Jerry Flint  takes a look at inventories in this column. We will study inventory in Intermed I, Managerial, and Audit this semester.  As always, Mr. Flint Is a seasoned observer of the auto industry and has some interesting ‘metrics’ to use.  A metric  is a numeric way of codifying how well one is doing. It can be thought of as a benchmark by which one is measured.  Jerry observe that the number of days inventory is the correct way to look at it.  And he notes that Detroit has many more days than its Asian counterparts. 

The problem of course is that inventory usually does not get MORE valuable, it gets less valuable the longer it sits, particularly if the dealer is paying interest to have it there.  As he observes, with the Dow down, mortgage rates up, and nervousness around, the public is not likely to go on a  car or truck buying binge. 
And gas is still north of $2.50. 

Jeremy Clark the manager of the Lancaster Medical Center will be speaking to the managerial class later this semester.  He uses metrics to gauge how well the hospital is doing.  We begin managerial accounting by studying the metrics of financial analysis, ratios that indicate the financial health of a business. 

So please read Mr. Flint’s article to learn more about metrics.

Section 204 of SARBOX has made internal control more important than ever. We wil be discussing this in Intermed I and Auditing this semester. Managerial Accountants are often responsible for internal control functions.  Well, for sure, folks are the same the world over, no control and temptation sets in.  Click
here to read about two bank employees in China.  They made off with  8.2 million but blew it all on lottery tickets.  Hmm, I doubt the Chinese government is big on moral redemption….

My point is that fraud happens when there is a permissive atmosphere, opportunity, and the theft is easily rationalized.  Gee, it’s  the same the world over.

Atlanta Sportswriter Steve Hummer  takes a look at the career of Michael Vick.  I am no sports buff but apparently Vick was a part of the real effort to make the Atlanta Falcons a  contender team. Now what?  As you surely are aware Vick has plead guilty to dog fighting.  And the details of the sadism and torture are even worse. Apparently poor performing dogs were hung and if not dead then drowned.  Ugh.

Sports figures have been behaving badly for some time now. One third of  NBA players have been convicted for a crime.  Now an NBA referee has been charged with gambling if not fixing games and no doubt more wil come out.  The sports and entertainment  culture has looked the other way at all sorts violent or suggestive of violence behavior.  The justice system has been sending the Fastows, Skillings, et al to jail for crimes against shareholders.  I bring this all up as ethics will be a topic we discuss in all our classes this and every semester.  What is amazing about Vick is that surely he did not engage in this for the money, the bets were in the thousands.  He had a $130 M contract!  The answer has to be elsewhere, this is about savagery and power, cruelty and the whole gangsta rap culture of violence. 

And so what is the ethical answer here?  Jeff Skilling of Enron sits in jail for dealing in derivatives that took the employees and shareholders down.  Yet Bear Stearns did the same thing in their hedge funds with the same result, everyone lost their money, and yet no one from BS is going to jail.  Is that ethically fair?  Hmmm I would be Jeff has some ideas on that one, wonder if we can call him?

Your thoughts?

8/23/07  Would the Falcons fiddle with the news to get the season tickets sold?    Read the hyperlink to learn how a lot of buyers now have remorse and worse, some are charging the team with mamipulating the news on Vick. Hmm, actions have consequences.

Here is a very bearish view of what might happen to the economy.  

There are many letter writers about what might happen to the US Economy.  They vary from the perpetualy bullish to the perpetually bearish. When good things happen the bulls claim victory when bad things happen, the bears claim victory.  Bob Prechter’s group has been overly bearish for some time, but there time may be upon us.  What this article says at least short term is pretty much right on so far.

This Forbes article on CFC explains some of the details of what has been happening these past few weeks.  At times like this it is vital that you understand Money and Banking as it is called in Economics and Finance.  Just how does the FED inject money in to the system, read this article and find out.

Meanwhile Goldman Sachs claims to see discounted value in its hedge fund and wrote a check.  Gee discounted value or a call for equity to avoid a collapse?

