Professor Elam

Accounting & Investing Info for San Antonio A & M

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  • Professor Elam

    Auditor Update

    April 21 2010

    Audit fees zoomed after SARBOX passed, no longer. Now fee competition is back. I was surprised to read this CFO article that a firm was considering switching a second year after the first switch just to see if they could get yet a lower audit fee. So much for client loyalty, now the audit has become a necessary commodity again, like electricity. 

    Accountants got into trouble bidding on audits in the 1990s, soon standards grew lax, and well, you can see what happened. This is also a chance for the second tier firms, like Alex Grant, to get a new foothold. An interesting read, highly recommended. 

  • Professor Elam

    Financial Reform Bill

    Wed april 21 2010

    No one ever titled a bill

    Whoops we really goofed up and should have done this sooner, 

    such legislation is always couched in terms like

    Technical Corrections Act

    Financial Reform Act

    to make it sound like congress is not just covering up their past lack of oversight which of course is exactly what they are doing

    In this case the 1300 page bill is much more in line with the Admin desire to control every aspect of the economy and your life, there is nothing in the bill about FNM or FRE, the two giants that caused much of this, nor is there anything about the involvement of the govt in urging people who could not afford houses to buy them and for the govt to insure that debt, no accountability as usual

    But here is a summary of the bill

  • Professor Elam

    Money Never Sleeps

    Tuesday April 20 2010

    You may have heard that Wall St II Money Never Sleeps is now in delayed release until Sept 24. 

    Perhaps the plot of Wall St II was not deemed audacious enough to keep the attention of the audience, given what is playing out in real life with Goldman, consider, let's create this plot for a fictional Wall St Firm….

    firm has advisers to every president

    firm lies to clients and bets against them

    firm gives a million dollars  in political donations to president to be

    firm's shenanigans cause near financial ruin

    firm runs to white house and demands to be rescued

    firm is rescued and showered with money not to mention FDIC insurance

    firm uses money to run market up, record bonuses from trading with OPM other peoples' money, having obtained the money on the theory that otherwise the firm would go broke

    then president in a fit of theatrical consternation, is stunned to learn that there is 'gambling in this place', ( a famous line from the movie Casablanca for our younger readers)  having pocketed the political donations already, wink, nod to Blankenfein

    president files a lawsuit, big annoucement on tv

    even the president's own SEC is dubious, 3-2 vote to file suit

    firm denies wrongdoing

    market rallies

    I mean satirizing reality is getting tougher and tougher…who would believe fiction like this?


  • Professor Elam

    First Let’s repeal the 16th Amendment

    Tuesday April 20 2010

    The 16th Amendment allowed the income tax to be passed. The fact that the Constitution had to be amended to allow this is all you really need to know, it was a bad idea in 1776, it is a bad idea now. 

    George Will like Walter Williams points out that we do not need both an income and a Value Added Tax VAT. We need to repeal the income tax first. That of course will not happen. The income tax gives politicians too much power in the ability to dispense favors to those that shower them with campaign money. We will certainly become a socialized Europe of we have both the VAT and the income tax. 

  • Professor Elam

    Bond Movie on Hold, MGM Toast?

    Tuesday April 20, 2010

    MGM teeters on bankruptcy. This is the studio that where the Bond movies, one of the most successful long running movie franchises in history, have been filmed. But the producers long to move to Fox or Sony, so the next sequel has been delayed. 

    Picture 1  I don't care for the way the producers have tried to make Bond an action hero, he is not and the last film as a disaster in my opinion, as well as its awkward title. As usual, go back and read the some of the original Fleming books. The first two films, Dr. No and From Russia with Love were pretty close to the original idea. Then the producers went for gadgets and locations rather than characters and plot. 

    But our story here, bankruptcy casts a wide net, even netting Bond. 

