Method style. It is the book that I have always wanted to write and I am thrilled with it. It covers what I think college students should learn in an introductory course. And, although I am obviously biased, I like to think it is written in an interesting and engaging style – using hundreds of real world examples.

After 41 years, I know two things for sure: (1) faculty members are often very critical of textbooks and (2) faculty members rarely change textbooks. I hear a lot of excuses for the tendency to stick with a textbook even if it is hated by all involved (the teacher and the students). I think adopting a bad textbook semester after semester is an awful educational practice, one that can only cause students to suffer.

Textbooks will never get better if professors aren’t open to new alternatives. That’s how the market system is supposed to work. Without real competition for adoptions, the products grow stale and stop being innovative.

Okay, so here’s the favor I am asking. If you teach financial accounting at a two-year or four-year college or in an MBA program, request a copy of the second edition of our Financial Accounting textbook and read one chapter. That’s all I ask. Don’t believe me. Heck, I’m biased. Read the buildings and equipment chapter (chapter 10) or the investments chapter (chapter 12) or the accounts receivable chapter (chapter 7). Or read the very first chapter where we talk about why learning financial accounting is important. Pretend you are a 19 year old college student. Could you read this book and understand it? Is it interesting? Does it cover what you want to teach?

Or, if you don’t teach financial accounting, if you know someone who does teach that course, forward this note to them. The book is published by Flat World Knowledge so the students get to use the book online for free. Yes, the students don’t pay $250 for this textbook. They can use the book online from day one for free. Why have them pay $250 for a book you hate and they hate?

Anyone who would like to receive a copy for adoption consideration should send a note to Becky Knauer at faculty@flatworldknowledge.com. It’s easy and quick. Be a wise decision maker – look at the alternatives.

And, in case you are interested, here is how the book opens. This sample provides a pretty good picture of the whole book. My goal was to catch the students’ attention right from the start and try to stimulate their curiosity. And, maybe most importantly, I wanted to push the real world into the students’ laps.

Question: In the June 30, 2011, edition of The Wall Street Journal, numerous headlines described the recent activities of various business organizations. Here are just a few:

“TMX and LSE Give Up on Planned Merger”

“Ally Financial Faces Charge for Mortgage Losses”

“HomeAway Jumps 49% in Debut”

“Ad-Seller Acquiring Myspace for a Song”

Millions of individuals around the world read such stories each day with rapt interest. From teen-agers to elderly billionaires, this type of information is analyzed obsessively. How are these people able to understand all the data and details being provided? For most, the secret is straightforward: a strong knowledge of financial accounting.

This textbook provides an introduction to financial accounting. A logical place to begin such an exploration is to ask the obvious question: What is financial accounting?


Answer: In simplest terms, financial accounting is the communication of information about a business or other type of organization (such as a charity or government) so that individuals can assess its financial health and future prospects. No single word is more relevant to financial accounting than “information.”

Sunday, 15 April 2012

Recap of Q&A w/ JC Chandor


Last Wednesday, we were fortunate enough to welcome JC Chandor, the writer and director of the Academy Award nominated film "Margin Call" for a Q&A session about his creative process, inspirations, and unique perspective on the financial services industry. Mr Chandor provided a personal background, but focused the majority of the discussion on his perceived transformation of the industry away from client-firm relationships towards short-term profits. Other topics include parallels of film details to real world events and people, growing up in New York, and his next film starring Robert Redford. Overall, it was a great event and a interesting alternative view on the industry.





