Professor Elam

Accounting & Investing Info for San Antonio A & M

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  • Professor Elam

    The Pension Crisis

    Sat Oct 23 2010

    CA cannot pay its pension obligations.   This is a link to Mish's blog but there are lots of other examples that he cites.  Pittsburgh for example, is toast, they just will not admit it. 

    Chicago has already sold its parking meter revenue to the Texas State Teacher Retirement Fund. As Mish says doing such things without addressing the underlying problem is lunacy. We will be studying liabilities in Intermed Accounting. I suggest you continue such outside reading to get a grasp of just how widespread this problem is. 

  • Professor Elam

    Crystal Cathedral, Bankrupt

    Saturday Oct 23 2010

    Picture 11 We are studying Cost Volume Profit topics in Managerial Accounting. The higher the fixed cost the higher the break even point. Here is a case in point.

    Robert Schuller's elaborate Cathedral became the signature look for what has emerged as the 'mega church.'  But as the article says, the Christmas pageant was more elaborate than a KISS concert. Clearly the group ignored budgets, controls, and warning signs that something was wrong. The recession of 2009 saw contributions plummet, this should have been clear in coming, and of course they were in no shape to cut massive fixed expenses. Please read the article to learn just how high fixed expenses became. 

    The Summit Sports Arena in Houston is today's Lakewood Church. What will happen to the $36M Cathedral, I don't know but I expect that there is just too much fixed cost here. This should have been paid for when it was built, not after, on, shall we say, a hope and a prayer. 

  • Professor Elam

    Fraudclosure

    Wed Oct 20 2010

    This professor who wrote the Best Way to Rob a Bank is to Own One explains the lack of oversight of bank lending that allowed many to profit from putting non qualified borrowers into homes they cannot afford. 

    Frankly I suspect that the government will have to invent some sort of rescue agency. The banks cannot absorb all the write downs necessary, so instead of debiting R'E Loss on the bank balance sheet I suspect we will bet a credit to the Mortgage Loan and a debit to Home Safety Net FDIC or something. 

  • Professor Elam

    Everything is Bigger in Texas

    Tuesday Oct 19 2010

    Picture 17 In the 1962 I movie Hatari, John Wayn perched on a seat on the bumper of a Land Rover, he was roping wild game in Africa.   Now fast forward 20 years 

    Yes this Critter Gitter really exists and yes it is built in where else, Texas. Now let me be clear that I have zero zip nada interest in hunting other than with my Olympus DSLR. but, always on the look for the outrageous, thinking outside the box what problem does this address product, we present this one. And yes as the articles says there is a market for this vehicle.  Actually as one post observed it is not nearly as expensive as most large powerboats and gee, certainly handy out on the ranch. I am wondering what fills the tires which in watching the tires  squash the prickly pear and mesquite in the video,  are apparently impervious to cactus and mesquite thorns. Frankly the thing looks rather top heavy to me, get a dozen close friends hooting and hollering on top, turn a bit too sharp and one could scatter guests all over an acre or so, at least that would be my guess. 

    Sign up now at $340K a copy, it's just the thing to stand out from the usual Hummer or Polaris when we go photographing antelope and such…. all aboard now….. 

  • Professor Elam

    Use ALEKS to Jump Start your Classroom Success

    Monday Oct 18, 2010

    ALEKS is a self paced learning system. We have at least one student here at Tx A & M San Antonio that used ALEKS over the Christmas break to improve his accounting skills. I believe that many of you would benefit from Essential Math Skills for Business which is located under Higher Education: Business. This is a fine review of both math and graphic concepts. The best part is that all of these classes are available on line for just $20 a month. 

     

    I will be showing you around the site in class this week. I think quite frankly that many of you have been short changed by the education system. The system is far too eager to spoon feed answers to simulated exams and then claim its own success, never mind your success. At any rate that is why McGraw Hill created ALEKS. Click on the link above and take a look. 

  • Professor Elam

    Big Mac Index

    Monday Oct 18, 2010

    Picture 16 The Big Mac Index attempts to show overvalued currencies by calculating the price of a Big Mac in various currencies. The ones at top are over valued. Sure enough the Euro is selling off this morning. 

