The latest white collar crime ( a felony commited without the use of deadly force) is detailed in this Fortune magazine Story.   Unlike Clyde Barrow, the criminal here, a Mr. Cox, never shot anyone but used elaborate fraud schemes to borrow against houses he never owned. 

This is another example of the need for forensic accountants.  The criminal operated with a female, she got caught.  He is still at large. It is not a stretch to imagine the banks and homeowners posting a reward for this fellow.  It is a long story but well worth your while in understanding how easily someone like this can operate.  Interestingly, his crime spree apparently began as he wrote a fictional account of someone doing just that-creating a string of frauds.

I mentioned the importance of reading Sherlock Holmes a few posts back. I was referring to prepration for an interview.  But as you can see from this story, it never hurts to keep your deductive reasoning powers sharp!

Crimes of the future will be commited through the intircacies of the financial and computer systems.  A successful investigator will need to know how to wend his or her way through the maze.  Accountants as special agent investigators and crime scene specialists, you bet when the crime scene stretches round the world through multiple offshore banks, false identities, and mortgage scams.

DLE

Aparently Google liked Shona Brown’s Competing on the Edge: Strategy as a Structured Chaos , hired her as Vice President for Business Operations.

It’s all here in an article brought to my attention by alert student Guadalups Barraza.  Chaos by Design  is the story of unstructured Google.  IT details how Google is generating more than $800 M incash each quarter.Larry Page cautions against being too cautious and doing too little, if we don’t have any of these mistakes, we’re just not taking enough risks."  Remember that Clint E. said the same thing, doing the same old thing is risky because nothing ever changes.  That’s why you see old tv shows being made in to movies.  No risk, no gain.

Engineers are supposed to spen 20% of their time pursuing their own ideas.  But Google has plenty of mistakes to show for its efforts too, Froogle never did much.  Their version of My Space, Orkut (huh?) only succeeded in Brazil, well and Iran….

Well strategy is a management discipline but sounds like managerial accounting to me, how do you foster creativity to get truly breakthrough new ideas?  Apple finally did it with iPod, but wandered in the tech wilderness for years first. MSFT has yet to do better than Windows or Office. 

This was an article well worth reading, thanks Guadalupe.

DLE

PS Competing is only eight bucks at Amazon, better earmark that for a future book report!

We have recently studied the income statement in Intermed and earnings mgt in Fin State Analysis.
Here is yet another case as President John Blystone  of SPW apparently  ‘set up’ investors back in 2003-4.  He predicted strong earnings growth which  doubled the stock from 30 to 60. On the way up he sold thousands of shares making a tidy sum.  But it turned out the earnings growth was a one time affair, remember that in comprehensive income, and the stock plummeted over 20% in one day.

I extracted the time period in question, click on the chart to enlarge that wonderful year for Mr. Blystone.  Such a stunt may not be illegal but certainly left the stockholders feeling duped.  The article details other ‘managed’ stunts.  Again this is why we study accounting, to get to, as they say, the bottom of it.  This is also why a fundamental analysts will carefully scrutinize the character and past record of management, leopards don’t usually lose their spots.

DLE

Trust me on this, if you can get plugged into a business that promotes horses, you can be showered with money.  Remember you must promote horses, do not own the horse.  I was remined of this again in the B/W article Fox Hunting San Foxes .  Yep all these fancy exec types, half are women, they wear the black jackets, saddle up and go on the trail, literally , of the scent of the fox.  How perplexed the dogs are about all this I can’t say, ie, there isn’t any fox.  But like a black tie gala, it is an excuse to get all gussied up and spend money, and that’w where I think the entrepreneur would come in.

It never ceased to amaze me how totally immersed people would get with horses when I had my CPA practice.  It has been said that a boat is a hole in the water into which the owner pours money, well the same can be said for horse, at least one can park the boat and stop buring fuel.  The horse however eats every day.  Moral of the story, there is money in stables….

DLE

I mentioned in class and on a previous post that Radio Shack shares were 20% of their 2000 high.  After jumping up from 15 to 20, shares fell again on a third quarter loss announcement.  However what is happening there appears to be the classic formula for straightening things up and out.  Read this news release about James Gooch.  Note that Julian Day the new CEO has worked with Gooch before.  This would be good thinking and planning on Day’s part, he is starting to assemble his own team loyal to him, and starting at the top with the CFO. Read Gooch’s background, a fine track record to becoming a CFO for a Fortune 500 firm.  So Day has written off possible losses in a big bath and started assembling his own admin team.  I would guess that RSH stock will make a higher low above $16. By the way, the stock is making what would technically be called a reverse head and shoulders reversal pattern.  I will demonstrate this in class.

DLE

Financial literature would have you believe that the present value of a stock is equal to the present value of its futures earnings discounted at the appropriate cost of capital rate.  As I like to point out, those adjustments to that discounted flow, tend to happen rather violently.

A case in point is Austin based Whole Foods WFMI.    Earnings for their fourth    quarter were 29 cents up from 23 cents the year before.  But the earnings rate of growth is decelerating, causing Wells Fargo to drop their projection on the stock price from $77.50 to $43.  That bit of information came a little late if you were still a recent stockholder this morning. 

Click on the chart at left to view a 22% loss in one day, er rather morning as the news of yesterday’s earnings increase but accompanying deceleration set in.  As you can see, stock prices are dependent on FUTURE expectations, which sometimes get dialed in very quickly.  So earnings are important but so are trends and where a company stands in its industry group.

In relations to a previous story about Dell, which was featured in another negative article on the Oct 2006 Texas Monthly, here is a look at Dell Hell.   Gee when it rains it pours from Austin to Beijing.

