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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


  • Major U.S. retailers refuse to sign Bangladesh safety agreement

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] MSNBC clip posted on YouTube May 17, 2013 " We are not even talking about wages here. We are just making sure that a building doesn't fall on top of you...and kill you...There is an obvious and irrefutable moral case for these companies to do that ." image from www.demotix.com In response to the outrage in the face of the recent Rana Plaza tragedy (notwithstanding many previous accidents due to a lack of safety controls), several retailers, led by Swedish-based H&M, have signed on to a five year contract to improve safety conditions in Bangladesh. According to the New York Times , "The plan requires companies to have rigorous independent inspections and to help pay for fire safety upgrades, like adding fire escapes, which many factories still lack." These are the retailers who HAVE signed the pledge (it looks as though these are mostly foreign-based): Benetton H&M Zara (Inditex) Tesco Marks & Spencer PVH (Phillips-Van Heusen, USA), owners of Calvin Klein and Tommy Hilfiger These are some of the retailers who have refused to sign the pledge as of May 19, 2013: GAP Target Walmart Macy's Sears JC Penney The North Face Kohl's Made In The Shade OshKosh Nordstrom's American Eagle Outfitters FootLocker Retailers refusing to sign the pledge have cited the risk of lawsuits. There are also concerns that participation may result in higher clothing prices for U.S. consumers. Sources: " GAP, Target Walmart: American Retailers snub Safety Agreement for Bangladesh ," reported by Chris Hayes, MSNBC , May 17, 2013. " As Firms Line Up on Factories, Walmart Plans Solo Effort ," by Stephen Greenhouse, The New York Times , May 14, 2013. " H&M, Zara, and other Brands Pledge to Help Bangladesh ," by Julie Ma, New York Magazine , May 13, 2013. " Bangladesh Factory Accord: At Least 14 Major North American Retailers Refuse to Sign, " Huffington Post , May 17, 2013 and May 20, 2013. Follow up: Is this a serious business dilemma, or a no-brainer, as the broadcaster seems to assert? What are the issues? How many people were killed in the Rana Plaza factory, according to the video story? What would be the public reaction if that tragedy happened in the USA? Would you pay more money for a pair of jeans if you knew they were produced in a safe factory? That is, would you be more likely, knowing about this agreement, to purchase clothes from H&M rather than the GAP? Why or why not?

  • Spanx Billionaire signs onto the Giving Pledge

    Sara Blakely, the 42-year-old billionaire-entrepreneur behind the shapewear company Spanx , signed the Bill Gates/Warren Buffett " Giving Pledge " this month. She was one of eight new signatories to the visionary agreement, but made headlines because of her status as a young, female, self-made billionaire (she owns 100% of her company). The Giving Pledge is "is a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to philanthropy." Its current page of "Pledger Profiles" includes 114 signers, among them: Richard Branson (Virgin Atlantic) Elon Musk (Space-X, Tesla Motors) Paul G. Allen Michael R. Bloomberg Eli and Edythe Broad Larry Ellison Reed Hastings and Patty Quillen ( Netflix ) George Lucas Mark Zuckerberg Ronald O. Perlman There has been some criticism that the Giving Pledge does not have a plan mapped out to achieve certain goals, and that it allows mega-foundations to influence public policy by influencing social services. Nevertheless, the commitment to spend wealth on philanthropic pursuits does keep the money in circulation--benefiting the economy--and it allows the wealthy individuals the right to direct their funds as they see fit. And, of course, philanthropic giving creates a tax deduction. Sources: " Spanx mogul Sara Blakely Becomes First Female Billionaire To Join Gates-Buffett Giving Pledge ," by Clare O'Connor, Forbes Magazine, May 7, 2013 " Philanthropic campaign by Gates and Buffett gets more pledges ," by Tom Brown, Reuters , May 7, 2013. Follow up: Read up on one of causes that Sara Blakely funds: The Empowerment Plan . What would you invest in if you were a wealthy individual who had signed this pledge? Do you think that the Giving Pledge is controversial? Why or why not?

