Professor Elam

Excel Help

Tuesday Feb 23, 2010

Pearson offers a genuinely helpful excel page at this link. I suggest you bookmark it, I was able to find the absolutge cell refence on the first try.

Black History Month, Media Change

Monday Feb 22 2010

While legislation was passed in the 1960s changing voting and other laws, it took a while to change attitudes. No doubt the admission of black athletes to major sports, which really took off, had a lot to do with that. But, media watcher that I am, it seems to me there were a couple of other events that figured prominently in the change. I mentioned a few posts back Sept 30, 2009, that Desi Arnaz was my pick for the most influential Hispanic in modern times. I found it odd that no one commented but...here i go again. 

Bill Cosby was certainly a transition figure in all of this. Bill never told jokes, he told stories. The stories involved his life as a kid with his brother Russell and buddies like Fat Albert. We all had those experiences but few of us had the ability to weave life lessons and humor the way Bill did and does.  

Bill Cosby Himself consisted of Bill, a mike, and a chair. It was perhaps the best one man comedy show ever, back in 1984. It got Bill his own television show all about the Huxtables, a well to do family. That show was one of those landmarks that set a standard for how things ought to be. 

The Jeffersons  was a spin off from All in the Family in 1975. The theme song Movin' on Up reflected the new lifestyle as a result of a successful dry cleaning business. While this sounds mundane now, the show featured a successful black family, their wise cracking maid, a son,  an interesting Englishman from down the hall, and a mixed race couple from another floor. The latter was unusual at the time. But compared to the over the top antics of George, frankly it came across as rather benign.  George was always spinning off into space, only to be brought back to earth by wife Louise.  My point is that such comedy forms a basis to conclude that we are all alike, we all have similar dreams and emotions. These characters deserve a place in the overall history as they changed opinion in a that legislation never could. 

Black History Month

Monday Feb 22 2010

Does anyone go back on the blog?  Let's see, try the archive for June 27, 2007. Any comments?

Students, Your Future Awaits

Monday Feb 22 2010

The one complaint about my classes is that, okay so there is perhaps more than one complaint....., but

the one complaint is that I expect too much. Here is a quick story. In high school I took two years of Latin Classes. At least I sat through two years. We only got to chapter 12 each semester in the books. But there were about 22 chapters in the books. Fast foward to my arrival at UT Austin. As a result of my triumphs in classic studies, two years of diligent study, I was placed in advanced Latin!  I discovered that my knowledge was exhausted after a mere, you guessed it, twelve chapters in that book, and we were covering three chapters a day. The rest of the class, mostly students from Dallas and Houston, had gone as far as translating Julius Caesar. I had,  on the other hand, seen the movie Cleopatra......I made my A but only after countless hours of scrambling to catch up.

I believe that my charge is to make sure you do not find yourself  in a similar situation. Now consiider this prediction  from Steve Kaplan at True Contrarian, this might shape  your expectations upon graduation in a couple of semesters. Quite simply he is suggesting we will see another drop possibly below the March 2009 S & P level of 666, trust me that will have consequences on hiring....

The structural situation of the worldwide economy is quite similar to 1930. By 1930, most worldwide stock markets had regained modestly more than 50% of their 1929 losses. Similarly, the S&P 500 index by January 19, 2010 had regained modestly more than 50% of its total pullback from October 11, 2007 (1576.09) through March 6, 2009 (666.79). I don't expect a collapse of 85% over the next two years, as we experienced from the 1930 high to the 1932 low, but certainly 60% or 65% is a reasonable projection for the total pullback from the recent (or upcoming spring) top to the ultimate bottom. The more that stocks end up declining, the more important it will be to wait patiently until the bear market is nearly over before purchasing your favorite securities.

Greed is Legal

Monday Feb 22 2010

Greed is Legal is the tag line from Oliver Stone's Wall St II, coming this spring. I have added several links to this blog among them Jesse's Cafe, here are his thoughts this morning. Plato's Republic envisioned a totally different system more along the lines of what Jesse suggests here.

One has to wonder what would have happened if some more coherent, approachable science, had put forward a system of management that relied upon the nearly perfect rationality and unnatural goodness of men as a critical assumption in order to work? They would have been laughed out of the academy. Yes, there is a certain power to befuddle and intimidate common sense through the use of professionally specific jargon, supported by pseudo-scientific equations.

Why doesn't 'greed is good' work? Because rather than work harder, a certain portion of the population, not necessarily the most productive and intelligent, will immediately seek rents and extraordinary income obtained by unnatural advantages, by gaming the system, by cheating and coercion, by the subversion of the rule of law, which will sap the vitality of the greater portion of the population which does in fact work harder, until they can no longer sustain themselves. And then the greedy seek to expand their venality, and colonies and then empires are born.

