The Dow Jones Industrial Average (DJIA) continued its remarkably strong rally this week to finish just shy of 13,000 at 12,949.87. The S&P 500 market index ended the week up 1.38% at 1,361.23 thanks in part to large gains in the energy sector. The CBOE volatility index finished the week just below 18, indicating that investors are starting to regain confidence in the stability of global markets.
Hedge fund managers across the globe have been turning significantly more bullish on bets in equities and the international credit market. Many of these investors are basing their strategies on the belief that the European Central Banks long-term refinancing operations which commenced in December and are continuing this month will be successful in propping up struggling European banks.
Oil and gas, chemicals, and basic resources were the biggest gainers this week in terms of market sectors. Gigantic deals such as the recently announced merger between Xstrata (XTA) and Glencore (GLEN), two of the worlds leaders in natural resources, have been steadily driving stock prices skyward. Gasoline prices are now approaching record levels for the season as crude oil futures for March delivery climbed to finish the week at over $104.
European shares ended the week on a good note on the back of speculation that Greeces leaders would reach an agreement on a second bailout by today in order to avoid a disorderly default. Unfortunately, Angela Merkel sustained an embarrassing blow a midst the forced resignation of German president Christian Wulff over a political favors scandal. Merkel, along with French president Nicholas Sarkozy, are widely perceived by investors to be the most important political players in keeping the euro zone solvent. The markets ultimately ended up in part because of the traditional investor optimism that accompanies three-day holiday weekends. Stock markets were closed today in the US in observance of Presidents Day.
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Editorial Staff
Wednesday, February 15, 2012
Sunday, January 15, 2012
Book Review: The Big Short
The Big Short
By Michael Lewis
The world of finance is one of losers and winners. When the sub-prime mortgage crisis hit the market in 2007, the big Wall Street firms with huge pile of sub-prime mortgage bonds lost while a few wise men betting against these bonds won. In Michael Lewis’ Book The Big Short, Lewis recounts the story of how a handful of Wall Street misfits anticipated the doom of the sub-prime mortgage bonds and made a fortune betting against the home-price inflation in mid-2000s. Lewis successfully tells the story with humor and clarity, considering the complexity of the sub-prime mortgage bond market before the crisis. However, his account of the financial crisis in 2007 is biased in that it exaggerates the effects of the public feature of investment banks, ignores factors such as government’s policies that lowered borrowing standards and neglects home owners’ speculative behavior.
Lewis overstates the effects of the public nature of the major investment banks. Lewis points out, toward the end of his book, that what lied at heart of the crisis was that all the major investment banks went public rather than functioned as partnerships. (Lewis traced the crisis back to a decision John Gutfreund had made- when he’d turned Salomon Brothers from a private partnership into Wall Street’s first public corporation.) Here is his logic: if a major investment bank were organized like partnership, each partner would have been more careful with their decisions and taken fewer risks. Now that these banks were public and the bankers were operating with shareholders’ money, they had few incentives to scrutinize their decisions or products because they could transfer risks to their shareholders; that was what led these firms to use high leverage and buy a great amount of sub-prime mortgages bonds without even knowing what were underlying these assets. (Lewis, 257) Lewis states that the incentives on these public Wall Street firms are entirely wrong because the bankers can get rich [even] when they are making dumb decisions. (Lewis, 256) In short, Lewis is saying that people within the investment banks took excessive risks because they had nothing to lose. This statement is not sound. First, the bankers did have many things to lose. Many individuals most responsible for the massive money loss during 2005-07 were the largest shareholders in their companies. These individuals lost money when their firms suffered.
