Professor Elam

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Professor Elam

Google to split Two for One

April 1, 2014

Tuesday April 1 2014

Google will split its common shares two for one. It is also issuing a new Class B voting to give the two founders more control. We are studying equity in ACCT 3312 as well as the toher classes.

Please read this article, it comes at a timely moment in our studies. As we discussed last night and one student observed, Buiffet has not split BRK and that makes for less volatility. GOOG has followed the same pattern. Will more investors buy in at the new low bargain price of $500 or so?

GOOG stock fell about ten percent last week.
Professor Elam

What the Market is Rigged, I am Shocked

March 31, 2014

Monday March 31 2014

An alert student spotted this article on high speed trading featured on sixty minutes last night.

Essentially high speed computers anticipate a buy, jump in with an order front running your order, and then sell you the stock back at a higher price. The higher price is not a dollar or two but fractions of a dollar, but in massive quantity, it adds up ato a tidy sum. Michael Lewis has written several books on the markets including Liars Poker about bond trading at Salomon Brothers.

Years ago outsiders charged the New York Stock Exchange was rigged by the market making specialists who set prices and were allowed to see the buy and sell orders. The idea was that the specialist dealing one stock maintained an orderly market.

In 1987 big traders were using arbitrage and portfolio insurance. This was later blamed as one of the causes of the crash. Actually I vividly remember the day. The market was down 200 points a huge move at the time that morning. By Noon it had come back and I guessed would close down 50 points for the day. And then the two idiots that ran the NASD and NYSE announced they might close the exchange. Needless to say then everyone wanted out and the real crash began in earnest closing down 508 plus points in one day.
Professor Elam
Job Posting, Reply to Me

March 31, 2014
Monday March 31, 2014

E mail Prof Elam at dennis.elam@tamusa.tamus.edu if interested

Immediate temporary to hire Compliance Analyst opportunity for recent/ May 2014 college graduates in SAN ANTONIO, TX with a Fortune 500 bank. Our client prefers degrees in Accounting, Finance, Math, Physics, Engineering, Economics; or Juris Doctorate. Ideal candidates should also have a GPA of 3.0 or higher and have played any team sport. If you or someone you know is interested in learning more about the opportunity, please call me TODAY at 210-696-8300. This opportunity will end April 21, 2014.

Compliance Analyst
- Complete investigations of customer accounts to determine if cash, wire, check and other activity was suspicious or consistent with money laundering.
- Knowledgeable of a Suspicious Activity Report (SAR).
- Identify examples of transactions and date range activity.
- Responsible for managing a high work volume and meeting daily individual goals as well as weekly team goals.
Communicate with customers as part of investigation or to clarify activity when needed
Professor Elam

Get Your Wash Board Abs and CPA Designation the Easy Way

March 31, 2014

Monday March 31 2014

I ran across this ad for The Flex Belt (used by 2 million people around the world it says). The idea is that you wear this gizmo around your middle and it uses, yes boys and girls.

EMS (try that one on your b biology professor)

Electronic Muscle Stimulation combinign 10 programs with 150 levels of intensity to

yes, activate your muscles !!!!! Testimontials by users state that the Flex Belt brings serious muscle contractions. And better yet, the FDA approves (huh?) of EMS.

This is a typical tv or internet ad promsing real physical improvement without the physical requirement of really doing anything, physical that is. I suspect the only thing contracting here is your bank account.

The ad world is chock a block full of promises of the easy way to success. Where am I going with this?

A student recently announced to me that he had found another CPA review system that touted 85% sucess rate, so clearly that was the one to use. In the modern world of instant information there is no guaranteed success rate with anything. As Arnold S. states, there is ony one way to a great looking physique, and that is through many hours at the gym.

And there is only one successful route to conquering the CPA exam. and that is by answering and mastering hundreds and hundreds of questions in a timed environment, which is what you have to do to pass the exam.

