Unemployment Numbers Good or Bad?

The new unemployment numbers came out today, and who you listen to may decide how you see them. The Labor Department reported the economy added 120,000 jobs last month. The unemployment rate also dropped to 8.2 percen, which is the lowest level since January 2009. These are great numbers right?

President Obama was quoted as saying "we welcome today's news that our business created another 121,000 jobs last month and the unemployment rate ticked down." However, GOP candidate Mitt Romney views these statistics as more proof that there needs to be someone else in the White House.

Romney stated that "this is a weak and very troubling jobs report that shows the unemployment market remains stagnant." He says this for good reason too. This is the first time since November that the new jobs figures fall below gains of 200,000. Romney also stated, according to FoxNews, that "more and more people are growing so discouraged that they are dropping out of the labor force alltogether."

Romney has a point that this is troublesome news, and that it appears that the slow economic recovery may be stalling even more. However, it is important for those reading these news stories and listening to the politicians do some research on their own.

For example, I am not sure where Romney sees that last claim. Although the Bureau of Labor Statistics makes the point that the number of discouraged workers is about the same as last year (not seasonally adjusted), the numbers released show that there are approximately 865,000 discouraged workers. This is down from over a million from last month.

In other words, people who will be voting in November should look up some of this information on their own to make up their own minds on the progess of their country.

Follow this link to see the report for yourself and make up your mind:
http://www.bls.gov/news.release/pdf/empsit.pdf

Luis Alexander

Community Outreach in Lexington

Today I had the pleasure of speaking with Ms. Raven Williams, the head of Sales and Development at Sweet Frog. She was kind enough to answer a few questions I had regarding their company structure and growth.

If you are unaware of what Sweet Frog is, you should go visit the frozen yogurt hangout located next to the Subway on Hunter Hill. Williams explained they currently have 50-60 establishments, but they plan to expand to nearly 180 stores in 15 states by the end of the summer. This impressive growth is nothing when you consider the other expansionary ideas Derek Cha, the founder of Sweet Frog, has for his company. Children’s books, mascots, television shows, and video games are just some of the projects Cha is working on.

Some may find this to be a bit too ambitious; however, Cha has faith and relies on God to guide his company. In fact, the “frog” in Sweet Frog stands for “fully rely on God.” Williams described this Christian background as the backbone of their company, and “corporately our main goal is to do outreach in the community.”

Their goal to reach out to the community happens to also be one of their big methods to differentiate from other established frozen yogurt chains. For example, Sweet Frog mascots visit the children’s hospital in Richmond.

I have to say it was refreshing to hear someone talk about the importance of reaching out and performing acts of charity in the communities this company becomes involved in. I know this is already a common practice, but I wonder what kind of outreach would be best for Lexington.

Lexington is different from other towns Sweet Frog does business in because college students play such an important role in this establishment’s business. It would seem to me that the best option for Sweet Frog to get involved with charities that the fraternities and sororities are supporting. Donating frozen yogurt and money to the events that the fraternities and sororities host for charities, like Muscular Dystrophy Association and Relay for Life, would be a good start.

I wish Sweet Frog good luck and plan on eating there on many occasions this Spring Term.

Luis Alexander

Companies Rethink the Value of Business Majors... uh oh

Today the Wall Street Journal published an article about corporate recruiters questioning the value of business degrees despite the fact that one in every five American students are business majors.

Seriously, how many more hoops does my generation need to jump through to get a job in this world?

Our frantic race to a jobless economy started in the 10th grade when we began wasting away our high school youth by getting tutored for SATs that became completely irrelevant to our lives the second we got into a school. I fondly remember being told that me and my friends needed to be kids, needed to get outside and get off our computers. This advice echoed through my head as I longingly stared at the blue sky and green grass from the window of my SAT tutor classroom. (Editor's note: this actually never happened because the classroom was in a basement). Upon entrance at our college, we flocked like blind sheep to majors that we thought were popular and would get us a job based upon the advice of others (hey, we were 18 at the time, we literally were blind sheep). Now, as we enter the work force, we find an economy without jobs because it got screwed up by an irresponsible older generation. Apparently, even if there were jobs, companies wouldn't hire us because they have decided that they don't value the skill sets we have acquired.

If we ever do get jobs though, we can look forward to giving all our money away to an unsustainable social security system to take care of the people that have secured this wonderful future for us.

Businesses today are looking for innovative, flexible thinkers with a well-rounded base of knowledge. Essentially, businesses want people with a liberal arts education, and thankfully, W&L lives up to its motto: "Not Unmindful of the Future" in the development of its curriculum.

As a Mass Communications major here, I am required to take 90 credits outside of the Journalism school. This has allowed me to take classes in a variety of subjects, and has left me with an education that is thorough and well-rounded. Unfortunately, students who do not go to a school such as ours may not be so fortunate.

I will conclude my gripes and belly aches with The Talking Heads' song "Road to Nowhere" because I think David Byrne says it best.
http://www.youtube.com/watch?v=JtdBtZOG17E

- Bryan Stuke 

The IPO model

I recently read an article in Wired Magazine saying that Mark Zuckerberg must be furious about Facebook getting ready for its IPO. This first stunned me because how could someone be mad that they are about to be a multi billionaire? However, as I continued to read I began to understand why a tech company going public may not be as celebratory as one would expect.

            The article titled Why Going Public Sucks discussed how venture capitalists have a way of forcing companies to grow too fast, which in turn causes their demise. The author, Jesse Lenz, said that Facebook is somewhat of a different case because Zuckerberg will still have 56.9 percent of all votes on company business, so in theory it is still his personal private company.

            Lenz says that for some companies going public causes a “death spiral of unsustainable growth.” The article says that when a company goes public, it becomes too caught up in stock prices and only focuses on short-term moves that will boost stock and make the investors happy, instead of focusing on more long term goals to make the company more stable. Companies like Google and Facebook don’t have this problem because they were so big by the time they made an IPO, but this hasn’t worked out so well for others.

            The article sits Groupon as an example of a company that skyrocketed after its initial IPO then started to lose revenue. In the first quarter of 2011, Groupon’s revenue was $645 million or a 1,357 percent increase in one year. However, recently Groupon reported a loss of $146 million in one quarter. Groupon wasted a large amount of money on advertising rather than looking at its expansion for the long term.

            After bashing the IPO model, the article does look at the multiple positive benefits that it brings as well. By going public, the company can now offer stock options to new employees rather than giving them a bigger paycheck, thus saving money in the process.

