• Professor Elam

    Monday Nov 17 2014

    Liam Denning provides a good example of financial analysis in today's WSJ.

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    He examines the potential outcome of  Halliburton taking over Gaker Hughes. 

    I don't know if this link works without a subscription but I will locate the same article on the WSJ database at school and follow up with another link. 

    We are studying the consturction of eraning per share in 3312 and the income statement and balance sheet in 3310. This article demonstrates how eachis used in financial analysis. 

    The question here is, will the new company be worth more than the old to the shareholders?

    BREAKING NEWS

    AS I write HAL will buy BHI for 78.62 a share with 

    1.12 HAL shares and $19 cash for each BHI share

    THat is a 31% premium over where BHI was trading. That sort of premium is necessary to get the deal done. 

  • Professor Elam

    Weekend Nov 15 2014

    Halliburtonis in talks with Baker Hughes BHI. Now the talks turn hostile.

    I have urged students to read for contextual understanding. ere is a good example. The freindly talks may take an unfriendly turn as HAL owns some BHI stock and can make Board nominations.

    And as the article says, is this really such a great deal for the customers?

    BHI

    Screenshot 2014-11-15 10.38.30

    HAL would have to offer a higher price to get BHI share holders to do the deal. As you can see rumore and expectations are driving the rpice up.

    This could develop into a proxy fight, a fight over the right to vote shares which could determine the outcome of the deal.

    Bottom line, I would definitely want to be working for HAL and not BHI if the deal goe sthrough. You can bet HAL will sack most of the BHI employees and use this as a way to keep prices from falling by eliminating a competitor. 

    If you have not read my posts on the falling oil price, you might go back and do so now. This is a result of falling oil prices. 

  • Professor Elam

    Weekend Nov 15, 2014

    Here is an article on Hertz, Movado, and HAL and Baker Hughes BHI.

    Movado slashed its outlook for Q3, Q4, and 2015. Their brand is not selling well. 

    MOV

    Screenshot 2014-11-15 10.30.14

    The stock fell 360% fRiday this is is a weekly chart for perspective. 

    FOSL

    Screenshot 2014-11-15 10.32.42

    Fossil makes their own as well as m. Kors, Armani, and Burberry, and has recorded the opposite result. 

    This is an example of why accountants need to understand the business as well as the accounting. 

     

  • Professor Elam

    Weekend Nov 15, 2014

    Hertz accounting woes continue to grow. HTZ will re state 23012 and  2013 and will go back to 2011 to investigate. The audit committee and maangement have concluded more adjustments are necessary. It may be mid 2015 before thngs are straightened out.

    A new CFO was named last year. The CEO stepped down last September. Carl Icahn is on the hunt and has a position in the shares. 

    HTZ

    Screenshot 2014-11-15 10.23.28

    The stock price has lost a third of its value in the last three months. Wow, earnings quality does matter. We are studying the income statement in 3310 and E/X in  3312., Violation of these rules can have dire consequences. And it will no doubt take a year or so to recover from such an episode. 

    The tone is set at the top.The article does not specify just what is wrong but hey, the market reacted quickly. 

  • Professor Elam

    Weekend Nov 15 2014

    This weekend both Dan Neil in the WSJa and Terry Box in the Dallas Morning News tested the Lincoln MKC Crossover. McConaughey has jump started sales with a series of ads featuring Matt driving and pontificating. Here is my take. 

    Interesting both you and Dan Neil wrote on the MKC Lincoln this weekend. Actually Neil spends more time on the Matt commercials than the car, as you both note a gussied up escape for a lot more money.

      
     
    I took to the lincoln website, it tells us a lot about the lincoln buyer.
     Under specs it lists engine type3
     
    3.7 L 24 valve TI VCT V6 which I doubt means anything to a lincoln buyer
     
    and then rather than listing the power it  lists the gas mileage
     
    well no doubt that spikes Ralph Nader’s heart beat but not mine
     
    I have not driven either vehicle but looks to me more like Lincoln has taken the seat at the table formerly occupied by 
     
    Mercury
     
    which was always a gussied up Ford and frankly did we ever meet a die hard mercury enthusiast in the cast of ford chevy or dodge?  I think not
     
    I suspect the MKC will be a popular choice for successful realtors, reliable and showy just the thing for travel to that $595 K must have movie’ on up to a higher suburb experience
     
    My wife’s caughter is going thru such an experience as she and her husband move from a 165K row house to  a  245 K home to a 595 K upper level sprawl
     
    As I explained the car must be specific to the house and so she has moved from a honda accord to a BMW five series and is still looking I think for the right upwardly mobile choice for the new half million house on the one acre spread – Range Rover anyone?
     