  • Cyber bank robbery

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ Visit NBCNews.com for breaking news , world news , and news about the economy :550:0] Seven sophisticated cyber criminals, part of a global network, recently stole $45 million from multiple locations in a matter of hours. Here is the basic overview of how investigators are imagining the perpetrators pulled if off: "hackers" invaded global bank information systems; they stole prepaid debit card numbers; they removed the restrictions on the maximum amounts that could be withdrawn; they spread the information to others in their worldwide network; across the world, these criminals coded the account information onto the magnetic strips that are on ATM cards; the thieves began withdrawing money from as many ATMs as possible, before the accounts could be cut off; they operated like a "virtual criminal flash mob"--at coordinated times; the criminal network's trial run was on December 21, 2012 [4500 ATMs, $5,000,000]; on February 19, 2013 they hit 36,000 ATMs, stealing $40,000,000. Arrests have been made, and the suspected ringleader was found murdered in the Dominican Republic between the robbery dates, but the investigation is not yet complete. Bank robbers hold a special fascination in the American psyche. Willie Sutton , who stole (only) $2 million from banks over an infamous 40 year "career" as a bank robber, is credited (perhaps apocryphally ) as answering the question, "Why do you rob banks?" with " Because that's where the money is." It seems as though these modern crooks have the same motivation...but use far more efficient methods. Sources: " In Hours, Thieves Took $45 Million in ATM Scheme ," by Marc Santora, New York Times, May 9, 2013. " $45 million stolen in cyber bank heist ," (video embedded above) reported by Tom Costello and Brian Williams, NBC News Nightly Newscast , May 9, 2013. Follow up: What precautions do you take on a daily, weekly, monthly or yearly basis to ensure that your internet financial presence is secure? What might this instance of cyber-crime mean for business and technology as we move into the future? Research what Willie Sutton really said in his autobiography about why he robbed banks. Do you think that these modern criminals would be influenced by the same feelings? Why or why not?

  • Econ 101 by Stephen Colbert via Comedy Central

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ The Colbert Report Get More: Colbert Report Full Episodes , Indecision Political Humor , Video Archive :550:0] Last week I cited a column written by Paul Krugman about the debunking of the "austerity" approach to economic downturns and debt that led to sequestration. Several political leaders promoted the austerity approach, partially based on a paper by Carmen Reinhart and Kenneth Rogoff of Harvard University. Thomas Herndon , a grad student at the University of Massachusetts, detected s ome math errors in the spreadsheets in the Reinhart/Rogoff paper, and also found that they had ignored data that did not support their hypothesis. Paul Krugman's article was a timely response to the "uproar" that ensued. Stephen Colbert weighed in about the Reinhart/Rogoff paper in the video clip above from The Colbert Report of April 23rd. Colbert also interviewed Thomas Herndon later in the same show. For those of you unfamiliar with Stephen Colbert , his on-screen persona symbolizes one point of view, but his message often connotes the opposite point of view. This works to his comic advantage, but could be a dangerous ploy for a marketer, as it may produce misunderstandings. Colbert's show is not likely to sway anyone's opinion, and the two sides to this issue continue to produce controversy. Nevertheless, the data delivered by Colbert (when it can be separated from the non-factual parody or satire) might hold a viewer's interest longer than the Krugman article on the same topic. Colbert's approach widens the possibilities for communicating information about economic issues. Sources: " Stephen Colbert discusses and mocks the problems resulting in basic mistakes made in a study by Reinhart and Rogoff" episode of The Colbert Report, by Stephen Colbert, et. al., Comedy Central via YouTube , airing April 23, 2013, published April 24, 2013. " Reinhart-Rogoff uproar settles nothing ," by Caroline Baum, Bloomberg View , May 1, 2013. Follow up: Watch the video and read the Krugman article. Which did you enjoy the most and why? From which piece did you learn more, and what did you learn? Watch the remainder of The Colbert Report for April 23, 2013, in which Colbert i nterviews Thomas Herndon . What did you learn? Which segment of the show was more effective at communicating about the economic theories at issue? Discuss the pros and cons of using humor to communicate about difficult (or boring) and controversial subjects.