            The main point of the article is looking at how Facebook was basically forced into going public by the SEC. Lenz believes this is an unfair pressure to put on new tech companies, which can result in the loss of a lot of money.

Billy Crosby 

The Dangers of Easter Eggs?

By Laura Simmons
This afternoon I spent some time reading articles about Easter and was very surprised when I read that a favorite Easter surprise, the Kinder egg, is actually illegal to import into the U.S. Spending so much time on globalization this semester, I thought this story was particularly interesting and relevant to our class discussions about global markets.
If you don't know, a Kinder egg is a special chocolate egg that comes with a small toy inside. While these are sold globally in many countries, they are not sold in the U.S because they are deemed "too dangerous" by the President, Homeland Security and the U.S Customs and Border Patrol......really?
I have trouble believing that these seasonal chocolate eggs are "dangerous". While the Consumer Product and Safety Commission and the FDA have said that this product is too dangerous because children can choke on the toy, I have to disagree. A kid could choke on a Skittle...Skittles aren't illegal. Similarly, a kid could choke on a Polly Pocket....Polly Pockets aren't illegal. According to the Border protectant agency, however, over 60,000 Kinder eggs were confiscated in 2011.
My first encounter with a Kinder egg occurred over this summer while I taught tennis to a 5 year old girl whose family was from Czech. She would bring one almost everyday with her lunch. It never occurred to me that this 5 year old was smuggling an illegal product....
In terms of globalization, I think this is a really great example of market barriers. For a product to sell on a global level, they want relatively easy or no barriers to entry. The Kinder Egg company may be sold in other countries, but they can not sell their product in the U.S due to market barriers, which can be caused by political, social or other reasons.
In my opinion, I think that the U.S Border patrol should be focusing on more serious and harmful products being smuggled into our country other than little chocolate eggs.

Unfortunate Confluence

The Labor Department usually publishes the employment report on the first Friday of every month and the timing of Good Friday depends on the cycles of the moon. This year the two events will occur on the same day. Since 1885, except in 1898, 1906, and 1907, the New York Stock Exchange has closed for the holiday.

As of today, the markets have continued to slide and it appears that nothing is going to shake the ill feelings on Wall Street this week. The Dow is currently down 3.67 points or less than a tenth of a percent at 13,071.08.  The S&P 500 fell 1.4 percent in the past two days.

This may be a result of the Tuesday release of the Federal Reserve’s minutes from its last meeting and an uneasy Spanish bond auction. The rise in Spanish bond yields renewed concerns about the Euro Zone’s financial health. Traders are reluctant to make any significant moves ahead of the Fed’s release of the unemployment rate tomorrow.

Last month, the U.S. economy added 227,000 jobs and the unemployment rate was 8.3 percent. Even though the economy is expected to add at least 200,000 jobs for the fourth month in a row, the unemployment rate is expected to remain at 8.3 percent. Because of Good Friday holiday tomorrow, any market reaction to the employment report will be seen on Monday.

“The stock markets can’t tell the government when to release the data, and the government can’t mandate that stock markets be open,” says Michael James, managing director of equity trading at Wedbush. “It’s an unfortunate confluence of dates.”

The last time the monthly employment report coincided with Good Friday was 2010. U.S. stock-index futures, yields on 10-year Treasuries and the dollar rose on April 2, 2010, after the report showed employers added the most jobs in three years. The S&P 500 future rose 0.3 percent, while Treasuries fell, driving the yield on 10-year notes up to 3.94 percent. The jobs report and Good Friday also coincided in 2007, 1999, and 1996, according to data compiled by Bloomberg.

All of the big nations, except Russia’s equity market, will be shut down tomorrow. While bourses in China and Japan will be open tomorrow, they will have closed by the time the report is published.

It is important to remember that even though every piece of news might move the markets up and down for one day, it does not mean much for long-term investors who are looking for long-term value creation. 

- Harlyn Croland

Globalization and Buena Vista, VA

With a population around 6,650, it may come as a surprise that within the small town of Buena Vista there is a company turning out millions of tactical accessories and gear to the United States military that is shipped around the world.

In 1987, Scott and Mary Sayre started Sayre Enterprises in their garage with one product–an ankle blousing strap. This strap provides a more comfortable fit for military officers who had to “blouse” their pants. As a result, the Sayres sold over one million blousing strap within the first year of business.

Today, total annual sales top ten million dollars and the company employes around 115 individuals. When examining the total annual sales, 65 to 70 percent of sales are military, 25 percent of sales are promotional and commercial sales claim the remaining percent of sales.  Since creating the blousing straps, Sayre Enterprises has branched out to promotional products, collegiate items–such as creating the T-shirts for Washington and Lee University Mock Convention, and additional uniform accessories. Sayre is the number one provider of reflective gear to the military.

Of interest to many Washington and Lee students, Sayre Enterprises is responsible for the embroidery and monogramming of Jcrew’s products. But how does Sayre have a global impact or deal with globalization?

When discussing foreign competition, Mary Sayre, CEO, says it is difficult to compete with labor costs in China because of minimum wage and benefit requirements in the United States. Therefore, Sayre is extremely reliant on its number one client–The United States Military.

However, the US military has many requirements and standard codes that Sayre must meet in order to be certified to work with the military. One of the requirements is that all materials used in military gear must be made in the United States. This creates a small problem for Sayre since they do have China products such as vinyl used in reflective gear.

In order to solve this problem, the company does not keep the China products in its 30,000 square foot Buena Vista manufacturing plant. Instead, they keep the China products in an offsite location and will only bring in the products as needed. This allows Sayre Enterprises to remain consistent with the wishes and codes of the US military.

I find it extremely interesting and surprising that within such a small community like Buena Vista, there is a company with global ties that must deal with the benefits and the obstacles of an increasingly interconnected world.

- Harlyn Croland 

Dwindling Peanut Industry

By Laura Simmons
April 3, 2011

For my enterprise paper I chose to write about the VA peanut industry and it's impact on the global peanut market. When I began my research I didn't know where to start. After contacting almost every peanut company in existence in Virginia, I started to see some results. My questions about the industry were met with overwhelming responses from peanut growers, shellers and sellers. I learned that the "Virginia" peanut is a gourmet peanut type that is mostly sold in the U.S, but is also sold on a global level. I also learned that while the U.S. had a global presence in the market historically, recently the industry has fallen behind China and Argentina. When speaking to the head of a "shelling" company (a business that buys peanuts from farmers and shells and cleans them before selling them to companies like Planters and Jif), he admitted that farmers in the U.S are pulling away from the peanut company because it is not as lucrative as other crops like cotton and soy. In addition, food safety is a huge issue with the peanut industry especially after serious salmonella scares that happened a few years ago in a peanut company located in Lynchburg, VA. Farmers are discouraged to grow peanuts because it requires such expensive food sanitation processes. But, there is still a lot of new research being done on peanut breeding and quality, which will hopefully re-vamp the U.S industry.