Saturday, 14 April 2012

Strike


Last week, a fellow E-Committee member, Mehyar Afkari, wrote a poignant piece on the over $2 billion dollar deal by Guggenheim Baseball Management to purchase the L.A Dodgers. The main question Mehyar brought up was just how this mammoth deal that makes the Dodgers the most valuable franchise in the world would be financed?
Earlier in the semester, Finance Society had the pleasure of bringing in David Becker of Inner Circle Sports to discuss this world of sports investing. Becker used the Dodgers as his primary example in explaining how teams are purchased or sold. Now I do not pretend to have a technical knowledge of investment banking, however, one concept seemed simple: when a person or entity purchases a new sports team, they pile on the maximum debt a team's balance sheet can handle and then pay the difference amongst a group of investors. So with a $2 billion purchase price that analysts believe is $800 million too much, the amount of debt taken on must be staggering. So what's next for the Dodgers?
With the enormous debt that stems from an inflated price-tag, the Dodgers have little room for team investments, the types of investments that win games and fill stadiums. Even with a reported $3 billion regional sports network deal in the works, the team must first win over land rights to refurbish its stadium, rights that were NOT included in that $2 billion figure. Magic Johnson may be loved in L.A; however, without proper investment in the right players, the fans will rebel. The "most valuable team in the world," will be expected to win multiple World Series titles, but with lack of extra funding, the Dodgers will be unable to attract stars that are demanding 6+ year contracts in the $100 million range. With the new management still in its infancy stage, perhaps I am being a little too critical. But for now, I'm calling this deal a strikeout.

-Aureen Sarker (Photo Credit: Fox)

Thursday, 12 April 2012

Groupon's Little Brother Might Get Adopted



By Matthew Giacobbe

While the buzz coming out of the social media sector this week is Facebook’s acquisition of Instagram, investors should keep an eye on the recent news out of Travelzoo (TZOO). Travelzoo, which is the so-called Groupon (GRPN) of travel, has announced that it is putting itself up for sale this week. Travelzoo offers its users exclusive deals to destinations around the world. However, Travelzoo is more sophisticated than Groupon’s daily burger deals; it offers deals to stay at destinations like the world-renowned Ritz-Carlton hotels. What has sparked a flurry of interest around this company is that Amazon (AMZN) and Google (GOOG) have been rumored to be actively pursuing acquisitions to strengthen their own daily deal businesses. Travelzoo is especially appealing to Google, which recently acquired the restaurant review company, Zagat. Combining Zagat’s ability to recommend high-quality restaurants and Travelzoo’s ability to provide luxury deals related to travel and food would appeal to a similar demographic. Although Amazon’s deal business has been largely related to clothing it could easily expand their offerings and user base through such an acquisition. Additionally, LivingSocial could also be in the hunt in order to strengthen its deal portfolio and differentiate itself against its main competitor, Groupon. One thing is for sure though; the battle for Travelzoo will be fierce, as competitors vie for dominance in the daily deals marketplace.

Wednesday, 11 April 2012

Japanese Pharmaceutical Companies Continue to Expand Overseas



Takeda Pharmaceutical announced its decision to purchase the Philadelphia-based URL Pharma Inc. for $800 million this past Wednesday. This is a deal that follows Asahi Kasei Corp's $2.2 billion acquisition of the Massachusetts-based Zoll Medical Corp that took place last month. Japan is seeing a trend in expanding the horizons of its health care sector. The high price of yen, low cost of drugs, and losses of patents in the United States are driving the country to look overseas, the Wall Street Journal says.

It's interesting to see that Japan, a country known for its global detachment that stems from a historical background of geographic seclusion, (most Japanese can speak only Japanese, refrain from studying overseas, and are highly traditional in their beliefs) is making an attempt to extend its presence overseas. The recent deals raise attention to future acquisitions and large-scale involvement of Japanese companies. It will be intriguing to follow Japan, already one of the world's top superpowers, as develop its health care sector. The deal is expected to close by June.

Chris Kim

My Favorite Quotes About Teaching – Number Six

Let’s assume that you are a true baseball or soccer or basketball fan and you’ve just been appointed manager/coach of your favorite team. You are absolutely thrilled. Your goal is to win the world championship with your team. How exciting is that? How would you go about achieving this goal? My guess is that you would willingly spend hours analyzing every aspect of your team. You would try to think of how you could help each player reach their potential within the team to bring on the victories. You’d study everything about the game to help everyone do better. Heck, this might be so thrilling that you’d do all the work for free just for the opportunity.