Ben Stein is the son of the famous economist Herb Stein.  Ben shot to fame in Ferris Bueller’s Day Off as the droll assistant principal. In addition to writing about financial matters and appearing on Neal Cavuto’s Saturday morning finance show, he has a successful career in the movies and on commercials. 

Here is his advice for the new college student.   Now our students at UNT Dallas are not 18 year old freshmen, but the advice rings pretty true.  Read the assignments ahead of class (few of your fellow students  do), ask reasoned questions grounded in fact, be presentable, not shabby in class, take math courses, and read  literature.  I am not particularly keen on the necessity of learning Roman and Greek literature as much of it  is or was simply there invention of their fictional action heroes of the day.  The Greek God Mercury certainly has his counterpart in Marvel Comics’ Flash.  Batman can certainly trace his lineage to the very first British superhero, Beowulf, .  The Iliad  set the framework for fables of good triumphing over evil that are repeated to this day. Indeed, Luke Skywalker of Star Wars fame and Harry Potter battle pretty much the same villains in a near religious quest for justice.  Such stories span thousands of years and are still popular.  Why?

As Patton remarks in his speech to the Third Army, Americans (and everyone else) love a winner and canto tolerate a loser.  Britain has nothing of particular merit in its history so to make folks feel better about themselves, tales of Beowulf and then  King Arthur, Lancelot, and Guinevere  to embellish the fictional accomplishments of the British.  And so it goes, Sherlock Holmes had his Moriarty, Harry Potter has his ‘Name that shall not be spoken,’   Valdemort.

Lonesome Dove  is yet another modern Iliad in which noble characters are on a journey of adventure.  My point is that a study of literature reveals common themes throughout the ages.

One thing students remark to me about  is just how quickly the four or five semesters seem to go.  Indeed that is true.  We think you will enjoy your time at UNT Dallas.  You can avoid the hassles of parking and large classes one enc outers at, well, large universities. You will get to know your teacher and your other students. MY point is that time is short and swift, make the most of your commitment to higher education.  This is not just your commitment but one that your family  must embrace also. They need to recognize your time for study and probably start shouldering some of the chores you once accomplished.  Make the most of this brief opportunity, because once gone, there is no getting it back.
‘
Whatever your field of study, there are commonalities that all of you should embrace.  Whale students say they read on the internet, this usually turns out to be much more about pop culture than their chosen field of study.  Find the websites that relate to your studies, read them daily, be up on current events in your field. Identify the movers and shakers and read their books and articles. Subscribe to magazine and periodicals about your major.  This blog is all about linking what we study in class with what happens in that famous real world.  Reading such articles will as they say make your studies come alive.

Welcome back to those returning and welcome aboard to those of you joining us for the first time. You have made the right choice to achieve a BA degree, start making the most of it today.

Imagine  four multi millionaire actors at the top of their game.  Imagine that they  can pick and choose their scripts.  Imagine that they have left B Movie Roles like
playing teen age werewolves (don’t laugh, Michael Landon and Michael Fox both did just that starting out)  far behind them.  We can do art, we can do creative, we can stretch ourselves. 

Now imagine that you and I are dead wrong in these assumptions. 

Clint Eastwood  once said you can learn a lot watching a bad movie and as the star of Pink Cadillac , he should know, one of his worst turkeys ever.  But I digress.

Bill Macy (Fargo), John Travolta (Broken Arrow), Martin Lawrence (Nothing to Lose), and  Tim Allen (Tool Time) are cast in  a turkey featurning the lamest script, worst dialog, worst collectionof junior high locker room humor, worst features of Any Which Way you Can , the Wild One , and  well, well.

I guess four stars can be bought for money to be in a sub B movie  like this.  Ray Liotta and a surprise cameo by Peter Fonda only scream, gee this much talent and such a waste.

