Monday, November 4, 2013

International Trade

This writer is fortunate to teach a course in Financial Management to a class of graduate students from China, Thailand, Taiwan, Japan, Mexico and the United States. The diversity and experiences of these students provide a wonderful platform for learning about financial management decision making and strategies.

Our class concluded the fall term this past week, the usual end of the term case studies and examinations dominated the class in the final week. But an interesting discussion I had with a student at the conclusion of the term, I thought meaningful to share in this forum.

The student was from Japan, he thanked me and all the fine staff of the University for his education experience and learning. But above all else he thanked me for proving his parent’s wrong. You see in Japan the relationship between the country and China is a long and distrustful one. Generations of Japanese students are taught in school and in the culture to keep their distance from the Chinese people. Through centuries of war, trade, and being neighbors, the Chinese were a people not to trust and even hate.

The student in fact told his parents that he had Chinese fellow students in class and his parent’s immediately wanted him to return home and enter another University. He did not, in fact he told them that through his studies he had become fond of his new friends and wanted to learn more about their lives and culture in China.

He has invited his new friends to visit Japan next summer and he desires to study business in China once he completes his studies here in the United States. Not to sound too “Red, White, and Blue” this is one of the best qualities of America and our higher education system. Yes, Universities have a cost structure out of control, revenue sources are ever changing, public monies are perhaps misspent, immigration laws out of date, but there remains in American higher education and society, the ability to bring people together without cultural or historical biases. To put aside what a person looks like, or where they come from, to understand what type of person they truly are.

Forget our billions of dollars international trade deficit, in my opinion; our international trade is just fine.

THE REST OF THE STORY - Deborah Cavallaro is a hard-working real estate agent in the Westchester suburb of Los Angeles who has been featured prominently on a round of news shows lately, talking about how badly Obamacare is going to cost her when her existing plan gets canceled. At her age, she's eligible for a good 'silver' plan for $333 a month after the subsidy -- $40 a month more than she's paying now. But the plan is much better than her current plan -- the deductible is $2,000, not $5,000. The maximum out-of-pocket expense is $6,350, not $8,500. Her co-pays would be $45 for a primary care visit and $65 for a specialty visit -- but all visits would be covered, not just two. Is that better than her current plan? Yes, by a mile. ...

The sad truth is that Cavallaro has been very poorly served by the health insurance industry and the news media. ... Anthem didn't adequately explain her options for 2014 when it disclosed that her current plan is being canceled. ... And the reporters who interviewed her without getting all the facts produced inexcusably shoddy work.

BOOK REVIEW -  PETER BAKER , chief White House correspondent for the N.Y. Times, is out  with his tour de force, "Days of Fire: Bush and Cheney in the White House" (Doubleday; 816 pages - 650 pages of text, plus footnotes, etc.). Here are a few notes from early readers: By the time they left office, Bush and Cheney were on opposite sides of almost every major issue, including North Korea, Syria, Lebanon, Russia, Middle East peace talks, gun rights, gay rights, climate change, surveillance, detention and the auto bailout. And that was all before the Scooter Libby pardon. ... There were more doubts about invading Iraq inside the Bush team than were publicly known at the time. Karen Hughes, one of the president's closest confidantes, worried that it would be a mistake to go to war and brought up her concerns with Bush. The president sent her to Condoleezza Rice for reassurance, but she was never fully convinced and at several points tried to keep Bush from feeling trapped into going to war. As one senior official who came to rue his involvement in Iraq put it, "The only reason we went into Iraq, I tell people now, is we were looking for somebody's ass to kick. Afghanistan was too easy."

“Iraq took more of a toll on Bush than he was willing to let on. As violence worsened in his second term, one adviser said Bush was discouraged "almost to the point of despondence" and at some briefings "it was almost as if he was pleading with us not to give him any more bad news." It got to the point that Bush was grinding his teeth so hard they hurt. Laura Bush took to inviting his brother, Marvin, to the White House on weekends to distract the president from his troubles. ... What really sank the Harriet Miers nomination to the Supreme Court was not opposition among conservatives but secret murder boards by administration lawyers who discovered how little she understood about constitutional issues like Fourth Amendment search and seizure rules or the Fifth Amendment bar on self-incrimination. "She literally knew nothing about it at all, nothing," said one official. Cheney could only shake his head. "I tried to tell him," he confided to an aide. ... When Bush first met Vladimir Putin and declared that he had "a sense of his soul," Cheney's staff was "rolling our eyes." Cheney told people that when he looked into Putin's soul, he saw: "KGB, KGB, KGB."