Is winning a few sporting events in basketball or baseball more important than helping your students to learn? Of course not – we may occasionally forget how important our jobs are but we should never lose sight of what we are accomplishing. I would argue that you already have a much more important job than any big league manager/coach. They play games; you change lives. They entertain; you make a difference. They occasionally play big games; you have the chance to improve lives every day.

Do you treat your teaching with enough importance? Do you approach your teaching with the same seriousness that you might have for the preparation of a sports team?

Over the past few months, I have been writing periodically about my favorite quotes concerning teaching. I find that certain things people have said can make a difference in how I think about teaching in general and my teaching in specific. Few quotes (maybe none) have influenced me more than the quote for today.

About four years ago, my teaching tips book got some publicity and I began to hear from a few people who talked about their teaching and their thoughts on teaching. One day, I got an email from England. It was from a person that I did not know. The note said something like “we have never met but I have read your writings on teaching and I feel like I know you personally. Here is a quote that has meant a lot to me over the years. And, knowing how you think about teaching, I believe it will mean something to you also.” How true that was.

I don’t remember who sent me that email.
I don’t even remember who said the original quote.
However, I think about this quote virtually every day. I believe that it really does hold the key secret to being a better teacher.

"Teaching does not come from years of doing it. It actually comes from thinking about it."

When I give teaching presentations, people will often ask me how they can become better teachers. They want concrete suggestions – talk more, talk less, use more PowerPoint, use less PowerPoint, work more problems, work less problems, yell a lot, don’t yell at all, test a lot, never test. The problem is that all of those do work for some people at some times but none of them work for everyone all the time.

The one thing that does work consistently (I believe) is thinking carefully about your students and your classes and your teaching and how things are going and what changes you need to make. In other words, improvement comes from seriously analyzing the infinite number of variables that make up a class over the course of an entire semester.

It is easy, especially after teaching for a few years, to go on autopilot. I have known teachers (heck, I have been a teacher) who could teach pretty well and never really think about that they were doing. At times, a teacher can come to function more like an actor repeating the same lines over and over on the stage with predictable results.

In my own teaching, I want to try to analyze every single aspect of the learning process on an ongoing basis so I can do better. I want to stay off autopilot. For example:
--What is my overall goal for my students by the end of the semester?
--What did I ask my students to do today? Did those assigned tasks further my overall goal or were they just busy work? What did they require of the students? How did they change the students’ perceptions and understanding?
--How well did my students perform today? Did they live up to my expectations? If not, what went wrong and how could I have gotten a result I liked better? Were the assignments too easy? Were the assignments too hard? Did I challenge each student enough or too much?
--Is every student improving at the pace that I want? If not, can I make adjustments to get better results from specific people?
--Are my students focusing on memorization or are they improving their critical thinking skills? How am I changing them? Is that what I want? How can I get them away from memorization and more into thinking? Too much education focuses on memorization - how do I get my students away from that?

I could go on and on but you get the point.

If I were a coach and wanted to win a championship, these are the kinds of questions that I would address every day. Why then don’t I think more about my teaching on a regular basis? If I believe that teaching is so important how do I stay off autopilot? How do I keep my teaching fresh?

There is not a good answer to these questions. Or, perhaps, each person has to find their own answer to each one. I want to help my students grow and mature. A good class can help them in so many ways. How do I do that? Hopefully, I think about my teaching in a serious and in-depth fashion much the same way as I would if I were appointed the manager/coach of a great sports team.

The next time I give a teaching presentation (Louisville and Savannah – both in May) and someone asks me how to become a better teacher, my truthful response is going to be: "Teaching does not come from years of doing it. It actually comes from thinking about it."

Go out there and do some thinking.