Or hey, maybe not, how about we market a sort of subliminal CD you can listen to in your car, I will narrate learning objectives and after listening to them over and over again, the listerner will

magically embrace all those concepts. Yes thousands of aspiring CPA candidates are now embracing

ECS Electronic Cortal Stimulation

For many years (Roger Sperry won the Nobel Prize for this in 1981 and who would argue with that by golly!) scientists have embraced the left brain, systematic, logic,language and critical thinking versus right brain, creative and expressive concepts.

Our subliminal DVD using ECS appeals to your left brain side which will need to be engaged during the actual CPA exam.

ECS Cortal Foundation is now seeking a295 CPA Candidates to be the leaders in this ground breaking or shall we say, mental breakthrough technology. If you are lucky enough to be early enough and be selected for this exclusive offer, you will possibly be recognized for breaking new educational ground.

To apply send your application fee of $ 295 to…….
Professor Elam

An Update on Keynes, the National Money Hole

March 31, 2014

Monday March 31 2014

Bernanke famously promsied to drop money from helicoptors if that was needed.

Here is an update on the National Money Hole.
Professor Elam

Facebook Goes Shopping

March 30, 2014

Weekend

Facebook Makes a Virtual Bet

Earth to Tech Investors, Facebook FB is now worth half as much at Berkshire Hathaway BRK. It that a good bet?

FB bought Instagram for $7156M, users are up from 30 m to 200 M.

FB bought What's App for $19 B. Whats app allows one to avoid paying for SMS (short messaging service, I had to look that up). If your life is texging, I guess this is a real break through.

FB bought Oculus, a 3D virtual reality company, even though it has yet to bring a product to market.

MY guess is that FB topped and is now headed back to fourth wave support at 45. At least Zuckerberg is using stock rather than all cash for some of these deals.

Elon Musk has been exhibiting a similar Midas Touch at Tesla.

The price is up 6X in one year. Now he is shopping cities for a battery plant, to be built which he says will be a battery breakthrough. Now the cars are limited to say Dallas to Waco on one charge, not so great if you are trying to get to Austin.

Netscape, Word Perfect, Lotus 1 2 3, all gone, My Space, a bad bet compared to Facebook, social mood is full tilt positive on these two developing tech companies.
Professor Elam

TAMUSA Faculty and Students Visit Valero

March 29, 2014

Posted Weekend March 29 2014

Friday March 28 Faculty and Students visited Valero headquarters in San Antonio.VLO is just east of UTSA on tthe south side of North 1604. Thanks for TAMUSA student Marianna Otero for helping make this happen.

Our tour guide was Katharine Farmer. Katharine came to VLO from UTSA Career Services where she worled with one of our COB Advisors, Bruce Howard. That's Katharine on the left nand yours truly on the right.

The tour began with a video all about the company. VLO is the largest indpendent refiner in the USA. It also operates multiple ethanol plants as well as a wind farm in the Panhandle. VLO is a downstream operator. It does not produce oil and gas. Rather it begins with pipelines leading to its refineries. And it refines adn then markets fuels. It recently spun off its retail arm into a separate company CST for Convenience Store Retail.

The company has quite a nice cafeteria with both inside and otuside seating. Outside is a well manicured ground including a bubbling pool. Katharine indicated some employees have held their weddings there it is such a scenic spot. The company also provides a workout facility with all sort of exercise machines and weights. Jogging trails are outside.

Left to right Marianna Otero, David Ullom, James Hackard, Dennis Elam, Leonard Love, Beatrice Therwhanger, Gil Barrera, Floy Waggoner, Eric Watkins

VLO maintains a large trading room. The purpose is to hedge their cost of oil. A refiner does not necessarily make money whether oil is $12 or $100. Rather it is the catalytic cracking spread, the difference between the price of crude oil to be refined and the wholesale price of the refined product. No doubt it helps to be in the retail business where VLO captures the retail mark up on gas as well, oh at all 7,300 stations CST operates.

