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. She attended the University of Michigan and Wayne State University.
image taken by Gerardo Mora, Getty Images, from link below
SeaWorld recently announced its intention to put forth a $100 million IPO (initial public offering). Its revenues have increased over the past three years, since it was purchased by the Blackstone Group LP. In the first quarter of 2012, revenues were up by 8%, and profits were up by 73%.
As with any IPO, the question that investors must ask is: What is SeaWorld planning to do with the money raised in the IPO? In this case, SeaWorld plans to pay down debt, and make a payout to Blackstone.
Source: "SeaWorld Going Public: Shamu making Splash in Stock Market," by , Southern California Public Radio, December 27, 2012.
image from article linked below
Demand can create supply. When it comes to food, a growing number of consumers want to only eat meat and poultry products that have not been pumped full of antibiotics, which is a part of big farm food production. From the linked article:
"Retailers like Costco, Whole Foods, and Trader Joe's, as well as some restaurant chains, claim they cannot get enough antibiotic-free meat."
To meet the needs of this growing consumer population, Bell & Evans is mixing oregano oil into its chicken feed, as an alternative to antibiotics.
Some "health nuts" claim that oregano oil can help cure colds and other viral and bacterial illnesses in humans, but there is scant scientific evidence to back up such claims. Nevertheless, Scott Sechler of Bell & Evans has been "medicating" his chickens with oregano-laced feed for about three years. His experience? Nothing has worked better as a substitute for antibiotics. The use of oregano oil is also complimented by several "best practices" in terms of hygiene.
In addition, Bayer, a drug producer, did a study with pigs comparing the oregano oil product used by Bell & Evans with four of Bayer drug products. To the surprise of Dr. Lucio Nipoli, the Bayer product manager, oregano oil out-performed all of the drugs, and the pigs taking the oregano oil looked "much more healthy and were not so dehydrated and wasted."
More testing will be required if alternatives to antibiotics are to be in wider use.
Source: "In Hopes of Healthier Chickens, Farms turn to Oregano," by Stephanie Strom, NYT, December 25, 2012.
image from mccoyouth.blogspot.com
Deferred Action for Childhood Arrivals (DACA)...is a law aiming for humane treatment of young adult immigrants. It creates opportunities for immigrants who arrived as children, but who are already integrated into the American education system and American culture. It allows businesses to be able to consider these young adults for employment.
DACA is a messy piece of legislation for businesses in some ways. For example, if an employee presents new documentation after their DACA application, and indicates that they are "now authorized" to work, does that put the employer at risk for having employed the worker (using unauthorized credentials) before they were "legal"?
On the other hand, businesses can hire workers with an EAD (employment authorization document) issued as the result of a DACA application, knowing that no laws have been broken or ignored. This expands the pool of qualified workers to hire.
"Deferred Action" does not provide a permanent path toward citizenship, however. It would take the Dream Act to create such a path.
Sources: "Deferred Action for Childhood Arrivals": Homeland Security URL with FAQs.
"New Policy for Young Immigrants Creates Paperwork Deluge," Karen Grigsby Bates, NPR, December 12, 2012.
"Five Issues Every Employer Must Know About DACA" by Ann Cun, LawLogix, September 12, 2012.
This is an ad that appeared in this week's New York Times Magazine:
The text of the second part of this advertisement reads:
"Travelers who order special meals seem more committed to their plans. The only way to discover a surprising fact like this is to use new tools to analyze massive amounts of seemingly unrelated information. It's called Big Data and it's creating investing opportunities well beyond the technology sector.At Fidelity, we dig deeper into the big issues and hidden trends, using our global reach and expertise to give you smart investing ideas. Watch the video on Fidelity.com/thinkingbig for more forward thinking."
Since this is an ad, its contents should be taken with a grain of salt. But there are a few things going on here. First, the ad--unusually--is based on an article that is footnoted in the fine print of the ad (and is linked below). The marketing tool used by Fidelity in this ad is that their advice is grounded in research, and is therefore more reliable.
