AU Blogspot

                  Thanks to Mattia for permission to use this Photo.

We’ve been fortunate enough to share the insightful perspectives of economist and entrepreneur Bill Conerly with our student community since this blog first launched in 2007.  Mr. Conerly is not only a contributing blogger, but someone we consider a friend of the greater Ashworth University community as well.  He was recently interviewed on the Small Business Advocate Radio Show on the topic of business planning after the recession.  The issues covered are of vital importance to anyone one with small business aspirations, so I highly recommend listening to this very informative podcast interview.  You can also visit Bill’s Businomics Blog to show your appreciation for his efforts on behalf of our Ashworth Blogspot readers.  Thanks everyone.

Ryan Rode
Ashworth University

  
               Image courtesy of Stanley Donwood/Radiohead.

Monday’s Wall Street Journal  had columns by Hillary Clinton and Barack Obama’s advisors.  In a post last week I chided Mitt Romney for glib generalities.  Now Clinton gives us the opposite extreme:  government by laundry list.  Remember some of the awful State of the Union speeches, in which the President (pick any recent president you wish) says: “There’s a problem with X; I have a new program.  There’s a problem with Y; I have a new program.  There’s a problem with Z; I have a new program.”  Well, that’s Hilary’s column.  I liked the internal consistency of her message at first, in that she presented a broad area of concern, then specified action steps to deal with the area.  That appeals to my analytical side.  But she shows no real philosophy about how government should operate, merely that for every conceivable problem there should be a new government program.  Gag.

If you don’t like laundry lists of specifics, then Obama is your man.  He apparently believes in content-free leadership.  His major theme: bringing people together.  Ending the divisive partisanship that infects Washington DC.  I’m not sold that a) he can end partisanship, and that b) we’ll get better policy without partisanship.  He has not made that case (it would require specifics, which Obama isn’t in to).  I confess that I really miss the Bill Clinton administration, when gridlock prevented action and we were all focused on that blue dress.  Remember, the economy was strong and the budget was in surplus while Congress was gridlocked.  Sigh. (more…)

 
                          Thanks to theskokieten for permission to use this Photo.

With one of the most critical takeovers in the history of business-tech hanging in the balance, there is predictably no shortage of rumors, innuendos, and overnight prophecy to keep anyone with even a passing interest in Microsoft’s bid to acquire Yahoo rather distracted. This brand of spin campaign is not entirely motivated by misdirection though. As you can imagine, deals of this magnitude are negotiated on multiple levels.  There are internal games within each empire’s own walls, strategies within strategies, many with their own internal logic; some may even be contradictory in relation to one another’s objectives. You then consider the number of different visions attempting to exploit emerging market opportunities that may not even be recognizable at this time. Recall the downfall of Apple in the 1980’s. The genius himself, Steve Jobs, was even fired from the company he co-founded. Apple almost went under. There were factors beyond product development mistakes, marketing errors, and market conditions that brought Apple into the dark. The company itself was at war internally. Marketing vs. Sales vs. Design vs. Finance vs. Jobs vs. Sculley and around the loop again.

The short-term endgame of Microsoft’s takeover can be anticipated in certain respects, i.e. the Yahoo brand will largely stay intact, Microsoft/Yahoo’s search capabilities will be integrated with Live search carrying the day—but I suspect that the long term implications of this deal will also be determined by the psychology of the individual players involved and how their respective agendas run productive or counterproductive to rapid market shifts. After all, we’re talking about an information game that’s played at light speed. There’s no longer enough time to make mistakes and recover from them. No one has a mastery over the fundamentals like Bill Gates and Microsoft. The rules of the game change, but they’re also cyclical. This is partly why Google has every right to be concerned about Microsoft’s latest move. Concerned in a responsible way.  Google’s not going to be spooked.  They’re already in close discussions with Yahoo.  It wasn’t a gamble, so rest assured that Page and Brin are ready to go.  The move fits within Gates’ fundamental playbook.  Consistency sometimes appears surprising or original because our memories are short and selective.  We forget so easy…

The following video provides an overview of this developing story.

Ryan Rode
Ashworth University

 
              Thanks to Mark Strozier for permission to use this Photo.

The first thing you see is that changes in stock prices are far, far greater than changes in the economy.  There are two good reasons for this.  First, corporate earnings are more volatile than the economy.  If sales drop 10 percent, many companies will see profits fall 100 percent.  Their variable costs usually don’t fall in proportion to the sales drop, and their fixed costs don’t fall at all.  So fully rational investors should change their valuations of stock prices more than proportionately to changes in their expectations for the economy.  Second, not all investors are rational.  (Surprise!  You didn’t know that?)

They often overreact to current news, causing stock market movements to swing much wider than economic trends.  There’s also a herd effect that’s at work.  You are getting nervous; not sure what to do; then you see everyone else selling like mad.  You sell.  It may not be rational, but it’s more comfortable to follow the crowd.  This might be a good time to reread Keynes’s General Theory. What is the economic outlook, given the huge sell-off?  Here’s a summary of the key points from Chapter 11 of Businomics:

• The economy impacts the stock market
• The stock market tends to be a leading indicator of the economy, but not consistently or with great precision
• The stock market can affect the economy, but only to a small extent

(more…)

 
                    Thanks to Dusdin for permission to use this Photo.

