Professor Elam

Accounting & Investing Info for San Antonio A & M

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  • Professor Elam

    Microsoft

    Monday March 5, 2011

    Microsoft was once a growth darling of Wall Street. Founder Bill Gates was touted as another college drop out billionaire. But like so many, DEC, WANG, Lotus, Supercalc, it seems to have lost its way. The stock stuck i the mid 20s, lots of cash, little to no debt, but no new products. Apple Soars at 360 but MSFT has no new tablet even though most all other firms do. 

    As the author says Was Gates that important?  Ballmer keeps trying to emulate Apple with rollouts and even retail stores, but to sell what I wonder?

    The lesson here is that innovation is hard to keep going. Has anyone seen a Zune on E Bay lately?

  • Professor Elam

    The Revolving Door

    Sunday March 6, 2011

    I have been posting articles about the Revolving Door in Washington and how it has bought influence for Wall Street. Business Insider has this list both historic and current on how people become professional influence peddlers, or lobbyists as they are known. At the end of the slide show, continue to read

    How Obama Feels About it, while understanding that this is the very group that provided a lot of money for his campaign, now with sagging poll numbers and a public unhappy over bonuses for a group that had to be rescued just two years ago, he bites back, gee can't a guy stay bought once you buy him?

    A few decades back Al Haig had this down to a fine art going from White House Adviser to White House Chief of Staff to  NATO Commander to  to President  for Untied Technologies, a big defense contractor, to being Secretary of State. 

  • Professor Elam

    Coulda’ Shoulda’ Woulda’

    Sunday March 6, 2011

    After a recent presentation at an  SA CPA meeting, one guy remarked that he was not a CPA. I commented that the difference was only four or five correct answers to multiple choice questions. Someone laughed suggesting I sounded like a college professor. Well, as a matter of fact, that is the difference for thousands of people that do not make the grade. 

    Modern mass testing is now virtually all multiple choice questions. Out of necessity, it is hard to 'fairly' grade essays or written answers. And mass testing means candidates expect their grades in short order. 

    I passed the Practice part of the CPA exam then a two day nine hour marathon exam with the minimum grade, back then a 75. One of my friends commented that most people who did pass, made that section with the minimum 75 grade. What's the difference, probably about four or five multiple choice answers, figure that is the case across the four exams and bingo, twenty answers makes or breaks you as a certified professional. 

    For that reason we will be having quizzes before our exams, this is for practice, but it is very serious practice. Never blow off practice, it is meant to simulate the real thing. You can test your readiness both for test taking (reading, timing, filling in the right answer, being on time, etc)

    If you grade exams you will notice that yes there are usually outliers at the top and bottom with very high and very low grades. But the great mass in the middle, a sigma each side of the mean that catches most folks. The difference of even two answers is either side of the A or B or C demarkation. Each answer counts. 

    Many people pass three parts of the four and then have a mental block on whatever number four is for them. As I have said, failure leads to an even greater psychological hurdle, knowing that one indeed can fail the exam. Plan to pass the first time. Plan to succeed, never walk in to an exam to 'see what it is like.' If you are unprepared, it is like

    HARD. 

     

  • Professor Elam

    Matt Taibbi on Wall Street

    Sat March 5, 2011

    http:Why Isn't Wall Street in Jail?

    Good question, Matt Taibbi in the Rolling Stone gives us the answers. Note, now typical Rolling Stone language in the article, be forewarned. 

    Picture 11 But, he is right. The government busts small time drug dealers and worse, users, illegal immigrants but fleece Fannie Mae, take Bear Stearns to the cleaners and need a bailout, no problem. As James Stewart said in Den of Theives, the Lions lay Down with the Lambs, no one watching this flock indeed. 

    See our comments on Bought and Paid For as well as Stickup in the sidebar and previous post. 

     

  • Professor Elam

    Student Evaluations

    Saturday March 5, 2011

    I was reading the student evaluations from last semester, gee are all these people listening to the same guy?