State Legislatures Play the Lotto

Last Friday, March 30, the jackpot for the Mega Millions lottery grew to a record-breaking $656 million.  With the jackpot at a record high, it caught the eye of not only millions of lotto hopefuls, but also state legislatures. 

The winner of the lotto has to pay a hefty tax back to their state.  In most states the tax on winnings ranges from 5 to 9 percent.  For states such as Rhode Island and New Hampshire, this meant the possibility of an over $20 million payout which would have gone a long way in their small state budgets.

In the end it was the Illinois, Maryland and Kansas state legislatures left with smiles on their faces as three residents from these three states split the record jackpot. Illinois and Kansas both have 5 percent taxes on winnings, meaning this jackpot alone will bring in an estimated $7.9 million for each state.  Maryland has an 8.5 percent tax rate on winnings and will take in an estimated $13.4 million from the winner. 

The Mega Millions jackpot is especially welcomed revenue for state legislatures because it comes largely from other states’ pockets.  Most lotteries are confined to one state but the Mega Millions is played in 42 states plus the District of Columbia and U.S. Virgin Islands. 

Many state legislatures rely on lottery revenue as part of the budget each year.  According to the website ThinkProgress.org, lotteries were first perceived as fiscal saviors, but they do not annually bring in the anticipated revenue.  Even with this knowledge, many states still earmark lottery revenue for specific parts of the budget, most often education. 

Studies have shown that this practice is not a good long-term solution to budget imbalances at the state and local level.  The Nelson A. Rockefeller Institute of Government found that “new gambling operations that are intended to pay for normal increases in general state spending may actually add to, rather than ease, state budget imbalances.”

Taking New Hampshire as an example, 27 percent of every dollar spent on a lottery ticket is earmarked for education.  What many people don’t realize is that because state governments expect to make a certain amount of money each year from the lottery, they actually decrease the allotted amount of stable funds for education. This means that the money from the lottery is not a bonus for education, but money that education actually relies on each year. 

This means states are betting on a steady revenue stream each year from lotteries.  Unfortunately for a state like New Hampshire that has seen the revenue on a steady decline for the past five years, this means less money for schools. 

So why earmark the lottery money for such a vital part of the budget such as education?

States often earmark lottery revenues toward education as a marketing ploy.  It sounds a lot better to a consumer when close to 30 percent of each dollar is going toward education rather than going to corrupt politicians’ salaries or an unnecessary regulatory board.

Lotteries aren’t just gambling away your money, they may be gambling away your child’s education too.  

-Tyler J. Tokarczyk

Sweden's Mexico: Conflicts Between The Needs of the Virginian Worker and His Ideology

For my enterprise story, I am writing about the Ikea plant that has opened in Danville, VA and the accusations surrounding the plant of mistreating and intimidating their workers.  

Ikea is a Swedish furniture factory, where in its native country, factory workers are paid about $19 an hour, and given five weeks of paid vacation thanks to government mandates. Danville workers, however, are paid at $8 an hour with merely 12 vacation days, eight of which are dates determined by the company.

One could portray Ikea as an evil corporation that is exploiting American workers. However, the company is for the most part working within the laws and regulations of the United States. Ikea has been criticized for not providing the same benefits to American workers that it does for their European counterparts. Why should Ikea be held responsible to operate by Swedish law in the United States?

My stance on the issue is not to defend Ikea in this situation, but to criticize the policies and voters of Virginia. I find the disconnect between the needs of the blue-collar Virginian, and his anti-government, anti-union, anti-interference values fascinating. Countries such as Sweden have found a way to formulate a mutually beneficial social contract between the government and its people. Why not us? Do Americans not want a higher quality of life? Do we prefer lower wages and less vacation days?

Perhaps some of our conservative values harken to a sense of patriotism, and the perception that government stepping in to protect workers from being abused is anti-American. Maybe it is an idealistic belief in the American Dream. To these types of thinkers, I offer this clip from The Daily Show with John Stewart, which deals with the reality that, in this instance at least, America has become "Sweden's Mexico".


http://www.thedailyshow.com/watch/wed-june-29-2011/swede-dreams---made-in-america

- Bryan Stuke

Fed Slows Down Efforts

            Today, the Fed showed signs that it would slow down its action to stimulate the economy. Apparently the Fed has decided to slow down its bond buying programs because the economy has showed signs of improvement.

            However, apparently Wall Street wasn’t as agreeable with this deal. According to an AP piece, traders started selling stocks and bonds after the minutes were released.

            This caused the yield on a 10-year treasury note to rise from 2.16 percent to 2.3 percent. This is pretty significant because the yield has an inverse relation with its price. As the yield rises, the price drops.

            The Dow closed today at 13,199 falling about 133 points throughout the day, 65 points lower from yesterday.

This seemed to be exactly what the Fed was trying not to do. They were so sure of the economy, so it stopped its policy of trying to stimulate the economy, only to have the Dow drop at the end of the day.

However, the Fed’s decision seems to be justified. They decided to do this with the recent drop in the unemployment rate. It is now at 8.3 percent, but, according to the article, Ben Bernanke says he doesn’t expect the unemployment rate to continue dropping at its current rate.

Billy Crosby

Oil Boom Towns Struggle to Adapt

            In 1995, the US Geological Survey published a report estimating that there were 150 million barrels of oil “technically recoverable” from the Bakken Shale formation, a rock unit covering around 200,000 square miles of land in Montana, North Dakota, and parts of Canada.  Because of rapid technological advances in surveying and extraction procedures, the estimate as of March 2012 now hovers around 24 billion barrels.  News of so much extractable oil has sent major US Energy companies racing to small towns near the formation to set up camp and get a piece of the profits, bringing with them a whole new set of challenges for local economies.

     

           Williston, North Dakota recorded a population of about 10,000 people from the 1960’s until 2000.   Like countless other towns in the region, Williston’s economy was based primarily around agriculture, that is until the mid 2000’s when major oil companies started eyeing North Dakota and the Bakken Formation for development.  Today, official estimates put the population level at 20 or even 30 thousand, comprised of workers from around the country coming for jobs where starting pay can surpass $100,000.