  • Apple borrows billions even though it has a pile of cash

    image from appleinsider.com Why would a company with $145 billion in cash reserves borrow $17 billion more by issuing bonds? to take advantage of very low interest costs--at the U.S. Treasury rate to pay more dividends to shareholders to buy back some of its stock from existing shareholders to avoid having to move cash from low-cost overseas locations to the United States, where it will be subject to higher differential tax rates Apple's action is also part of a trend--Nike recently issued bonds, and Microsoft issued bonds late in 2012. But the market was still hungry for Apple's bonds: investor demand was at $52 billion--more than 3 times the size of the bond issue. Source: " To Satisfy Its Investors, Cash-Rich Apple Borrows Money ," by Peter Lattman and Peter Eavis, New York Times, April 30, 2013. Follow up: When is it a good idea for an individual to borrow money, even if they have cash? What is a poor source of loaned funds, especially if an individual has other resources?

  • Economics 101 in 2013

    Government stimulus .................vs.................Austerity image from decisionsonevidence.com The economics story of our time, according to Paul Krugman, is the failure of "austerity" as a response to a fiscal downturn when compared with government stimulus packages to stimulate the economy. The "real-life experiment' has taken place over the last three years, as the United States government provided modest economic stimulus by spending tax dollars investing in government projects and infrastructure. During this time, several European countries, notably the United Kingdom, has "tightened its belt," responding only with shrinking government and cuts to services. Theoretical support for austerity has recently been debunked . But Paul Krugman makes additional points with respect to why austerity is still a bad idea: The economy is not like an individual family, which earns what it can and spends what it can afford, as its own, closed system. The economy is interdependent: In the economy, if one person spends, then someone else earns. Because of the interdependency, if both entities stop spending at the same time there can be a depression. If one side stops spending (in response to earnings loss), and the other side is still spending, there is some hope that the earning will revive for the economic partner, and the cycle will get back on track. History lesson: in 2008, because of the housing bubble bursting, there was a subsequent restriction of loan money, which curbed spending, which led to more job loss, etc. We are still in a period of underemployment, and government stimulus is still needed to bring more people back into the interdependent economic community. Of course there are still other ways to look at things, but growing businesses and start-ups love investors, and a government investor is better than no investor at all. Krugman makes the point that there are other ways to look at the situation--but that recent economic history has given a clear indication of what works now. Source: " The Story of Our Time, " by Paul Krugman, New York Times, April 28, 2013. Follow up: What are the solutions offered by those favoring austerity? Several are mentioned in the linked article. Under what circumstances have these solutions worked in the past?

  • An argument AGAINST out-sourcing

    image from chicagocreativedesign.com Double Encore is a company that is betting everything on home-grown apps. They develop for Apple (not for the android market), and they employ all their own developers. They are a Colorado-based technology company with a special relationship with Apple...and--THEY DON'T OUTSOURCE. Their policy is contrary to the industry trend. The Computer Economics Annual Outsourcing Study recently reported that information technology outsourcing was up by 23% in 2012. But Double Encore is bucking the trend. Here are some of the reasons: quality control can only be monitored in a controlled environment their office is an environment of "experience, creativity, and unwavering ambition" their commitment to their clients is based on originality--not on "knock offs" outsourcing contributes to lower salaries for engineers...which then contributes to a smaller pool of talent willing to work for sub-par salaries they've seen the poor results from their clients failed outsourced products, which have to be cleaned up Double Encore is marketing itself from this quality niche. Its policies also set the standard for its human resource management. Does it sound like a good place to work? Sources: " Why We Don't Outsource [Seriously, Stop Calling Us] ," by Emily Grossman, Double Encore Blog, March 24, 2013. Follow up: What do you think of the Double Encore idea that "Genius doesn't go on sale. It just leaves the market"? What does it mean, with respect to outsourcing policies?

