Professor Elam

Professor Elam

Why Punish Mexico?

January 27, 2017

Friday January 27, 2017

Why Punish Mexico?

It is difficult to stop a bad idea cloaked in good intentions.

Dennis Elam

The President is treating our neighbor like Obama treated Israel.

The Wall Street Journal WSJ on Mexico

And then…

A US –United Kingdom trade deal may never be easier to strike than right now.

The WSJ again, but why penalize Mexican made Fords and not British made Jaguars and Range Rovers?

Trump has some good ideas in approving the Keystone Pipeline construction and re starting the Dakota Pipeline. But his ideas on Mexican trade are the failed ideas which have been tried before. Mexican President Nieto cancelled a planned Washington DC trip on trade after a bitter Twitter exchange with Trump. Yet Trump meets with British Prime Minister Theresa May today to negotiate a trade deal! Or as P J O’Rourke titles his new book, What the H___ is going on Here?

Trump, well make that President Trump, complains that the US has a $60 Billion trade deficit with Mexico. This means we buy more from them than Mexico buys from us. Well, yes, and perhaps Trump should dust off those Wharton School of Business lectures;he sure likes to brag about the degree. But where is the learning?

If two nations produce very different kinds of goods, there is a reasonable chance for balanced trade. Consider say Japan and Chile. Chile produces vegetable and fruit which cannot be grown in Japan. Japan produces economical light trucks which are useful in a developing country like Chile. So the two trade with one another on a somewhat equal basis.

Mexico produces vehicles for a variety of companies, notably Nissan and VW but now Ford and GM as well. As those cars can be assembled for less cost in Mexico than in Michigan, production gravitates to its lower cost provider. So of course we have a trade deficit with Mexico!

Elsewhere in today’s WSJ, some bone headed economists suggest NAFTA has not had that much impact on the US Economy. Obviously these guys have not visited Laredo, one of the biggest trade ports in the US now, or tried to navigate I-35 between Laredo and DFW.

Trump now threatens (promises?) a 20% import tax on goods made in Mexico to finance his Wall on the Border. This idea has been tried before, with disastrous results. And interestingly it surfaced at about the same time in the markets.

The Smoot-Hawley Tariff Act of 1930 was signed into law June 17, 1930. The tariffs (import duties on foreign goods) were the highest in 100 years. Trading partners retaliated slowing trade, and job growth, both places. Exports and imports were cut by half, lengthening the Depression. The idea then was to ‘protect’ famers as land had been freed up from grazing livestock as America embraced the automobile.

Now consider the timing of the planning. During his 1928 campaign, Hoover promised to ‘help’ farmers by raising import duties on agriculture products. The thinking was that this sort of trade protectionism would lower imports and raise the market for US agriculture products.

The House passed a version of the bill on May 1, 1929. Smoot and Hawley by the way were both Republicans as was Hoover. The Senate bill passed in March 1930, 44 to 42. My point is that the House version passed six months before the market crashed. No doubt in a misguided attempt to help, the Senate passed its bill just as the markets had risen 50% and began its historic dive to Dow 41. My point is that this same bad idea is being floated just at the US DJIA has hit 20,00, a new record now as then in the markets. This is a remarkable similarity, decades apart.

All of this really began back in the 1970. Japan became the leader in motorcycles and then small cars using motorcycle engine technology. Instead of meeting the competition (such as making AM FM radios standard equipment in US cars) the automakers fought with tariffs then as well. It did not work.

The fact of the matter is that modern production techniques are such that is it just not economical to pay someone $25 an hour to assemble a washing machine or air conditioner. Those workers need more sophisticated jobs. And so Mexico moves to where the US was after WW II with a growing manufacturing economy. Worker wages in Mexico have grown in some cases 8x in the twenty years since NAFTA passed. In the 1980s Monterey was a sleepy town, to day you can go to the opera there.

The far better idea would be a powerful NAFTA from Vera Cruz to Montreal. That would create a North America which was finally energy independent from the precarious Middle East. And trade would flourish.