            

            The large number of workers have made Williston one of the top oil-producing sites in the United States in terms of output, close to surpassing Alaska’s Prudhoe Bay, the historical top-dog in domestic output.  This has brought big money, as well as unprecedented amounts of stress, to the once sleepy farm town. 

In just the past two years the Williston school district has dealt with 480 new students, a 22 percent overall increase.  This may not seem extraordinary, but the superintendent Viola Lafontaine notes that the increase is equivalent to adding “a whole elementary school.”  Even more, Lafontaine expects 1,200 more new students in the coming year. 

Because of a lack in available housing, oil workers used to sleep in their cars in the local Wal-Mart parking lot, which eventually evolved into a neighborhood of trailers and RV’s until management kicked everyone out.  There is finally some new housing going up, but demand is so high that workers can expect to pay $2000 a month for a small one bedroom apartment, that is if the they can find a lease.  Most new apartment complexes are entirely leased months before planned completion.

Williston’s economy might appear strong from the outside (it boasts a 0.8% unemployment rate), however many are concerned that the percentage of oil-revenues major companies are required to give to local economies is not keeping up with the explosion in economic demand.  Williston is a town built for 10,000 local residents, not 20,000 newcomers who now require new streets, sewer facilities, water-treatment plants, schools, housing etc.  Many locals, like Lafontaine, are fighting for more state aid for North Dakota’s booming oil-producing region, but they’ll need significantly more funds than they’re currently allocated to keep up with the soaring population levels and production rates found in towns around the Bakken Formation.

-Harper Coulson

RIM's New Woes

            Research in Motion, once the leading player in the Smartphone market, recently posted a quarterly loss of $125 million, or $0.24 per share, amid fierce competition from Apple and Android.  Adjusted net income fell from earnings of $934 million this time a year ago to just $418 million, confirming analyst’s weak revenue expectations. Former co-chief executive and board member Jim Balsillie and chief technology officer David Yacht resigned shortly after the posted loss, adding to the company’s woes. 

            Thorsten Heins, recently brought in as CEO, made a statement claiming RIM would start focusing on the business market, a segment it dominated in the early 2000’s when it was one of the only companies to offer email on a mobile phone.  “We plan to refocus on the enterprise business and capitalize on our leading position in this segment,” he said.

            RIM has long been losing relevancy across the board as key competitors continue to innovate and crowd out market share.  RIM seemed to have been so blinded by their successful stranglehold on the market in its early years that it forgot to continue pushing the envelope, staying true to the basic applications like email, calendars and SMS messaging while Apple introduced us to a world of cutting-edge Smartphone technology.

            Many analysts are starting to draw comparison between RIM and Blockbuster, one of the most prominent business flops of the past decade.  Blockbuster one dominated its space for years, but failed to keep up with innovative competitors like Netflix who offered a more convenient and cost-effective business model focused on DVD rental by mail.

            Is RIM destined to go the way of other obsolete technology companies that fell from market dominance? Top executives think there is still time to make a push to regain market share by refocusing on the foundation of its core business.  Investors apparently share this confidence-- RIM stock traded close to $15 with high volume the day after the earnings report was released. 

            On the short term RIM stock looks to be a risky investment as it undergoes complex corporate refocusing.  However, investors seem to be willing to ride the wave for a payout in the long-term as RIM seeks to become the business-enterprise focused company it once was.

-Harper Coulson

Why Should We Care About the ESM?

By: Mike Ott
3/29/12

For something that has yet to do anything, the Eurozone’s new European Stability Mechanism, or ESM, has commanded plenty of attention this year. The ESM is a pool of funds which takes money from Eurozone member countries and sets it aside for use in case a member of the Eurozone is threatened with insolvency. Right now, the ESM is planned to replace the European Financial Stability Fund, or EFSF, which is expected to last until mid-2013. The ESM, which is meant to be a permanent fund, is expected to become operational during June of 2013. Currently, it is expected that the ESM will have 500 billion Euros with which to lend or purchase assets in distressed situations. The Eurozone is also in talks to combine the EFSF with the ESM, effectively creating a 740 billion Euro fund.

Will an improved ESM really defend the Eurozone against collapse? Not alone. The real answer hinges on other components such as the ECB, politics, the capital markets, economic growth and just plain good luck.

First, let’s look at the positives. More than anything else the ESM shows that the Eurozone is committed to staying together. By committing their taxpayer money to a permanent fund, the Eurozone countries are betting on the Euro’s survival. Secondly, the fund is a very large sum of money. By comparison, Greece’s most recent bailout was 130 billion Euros. So while it is not enough to stem a systemic collapse, it is sizeable. Third, the money is being set aside in advance, reducing the risk that political squabbling could squander a solution in a crisis situation.

However, the ESM is a far cry from a solution to Europe’s problems. Mario Draghi’s policy changes as head of the ECB have thus far been the most effective steps towards preventing a crisis in the Eurozone. In the event of a crisis, all Euro member countries still need to vote to approve the use of ESM funds, essentially still leaving Europe’s political conundrum as a potential risk. There is also the risk that the ESM will become a self-fulfilling prophecy. While it seems evident that Greece and other slow-growing, spendthrift countries will have troubles for years to come, having funds already set aside to bail them out may just encourage bad habits. True, the release of funds needs to be approved by all Euro members. However, the threat is not quite as strong as it would be if the funds had not already been set aside and the breakup of the Euro was a more realistic possibility.

Standing alone, the ESM will not prevent a crisis. Reducing the debt burden of the PIIGS will take years, economic growth, help from the ECB, and the full commitment of Eurozone governments – which derive their power from Europe’s large and fragmented population. The best outcome that can come from the Euro crisis is that enough economic growth materializes and the right policies are put in place over several years, enabling the PIIGS to slowly reduce their debt burden with bailout help along the way. Unfortunately, stability will still rely on politics, economic growth, and perhaps most of all just plain good luck that no unexpected events cast Europe into a deep recession.

Sold! For $2.15 billion To The Man in the Back

Last night, Tuesday March 28^th, the Los Angeles Dodgers were purchased for a record setting $2.15 billion by an ownership group that includes Los Angeles icon Magic Johnson.  This price shatters the mark for a professional franchise previously set in 2005 when Manchester United soccer club was purchased for $1.47 billion.  Magic Johnson and his ownership group received in return the second most valuable team in Major League Baseball, current value estimated at $1.4 billion dollars by Forbes, the iconic Dodger Stadium, and real estate surrounding the stadium.  This deal sets a new precedent within professional sports ownership, and has most sports fans wondering if the era of individual and family owned franchises is over.