  • Film Visual effects: Product quality up...but revenue down

    image from www.teamelf.com Digital Domain , Custom Film Effects , Rhythm & Hues , Frantic Films , Lowry Digital --these are all digital effects companies in Los Angeles that have either filed for bankruptcy or been bought up by a foreign competitor recently. The irony is--with high definition and increasingly realistic visual effects on Avatar , Life of Pi , The Avengers , and other films--an observer would think these businesses would be thriving rather than going under. [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] But foreign competition has driven the business out of the US market. This is partly due to industry subsidies by governments in Canada, Britain, and New Zealand, and partly due to cheaper labor costs in India and other Asian countries. Source: " Generating Stunning Visual Effects, But Not Enough Revenue ,"by Richard Verrier, Los Angeles Times , March 24, 2013. Follow up: When other countries subsidize an industry, do you think the US government should also subsidy the industry, to re-create a "fair playing field" on a world-wide basis? What would be the pros and cons of such subsidies? What industries are subsidized by the U.S. government? How does this help or hurt world markets?

  • Investors unhappy with Lululemon "transparency"

    This is what the Lululemon pants USUALLY look like... Usually, "transparency" is a quality that investors appreciate from the companies they've invested in. But a different kind of transparency has caused a serious problem for Lululemon Athletica Inc. ( LULU ), the high-end yoga-wear retailer and manufacturer. The problem? Black Luon pants had quality control problems that made them see-through. The pants were shipped at the beginning of March and pulled from the stores shortly thereafter, but because they constituted 17% of the inventory in women's pants, the effect on sales (and Lululemon's reputation) has been considerable. First quarter earnings will be even lower than expected. Shares in Lululemon have fallen 16% since the beginning of the year. Over that same period, the Standard & Poor's 500 Index is up 8.6%. Source: " Lululemon falls as pants deemed too transparent, "by Leslie Patton & Sapna Maheshwari, Bloomberg online, March 19, 2013. Follow up: What could Lululemon have done to prevent this problem? Since this is not the first quality-control problem that Lululemon has had, what actions do they need to take from the Management side? What about the Marketing side? What is the Standard & Poor's 500 Index? What information can it give an investor?

  • Faux "faux fur" causes hair to stand on end

    image from caninescorner.org: a Raccoon Dog What is a company to do if they can't get control of their supply chain? The demand for "faux fur"--high quality synthetic furry material--has been higher than supplies. Some companies have made a surprising substitute: the Real Thing. The retailer Nieman Marcus was recently caught advertising Burberry coats trimmed in "faux fur"...which turned out to be raccoon dog , an East Asian canine that looks like a raccoon. image from www.niemanmarcus.com The marketing problem is also a legal problem: some individuals have allergies to real fur, and others just prefer not to wear it for ethical or other reasons. A company can't advertise a product as "fake fur" and just substitute real fur. The Humane Society tested the suspected products , and reported their findings to the Federal Trade Commission (FTC). FTC officials reported that Nieman Marcus and the other retailers agreed to follow the law. Source: " A Faux Faux Fur Kerfuffle at Nieman Marcus ,"by David Weinberg, Marketplace, American Public Media , March 20, 2013. Follow up: Recently there was another case where substitutions had been made: horse meat had been substituted for beef. Research this substitution. Summarize who was involved in that case and what consequences occurred and were imposed. What are other alternatives manufacturers have (besides substitution) when they have problems getting supplies needed for production? What are the consequences of these alternatives? If you were the purchaser of a product in which there had been a substitution from what was advertised, what remedies would you expect would be fair?

