Playing for the Big Green

By |2014-09-09T16:03:06-04:00May 31st, 2012|Global Market Update|

“Pay to Play” is a pernicious system. Some nonprofits use their investment portfolios as fundraising tools. Periodically, the nonprofit asks investment management firms to submit proposals on how they would manage a portion or all of the organization’s investments, and what they would charge. When the proposals are evaluated, the nonprofit also examines the record of charitable contributions they have received. Unless a manager is on the list of the organization’s donors (they “pay”), they won’t have a chance of being hired (“playing”). It’s [...]

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Booking a Bankruptcy

By |2017-07-17T12:34:54-04:00May 30th, 2012|Global Market Update|

Does Houghton Mifflin’s bankruptcy have a larger meaning? Last week Houghton Mifflin Harcourt Publishing Company declared bankruptcy in the US District Court in Manhattan. The Boston-based publisher claimed that cutbacks in state and local education budgets meant that school districts around the country just weren’t buying textbooks fast enough for it to be able to service its debt. The bankruptcy comes as booksellers adjust to the advent of the Kindle and other eReaders. The storied company has a long history, going back to 1832. [...]

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Skin in the Game

By |2017-07-17T12:34:54-04:00May 29th, 2012|Global Market Update|

How can colleges be encouraged to control their costs?College costs are ridiculous. As our economy becomes more knowledge-based, additional training is more necessary than ever in order to add value to an employer. A four-year degree from many private schools now costs between 200 and 250 thousand dollars. For most families, the prospect of paying upwards of half a million dollars for their children’s education is daunting. […]

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The Failure Effect?

By |2012-05-25T06:44:08-04:00May 25th, 2012|Global Market Update|

Will Facebook forever live under the cloud of its lousy IPO?As revelations keep coming in about bankers behaving badly, company executives making rookie errors, and institutional investors bailing at the last minute, it’s helpful to remember: we’ve seen this movie before.Back in 2004 Google had troubles with its public offering. The pricing was in question. The number of shares was in question. The principals used a quirky auction IPO to cut out Wall Street. Then, in the middle of all this uncertainty, Playboy published [...]

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The Facebook Effect?

By |2012-05-24T06:50:35-04:00May 24th, 2012|Global Market Update|

Well that was a short honeymoon.Some large shareholders who participated in Facebook’s initial public offering have turned around and sued the company, its CEO, and its bankers claiming that just before the IPO the company and bankers materially lowered their revenue forecasts for next year and didn’t tell them. That, they claim, is why the stock declined almost 20% after launching at $38 per share, almost 100 times last year’s earnings.I suppose it’s the American way to find someone to sue when something goes [...]

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The Success of Failure

By |2017-07-17T12:34:54-04:00May 23rd, 2012|Global Market Update|

The Success of Failure What makes a successful innovation? The US has been blessed by a series of dramatic innovations over time: electrification, telephones, personal computers. Some of these have been truly disruptive, changing not only the way people do their jobs, but the very jobs themselves. Indeed, mastering the dynamics of innovation is critical for any company. In the past year corporations that file with the SEC used the word “innovation” over 33 thousand times in their annual and quarterly reports! But by its very nature [...]

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Facing the Books

By |2017-07-17T12:34:54-04:00May 22nd, 2012|Global Market Update|

Should you buy shares of Facebook?Before I answer that question let me re-state the obvious: this blog doesn’t dispense investment guidance, recommendations to buy or sell securities, or anything remotely resembling advice. For that you need someone who can tailor a plan to fit your particular goals and constraints. Blogs don’t do that.But having said that, is it a good idea to buy Facebook now? After all, many people get a lot of enjoyment buying MacDonald’s shares and eating at MacDonald’s, buying Disney shares [...]

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Capital Thinking

By |2012-05-21T06:26:44-04:00May 21st, 2012|Global Market Update|

What are capital controls, and why do countries have them?Capital controls are restrictions on money flows. Countries enact them to control the flow of cash into and out of their economy. They can take the form of alternative exchange rates, market regulation, and sometimes outright prohibitions. Most countries have some kinds of rules around money flows. In the US, we regulate cash movements into and out of the country, and we take special note of large cash transactions by bank customers, primarily to fight [...]

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Toxic Secrecy

By |2017-07-17T12:34:54-04:00May 18th, 2012|Global Market Update|

Usually it’s a good idea to keep your mouth shut. But not always.Last year, Brian Dunn, the newly installed CEO of Best Buy, developed a close personal relationship with a junior female worker. This kind of thing is bad for company morale. Among other things, it’s hard to oversee someone who is chummy with the new Chief. The Chairman and founder, Richard Schulze, was informed about it and confronted Mr. Dunn. When Dunn denied the allegations, Schulze let the matter drop. That was a [...]

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Losing A Bundle

By |2012-05-17T05:51:28-04:00May 17th, 2012|Global Market Update|

What are some other bundled products?Yesterday I discussed how part of Apple’s success comes from the iTunes Store, where they unbundled the individual songs on an album. You can still purchase an album, but now you don’t have to. With individual songs costing 99 cents, piracy is less of an issue: most people feel they can afford the price.Bundled products load unneeded products in with desired ones, simplifying the marketing and enabling the seller to earn a wider margin. But if the same goods [...]

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