This agreement ends a struggle between Major League Baseball and previous Dodgers owner Frank McCourt.  McCourt purchased the team in 2004 for $430 million dollars.  However, recently McCourt went through a very public and bitter divorce that left the team bankrupt and filing for Chapter 11 bankruptcy protection.  In November, McCourt and MLB agreed to place the team up for private auction, with McCourt choosing the highest bidder.  Three finalists made initial offers for the team including Johnson’s ownership group.  Reportedly, the other two finalist’s offers were both around $1.5 billion.  McCourt accepted the $2.1 billion figure without giving the other two groups a chance to match. 

Frank McCourt now leaves baseball as the sports most successful owner.  When the team filed for bankruptcy protection their debt stood at $579 million dollars.  McCourt also owes $131 million to his ex-wide in divorce payment, due at the end of April.  Therefore, McCourt will still be walking away with hundreds of millions of dollars and a 26% annualized return, despite running a franchise financially into the ground.

This deal is a case of simple economics; buy low and sell high.  McCourt will be able to pay the outstanding debt on the team and in his personal life, and still have plenty of money to spare.  On the other hand, Johnson and his ownership group are going to need some high immediate returns on their investment to come out on top in this deal (aka World Series Victories).  The joy of an open market!

As a baseball fan, I can only sit back in amazement at the amount of money exchanged for a professional baseball franchise.  It makes me wonder, how much the New York Yankees (the worlds most valuable franchise, estimated to be worth over $1.85 billion) could now be auctioned off for?            

-Morgan-Reese V. Hale

Why Buy Gold as an Investment? A Brief Market Overview

By: Mike Ott
3/21/2012

It was asked in this morning’s class why someone may be inclined to buy gold as an investment. The question is especially perplexing given that an ounce of the shiny metal is trading for over $1600 in spot markets, roughly seven times the spot price in year 2000. Nonetheless, I thought I might take a stab at it.

There are three main sources of demand for gold. Jewelry demand accounts for about half of world demand, fueled by fiercely growing consumption in China and India. Demand for gold as an investment accounts for around 40 percent of global demand. The rest of demand is for gold to be used in industry and technology, and will not be a focus of this post.

Jewelry demand is fairly easy to understand, as it has existed for centuries. With vast sources of new wealth coming into the world economy throughout the 2000’s, it is of little surprise that nations such as China and India would become rapidly growing consumers of luxury goods. Investment demand is more complex. Traditionally, gold is a “store of value,” or an alternative to holding cash. Investors have long had the option of holding gold, knowing that they can readily convert the metal back into virtually any currency. In recent times, quantitative easing and Fed monetary policy have increased the supply of US Dollars and created a greater threat of perceived future inflation, forces that weaken the Dollar in foreign exchange markets. A weaker Dollar is gold positive. That is, if an investor buys gold and the Dollar weakens, then that same ounce of gold is suddenly worth more in Dollars, creating return potential. Add to the mix that interest rates are at historic lows. This means that there is little opportunity cost to holding gold. If an investor converts cash to gold, the investor in the current environment is passing up virtually zero interest income. Finally, gold has become a “flight to safety.” Investors that feared a collapse of the Euro during 2011 at least felt comfortable holding gold and soup cans, knowing that they would be fed in the near term and that they could convert their bullion into cash once the dust from the crisis had settled.

On the supply side, gold can be mined or recycled, an expensive process either way. Mining requires equipment, lots of oil, labor and a complex refining process. Recycling involves heating gold to temperatures that liquefy metal. Gold cannot be produced to match demand overnight, and statistics have shown that supply has not kept up with recent demand. This allows demand to heavily influence prices.

It is another post entirely to explain a buy rationale for gold at $1600/oz. However, with strong jewelry demand, plenty of events on the horizon that may cause another flight to safety, potential inflationary pressures, low interest rates and prices that have come down since the second half of 2011, gold may not be such a bad buy after all.

Jeffrey Friedman's on "Greedy" Bankers

After confusedly watching Margin Call, I found myself realizing that I knew close to nothing about the financial crisis and its causes. Luckily, I had a reading in one of my other classes that also covered the causes of the crisis and helped shed some light on some things for me.

Jeffrey Friedman’s “A Crisis of Politics, Not Economics: Complexity, Ignorance, and Policy Failure” attempts to describe what caused the subprime bubble to boom then bust and how it went global. Friedman uses references to other authors to prove that excess government regulations and bankers’ ignorance are the two main causes for the crisis.

Friedman blames the government for the inefficiency of the three rating agencies, the expansion of home ownership, and extremely low interest rates which all led to the housing bubble crash. It was because of government mandates that agencies were encouraged to give out mortgages to people with subprime credit. Because Moody’s, S&P, and Fitch are all granted effectively oligopoly status by the Securities and Exchange Commission in 1975, the three agencies could use outdated data and did not have to worry about accuracy when giving triple-A ratings on bonds consisting of segments of subprime mortgage-backed securities. Finally, it was the extremely low interest rates that caused banks to use ARMs to protect themselves.

Friedman spends the next half of his paper explaining that bankers invested in these mortgage-backed securities because they were fooled into thinking they could trust the ratings given by the three government-backed rating agencies. It was not their greed, as Margin Call would like to portray that led to the crisis, but the government’s overly complex web of regulations that ultimately led to our current problems.

I highly recommend reading Friedman’s article, instead of relying on this super concise summary.

Luis Alexander

Here's an Idea for Apple's Cash Dilemma: Buy Something Exciting

Apple Inc. announced that it intends to dole out billions of dollars of profit to shareholders. Tim Cook, CEO, stated that Apple plans to pay shareholders $2.65 for every share of stock each quarter. This is the first stock divided from Apple in more than a decade. In addition to providing a dividend to shareholders, Apple intends to buy back roughy $10 billion in stock over the next three years, starting at the beginning of the 2013 fiscal year.

According to Cook, "Even with these investments, we can maintain a war chest of strategic opportunities and have plenty of cash to run our business." Analysts predict that Apple will likely generate $75 to $80 billion in free cash over the next four quarters. Add that to its current $97.6 billion cash surplus, subtract the $45 billion from the stock buyback and dividend, and Apple will still retain an enormous amount of cash in retained earnings.