Sorry, but Mr. Trump cannot dictate growth by fiat any more than Hugo Chavez could in Venezuela.

Smoot and Hawley proved that 80 years ago.
Professor Elam

Ethics in the News

January 26, 2017

Thursday January 26, 2017

We study ethics in ACCT 5308. As you can see ethics are a topic at both the state and local level. But as you can see in Who's the Worst, efforts inevitably fail to

reign in unethical behavior.
Professor Elam

Dow 20,000

January 26, 2017

Thursday January 26, 2017

It is said that when non financial publications make financial news front page or on the magazine cover, the move, in either direction, is near an end..

While most would label the WSJ a financial publication yes it runs columns on markets buried in the Markets and Investing section every day.

But rarely is the stock market front page and center in every day news.

Well not today. I have never seen so many stock market graphs in one edition of the WSJ. And yes it is a doubling of the market since hitting the 10,000 mark in Year 2000.

While the news seeks to link the new high with the promise of Trump the market was heading up already. And no doubt the change in administrations helped the parabolic rise, well,

grow more parabolic.

But market moves up usually end in parabolic fashion, and this is no exception. The last 1,000 points took but 42 days.

Market tops occur as a result of positive social mood.

In the mid 1960s as the Dow approached 1,000 for the first time ever, Americans went to see My Fair Lady and The Sound of Music.

In an echo of that era, La La Land, one of the few musicals recently made, is an Oscar favorite.
Note the happy couple dancing at right, a frequent image of the movie.

Conventional wisdom has it that such movies case movie goers to be optimistic and upbeat, hence the attend La La Land.

But in fact it is social mood turning positive, and turning up markets, that causes La La Land to be popular now, just as Sound of Music was a hit at Dow 10,00.

So it is no accident that La La Land, an appropriate title for Dow 20,000, both are popular at the same time.
Professor Elam

Why People Elect Crooks

January 25, 2017

Wednesday Jan 25 2017

Why People Elect Crooks

is the topic of the book review of When Crime Pays in today's WSJ, page A 15.

The book focuses on rascals elected in the world's largest Democracy, India. One politician threatened to 'feed those who cross him to the crocodiles' making most of

Trump's threats look pretty tame.

The belief is that when the government fails to provide services, someone will step in to capitalize on that failure. I recently watched Excobar Paradise Lost.

He built medical facilities and swimming pools and such and promoted himself to Colombians on that basis. Of course once he agreed to a prison term, he had everyone killed who m ight remotely tell the authorities more dirt on him.

But my point here is that on Wednesday the WSJ has a long book review. One can learn a good deal reading such reviews as well as

reviews on Amazon. Here is a link to When Crime Pays.

We are studying accounting ethics in ACCT 5308 this semester. Reading book and movie reviews of books and movies with ethical themes and content is a way to broaden your understanding of such topics.
Professor Elam

Vision

January 24, 2017

Arnold on Vision
Professor Elam

Target Cannabilizes its Own Sales

January 24, 2017

Tuesday Jan 24, 2017

The CEO at TGT increases digital sales, to the detriment of brick anjd mortar sales.
Professor Elam

From the Market Perspective

January 22, 2017

Weekend January 2, 2017

I introduced the topic of social mood in class this week. And this weekend I have an interesting post about The New Civil War comparing the map with the Right to Work Map, guess what they are the same.

So here is the post from http://www.themarketperspective.com this weekend.

Weekend January 22, 2017

Cycles

My apologies for getting too bearish too soon. The high in the Transports back in Fall, 2014 went before a final low in multiple indexes this last February 2016. That led to multiple highs

across many indexes which is occurring, and probably peaking now. Let's look at the confluence of cycles now coming together.