In other words, they did not transfer much risk to the companies’ shareholders. Even though Howie Hubler, a former trader at Morgan Stanley, got away with large bonuses, the majority of the Wall Street professionals responsible for the crisis suffered from the crisis. Jimmy Cayne (CEO of Bear Stern)’s stock declined from 1 billion to 50 million. Richard Fuld (Lehman’s chairman) lost 550 million of his Lehman stocks when Lehman Brothers went under. The bankers had a great deal of interest within these firms. These individuals did want their firms to perform well. Even though the bankers are employees in a public company, they are effectively like partners in a partnership company because of their large stock holdings. Therefore, the employees engaged in careless behaviors not because they were in a public firm, but rather, because of some other factors. Second, we can refute the author’s contra-positive statement: if an investment bank were not public, bankers would not have been as careless. To refute this, just imagine that an investment bank were actually a partnership. In this case, a banker would still have bought those mortgage bonds because they were led to believe that they could make profits in these bonds. The only difference would be that the bank would not have had the ability to raise funds in the stock market. In this case, these partnership firms would just have found other creative ways to raise enough capital to buy the mortgage bonds, which would eventually lead to the 2007 crisis. To conclude, the mere fact that the major investment banks were public is not important in causing the crisis.
Moreover, the book is biased in that it gives all the blame to investment banks and ignores the government’s policies’ effects on the crisis. If the government did not lower the borrowing standards and encouraged lending at Fannie Mae and Freddie Mac, the crisis might never have had happened. Here is what happened: at first, the banks were making money with bundling mortgages backed securities backed with good credit and down payment and selling them to investors. Then they became greedy and wanted to make more money by making more loans. When there were not enough people with good credit, the banks invented credit default swaps. (In the book, a trader named Mike Edman within Morgan Stanley came up with this idea). With these swaps, a bank could give out loans to people with low credit score and little down payment. However, a loan could be granted only if it fulfilled the underwriting standards designed by the government. Therefore, the banks had to persuade the politicians to ease the underwriting standards. The investment banks then spent huge amount of money to get the government ease the standards. Then Barney Frank was saying that everyone deserves to own a home and Bush was saying that everyone deserves to live the American Dream. Clearly, if the government had not relaxed lending standards, the investment banks would have never got the chance to create the CDOs, which eventually led to massive defaults of people who should not have owned houses at first place. True, the investment banks were greedy. However, without the help of the government, they would have never been able to unleash their greed. The book also ignored that homeowner speculation also contributed to the crisis. In the book, the homeowners who got sub-prime loans were depicted as poor people who were told by the mortgage sellers to tell lies and who got deceived by the teaser rate and was later ripped off by the real rate. (Lewis, 19) These customers were truly the victims of the entire housing market scheme.
However, we had another crowd of customers who had more than one house, to whom we should not be as sympathetic. They were buying houses as speculative investments. During 2006, 22% of homes purchased were for investment purpose, with an additional 14% purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. The widespread speculation pushed house prices up dramatically. Housing prices nearly doubled between 2000 and 2006. Many homes were purchased even when they were still under construction and then sold for a profit without the sellers ever having lived in them. The housing bubble was so big that Warren Buffett stated that it was the greatest bubble he has ever seen in his life. The question is how did the broad speculation contribute to the crisis? The rising housing price gave mortgage sellers excuses to give out sub-prime mortgages, whose defaults eventually led to the crash. The inflating house prices also gave credit to the CDOs that investment banks created and encouraged large trading volume of CDOs, which increased the magnitude of the crash. As a reader, it is hard not to wonder how could Lewis know every time in advance that a crash was coming and went about documenting it, as what he did when he wrote Liar’s Poker and this book. It must be that the crash had shown its signs in times of prosperity and Lewis captured these signs.
We should learn to be as forward-seeing as Lewis is. We are just four years away from when the crash happened and our economy is still not fully recovered. As we gradually pull ourselves out of recession, let’s remember the lessons learned in the past and walk with great care. And here, we refer not only to investment banks, but also the government and every average American citizen.
--
Editorial Staff
By Michael Lewis
The world of finance is one of losers and winners. When the sub-prime mortgage crisis hit the market in 2007, the big Wall Street firms with huge pile of sub-prime mortgage bonds lost while a few wise men betting against these bonds won. In Michael Lewis’ Book The Big Short, Lewis recounts the story of how a handful of Wall Street misfits anticipated the doom of the sub-prime mortgage bonds and made a fortune betting against the home-price inflation in mid-2000s. Lewis successfully tells the story with humor and clarity, considering the complexity of the sub-prime mortgage bond market before the crisis. However, his account of the financial crisis in 2007 is biased in that it exaggerates the effects of the public feature of investment banks, ignores factors such as government’s policies that lowered borrowing standards and neglects home owners’ speculative behavior.
