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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.

  • IRS says Bitcoin is not currency, it is "property"

    [View: :550:0] video from BizJournals Bloomberg Even though Bitcoin has an internet presence as a currency, the Internal Revenue Service sees it differently. This means that transactions in Bitcoin have to be reported on tax returns in a way similar to a stock investment. The plus side is that the ruling by the IRS gives Bitcoin more legitimacy. The downside is that tax consequences have to be a consideration in all Bitcoin transactions. The rationale used by the IRS in its determination was that Bitcoin "does not have legal tender status in any jurisdiction." What this means to an individual possessing Bitcoin is that a gain or loss between the date acquired and the date spent now has tax consequences...and there are vastly different consequences for short term transactions (taxed at "ordinary rates"--up to 39.6%) and long term transactions (taxed at "capital gains" rates, which are far less--20%). This may cause a slowdown on transactions in Bitcoin, as holders might "hoard" the currency to achieve "capital gains" rate status. The ruling by the IRS has shifted Bitcoin from an unregulated status to a traditional investment asset, at least for US taxpayers. For some Bitcoin enthusiasts, this is definitely unfavorable. Source: " I.R.S. Takes A Position On Bitcoin: It's Property ," by Rachel Abrams, New York Times , March 26, 2014. Follow up: What do you think the IRS ruling will have on the use of Bitcoin as an intermediate or virtual currency? Do you see the ruling as a positive or negative event for Bitcoin? If you were (or are) a Bitcoin enthusiast, what actions would you take with respect to the status of your investment as it now stands?
  • China wants U.S. milk

    image from powdered milk produced by Fonterra, and were part of a bribery scandal. Above is a picture of a shopping aisle in China--fully stocked with powdered milk. In the above photo, however, the milk is being removed because of a bribery scandal involving a foreign company that paid to have its product stocked on these shelves. The market for non-domestic milk product in China is particularly high for two reasons--breastfeeding is unpopular, and the 2008 melamine-tainted Chinese milk that poisoned over 100,000 infants is still on the minds of parents. Responding to this demand are tiny farming towns in the United States. The town of Fallon, Nevada, has built huge processing plants to convert milk into powdered milk for shipping overseas--since shipping to nearby California has been thwarted by "Real Milk from Real California Cows" advertising campaigns. image from Fallon, NV production plant from the article linked below Because U.S. milk consumption has plateaued, the new Chinese market represents a growth opportunity. Source: " China's thirst for milk gives dairy farmers a boost ," by David Pierson, The Los Angeles Times , March 15, 2014. Follow up: What might happen to domestic milk availability and prices as a result of factories being built to process powdered milk for overseas shipment? Is this production and sales system sustainable? Why or why not?
  • Foreign shoppers in the United States

    image from When American shoppers choose to shop in one state vs another--it is probably only the tax rate they are looking to get a deal on, as most product prices are similar. Moreover, this price dodge will even out in the end, as state taxes have to be paid in the state the product is going to be USED, anyway. But product prices between countries can change a lot. Here are some examples: Slingbox 350 : When it goes on sale in Mexico it will cost $75 more than it costs in the U.S. This is possibly because of the way things are taxed, but also because there is less competition among electronics dealers in Mexico. Apple computers : These can cost $500 more in the United Kingdom than in the U.S. And iPads can cost $160 more. Car tires : Black Friday sales on car tires brought Canadians over the border for bargains. Adobe software : According to the article it is " cheaper to fly to the U.S. and back to buy Adobe's software than it is to buy it in Australia" Some products, such as Photoshop, cost $1700 more overseas. Middlemen try to create other buying opportunities for foreigners: image from Source: " Why Foreign Consumers Shop In the U.S, " by Jeff Tyler, Marketplace Morning Report on American Public Media , March 7, 2014. Follow up: What products are cheaper for Americans overseas? What international laws may be violated in some of the travel-and purchase transactions? Can the workarounds be justified ethically?
  • T-Mobile spurs competition among wireless providers