    Mustang has taken off as the new Ford Corvette
     
    If Lincoln wants to play in the BMW Audi league I say
     
    get the rights to Commander Cody’s Hot Rod Lincoln tune
     
    the mustang 2.3 fours good, how much better would a mustang V 8 with rear drive be
     
    and then with hot rod lincoln playing int the background
     
    Have McC in a t shirt and jeans standing by the new HRL (now that is a nomenclature I can understand)
     
    look into the camera and say
     
    I huddled with the engineers and
     
    …Lincoln made this one for me
     
    and take off on a lonely road zooming past a US Highway marked Route 66
     
    Naw, I suspect they will stay with realtors who have no idea how much power the engine makes as long as the rear view camera works
     
    Lincoln has taken on Accura and Volvo, two more lost brands, not BMW and Audi
     
    Bu well realtors buy cars as well
     
     
  • Professor Elam

    Thursday Nov 13 2014

    You are riding a bus to your destination. An aggravated individual boards the bus. He aggressively engages one passenger after another with taunts such as 'who you lookin' at?'  He is trouble looking for a place to happen. After failing to get a rise from other passengers, he confronts you. Who you lookin at he sneers, You meekly reply no one, and then the aggressor pulls a gun and mortally wound you. He exits the bus. 

    This week Zachary Gonzales is charged with the above crime accused of  shooting Donovon Rae Arzola, 23. Zachary apparently did not know Donovon. And yet this happened right here in San Antonio at 2 30 PM in the afternoon. 

    Jeff Cooper addressed this threat potential with what he termed The Combat Mindset and the Cooper Color Code. Please take time to read the article link. It might save your life at one extreme. At the other extreme it might make you more prepared as a student.

    Cooper served in the USMC in bvoth WW II and Korea. He formed the Gunsite Training Center to reflect his beliefs on preparedness for law enforcement and military personnel. 

    RAther than describing it, here is hte excerpt form the article on the Color Code. 

    The color code, as originally introduced by Jeff Cooper, had nothing to do with tactical situations or alertness levels, but rather with one's state of mind. As taught by Cooper, it relates to the degree of peril you are willing to do something about and which allows you to move from one level of mindset to another to enable you to properly handle a given situation. Cooper did not claim to have invented anything in particular with the color code, but he was apparently the first to use it as an indication of mental state.[citation needed]

    • White: Unaware and unprepared. If attacked in Condition White, the only thing that may save you is the inadequacy or ineptitude of your attacker. When confronted by something nasty, your reaction will probably be "Oh my God! This can't be happening to me."
    • Yellow: Relaxed alert. No specific threat situation. Your mindset is that "today could be the day I may have to defend myself". You are simply aware that the world is a potentially unfriendly place and that you are prepared to defend yourself, if necessary. You use your eyes and ears, and realize that "I may have to shoottoday". You don't have to be armed in this state, but if you are armed you should be in Condition Yellow. You should always be in Yellow whenever you are in unfamiliar surroundings or among people you don't know. You can remain in Yellow for long periods, as long as you are able to "Watch your six." (In aviation 12 o'clock refers to the direction in front of the aircraft's nose. Six o'clock is the blind spot behind the pilot.) In Yellow, you are "taking in" surrounding information in a relaxed but alert manner, like a continuous 360 degree radar sweep. As Cooper put it, "I might have to shoot."
    • Orange: Specific alert. Something is not quite right and has your attention. Your radar has picked up a specific alert. You shift your primary focus to determine if there is a threat (but you do not drop your six). Your mindset shifts to "I may have to shoot that person today", focusing on the specific target which has caused the escalation in alert status. In Condition Orange, you set a mental trigger: "If that person does "X", I will need to stop them". Your pistol usually remains holstered in this state. Staying in Orange can be a bit of a mental strain, but you can stay in it for as long as you need to. If the threat proves to be nothing, you shift back to Condition Yellow.
    • Red: Condition Red is fight. Your mental trigger (established back in Condition Orange) has been tripped. "If 'X' happens I will shoot that person" – 'X' has happened, the fight is on.