DAVID FRUM, former Bush speechwriter, reviewed "Days of Fire" last weeks’ New York Times Book Review, "Who Decided? Peter Baker's account of the George W. Bush administration is haunted by the question of leadership ": "The Bush administration opened with a second Pearl Harbor, ended with a second Great Crash and contained a second Vietnam in the middle. ... Peter Baker (who covered the Bush White House first for The Washington Post, then for The New York Times) neither accuses nor excuses. He writes with a measure and balance that seem transported backward in time from some more dispassionate future. Yet 'Days of Fire' is not a dispassionate book. Its mood might rather be described as poignant: sympathetic to its subjects, generous to their accomplishments and extenuating none of their errors. ... Almost every leading figure in the Bush White House ... has now published his or her version of events, and Baker has painstakingly worked through them all. The result is what you might call a polished second draft of history, most likely the most polished draft we'll have until the archives are opened and the academics can get to work."

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Hugh Bonneville (50), Glenn Frey (65), Billy Graham (95), Miranda Lambert (30), Joni Mitchell (70), Maria Shriver (58), Sam Shepherd (70).

TWITTER IPO A CASH MACHINE - [Goldman Sachs, JPMorgan and Morgan Stanley] are set to collect a total of $37.2 million in fees as underwriters of Twitter's initial public offering next week ... The seven financial firms hired to pitch the $1.6 billion deal will get a combined $49 million if the shares slated to be sold go for $20 apiece, or the top of their projected price range. Goldman Sachs's likely fee of $20 million as the IPO's lead underwriter amounts to less than one day of revenue for the securities firm.

But there are lots of other ways that Wall Street can profit from the IPO. The fees are largely compensation for banks tapping their client lists to find investors for the deal and for the labor involved in getting companies prepared for filings with regulators and meetings with investors during the 'roadshow' that precedes the final IPO pricing.

RED OCTOBER - Resurgent Red Sox give battered Boston a world championship, it was a Back Bay Bacchanal, a party unlike anything since 1918. Six months after Shelter in Place, the city of Boston invites the world to celebrate a victory of team over self. Boston Strong, at least a variation of the theme, hit a crescendo Wednesday night on the Fenway lawn, the town common of 2013. These Red Sox, the motley crew that left Fort Myers begging, 'Please don't hate us,' completed the ultimate redemption song, thrashing the St. Louis Cardinals, 6-1, in the sixth and final game of the 2013 World Series. The Brotherhood of the Beard are World Champions for the third time this century, worthy progeny of the 20th century Sox, who won five of the first 15 Series back in the days when Babe Ruth was a fuzzy-faced left-handed orphan from Baltimore.

Nobody saw this coming. After the worst season in 47 years-the Bobby Valentine clown show of 2012- Sox general manager Ben Cherington and new field manager John Farrell made the Red Sox relevant and good again. The 2013 Sox dusted the field in the American League East, then blew past the Tampa Bays Rays, the Detroit Tigers, and the estimable Cardinals in an 11-5 postseason onslaught. The Sox were dominant. In the 2013 playoffs they bested aces Matt Moore, David Price, Justin Verlander, Max Scherzer, Anibal Sanchez, Adam Wainwright, and Michael Wacha. And so Boston has its eighth championship parade since 2002, and outgoing mayor Thomas Menino will be on a duck boat, which is scheduled to roll down Boylston Street, past the places where the bombs exploded on Marathon Monday, April 15. It is the ultimate civic comeback story.

CBS BLACKOUT SLAMS TIME WARNER - The CBS blackout in homes with Time Warner Cable ended in early September. But the damage from the feud is still being tallied up - and it may be lasting. On Thursday, Time Warner Cable reported the steepest quarterly loss of television subscribers in its history ... When the third quarter wrapped up at the end of September, Time Warner Cable had shed 306,000 of its 11.7 million TV subscribers - a loss even worse than the company had anticipated.

The results underscored, to a degree rarely seen before, the damage that can be done when distributors and programmers publicly feud over contracts. They also offer vivid evidence that content has the upper hand in disputes with distributors.

SPORTS BLINK - COLLEGE FOOTBALL - No. 2 Florida State gains ground on No. 1 Alabama and moves ahead of No. 3 Oregon in latest BCS college football poll, earning four more first-place votes than it did last week. The Seminoles are coming off another easy victory against a previously unbeaten rival. Florida State beat Miami 41-14 on Saturday night and received six-first-place votes from the media panel Sunday. Last month the Seminoles handed Clemson its first loss. Alabama remains No. 1 with 52 first-place votes, three less than last week. Oregon received two first-place votes, a loss of one for the Ducks. Miami's first loss drops it seven spot to 14th. Notre Dame moved back into the rankings at No. 24 and Michigan fell out after losing to Michigan State. The Spartans advance six spots to 18th.