  • Professor Elam

    Thoughts on College Success and a Practical Lesson

    Saturday Oct 16, 2010

    I have begun posting my thoughts on the markets in the companion blog, 

    the link is at the top of this blog, just click to go there. No doubt most of you are just now learning about markets. Frankly such analysis is not studied at colleges and universities, most professors prefer fundamental, read near useless, research. But I predict the next two years will bring startling consequences to your life. Your assumptions of that assured job after graduation will certainly be challenged. I suspect we will see an accelerated trend towards employer testing of new hires, for the very few that are hired. This is the reason for my suggesting that you focus on attaining a certification now, and have it in hand by graduation. 

    I realize that many of you are disappointed in your scores thus far. Frankly most of that is not your fault, you are a product of a testing system that has handily provided test answers or near answers since you were in the ninth grade. And so it is understandable that most believe they do not need to read a textbook as you never have, and after all, it got you this far. 

    My efforts top put more on line via the electronic tablet were not in my opinion, of a high enough level of assistance to merit posting. I am still casting about for a better video platform. However one thing was clear to me while watching the graduate students demonstrate problems in cost class last week. 

    It is absolutely necessary to have read and attempted the problems before coming to class. Otherwise you are walking into the movie thirty minutes into the plot, you have no idea what is going on. Success requires reading the chapter for content, outlining the learning objectives, watching any available power points, attempting the multiple choice quizzes on line and in the text, and then the homework. then come watch me try it. So far only about 15% of each class is using this method, and the grades reflect it. 

    Now for a practical application of cost managerial, financial accounting, and socionomics. 

    Now, another thing I hope you learn from my class, is to observe what is going on . If you read the markets blog I make a strong case that the financial markets are topping now. This is happening amid a new found era of better feelings, Now let's look at the newspaper. 

    Chris Pappas of Pappas Brothers restaurant fame has struggled with LUB since buying it in 2001, it was a near bankrupt then. This past year 24 stores were closed. Now Chris announces that after 2.5 years of negative sales, Luby's has stabilized. No Chris, what happened is that LUB is experiencing the top of the Wave 2 rebound from the March 9, 2009 stock market low. People now feel confident enough about the future to spend ten bucks for lunch. The only winners in the lunch game have been the one dollar deals at MCD. 

    Picture 13 So what to do, well, now the Brothers have purchased Fuddruckers, the guild your own burger chain which started right here behind the office of San Antonio CPAs as a matter of fact. While it is one of the ten largest casual fast food chains (gee now what category was that?) it too was or is in bankruptcy but available for a mere $63M. 

    Earth to Chris, hmm, what's the fat content on that plate, cheeseburger, giant french fries, not a Michelle Obama approved lunch. Just today in the same paper is an article that obesity is causing 17% of all medical problems. Now it is true that in downturns people are less interested in physical fitness, they are also less interested in $10 lunches. 

    Warren Buffet never likes turnarounds. Luby's has doubled down after one near bankrupt to try the same thing again but at the top of a stock market recovery, a poor timing decision indeed. 

    Picture 15

    It is easy to see Chris thought process here. Even a year after the stock market lows of March 2009. LUB was still scraping bottom near 3.25, yikes. Now the summer rally has lifted all boats and stocks, but LUB failed to register a new high for the year, even though the stock market did. This is a classic negative confirmation that the market does not like what it sees. It has not rallied the entire summer but gone sideways as the overall market did rally. For comparison I put McDonalds MCD at top, see how it went to a new high, see how LUB did not, this is what we mean by a negative divergence, investors refuse to bid LUB higher. We suspect LUB will see 3.25 before it sees $6.  LUB trades  at .88 of book value and is still losing money. Good luck guys. 

  • Professor Elam

    Wanna Bet?

    Thur Oct 14 2010

    Well of course you do, that is why we have Atlantic City and some thirty plus states the lottery business, a horse track in San Antonio, Wall Street, but I 

    Intrade is a national site that lets you bet on the outcome of events. In this political season it is particularly interesting. Click and take a look. 