Lewis overstates the effects of the public nature of the major investment banks. Lewis points out, toward the end of his book, that what lied at heart of the crisis was that all the major investment banks went public rather than functioned as partnerships. (Lewis traced the crisis back to a decision John Gutfreund had made- when he’d turned Salomon Brothers from a private partnership into Wall Street’s first public corporation.) Here is his logic: if a major investment bank were organized like partnership, each partner would have been more careful with their decisions and taken fewer risks. Now that these banks were public and the bankers were operating with shareholders’ money, they had few incentives to scrutinize their decisions or products because they could transfer risks to their shareholders; that was what led these firms to use high leverage and buy a great amount of sub-prime mortgages bonds without even knowing what were underlying these assets. (Lewis, 257) Lewis states that the incentives on these public Wall Street firms are entirely wrong because the bankers can get rich [even] when they are making dumb decisions. (Lewis, 256) In short, Lewis is saying that people within the investment banks took excessive risks because they had nothing to lose. This statement is not sound. First, the bankers did have many things to lose. Many individuals most responsible for the massive money loss during 2005-07 were the largest shareholders in their companies. These individuals lost money when their firms suffered.
In other words, they did not transfer much risk to the companies’ shareholders. Even though Howie Hubler, a former trader at Morgan Stanley, got away with large bonuses, the majority of the Wall Street professionals responsible for the crisis suffered from the crisis. Jimmy Cayne (CEO of Bear Stern)’s stock declined from 1 billion to 50 million. Richard Fuld (Lehman’s chairman) lost 550 million of his Lehman stocks when Lehman Brothers went under. The bankers had a great deal of interest within these firms. These individuals did want their firms to perform well. Even though the bankers are employees in a public company, they are effectively like partners in a partnership company because of their large stock holdings. Therefore, the employees engaged in careless behaviors not because they were in a public firm, but rather, because of some other factors. Second, we can refute the author’s contra-positive statement: if an investment bank were not public, bankers would not have been as careless. To refute this, just imagine that an investment bank were actually a partnership. In this case, a banker would still have bought those mortgage bonds because they were led to believe that they could make profits in these bonds. The only difference would be that the bank would not have had the ability to raise funds in the stock market. In this case, these partnership firms would just have found other creative ways to raise enough capital to buy the mortgage bonds, which would eventually lead to the 2007 crisis. To conclude, the mere fact that the major investment banks were public is not important in causing the crisis.
Moreover, the book is biased in that it gives all the blame to investment banks and ignores the government’s policies’ effects on the crisis. If the government did not lower the borrowing standards and encouraged lending at Fannie Mae and Freddie Mac, the crisis might never have had happened. Here is what happened: at first, the banks were making money with bundling mortgages backed securities backed with good credit and down payment and selling them to investors. Then they became greedy and wanted to make more money by making more loans. When there were not enough people with good credit, the banks invented credit default swaps. (In the book, a trader named Mike Edman within Morgan Stanley came up with this idea). With these swaps, a bank could give out loans to people with low credit score and little down payment. However, a loan could be granted only if it fulfilled the underwriting standards designed by the government. Therefore, the banks had to persuade the politicians to ease the underwriting standards. The investment banks then spent huge amount of money to get the government ease the standards. Then Barney Frank was saying that everyone deserves to own a home and Bush was saying that everyone deserves to live the American Dream. Clearly, if the government had not relaxed lending standards, the investment banks would have never got the chance to create the CDOs, which eventually led to massive defaults of people who should not have owned houses at first place. True, the investment banks were greedy. However, without the help of the government, they would have never been able to unleash their greed. The book also ignored that homeowner speculation also contributed to the crisis. In the book, the homeowners who got sub-prime loans were depicted as poor people who were told by the mortgage sellers to tell lies and who got deceived by the teaser rate and was later ripped off by the real rate. (Lewis, 19) These customers were truly the victims of the entire housing market scheme.
