Professor Elam

Tales from the Dark Side, Now Mainstream

Parade magazine is that familiar Sunday newspaper insert. Most of the articles are rather bland family fare The latest edition asks about the Child Care Crisis. In reality this is a crisis brought on by higher government taxes forcing more people into the work force as well as the idea that 'one person can live as cheaply as two' which is to say divorced. But that is not the topic today.

Rather I was taken aback but not surprised as the questions and responses in the Sunday July 19, 2009 edition.   In Personality Parade, usually a series of who is doing what in Hollywood we get these exchanges. See what this tells you about the mood of popular culture

• Does CBS realize canceling its  vampire series Moonlight was a mistake?  The answer of course is yes.
• Why would Mischa Barton choose to appear as a deranged stalker in her latest film? (The socionomic answer is because that reflects the public mood and will be popular but read her answer).  I am attracted to characters who are a departure from my own experience. My character goes to extremes which is why she was so much fun to play. Emphasis added 
• Is it true that Megan Fox is playing a dead person in a horror movie? Half true, In the horror comedy (there is a genre for you) Fox starts out as a cheerleader suffering from demonic possession: a slight problem for some of her schoolmates. (only slight?)  I spent half the movie being dead Fox said.  Professor Elam comment The movie Jennifer's Body will be out this fall, perhaps just in time to catch Wave Three down in the markets.  

The point I am making is that fascination with the dark side has now moved fully mainstream. Up and coming personalities are playing darker and darker characters. This is not Julie Andrews in Sound of Music as the Dow hit 1,000 in 1965. This is the Exorcist s the Dow plummeted from 1,000 in 1973. Watch out below.   

Six Reasons to Abolish the FED

Do you read Mish's Economic Analysis?

Ron Paul has sponsored a bill to audit the FED, will he get enough votes?

Managing Your Career

The trick is to be looking and planing your next shot. Do not focus on the last shot.

I do not know that anyone ever said that but it is certainly the trick to winning in pro sports. 

I mentioned Farrah Fawcett July 12 in managing your career. An article in the SA Sunday paper caught my eye. I looked but could not find the interview with Geena Davis that Froma Harerop describes on page 9B. Anyway, stunning 53 year old Geena Davis complains that there are no good roles for women her age. Indeed Hollywood has been terrible about this. Anne Bancroft played Ms. Robinson at age 37,  just six years older than Dustin Hoffman at the time. Davis and her husband produced Cutthroat Island in which she played an athletic pirate and she last starred in tv's Comnander in Chief. 

I would note that at age 85+ Betty White is stealing the show in Sandra Bullock's latest romantic comedy but that is beside the point. 

It seems to me that this is hthe perfect application of socionomics. What is suggested by the current popular culture that would resonate with audiences?  Well let's see

unemployment is rising, and fast

the stock market has crashed

people cannot even afford divorce, the ultimate personal indulgence of the last four decades

I just read a story about couples having to live in their same home but sleeping in different rooms. 

I recall an interview in which Sylvester Stallone recounted how many rejections he got for the idea of Rocky. By the way if you have never seen the original, with its fine Bill Conti  music score and role of a lifetime for Burgess Meredith, watch it in the uncut version, not with all the commercials on tv. It is the classic underdog story. Its timing was perfect as the markets came off their 1974 crash low at Dow 577.  With the markets coming off their crash lows at Dow 6600, housing in the dumps, America is likely looking for a another comeback kid. Boomers are not kids any longer, I would think Geena Davis is perfect for such a role. 

Individuals that have successfully created their own roles include

Stallone, Rocky

Chuck Norris, Walker (don't laugh, he took over Sat nite ratings which were nowhere)

Eastwood, an iconic series of movies usually focused on an underdog often playing the role of avenging angel

Roseanne Barr-created the longest running sitcom since Lucy about a working class family

Paul Hogan, parlayed a commercial for Australia into Crocodile Dundee

Sean Connery avoided typecasting and left the Bond series to become an even larger actor

I suspect Geena needs to create a family along these lines

Husband laid off in the auto slowdown in the midwest

Marriage not going well

Teenagers cannot find work with their college degrees, they move back home

here we sit what to do

Mom re energizes herself, takes local auto parts factory, gets grant, turns it into a company to 

make solar powered water heaters

Is that the right formula, I do not know, some focus groups might help  but it is along the Roseanne Barr formula

And I would think that idea would appeal to a cable tv movie channel

anyway, back to the looking ahead idea. 

It is easy to get caught up with school as an end in itself. But if your goal is say CPA, school is a building block to that end. Be thinking ahead, 

Grad degree gets you a ticket to sit for the cpa exam

You must pass the cpa exam

that gets you a ticket into the job place, which way to go, tax audit, consulting, which industry

then what, cpa firm, industry, non profit, government

No one can tell you the answer. But it pays to be looking ahead. I do know this, one cannot just wait for the right thing to come along, one has to make it happen.

CPA = GPA Govt Professional Accountant?

I was just thinking  about the future of CPAs.  What are the three main functions CPAs, at least external CPAs, perform. 