    Speaking of politics, Real Clear Politics has interactive maps on the House Senate and Governor races. Less than three weeks and counting…..

  • Professor Elam

    News in Review – Business Week

    Wed Oct 13 2010

    Currencies

    The high Swiss Franc means a meal at MCD in Switzerland is now $15.50 with no refills!  I doubt the Europeans will care fo that continuing. The French are protesting the hike in the retirement age from 60 to 62. Germany suggested that Greece could sell a few islands, guess not, an idea for one island resort employing 50,000 fell through. The Greek bureaucracy is such that no one knows who owns what.

     

    Dot.coms Again

    We all recall that the dot.com for sale on the net idea did not work, but wait, what about

    diaper.com and soap.com. Seems they are succeeding with SKUs Stock Keeping Units that are also for sale on the site. Check out the site, this started in a garage and now has big warehouses.

    Toyota  Tundra

    Well only 79,385 TUndras were sold in 2009 Nissan Titans dropped to 19,042. This is a far cry from Toyota's original goal of 325, 000, the factory capacity here in San Antonio. What went wrong?

    Well it tuns out Chevy Ford Dodge guys own an RV, a shotgunj and a riding mower. Tundra guys ride bicycles and read Runners World and probably like quiche. GM sold 825,000    Ford sold 724,478 and even Dodge 339,448.

    Good thing Toyota brought the Tacoma here.  I think the lesson is that one should not stray from the original idea, Toyota was all about economy cars, that can mean an economy pickup but beyond that is a stretch.

    Meredith Whitney

    In the same vein, Mert was the darling of Wall sT in 2007 predicting a bank crisis. And so she left Oppneheimer and started her own firm. This of course  like the Tundra pickup is a completely different business, managing and forecasting. So far about 2/3 of her picks have fared worse than market indexes. Again, stick wtih what you know.

  • Professor Elam

    Low Budget Movies

    Tuesday Oct 12 2010

     

    Easy Rider We are discussing cost volume profit and break even in ACCT 3314. I mentioned that Easy Rider started the modern low budget movie trend. IMDB   suggests Easy cost $400,000 and grossed $60 M, back when ticket prices were about 2 bucks.

    The movie got poor initial reviews but then quickly resonated wtih the times- economic stagnation, a sideways stock market, America reeling from scenes of the TET Offensive (we won the battle and lost the war, those battles  became the basis of the movie Platoon). The movie was a true counter culture hit and got Jack Nicholson and Dennis Hopper going in their careers. Hopper ran afoul of drugs in real lilfe but blossomed later one. Nicholson became a mega star. Peter Fonda was not so lucky. He squandered the earnings of Rider on trying to do it again, his career seemingly ending with a one hit wonder.

    Other examples of this genre are Blair Witch Project

    Roger n Me which got Michael Moore going, and John Carpenter's Hallowwen series which kicked off Jamie Lee Curtiss career. roger Corman was a pioneer in the genre and responsbile for giving many young actors a start.

     

    Fistful of Dollars While on the topic the Spaghetti Westerns were initially done on the cheap, Eastwood famously receiving only about $20,000 for his first role as the Man with No Name in A fistful of Dollars. Again this movie resonated with the time as America became more embroiled in Viet Nam. People became more introspective and interested in themsevles as opposed to the group. That was specifically what the Man with No Name came to symbolize. He was the anaonymous figure looking out for

    himself amidst a violent landscape that rewarded the violently successful. This was, from a socionomic standpoint, a great metaphor for what was about to happen to the United States.  While pepople were dying in Viet Nam for questionable reasons, the anit hero overcame his foes and got rich in the process, about as far from John Wayne as one could get.

    We will have more to say as the movie analogy, keeping fixed costs low, is a feature of some of the most financially succesful movies.  Eastwood never forgot this Gran Torino is  a great example of keeping costs low, and the gross high. No  wonder Universal loves this guy, more to come, stay tuned to this site.