However, we had another crowd of customers who had more than one house, to whom we should not be as sympathetic. They were buying houses as speculative investments. During 2006, 22% of homes purchased were for investment purpose, with an additional 14% purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. The widespread speculation pushed house prices up dramatically. Housing prices nearly doubled between 2000 and 2006. Many homes were purchased even when they were still under construction and then sold for a profit without the sellers ever having lived in them. The housing bubble was so big that Warren Buffett stated that it was the greatest bubble he has ever seen in his life. The question is how did the broad speculation contribute to the crisis? The rising housing price gave mortgage sellers excuses to give out sub-prime mortgages, whose defaults eventually led to the crash. The inflating house prices also gave credit to the CDOs that investment banks created and encouraged large trading volume of CDOs, which increased the magnitude of the crash. As a reader, it is hard not to wonder how could Lewis know every time in advance that a crash was coming and went about documenting it, as what he did when he wrote Liar’s Poker and this book. It must be that the crash had shown its signs in times of prosperity and Lewis captured these signs.
We should learn to be as forward-seeing as Lewis is. We are just four years away from when the crash happened and our economy is still not fully recovered. As we gradually pull ourselves out of recession, let’s remember the lessons learned in the past and walk with great care. And here, we refer not only to investment banks, but also the government and every average American citizen.
--
Editorial Staff
Monday, December 12, 2011
Book Review: A Random Walk Down Wall Street
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
By Burton Gordon Malkiel
Money Lying on the Ground and an Ape Throwing Darts: two stories in A Random Walk Down Wall Street strike me the most. First, if you are walking on the street and see a $100 bill lying on the ground, you should not pick it up. Second, a blindfolded ape throwing darts at a newspapers financial pages could select a portfolio that would do just as well as one carefully selected by experts. And these two stories illustrate the main point of the book: the stock market is efficient and no one can earn above-average returns without accepting above-average risks. Therefore, an average person who invests in index funds can even do better than a professional who actively manages a fund. Besides this thesis, the book also introduces some investment vehicles and strategies. The question is: should I recommend this book as an introduction book to an intelligent friend with no investment experience?
The answer to this question depends on what my friend’s situation is. Specifically, it would concern my friend’s intended length of investment, market she chooses to invest in and her purpose of investing. In the following, I will mainly talk about situations where I won’t recommend the book to my friend. The book’s Efficient Market Hypothesis might not work well if my friend wants to invest short-term. If she sees a $100 bill on the street, why wouldn’t she pick it up just because it should or will disappear eventually? (The EMH says that the bill should or will disappear.) In other words, if my friend wants to invest in the short-term, why would she refuse to grab the short-term benefits just because it will disappear in the long run? Say that if my friend needs to send her children to college in four years, she can only invest the inheritance for the next four years. She might be better off by investing in an actively management fund. She probably will get much money by buying some tech stocks in 1995 and selling them in 1999, even though the internet bubble busted later on. If one is investing in a short period of time, the book’s theory will not necessarily apply since the thesis is based on long term. In this case, I won’t recommend the book to my friend. Instead, she will benefit more from a book that introduces different strategies on how to select stocks or fund managers.
The place the ape (average investor) is at also matters. "King Kong was a king and a god in the world he knew, but now he comes to civilization merely a captive", says Carl Denham in King Kong. Index funds might not outperform the actively managed ones at certain places. For example, if my friend is in China, she might be better off by hiring a good manager to manage her funds because the Chinese stock market is highly speculative and relatively opaque. According to the China Securities Regulatory Commission, as high as 65% to 70% of the investors in the Chinese stock market consists of private individuals. Partly because individuals tend to aim at the short-term rather than the long term compared to institutions, the Chinese stock market can swing dramatically and easily go out of norm. In the book, the market always adjusts itself to normal state. However, if abnormality is the rule, rather than the exception, like the Chinese stock market, the abnormal state becomes the new norm. Since it would be difficult to tell when the market will correct itself, one can do better by just following the trends or the new norm. Moreover, information from the public companies is not highly transparent, which prevents the market from performing efficiently. Since the Efficient Market Hypothesis is a condition for the superiority of index funds over actively managed funds, sticking with index funds, as promoted by the book, might not work well. Sometimes, the big mutual fund management companies have insider information that helps them take advantage of market inefficiencies and perform better than the index funds. (Note that the Chinese law system is not mature enough to prevent that from happening.) In fact, a recent research on S and P has shown that in some areas, stock picking outperforms passive investing. For example, more than half of actively managed large- and small-cap value funds beat the benchmarks in the past five-year period. Actively managed large-cap value funds did particularly well, returning 2.2% per year on average, versus 0.63% for the index; actively managed small value funds earned 3.79% per year, versus 2.96% for the index. The average actively managed international small-cap fund returned 4.91% per year over the last five years, more than triple the index. Index funds might be the King and God of stock market in some areas, but merely a captive to actively managed funds in other areas.
