Well, here we go again.  It seem the Economics Professor who managed several investment funds has managed to contract amnesia when questioned about the investments.   Once again, there is a demand for assurance by independent auditors that things are as they should be.  He may well be in the hospital to protect himself from lead poisoning, you know the kind that comes at you at 2,000 feet per second in about 150 grains…….

Please click on the image at left.  While it may look like a Ouija Board to you, it makes sense to me. I would like to revert to meeting before class in Intermed II (9:00 AM) and at (8:30 AM) for the grad class on Saturday. One reason students have a hard time with equity section of the balance sheet is the literal lack of experience in trading stocks. I spoke aobut derivatives in the INTERMED class the other day, clearly that is a new subject and confusing to most of you.  Ditto for the grad students, I hope to

clear up understanding of the puts and calls

introduce you to some simple charting techniques so you can start following markets yourself

this is shaping up to be a very interesting month in commodity trading so I think you can really enjoy the discussion as we highlight the energy and metals sectors

At top right, crude oil has been below its moving averages for the last seven months. It has now broken above them and is re testing the 200 day MA. This is typically a powerful formation and suggests much higher prices lie immediately ahead.  This is further confirmed by stocks like VLO going to new highs on the move.  I will not be holding you responsible for this on exams but trust me, this is important information and you will learn a lot.  I had to assimilate all this on my own and now write a column for a weekly newsletter on mutual fund trading.  Good stuff, see you before class.

Here is another example of globalization, The NYSE has merged with the European Exchange.  The NYSE has been racing to get this deal done to stay a large market as others around the world are doing the same and equities are caught behind the big commodity mergers.  Accounting wise, this will hasten the adoption of IASB standards here, usurping FASB standards, whoa, look for a raft of new intermed accounting books by 2009, the date the SEC has set for congruence of standards.

Another tip of the hat to Jason Raper for bringing this one to my attention.

As usual, another great column from Jerry Flint. Here he states that unless you are a luxury botique like Porsche, it is tough being small,  Why?  Because one has to over come fixed costs and achieve economy of scale.  Apparently that is about 300,000 units for a manufacturer in the American Market.  Amazing how long the list is of folks that aren’t there, including some American brands.

This relates directly to our study of cost volume profit relationships. Can you see the connection?

Another part of the University Experience should be an exposure to history, art, and literature that you would not otherwise experience.  Such an example is in the WSJ review of www.monitor.org.  This is a review of the new museum dedicated to the recovery of the Union Ironclad, Monitor.  I urge you to read the article, and surf around the website, as the author says, it is a model of how to display information. I found the description of the battle scene with its maps and diagrams, particularly interesting.  And the idea the the entire war might depend on the outcome of a new technology, an ironclad ship, is most interesting.  How about he Confederates reading about it in Scientific American?  Technology is nothing new and everyone always expects more than it seems to deliver.  Have nuclear subs changed the balance of power as everyone thought they would?  The problem of course is that a nuclear sub is a blunt instrument, and tactics more often call for tactical, controlled responses as opposed to nuclear attacks. 

At any rate, ironically the two ships were sunk and lately recovered.  The salt water electrolysis story of re recovering the parts is also interesting.  Good stuff.

UPs programs its routes for right turns.  And saves time and money in the process.  This is  a great example of how to eliminate non value added activities.  I saw the story on abc news but abcnews.com does not put the story up till after the six o clock news, at least I could not find it.  UPS programs the routes its drivers use to turn right as often as possible.  The result is that the avoid time consuming left turns.  This save time and money, non value added activities, the whole point of JIT. 

The news program featured a computer view of the route sketched by the computer to be the shortest and save the most time.  An interview with a driver confirmed the same thing.  When I was driving back and forth to San Antonio from San Marcos, I concluded the same thing. If the fast food joint was not on the right side of the freeway, no way.  And in SA, I turned before I got to school so I could turn right on VIllarette, if you went down Palo Alto Blvd, the left turn lane was a killer.  Ditto making the mistae of heading west in the afternoon down that lousy two lane street. 

Are you turning right?

In response to student demand we are opening Room 201H for general access computer use immediately. For the rest of this semester we will work around classes scheduled in that room. For future semesters this room will not be in the classroom inventory.