40 Year cycle from 1974 Low to present High

17 Year Cycle from January 200 to right now, a remarkable timely occurrence

14 Year Cycle from 1988, 2002, 2016

10 Year 1997-2007-2017

And 66 week, 33 week, and a 5 month Jan 2016 June 2016 Nov 2016 with the next half of that cycle occurring now

We suggest readers consider a subscription to Insiide Track for more insight, Caution the author uses a proprietary method which takes a lot of time and reading to grasp

http://www.insiidetrack.com

I am not affiliated and receive nothing from subscriptions to that sight

Gann also warned about the seventh year of a stock market and the danger there in, consider 1987, 1997, 2007

So I am expecting a high in the stock markets now followed by ups and downs the rest of the year. We shall see if the previous Nov 2016 low holds

Social Mood

We techies like to say there is always a fundamental event to validate the technicals. And wow we have a bunch on the table.

Negative mood results in a throw the bums out attitude and that is now just in the US but world wide.

Cameron out as British PM on the Brexit vote.

Hollande not running for re election he is so far down in French polls. Right wing French politicians also calling for an exit from the EU. See the move from left socialist, to right in France.

Italy PM out.

In Mexico NIeto falls to 12% approval rating.

Barack Obama out and Trump already falling in popularity polls here.

Venezuela Brazil Argentina in terrible shape, Brazilian President impeached

and so it goes.

Like him or not, everyone from Rush to the political left agrees that Trump has no particular ideology. Instead he sees the world in terms of winners and losers. It is not that he embraces Putin's policies,he just sees Putin as a winner in Russia versus our loser list above.

And like a pugnacious 13 year old, Trump feels compelled to answer every real or imagined insult with a Tweet. Yesterday his press secretary was excoriating the press for suggesting his inaugural turnout was lower than Obamas, I mean who cares, is that the PR Hill to die on the first day?

But my point is that he openly has declared the press unfair to him, )as though the declaration would change their mind), and that he will continue tweeting to get his message across. In his column last Thursday Karl Rove explained the danger of such 140 character comments on national and international policy. But what we need to grasp is that this sort of action will probably be cited as careening markets first one way and then the other this year. Polls indicate a majority of Americans have tired of the tweets but that won't change Donald.But the point is that Trump's tweeting to every imagined insult will just give encouragement to his supporters and more blood in the eye to his detractors. At the height of the Watergate frenzy, the press devoted thousands of lines of print to nothing but the crisis.The Trump Presidency is already shaping up the same way, consider his calling his own CIA a bunch of Nazis. Then yesterday he claimed more support than ever for the same CIA. This sort of flip flop will not help assure the markets.

It was interesting to watch the interviews with the crowd January 20. There were clearly many ordinary folks who had not attended before but were happy to stand for hours in the drizzling rain to see their guy. And he did not disappoint with his sixteen minute Change Starts Today speech.

The tone is further set by one third of the House Demcrats boycotting the event, so much for reaching across the aisle.

Conclusion-the political stage is now the most polarized since Nixon in 1972-the start of the 40 year cycle kicking in even back then.

Markets

Russell 2000

The RUT 2000 posted a stunning near 50% rally from the February lows. The PAR SAR has traced out five waves to the upside.

And this seems to qualify as a parabolic blow off. It will take a weekly close under 1200.67 to revers the pattern.

All indexes will peak at different times so as to throw off as many investors as possible.

Bonds

Wave A up and now a Wave B down, this market needs to turn back up this week to keep the idea alive of a counter trend bounce.

XAU Daily

The daily is over bought for now but the weekly looks quite strong.

Energy

UNG Nat Gas

I am still bullish into February for a new high in nat gas prices.

Bottom Line

Stocks are topping, notice the DJIA has still not crossed 20,000.

Bonds need to advance this week to resume counter trend bounce.

Crude and nat gas are moving up.

Social Mood

Pop Trends Price Culture

A topic I began writing on in creating this blog was The New Civil War.

Notice this article was written in November 2012.

Here is the Obama Romney map

In my original article I showed the 1861 Civil War map, then the Right to Work map, and then the Red Blue Map. I pointed out they were all the same map.

The Southern States voted Red for Republican. Democrats were mostly isolated on the coasts and in the mid west, traditional union territory.

Now compare the above with the 2016 final election map

T

The Democrats lost all the South including Florida. And that Blue Wall of the mid-west gave way. If Trump had not fueded with the Republican Governor of New Mexico he might have done better there. But picking pointless fights is part of his brand.

