• Professor Elam

    A Senate seat is a valuable thing, You just don't give it away for nothing. I want tomake money

    Ill Gov Rod Blagojevich

     

    Brian Culp claimed to be an Army Ranger involved in the Black Down episode, click the hyper link to read the truth.

    Bernard Madoff has pulled off the bigggest fraud in Wall Street history. this former head of the NASD National Association of Security Dealers has biled investors in a $50B Ponzi Scheme.  Please read hyperlink on ponzi schemes as we will be referring to these throughout the course. 

    A Ponzi Scheme takes money from later investors to pay the first investors. As confidence grows the perpetrator convinces people to 'let their money ride and re invest, rather than take it out. Madoff got caught when his investors wanted to withdraw $7 B during the stock market meltdown, he was unable to cover and the house of cards collapsed. 

    We will be studying these gypsies tramps and theives as Cher's song described them, this spring. I am fashioning the syllabus from the last time I taught the class. This time we have 21 people enrolled. This will not allow as many personal presentations. We will be looking for your personal participation in the class.  Please start your study now by reading aobut these scams. 

    I also plan to involve other faculty like Psy Prof Sam Rock when we discuss why people lie.  All of the above did,, all knew better, and it happens again and again Worse people are bilked and taken in by them again and again.  This failure of trust is what ethics is all about, or as Socrates asked, How shall we live? 

  • Professor Elam

    Jerry Flint puts the whole auto picture in perspective here. Truth is

    GM and Ford make lots of money overseas

    Hybrid cars do not sell well, Honda has taken most of theirs off the market

    new turbo gas cars are the most efficient solution, hybrids with their expensive batteries are not
    Southern senators are not being forthright refusing to acknowledge their subsidy of foreign automakers as well as the  increased business if GM goes down.

    Or as he says, look at government designed cars like the Yugo,yeah that was a winner

    You can find other Fliont stories there that put this debate in perspective.

  • Professor Elam

    One student reported in class that her company had received notice of reduced credit card limits.

    Meredith Whitney points out that the control of credit cards are in the hands of a few big banks. With less capital to risk, they are now cutting back on credit card limits.  As she says (this was on CNBC this morn at 6:35 AM) about ten percent of credit card holders would never have been granted loans in the past but now get them thru the cards.  It struck me that the irony of this is that regional banks in good shape now brag that they have no mortgage exposure or credit card exposure. Well that is the problem, they cannot make a decision about how might be a decent risk, so the big banks throw eveyrone overboard. Point is, contracting credit card limits in a crunch will lead to, you guessed it, less spending.

    She predicted that the big banks would survive but zero growth or profit for two years. Lower mortgage rates mean nothing if your home value is underwater, The real estate markets will have to work that out. Prices must fall on marginal homes. there are apparently hundreds of what I  would call marginal homes built on the fring areas of San Antonio, such as west and north of 1604 that now sit empty for rent or sale. Most are really stand alone apartments of about 1500 sf. What are they worth, not what they are asking at $125 K. They are really woth the comparable rent on a similar apartment, adjusted for the higher insurance and property tax one has to pay.  So a price of $75 K would be more like it.

  • Professor Elam

    I have mentiobned that the casino stocks in Nevada have lost over 90% of therir value. Sure enough the other Nevada US Senator Ensign is on this morning whining about how the hotel industry is bigger than the auto industry.  At least he is for a corporate tax cut though it is hard to see at the moment how that helps a hotel that is not making any money.

    Nevada casinos are heavily unionized like the Detroit UAW and that is how Senator Reid got elected. Ensign the Republican senator from nevada was saying that Detroit had bad management. Well gee Seantor, as Las Vegas cotinued to build on a gambling business model assuming people would always gamble, how smart was that? should the management of Las Vegas casinos be replaced?  And while I am at it, how would the poorly managed US Senate or Congress know a good leader?

    for sure Pelosi and Reid are not Sam Rayburn and Lyndon Johnson….

    Trivia Question, who was Sam Rayburn, look it up!