Moreover, the purpose of investing matters. If my friend is on the street to appreciate the spectacular architectures, a $100 bill lying on the ground will not be appealing to her. If my friend wants to invest to have fun, she would not derive much pleasure from just passively investing in index funds. Rather, I would recommend some other book that goes into the details of how to pick stocks to her. In another case, if my friend is investing to learn about companies or behavior of equities, she would not learn much with index funds. On the other hand, if my friend just wants to get rich slowly, the book by Malkiel is the right one. Lastly, you never know if your friend will be the next Warren Buffet. It is always worth a try. If I recommend the random walk book to my friend up front, she might become a passive investor and just give up picking her stocks and developing her own investment strategies.
A potential Warren Buffet might just get covered up in the mascot of a blindfolded ap.
--
Editorial Staff
By Burton Gordon Malkiel
Money Lying on the Ground and an Ape Throwing Darts: two stories in A Random Walk Down Wall Street strike me the most. First, if you are walking on the street and see a $100 bill lying on the ground, you should not pick it up. Second, a blindfolded ape throwing darts at a newspapers financial pages could select a portfolio that would do just as well as one carefully selected by experts. And these two stories illustrate the main point of the book: the stock market is efficient and no one can earn above-average returns without accepting above-average risks. Therefore, an average person who invests in index funds can even do better than a professional who actively manages a fund. Besides this thesis, the book also introduces some investment vehicles and strategies. The question is: should I recommend this book as an introduction book to an intelligent friend with no investment experience?
The answer to this question depends on what my friend’s situation is. Specifically, it would concern my friend’s intended length of investment, market she chooses to invest in and her purpose of investing. In the following, I will mainly talk about situations where I won’t recommend the book to my friend. The book’s Efficient Market Hypothesis might not work well if my friend wants to invest short-term. If she sees a $100 bill on the street, why wouldn’t she pick it up just because it should or will disappear eventually? (The EMH says that the bill should or will disappear.) In other words, if my friend wants to invest in the short-term, why would she refuse to grab the short-term benefits just because it will disappear in the long run? Say that if my friend needs to send her children to college in four years, she can only invest the inheritance for the next four years. She might be better off by investing in an actively management fund. She probably will get much money by buying some tech stocks in 1995 and selling them in 1999, even though the internet bubble busted later on. If one is investing in a short period of time, the book’s theory will not necessarily apply since the thesis is based on long term. In this case, I won’t recommend the book to my friend. Instead, she will benefit more from a book that introduces different strategies on how to select stocks or fund managers.
