Tag: Prof Note

3 October 2018

 

ENRON!  Correction, every 50 minutes during the four-hour examination I was walked around the building for 10 minutes, i.e. I was given 50 minutes to model, interrupted for 10 minutes, then another 50 minutes to model, etc.  Also, the salary offered was $80,000/yr with a $10,000 signing bonus payable in 30 days of start of employment.  Also, I was asked by several to comment on Enron’s hubris.  I am not about to say I did not have “confidence/ego” at that point in my life.  However, I have learned, and continue to learn, that being humble is best for many reasons.

 

Question: According to MSN:Money, the elimination of what 15 expenses will save you $9,955.94/year?

 

Trump considered blanket ban on all China student visas over spying fears – Pg. 1

–          …proposal was shelved over concern for its economic and diplomatic impact (Prof Note: Consider the U.S. Universities that would have literally imploded over night!  I love the Panda!!!)

–          US officials in Beijing made a broader economic argument that most US states enjoyed service-sector trade surpluses with China because of spending by Chinese students

 

Fed chief defends caution on rate rises despite wage growth – Pg. 2

–          Jay Powell cited the experience of the 1990s as he argued an acceleration of wage growth need not trigger too much inflation.  The link between tight labour markets and inflation has been “greatly reduced”, although not eliminated, in recent decades…

–          Fed officials have been picking up increasing anecdotal evidence of shortages of available workers as US unemployment hovers at 3.9%, with further declines predicted in the coming months.

–          Wage growth has accelerated to its quickest pace in nine years while the economy expanded at an annualized pace of more than 4% in the second quarter

–          …assess whether there was a danger of the “revenge of the Phillips curve”, but he suggested those risks were limited

 

Customers’ tips leave workers waiting for fairer pay – Pg. 9

–          This week, the UK government said it would ban restaurants from keeping any of the tips that customers pay by card

–          Customers may also be swayed by racial and gender biases (or simply their mood).  Employers can be biased too, but at least when that is the case, the employee has some legal redress

–          Moreover, plenty of customers do not want to have this management function thrust upon them at the end of a meal.  There is nothing enjoyable about the quick mental arithmetic, the fumble for spare cash and the worry you have not been generous enough (Prof Note: I am a proud member the Army/Navy Club in DC.  Of the many things I enjoy, one of the top is that when my guests and I are finished we simply leave.  We are not held hostage waiting for a bill (have signed when seated) nor worried about the staff remembering the gratuity level I, or anyone, leaves.  We are all equal.)

–          In many states, employers are legally allowed to pay measly hourly sums to “tipped staff” like waiters and barmen

 

Fed’s Quarles outlines plan to cut lenders’ rules burden – Pg. 14

–          The Federal Reserve plans to lighten the regulatory burden on large US banks, …but big foreign banks operating in the US that had also hoped for relief will not see changes anytime soon

–          Congress has already ordered the Fed to lift some of the strictest provisions of the Dodd-Frank regulations for banks with between $100bn and $250bn in assets, under legislation earlier this year known as the Crapo Act…

–          …G-SIBS [globally systematically important banks]

–          G-SIBS face the highest capital and liquidity requirements because of their critical role in the world financial system.  US banks that have more than $250bn in assets but which are not on the Financial Stability Board’s list of G-SIBS include US Bankcorp, TD Bank, PNC and SunTrust

 

Answer: (1) Streaming Services (Prof Note: If you got rid of cable this may be your baseline…like it is mine…love NetFlix!); (2) Phone games; (3) Newspaper subscription; (4) Satellite Radio; (5) Designer Coffee; (6) Life Insurance; (7) Brokerage Commissions; (8) Investment Costs; (9) Cable TV; (10) Premium Gas; (11) Warehouse Club Memberships; (12) Bank Fees; (13) Bottled Water, (14) Gym memberships; (15) Cigarettes

2 October 2018

 

ENRON!  (Bet that got your attention! :))  In August 1999 I interviewed, and was offered, a position with Enron.  The position was Manager of Model Development, i.e. pro forma development, for Asia, Africa, and Australia.  I turned down the position due to salary.  However, I just found, see attached, the modeling examination I was provided in Houston as part of the interview process.  The modeling test was four hours and every 10 minutes, I am NOT joking, you were interrupted and walked around the building.  Enron’s thought was that one never gets an uninterrupted 4 hours to model.  My response when told this was, “Who will interrupt me between 2am and 6am.”  They did not comment.  Within the four hours the entire model was completed WITH US GAAP compliant financial statements, i.e. Income, Statement of Cash Flow, Balance Sheet (which incorporated the Statement of Retained Earnings), Depreciation and Tax pages.  I provide this as, I just found it while cleaning my office, an example of where, I believe, new graduates should be regarding their modelling skills.  Enjoy!

 

Question: According to MSN: Money, what are five suggestions that can earn more money so one can get on the path to true wealth?