  • Professor Elam

    Two of the speakers at the two day CPE Expo this past week emphasized service to the client. One used examples of traveling with his wheelchair bound wife, of course the airline lost the wheelchair, the hotel never had the room with  wheelchair accessible shower as promised, and on and on, one wondered that he was surprised at such outcomes.

    Still the very hotel where we had the meeting was making the same sort of mistake, Thursday some sponsor provided sandwiches for lunch  and  a speaker, Friday we were on our own for lunch, Now stop and think.

    the hotel had a captive 150-200 potential lunch customers

    We were right there after all.

    And stop and think, the kitchen staff of their high priced in hotel cafe were fixed costs, on salary already anyway, right?  so the logical thing to do would be to set up a buffet line for say a bargain ( well by Omni Hotel standards) lunch, right?  Wanna guess what they did? If you guessed nothing move to the head of the class. Hotel restaurants are notoriously expensive so of course we all trooped out to Jason's Deli across the parking lot.

    This is a great example of relevant decision making. the actual cost of the buffet would be less than the manager thought as the fixed cost of the kitchen staff is already a sunk cost. Hence all he was out was the cost of food, that actually raises the contribution margin.

    And while I am at it, did they make up some sort of Egg McMuffin in the mornings to sell for say three bucks, or just think we would buy a breakfast for ten bucks plus in the cafe, again, wanna guess?  of course not, and then they wonder why the hotel cafe is never full. I don't understand this kind of thinking but that is the sort of thing one can learn from mangerial accounting.

  • Professor Elam

    I have post3ed the first two paragraphs of  Emerson's Essay on Gifts for several Chirstmas seasons on the blog. While it always has releveance this time of year, please at least read the first line, gee nothing changes eh?  You can easily Google and find the entire essay. but as he says,  a  proper gift conveys something of our person, pity the person who can only go to a shop, a cold and lifeless business as Emerson puts it. Emerson wrote this about 1840, times change, people don't, enjoy and take this as your directive for the season. Someone will remember your thoughtfullness from a gift you made rather than purchased.

    "Gifts"
    By Ralph Waldo Emerson.

    IT is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay, and ought to go into chancery, and be sold. I do not think this general insolvency, which involves in some sort all the population, to be the reason of the difficulty experienced at Christmas and New Year, and other times, in bestowing gifts; since it is always so pleasant to be generous, though very vexatious to pay debts. But the impediment lies in the choosing. If, at any time, it comes into my head that a present is due from me to somebody, I am puzzled what to give, until the opportunity is gone. Flowers and fruits are always fit presents; flowers, because they are a proud assertion that a ray of beauty outvalues all the utilities of the world. These gay natures contrast with the somewhat stern countenance of ordinary nature: they are like music heard out of a workhouse. Nature does not cocker us: we are children, not pets: she is not fond: everything is dealt to us without fear or favour, after severe universal laws. Yet these delicate flowers look like the frolic and interference of love and beauty. Men use to tell us that we love flattery, even though we are not deceived by it, because it shows that we are of importance enough to be courted. Something like that pleasure the flowers give us: what ant I to whom these sweet hints are addressed? Fruits are acceptable gifts because they are the flower of commodities, and admit of fantastic values being attached to them. If a man should send to me to come a hundred miles to visit him, and should set before me a basket of fine summer fruit, I should think there was some proportion between the labour and the reward.