    [View: /utility/ :550:0] Video from T-Mobile offered to pay the costs of contract termination for those willing to switch from one of the big carriers. AT&T countered by offering to pay $200 of the costs--but only of T-Mobile users switching to AT&T. This comes on the heels of T-Mobile reporting higher 4th quarter 2013 earnings--a result of an increase of 1,645,000 customers. T-Mobile seems to have zeroed in on the costs of switching providers as being a major factor in customers being unwilling to change. It has taken a marketing risk in covering the costs of this switch...and it could be that the gamble is paying off. Source Strategy Analytics , however, feels that even though T-Mobile is a catalyst for price competition, that they will not prevail moving forward against the bigger providers--primarily AT&T and Verizon. The market reaction to T- Mobile's moves has shown that a larger number of companies in the pool can stimulate competition and improve the situation for custormers. Sources: " Comparison: How Does T-Mobile’s New Plans Stack Up Against the Competition? " by Alexander Maxham, Android Headlines , March 27, 2013. " T-Mobile to Pay Termination Fees; Reports Customer Growth ," by Reuters, , January 8, 2014. " LTE Enables US Wireless Price War as Carriers Fight for 60 million New LTE Subs in 2014 ," by Source Strategy Analytics, 12 NewsNow, February 25, 2014. Follow up: What does "LTE" mean? What are the alternatives, and why does LTE look to be a medium for the future? What is the projected growth according to Source Strategy Analytics? What are the key factors that keep you from switching wireless carriers, even if there is a price advantage? Consider: your level of understanding about the plans, the information sources you trust, the time factor, start-up or termination costs, and any other factors. What is the industry term for customer defectors? (read all of the linked is in there somewhere)
  • Sweet-to-the-core product launch

    image from article linked below Pictured above is one of Ben & Jerry's new "core" ice cream flavors: Hazed and Confused. There is a core of Nutella (chocolate/hazelnut), surrounded by hazelnut ice cream and chocolate ice cream with fudge chips. The products in this launch have multiple ice creams in one yummy container. Ben & Jerry's is a company that started in 1978. During that time, they have expanded world-wide and have remained profitable. One way that they have continued to thrive has been to adapt their product line on a regular basis. This product launch is one innovation. The other products that are a part of this launch are: That's My Jam Chocolate Peanut Butter Fudge Salted Caramel I wish I could say I'd already done a product taste test. Which flavor do you think will be most successful? Source: " Ben & Jerry's Nails It With New Core Ice Cream Flavors, " Huffington Post, February 25, 2014. Follow up: Read about Ben & Jerry's on their website, linked above. What attributes make Ben & Jerry's different from other corporations, and in what way is it similar in terms of structure? What are Ben & Jerry's "core" values? How do they influence the following: marketing campaigns? product manufacture? employee relations?
  • Drugs made in India found to be substandard...and a lot of our Rx are imported from India

    image from " Bad Medicine" American Enterprise Institute From the New York Times: " India, the second-largest exporter of over-the-counter and prescription drugs to the United States, is coming under increased scrutiny by American regulators for safety lapses, falsified drug test results and selling fake medicines ." The FDA has recently increased its inspection schedule of Indian drug producers, and has banned the export of several generic version of medicines including Accutane and Cipro, which had been found to be adulterated. Worries about drugs produced in India reached a high point last week, when the Indian drug producer Ranbaxy (which had been found in violation of safety violations "too numerous to count") asked the FDA to please let them continue to ship drugs while they are trying to fix the problems. The FDA said no. I would say that Ranbaxy is "unclear on the concept" of the importance of drugs being produced to a high standard of safety. But the problem is not just with that one firm in India. G. N. Singh, India's Drug Controller General, said in an interview with The Business Standard : “ If I have to follow U.S. standards in inspecting facilities supplying to the Indian market, we will have to shut almost all of those .” Some of the problems that have occurred include: over 100,000 orders were knowingly shipped of antibiotics with no medicine in them the World Health Organization study estimated that 1 in 5 drugs made in India are fakes counterfeit medicines in a hospital in Kashmir resulted in hundreds of infant deaths drugs shipped to Uganda had counterfeit labels from Cipla, a company which tries to maintain high standards. I have started looking at the labels that are on the medicines provided through my health plan. Sure enough--almost all of them are made in India. Hmmm... Source: " Medicines Made in India Set Off Safety Worries ," by Gardiner Harris, New York Times, February 14, 2014. Follow up: What are the possible remedies for this situation? What might you do to protect yourself? Would you pay more for drugs manufactured in the United States? Would a private auditing company's seal of approval be better? Who should be in charge of regulation of drugs taken by Americans? The U. S. government? The Health care provider that contracts with the drug companies? Explain your thoughts on this matter.
  • The Lego Empire