    At any rate, that feedback won't be a lot of help to those folks, hey are gone but that is not the case with those of you in class now. I am seriously interested in your feedback, well constructive feedback, really I am. How would be the best way to collect that, distribute anonymous note cards that you could fill out and put in a box?

    Categories might include

    Connect

    the textbook

    Class, more problems fewer problems more quizzes, more discussion, more guest speakers, I dunno, just a few suggestions

    Assignments – How should this be structured, 

    Class Participation  - More or less, required or optional

    Anyway sound off I am interested in how this should be approached We are at the half way point in the semester there is time to trim the sails and alter course to your liking.

  • Professor Elam

    Bought and Paid For

    Saturday March 5, 2011

    Picture 10 Charlie Gasparino has covered Wall Street for many years. Here is the story of how a the Junior Senator from Illinois wooed Wall Street, got their backing, and despite what you hear, has adopted policies that pay off on a daily basis for his supporters.

    Wall Street is interested in Wall Street, forget what is best for the country. More debt means more debt underwritings, more deals, more commissions, and more information on who is buying what.

    Check out this summary

     

  • Professor Elam

    The Madoff Tapes – Interview with the Vampire

    Saturday March 5, 2011

    Picture 9 Here is one for the Ethics and Criminology Files. Bernie Madoff called a writer for the New York Times Magazine and told

    his story.  It runs about nine pages and is well worth the read. Ulysses had himself tied to the mast of his ship so that he would not be lured onto the rocks surrounding the island where the Sirens sang. So beautiful was their song that many a sailor had met his end trying to reach the. Madoff heard the song, and became a Siren. It is a sad story not only for him but for his older son that committed suicide and for his family that will not speak to him.

    As always if it sounds too good to be true, that is probably the case. When soomeone claims to be making money or is making money, those on the receiving end often fail to ask the hard questions, like, what is the downside?  This is why auditors are supposed to exhibit professional skepticism.

     

  • Professor Elam

    Alice’s Restaurant

    Friday March 4, 2011

    Picture 10 It was all about Alice and the Restaurant and Officer Obie and the VW Microbus. 

    I just realized that while I know most of you do not know this song, you probably don't know the original mini van the official counter culture live in it if you have to vehicle, the VW Bus as it was called.

    Anyway, Arlo burst on the scene in 1967 with 

    Alice's Restaurant. This 'story' rambled for about twenty minutes in song form, too long for radio play. But it caught on  as did his career. Arlo is the son of Woody Guthrie, a folk singer of some note during the 1930s. It is a socionomic moment of note that Arlo had success just as the bear market of 1966-1982 began. His counter culture story about the absurdity of being arrested and ending up on the Group W bench hit a responsive chord as a rebellion against government intrusion in general We are seeing revolt in Wisconsin as I write, and by golly Arlo is back on tour, right at Gruene Hall. Another bear market, another guthrie Song. Click on the hyperlink to read the lyrics and yes those are the actual lyrics to the song. 

    Our point here is that a socionomist would expect counter culture singers like the Guthries to emerge during times of social protest. And so the bear markets of 1930, late 1960s and now in 2011 are seeing a re emergence of his popularity. 

    Interestingly the revolt in Wisconsin is being staged by people supported by the government. The Tea Party takes the opposite stance in wanting less support for that group, and so the battle rages. 

    Groups like this played at funky spots like Austin's Armadillo World Headquarters in the late 1960s and 1970s. San Antonio has some interesting jazz spots but nothing like AWH. 

    By the way, before there was a 1960s counter culture there was the Beat Generation which gave rise to the Beatnik.

    Picture 11 Beatniks tended to hang out in coffee shops way before there was ever a Starbucks but we don't mean the Denny's kind of coffee shop, we mean the laid back with guitar playing beat generation James Dean fans of what passed for counter culture even then. 