DLE

Wesley Snipes is usually seen in movies hunting the bad guys. Well the hunter has become the hunted, by the IRS no less.   It seems Wesley hired a group associated with filing fraudlent returns.  The scam is to file a return claiming losses to obtain refunds of previously paid taxes.  The IRS does not take such foolishness lightly. The IRS particularly enjoys making a public spectacle out of famous people like Leona Helmsley  and Red Foxx  and even Willie Nelson .  Sophia Loren served time in jail in Naples Italy  for tax evasion, so we can conclude foreign revenue services can’t take a joke either.

The need for ethics in handling tax returns is high, the penalties for failing to do so are high too.

It’s not nice to fool Mother Nature, or the IRS.

DLE

To better help your understanding of intermed and cost, I will be arriving at 8:45 before class.  This past Wed several of us found ourselves chatting on the comfortable couch and chairs outside 243.  We enjoyed the visit so much I decided to make it more permanent.  These were posted office hours anyway but there is room for everyone in the hall.  Arrive with your questions and obervations and your latte if you like, I’ll be there at 8:45 so we can spend more time on whatever you want to discuss.

DLE

The only gift is a portion of thyself.  The poet brings his poem, the painter his picture.

Well put way back in 1844 by RWE.   Yes that gosh awful season of greed and imposed necessity is upon us.  It is a national retail frenzy and oft forgotten religious holiday.  RWE’s essay on Gifts is perhaps the classic comment on this most difficult of challenges in our lives.  Click on the hyper link to read this classic again, or for the first time if you have not had the pleasure.

And don’t overlook what RWE is saying. I heard recently about a fellow who never purchases a store bought greeting card.  Rather he fashions his own molding its content and message for the specific occasion and person to whom it is aimed.  There is great merit in this idea and exactly what Emerson is saying.  Your appreciation for what someone else has done for you is certainly better expressed by saying just that than the purchase of a soon fogotten something or other.

In that regard, a while back I challenged everyone to name their favorit gadget or thing or gizmo. This season of gift giving my be a good time to re visit that request as I only got  a couple of responses.

Right now I would say a couple of my favorite tangible things are a handy wool wind breaker with just enough cashmere (10%) to give it  a soft to the touch feel and a nice warmth on these chilly mornings, I found it marked down at Men’s Wearhouse for 80 bucks.  My other favorite is surely my Olympus digital camera, I am still using the 2100 UZ more than the newer SP 500 as I am more familiar with the software for the 2100.  Are you taking digital shots of your family , friends and life around you?  You should be, trust me, deacades from now you will wonder where the time went.  The digital camera is a computer with a lens, but only handy if you use it to record life around you.

A couple we know attended the Rolling Stones Concert in Austin last weekend.  Cheryl noted that there were lots of ‘old people there.’  That happens with a group that dates to 1965. Trust me, start that photo album now, the years go by faster than you think.

Several of you have asked about a book to review.  The idea behind the book review has multiple goals-college should require one to read and acquire knowledge outside the classroom
you should develop a stable of authors you admire
you should discover new ways of looking at the same old landscape.

For example, who is your favorite non fiction author?

If I had to pick one, it would be hard to improve on Tom Sowell .  Dr. Sowell is officially a professor of economics at Stanford, but also an incredibly prolific author and columnist.  One rarely sees him on television or hears him on radio as he refuses to let the host cherry pick questions for him and then edit his actual response at a later time.  You can click on the hyper link to look at the incredible range of topics he has addressed.  Tom Sowell’s Random Thoughts  are better than most people thinking at their best.

Walter Williams  is a professor of economics at George Mason University.  Here is another brilliant and prolific author worthy of your investigation. Williams and Sowell are good friends on opposite coasts, if you get the chance to hear Walter Williams interview T Sowell on the radio, don’t miss it, Sowell does not suffer fools gladly.

A UNT professor named Dr. James Duban  has written Be a College Achiever: The Complete Guide to Academic Stardom.  Note it is on Dr. Williams list of must reads, and mine too!

Some of you are reading  Jim Rogers  books recounting his two round the world tours. I have two copies of each for loan (but I want them back!). These are excellent introductions to the global economy. In the first, Investment Biker, he spends three years circling the globe on a BMW motorcycle. On the next trip, Adventure Capitalist, he has a special $800,000 hand built Mercedes 230 sports car built on a G Wagon 4wd diesel powered chassis-and amazingly returns without a scratch on the car.

Here is a Business Week site on current best sellers.

Some of my other favorites include

Den of Thieves by James Stewart – the non fiction account of the rise of Mike Millikan at Drexel Burnham and his junk bond empire, and the second half details how the government brought him down-better than fiction

Final Accounting by Barbara Toffler –  an inside look at the fall of Arthur Andersen, we read this in the audit class

How to Swim with Sharks without Being Eaten by Harvey McKay – McKay runs an envelope company in Minnesota, but has a lot of great ideas on business

What they Don’t Teach You at Harvard Business School by Mark McCormack who was the original Jerry McGuire by signing Arnold Palmer as a client and creating the sports agent business as we know it today.

I have found the easiest way to get any book I want is either the public library or log on to Amazon.com  and type in the title.  You can order anything used for less than the cost of driving around DFW looking for it.

Other recent winners include Freakonomics and The World is Flat.

Don’t hesitate to stop by the office to peruse what I have available, or you might visit a public library, this would be a public building filled with books that are free for holders of a library card.  Not familiar with a library, no problem as my high school English teacher used to say, you don’t need to know how to use the library but you do need to know how to use the librarian. These are always helpful folks who can usually find whatever you need.

DLE