Accounting & Investing Info for San Antonio A & M
Roger Penske Auto Group will buy Saturn from GM. Roger is one of the most successful business
guys in the auto arena period. It will be interesting to see what he dose with Satur. Chevy hobbled Satrun from the get to at GM, yet it still attracted a loyal fans. Everything that gets Roger's attention seems to succeed.
Most government plans result in the exact opposite of what they intended.
Some tax preparers are licensed, this wold include attorneys, who rarely prepare a return but participate in estates and trusts, cpas, and enrolled agents. Now Congress wants to license tax preparers in general.
MIT is working on the iPhone of the future. I am not quite sure this is a great idea but
Bill Gross founded Pacific Investment Management Company. He comments on GM and unfunded liabilities. We will be studying such in Intermediate II . I am more interested in your understanding just how big a danger this is and will be than in memorizing journal entries. You can read his monthly letters at http://www.pimco.com
Gross comments.
The Banana Republic of
America
Banana Republic is a pejorative term for a country that is politically unstable, dependent on limited agriculture (e.g. bananas), and ruled by a small, self-elected, wealthy, and corrupt clique. A banana republic also typically has large wealth inequities, poor infrastructure, poor schools, a "backward" economy, low capital spending, a reliance on foreign capital and money printing, budget deficits, and a weakening currency
If your life has been turned upside down this past year, perhaps
Washington
,
DC
has finally come to affect you. I submit that the
USA
is looking more like a Banana Republic every day, let’s take a look.
California
has long been a ‘window on the future’ for the
US
.
California
recalled its Governor a few years back. Now Governor Terminator is in even more trouble, but at least he is better looking than Gray Davis.
California
is dependent on lots of things, but is seemingly not in control of any of them. The legislature, in its own culture of corruption, rejected Gov Terminator’s plan for redrawing districts, and kept itself in power. Gee that sounds corrupt to me!
California
is now broke, sending IOUs as tax refunds. The voters just rejected more taxes. Gee, what a window on the future!
The
USA
does not have large wealth inequities other than Richard Fuld’s $300 M last year salary at Lehman. Lehman then went broke along with a few thousand other examples like that. By the way, did you know Fuld was on the Federal Reserve Board when that happened, really he was! The PresBO says the infrastructure needs improving and that bridge did fall in the river in
Minnesota
. And gosh help you trying to drive down I 35 on Friday afternoon but …. We will need to resurrect Al Capp’s
Lower Slobovia
to find a country our math grads might beat on an exam. This has resulted in creative college degrees like Recreation and Environmental Engineering. Our capital spending is to keep people in homes they cannot afford to begin with.
China
meanwhile is building a road system second to none. Our newer bridges tend to go nowhere….So actually we have high capital spending with negligible results.
And boy do we have a reliance on foreign capital. In an effort to rally those financial troops, Treasury Secretary Geithner was preaching to the faithful in
China
this week. Chinese students laughed when he claimed the
US
has a strong financial system. It seems we will be printing trillions of dollars to jolt our economy. The economy as noted will be jolted by trying to keep AIG in business which is handily guaranteeing GM bonds. We are also building magnetic trains from
Los Angeles
to capital intensive, business friendly, er ah
Las Vegas
. The budget deficit will exceed an admitted $1.5 trillion this year so no telling how high it really is.
The currency, dollar index, has fallen from 120 in 2002 to 72 this past year; that should qualify as weakening I would think. Interestingly the solution is to issue more debt while claiming the Dollar is strong. That debt is then invested urging folks to buy condos in Vegas, after all that magnetic train will need some riders. Well, I hope this clears up the big picture.
Meanwhile here in Andrews,
Texas
, epicenter of land based petroleum reserves in
Texas
, there is a reluctance to develop the oilfield. Why would that be? Capital market confidence measured by the Dow Jones has been from 12,000 to 7500 to 14,000 to 6,600 to 8,500 as I write. Playing the US Dollar like a yo yo, the oil price rose to $145, fell to $35, and is now $68, probably headed to $75. But what then? (well keep reading this column like any good Indiana Jones serial….) These numbers will not fit into any workable capital budgeting model known to this accounting professor. The oil prices gyrate with the dollar, not oil demand. And that is precisely the problem. Oil producers cannot be assured of a price which means they cannot price oil services into a workable business plan.