They are also making the point that their company is on the cutting edge of information technology--the use of big data--not just to market products, but to look for investment opportunities that relationships hidden to most of us might provide. The "smart investor" usually wants to get ahead of market trends, because that is where the bigger returns might be.
I found it interesting, when reading the background article, that some of the most effective analysts of Big Data are engineers, physicists and actuaries, rather that MBAs. These scientists and math experts are more interested in the soundness of the algorithms providing the data, rather than being attached to any particular regression theory.
As ever, every reader, investor, or analyst must be careful to remember that Big Data is providing correlations not cause and effect. Nevertheless, if knowledge really is power, then investment opportunities might evolve from the best information extracted from Big Data.
Sources: Fidelity ad reproduced above, New York Times Magazine, pages 8 and 9, December 23, 2012."Bizarre Insights From Big Data," Quentin Hardy, NewYorkTimes.com, March 28, 2012.
website linked below at "Sources"
Shawn Achor has studied happiness, and he has found that a person's external world is only a 10% predictor of their success and happiness. A better predictor, according to his research and the research of other brain scientists, is the way one's brain processes the world--whether it is through a positive or negative filter.
Achor quoted other statistics relevant to his research into "positive psychology":
If your approach is more to the negative, do not despair. There is one key activity that research has shown can activate the positive brain: For 21 days in a row, take 2 minutes to write down THREE new things that you are grateful for. To support this activity, other actions to increase the habit of positivity are:
Sources: "The Happy Secret to Better Work," Shawn Achor, filmed at TEDxBloomington, May 2011. This is the link to the video embedded above. It also contains a link to a transcript of the talk.
Talk #2 in this link: "Shawn Achor: The happy secret to work success," filmed at TEDxBloomington, May 2011; posted February 2012 [ALL of the TEDxBloomington talks on business topics are posted here].Good Think Inc. "The Happiness Advantage" (contains links to book and other materials)
Bill Moyers, in an interview with James Autry, former publishing executive and poet.
James Autry was the CEO of a publishing company...but he is also a poet. He has hired people, fired people, has dealt with budgets and administrative edicts. But...maybe...he is mostly a present and mindful human being who is interested in all that life has to teach us. Listen to this extraordinary interview and/or read the transcript. Read or listen to the poems..and the reflections of a CEO for whom self-interest took a subordinate position to reality.
Source: "Poet James Autry on Issues of Art and Heart": Bill Moyers, December 14, 2012. Note: video and full transcript are available at this site: take your pick.
photo from the December 18 Fox News article
Shortly before the tragic shooting at the Sandy Hook Elementary School in Newtown, Connecticut, Fox News reported that gun sales were up during this holiday season. Commentators speculated that increased sales were due to Obama's re-election (and the possibility that it might mean future implementation of gun controls) and fears regarding "the apocalypse" (presumably the Mayan calendar issue). Said interviewee Tim Strunk, of the sports outfitting store, Dunkelberger's, in Stroud, Pennsylvania:
"It is through the roof, absolutely," he says. "Assault rifle-style guns, the black guns, are doing especially well."
The article (posted prior to the shooting tragedy) focused on the surge in gun ownership and concealed-weapon carry permits by women. Ironically, the guns involved in the elementary school tragedy were owned by an outspoken female gun enthusiast.
Another spike in gun sales has occurred since the Newtown killing spree. Many fear that there will be a crackdown on gun sales, particularly of assault weapons, and are buying now. In addition, sales of ammunition are up. Some gun owners think that it would be easier to crack down on ammunition sales than gun sales, and fear that ammunition will be in short supply, so they are buying in anticipation of short supply later.
There are gun enthusiasts, and there are those who eschew weapons...but there is no convincing another to change their position on gun possession. That said, are there business opportunities to be exploited in this environment?
Certainly. Every person has to make their own decision. My pension plan, STRS, is invested in the maker of the gun that was used to kill most of the kids at Sandy Hook. They stand to benefit for increased sales of the "Bushmaster," and, ironically, so do I--a person who promised my dying father I would never own a gun. But I might benefit from a pension plan who does own the maker of guns.