Floy Waggoner poses outside one of the three main buildings around VLO Circle.
Professor Elam

RAX Caught in Price Competition

March 27, 2014

Thursday March 27, 2014

Amazon and Google continue to cut Cloud Prices.

Each bar represents one month of trading for RAX. Once it hit 80, all the good news was in the market. now the market is concerned bout th cost cutting from a behemoth like GOOG. With all their revenue they can cut below cost just to steal business from RAX. At bottom the momentum indicator MACD has yet to bottom and turn up. Clearly RAX needs to hold $30, or the price is heade way down. This bears watching.
Professor Elam

Anyone for Candy Crush?

March 26, 2014

Wednesday March 26 2014

The popular video game maker King Digital, makers of Candy Crush, came public today. HEre is the

F 1 or SEC Registration Statement. Please take a look at what the SEC requires under the Act of 1933.

Stocks first come public via an IPO or Initial Public Offering. King Digital came public today at $22.50 per share. So how is it doing?

King Digital

Each bar represents five minutes of trading. Which is to say it never really traded at 22.50 and sold off rom the get go, just like FB when it came public. But King is a game maker and FB well gee, we are told has much more potential, as everyone is on it. So we are told, perhaps the idea is that with that many players, surely there is a way to make money from it, sort of like the idea of selling to China with one billion customers.

I have never played Candy Crush but I did just read about it and it strikes me like Farmville, so what, but let's take a look at ZYNGA.

As you can see, expectations were a bit on the high side for that one as well. The drop from 16 to 2 was a drop of 87%. That is a pretty poor estimate on the part of the underwriter.

Ideally the underwriter prices the stock such that it goes out at the IPO price and then rises a bit the next week. Then the buyer and seller can be happy.

More to follow, hope this finds an appreciative audience.
Professor Elam

Best Guess of the Underwriters

March 26, 2014

Wednesday March 26, 2014

A stock becomes public by having an initial public offering or IPO. See F 1 for King Digital in previous post.

The underwriter, a firm like Merrill or Goldman or J P Morgan, buys the stock from the issuer and sells it to the public. The underwriter makes a profit on the difference plus feesh charged. It is incumbent on the underwriter to guess the 'right price' for the new issue. As we saw with King Digital, the underwriter guessed incorrectly.

ZYNGA

Not long ago, playing Farmville was all the rage. Zynga was the creator of Farmville. As you can see the underwriters initially guessed corectly, the stock moved from 9 to 16. Sure the buyers were happy but what about ZYNG, they were unhappy. The firm saw those dollars as dollars they should hvae had in the initial price. But such remorse was short lived. ZYNGA then collapsed 87% from its high to $2.

I mentioned that we were at an interesting juncture for stock prices. HEre is what I mean.

S & P

The S & P 500 are the five hundred largest stocks. Their collective movement is Representative of the market as a whole. As you can see prices are at a new high for the last 15 years. NOtice the momentum indicator at bottom, the MACD is at a new high.

This might be a good time to read my other blog

http://www.themarketperspective.com

Now why is it that one day ZYNGA is worth $16 and then the same company weks later is only worth $2.

While the finance books trot out all sorts of random walk and valuation explanations, the real reason I have concluded after years of resaerch is

social mood.

This link to the Socionomics Page outlines the basics of social mood. Happy people buy stocks and listen to upbeat music in an expansive mood. Unhappy people sell stocks and listen to downbeat music. Happy people wear bright colors, unhappy people express their mood with drab colors.

Think I am kidding? Have you seen any photos of any happy people in the Ukraine, Syria, or Venezuela?

For that matter have you ever seen a photo of any ordinary person in Russia who appears even remotely happy, I know I have not.

And that is the reason the population of Russia is going down. Yes, the birth rate has dropped below the 2.1 children per couple needed to maintain a constant population. Russia is paying moms to have kids, but it is not working. The problem rather obviously, at least from here, is that depressed people don't procreate, they don't see bringing children into their world.

At any rate, read the section on socinomics and we will be back with more tomorrow.

So find any of this interesting?

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