While this new strategy for Apple sounds splashy, it isn't all that exciting. Most press conferences held by Apple unveil shiny, new tech products. However, since former CEO and tech guru Steve Jobs stepped down, Apple has done something unusual: flown under the radar. The iPhone 4S and the "New iPad" received good reviews, but hardly met the levels of innovation their predecessors reached. The newly announced $10 billion a year dividen only carries a yield of 1.81%. That is a significantly smaller yield than fellow technology firms both Microsoft (2.5%) and Intel (3%).

So how can Tim Cook make a splash? How about Apple goes out an buys a social media company? While Apple has created fantastic hardware and software, and integrated them seamlessly, they have not succeeded in making a jump into social media.

Imagine Facebook wasn't filing for an IPO. If Apple were to integrate Facebook into its products (think laptops, iPads, desktops, iPods, iPhones, and, most interestingly, iTunes), it could open new doors. Barry Ritoltz of The Big Picture mentions Twitter as a fantastic opportunity for Apple (The Big Picture). Other opportunities like Pinterest, LinkedIn, etc. all offer interesting and unique opportunities. But if Apple has the cash, why not swing for the fences? Make Mark Zuckerberg and offer he can't refuse before its too late.

- Reid Coopersmith

Dan Gillmor

On Friday, March 16, 2012, Dan Gillmor spoke to Washington and Lee University students during an ethics institute day. Gillmor had an interesting take on what he believed made a journalist ethical. He summed up the principles for creators via the acronym TAFIT. Thoughtfulness, Accuracy, Fairness, Independence, and Transparency. In order to effectively succeed in each of these areas, the author must use hyperlinks when publishing online and always utilize an editor as well as at least triple checking facts with various primary sources and admitting when you have made a mistake.

The most interesting thing I took away from Gillmor’s talk was his hatred towards Apple. After our press conference on Monday, I thought it was difficult for people to consistently look negatively at this company. Gillmor enjoys their actual products but does not like the practices that take place in order to produce these products. He hopes that Apple is not off the hook for their unethical manufacturing practices. His other major issue with Apple is that if someone tries to sell his/her app in the Apple Store, Apple has the ability to turn down these apps. He poses the question, “When did Apple become your editor?”

Overall, Gillmor had a common outlook on journalistic ethics with an interesting take on specific conflicts in the past.

-Meade Brewster

Will Greg Smith Make a Difference?

Does Greg Smith look like a man who can hurt Goldman Sachs?

He certainly did his best this morning, resigning from his position as an executive in the company's London office and composing a disparaging Op-Ed to be run in the New York Times. In the letter, he was candid in describing the international firm's culture, which he says has grown far more "toxic and destructive" in the 12 years since he first joined. He insisted that greed has taken hold of employees to the point where the wellbeing of clients is getting overlooked.

Smith's actions generated a great deal of noise among in corporate and public circles alike. After all, in a world where large companies have public relations officials working around the clock to drown us in good news, hearing a negative critique is rare, especially when it comes from the inside.

So he made his point and told us what he thinks. Moving forward now, it'll be interesting to see if the nation's business leaders of tomorrow care.

At the very least, the mighty investment bank has plenty of potential room to fall. As reported by Forbes' Kurt Badenhausen this afternoon, when Universum, an American employer research firm, conducted its most recent annual poll of which organizations MBA students viewed to be the most desirable to work for, Goldman Sachs was fourth in the U.S. Only Google, McKinsey & Co. and Apple placed higher. According to the survey, it was the sixth year in a row that Goldman was ranked at least that high.

The young professionals that are drawn to a place like Goldman Sachs are both highly intelligent and highly ambitious, and the statistics provided by Universum suggest that it would likely take a lot more than one disgruntled mid-level employee to discourage MBAs from working like dogs to earn their place with the company.

I don't know that this is necessarily a bad thing or a good thing. All I know is that if Smith's warning, that Goldman will not remain sustainable if it continues in the moral direction it's been headed, ends up being a prophecy, then he'll be able to drop a heck of an "I told you so" on many of our nation's hyper-motivated youths.

http://www.forbes.com/sites/kurtbadenhausen/2012/03/14/greg-smith-doesnt-like-goldman-sachs-but-mbas-still-do/

-Brian Seliber

Goldman Exec Says Goodbye to the ‘Destructive’ Firm

In an open letter to the New York Times, Greg Smith explains how drastic changes in company culture led to his resignation today as one of Goldman Sachs’ executive directors.

When Smith began work at Goldman as an intern, he asserts the company’s success “revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients.” Smith says that mindset was the company’s “secret sauce” that helped them build trust with clients for over 140 years.

However, Smith now asserts that Goldman is “as toxic and destructive” as he has even seen it. Smith asserts the company has placed profits over the interests of their clients, and as long as employees can make money without becoming “an ax murderer” they can be promoted within Goldman. Smith believes he had no choice but to resign given that he “can no longer in good conscience identify with what [Goldman] stands for.”

Smith’s letter sent shockwaves around Wall Street and certainly within Goldman Sachs. Lloyd Blankfein, Goldman’s CEO, released an internal memo saying that Smith’s assertions “do not reflect our values, our culture, and how the vast majority of people at Goldman…think about the firm…”

Blankfein also asserts that Smith’s comments “should not represent our firm of more than 30,000 people,” and that he expects employees to find Smith’s claims as “foreign from [their] own day-to-day experiences.” Despite Blankfein’s rebuttal, it is hard to discredit Smith’s assertions given his former position in the company.

Smith served as head of Goldman’s United States equity derivatives business in Europe, the Middle East and Africa. In addition, Smith once managed the New York sales and trading summer intern program. Of the 30,000+ employees at Goldman, Smith was selected “as one of ten people to appear in [their] recruiting video, which is played on every college campus [Goldman] visits around the world.”

This suggests that Goldman Sachs, as well as other firms on Wall Street, may still need to reconsider some of their key business practices. Smith asserts firms like Goldman are “too integral to global finance to continue to act this way.” In his final sentence, Smith says, “People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.” 

It is likely those people will not sustain this nation’s economic well-being either.


- Jarrett W. Smith

Unemployment Holds Tight

The US Department of Labor Statics released their employment numbers for February on March 9^th.  The report showed about 227,000 jobs were created during the month, while the unemployment rate remained unchanged from the January number, 8.3%.  The number of jobs created in February is slightly down from the 284,000 jobs created in January.  Retail jobs declined in February, while the percentage of unemployed men and unemployed women both remained equal at 7.7%.   