And more states are joining the right to work movement, see this map and notice yep, just about the same as the 2016 election map.

So the trend has been for fewer Democrat victories amid the loss of over 1,000 Democrat seats since the Obama win inj 2008.

More states are voting right to work as RTW states gain more employers.

And non RTS states like Illinois CA New York CT continue to lose population to RTW states.

The trend is clear. And this is precisely why Trump won, te disconnect between Washington DC and the governed. Henninger noted the crime in Chicao and the ACA failure as the two big determinants of the failure of central planning.

Or as Betty Davis remarked in All About Eve, fasten your seat belt, it's going to be a bumpy ride.

dennislelam@gmail.com

The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance and no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or charts.
Professor Elam

Samsung CEO Faces Potential Arrest

January 17, 2017

Tuesday January 17 2017

Samsung CEO Faces Day in Court.

Will he be arrested?
Professor Elam

Accounitng Positions Available

January 17, 2017

Tuesday January 17, 2017

I post these as examples of just how in demand professional accountants are. Our students would no qualify for these positions upon graduation but would grow to them. Notice however most require CPA or other certification.

We have the below 5 positions with 5 growing companies in TX – 1 in the Greater HOUSTON/ WOODLANDS Area (Controller) + 2 in SAN ANTONIO (Accounting Mgr. + Tax Mgr/Sr.) + 1 in MIDLAND (FPA Mgr) + 1 in CISCO (Payroll Mgr.) – all with recurring Clients/Friends – required Qualifications are:

#1: CONTROLLER (OFS)-HOUSTON (WOODLANDS): $100-$130K + BONUS/BENEFITS

– Small/Emerging Business Controller, OFS and PE Firm Reporting Experience

#2: ACCTG MGR.-SAN ANTONIO: $110-115K+ + 25%+ BONUS/BEST BENEFITS/RELO

– CPA with Midstream/Downstream Energy Revenue Accounting Mgt. Experience

#3: FP&A MANAGER (OFS)-MIDLAND, TX: $90-100K + ESPP/BONUS/BENEFITS

– CPA/CPA Candidate or MBA with Financial Analysis Experience in the OFS Industry

#4: TAX MANAGER/SENIOR (CPA FIRM)-SAN ANTONIO: $65-$85K+ + BENEFITS

– CPA/CPA Candidate with Supervisor Level Public Accounting/Tax Experience

#5: PAYROLL MANAGER-CISCO, TX: $50-$65K + BONUS/BENEFITS/RELOCATION

– CPP/CPP Candidate + Degreed OR 10+ Years’ Experience with Payroll Mgt. Experience

Please see complete JOB PROFILES below. Relocation provided as noted below in each Job Profile.
Professor Elam

Who’s the Worst for Spring 2017

January 17, 2017

Who's the Worst 2016

July 10, 2016

Each Fall I begin a Who's the Worst list of fradusters.This is preparation for the Accounting Ethics 5308 class taught in the spring. One particular case has already caught my eye so let's get underway.

August 1, 2015

August 4, 2013

October 30, 2012

December 9, 2011

April 30, 2010

It's a tough call, all the fat cats at Bear, Lehman, Goldman, paying themselves as their very firms fell apart, John Thain redecorating the office for $1 M, demanding $10 M in bonus for saving Merrill an hour before Lehman evaporated, Blankfein denying Goldman bet against their clients, a true rogue's gallery but

my nomination goes to Richard Fuld at Lehman. Now he is back on the witness stand and apparently engaging in perjury about just how much he did make. Come prosecutors, make my day, march re election glory for putting this guy where he belongs, off the yacht and into jail.

Business

Valeant Pharma stock has fallen 73% this year.

CEO Mike Pearson is leaving, not a mutual decision. Activist investor Bill Ackman is joining the Board. There will be more on the firm in this space I am sure….

Valeant's Elizabeth Holmes banned from running a lab for two years. She intentionally omitted information about lab tests to shareholders.

________________________________

Fiat Chrysler admits to falsifying sales figures for 71versus thecorrect 40 months.