And what is the  likely future for those three things?

first the backdrop.  CPAs have lost the ability to govern themselves thanks to Enron et al, but that is just the latest round of fiascos as we discover in ZZZZ Best, Lincoln Savings, et al. Now the PCAOB oversees CPAs and the PCAOB's budget is determined by the SEC. And the SEC is responsible for overseeing public somp;any finanical statements. Except they never have done anything about that until it has been too late, the SEC is only on the scene AFTER the cows are out of the barn. So, clearly like any govt agency they are not going to admit that, who could be the scapgoat?  Hmmm....

I can imagine the SEC taking the position that external auditors are really working for them. After all if the company fails it makes the SEC look bad. And after all, CPAs have an inevitable conflict of interest. The client pays them, gee problems arise when the cpa rules in favor of the client. So, are you following this, the SEC takes the position that the external CPA should really be working for, yes, the SEC!  It will not be a big leap to see the SEC then deciding how much those cpas ought to be making, after all they are really quasi govt employees, and congress only makes about $165K per year. The Administration already has the position that one should not make more than $250,000. And remember to audit a public company a firm already has to be registered with the PCAOB. Limiting salaries would just be another govt ruling for the external cpas. 

the next thing CPAs do, well prepare financial statements for bank loans. Hmm, who insures banks, well the Federal Government. So if the loan goes bad, it is really a hit on the government. So, perhaps the CPAs should be working for the govt, after all that is the REAL client, not the bank, as the govt insures the bank and therefore the loans the banK makes!  It is not a stretch that the govt thinks CPAs should be reporting to them, not the banks themselves. 

The third thing CPAs do is, well, income taxes. You will recall that KPMG paid the largest criminal tax penalty ever, about $450 M for its role in a tax shelter scheme. And KPMG never went to court....So not much of a stretch for the govt to decide that CPAs are really quasi govt tax collectors. The CPA should be working for the govt, why should the govt have to go back and second time and audit taxpayers, the CPAs should be doing that the first time!

APB gave way to FASB and GASB to PCAOB and now SEC. 

I suspect that FNM and FRE would have been the tipping point for all this to happen except those had so many congressional fingerprints all over it. CIT is rumored to be the next bankrupt and has financed lots of small business. There is no way to tell what the tipping point will be but, what is your take on this One Two Three scenario>

Texas Recedes

Weekly Column from Professor Elam

Texas Recedes

 

You may be of the notion that both Texas and Texans have been relatively unaffected by this recession thing going round the rest of the country. Not so fast. Whether you realize it or not, you probably experienced a real loss in the stock market.  It is not surprising the politicians have not told you about it.

Tens of thousands of Texas teachers depend on the Texas Teacher Retirement System. No wonder, teachers do not contribute to social security, remember that.

A retirement system promising specific benefits in the future makes assumptions on what its retirement fund will earn.  Those earnings are necessary to hit a future target.  Hitting that target allows the benefits to be paid. If the fund falls short of the target, the promise of a specific payment cannot be met.

Texas Teachers Retirement assumes it will earn 8% per year. However according to Bloomberg, it has earned 2.6% the last ten years. How much difference is that?

8%	3.5%	2.5%
Assume $100	Assume $100	Assume $100
$215.89	$!41.06	$128.01
Less 27%	Less 27%	Less 27%
$157.60	$102.97	$93.45

 

The above table shows what a single amount of $100 would become at three different interest rates. The first, 8%, is what Texas assumed. The money nicely more than doubles. The second rate of 3.5% is about what the California Public Employees Retirement System CALPERS earned the last ten years. The third column is what the TTRS actually earned, actually 2.6%, quite a difference eh?

But it gets worse, much worse. Last year TTRS actually lost 27%, so it retained 73%. This means by my arithmetic that TTRS is actually below where it started ten years ago. So no net progress has been made at all.

In the meantime of course, thousands of teachers believe that they can retire with the promised benefits. Teachers are now being urged to continue working, no wonder. The only way out is to deliver far lower benefits or turn TTRS into a Ponzi social security scheme where new hires pay the old. It is conceivable that if the new hires learn what has happened they will insist on opting out. Indeed that would make more sense; let everyone contribute to his or her own managed 403b plan, good luck!

Meanwhile, some 82,000 Texans have run through their 59 weeks of unemployment benefits. Governor Perry has rejected Federal Stimulus money since its acceptance requires extending benefits even further. This is quite simply the difference between California and Texas thinking. Unemployment is a bridge between jobs, not your new job.

Frankly this explains the strength of the US Dollar while the FED prints so many. California has run out of Dollars.  Debt or the implied promise of payment requires dollars. And if the company or government is out of them, there is a demand for dollars.  And so California now prints its own fiat currency, IOUs. The Golden State has moved from paying tax refunds to vendors with this ‘new currency.’  How long can that last?

The silence concerning TTRS is truly deafening.  Are any teachers starting to ask questions?

 

More from Dennis Elam at www.professorelam.typepad.com/markets.

 

 

Texas Exhausts Unemployment Benefits

Texas  has apparently exhausted money in its unemployment fund. I say apparently because frankly teh article is not clear, click to read. 

