Accounting & Investing Info for San Antonio A & M
Sat Oct 8, 2011
Here is a short article on filling the cabins on a cruise lines.
Indeed once the ship has enough passengers to cover the fixed costs, the remaining cabins can be rented as long as there is a contribution above the variable cost, ie, how much to feed the passengers. All the other costs of entertainment and just cruising the ship are fixed costs. We will study this later in ACCT 3301.
Thursday Oct 6, 2011
Contact our Career Service dept via Bennet Grey
Bennett.Grey@tamusa.tamus.edu
This is an excellent opportunity for Texas A&M students to:
Experience first-hand the newest technology in emergency power management and in solar power generation
Learn how your current field of study applies to future applications at the nation’s largest municipally owned utility
Have an opportunity to network with managers and employees in your chosen field of study
The Program will begin at 8:00 AM at the CPS Energy Main Office Building located at 145 Navarro in downtown San Antonio (free parking will be provided) and will conclude no later than 4:00 PM.
The day will include a tour of our Emergency Management Center (EMC) and a visit to a Solar Farm right here in San Antonio.
For more information, please contact your Career Services Staff. For more information about CPS Energy and the CPS Energy Corporate Intern Program, go to http://www.cpsenergy.com.
Monday Oct 3, 2011
Seems the five big banks here have 96% of the off exchange derivative exposure.
This raises the question of who is the counter party and can they perform? If the Eurozone goes kaput, does the derivative risk do likewise? Another good question. I suspect the banks cannot tell you their real risk exposure. I even wonder if, with all this off exchange trading, the derivatives are rather like the sub prime mortgage bonds, does any one know the real owner?
Accounting students and professors are woefully under informed about derivatives, take a read and broaden your exposure to this important topic.
Monday Oct 3, 2011
I used American Airlines AMR as an example of a weak balance sheet in class. I the ACCT 3301 TR class someone asked who would lend them money, good question! Surprisingly the demand for airline bonds is still strong. Selling bonds to finance the aircraft is about the same as signing the long term lease. The collateral is the airplane.
Still this is a good discussion of AMR liquidity and whether AMR could would should take bankruptcy.
Monday Oct 3, 2011
October is the worst month of the year for stocks. 1929, 1987, and 2008 all experienced October meltdowns. The 1974 low was delayed until December.
Investors have fled the market no doubt fearing the worst. Is there worse to come? I have been commenting in class that this will be an interesting semester to study accounting, and it has certainly shaped up that way. Gee BRK.A and BRK.B both at book value and no one but Chairman
Buffet is interested. I am a bit conflicted. My guess is that we are due one more rally before an October low.Come to think, it would be interesting to construct a chart of BRK at its current versus book value price. But Mr. Market could trick everyone now that so many are out of the market.
Note that all market lows happen amidst gloomy news. This time it is the sovereign debt crisis in Europe as well as banking and mortgage and state debt woes here.
Tues Sept 27, 2011
We are studying merchandising companies in ACCT 3301. I mentioned that the Gross Margin percentage is closely watched by such companies. To see what I mean in class I will demonstrate the difference among different firms.
But why wait, you can log into finance.yahoo.com and compare for your self.
How does BIG, DLTR, FDO compare one to the other, don't know those symbols, they are all successful dollar stores, Big Lots, Dollar Tree and Family Dollar.
Now try SHLD, DDDS, JCP, or BBBY. That would be Sears, Dillards, JC Penny and Bed Bath and Beyond.
The discounters have a higher gross margin percentage. They have higher mark ups and distinctly lower overhead. If you compare the GM % of a like group you are performing horizontal analysis, which firm makes the most money on each sale? Understanding how to use accounting information will make you a more successful investor.
Tuesday Sept 27, 2011
Monday morning Warren Buffet announced he would be buying back shares of Berkshire Hathaway.
The market reacted by jumping the shares about ten percent. And sure enough the analyst above is right, at 98K BRK.A is trading for book value. Please read the analysis. As he says, Buffet does not own options, he owns the stock. Buying shares means there will be fewer shares in the market place, raising the earnings per share. Presumably that will boost the stock price as earnings increase. Note the overall market rallied nicely, see our companion blog http://www.themarketperspective.com.
Tuesday Sept 27, 2011
Eastman Kodak used to be one of the Dow's Bluest Chips-no more. Monday EK shed a quarter of its diminishing stock value. Its bonds trade for 47 cents on the dollar.