    Bob Denver poked fun at this group with his character Ernest Krebbs on the Dobie Gillis Show. Denver later played essentially the same character in Gilligan's Island, where he starred as Gilligan. Denver was never able to shake the long cultivated image of the light weight guy that didn't care in his  real life. 

  • Professor Elam

    Oil Prices

    Friday March 4, 2011

    Triple Digit  Fear and Loathing

    Crude oil is about 27% higher than a year ago, not an alarming gain, History shows a 50% rise (now $120) start to hit corporate earnings while an 80% rise ($150) has historically led to recession.

    Gina Martin Adams, Director of Equity Research Wells Fargo Securities

    Let’s remember that, next time the oil patch is on its back with $35 oil prices ala Fall 2008, we can remind everyone that, after all, a 27% rise is not an alarming gain.

    This sort of nonsense gets trotted out to glibly justify high and soaring prices in such times. The fact is, roller coaster parabolic rises nearly always end badly for oil producers as well as the service industry. Our aim today is to provide some perspective on historic oil prices; where are we now in relation to past tops in price?

    The inflation adjusted oil price chart shows that the 1980 peak of $36 translates to about $110 in today’s dollars. With oil at $102, that alone is a warning sign. The run-up in 2008 went to $140. Given the time  proximity of that run, let’s examine it in detail.

    In February-March, 2008, prices  broke out of their sideways  pattern and jumped above $10.  Price fell back almost immediately to test that break out in April. The fall was from $110 to $100. Price then started up in a nice unbroken channel form $100 in early April to $145 by late June. That is a 40% rise in just three months. And then it was all over.

    Oil fell back to $100 by September. So the fall back lasted the same three months as the price rise on the way up. Price broke the 200 week moving average in October, then at $75, and collapsed to $40 by early December.

    I do not have a record of whether Gina said that the price  drop helped corporate earnings. It certainly did nothing for earnings of oil service companies. Or the tax roles for Andrews local governments for that matter.

    Coffee, corn, soybeans, and lumber are still at the top of their charts.

    So best guess is that the analog of 2008 will repeat. Recall that gold and silver topped in March of 2008. Whether that will reoccur exactly the same way we cannot know.

    What we do know is that right now there are no shortage or supply interruptions in the oil market. The run up is based on sheer fear and speculation that there will be a supply interruption.  The Mid East is expressing the  desire for the same standard of living that the Chinese enjoy. 1200 years of social lag time is being compressed into 2011 as demand for change.

    The most realistic expectation is that whatever happens, more oil will be produced to satisfy the masses. The  yearning for a better standard of living in the Middle East can only be satisfied in the short run with more income, read, more distribution of oil income. 

    Meanwhile back here at the Ellenberger ranch, Barack Obama is surely the Citizen of the Year for West Texas. All hail $100 oil. His policies of denying permits for   onshore and  offshore drilling, clamping down on coal plants, and producing EPA regulations faster than any previous administration have led to even less domestic ability to produce our own oil. No one else has delivered triple digit oil prices for Andrews like Barack.  But this is the administration, like John Kerry, that wanted high gasoline prices, all the better to force and support alternative energy on us. (Has anyone filled up their electric pickup at the wind farm in Stanton, just wondered….)  Four dollar gasoline coupled with double digit unemployment seems a strange brew for a re-election bid to this writer but then I never bought into the global warming argument anyway,  (See photos of cars stalled in snowdrifts on Chicago Lakeshore Drive just weeks ago).

    At this point our best estimate is higher oil and gasoline prices into the summer. Our best analog is to compare energy service industry stock prices now and in 2008. The XES Oil Service Exchange Traded Fund ETF  now sits at $43; it topped in 2008 at $50. That leaves seven bucks on the upside to go. Notably the XES share price topped before the price of oil peaked in 2008. . It may seem redundant to keep covering oil prices  in coming weeks but frankly this is the economy of West Texas . We intend to keep readers updated.