Ohio State, Michigan State in control of Big Ten. No. 4 Ohio State laid another beating on an overmatched conference foe, and No. 24 Michigan State took control of the Big Ten's other division with a rout of Michigan. The Buckeyes ... crushed Purdue 56-0 in West Lafayette, Ind. Ohio State has won 21 straight and has been far and away the Big Ten's most impressive team. The Buckeyes appear to be cruising toward a Leaders Division title and their first Big Ten title game. They have a one-game lead over Wisconsin, a team they've already beaten ... Michigan State and the nation's No. 1 defense were even more impressive. The Spartans pummeled their rivals 29-6 in East Lansing, Mich., and have a game and a half lead in the Legends Division.

COLLEGE FOOTBALL PICK OF THE WEEK – Thursday 11/7, 9:00 PM ET, ESPN: #3 Oregon Ducks (8-0) at #5 Stanford Cardinal (7-1). The Pac 12 game of the year, the Oregon offense vs. the Stanford defense, Oregon wins 28 – 17.  Season to date (8-2)

SMALL COLLEGE FOOTBALL PICK OF THE WEEK – Saturday 11/9, 12:00 PM ET, BRAVO: the first big game in a long time in Canton, New York. The #7 Hobart Statesman (7-0) visit the Scarlet and Brown St. Lawrence Saints (5-2) in a battle for first place in the Liberty League. Can Mark Raymond’s team pull off the upset, no – Hobart 30 St. Lawrence 17. Season to date (7-1)

NFL PICK OF THE WEEK – Sunday 11/10, 1:00 PM ET, Fox: Another big game in the Norris Division; Detroit Lions (5-3) at Chicago Bears (5-3). The QB with the better game wins, Detroit 21 Tha Bears 20.  Season to date (7-1)


(NCAA, Nov. 9) UCLA Bruins (6-2) 40 at Arizona Wildcats (6-2) 30
(SCIAC Game of the Week, Nov. 9) Cal Lutheran Kingsmen (3-4) 20 at La Verne Leopards (3-4) 24
(NHL, Nov. 9) Vancouver Canucks (10-5-1) 3 at Los Angeles Kings (9-6) 2
(NFL Upset of the Week, Nov. 10) Denver Broncos (7-1) 28 at San Diego Chargers (4-4) 35
Season to date (38-31)

JACKASS OF THE MONTH - Senator Tom Coburn (R-Okla.) may have opposed Hurricane Sandy recovery funding, but that reportedly did not stop him from visiting the Northeast to raise money on the eve of the disastrous storm's anniversary.

Senator Coburn raised money at a law firm in midtown Manhattan last Monday morning, the News reported, and the National Republican Campaign Committee has a fundraiser on Wednesday in the city.

Senator Coburn voted against hurricane recovery in January. Coburn said it was wasteful and would take too long to implement.

DRIVING THE WEEK – This week brings us another jobs day (Friday) and a first look at third-quarter GDP (Thursday). The jobs number is likely to be weak, hit by the government shutdown. The big question is how soft the October number will be when you discount the shutdown. The jobless rate could tick up a couple tenths given that furloughed workers will show up as unemployed in the household survey but not the employer survey. Third quarter GDP is a clean number and will give us a good early snapshot of how things were before everything blew up in DC. The number could come in stronger than expected given the good ISM manufacturing data out Friday.

Couple of key elections Tuesday including the Virginia Governor's race where Democrat Terry McAuliffe is expected to win, further tilting the state away from Republicans. In New Jersey, GOP Gov. Chris Christie should dominate, further bolstering his position to run as a moderate for the Republican presidential nominate in 2016. Bill diBlasio expected to handily win the NYC Mayor's race, an event that has many Wall Streeters fearing higher taxes ... Twitter prices its shares Wednesday and starts trading Thursday, entering a smoking hot IPO market ... Prosecutors are expected to announce a $1.2 billion insider trading settlement with SAC Capital today including a guilty plea and agreement to stop taking outside investor money.

Factory orders at 10 a.m. EST today expected to rise 1.8 percent ... ISM non-manufacturing at 10 a.m. Tuesday expected to dip to 54 from 54.4 ... Index of leading indicators at 10 a.m. Wednesday expected to rise 0.6 percent ... First read on Q3 GDP at 8:30 a.m. Thursday expected to show a gain of 2 percent ... BLS jobs report on Friday at 8:30 a.m. expected to show a shutdown-impacted gain of just 125K with the unemployment rate rising a tenth to 7.3 percent ... Univ. of Michigan consumer sentiment at 9:55 a.m. Friday expected to tick back up to 74.5 from 73.2.

QUOTE OF THE MONTH – “There are no secrets to success. It is the result of preparation, hard work and learning from failure." - Colin L. Powell

Next week: Dear Rink Rats, a good chili recipe, and Conferences

Until Next Monday, “Adios.”

Claremont, CA
November 4, 2013

#IV-29, 186

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