  • Professor Elam

    994,795 Reasons Nothing Happens to Goldman

    Tuesday April 20, 2010

    This list shows that Goldman PAC contributed $994,795 to the Obama campaign. Also note the usual suspects of Morgan and CIti on the list. Here is the big picture. Wall Street helped get Barack into office. He is surrounded by former Goldman employees as advisors. He wants a financial regulation bill passed to make it appear he is tough on Wall Street. In fact the bill puts enforcement in the hands of the FED, a very bad idea. Goldman was allowed to become and FDIC insured bank during the financial crisis, it still is. Goldman was able to use TARP money to run the market up, reap big profits, pay bonuses, the same ones the public is angry about. 

    So the lawsuit, passed 3-2 at the SEC, makes it appear for campaign purposes that the Administration is 'going after' Wall Street. Goldman claims its innocence, it has hired A former Clinton lawyer used during the impeachment threats. After the fall elections, Goldman signs a consent decree neither admitting nor denying guilt and pays a fine. The fine is peanuts compared to how much it has made. Business continues as usual, Goldman is still in the White House. 

  • Professor Elam

    SEC on Goldman Fraud, Maybe Not…

    Tuesday April 20

    Turns out the SEC voted 3-2 on whether to prosecute Goldman, another party line vote. This is hardly the stuff of real ethics. The rules should be clear, ethics in financial dealings should not be a value judgement. 

  • Professor Elam

    Steve Jobs Urges Californians to Donate Organs

    Tuesday April 20, 2010

    One of the emerging ethical issues of our time is organ donation. Here is an interesting story on how Steve Jobs induced the state of CA to become pro active in this endeavor. The truth of the matter is that organs need to be harvested quickly when someone dies. The most occurring incident is fatal vehicle accidents. At present one could volunteer to become an organ donor when renewing a driver license but no one is pushing it. They are now. 

    Hopefully this is an idea that will catch on in other states. 

  • Professor Elam

    Monday Monday

    Monday April 19

    Monday Monday

    Can't stand that day

    The Mamas and the Papas

    THere is an excellent summary of the weekend events since Friday regarding Goldman et al at 

    Jesse's Cafe this morning. Mish this morning, interesting videos, widening scandal. 

    Meanwhile the volcano in Iceland could lead to another volcano in Iceland erupting. This is stopped air traffic over Europe. The reason, thanks to former TWA Pilot Prof Richard Green, is that one has to descend through the cloud of vaporized magma which would ruin any airplane engine. So no matter what direction on approached Europe, it is not possible to land there. One might come overland from Africa. This could have a significant economic impact on the airline industry, then business, then tourism, even now crops in Africa are threatened.  Stock market tops are often marked by natural disasters that slow the economy.

    In answer to a student post this weekend, yes others will be charged. 

    No Surprise

    That Merrill Lynch now stands accused should not surprise anyone. Nor will it be any surprise if Morgan Stanley and Citigroup are accused of similar dealings. Indeed, it may be interesting to see who is not accused.

  • Professor Elam

    Govt Attacks Success at the Top

    Sunday April 18 2010

    The Government has a habit of attacking business success at the top of the markets. Radio Corporation of America was the tech stand out of the 1920s, the Federal Govt sued RCA at the end of the market run up. 

    The SEC began investigating Drexel in 1986, the market would crash the next year in Oct 1987

    At the end of the market run up 1982-99, the Clinton Administration sued MSFT. MSFT stock has gone nowhere since staying mostly in a $25-30 range. MSFT was arguably the poster child for software success running most of the PC operating systems on the planet. The dot.com crash began in 2000. 

    Now the Federal government has sued Goldman Sachs GS, the most profitable securities firm ever. Mish notes today that other banks and brokers are just as guilty of playing against their own clients, but Goldman is a richer prize as it still stands alone. We would guess that the lawsuit will be settled in a nolo contendere manner neither admitting nor denying anything. But we suspect the GS partners, like the Arthur Andersen partners, will sense game over and exit, effectively escaping the government  executioner's guillotine. Remember AA was finally found not guilty, after the firm collapsed. Interestingly the movie Wall Street II Money Never Sleeps, will debut in Sept of this year. Wall ST I debuted shortly before the 1987 crash. Hmm, will the lawsuit and the movie portend another crash this year?