    image from Forbes magazine This movie has something for everyone--parents, kids, casual moviegoers, erudite film critics, and Warner Brothers investors. It only cost $60 million to make, and its domestic box office for the first three weeks topped $183 million . My husband and I saw it in 3D on a Saturday afternoon and we didn't know what to expect. But a few minutes in, it was pretty clear that the script was dense with puns and double-entendres. The story itself contained themes about job autonomy and the responsibilities and choices corporations make to improve or harm the world of its employees and customers. Plus, it was a sweet story about overcoming the obstacles of low self expectations...and of inflated self-perceptions. The song " Everything Is Awesome " has staying power as well. [View: utility/ :550:0] The movie is a metaphor for the success of both the Lego Company and Time Warner. According to Scott Mendelson in Forbes , " all likelihood, The Lego Movie will be a big hit that will not only sell countless new Lego sets, but also be the first building block towards reestablishing Warner Bros. as an animation powerhouse." Opportunistic investors have probably missed their best window to buy, but it remains to be seen whether either company can build on this success. Source: " Lego Builds an Empire, Brick by Brick ," by Gregory Schmidt, New York Times, February 15, 2014. " Review: Everything About The Lego Movie Is Awesome ," by Scott Mendelson, Forbes , February 4, 2014. Follow up: Are you familiar with the Lego brand name? Have you owned Lego block kits? Visited LegoLand? Played the Lego video game? What are the first words that come to your mind with respect to this product? What does Gregory Schmidt think about Lego's business plan?
  • Rakuten? Viber? Maybe we need to be paying attention

    image from We know what Skype and Facebook can do...but Rakuten ? Viber ? As it turns out, Rakuten--formerly known as a huge Japanese eRetailing company. It just spent $900 million to buy Viber--a messaging app company. A free texting and voice calling company, really. Viber and other similar service companies-- WeChat for example--may not be a household name here in the U.S., but the services those communication services companies provide are a big deal in China. They could become a big deal here, too. It only takes a little time to get hooked on the rich menu of services that one of these messaging apps provides. I have an iPhone, and I really enjoy sending my older daughter visual "stories" using the icon menus built into the iPhone. airplane...the statue of Liberty...a taxi. What a nice way to tell my daughter I am excited about visiting her in New York City! But my husband and my other daughter have an Android and a Windows phone. My icons look like swear-word symbols when they show up in texts to them...which is not my intention at all. But we all could download Viber and use its features across phone platforms. This could be fun. Plus the voice calls, according to the reviews, are super-clear; no distortion or feedback. According the the Marketplace piece, a messaging app like Viber could replace "your voice plan, your texting plan, and half of Facebook." And Rakuten--a retailer that's bigger than Amazon--just bought it. It could be big. Source: " Messaging apps: Skype has competition. Facebook too. ," by Dan Weissman, Marketplace, American Public Media, February 14, 2014. Follow up: Download Viber or WeChat and have 4 or 5 of your main contacts do the same. Play with the app for a week or so...then comment on what your experience was like.
  • "Bull Market's 5th Birthday" may be its last...

    It seems as though the celebration of five years of a Bull Market , which I wrote about last week, was the last bit of stock market cheer we might be hearing for a while. Investors seem to be responding to several negative economic factors, and the Standard & Poor's 500 stock index is down 5.8% since January 15th.The S&P 500 index was at 1741.89 at the end of trading on Monday, February 3rd. Some of the negative economic factors include: the pullback of "quantitative easing" by the Fed, which stimulated the money supply the global response to the change in U.S. monetary policy a manufacturing industry survey released on February 3rd (whose "bad" numbers were a result of this winter's bad weather) Observers are now awaiting the market's response to the employment numbers which will be released later this week, on Friday, February 7th. Source: " As Recovery Looks Weak, Stocks Take a Deep Dive ," by Nathaniel Popper, The New York Times Dealbook, February 4, 2014. Follow up: What is the annualized percentage decrease, based on the 5.8% number noted above, that might be projected if the current bear trend goes unchecked? [Hint: it is an appallingly large number, and it is unlikely that the market will continue to plunge at the rate it has been falling over the last 2 weeks. Nevertheless, it is an interesting number to compute, to put the percentage in an annualized perspective.]
  • "Fragile Five"...what does THAT mean?