FCA at first denied accusations in a lawsuite brought byMaserati dealers.

FCA claimed a 300% increase in sales. In fact, the 'sales' were cars in demonstrator status. This is doubly disappointing in that theCEO of FCA,

Sergio Marchionne,is a Chartered Professional Accountant in his home country of Canada.

___________________________________

PwC faces rare Crisis Era Suit

Lee Farkas was chairman of Taylor Bean, a mortgage company.He is now serving 30 years for fraud. The bankruptcy trustee for Taylor Bean is suing PwC for $5.5 Bin damages. PwC defense is that it was lied to by the company. At issue here is the gray area of just how responsible an external auditor is for uncovering fraud.

And as Zero Hedge Says, You can't make this up, Coorzine sues PwC for the failure of IMF Global

If Corzine had not been a former Dem Governor and Senator he would surely have been jailed for the first securities firm to stiff its customers, Corzine claimed he had no idea where their money went in the collapse, strange for a former Goldman Sachs partner….

_____________________________________

The fallout from the VW emissions scandal continues.

Here are five reasons why Americans are not buying. And to think, someone in the last two years invested in a brand new VW dealership in the Dominion area.

_____________________________________

Wells Fargo was fined $185 M by various agencies. for creating unrequested bank accounts and collecting fees on them.

Rumblings of account impropriety have been in the open since 2013, when an LA Times investigation first revealed that sales pressures led Wells employees to cut legal and ethical corners. “Wells Fargo is the nation’s leader in selling add-on services to its customers,” the paper wrote at the time, in an article that would go on to get the attention of the Los Angeles city attorney and lead to the city’s 2015 suit against the bank. ”I’m not aware of any overbearing sales culture,” then-CFO (and current COO) Timothy Sloan told the Times.

All the while, Wells CEO John Stumpf has been frank about his desire to get Wells credit cards in the hands of his customers. “I am not going to be satisfied until every creditworthy customer who calls us their bank carries our credit card,” he said in 2014.

In ACCT 5308 we study ethical behavior and corporate governance. And we learn that proper ethical behavior is a result of the 'tone at the top.' What is implied in the tone of the remarks above by the CFO and current CEO?

Worse, half of all the bank accounts in the USA are now in the custody of four or five large banks, WFC is one of them. It is unusual that finally a company actually admitted complicity in such an act.

“Our entire culture is centered on doing what is right for our customers,” Stumpf said in a company-wide memo Thursday. “However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs.”

This news came out Sept 9, 2016. As I write the Dow is down 269 points, WFC dropped 70 cents along with the overall market.

This is just another example of Too Big To Fail. The government pockets a hefty fee, the guys at the top keep their jobs and bonuses, and 3,500 employees get pink slips for doing what the guys at the top wanted.

_______________________________________

Small Potatoes Dept – Sequin store owner sentenced to one year on jail for SNAP fraud.

Nasir Ali, 67, pleaded guilty to charging up to double for amounts purchased under the Food Stamp Program. So at age 67 he gets a year in the pen and restiution of $274K.

If one is going to become a criminal , this is not the way to do it!

______________________________________

__Indian fraudsters are posing as US IRS agents and demanding payments.

This is the result of outsourcing US tax information abroad. Never give information about your taxes to a stranger on the phone.

Politics

Representative Corrine Brown has been indicted along with her Chief of Staff for using the One Door for Education Foundation as a sluch fund.

She had raised some $800,000 but only dispensed one $1,000 scholarship. Apparently she deposited money from the charity to her personal bank account.g Funds were also used to pay for events hosted by Brown including lavish receptions and luxury boxes at concerts. \

In 2013 Crown responded to a question by saying Don't confuse me with the facts.

_________________

U S Rep Chaka Fattah was found guilty of all counts including racketeering, fraud, and money laundering.

This scheme also involved an education non profit.

He routed a federal grant through his consultants to pay back an illegal loan. The 59 year Old Democrat had been in Congress since 1995 and served on the powerful House ?Appropriations Committee.

Gee how is that for irony!