  • Bank "tax" on money laundering in Cyprus has ripple effect

    image from www.guardian.uk.co The International Monetary Fund and Germany have been putting pressure on Cyprus to take a "tax" on all bank accounts as a condition of a monetary bailout. The justification? Almost one-third of all Cypriot deposits are from Russian entities--many of which are suspected of using the banks in Cyprus for "laundering" funds obtained criminally. Cyprus is trying to raise about $7.5 billion from this levy. The proposed tax has had an effect on the share prices for major world banks such as Barclays, Deutschebank, Citigroup and Morgan-Stanley. Demonstrations have taken place in Nicosia, Cyprus. Depositors in other countries struggling financially--Spain and Italy--are considering pulling their funds out of local banks and investing them in other countries. According to Global Financial Integrity, a US-based oversight organization specializing in money-laundering, significant transactions between Cyprus and Russia in 2011 point to an institutionalized money-laundering operation. Ties with Russian businesses form at least 40% of the Cypriot economy. The IMF, Germany and other members of the European Union want Cypress to break its Russian ties in order to sustainably and legally proceed--especially since European Union bondholders will bear the brunt of the losses if Cyprus does not "clean up its act." Meanwhile, to raise the capital demanded, innocent bank depositors would also be assessed. image from www.washingtonsblog.com Moving forward, rules will require that companies can only operate if accredited by the Cyprus Securities and Exchange Commission. The practices of never having to show up in Cyprus to run a business, and of depositing suitcases full of cash will have to stop. Source: " Cyprus Bailout Puts New Pressure on Europe's Banks ," by Mark Scott, New York Times DealBook , March 19, 2013. " Cyprus fights doubts over Russian Money ," by Kerin Hope, in Nicosia, with additional reporting by Agnieszka Rakoczy, Financial Times online, March 14, 2013. Follow up: How would you feel if your bank suddenly took a 10% "tax" on your deposits? What do you think would be the response of the American public? What is "money laundering"?

  • Vehicle Sales and Production up World-wide

    The Canada-based multinational Scotiabank published its Global Auto Report earlier this month. Some of the news it reported included: Vehicles sales, globally, are up 13% over last year Chinese sales are up 49%, year over year since 2010 Overall Asian sales, compounded each year, are at 30% over the same period South American sales and production were up The U.S. housing market rebound caused an increase of 21% in pick-up truck sales Production in Thailand increased at a higher rate than production in China North American production increases are primarily in Mexico According to another source, Wards Auto/Automotive Compass, these rates of increase are not forecasted to continue over the next three years. Source: " Global Vehicle Sales and Production Surge in Early 2013: Scotiabank " from Joe Konecny, Scotiabank Media Productions, reported in the online Wall Street Journal , March 6, 2013. Scotiabank Global Auto Report [this is a .pdf file] Wards Auto/Automotive Compass data reported in the International Business Times , January 2013. Follow up: Look at the graph of projected vehicle sales and production over the next three years. What conclusions can you draw from that graph? Use some of the information from the linked article to inform your analysis. What is the difference between a graph showing "the changes in the rates of increase from one year to the next" versus a graph showing the "actual increases or decreases in production from one year to the next"? How can this mislead the reader? What does Scotiabank do? What companies in the USA are comparable?