We are studying financial statements in class. You have heard me say that the cash flow statement is the most important of the bunch. Take a look at EK's Cash Flow Statement. As the saying goes, what's wrong with this picture. EK is not generating cash from any of its sources. The bonds have sold off because investors fear EK will run out of cash and not be able to re-finance its debt or pay creditors.
EK made its money in the film business. Think about it, you took say 24 exposures and had to pay to develop all of them whether you wanted each one or not. What a business. Digital changed all that. So EK bet on kiosks to print photos. But then cell phones became cameras and people stored images digitally. Gee these guys can't get a break. Now EK is trying to get into the printer business. But look at the lead HP and Epson have in that field.
Catch up is a tough game.
Friday Sept 23, 2011
No One Rings a Bell at the Bottom
The FED hopes the lower rates will boost investment and spending and provide a shot of adrenaline to the beleaguered housing sector.
Wall Street Journal, 9/22/11
The FED has been lowering rates for three years to no avail, and, gee, the market seems to have beaten Ben Bernanke to the punch. Let’s take a look at why we may be much closer to a bottom for risk assets (stocks) than most analysts think.
Ben we’ve been here before. Market opportunities occur at extremes of valuation, which is derived from the extreme social mood of the participants. At the worst of the Fall, 2008 financial crisis, thirty-year bond yields dipped to 2.6%. Today, they are at 2.78%, pretty darned close to that fifty-year extreme. Ten-year note yields are already lower than in 2008! Then the low was just over 2%, yesterday the Ten Year closed at 1.715%.
And this is a replay of the same thing Ben did last summer. QE II was announced/began on August 10, 2011. Bond yields immediately bottomed and bond prices fell for five months. Stocks rallied.
In 1986 I spent a day at the Merrill Lynch trading room in New York City. The bond trader had a fancy computer display for prices and yields. It even allowed the placing of trend lines and such. Today anyone with a discount brokerage account has that. And so literally everyone looks at the same charts. This leads to even more ‘herd following, group think.’ The blogs are awash last night with ‘downside breakdown’ types of comments. And so ‘the crowd’ focuses on even lower prices. But Thursday the New York Stock Exchange had 946 new lows, topping the August 8, 2011 panic low of 943! Or as Joe Granville remarked on Financial News Network after the 1987 crash, ‘when it takes a foot and a half in the newspaper to print the new lows, that’s a low!’
Here is a specific example of what I mean. In the last hour of trading the QQQ, an Exchange Traded Fund which mimics the NASD Composite 100, had a low of 53 for the day. It broke that low and traded to $52.75. Bingo, that was the low. It then marched up to $53.80 in the last half hour. Everyone thinking it was going to new lows was fooled by the false break lower. As we said, no one rings a bell at the bottom. So, we have an extreme in stock market new lows and an extreme in the flight to safety, bond yields, anything else?
Ah yes, there is that most emotional of all indicators, the price of oil. Indeed it dropped 5% Thursday. But at its low of the day , $79.66, it is still above the recent panic intraday low set August 9 at $75.71. Patterson PTEN fell out of bed, breaking its $20 ‘support level.’ That has no doubt turned all bearish and it’s a quick two bucks to the next chart level at $16. We have been warning that the top at $34=35 for PTEN would bring much lower prices, and so PTEN has lost half its value already. Not a good thing for the Permian Basin, but probably over done on a short term basis.
Investors have adopted a rear view mirror strategy. Fearful of being caught in another Fall, 2008 meltdown, all those ‘long term investors’ have fled risk assets like stocks and oil for the ‘safety’ of long government bonds. The markets are some 4,500 DOW points higher now than in March, 2009. But the bond market has dialed in the same degree of fear as when the DOW was 6,666. So, the market is long fear. Funny thing, the US markets are up a bit this Friday morning in pre-opening trading.
When everyone is certain prices must fall further, they usually don’t. Bear markets feature stunning rallies from oversold extremes. Nine Hundred new lows sounds extreme to me. The low may have been yesterday or it may be next week, but no one rings a bell
Wednesday Sept 21, 2011
The world of digital photography and video has allowed all sorts of new communication. The Orient Express is a hotel chain, who knew? And they have created a travelogue of a fictional family galavanting all over the world, living the Town and Country lifestyle, impossibly thin but always seen eating, clothes impeccably presented, never crumpled after retrieval from a crushed duffel, yep this is the ticket!
I took me a while to figure out what they were promoting, but it is lifestyle and the hotel chain.
Heck If I thought I would look that thin in one of their videos, I'd check into one of their expensive hotels myself!
Anyway, the quality of the video is impressive, just goes to show you what a bit of creativity can do. Still no recession in First Class on the Orient Express….
Professor Elam 