Accounting & Investing Info for San Antonio A & M
Monday Feb 8 3020
Yep John Thain got the top job at CIT, the financier that just took bankruptcy. Last time we read about John he got the boot from Bank of America after convincing them to buy Merrill, then he wanted a $10 M bonus for doing so, then it was revealed he spent $1 M redecorating his office and bathroom at Merrill,
I guess Muhammad Ali was right, just be sure folks are talkin bout you, don't matter what they say….
Monday Feb 8 2010
THe US has seven states that are larger than the four countries getting so much publicity in Europe.
These states comprise 35% of the US population with 108 people. As the author says, CA has lost its housing, Michigan and Ohio their auto production, New York and New Jersey their financial base, hmm, the US can print money for them but one day they will have to do something different. Texas does not make the list in that Texas is energy independent, as he says, producing your own energy is close to printing money, and hey, it does not snow as it did in Wash DC this weekend. By the way has anyone heard from Al Global Warming Gore amidst the biggest snow storms in decades?
U 6 unemployment in Texas is 13.6% but Texas is not experiencing the problems of these other states.
Sunday Feb 7 2010
Every Stoic was a Stoic but where in Christiandom is the Christian?
R Waldo Emerson
There is a legend that, one to three days before the final Mexican assault, Travis gathered all of the Alamo's defenders in the main plaza of the fort. Announcing that reinforcements would not be coming, Travis unsheathed his sword and drew a line in the dirt. He then told those men who were willing to stay and die with him to cross the line; those who wanted to leave could do so without shame. Most of the Alamo's defenders subsequently crossed the line, leaving only two men behind. One soldier, Bowie, was confined to a cot with typhoid, but asked to be carried across the line. The other was a French veteran of the Napoleonic Wars named Moses Rose. Rose, who later declared, "By God, I wasn't ready to die," scaled a wall that night and escaped, thus preserving the story of Travis's line in the sand. This account was told by Rose to numerous people later in his life.
Wikipedia on William B. Travis
I am leading a class in ethics in Accounting this semester though I cannot see that Accounting Ethics differ from any other class of ethics applied to human beings. My thoughts today are on the proverbial 'line in the sand.' The class is doing, I must say, a fine job of reviewing movies with ethical themes. At some point the hero or heroine is called up to make his or her ethical decision, that line in the sand.
Most accounting frauds or failures to appear ethical stem from such a failed decision. For example. I read today that Goldman is juggling their bonuses amid criticism of their behavior. CEO Blankenfein is being paid $9 M down from a recent year $68 M. Forbes puts his actual base salary at $600,000 per year, presumably this pays his utility bills eh?
As Mary Matalin might say, what a missed opportunity! Goldman is being criticized for
claiming it was a bank so it could obtain TARP money and access the FED borrowing window
taking the TARP money
Investing it in the stock market, ie gambling
realizing massive gains on its front running nano second trading program
Rewarding themselves beyond the imagination of the average person, and of course keeping it all to them selves
All this is happening amid double digit unemployment in multiple states, earthquakes in the poorest country in the Americas, well you name it. Contrast this with the public apology by the President of Toyota, no apology from 85 Broad Street at Goldman Headquarters though!
How much is enough Lloyd? No doubt Lloyd would point to Richard Fuld at Lehman who pocketed a cool $300 M his last year, and then the firm went bust. Fuld was of course, lawyered up, as the saying goes these days, at his Congressional hearing. Goldman stock is down $40 from its October high. I suspect that high will stand for quite some time. As the economy crumbles this fall, expect public outrage to move opposite the stock price of GS. It's pretty clear where GS is regarding their line in the sand.
Another facet of the Line in the Sand is the numerous attempts to straddle the line.
The Administration wants to try the mastermind of 9/11 in New York and at the same time the Press Secretary assures us he will receive the death penalty, huh? New Yorkers rally against the move.
Students who fail to pass the various high graduation exams still demand to 'walk' the stage at graduation.
Provision is made for a pro golfer to ride in an electric cart due to a leg handicap.
Note, no one is admitted as an NFL quarterback on the provision that he learn to throw a football threw a tire at thirty five yards, why is that?
Read yesterday's reference to Handcuffed by Consent, the PCAOB protests of various shortcomings of the Big Four, but nothing is done about it. Gee what happened to those Stoics?
Sunday Feb 7 2010
Jeremy Warner in the UK Telegram suggests the PIGS are causing investors to question the value of sovereign debt. This article was posted on BB by an alert student in Intermed ACCT, it is spot on and I thought should be shared on the blog. First business debt was questioned and markets plunged as hedge funds met margin calls with liquidation of securities. Then second governments borrowed more to 'stimulate' their economies. Not surprisingly all that did was add to existing debt. The slow economy has not tempted any one to start a business and unemployment has soared everywhere. Now the PIGS are on credit watch and downgrade. The so called bailout of Dubai was actually another debt increase, yes Dubai issued bonds to its lender. As Warner says, slower economies bring in less taxes, this is why even school districts in San Antonio, as we have noted, are cutting back. And so the down spiral continues, more debt, more interest payments, less tax revenue, services are cut back, expectations are lowered, spending by consumers falls, sales tax revenues fall, get the picture?
