Professor Elam

Accounting & Investing Info for San Antonio A & M

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  • Professor Elam

    Law Firms not TBTF

    Tuesday May 29, 2012

    The legal profession has been idolized in the media for years. Prominent tv shows have featured lawyers, always brilliant of course, as well as movies. The same is true for the series of Grisham novels. 

    Now however ther are law school grads suing their alma maters for not being able to find the big promsied job. And a couple of big law firms have gone belly up. Jenkins and Gilchrist was a prominent Texas law firm. It went under in a disastrous tax shelter service.

    Dewey and Leboeuf LLP has filed for Chapter 11 bankruptcy protection.  Half the partners left the first quarter as cash flow dried up.  This law firm had liabilities in the range of $100-$500 M. One wonders why a law firm would be so deeply in debt. 

    We will study cash flow staements in class this summer. Apparently Dewey failed to do so. 

  • Professor Elam

    Facebook, the Envelope Please, Mark Hulbert Says $13.80

    Memorial Day Weekend

    Mark Hulbert suggests FB is worth $13.80. Looks like he is about right to me..

  • Professor Elam

    Snow White Then and Now, A Socionomic View

    Memorial Day Weekend, 2012

    Screen shot 2012-05-27 at 8.48.19 AMThe original story of Snow White is a fairly gruesome tale. The sentence meted out to the Evil Queen is Pure Medieval, the Old Testament eye for an eye idea. But in the original story, Snow White is a passive character. She is acted upon by the Evil Queen. It takes an accident for the poisoned apple to be dislodged from her throat so that she awakes to her Prince. 

     

     

     

     

    Now fast forward to 2012. Popular entertainment resonates with the prevailing soial mood. And what is the prevailing social mood-revolution and protest. From Western Europe ( no austerity for us) to North Africa nd the mid East (freedom now) to Moscow ( Putin is the Czar Reincarnate) to Cuba, people are unhappy with their lot in life. So in the new version, Snow White and the Huntsman, Snow White becomes an active participant in her own reinvention. This switch from passive tense to active tense reflects the ongoing social mood of the world. The plot line of  the original fairy tale suggests a story that had surely been hundreds of years old when the Brothers Grimm began publishing their story collections in the early 1800s. in the original story the Queen seems to fear no one and does as she please. Snow White is a metaphor for an unlucky population under the rule of an unjust Queen. 

    Not in the modern version. In the movie poster the armor clad sword bearing warrior is in fact Snow White herself, backed up by the Huntsman's warriors. No doubt this also reflects in increasing female Screen shot 2012-05-27 at 8.54.47 AM activism, at multiple levels.  Reflecting the general popularity of sword and sorcery movies the last ten years, this one will likely be a hit, after all, it resonates perfectly with the social mood on march around the world.

     

  • Professor Elam

    Why We Lie

    Weekend May 25, 2012

    A Duke Professor constructs an interesting experiment. The idea is to learn when people we lie, what prompts or encourages such behavior. 

    His conclusion is that a great deal of people  lie just a little, but in total that leads to significant costs. 

    Take a read, pretty interesting. The presence of an obvious cheater causes many to cheat. This was the core of the Dallas Indpendent School District purchasing scandal. Everyone was doing it, why not?

    Meanwhile the John Edwards trial goes on, no question he lied, but the trial is about the mis use of campaign money, not his obvious infidelity. 

  • Professor Elam

    More FB Woes

    Friday May 25, 2012

    In the movie, and real life,  Bugsy, Ben Siegel sells more shares of the Tropicana, the first ever big casino constructed in Las Vegas. One mobster notes that 'we will have to deal with these people, some of them are substantial.'

    Well fast forward seventy years and the Wall Street mobsters are having the same problem with Facebook, too many shares that fell too low too fast. Now who's to blame?  Who exhibited the greater greed?

    The FB insiders that happily sold to the late comers?

    The Underwriters pricing the shares at 33 times ad revenue when Google trades for 5.5 times?

    Underwriters like Knight Capital that are astonished the whole thing is up in smoke?

    Investors ((pigeons?) who are holding the limp FB bag?

  • Professor Elam

    Facebook at 33 times Ad Revenue

    May 23, 2012

    This writer believes Facebook is too big to succeed!  The insiders dumped their stock on the public and got rich. FB was valued at 33 times its advertising revenue. Google by contrast is valued at 5.5 times revenue. So FB was way over priced. 

    We learn fundamentals of valuation by studying accounting. This is a classic case where the early investors buying privately for less than $10 did very well, not so for the late comers. 

     

    This story describes the selective dissemination of information about sagging revenues.

    FB is worth $29 assuming it has revenue growth of 40% a year for the next five years.  Sure that will be easy. 

  • Professor Elam

    Nassim Taleb on JPM

    Monday May 21, 2012

    Nassim Taleeb the author of Black Swans remarks on the recent JPM $2B + loss.

  • Professor Elam

    It’s Earnings that Count

    Thursday May 17, 2012

    Here is a good analysis of Transocean RIG.  

    I looked up It's the Earnings that Count. It is available on Kindle for a reasonable $15. This may be one to add to the reading for Intermediate II.

  • Professor Elam

    JCP – Once Again the Conventional Wisdom Dies Hard

    Wed May 16, 2012

    Ron Johnson the new JC Penny CEO is discovering what it is like to be a retailer without an exclusiv e 20 item line of sought after products. The stock dropped 14.7 % – yesterday. 

    The company had double the loss expected last quarter and is suspending the dividend as it sees ' more restructuring charges.'

    Johnson was supposedly the brains behind Apple's successful retail stores. Those of course were about as different from a typical JCP outlet as a Ferrari is from a Kia Rio. And just last week I read that morale was sinking as the lay offs continued among middles managers at stores. 

    Screen shot 2012-05-16 at 8.32.33 AM

    The idea that somehow Johnson would dupicate the Apple success in a chain that has massive competition with Target, Kohls, Bealls ec, made no sense to me. And JCP has been moving out of malls into stand alone locations. Lots of changes, no real results. 

    And of course this will give the I told you so crowd at JCP plenty of ammunition. Infighting never gets results.