    The USMC uses condition Black, although it was not originally part of Cooper's Color Code. Condition Black: Catastrophic breakdown of mental and physical performance. Usually over 175 heartbeats per minute, increased heart rate becomes counter productive. May have stopped thinking correctly. This can happen when going from Condition White or Yellow immediately to Condition Red.

    In short, the Color Code helps you "think" in a fight. As the level of danger increases, your willingness to take certain actions increases. If you ever do go to Condition Red, the decision to use lethal force has already been made (your "mental trigger" has been tripped).

    In the situation on the bus, we now know that the victim had mere minutes, if that, to move from Condition White all the way to Condition Red – Fight. And the victim needed to take initial action, not a defensive stance, as the perp was armed nd the victim was not. 

    Would you have recognized the deadly threat in time?

    On another level we can apply this to taking an exam. In one class yesterday the students asked for more time to take exams. Yet all certified exams are timed. The best way to prepare is to take timed exams from thet get go. And in my classes you receive thorough exam prep on what will be on the test. All questions are culled from a test bank that represent problems we have worked in class. Allowing unlimited time to take an exam at home on line would simply result in a group project of looking up the answer or copying from someone who cold work the problem. That is anything but content mastery. THis would not prepare you for any advanced class after this one. 

    I typically receive very few questions in class. This reflects a condition white mindset, It reflects that little to no time has been spent trying to work the problems prior to class. This means the student will learn little watching the solution.l That is because the student is watching not participating. 

    Passing an exam is a matter of thorough preparation. It is a matter of practice just as one would practice pistol shooting or playing volleyball. 

    Plan on raising your alert level, it could be a life altering experience. 

  • Professor Elam

    Tuesday Nov 11, 2014

    I would agree with thre of Michael Lewis picks. 

    Reminiscences of a Stock Operator This is the story of Jesse Livermore, one of the most famous stock Screenshot 2014-11-11 11.48.46investors of all time. While written decades ago it is as instructive today as then. Tragically the burden of performance was such that Livermore eventually took his own life.  This is an incredible bargain at 1.99 for the Kindle version. This has been on the sidebar of my market perspective blog since it began. And I discuss The Right Stuff later on. 

    Huckelberry Finn is on many such lists but I found a couple of Twain's other works incredibly modern and insightful. 

     

     

     

    Screenshot 2014-11-11 11.52.36The Mysterious Stranger like a Connecticut Yankee is more science fiction and what might be termed paranormal in this day and age. It is the story of Phillip Tradd. Who is Phillip?  If you enjoyed the movie The Devil's Advocate, you will find this essentially an earlier version of the same tale.

    I am amazed Spielberg or someone like him has not made movie of Mysterious Stranger.  

     

     

     

    Letters from Earth is another audacious tale from Twain. An Angel falls from Grace and is sentenced to a time of penance on a little known planet at the far side of a forgotten solar system. Of course it is Screenshot 2014-11-11 11.58.48Earth. The Angel records his observations of these strange people and their habits. He notes that their idea of heaven is to be robed in white while singing hymns, yet the same group seems to enoy a beer while watching a baseball game on that same Sunday Afternoon. Why then is Heaven not a baseball park the Angel wonders?

     

     

     

     

     

    Screenshot 2014-11-11 12.03.03Think life is tough these days, well try A World Lit Only by Fire the Medieval Mind and the Renaissance Portrait of an Age.  Manchester traces history from the brutal Middle Ages into the Age of Enlightenment. Serious stuff, not a sissy read I promise. 

     

     

     

     

    American Caesar: Douglas MacArthur 14880-1964 is much more than just a biography. But as the saying goes, there is no history there is only biography. Manchester begins with MacArthur's relatives how fought in the Civil War. He takes us on a the young MacArthur's journey as one of only about twenty Americans to have visited China by 1900. It is the story of the development of the Pacific Rim and more. The William Manchester page is here.  His three part biography on Churchill is the definitive work on the man. 

    Paul Johnson is another famous British historian. Modern Times will be the most informative book you ever read on the 20th century. IT is the biography of notable figures, no monsters, like Mao and Stalin. 