  Unemployment data is a key indicator of the strength of the economy and is always closely scrutinized by Wall Street.  Many experts on Wall Street see this report as solid, even though the unemployment rate remains high.  However, critics believe the economy needs more growth and the number of jobs created each month must continue to increase in order to lower the unemployment rate.

  Discouraged workers reentering the job market are one of the key factors in keeping the unemployment rate constant from January to February.  Discouraged workers are not taken into account in the unemployment figures because they are not actively seeking employment.  However, in February economic confidence was high coming off the surprising January unemployment rate, so analyst believe many reentered the market and offset any drop in the rate.     

  I believe in the next couple of months, the unemployment rate will continue to hover around 8.3% as citizens continue to gain confidence in the economy and reenter the workforce. 

  I would not be surprised if the unemployment rate happened to increase.  The more important factor to me is the number of jobs created each month, and, as long as jobs continues to be created the economy will turn itself around.  In addition, with the upcoming presidential election looming, if unemployment drops below 8%, President Obama will have a great speaking point and strong figures to lean on for reelection.  

-Morgan-Reese Hale

Just Go with the Flow: The Journalist's Need to Adapt Quickly to Technological Changes

I went to a lecture given by Ken Auletta this afternoon about how news and media are being changed by technological advances.

One of the most interesting points I thought he made was about why technology keeps developing so rapidly. Auletta said Google engineers he spoke with explained to him their mindset while they worked: Why not? In other words, what is stopping them from coming up with a new idea, such as selling individual songs for 99 cents, and implementing it?

It appears to me that technology engineers are able to decide on a goal, and then do whatever they possibly can to reach it. So why can’t journalists do the same thing? When a new technology is developed that affects journalism, journalists should be able to think like the engineers and find a way to overcome the new obstacle.

If journalists can discover better adaptation mechanisms, I think that they would be less likely to face hardship in the first years of new technology’s popularity. Auletta also said that journalists fear the future because of technology changes. I think that instead of being afraid of what technological advances have in store for media, journalists should ask themselves one simple question: Why not?

- Olivia Davis

A Warm Winter: A Blessing or a Curse?

This past week Lexington, Va. experienced its first real snowfall of the winter season, which got me to wondering what effect has this unseasonably warm winter has had on the economy. 

For many private businesses, particularly in the North and ski country out West, the effect has been detrimental.  According to an article in Time, skier visits at six mountain resort properties have dipped more than 15% year-on year.  The ski industry relies on the cold weather and snow to attract tourists and turn profits.  With a largely seasonal income these resorts have had to suffer through small crowds and continue to hope for a late snow surge to recover some profits.

Other industries have also felt the pain of a warm winter.  Cold-weather clothing sales are down, as are sales for shovels, snow blowers and salt.  In the North these account for a significant part of the winter seasonal income for retail and hardware stores.

One of the most interesting industries to look at in terms of the warm winter is the plowing industry.  There is a large contingent of people in the North that earn a living in the winter plowing driveways and commercial parking lots.  Without snow, they have been put out of work.  Landscapers, who use plowing in the winter to supplement their summer businesses, are now abandoning hope for their winter income and hope an early spring will lead to an increase in their warm weather profits in 2012. 

But for some, including most cities across the North, the warm winter has been a blessing.  According to an article in The Guardian, Buffalo, NY has saved more than $300,000 on salt and public works overtime is down by 25%.  In North Dakota snow removal costs have fallen by nearly half.  For many cities strapped for cash in this poor economy, the warm winter has been welcomed with open arms as the money can now be spent elsewhere.  

So as the seasons begin to change and spring rolls in, this winter has left many businesses disappointed with profits and city governments ecstatic with budget surpluses.  But if I know anything about Mother Nature, it's only a matter of time until she evens the score. 

-Tyler J. Tokarczyk

Fannie and Freddie: Mind the Debt

U.S. taxpayers were reminded on Tuesday that our long national Fannie Mae and Freddie Mac nightmare is far from over.

During the 2008 financial crisis, President Bush and the Democratic congress approved the formation of the FHFA or Federal Housing Finance Agency.  The organization would manage the GSE’s Fannie and Freddie.

The head of the organization Edward Demarco issued Congress a note Tuesday on how to fix their ailing investment.  The plan calls for building a secondary mortgage marketplace infrastructure with the goal of getting more private involvement in the industry, to slowly contract the GSE presence in the market and help prevent foreclosures and maintain credit availability for new mortgages.   

The total Treasury bailout of Fannie Mae stands now at $180 billion, with only $14.7 billion being returned in the form of dividends. This is more than twice as much as the bailout for the automakers (which totaled some $60 billion) and is by far the largest outstanding bailout debt still owed to taxpayers. Together, the two mortgage giants owe more to taxpayers from their bailout than all other industries combined, and the bill is still growing.

This is a problem that can’t be ignored.  Fannie and Freddie continue to dominate household mortgage holdings in the U.S., with over 90 percent of all U.S. mortgages owned or guaranteed by them. Together they control nearly 31 millions home loans with a total value in excess of $5 trillion. 

-Bryan Kloster

Margin Call and the Lack of Informed decisions

When I watched the movie, Margin Call, I was pretty disturbed by the lack of informed decisions made by the bankers. One of the bankers stated that in banking there is "never a choice". This idea that things are decided automatically, without any discussion or thought was very scary to me and  made the whole banking process seem unnecessarily risky. Similarly, going  off of this idea that the banking process is just an automatic response, one banker said, "we just react and there's always a winner and a loser." This makes it seem like the bankers aren't in control of the situation and were never in control. It's a scary thought that at any moment the economy will either make us "winners" or "losers". It's even scarier when the bankers who are suppose to be monitoring everything are simply just reactors to the situation and not actively in control. And then this isn't even the worst part. The movie went on to suggest that some of the bankers don't even care about the assets that they monitor. As one banker says, "it's just money; it's made up". This type of ignorant attitude is the last quality I would want my banker to possess. It goes along with the theme that the bankers aren't really involved or in control of the situation, they are just by-standers who react automatically and without thought.
-Laura Simmons

Margin Call and Digging Ditches

In Margin Call, writer/director J.C. Chandor often compares the jobs that exist on Wall Street to other professions that produce more tangible results, such as construction or engineering. Peter Sullivan, the young but exceedingly bright analyst that discovers the crisis that the bank he works for is in, often questions the worth and morality of his job. Admittedly, he himself was drawn to Wall Street for the attractive pay and the fact that the job only requires that he "move numbers around." However, as he learns what his bosses are getting paid, Sullivan is shocked. He knows the little knowledge that those above him have, and does not believe anyone in any profession deserves that much money.