This lab will have special restrictions enforced: No cell phone use, no team activities, no children. This room will maintain a library/study atmosphere at all times.

Please help us spread the word to students.

Currently the hours are:
Monday 7:00am – 1:30pm, 5:00p – 10:00pm
Tuesday 7:00am – 6:00pm
Wednesday 7:00 am – 5:00pm, 8:30 – 10:00pm
Thursday 7:00am – 5:30pm, 9:00pm – 10:00pm
Friday 7:00am – 6:00 pm
Saturday 9:00am – 6:00pm

After this semester the quiet lab will be available to students all hours the building is open.

Click here to read about the 13% tuition hike at A & M.   This is for College Station, the small schools that make up A & M ‘s real ‘minority population’ are not at $4,000 per  semester.  About three years back ,the Legislature allowed the schools to start setting their own tuition. And of course UT wasted no time in moving from $2500 to $3500 in two years, A & M has of course followed suit, now $4K is the number.

An Aggie alum of mine makes the point that there are lots of ways for students to get over this hurdle, true there are Pell grants but their very existence only encourages the type of price gouging that these schools engage in.  Another defense, is, well it is still much cheaper than private schools, true enough.  But that too encourages every one to go up, and 13% is surely beyond even what the head in the sand FED would call inflationary.

Who is the consumer, the student, the business and govt that hires the graduate, the ‘research’ these schools provide?  This strikes me like witholding of income tax, since you never have it you don’t miss it.  After all school loans are not paid till AFTER graduation. How many students realize what  their real obligation is when signing on to grants, loans, etc.

University costs have outpaced the general level of costs for decades.  And while the ‘all our grads get great jobs’ story is true for say the top 10-20%, there are lots of students in liberal arts or other non specific outcome majors that end up at the outlet mall, hardly a feather in the distinguished alum list. And by the way, has any one repealed the bell shaped curve, don’t most students have a C average. Is hmm 4K x 8 or these days 10 semesters, $40,000 worth a job at the outlet mall or teaching school at what, $30 K to start?
What say you?

A tip of the bloggin hat to Jason Raper who found this article about our friends, the airlines.  What a classic TQM, CQM, Six Sigma disaster!  But as usual LUV scores the best and folks like
UAL are doing the worst. What is interesting is that the same names usually appear on the best lists and the same names appear on the worst list. You would think the guys in the cellar would try to recruit some homerun hitters from the winners! This is what managerial accounting is all about.

I guess we still have too much overcapacity in the airline industry.

At least three items are in the DMN this Sunday 4/1/2007 concerning accounting and or tax issues. 

You will recall that Arthur Andersen collapsed in the wake of its failed audit of Enron. Since then KPMG has paid the biggest fine ever (about $450M and not tax deductible) to the IRS for promoting alleged fraudulent tax shelters. Now what was the largest and one of the three most prestigious (Fulbright Crooker, Baker Botts)  law firms, Jenkins and Gilchrist has collapsed over KPMG like involvement. Click now or buy the paper I am sure this link won’t be up long.  But their Chicago office earned some $297 M over  a few year period by issuing ‘more likely than not’ letters assuring the validity of currency swap tax shelter schemes.  Whoops, now the firm is gone after lawsuits by plaintiffs extracted over $80 M from their liability insurers and more millions from the firm.  I will explain the details in class but this really is a must read.

Meanwhile right here in Lancaster ISD, the annual report from the School District to the Texas Education Agency is past due. And the long time CFO has quit in January and has no comment.  The article says the books don’t balance and the external auditors are trying to fix that.  Strange, modern computer accounting programs won’t let one make an out of balance entry, and the format for TEA reporting is very specific.  Lancaster ISD voters just rejected a  $215 M bond issue.  There is a $142 M bond issue on the May ballot.  The article suspects that late reporting may affect the bond rating and interest rate. Do you think it will cause  a confidence crisis among voters-I know it has for me!

Finally there is a good article about forensic auditing and accounting at Grant Thornton. in the business section, a Cheryl Hall column.  Seems accountants readily admit to their thievery if you just tell them they took more than they did-hey you stole $5 M, no I didn’t it was only $4.8 M. Gee….