Sat Feb 5 2010
Sara McIntosh blogs on finance accounting auditing. In this blog she takes on the restrictions on the PCAOB, interesting. We will be linking to her blog. Sara takes the view that the PCAOB really cannot do much about the Big Four Accounting Firms, and so we continue to play the game of cat and mouse.
Sat Feb 6 2010
The President of Toyota publicly apologized for the failing his customers with a 4.5 M vehicle recall over the accelerator pedal fiasco. Now, does anyone recall the Presidents of GM or Chrysler apologizing for needing a bailout? Did Bill Ford apologize for Ford needing to hock the entire company for $18B to keep it running once Mulally took over? Funny I don't recall those press conferences…
We mentioned the red ink at Valero VLO a few posts back. I cannot access mysa.com right now but there is a good article explaining that for Tesoro and Valero, the price of gasoline, their product, has not risen as fast as the price of oil. The result is that their margin the difference between what they pay and what they charge for the product, has dropped. In addition, reduced shipping has cut fuel demand by 10%. Overall, this is why we study accounting, to better understand financial results.
Meanwhile the photos of the back yards literally falling away from their owners look more like mudslides in CA than what we usually see in San Antonio. The City is talking tough, but seems to me that just rebuilding the wall will not exactly get Humpty Dumpty back up there, so to speak. The problem here is that the homes should never have been built in these locations to begin with. Mother Nature strikes back. Once a bad decision is made, no amount of finger pointing will improve the original decision.
By the way, do you have a business card? What you say, I am a student, I don't have a business!. Networking is all about improving your Rolodex. Author Gladwell in Tipping Point calls such people Connectors. Connectors have large rolodexes. They know lots of people. Your business card should look something like this
Ima Student
Texas A & M San Antonio College of Business
Anticipated Graduation Date __ or Class of 2011
imastudent@tamuk.edu
Cell phone number ___ _____
Friday Feb 5 2010
Jerry Flint comments on Toyota's troubles. I agree that never before has a DOT government man told people to stop driving a particular car. It is hard for me to believe the govt is not punishing non union Toyota at the behest of big Dem donor UAW. As Flint observes, the Cobalt plant is not being closed for its problems.
Friday Feb 5 2010
Today the Labor Dept issued the monthly jobs number claiming that unemployment U 3 has fallen below 10%. But Rick Santelli at CNBC disputed this as did the Wall Street Journal, Richard Russell of Dow Theory Letters makes this comment.
By the way, a little article in today's WSJ is entitled, "Digest the Jobs Report With a Grain of Salt." The article details the various phoney aspects of the Labor Dept. report. And I ask, why the hell can't the government give us honest reports instead of these fake, "doctored" reports. Who does the Labor Dept. think it's fooling? Putting out misleading (bullish) reports lowers confidence in the government. At this point, everybody knows that the government is lying. How about a dash of honesty.
there are numerous questions in various accounting text books now about the wisdom of 'cooking the books,' fudging the numbers, adjusting the adjusting entry. And as Russell says, once the word is out, there is no credibility for the accounting department, in this case the Labor Dept.
And of course this makes life even more difficult if and when things finally do improve and the numbers are better, by then there is no credibility left.
Friday Feb 5 2010 1 11 PM CST
We showed Spain yesterday, here is the ETF for Italy and the day is not over yet!
Our point to students is that debt ratings matter. The PIGS are in the news and fear of default is causing investors to sell all equities as well in those respective countries. The problem is that none of the countries in trouble, that have spent more than they take in, can print their own money ala the USA. This is the lynchpin of the Euro agreement, and why member countries agreed to abide by fiscal discipline rules when they were admitted. Whoops, we fudged. It appears this chart is in a third wave down with a fourth up to follow and then a final fifth down, so it ain't over yet folks.
Thursday Feb 4 2010
Worries over Portugal Spain and Greece helped take US markets down today.
Well that is what we technicians call the fundamentals verifying the technical state of the market. Markets have been falling since their peak in early January, today continues the trend now well underway.
But as I told the students at the start of this semester, this is a very interesting time to be studying liabilities on various balance sheets. That is precisely the problem in the PIGS. See our post three days ago about the PIGS. Remember, in a bear market all news is ultimately bearish! Hence Honda and Toyota are having a bad time, the Med countries are pressed. And we regularly on which state here in the US may win the race to bankruptcy court first.
Okay please Prof, you get all excited about this stuff, how much did it matter, glad you asked.
This is the ETF that stands for Exchange Traded Fund for Spain. This ETF trades on the New York Stock Exchange and replicates the Spanish Stock Exchange. Click on the chart to enlarge the picture. This was not a good day for Spain.
Professor Elam 