    Image from The "Fragile Five": Turkey, Brazil, India, South Africa and Indonesia. These are emerging-economy nations that have become too dependent on investments from foreign countries. The recent change in the U.S. government's stimulus policy has resulted in less availability of investment money. Much of this money flowed into these fragile emerging economies. The most recent event that has caused concern among global economic observers occurred this week: Turkey raised interest rates by 4.25%. This was followed by an interest rate increase by India...and then another by South Africa. The higher rates are meant to attract foreign investment. But now that investment funds are not as available as they were, the underlying value of the business investment becomes a more important factor in determining where an investment might be made. Sources: "‘ Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil " by Landon Thomas, Jr., New York Times , January 28, 2014. " South Africa joins battle against sell-off "by Alanna Petroff, , January 29, 2014. Follow up: Research another important acronym for global business observers: BRIC. What countries does that acronym stand for? How have the economies of those countries fared? What does the bar graph in the attached article from the New York Times indicate for the Fragile Five versus the BRIC countries?
  • Bull Market's 5th Birthday

    image from STAN HONDA/AFP/Getty Images: on Wall Street The stock market has been doing well for almost 5 years now. What a surprise! The Dow Jones Average is three times what it was in March 2009 (6,447). As usual, observers are predicting a decline...or a "correction"--which would mean a drop of 10% or more. Since the Dow usually has a correction about every 18 months, and we haven't had one since 2011...some think that we are 2 years overdue. Part of the reason that the market has done well, is that Federal monetary policy has reinvested in the bond market and kept investment money in circulation. When the Fed pulls back on its stimulus policy, observers will be able to analyze whether it has been public policy or the business entities themselves keeping value in the market. Nevertheless, Gary Thayer, Chief Macro Strategist, Wells Fargo Advisors, feels that the correction would not be a "crash," and would be only temporary. Source: " Happy 5th anniversary, bull market? " by Stacey Vanek Smith, Marketplace, American Public Media , January 22, 2014. Follow up: If you have current stock investments, do you plan to hold them over the long term, or sell in anticipation of a stock correction? Explain your rationale. What is a stock market correction? When, historically, have they occurred?
  • China way ahead of U.S. in stimulating the economy

    image from " Move over, Janet Yellen and Ben Bernanke. Step aside, Mario Draghi and Haruhiko Kuroda. When it comes to monetary stimulus, Zhou Xiaochuan, the longtime governor of the People’s Bank of China, has no rivals ." This is a quote from the NYT article about how the Chinese government's uses of economic stimuli have strengthened the Chinese economy at a far higher level--and more effective level--than the U.S. government has helped U.S. businesses. China has pumped 300% of the money that was available in 2006 into the Chinese economy in 2013. No wonder Chinese production and sales have had such a growth spurt! Nevertheless, there are differences in the ways that this stimulus works. In the U.S. the government pumps money into the economy by buying bonds. In China, government pumps money into the economy by " issuing more renminbi to bankroll its purchase of hundreds of billions of dollars a year in currency markets to minimize the appreciation of the renminbi against the dollar and keep Chinese exports inexpensive in foreign markets. " That amounts to considerable support. However, now, there is talk of reining in that support...and doing so without damaging the economy. The People's Bank of China and the Chinese government are moving slowly on this one. Source: " With China Awash in Money, Leaders Start to Weigh Raising the Floodgates ," by Keith Bradsher, The New York Times, January 15, 2014. Follow up: What are your thoughts about government stimulating the economy? Support your position with multiple internet sources. How has government stimulus helped China? Would that approach have worked the same way in the U.S.? Why or why not?
  • Greatest Business Card Ever !