___________________

Hillary Clinton violates the Federal Records Act, among other statutes.

FBI's Comey confirms foreign hackers probably have all 60,000 e mails including the 30,000 not released. President Obama campaigns for her the same day the Attorney General is supposedly deciding on prosecution. Hmm, do we have a double standard here?

_____________________

Democrats planned a craiglist ad supposedly placed by Trump seeking cooperative women

_____________________

Debbie Wasserman Schulz resigns as Democrat Chair amid wikileaks e mails.

Thousands of hacked e mails were released showing Schulz complicit in trying to de-rail the Sanders campaign, just as Sanders had suggested. Interestingly Hillary gets to keep the nomination, no matter how she achieved it. And this suggests the Russians are indeed in possession of Hillary's unreleased e mails. How might Putin use those during a Hillary presidency?

_______________________

Malaysian Prime Minister involved in $3.5 B money laundering scam. Here is the Jeff Foxworthy you can't make this stuff up moment.

Apparently some of the money went to finance the movie The Wolf of Wall Street.

http://www.wsj.com/articles/behind-the-1mdb-scandal-banks-that-missed-clues-and-bowed-to-pressure-1473109548

http://www.wsj.com/graphics/1mdb-money-flow/

http://graphics.wsj.com/1mdb-decoded/

Who is Najib Razak?

The Malaysian prime minister at the center of the 1MDB scandal is a member of one of the most prominent political families in the country. Najib Razak’s father was a revered prime minister and leader of the political party that has ruled the country since independence. But he also helped create a system of preferences that is seen by some as a cause of corruption in Malaysian politics. Mr. Najib, who is facing protests and criticism for his role in 1MDB, has denied wrongdoing or taking any money for personal gain.

____________________

And Bill Clinton is back in the news. The Federal Government forced ITT Technical Schools out of business. That did not happen to Laurete College founded by Doug Becker. Becker shrewdly paid Bill Clinton $17.2 M over five years to act as the Honorary Chancellor. Laurete also donated $1-$ M to the Clinton Foundation. And just to make sure another $2,700 for Hillary's campaign. This folks is crony capitalism

at its best or worst depending on your POV>

Sports

The Russians have been accused of widespread doping of athletes at its 2014 Sochi Games.

Seems the FSB, successor to the KGB, figured out a way to open the sealed urine sample containers without breaking the seals. Recall that V. Putin got his start at the KGB.

__________________________

Irish Intl Olympic Chief Patrick Hickey arreseted in Rio for scalping tickets

Hickey and at least six others were involved in selling more than 1,000 tickets sold for higher fees after being allocated to the Olympic Council of Ireland. Gee, Patrick talk about tawdry behavior, first the Russian doping scandal, then scalping tickets and then the green water in the diving pool, one wonders how the Brazilian authorities managed to catch them but catch them they did

____________________________

And the Bum Steer Award of the Olympics surely goes to the guys and gals in charge of the diving pool.

Why the Water Turned Green

As anyone who has worked at a pool would know, they ran out of chlorine and algae quickly took over, well duh….Millions of people in Rio and no one could find some chlorine to fix this????

________________________________________

Ryan Lochte – I over exaggerated but did not lie about the robbery.

Well, as Richard Nixon demonstrated, covering up the story can be much much worse than the story it self. You may recall that Mr. Lochte claimed his group had been held up by armed robbers posing as police. It turns out he had vandalized a convenience store and the guards demanded he pay for the damage. Granted the guards did not call police but once we practice to deceive, it gets harder and harder to remember what we said.

Ryan Lochte losing sponsors. Yep, actions have consequences.

Seattle Seahawks sanctioned for practice violation.

And it happened in 2014 as well. Read the link to learn that the coach had the team engage in a prohibited training outside the regular season. The result was fines and a loss of a draft pick. How could a coach who had previously done the same thing, be so foolish! Apparently he thought he would not be caught. This sort of small thing is evidence of a lack of tone at the top, and unchecked, usually leads to other, larger problems.

Posted at 11:20 AM in Ethics | Permalink

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