Professor Elam

A TQM Program Includes Thank you notes

Thursday May 31, 2012

Check out this essay on the importance of thank you notes.

In ACCT 3301 we will be reading about Dr. Deming's Total Quality Management Philosophy. Putting the customer first is one of Deming's BIg Ideas.  Clearly the non profits were doing this by telling donors they did not include a gift but spent the money on the animals instead. 

You will also find many refernces on my blog to socionomics. This social science holds that changes in social mood cause actual changes in society. such changes are generated internally, rather than from external stiumulus as most believe. this must be the case of the good news would perpetually keep people happy at stock market tops and the bad news would make them permanently unhappy at stock market bottoms. 

Barry Ritholtz on the Financial Crisis

Tuesday May 29, 2012

Here is a good run down on the Financial Crisis.

I will be recommending, make that reaquiring both summer classes to read and comment on this article. 

College Debt

Tuesday May 29, 2012

I am seeing more and more articles about the looming college debt crisis. 

Howard Gold comments on it in this article. He notes the rise in administrative costs.

Mark Cuban doubts the very wisdom of many college programs.

Peter Thiel the Pay Pal founder recently appeared on Sixty Minutes offering students an incentive to discontinue college. He has pronounced this to be a bubble. Indeed students ow more debt than the entire credit card debt in the USA. 

Our point here is that students should be careful in assuming debt. This is another reason we emphasize obtaining certifications so that one will have additional assets to offer in the workplace. 

Law Firms not TBTF

Tuesday May 29, 2012

The legal profession has been idolized in the media for years. Prominent tv shows have featured lawyers, always brilliant of course, as well as movies. The same is true for the series of Grisham novels. 

Now however ther are law school grads suing their alma maters for not being able to find the big promsied job. And a couple of big law firms have gone belly up. Jenkins and Gilchrist was a prominent Texas law firm. It went under in a disastrous tax shelter service.

Dewey and Leboeuf LLP has filed for Chapter 11 bankruptcy protection.  Half the partners left the first quarter as cash flow dried up.  This law firm had liabilities in the range of $100-$500 M. One wonders why a law firm would be so deeply in debt. 

We will study cash flow staements in class this summer. Apparently Dewey failed to do so. 

Facebook, the Envelope Please, Mark Hulbert Says $13.80

Memorial Day Weekend

Mark Hulbert suggests FB is worth $13.80. Looks like he is about right to me..

Snow White Then and Now, A Socionomic View

Memorial Day Weekend, 2012

The original story of Snow White is a fairly gruesome tale. The sentence meted out to the Evil Queen is Pure Medieval, the Old Testament eye for an eye idea. But in the original story, Snow White is a passive character. She is acted upon by the Evil Queen. It takes an accident for the poisoned apple to be dislodged from her throat so that she awakes to her Prince. 

 

 

 

 

Now fast forward to 2012. Popular entertainment resonates with the prevailing soial mood. And what is the prevailing social mood-revolution and protest. From Western Europe ( no austerity for us) to North Africa nd the mid East (freedom now) to Moscow ( Putin is the Czar Reincarnate) to Cuba, people are unhappy with their lot in life. So in the new version, Snow White and the Huntsman, Snow White becomes an active participant in her own reinvention. This switch from passive tense to active tense reflects the ongoing social mood of the world. The plot line of  the original fairy tale suggests a story that had surely been hundreds of years old when the Brothers Grimm began publishing their story collections in the early 1800s. in the original story the Queen seems to fear no one and does as she please. Snow White is a metaphor for an unlucky population under the rule of an unjust Queen. 

Not in the modern version. In the movie poster the armor clad sword bearing warrior is in fact Snow White herself, backed up by the Huntsman's warriors. No doubt this also reflects in increasing female activism, at multiple levels.  Reflecting the general popularity of sword and sorcery movies the last ten years, this one will likely be a hit, after all, it resonates perfectly with the social mood on march around the world.

 

Why We Lie

Weekend May 25, 2012

A Duke Professor constructs an interesting experiment. The idea is to learn when people we lie, what prompts or encourages such behavior. 

His conclusion is that a great deal of people  lie just a little, but in total that leads to significant costs. 

Take a read, pretty interesting. The presence of an obvious cheater causes many to cheat. This was the core of the Dallas Indpendent School District purchasing scandal. Everyone was doing it, why not?

Meanwhile the John Edwards trial goes on, no question he lied, but the trial is about the mis use of campaign money, not his obvious infidelity. 

More FB Woes

Friday May 25, 2012

In the movie, and real life,  Bugsy, Ben Siegel sells more shares of the Tropicana, the first ever big casino constructed in Las Vegas. One mobster notes that 'we will have to deal with these people, some of them are substantial.'

Well fast forward seventy years and the Wall Street mobsters are having the same problem with Facebook, too many shares that fell too low too fast. Now who's to blame?  Who exhibited the greater greed?

The FB insiders that happily sold to the late comers?

The Underwriters pricing the shares at 33 times ad revenue when Google trades for 5.5 times?

Underwriters like Knight Capital that are astonished the whole thing is up in smoke?

Investors ((pigeons?) who are holding the limp FB bag?

Facebook at 33 times Ad Revenue

May 23, 2012

This writer believes Facebook is too big to succeed!  The insiders dumped their stock on the public and got rich. FB was valued at 33 times its advertising revenue. Google by contrast is valued at 5.5 times revenue. So FB was way over priced. 

We learn fundamentals of valuation by studying accounting. This is a classic case where the early investors buying privately for less than $10 did very well, not so for the late comers. 

 

This story describes the selective dissemination of information about sagging revenues.

FB is worth $29 assuming it has revenue growth of 40% a year for the next five years.  Sure that will be easy. 

Facebook Disappoints, an Underwriting Tale

Tuesday May 22, 2012

Morgan Stanley and NASD are being blamed for the poor performance of the FB Initial Public Offering IPO.

This article is instructive by explaining how the underwriting process works, or should work. 

In this case, Second Market had already been managing the real IPO, which occurred in 2010 among private investors. They did well and the stock has advanced from an initial $6.81 to the final $38 offer price. So the early investors did well. It is important that accounting students understand this process.