The Idea is that four fifty something guys take a road trip to relieve the tensions of life.  Even the set up  of their four lives at the beginning  is lame, forecasting the dud to come.   I actually did make it to the end of the movie which tells you just how much I am putting off re doing the assignment sheet for cost….but it never got better, so at least it was consistently bad.

Ok, that’s my pick so far this year, what’s yours?  OF course with the ever present lure of big money to lure a guaranteed box office winner, like  these four guys, and greed being what it is in Hollywood, we must be ever vigilant for the emergence of an even bigger turkey before the year is out…….I will trust all of you to keep us forewarned.

On other fronts I read a great review of the second remake starring Nicole Kidman of
Invasionof the Body Snatchers.    The 1978 version with Donald Sutherland was truly great sci fi, check it out if you can find it. 

Dell will restate earngins all the way back to 2003.   As usual, an internal audit revealed, are you ready for this yet again. that numbers had been
modified
fudged
altered
smoothed
you pick one
to make ”performance targets’  How many times have we read this same story?  Employees are given incentives for stock options or bonuses based on financial performance. Well they may not be able to get the company to perform but they can certainly get the financials to do so. 

We will be discussing accounting ethics or the lack thereof in all our classes this semester.  Will anyone suffer for all this at Dell? Well the stockholders did as the stock price dropped from the 40s to the low 20s the last few years amid specualtion that all was not well at Dell.  And sure enough, it wasn’t.

Regular readers of the blog are aware I have been predicting a real estate and financial meltdown, it is here  now.  Click on the graph of the largest mortgage company in the US at left to see what a real PANIC can do short term.  Only a fraction of CFC’s mortgages are sub prime but that is not helping the stock price.  CFC borrowed $11.5 B this week to assure the market it could live up to its commitments which is to say fund existing mortgage commitments. 

I have been telling classes this is an excellent and exciting time to study accounting.  Here the issue for accountants is, what are the mortgages worth.  After all, that is what is on CFC’s balance sheet.   Click the hyperlink to see that the majority of assets are ‘long term investments’ read, mortgages held by CFC.  So, what are these intangible assets worth?  The market is saying, not much.  Do the outside auditors of CFC have reason to be embarassed?  Was their  certified audit incorrect? How does one value a mortgage?  Should the auditors consider the value of the real estate, the collateral?  We will be studying such questions particularly in the audit class this fall.

Short term the market looked exhausted to me on the close yesterday, it had come back some 300 Dow points from a low.  We should make some sort of low in the next few days if we have not already.   But that should prove to be short term.

I suggested on these pages that if a dark horse political candidate wanted to break out of the pack , the best way to do so would be to embrace real tax reform. Well guess what, read on.

Huckabee’s Under-the-Radar Tax Plan

Did Mike Huckabee have a secret weapon that enabled him to finish second to Mitt Romney in the Iowa straw poll? After all, the former Arkansas governor pulled off the rare feat of getting more votes than the number of $35 voting tickets his campaign purchased.

It appears that Mr. Huckabee benefited from being the only declared GOP candidate who has fully embraced the Fair Tax, which seeks to abolish the income and most other federal taxes in favor of a single national sales levy. The group behind the Fair Tax spent $150,000 to bus 500 voting Iowans to the straw poll site in Ames, where another 5,000 to 7,000 attendees walked through the Fair Tax group’s much-welcomed air-conditioned tent.

Mr. Huckabee took pains to plug the Fair Tax in his speech at Ames, declaring to loud applause: “We need to go to a fair tax that is so simple a seven-year-old running a lemonade stand could understand it.”

The Fair Tax has largely been ignored as an issue by a media pack that prefers to focus on abortion, gay rights and health care issues. But just as the media was forced to deal with widespread support for the flat tax pushed by Steve Forbes in 1996, so too may reporters actually have to take off their blinders and notice the noisy and well-organized Fair Tax movement.

— John Fund

(Political Diary, OpinionJournal.com © The Wall Street Journal, August 14, 2007)