 

IMF picks its first female chief economist – Pg. 2

–          A US and Indian citizen, Ms Gopinath grew up in India, received her Ph.D. from Princeton University and worked at the University of Chicago before moving to Harvard

–          She is best known for her work on exchange rates, writing recently that the gains to flexible exchange rates “are less that you think” – a view that will be challenging to the IMF, which traditionally supports the policy

–          …her research has shown that currency depreciations are ineffective in stimulating exports in most countries because goods are overwhelmingly invoiced in dollars.  With a “dominant currency”, export prices do not fall when the exchange rate changes and so export flows are quite unresponsive to exchange rates.  Imports often fall due to a lack of purchasing power in dollars

 

The US must hold firm on bank capital rules – Pg. 9

–          Few things are more complex than rules designed to constrain excessive borrowing by large “systemic” financial institutions.  There are “leverage ratios” – relatively simple metrics that require a bank to hold a minimum amount of equity relative to total assets – and “risk-weighted ratios” that specify equity minimums based on the perceived riskiness of a bank’s holdings

–          Tough capital rules are a competitive advantage, not weakness

–          Thick capital buffers keep the banking system functioning through economic cycles.  Every dollar reduction in bank capital weakens the public’s protection against big failures

–          The fed should be free from political influence in the exercise of both monetary and regulatory policy.  The Federal Reserve Bard has autonomous funding and lengthy terms so that its members can withstand the destructive animal spirits of politicians up for re-election

 

Answer: (1) Negotiate your salary; (2) Take on a side hustle; (3) Improve your skills (Prof Note: Personally, raise your skills to the level that your employer worries you will leave rather than you worrying they will eliminate your position!); (4) Invest in income-producing assets (Prof Note: Can you say, “Real Estate”?)

1 October 2018

 

Question: According to MSN: Money, what are 7 costly problems a home inspection probably won’t catch?

 

Italy pledges debt cut despite spending rise – Pg. 2

–          Italy’s government bond yields jumped last week as investors took fright at the fiscal plans of the coalition…

–          Italy has the second largest debt as a percentage of GDP in the Eurozone

 

Fall in demand for MBAs driven by US decline – Pg. 3

–          Global demand for business masters degrees has fallen for the first time since the financial crises…

–          Global applications for places on courses that started last month were down just 0.02% year-on-year.  But this was driven by a fall of nearly 7% in the US, birthplace of the MBA

–          Demand for business school courses in the US has been falling for five years.  But previously this had been offset by strong growth in the fast growing Asia Pacific region and Europe, where courses are generally shorter and less expensive

–          Degree courses in Asia Pacific had an 8.9% increase in applications, demand in Europe rose 3.2% and in Canada growth was 7.7%, ..

 

US business schools lose their lustre as overseas applicants fall away – Pg. 10

–          Nearly 60% of US programmes reported a decline in applications

–          Decline in the US market is blamed by schools on a combination of an improving jobs market at home that raises the opportunity cost of returning to college, and increased competition from cheaper overseas institutions, many of which have risen in global rankings

–          Many US course heads are most worried by a decline in overseas applications

–          The lack of overseas students is not a problem in Asia because domestic demand is booming

 

ICE closes in on $15tn US mortgage market – Pg. 14

–          …99% of mortgage documents are still on paper, …

–          The arrival of ICE into the mortgage industry has parked intrigue as to its plans.  Founded in 2000 as an energy trading platform, it is now the world’s second-most valuable exchange group

–          What ICE intends to do is make it faster and easier to track who has issued home loans and who has purchased them.  Improved technology could hasten the adoption of digital mortgages and facilitate the process of securitization, in which home loans are bundled for sale to big investors

 

Answer: (1) The previous owner was a smoker (Prof Note: Rent to smokers and charge a premium); (2) The ground beneath your home is unstable; (3) The roof is in rough shape (Prof Note: Just put a new room on a Falls Church townhome.  Total Cost: $3,000); (4) The swimming pool needs repair; (5) There’s an issue with the septic system; (6) The chimney is a safety hazard (Prof Note: I just put in a new cast iron insert in my chimney.  Total cost: $5,300); (7) The walls are full of toxins (Prof Note: Cat Ghaut was infested with wood lice and termites.  Total home renovation!)

29 September 2018

 

Question: According to MSN:Money, what are 8 creative ways to shrink your credit card debt?

 

Tesla tumbles as SEC accuses Musk of fraud – Pg. 1

–          More than $6bn was wiped off the value of Tesla after US regulators accused Elon Musk of lying to investors, sparking fears on Wall Street that the electric car maker’s maverick chief executive will be forced to step down

–          …Mr Musk made “false and misleading statements” when he said he had “funding secured” to take the company private at $420/share in August

–          ….cost of insuring against a default in its debt rising to a record high yesterday

 

Global M&A tally topples pre-crisis record – Pg. 14

–          Global merger and acquisition activity in the first nine months of 2018 set a record, eclipsing a previous high reached on the eve of the financial crisis more than a decade ago

–          Deals worth nearly $3.3tn have been agreed so far this year, a 39% jump from 2017, as companies race to remake themselves in the face of sweeping technological change

–          The total has been bolstered by a string of mega-deals, defined as takeovers worth more than $5bn

–          The blitz of energy takeovers was accelerated by an investor revolt against complex corporate structures and by changes to the US tax code

–          Only twice before has M&A exceeded the $4tn mark

 

Answer: (1) Look for rebates and rewards; (2) Put your extra space to work for you!; (3) Negotiate everything; (4) Sell your stuff; (5) Consolidate your debt; (6) Automate your payments (and savings) (Prof Note:  I do not agree with this.  I do not automate any of my payments.  This way I stay on top of everything every month.  Savings…yes!); (7) Watch your credit closely; (8) Get a side gig (Prof Note: Do the hustle…the side hustle!!!)