  • Honeybee shortage and almond production

    image from thechronicleherald.ca The environment is not great for honeybees lately. That might not seem to mean anything to many of us, who don't care for insects, or think bees are only about honey. But bees and other "pollinators" have a huge impact on agricultural business operations, on food prices, on wildlife, on nature, and on all business operations relating to the environment. Without pollinators, many crops can't grow, there's less food for wild animals, and eco-systems fail. In case you haven't been following the stories, here is what has been happening with bees lately: From coast to coast, bee colonies have been dying off. Beekeepers are "lucky" if their losses are only at 30-50%. Some of the causes include a "drought in the Midwest, parasitic mites that feed on bee blood, and an unusually cold snap earlier this winter in California." In addition, the trend by some farms to plant more corn (because of the demand for high fructose corn syrup), which doesn't flower, means that bees that used to thrive during part of the year on other flowering crops, no longer have food to maintain and increase their hive size. The shortage of honeybees is a critical problem for almond growers in California. Honeybees are needed to transfer pollen from male almond trees to female trees, or nuts do not form. One grower, Paramount Farms, rents 92,000 bees to pollinate 46,000 acres of almond trees. It has to scramble to get its bees from 15 different states. There are not enough bees, due to the problems with bee colonies, for all of the almond growers in California to fully pollinate all of their trees. California produces 80% of the world's almond crop...and almond demand is growing world-wide. almond orchard from agsi.psu.edu. The trees are in bloom, but are there enough bees? Gordon Wardell, a bee biologist, thinks that the almond industry needs to solve the bee population problem if the industry is to thrive and grow. "It's our responsibility as stewards of the bees to figure out about what's going on and bring them back into balance," he said. Sources: " Honeybee Shortage Could Harm World's Supply of Almonds " (includes slideshow), by Wendy Lee, Take Two , KPCC, Southern California Public Radio, March 13, 2013. " Colony Collapse Disorder " Wikipedia. Follow up: Think of the "stewardship" of the bee colonies as being analogous to gaining "control of the supply chain" for a more industrial business. Can you think of other examples where "stewardship" of a resource is similar to assuring that a production essential is available when the business needs it for production? Check out a related story from the same Take Two program, about changes in the migration habits and populations of monarch butterflies. How do monarch butterflies affect the eco-system, and which businesses might depend on the eco-system that is affected?

  • The Global Economy: Living on $1.25 per day

    On a Marketplace Quiz, Stephan Richter asked this question: How many of the world's 3.1 billion workers live on just $1.25 per day -- the global poverty line as defined by the World Bank? a. 50 percent b. 25 percent c. 10 percent d. 3 percent What is your answer? Please note, before you answer--the answer is different from the chart above, because the Quiz question is about the percent of "workers," whereas the chart tracks the goals for the number of total persons--including children--living at the extreme poverty level. Note the differences in the rate of improvement among the countries listed in the chart. Sources: " Quiz: How Many Workers Live on $1.25 per day " Interview with Stephan Richter, Marketplace , American Public Media, March 12, 2013. The Globalist , a daily online magazine about "how the world really hangs together." Follow up: Listen to the short audiocast to find out the answer to the quiz. How much, per day, does it cost YOU to live? Prepare a spreadsheet, and include all monthly and annual costs, divided down to the day. According to the chart above, which areas of the world are making the greatest improvement? Which are making the least? What are some of the underlying causes of this discrepancy?

  • A "superpower" for everyone...

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] Video produced by Code.org, starring Bill Gates, Mark Zuckerberg, et. al. This video was produced by Code.org , to promote the idea of learning how to write computer programs. Listening to the men and women on the video--it seems like fun. Lots of today's programming can be done with logic, organization, and problem solving skills rather than higher-order mathematics. Considering how important these skills are in the marketplace, it is baffling that programming isn't a graduation requirement for a college degree. I have a little experience with this. Back in 1973, "Intro to Computing" was a programming class, not a class to become a skilled application user. We learned a Fortran language called WATFiV. Our programs had to be typed onto punch cards and dropped off at the computing center to be run, and then debugged if necessary, then run again. Writing the programs was like solving a puzzle, and actually very satisfying. My first job at Coopers & Lybrand (long before it combined with Price Waterhouse) was to use their closet-sized punch card computer to run "What-if" scenarios for limited partnership prospectuses. Basically, the programs I wrote and adapted were just a more clumsy version of what, a few years later, was Lotus 1-2-3 and then Excel. In 1983, I bought my first PC, and have been a "user" ever since. Today, there are several computing frontiers--apps, biomedical, transportation, mobile everything, computing everywhere. A lot of the money to be made in the future will be made by knowing how to not only use computers, but more importantly to control what they do . That's computer programming. Source: " What Most Schools Don't Teach " by Code Org, YouTube , February 26, 2013. Follow up: Have you ever taken a programming class? What computer language? What kinds of programs did you write? If you don't know a computer language, do you know another language besides English? How will you enhance your ability to communicate world-wide 25 years from now? Do you have an idea for an app? What have you done to get it working and in the marketplace?
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