Meanwhile, plans for alternate energy such as windmills flourish. Plans to penalize carbon energy only need a few more votes from coal states to pass. Such mixed messages continue to make planning difficult.
So much for the main course, time for dessert, make mine a Bananas Foster, and hold the flambe. We’re getting lean and mean here in the Banana Republic of the
USA
.
Stay in touch with Dennis the rest of the week at http://www.professorelam.typepad.com/markets
Professor Elam writes a weekly column for the Andrews County News.
As usual, P J O'Rourke gets it right.
In ACCT 3314 Managerial we study benchmarking. Benchmarking is the practice of emulating the best ideas of the leader in a particular field. Example, Toyota and Ford have about four model lines, GM has more than they could say grace over, guess what, GM will shortly have four or less.
I was trying to locate the Kieso intermed accouting text we will use for the fall ACCT 3311 class.
Go ahead, click on the hyperlink and give it a go. Confused, so was I…..
In marketing theory discusses product diversification. This is the idea that if you have a winner, you diversify and offer it in multiple forms. That way you prevent others from entering the market. The cereal companies, there are only two or three, and the cigarette companies, only two or three, did this in extremo, dozens of brands all from the same three blanketing that aisle of the grocery making it tough to impossible for a competitor to get a foothold. Soap companies like PG or Lever do the same thing.
In some situations however it seems to me that this only breeds confusion. Dad once said that Ringling Brothers Circus experimented with three, then five, and finally seven simultaneous acts, or the seven ring circus. If three rings are good, seven is oh so much better right? Wrong, it was too much for the audience to follow. Circuses all went to three.
Sears pioneered catalog sales in the 1890s. Today this is known as internet sales, same thing. There is nothing new under the sun. Sears figured out that the Good, Better, Best three choice set up was the way to go. The ad tried to move the customer to the more expensive item, extolling the better virtues and features.
But I find the Wiley presentation like the seven ring circus. I never could find the book I was seeking.
We shopped for a gps for the wife this weekend. Same thing, Garmin must have ten versions of the same thing. This is confusing for the customer and the sales person, and it means more production changes and setup costs at the factory.
Toyota
Good Scion
Better Corolla
Best Camry Solara
GM
Chevy, Pontiac, Olds, Buick, Cadillac, Hummer, Saab, Saturn, GMC, Isuzu
Soon to be slenderized
Ford was
Ford, Mercury, Lincoln, Volvo, Aston Martin, Land Rover, Jaguar
Mulally has sold all the foreign makers but Volvo
Got it?
I had the students in Intermed II write a short piece on IFRS, XBRL, and new developments in accounting statements this past semester. Yes it is that importnat. Here is an article from the Journal of Accountancy about implementing IFRS. It will be reality by 2012.
Thursday May 28, 2009 Pre Market Openning
WE have been cool on CEF since it spiked in January. It seemed to us that the money was made between the low in Oct Nov and the sharp rally into the new year. We think our opinion is being vindicated now. While gold bug blogs and websites are chock a blog with speculation that the Dollar is about worthless and therefore gold is about to explode in price, money seems to be exiting Central Fund CEF.
MACD confirms that decline
Most ominous, Chakin Money Flow CMF shows a lack of commitment to more purchase of CEF, just as OBV does.
Not shown, gold and silver meanwhile have been moving up nicely. but we do not have new highs in CEF. CEF is trading at a 10% premium to Net Asset Value NAV. Perhaps holders are not willing to pay any more above market for gold and silver.
The money flow moving for the exits should be a cautionary note. The Dollar appears to be bottoming. We wonder if the lack of commitment to CEF here is a forward look to Dollar Strength.
Professor Elam 