The place the ape (average investor) is at also matters. "King Kong was a king and a god in the world he knew, but now he comes to civilization merely a captive", says Carl Denham in King Kong. Index funds might not outperform the actively managed ones at certain places. For example, if my friend is in China, she might be better off by hiring a good manager to manage her funds because the Chinese stock market is highly speculative and relatively opaque. According to the China Securities Regulatory Commission, as high as 65% to 70% of the investors in the Chinese stock market consists of private individuals. Partly because individuals tend to aim at the short-term rather than the long term compared to institutions, the Chinese stock market can swing dramatically and easily go out of norm. In the book, the market always adjusts itself to normal state. However, if abnormality is the rule, rather than the exception, like the Chinese stock market, the abnormal state becomes the new norm. Since it would be difficult to tell when the market will correct itself, one can do better by just following the trends or the new norm. Moreover, information from the public companies is not highly transparent, which prevents the market from performing efficiently. Since the Efficient Market Hypothesis is a condition for the superiority of index funds over actively managed funds, sticking with index funds, as promoted by the book, might not work well. Sometimes, the big mutual fund management companies have insider information that helps them take advantage of market inefficiencies and perform better than the index funds. (Note that the Chinese law system is not mature enough to prevent that from happening.) In fact, a recent research on S and P has shown that in some areas, stock picking outperforms passive investing. For example, more than half of actively managed large- and small-cap value funds beat the benchmarks in the past five-year period. Actively managed large-cap value funds did particularly well, returning 2.2% per year on average, versus 0.63% for the index; actively managed small value funds earned 3.79% per year, versus 2.96% for the index. The average actively managed international small-cap fund returned 4.91% per year over the last five years, more than triple the index. Index funds might be the King and God of stock market in some areas, but merely a captive to actively managed funds in other areas.
Moreover, the purpose of investing matters. If my friend is on the street to appreciate the spectacular architectures, a $100 bill lying on the ground will not be appealing to her. If my friend wants to invest to have fun, she would not derive much pleasure from just passively investing in index funds. Rather, I would recommend some other book that goes into the details of how to pick stocks to her. In another case, if my friend is investing to learn about companies or behavior of equities, she would not learn much with index funds. On the other hand, if my friend just wants to get rich slowly, the book by Malkiel is the right one. Lastly, you never know if your friend will be the next Warren Buffet. It is always worth a try. If I recommend the random walk book to my friend up front, she might become a passive investor and just give up picking her stocks and developing her own investment strategies.
A potential Warren Buffet might just get covered up in the mascot of a blindfolded ap.
--
Editorial Staff
Sunday, December 11, 2011
M&A Activity Review
SAP Moves to Acquire Success Factors
Success Factors is a Web-based software company and is valued around $40 a share. This move by SAP comes in response to rival Oracle’s acquisition of RightNow Technologies for $1.43 billion this past October. This move highlights the purchase of smaller software companies as larger companies look to compete in cloud technology.
Buffet to Buy Omaha Newspaper
Warren Buffet looks to by the publisher of the Nebraska principal daily newspaper. Berkshire Hathaway reportedly is buying Buffet’s hometown newspaper. Terms of the deal have not been revealed, but this marks an interesting buy of the Omaha World -- Herald company.
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Editorial Staff
Success Factors is a Web-based software company and is valued around $40 a share. This move by SAP comes in response to rival Oracle’s acquisition of RightNow Technologies for $1.43 billion this past October. This move highlights the purchase of smaller software companies as larger companies look to compete in cloud technology.
Buffet to Buy Omaha Newspaper
Warren Buffet looks to by the publisher of the Nebraska principal daily newspaper. Berkshire Hathaway reportedly is buying Buffet’s hometown newspaper. Terms of the deal have not been revealed, but this marks an interesting buy of the Omaha World -- Herald company.
--
Editorial Staff
Monday, December 5, 2011
Market Recap (Dec. 5)
The Dow Jones Industrial Average (DJIA) finished the week up 7% despite a late downturn as the market closed on Friday. This marks the second biggest weekly gain in the index’s history. The S&P 500 and the Nasdaq Composite finished the week up 7.4% and 7.6% respectively. Investors responded positively to reports early in the week that unemployment had fallen to 8.6% and that 120,000 nonfarm jobs were created in the month of November. This is a broad indicator that the US’ ailing economy is improving, but analysts are quick to caution that we are not out of the woods yet.
There are still major concerns looming over the European debt crisis and although domestic manufacturing is on the rise, the interdependencies in world economies could create serious problems as Europe slides into a recession. The leaders of the 17-nation Euro zone will meet for a summit on Thursday and Friday of this upcoming week and investors will continue to follow measures to ease the debt crisis closely.