Sullivan is not the only one who perceives his job to be of little value though. In one scene, Sullivan is trying to explain to board members the crisis their bank is facing. The members, who would rather ignore bad news than address it and fix it, immediately begin to question Sullivan's background. As they find out that Sullivan is essentially a rocket scientist, with degrees from UPenn and MIT, they all retreat from their interrogation, fully aware that although he is simply an analyst, he is clearly the smartest person in the room.

Near the conclusion of the film, Sam Rodgers, a senior executive at the firm, also questions the worth and morality of his job. As his boss tells him, "come on, you could be digging ditches right now," Rodgers points out that at least if he was digging ditches, there would be evidence of his work in the soil of the earth.

Through these muses on worth and morality, Candor emphasizes the little value that Wall Street adds to society. I personally cannot comment on that, because I still don't really understand how Wall Street works. When I talk to my friends, all of whom are pursuing careers in finance and investment banking, I always find myself completely lost, and usually tell them, "you guys are just making terms, numbers, and money up." It was refreshing to me when watching Margin Call that someone else agrees with me.

- Bryan Stuke

Margin Call: Analyzing the Roots of a Crisis

J.C. Candor's Margin Call has been praised by critics for its portrayal of the moral and economic complexity surrounding the financial crisis of 2008. While Wall Street has been publicly demonized as a morally bankrupt institution, the film successfully analyzes the crisis as more than a mere story of good and evil. 

One constant theme throughout the film is a lack of accountability. In place of morality, decisions were guided by complex financial models and most importantly by a constantly changing set of assumptions. It becomes abundantly clear that no proper controls were in place within or outside of the firm, and that perilous decisions were instead left to the discretion of executives such as John Tuld and Jared Cohen.

Prior to the slowdown in housing prices in 2007 and the ensuing crash in 2008, decisions at investment banks had been made according to largely the same set of unchanging assumptions. These included but were not limited to easy monetary policy, loose credit standards, steadily increasing housing prices, and constantly growing demand for complex fixed income instruments such as MBS and CDOs. Even renowned economists such as Alan Greenspan had declared a new age of American prosperity instead of recognizing that these conditions were likely to change at some point. This allowed executives such as John Tuld, played by Jeremy Irons, to irresponsibly leverage their banks to the point where any notable increase in volatility or change in assumptions would lead to disaster. The market collapse that ensued was the result of executives ignoring the risks that were inherent to the instruments that they were selling, and instead counting on their willing counterparties to be steady buyers.

Mike Ott

Margin Call Paints Ominous Picture of Chaos

Margin Call has something very scary to say.

Through the dark and dreary chaos that unfolds throughout the night at Jeremy Irons' investment bank, an unsettling realization comes rising to the surface. Put simply, the movie makes us blatantly aware that the country's financial system is too complicated for just about any man or woman to navigate while claiming to possess a true understanding of what he or she is doing. What a harrowing thought.

To see that moral and compassionate men, such as Kevin Spacey's character, and greedy, ruthless men like the one Irons plays, can be equally powerless to fend off disaster when the going gets tough is frightening. It literally took a rocket scientist (played by Zachary Quinto) to put all the pieces together and sound the alarm; alas, it was already about two weeks too late. And the man (Stanley Tucci) whose work set him on the course to the big discovery? He was terminated while some of his younger coworkers got to stick around to count their bonuses. What a tragic mess.

More than for any other reason, this movie plays out as a thriller because nobody is ever fully in charge. Irons' John Tuld might sit in the chair at the head of the dreary board room table, but he's just as desperate and unsure of himself as the sheep he's been naively leading to slaughter. Really makes you worry about the country's biggest real life corporations. Have some of our banks gotten so big that they've become impossible to manage?

-Brian Seliber

"It wasn't brains that got me here"

The movie “Margin Call” directed by J.C. Chandor gives a troubling view of the financial world and especially those who run it.  

Each time a new level of management is brought in, they need a simpler explanation of what is happening from Peter Sullivan (Zachary Quinto).

 “Speak to me as you might to a young child, or a golden retriever. It wasn’t brains that got me here, I can assure you of that” says John Fuld (Jeremy Irons) to Sullivan who seems to be the only one who understands what is happening.

I don’t expect top executives to understand all of the complex risk equations, but they should be able to talk to their employees and understand the financial lingo.  It is troubling that the people making decisions for influential banks that affect the entire world’s economy need things to be explained to them as if a child.   

In the end, the final decision comes down to Fuld who openly admits, “I don’t get any of this stuff.”  He therefore makes his decision to sell off all of the toxic assets with nothing but his own interests in mind, despite the disapproval from Sam Rogers (Kevin Spacey).  If you admittedly know very little about something, it is usually a good idea to listen to someone who does.  Fuld chooses to ignore Rogers’ advice and to instead minimize the damage done to the firm at the cost of his employee’s careers and the bank’s relationship with its competitors.

Unfortunately I do believe this to be a realistic account of Wall Street and the financial world.  The ethics practiced in the financial world are not a strong suit by any means.  In order for banks to be successful they must keep the focus on the bottom line and this sometimes leads to acting unethically.  This exemplifies how guys such as Fuld rise to the top and others such Rogers get passed up for promotions (another common theme throughout the movie).  Rogers hesitates and thinks about the repercussions of his actions while Fuld looks to simply save the firm as much as possible at any and all costs.   

-Tyler J. Tokarczyk

Margain Call

Margin Call takes place within twenty-four hours inside a powerful investment bank, just before the financial crisis of 2008. As people who had been working there for 15 years got laid off, young, inexperienced men were given their work. A young analyst is able to fix a formula created by his ex-boss that forecasts the demise of the firm. While the information is passed up the corporate ladder, the corruption within the hierarchy itself becomes evident.

 A 2011 film directed by JC Chandler, Margain Call constantly uses lines such as “just speak to me in plain English” and “it’s just money” to show how ill-equipped the heads of the bank were. It amazed me how the executives in the firm did not fully understand what was happening and jumped to quick conclusions, which saved only themselves.

While many investors would be left without anything, the head of the bank made the decision to protect only the bank, selling everything before the Fed got involved. The lack of care about long time clients proves that the financial system is untrustworthy.

Meade Brewster