Forbes had an article on how Cerebus is running Chrysler.  Deicisions are getting made, now, the opposite of the usual endless corporate meetings. Good thing, no company could use the change more that this one.  Forbes muses that private ownership, not beholden to penny a share snafus might be just the thing to get the company profitable, and Cerebus has done this sort of thing before.

Delivering value is what TQM is all about, a lean company not beholden to anything but that might just be able to do it, read the piece about the trip to the proving ground.

Ever wonder what happens to that $3 gas money you are spending?  Well click on the Dubai Air Show to learn about the most luxurious jet yet.  A Saudi Prince, 13th riches person in the world, has purchased his own A 380. The plane will be custom fitted with all manner of luxuries and with two floors, why not? Notably serious money is being spent on making
Dubai a real investing center, a diversification that escaped the Oil Rich East in the first oil boom of the 1970-80s.

J P Morgan recently did a presentation on why one should buy High Yield bonds of Neiman Marcus. Click on JPM for the link. This is a very well done presentation, notice how it leads you to the conclusion. Also notice how it uses a number of years to establish trends that stay in place, assuring the investor that NMG is on track.  Note how it uses pie graphs to compare Neiman, Horcahs and BG as to the number of stores.

This is an excellent example of a professional presentation.

Securitization is the process of selling receivables to third parties. We study this in the capter on accounts receivable in Intermed I.  Turns out the wondeful thing about the process is that is does not have to be shown as debt.  The sale of the receivables gets a higher credit rating than the seller of the receivable. The transaction is moved to a Special Purpose Entity SPE. The transaction carries the credit rating of the SPE not the issuer and it is now shown as debt on the balance sheet of the issuer. The article goes on to cite cases where this was non recourse so the firm’s creditors could not ‘reach’ teh receivables in a bankruptcy transaction. Interesting stuff, but does anyone grasp the significance, we will discuss this in class.

CFO featured an interview with Delta Airlines CFO.  He discussed how Delta went from losing $4 B to making $1.5 B in the period after it came out of bankruptcy.  How did  Delta do it?

They moved airplanes they owned to growing markets.  They became an international carrier instead of primarily a domestic one with international connection. In short they did Cost Volume Profit Analysis on their routes, determined the ones with the highest contribution margin, and then went there.  As he says this is not a business for the faint of heart.

We study CVP in Chapters 5 ande 6 in the Managerial course, this is an excellent application of that methodology in action.

There are private firms that insure mortgages. Now they are in the soup with all the delinquencies in the housing market.  Should the insurers go out of business, then what?  This is another clue that the sub prime mess is far from over.

Fresh Produce like avocados or bell peppers has to be sold ni a certain time period or the vegetable spoils. This keeps such markets at an equilibrium of supply and demand with prices reflecting the seasonality of the product. This is not the case with items that can be stored like say cotton.  When cotton prices are low, farmers store the cotton, waiting for the price to go up. The opposite happens as buyers are aware that potential supply is growing.  Hence ag products that can be stored are a boom or bust business.

North Texas Housing Starts are much the same.  This economist argues that speculative home building needs to stop.  There are over 10,000 unsold new homes on the market. This depresses their prices and requires incentives, hello auto industry.  We see the same thing now with pickups and SUVs.  I do see that the Arlington GM SUV plant is going to start producing hybrids.

Meanwhile, Detroit announces two new muscle cars.  Here are stories on the monster engine Dodge Charger, the Viper is sporting an ever larger V 10 engine than before.  What is going on here as gasoline hits $3?  Ford sales are down 9%  GM loses $39 B.  Hmm …..

A column in Portfolio.com links to a blog explaining the GM writedown. As the blog suggests,  how much of GM’s perceived $210 B market cap is actually a bet that the company is too big to fail.  The blogger makes the point that this charge is more than GM has made in the last several years. Are there old assets at historical cost from the 1940s, well sure, that land under those plants is worth something as are the plants, question is, how much would it be worth in a distress sale.

Take a read and ponder how we calculate value, we will be exploring the reality of historical cost when we get to depreciation in Chapter 10 of the Intermed book.

Here is an interesting study of optimism.   There seems to be a middle ground of optimism and pessimism, with optimism winning the day, except for one profession.  This is an interesting article, your take?

I have written extensively about the sub prime crisis and the housing bubble in this blog.  The reality of all that is now coming home.  A couple of you breezily suggested earlier this week in a post that, somehow in the short space of one week, everything was now AOK at CITI.  A glance at the close of yesterday’s trading in the graph at left should dispell such naivety.  Now I suspect that we are at such an oversold point that CITI could rally a bit here as could the rest of the bank stocks. Why?  Well the sellers have overwhelmed the buyers. Many have gone short selling the stock betting on lower prices. Now that it has fallen over 20 bucks, many shorts will take profits. If you are short that can only be done by re purchasing the stock. These re purchases will drive the price higher, short term.  Look for CITI to move back up to the blue line, its 50 day moving average. This provides an excellent opportunity to learn more about how the stock market and its participants actually work.

The comments posted this week by students have been far short of what I have in mind. I am looking for analysis, that you haver read the articles posted, or better yet, you read the websites of the companies being discussed. Are their actions in sub prime reflective of their stated vision and mission, probably not.  Rene did make an inciteful observation about how conventional wisdom has quickly changed.

Most of you are looking at the requirement to post on the blog as just that, a requirement, What you should be doing in sharpening your analytic skills. Suppose for example you had been hired by a bank, brokerage firm, accounting firm, etc.  You are now in a three week training class.  Your classmates are from other state schools like UT Austin, Trinity, and Texas Tech, others are from out of state like Vanderbilt (you know where Vanderbilt is right?) or Univ of Ark.  Everyone is trying to look their best and be recognized as a TOP GUN coming out of the training program. It is here that the cream will rise to the top and ‘fast track’ individuals will be recognized. Now with that in mind, what would you post, a breezy comment that reflects little or no research or something in depth with hyper links and some real analysis?  This is the time to practice on such analysis, trust me, this is what top students do at top schools.