The European Central Bank (ECB) recently pledged 200 billion euros to the International Monetary Fund to be used in alleviating the fiscal woes of countries such as Italy, Greece, and Spain. Oil finished the week at over $100/barrel and energy stocks performed extremely well on the whole. This sector is awaiting a final decision on a proposal from TransCanada (TRP) to build a pipeline from Canada to the Gulf of Mexico. While the Obama administration has initially rejected the idea over concerns about safety and the environmental impact the pipeline may have, House Republicans have introduced a bill to legislatively force approval. Proponents of the project say the pipeline would create 20,000 jobs and release problematic oil gluts in places like Cushing, OK.
Financial stocks posted huge gains as three out of four companies listed on the DJIA ended with positive numbers for the week. European banks benefited from Angela Merkel’s comments early in the week on plans to reach a tighter fiscal union in the EU. American bank shares responded well to the positive labor reports but, like every other sector of the economy, are still extremely vulnerable to economic unrest in Europe.
--
Editorial Staff
There are still major concerns looming over the European debt crisis and although domestic manufacturing is on the rise, the interdependencies in world economies could create serious problems as Europe slides into a recession. The leaders of the 17-nation Euro zone will meet for a summit on Thursday and Friday of this upcoming week and investors will continue to follow measures to ease the debt crisis closely.
The European Central Bank (ECB) recently pledged 200 billion euros to the International Monetary Fund to be used in alleviating the fiscal woes of countries such as Italy, Greece, and Spain. Oil finished the week at over $100/barrel and energy stocks performed extremely well on the whole. This sector is awaiting a final decision on a proposal from TransCanada (TRP) to build a pipeline from Canada to the Gulf of Mexico. While the Obama administration has initially rejected the idea over concerns about safety and the environmental impact the pipeline may have, House Republicans have introduced a bill to legislatively force approval. Proponents of the project say the pipeline would create 20,000 jobs and release problematic oil gluts in places like Cushing, OK.
Financial stocks posted huge gains as three out of four companies listed on the DJIA ended with positive numbers for the week. European banks benefited from Angela Merkel’s comments early in the week on plans to reach a tighter fiscal union in the EU. American bank shares responded well to the positive labor reports but, like every other sector of the economy, are still extremely vulnerable to economic unrest in Europe.
--
Editorial Staff
Friday, December 2, 2011
Interview with P&G CEO Bob McDonald
The CEO of P & G talks about his global career experience, P & G's expansionary strategies and offer career advice for college students.
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Editorial Staff
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Editorial Staff
Occupy Wall Street: Where Is It Headed?
As the Occupy Wall Street movement continues to sweep the nation, and the 99% continue to cry for accountability and justice within the financial system -- we should take heed in not only their movement, but also the glaring reality that the group is fighting a battle they simply cannot win. For despite the growing number of Occupy groups that have sprung up across the nation (both on and off college campuses) -- these protesters face a discouragingly long uphill battle. Starting with the negative media surrounding the group’s often fragmented goals, and ending with a financial situation that is often too complicated to explain to the average American -- OWS was doomed from the start. The blame the group seeks falls to no one individual, nor can the economies downturn be traced to one specific event. Beyond the desperate cries for Wall Street executives to be held accountable for what they have done -- what the movement has failed to realize is that they are not protesting the greed and corruption of the financial system, but those of American society. The full-bodied, drastic changes OWS wish to see implemented would only come only at the cost of broad-spectrum changes to American consumer culture and massive disruptions to the American economy.
Without even taking a stance on the movement, it is easy to see that the group’s vision completely outdistances the realities of our current situation. There is no doubt that the glaring disparities in wealth, education and living standards need to be addressed within our society -- but protesting the men and women who have the means and the ability to keep themselves in the 1% is not the best way to get there. To attack the principals of capitalism -- the foundation upon which this nation was built -- is but to alienate yourself to a position where you can no longer create the meaningful change you wish to create.
--
Editorial Staff
Without even taking a stance on the movement, it is easy to see that the group’s vision completely outdistances the realities of our current situation. There is no doubt that the glaring disparities in wealth, education and living standards need to be addressed within our society -- but protesting the men and women who have the means and the ability to keep themselves in the 1% is not the best way to get there. To attack the principals of capitalism -- the foundation upon which this nation was built -- is but to alienate yourself to a position where you can no longer create the meaningful change you wish to create.
--
Editorial Staff
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