    Check out the details on this English-language business card of a Chinese entrepreneur. This card first caught my eye when I was perusing posts in Facebook, but it turns out that Guangbiao Chen is actually a serious contender for fame. His "flashy philanthropy" and his recent interest in buying the New York Times has brought him notoriety in many circles. I don't know about the veracity of the claims he makes on his business card, but third party sources can verify that Guangbiao Chen is one of the 400 richest people in China. Sources: " The Incredible Business Card Of The Chinese Millionaire Who Wants To Buy The New York Times. " by Adam Taylor, The Business Insider, January 8, 2014. Follow up: What does YOUR business card look like? Design a card for yourself with the same kind of hyberbole regarding your achievements that Guangbiao Chen has shown on his card. What are the pros and cons of exaggerating your experience and accomplishments? Perhaps you can list some unforeseen consequences. Can you debunk or prove any of the claims on the business card posted above?
  • Paradise hides Chinese corruption scandal

    Image by Gilles Sabrie for The New York Times The Jiuzhai Paradise ... It is a 1,010 room, 7-building hotel in a Tibetan area of China...a mountain resort on the edge of a wilderness similar to Yosemite in the US. How did such an extravagant hotel space get built at the edge of a pristine wilderness? Deng Hong , a Sichuan Province billionaire and businessmen is the force behind the building of this "paradise." Observers say that his success may be due to his close relationship to Li Chuncheng, a Communist party official who is currently the object of an anti-corruption investigation. image from the Jiuzhai Paradise site According to the New York Times article, " On Nov. 8, Xinhua, the state news agency, posted on its website an article from Beijing News that said Mr. Deng had been formally arrested. Police officers in the city of Xianning, where Beijing News said Mr. Deng was being detained, declined to comment, as did representatives of Mr. Deng’s company...[Deng] has an ambitious list of projects, including the New Century Global Center, a mall and hotel complex in Chengdu that is the world’s largest building, but Jiuzhai Paradise is the one most dear to him. A painter and calligrapher, Mr. Deng designed the hotel and often stayed there with his family ." This corruption investigation may be tied to a larger one involving Zhou Yongkang (another party official), and Deng may be involved because, as a businessman, if he confesses to bribery, his testimony can be used to build a case against the political officials. While the investigation goes on, however, the hotel remains open, offering many amenities. It remains popular, usually selling out on holidays. Sources: " Fog-Wreathed Paradise, Built by a Billionaire Under a Cloud " by Edward Wong, with contributions by Mia Le and Ye Fanfei, New York Times JIUZHAIGOU JOURNAL, January 5, 2014. Follow up: Read and comment on other articles written about this scandal: Caixin Online Wall Street Journal
  • Bitcoin Explained

    The five-year birthday for Bitcoin is January 3rd, 2014. Bitcoin's "daddy" is a group of hackers named "Satoshi Nakamoto." Five years ago "Nakamoto" set up the currency to be outside of any government's control. Bitcoin's software is set up to allow anonymous currency transactions. According to the explanatory essay that accompanied the currency's launch, bitcoin's purposes included: a protest against the government-controlled currency values that could be undercut by the issuance of an unlimited number of currency units easing the transfer of funds globally, directly from individual to individual empowering smaller economies avoiding transfer fees from near-monopolies like Western Union, or bank wire transfer fees allowing private transactions--sometimes involving products that are normally regulated by governments, such as weapons and drugs. Many libertarians were attracted to the independent-of-government aspects of bitcoin. And some financiers have invested in bitcoin as they might hedge investments in any "foreign" currency. But to bitcoin enthusiasts, such as Elizabeth Ploshay, bitcoin not just money, it's "a movement." Tradehill co-founder Ryan Singer has opined that just as email supplanted snail-mail...bitcoin will supplant traditional banking. One source of information for those wishing to keep up with this rapidly changing currency platform is Bitcoin magazine, which has the stated mission to be “the most accurate and up-to-date source of information, news and commentary about bitcoin.” Source: " The Bitcoin Ideology, " by Alan Feuer, the New York Times, December 14, 2013. Follow up: Have you been involved in a bitcoin transaction? Do you have an account? What do you see as the plusses and minuses of this online currency? Would you consider "investing" in bitcoin? Why or why not? What does "P2P" mean?
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