Professor Elam

Accounting & Investing Info for San Antonio A & M

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  • Professor Elam

    Studying CPA over the Holidays

    Tuesday Nov 10, 2015

    Rogers CPA has five tips for CPA study over the holidays.

    I would disagree with his idea that digital is your friend. Indeed, travel can involve loss of internet or possibly forgetting the one charging chord that is needed for your device. This is why Gleim has a separate book for each section of the exam. Having the book means having the study material and the m/c questions whether the internet  is working or not. And frankly it helps me to yellow highlight important passages as well as write notes in the margin.

    Sometimes paper and pen trumps digital.

  • Professor Elam

    Internal Auditors Focus on the Company Culture

    Tuesday Nov 10, 2015

    This article suggests Internal Auditors can help by focusing on the corporate culture.

    A breakdown in appropriate behavior usually precedes a financial calamity. Arthur Andersen, Enron, WorldCom, and yes Penn State are all examples. For example in auditing payroll bonuses, IA can ask of the bonus is rewarding the right behavior that mirrors  the vision mission of the firm.

    These days IA does a lot more than just add up the numbers.

  • Professor Elam

    Potential Topping Action in Stocks

    Tuesday Nov 10, 2015

    TheSPX and Dow Industrials have made new highs unconfirmed by the Transports or smaller cap indexes. 

    DOW Industrial

    Screen Shot 2015-11-10 at 6.26.03 AM

    DOG

    Screen Shot 2015-11-10 at 6.28.17 AM

    DOG is an inverse ETF of the Industrials and it is performing as it should generating  buy signal on the SAR PAR. Note MACD is quite low and looks to be turning up. 

    Short QQQ

    Screen Shot 2015-11-10 at 6.30.51 AM

    The same buy signal is here for the ETF that shorts the QQQ.

    Mainstream thinking is that we had the usual fall pullback for an overbought market. After the very strong rally, another pullback is now in order. Then  after say Thanksgiving the markets being their usual Nov thru May rally. 

    The other line of thinking is that we have a Dow Theory sell signal August 24 with Industrials and Transports both  making new lows. The Transports did not confirm the new high in the Industrials. The Bulls ignore this saying just give it time. Other bear thoughts are that we are in a 40 year cycle high similar to 1932-1972, 1974-2014. I have written extensively about the 1973-74 meltdown and this is exactly the way it began.  There was weakness in many stocks, take CAT or PG for example ignored by those buying the nifty fifty back then. Today that would be social media stocks like Google or FB. 

    Mood in bear markets is exclusionary. Pages a 10-11 in today's WSJ make the point that the mood of 'throw the bums out' is taking over world wide. 

    The military is on the way out in Mynamar

    Brazil Crisis Stalls the Middle Class Rise (translation, Brazil is back to being the country of the future rather than a BRIC)

    Eurozone Presses Greece on Overhauls (translation, nothing ever changes in Greece)

    Catalonia Moves on Secessioin – the failure of Spain has long time Catalans demanding independence, Spain of course disagrees

    Germany Hits the Wall in Immigration

    And as Gerry Seib puts it on A4, A Fourth GOP Debate, no Certainty in Sight – here is the ultimate throw the bums out statement, two non politicians are the front runners, has anyone looked at Trump's platform of opposing trade?

  • Professor Elam

    Valeant CEO Gets Margin Call from Goldman

    Weekend Nov 7, 2015

    Michael Pearson Valeant CEO got a $100 M margin call from Goldman Sachs this past week.  Friday Oct 30 GS told him to pay the loan or face foreclosure by Tuesday Nov 3. Sure enough GS sold 1.3M shares that Thursday Nov 5. We study equity in ACCT 3302 and 3304.  So here is a teachable moment. 

    What is a margin call?  Stock purchased with borrowed money from the border is said to be bought on margin, that being the borrowed money. Ione can borrow 50% of the purchase price. If however the stock falls enough that the 50% equity of the buyer is wiped out, the broker 'calls' the margin and sells the stock. 

    Screen Shot 2015-11-07 at 7.33.48 AM

    VRX.TO has been in free fall.That is the reason for the margin call. It is falling so much there is barely equity to pay the loan. 

    Screen Shot 2015-11-07 at 7.39.13 AM

    On this two hour chart one can readily see the GS forced sale Nov 5. And it looks like there have been at least two other previous instances where no doubt the same thing happened. Dumping such a stock into a market with few buyers, well I am amazed the stock has not gapped down much further.

     

  • Professor Elam

    On Line Classes Create On Line Cheating

    Weekend Nov 7 2015

    Firms now exist allowing one to 'outsource' attending class and taking exams on line.

    Ethical Question-what does this say about the ethics of both client and firm?

    Is it ethical for schools to fail to do anything to identify who is taking the exam?

    How will this affect the value of the degree for both those outsourcing and doing the honest thing themselves?

  • Professor Elam

    Valeant Pharma CEO up to the Task?

    Friday Nov 6, 2015

    Questions continue to swirl if Michael Pearson can operate Valiant Pharma.

    Screen Shot 2015-11-06 at 7.33.08 AM

    It has shed some $3 B in market value since its top a few months back. There are questions surrounding its accounting and financial practices with companies that sell its products. This is  the meaning of good governance and the absence of managed earnings. Once social mood turns against such practices, it is hard to get the proverbial ox out of the ditch. 

  • Professor Elam

    Only VWs accountants will know the whole truth

    Wed Nov 4

    Only the accountants will know the truth

  • Professor Elam

    Kim Ford Graces the Cover of San Antonio Woman

    Wed Nov 4, 2015

    Kim Ford CPA and valuation expert is the subject of a cover story in San Antonio Woman magazine this month.

    Ms. Ford has re fashioned her career. Originally the firm engaged in the traditional write up and tax work of a typical CPA firm. She has moved to the area of forensic accounting. Now her focus is on expert Screen Shot 2015-11-04 at 11.55.28 AMtestimony in valuation lawsuits and buy outs. 

    Ms. Ford has visited our campus in the past and shared her experiences with our students. In addition I dropped in with a couple  of students after a Petroleum Group meeting. She graciously spent time with us and explained the importance of the appearance of the conference room in selling an intangible service. Her firm is centrally located in the Petroleum Building right behind the Chapter Headquarters of SA CPA on north 410. 

    Check out he links. One can sign up to receive free updates from her firm  on accounting matters. 

  • Professor Elam

    More Audit Committees are Disclowing Info on the External Auditor

    Wed Nov 4, 2015

     More public firms are disclosing information on ther relations with the external auditor.

    This is a part of the idea of transparent governance. I expect this trend will continue.

  • Professor Elam

    What is the Most Difficult Section of hte CPA Exam?

    Wed Nov 4, 2015

    Thisis a service which apparently offers tips on how to pass the cpa exam.  Click to learn the most difficult section. I was not surprised, that section was titled Theory when I took the exam.