I'm not sure what I should do about this.
Sources: "After Obama re-election, gun owners clinging to Second Amendment," by Peter Boyer, Fox News, December 6, 2012.
"Gun Sales Surge After Connecticut Massacre," by William La Jeunesse, FoxNews.com, December 18, 2012.
Michigan is now also a "right to work" state.
Recently, the lame-duck state legislature in Michigan voted to make Michigan a "right to work" state, and Governor Rick Snyder immediately signed the bill into law. "Right to work" is a cleverly-worded descriptor. Any "right" implies something good. However, the issues around the recent legislation in Michigan are more complicated.
The opposite of "right to work" is "union shop." "Union shop" workplaces have taken a vote, at some point, that included all workers--both union and non-union members. The question posed would have been something like:
Should everyone who works here, and who benefits from the union-negotiated wages and benefits, be required to pay union dues? Or, should workers who choose not to pay get a "free ride"?
If the vote was affirmative, then everyone in the workplace would be required to pay dues. Workers who chose NOT to be union members could request that the "non-chargeable" expenses of the union be subtracted from the dues that they paid, but the expenses of the union that supported negotiations would be shared by everyone.
"Right to work" legislation removes the right for unions to hold this vote and collect dues from all workers. It requires unions to sign up members one-by-one. This increases administrative expenses for unions, and takes energy away from their primary function to present a united worker front in negotiations with management.
On the other hand, weaker unions may seem attractive to businesses thinking of locating in the state.
The law will not take effect immediately, as current contracts need to expire first. The immediate aftermath of this legislation has been union mobilization for the the next election cycle and the decline in popularity of Michigan's governor. It will be interesting to see how this plays out in the months and years ahead, given the current strength and size of Michigan's unionized working populations.
Sources: "What 'Right To Work' Would Mean For Michigan," by Roland Zullo, Research Scientist, Institute for Labor and Industrial Relations, University of Michigan. [research paper written before the vote]
"Now Michigan: anti-union legislation in the home of the car industry," editorial in The Economist, December 15, 2012.
"After 'Right to Work,' Michigan Snyder's Popularity Plummets," by PaddyK PaddK, The Political Carnival Blog, December 18, 2012. [data from Public Policy Polling]
image from jschott.com; cartoon by Trussell & Trussell
"Dodd-Frank" is a comprehensive regulatory law that was passed in 2010, as a response to the financial meltdown and banking crisis of 2008. Wall Street and big banks don't like the law. They have spent millions of dollars lobbying to fight it, and hiring consultants to manage "compliance" in form but not substance. So Dodd-Frank has not been fully implemented. Only a third of the regulations are actually in place, and some of those have only been implemented with compromises. Check out the link to a comprehensive chart delineating what aspects of the law have been implemented. Note that only 9% of the banking regulations have been put in place. Only half of the derivative regulations have been implemented, even though the valuation of derivatives was widely acknowledged to be the prime cause of the financial meltdown.
Another chart on the same link shows how much taxpayer-subsidized meeting time with federal regulators has been used by the various lobbying agencies.
The cartoon above compares Dodd-Frank to the Glass-Steagall Act, a simpler piece of legislation which regulated bank abuses pretty effectively for over 60 years. The cartoon makes an reference to the business success advice to "build a better mousetrap" but also touches on the irony that Dodd-Frank was set up to allow a period of "ironing out the details" where the entities who were supposed to be regulated could influence the regulations. Uh-oh.
Source: "Deconstructing Dodd-Frank" by Ben Protess, Dealbook, New York Times, December 11, 2012.
image by Andrew Harrer of Bloomberg Business Week
Reed Hastings' use of social media is in the spotlight again. Do you remember when Netflix was in trouble, back in September of 2011? Then, the Netflix CEO posted a video where he personally explained the Netflix position and apologized to customers. That may have been unprecedented, but it was not illegal.