Fixed assets are an important part of every company.  These include the long-term assets that you do not plan to use up in under a year.  These items are dealt with slightly differently, and include Plant, Property and Equipment as the main categories.  Many times a company will have the CPA deal with these items, but you will be all the more valuable if you know how to account for them also!  Check this website for more information:  http://www.fixedassetinfo.com/

Misty Hand
Computer Accounting Instructor
Ashworth University School Of Business 

            Thanks to Eugene Smith for permission to use this Photo.

Mutual funds are increasingly making use of Derivatives in its portfolio as a strategy to boost the returns from investment. Peruse your Fund’s portfolio in the monthly and quarterly fact sheets to ascertain the exposure that your fund has taken in these Derivatives. Comparing these across periods will reveal the extent of churning that your fund manager dolls out in these funds.

Greater Quantum of Derivatives augments the returns and amplifies the risk of your portfolio. The strategy endorsed by the portfolio manager may be Conservative or Aggressive. A Conservative Strategy reduces federal taxes but may also constrict short-term returns. Aggressive churning on the other hand increases the Federal Tax but collates greater short-term returns. Furthermore, derivatives are more effective in flat markets vs. volatile markets.

These Derivatives are usually one of the three types-

1) Credit default swaps

2) Covered Calls

3) Index tracking Derivatives (more…)

In updating my economic forecast for the new year, I surprised myself.  I walked into the spreadsheet moderately gloomy (I thought) and plugged in conservative numbers.  Out came the fairly pleasant forecast that is pictured above.

There’s weakness in the current (fourth) quarter, and then things look better.  I did put some dreadful numbers in for housing construction, but that sector is now only 4.5 percent of total GDP.  I clobbered housing starts, but that doesn’t have a huge impact on GDP.  I brought down the growth rate of consumer spending for a couple of quarters, and kept inventory growth down to near zero in the first half of 2008.What’s keeping the forecast up?  Export growth will remain strong, and import growth will weaken.  Nonresidential construction, though it will decelerate, still grows at a nice pace.  Late in 2008 I see business spending on equipment and software recuperating.  Defense spending grows at the recent pace, then the growth rate slows.  I have less confidence in this area.

Why the disconnect between my economic outlook and the news reports?  I think it’s a weighting issue.  For instance, when the housing starts numbers come out and they are rotten, that fact is seized on by the press.  Same thing for falling home prices. (more…)

Paul Krugman is simultaneously one of the most respected and controversial economists in the world.  Named by The Economist as “the most celebrated economist of his generation,” Krugman’s provocative opinion pieces in the New York Times often set the tone of political debates that appear across the cable/network television and talk radio wire.  It’s not uncommon for Meet The Press’s Tim Russert to relentlessly grill Presidential candidates on Krugman’s latest “op-ed”, so it’s clear that he does project quite a lot of political influence whether you agree with his analyses or not.  In this video, which you can view by clicking on the image above, you’ll watch Paul Krugman’s recent presentation at Google Headquarters.  Enjoy the video.  I look forward to hearing your perspective.

Ryan Rode
Interactive Services Manager
Ashworth University       

            Thanks to Jason Meredith for permission to use this Photo.

As 2007 draws to a close, let’s take a moment to reflect on what we have learned by highlighting our mistakes. We all make them, there are no exceptions to that rule. The only variable here is how big of a mistake was it.

I’ll start. My biggest financial mistake of 2007 was going against my good friend David Gordon’s advice and jumping into the options market without adequate knowledge or experience. Instead of sticking with my bread and butter of stock trading (short and long term), I wanted to test my luck in the options market. To my shock, I have never seen so much money lost so quickly from my portfolio. While I did have a couple triple digit percentage winners, I also had a couple options expire to the worthless state.

The real shocking thing was that I had picked winning stocks, but in the game of options, you need not only winning stocks but also winning time frames. This is where I fell short and the lesson was learned. You see with options, you need not only to pick the correct price, but also the correct time frame. My investment strategy doesn’t look at time frames but rather stock behavior to determine my buy/sell points. While time is also an important factor when I trade, to limit my forward looking time frame was something I wasn’t comfortable with from the beginning. None the less, I jumped into the options market against my better judgment. (more…)

 
                 Thanks to Junhao for permission to use this Photo.

One of the main problems being discussed in the US recently is the problem of underfunded pensions and sky rocketing benefit expenses. Old line American companies (the same is true elsewhere is G8 countries) are now burdened with pension costs that their competition does not have, but these cost are higher now that their obligations have extended longer than these plans had allowed for.

It really doesn’t matter if the companies poorly planned, or the insurance/investment industry mis-advised, but there are at least problems that will become painfully obvious in the days ahead. First, old line companies, burdened by benefits are uncompetitive with their newer or less obligated competition. Second, a society that ignores social services and leaves it to business, will either have a failing social systems or failing businesses. Society needs to establish government funded safety nets that work to make life in a world of temporary jobs manageable and rewarding to both the worker and investors. (more…)