    For common gifts, necessity makes pertinences and beauty every day, and one is glad when an imperative leaves him no option, since if the man at the door have no shoes, you have not to consider whether you could procure him a paint-box. And as it is always pleasing to see a man eat bread, or drink water, in the house or out of doors, so it is always a great satisfaction to supply these first wants. Necessity does everything well. In our condition of universal dependence, it seems heroic to let the petitioner be the judge of his necessity, and to give all that is asked, though at great inconvenience. If it be a fantastic desire, it is better to leave to others the office of punishing him. I can think of many parts I should prefer playing to that of the Furies. Next to things of necessity, the rule for a gift which one of my friends prescribed is, that we might convey to some person that which properly, belonged to his character, and was easily associated with him in thought. But our tokens of compliment and love are for the most part barbarous. Rings and other jewels are not gifts, but apologies for gifts. The only gift is a portion of thyself. Thou must bleed for me. Therefore the poet brings his poem; the shepherd, his lamb; the farmer, corn; the miner, a gem; the sailor, coral and shells; the painter, his picture; the girl, a handkerchief of her own sewing. This is right and pleasing, for it restores society in so far to the primary basis, when a man's biography is conveyed in his gift, and every man's wealth is an index of his merit. But it is a cold, lifeless business when you go to the shops to buy me something, which does not represent your life and talent, but a goldsmith's. This is fib for kings, and rich men who represent kings, and a false state of property, to make presents of gold and silver stuffs, as a kind of symbolical sin-offering, or payment of black mail.

  • Professor Elam

    Talk about unintended consequences, Holy Bailout Batman! NASCAR was red hot as the new sport the last few years. But with the big Three on the ropes, sponsorships are headed south. Seems the NASCAR Rookie of the Year is about to be out of a job. This is a great example of just how many people can be affected by letting GM Ford et all go bankrupt.

    Elsewhere, even Honda is cutting its whopping $300 M commitment to Formula One Racing, Anyone interested in taking up the slack so to speak?

  • Professor Elam

    John Thain ahs actually asked the merrill Board for a $10 M bonus. He managed to pull off a merger at the last minute and he sold $30 B worth of sub prime for thirty cents on the dollar.

    But as the article says, in the midst of bailout fatigue, I find it unbelievable that he would have the nerve to ask for such a thing, can you imagine being a typical merrill broker trying to make head or tails of what is going on, trying to hold on to your clients in the middle of absolute chaos in the markets and amidst a merger with B or A?  This sort of thing will be a good topic for ethics class.

    DLE

  • Professor Elam

    Regualr readers of the blog are aware that Barney Frank and Chris Dodd personally chaired the oversight committees for Freddie Mac and Fannie Mae. Both have collapsed but neither guy has assumed any responsibility for it. We are now confronted with the problem of letting 435 congressmen and 100 senators 'play' CEO. 

    Which is to say the Chris  Dodd who never saw the FNM train wreck coming has announced that Rick Waggoner at GM should resign. We are also getting simultaneous calls for the UAW to take across the board pay cuts. Well, what is it?  None of them are going to repsond to hypothetical do this or do that.

    And a checkerboard solution is not going to work. 

    Just this morning Rick Santelli who covers bond futures for CNBC made an interesting observation. The markets have retreated. The open interest of future contracts several months out has shrunk. In other words there are fewer players. The reason is that the traders do not know what to expect. Is the government going to bail someone out, lower mortgages, suspend mortgage payments, what?

    Infjecting uncertainty into markets does not help. The transition from lame duck Bush to new Barack and all the bailout ideas in between have injected tremendous uncertainty.  We are having a market rally this morning but i suspect there will be a pullback later this week.

  • Professor Elam

    Your new accounting gang, Professors Richard Green, Lynette Chapman,and myself have reworked the spring schedule from the fall schedule.  You will notice most accoutning classes meet twice a week, by design. We firmly belileve that re inforcement is an integral component of learning accounting.

    Prof Green and I attended the TSCPA CPE  Expo here this past week.  That would be the 

    Texas Society of CPAs Continuing Professional Education seminar.  We continue to make more connections to the SA accounting community. I met a comptroller for a local oil and gas firm that was a proud Texas A & I grad. I hope to data mine this group to bring such successful folk to campus to visit with us.

    Our new business club, BOSS has grown legs, elected officers, and is off to a good start.

    Enrollment continues to exapand nicely we expect a one third increase forthe spring. 

    I will be integrating the Gleim books in to class for a better look at what to expect on certified examinations.

    We will begin offering the Masters of Profeassional Accountancy degree in Fall 2009. We will be the lowest tuition program in town with by then four full time accounting professors.

    Not bad for our first semester I would say, we welcome your feedback!