Gov Perry did reject taking federal stimulus money because doing so would require extending benefits AFTER the Federal money has run out. Some Texans have already gone through 59 weeks of unemployment benefits. Well unemployment is not a job but a bridge. Making unemployment compensation the new employment is precisely the sort of thinking that got California and the NE is trouble. 

ACCD Staff Travel the World

We reported that the Chancellor of Alamoc Coummunity College District was trying to consolidate the schools in the District under one umbrella. This is not popular with the schools themselves. When the battle lines are drawn, one can bet those in the besieged castles will look for anything to throw.

Well WOAI reports that the Chancellor and staff racked up about $143,000 in travel expenses going to overseas and expensive US locations. While the Chancellor explains that hte groups he spoke to paid for his trips, this has of course unearthed questions about all the travel. Staff has stayed at the Ritz Carleton and Lowe's hotels for example.

This occurse as the ACCD says it has a $7 M shortfall. And tuition has risen very year for the last several years. Whilehte amounts spent on travel are tiny in relation to the overall budget, hte timing of the revelation could not be worse for the Chancellor. One of the reasons cited for consolidation is 'saving money.'

What is that saying about people in glass houses throwing stones?

Has Divorce Peaked?

It appeared that various trends would never end, but they have. The markets have crashed, home prices are down, illegal immigration is slowing and now, couples are not able to afford the great luxury, divorce. 

From Today's WSJ

• JULY 13, 2009

What God Has Joined Together, Recession Makes Hard to Put Asunder

For Some, the Downturn Keeps Divorce on Ice; Ms. Brewster, Husband Share a House Divided

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By JENNIFER LEVITZ

Rhonda Brewster and her husband have decided they don't want to be married to each other anymore. But while they're ready to move on, they still can't move out.

RHONDA BREWSTER

They don't want to sell their home, in Huntsville, Ala., in a down market. They can't afford two households until Ms. Brewster finds steady work. So for now, they are living under the same roof but on separate floors.

The "kids are OK with it." says Ms. Brewster, a 39-year-old freelance writer and stay-at-home mother. "They just know that mommy lives upstairs and daddy lives in the basement."

Unwinding the ties of matrimony is rarely simple or inexpensive, but for many couples, the sour economy is complicating the process further.

Divorce lawyers say many couples are delaying the decision to dissolve marriages and are staying in unpleasant situations for fear of being on their own at a time of economic uncertainty. Others are being forced to live together after the divorce is final for financial convenience. That can strain the emotions and result in awkward negotiations about subjects like dating.

In Nashville, Tenn., Randy and Lori Word jointly filed for divorce in February, after 10 years of marriage, and expect to get a court date this summer. Meanwhile, they continue to share a house while Ms. Word -- who had been a stay-at-home mother in recent years -- tries to find work in marketing. "I don't see jobs out there," she says.

Things are getting a little cramped in the house. Mr. Word, a 36-year-old construction-project manager, keeps his clothes in boxes in the study and sleeps in the living room. "Luckily, we bought a very nice couch two years ago," he says.

Ms. Word, who is 37, works part time as a waitress while she is searching for full-time work. Some nights she returns home from a shift to find Mr. Word in the bed complaining that his back can't take another night on the couch -- and asking her to please sleep in the living room, which she does.

Both say they are actually getting along better now that they are no longer in an emotional marital relationship.

"We're a lot kinder to each other," says Ms. Word, adding, "We're not so offended and bothered by each other." Mr. Word says, "We've actually developed or redeveloped a friendship that I think had gotten lost a little bit."

A May survey by the Institute for Divorce Financial Analysts, a national organization for financial professionals who work on divorce cases, found that the recession was delaying divorces, and inspiring "creative divorce solutions" in living arrangements.

Frankly this strikes me as a much more workable arrangement. I served as a County Comptroller in a couple of Texas counties when divorce got popular in the 1970s. Guess what it does not work, The court system became the bookkeeper for all the divorced families. 

Or as Barbara Walters, a multi milionaire herself observed

You can have a career

You can have children

You can have a husbad

You can't have all three

Your thoughts?

Goldman Still on Top

I remind classes that while Presidents come and go, Goldman Sachs always has a man in the White House. 

Let me get this straight. Hank Paulson Bush Treasury Secy was a Goldman man. When push came to shove,  Goldmand was fine, Lehman was toast. Advantage Goldman. Goldman now reports great earnings, get the picture?

If You Can't Trust a Swiss Banker...

UBS  is in negotiation to reveal some 52,000 names on Swiss bank accounts. Well so much for the secrecy industry in Switzerland. One recalls that Panamanian Manuel Noriega was our friend, he took in the Shah of Iran.  But when it was revealed he was becoming Swiss Bank West *see the movie Blow) with lots of drug money bank accounts he did not last long. 

Whoops that link will not work, it is to the subscription WSJ, gee I wish we had that for all of us. 

Bermuda and the Bahamas take note.  I made  a trip to the Bahamas as a Bankruptcy Trustee. There and in the Caribbean it is clear that the chief industry is wiring money to bank accounts. Satellite dishes are shall we say in evidence.