What will take the place of these modern economic myths? Time will tell, and it will vary from nation to nation. But the winds of change are rising, and may soon be blowing a hurricane.

Sunday News

Sunday Feb 21 2010

I had a post on the Austin airplane attack yesterday. Update, Shane Hill, has 20% burns and is now being treated at local Brooke Army Burn Center, let's hope for the best for this unfortunate victim of terrorism. 

Alexander Haig died this weekend. David Halberstam included Haig in his book the Best and the Brightest. Haig managed to rise above gunfire and warfare to become a diplomat and a member of the revolving door fraternity that moves from govt to the private sector and back as easily as you and I change socks. Ironically it is this sort of individual and the perks they enjoy that in part frustrated Stack's attack on the IRS. Goldman is giving bonuses, Stack is being stalked by the IRS, at least in his mind.

 On the Waterfront is on Turner Classic Movies tonite, if you have never seen it, get the popcorn a great study in ethics as timeless today as when it won numerous Academy Awards. 

 Hmm, the Sookie Stackhouse series which has become True Blood has northern Louisiana visitors looking for the local haunts of the series. Sorry, Shreveport has bars but no vampire bars.

Years, okay decades ago, Galveston benefited from a song by Glenn Campbell about the island Lightning strikes twice. 

Tax Man

Sat Feb 20 2010

Let me tell you how it will be; 
There's one for you, nineteen for me. 
'Cause I�m the taxman, 
Yeah, I�m the taxman. 

Should five per cent appear too small, 
Be thankful I don't take it all. 
'Cause I�m the taxman, 
Yeah, I�m the taxman. 

(if you drive a car, car;) - I�ll tax the street; 
(if you try to sit, sit;) - I�ll tax your seat; 
(if you get too cold, cold;) - I�ll tax the heat; 
(if you take a walk, walk;) - I'll tax your feet. 

Taxman, the Beatles

joseph Scott flew his airplane into an IRS office in a seething fit of rage. But the reality here is that many people are not 'wired' to face the reality of paying their own tax bill. If witholding were repealed, the entire US Government would not last six months.  Scott was apparently a tax protestor and had been in trouble with the IRS before. He had a failed business or two and the news does not say if he still owed payroll taxes. in one recent year he failed to file a tax return. 

As a professional accountant you should know that most tax problems are of the following varieties, at least this was my experience as a CPA. 

The big issue, a taxpayer knows the tax is due and simply does not pay. This is a particular problem with payroll taxes. Remember that the employer is liable to send in witholding for income tax, social security plus matching, FUTA, SUTA. The IRS knows of course when someone stops paying and should intervene right them but they never do in my experience, Of course the situation only gets worse. Understand that the IRS likes penalty and interest to mount up but usually this just results in an inability to pay.

A second problem is the simple failure to file. Again the statue of limitations does not even begin until the return is filed. And of course there are income returns for partnerships, corporations, and sole proprietors as well as 941 payroll tax returns as well as estate and gift tax returns. 

And the third problem is filing an unrealistic return. The IRS of course has all the stats on what are reasonable deductions for  every kind of allowable expense. If the return exceeds those expectations, like in any audit, the IRS uses analytical procedures to determine likely candidates for audit review. 

Bad Moon Rising

Sat Feb 20 2010

John Fogerty, Bad Moon Rising

I started writing about the downturn in mood in 2008 when the movie Dark Knight did $500 M gross, there was a tip off. Recently we had  a Major kill several soldiers at Fort Hood, an Alabama college professor killed three other faculty members and wounded three others, and finally Joseph Stack flew his airplane into an IRS building in Austin, TX killing himself, an IRS worker, and injuring others. 

The Major and the Professor are  claiming insanity, but each picked their targets, brought a loaded gun or guns, planned the attack, and were successful in killing people.  Stack used an airplane.  Sounds pre meditated to me. 

But this is not criminology class but socionomics class. The mood is ugly. The Mayor of Las Vegas refused to meet with the President who has criticized  Vegas as a destination twice on national tv.  Now his Senate Majority leader is in trouble election wise and Obama announced he loves Vegas, well, we will let the pundits debate the validity of that statement. 

Our point is that negative mood brings on a bear market. Murder and war are the ultimate negative human emotion. We take no joy in reporting the loss of life but, this is the reality of a bear market. 

Consider that world wide bear markets allowed dictators like Hitler and Mussolini take power, they came to power near the low of the 1930s markets, it was the negative mood that allowed that to happen. You know the results.  

Factoring

Sat Feb 20 2010

David Hendricks has a good column on factoring in the Sat Express News, I was not able to find it on mysa.com to link but the upshot is that  a start up company is using factoring for financing. Factoring is the process of discounting an invoice at a substantial cost in exchange for cash, here is my take. 