    A History of the American People is the book of American History.  ?Which is to say it is a serious of short Screenshot 2014-11-11 12.12.57biographies of those who shaped this country. Yes it is a long book but reading in fifty page chunks, as with American Caesar is the ticket. It is these men and women that shaped the unique experiment that became America. Which is something Russia will has and never will accomplish.  

     

     

     

     

    And then there is simply the Dean of American Writers, Tom Wolfe.

    Wolfe came to prominence with a piece he did for Esquire on Las Vegas. His stream of conscious it is happening right now method of writing was just right for the town that truly never sleeps. He observed that the radio in his rent car never would turn off, just the metaphor for a town where grocery stores were open at 3 AM for show girls getting off work. 

    I remember reading the Kandy Kolored Tangerine Flake Streamlined Baby sitting by the pool in my college apartment house. Hunter S Thompson followed with Fear and Loathing in Las Vegas but given that Thompson later blew his brains out during a phone call to his wife, and the fact that Wolfe is still with us, gives Wolfe the nod I think, don't you. 

    I preferred his non fiction to the fiction. HIs book The Right Stuff put pioneer Mach One Chuck Yeager on the pedestal he deserves. 

    Wolfe's description of what it is like to land a jet aircraft on a heaving carrier deck is a classic in itself, a controlled crash as he says. 

    Others in my MBA class chuckled when I named Davide E Davis as a great write of our time.  But he was. I just ordered his compilation Thus Spake David E for a bargain price and look Screenshot 2014-11-11 16.11.30 forward to reading it over Thanksgiving.  He declared that Tom Wolfe would be an
    inspiration for the writing at Car and Driver and he was.  

     

     

     

     

    If you want to improve your writing, read good writers. For example,

    Malcolm Gladwell on Ron Popeil, The Pitchman. Here is the Malcolm Gladwell page.

    I hvae read Ouliers (not what you might think about exceptional people like Gates and the Beatles) and The Tippoing Point, both recommended. The latter describes how small ideas become big ideas and beliefs.

    And finally, How to Pass the CPA Exam by Gleim is a must read for all accounting students.  Screen Shot 2014-11-12 at 4.58.13 PM

    I used the very first Gleim review when it came out in  1974-75. Gleim has expanded since and has similar guides and courses for CMA, EA, and CIA. All have excellent ideas on how to study, how to develop a 'solutions approach' and yes they have the schedule leading up to sitting for any of these exams figured out to the week and day of what to do. 

    I find that most students simply do not understand what the word 'study' really means. Gleim addresses that question. 

    And in the non fiction deparment, no one writes about life at the top better than 

    Dan Jenkins. Try Limo or Baja Oklahoma for starters. Jenkins professionally follows golf but has written on football in Semi Tough and gold in Dead Solid Perfect. Here is a line from the latter

    I always figured hanging around a country club golf course in an alpaca sweater was a better deal than working under the grease rack on some guy's chevy…..

    And while I amat it, nothning beats a Kindle Paper White for being able to carry around one hundred books at a time weighing only a few ounces,just the thing for the Qantas ride to Australia. 

     

     

  • Professor Elam

    Tuesday Nov 11 2014

    Michael Lewis forte is books about Wall Street beginning with Liars Poker. 

    Here is a list of his reading recommendations.  I have read

    Reminiscences of a Stock Operator

    Huckeberry Finn

    The Right Stuff

    all on the list. If someone asked, what books would you have them read?  What has influenced you. 

    Here is the Bill Gates list.

    I will be presenting my list in a week or two. I look forward to hearing about yours. 

     

  • Professor Elam

    Tuesday Nov 11 2014

    The IIA has announced a career map for aspiring future internal auditors. One needs to ber a  member of the IIA to participate. Student membership is only $35 a year. That entitles you to attend monthly meetings, on line webinars, and participate in projects like the career map. 

    I suggest you seriously consider this option.

  • Professor Elam

    Monday Nov 10 2014

    I posted an article on bowling recentlynoting it should have a potentially wider appeal than golf. 

    Now I see a retro themed alley will open in a former alley next to Goodwill at 281 and Bitters.

    Clearly they are going for a different look to attract a different bowler. I would agree but I don't see how featuring a 5 pound 'bemoth burher' changes the bowling image. This sounds like the old bowler to me.