It seems that a congratulatory shout-out on Facebook, however, did break the law. At least the SEC thinks so. Here is what Reed Hastings posted on July 3, 2012 at 7:57 am near Los Gatos, CA, to his public Facebook page:
"Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we'll blow these records away. Keep going, Ted, we need even more!" [linked from the Bloomberg article posted below]
According to an SEC rule adopted in 2000, any disclosure of "non-public information" by SEC filers must be made in a forum that is "public." Apparently, even in this age of social media, Facebook is not yet considered a "public" forum by the Securities and Exchange Commission. News releases and regulatory filings are the usual venues for such disclosures.
Businesses engaging in social media will most likely be following this story closely, to see if the business communication environment has changed sufficiently to cause changes to laws and regulations.
Source: "The Facebook Post that got Netflix CEO Reed Hastings in trouble with the SEC" by Kirsten Salyer, Bloomberg Business Week, December 7, 2012.
image from onqny.com
I can remember the first time "data mining" really freaked me out. I was writing an email in Gmail, and I excerpted a children's story I had written about two sisters who were stowaways on a boat of female pirates going to Catalina, an island off the coast of Los Angeles. Before I had finished the email, ads popped up in the right column of my mail account, advertising hotels and bed-and-breakfasts in the main city on Catalina. Plus a coupon for the ferry. "Creepy!" I thought. But "creepy" is the new "normal." It turns out that others are also disturbed by search engines and other cyber outposts mining your online clicks to develop specialized marketing tools to direct at you.
"Need is the mother of invention"...and this need for privacy is the inspiration for new businesses that cater to those who do not want to be data-mined. One such business is the search engine, DuckDuckGo.
image from the search engine's website
DuckDuckGo still connects you to businesses when you search for products...but they do not provide advertisers with your personal data, so that ads are not targeted to your address, or your friends.
Another website, DeleteMe, actually promises to separate you from your data trail...for a small fee. It searches the web to remove photos and personal information.Talk about job creation! Businesses are forming, and apps are being developed, to DO more data mining...and, on the other side, there are businesses forming to THWART data mining. Perfect.
Source: "The growing art of data dodging" by Stacey Vanek Smith. Marketplace, American Public Media, November 29, 2012.
Netflix has had a very rocky year. It lost a significant amount of content shortly after changing its pricing structure and alienating many of its customers. (Intro to Business, Sept 2011)
Now, things seem to be looking up. Netflix made a deal with Disney to air its content, including some of the classics in the Disney library. Disney thinks that Netflix is an excellent partner for its family-oriented content. The stock market responded yesterday in strong support of this partnership.
Source: "Netflix-Disney Deal: A game changer?" MSNBC, featuring Julia Boorstein. Aired December 5, 2012.
image from the Congressional Budget Office, courtesy of local10.com
The fiscal cliff is in the news every day. Reading about the drama it is creating is a great opportunity to observe negotiation styles and negotiating techniques. The "bottom line" is that the fiscal cliff is a manufactured crisis, and is therefore resolvable.
Walter Shapiro of Yahoo! News makes these main points:
cartoon by Bagley of the Salt Lake Tribune.
Source for blog text: "Fiscal Cliff Notes: a study aid for the budget shell game" by Walter Shapiro, Yahoo! news, November 26, 2012.
Hewlett Packard shareholders have sued the auditors of Autonomy, HP's over-priced acquisition. Meg Whitman, the CEO of HP, said that she relied on the financial statements that were prepared by the United Kingdom branch of the Big Four accounting firm, Deloitte Touche Tohmatsu (Deloitte). In addition, HP also relied on the work of KPMG, another Big Four accounting firm, who supposedly audited the work done by Deloitte.
The lawsuit also named Hewlett Packard's Board and various executives for not providing adequate "due diligence" in making the purchase. It will be very interesting to see what comes to light about the accounting firms' work as a result of this lawsuit.
Source: "Audit Firms Sued in HP Autonomy acquisition", Reuters, November 28, 2012.