I always enjoy your column although as usual I could not find it to hyperlink for my students at mysa.com, oh well

At any rate, I have some experience factoring for other businesses and my question for Bio Pulp is, how will you get off the factoring treadmill?  I would very much like to see that excel spreadsheet projection. Bio Pulp is paying way over the bank rate all right, 15% or more I would guess. Does this business actually net 15% on sales?  If not it is hard to see how they are anything but a bank resource.  Yes they believe they have cash flow but that is not what a cash flow statement would indicate.   Every invoice does not result in cash flow, net cash flow would be the sum of 

operations

financing 

investing

here financing offsets operations, and the fact is that Bio Pulp is never developing its own cash flow, it cannot get above the debt incurred. A venture capital rescue would have to pay off the factoring debt, I doubt Bio Pulp is doing much more than paying the interest. And then the VC would have to pony up that much capital again, or it is back to the bank. 

Your article reflects the same thinking as the accounting textbooks, but my experience is that it is near impossible to stop the factor treadmill. Even if business triples, their demand for more credit will expand. 

The horror of the factor of course is that somehow the business manages to keep the money from the next invoices, and skips town with the bank debt unpaid.  I am not suggesting these fellows are unscrupulous but that is the danger, esp if it dawns on them a VC bailout is not likely. That is after all what happened to the local Dem party reflected in another column in today's paper, the water is shut off, where is Dwayne?

PS In our own business we factored for an individual, the problem was he always wanted more money, at $100 plus I thought I had enough of his invoices, what to do?  No harm done but I could not get him to realize that he needed to stop factoring if he was ever going to make any money....Most small debtors sadly do not grasp that concept. 

Perspective on Gold

Thursday Feb 18 2010

I asked permission and it was granted from Richard Russell, author of the Dow Theory Letters, to reprint a recent column.   Mr. Russell has written his investment letter since the 1950s. He has authored numerous articles for Barrons and is well respected in investment circles. By the way, at age 85 he writes every day, and has more subscribers than ever. His remarks on gold deflation and the dollar appeared Feb 17 2010.

What does it mean when people say that the "dollar is strong?" At present, there is no definition for the dollar. The dollar is only defined in terms of other currencies. For instance, "The dollar is worth so much in terms of the British pound." The euro was created to be the chief competitor to the dollar. The euro, because of the Greek mess, has been weak. As the euro weakens, the dollar is listed as "strong." 

But there must be one solid reference point against which everything is gauged. That item is gold. When the dollar price of gold rises, it means that the dollar is truly strengthening. When the dollar, as now, is declining against gold, it means that the dollar is weakening. A "strong dollar" today is taken to mean a dollar that is strong against the euro. But at the same time the so-called strong dollar can be weakening against the standard -- gold.

At this time, almost every item and sector class is declining against gold. This is a indication of deflation. If the price of houses, commodities and real estate were rising against gold, that would be a symptom of real price inflation. T hat is not what's happening. People do not understand deflation. They think deflation is a decline in the dollar price of items. Deflation is a decline in price of items against gold. As the value of the dollar declines against gold (or as gold rises in price in terms of dollars) we see deflation. 

As the price of gold rises in terms of dollars, the dollar is being devalued. In a matter of months or possibly years, this decline in the dollar vs. gold will transfer to other prices. The price of everything will decline in dollar terms. This is what the Fed is so afraid of. The Fed can control inflation simply by raising interest rates or cutting back on the money supply. But once deflation sets in, there's little the Fed can do about it except attempting to smother deflation with new oceans of money.

Deflation and unemployment tend to feed on each other. The real battle facing the nation today is chronic unemployment. Americans are both frightened and furious. They see that the Fed has bailed out Wall Street, but what has it done for the man on the street? The so-called "stimulus" packages have proved useless. 

The real employers of people are America's small businesses. The small business man is now confronted with higher taxes, uncertainty, debt and "too much government." The small business man must cut overhead in order to survive. The easiest way to do that is to fire every last employee he can live without. His second option is to move to lower rent quarters. Both of these are basically deflationary. The cost of the Obama health plan would be a further burden on the small businessman. 

The US economy is caught between a rock and a hard place. The little guy sees the government, not as his savior, but as his main problem. This has given rise to the "tea parties." Get the government and Wall Street out of my hair" is the cry. Soon the cry will be deflation.

The question -- Why hold gold if deflation is our future?

The answer -- The Bernanke Fed will fight tooth and nail against deflation. They will do it with zero interest rates and the creation of massive amounts of more dollars. This will have the effect of destroying the dollar over time. And it will direct "survival" traffic toward the one item that can not be devalued -- gold. When all confidence in fiat paper disappears, the rush will be on for the one money that cannot be destroyed or devalued -- gold.

Russell recommendation -- Do not expect too much from gold now. Over time, gold will prove to be the ultimate reservoir of wealth. In the end, gold will be "the last man standing." Compute your gold position in ounces, not in its current value in dollars.