Apple for You?

Apple is set to eclipse Microsoft and Cisco after hitting a market capitalization of over 500 billion yesterday. While Microsoft reached this number back in 1999, they have been unable to sustain it and now trades at a market cap of 266 billion. At its current market valuation, Apple is now worth more than the country of Poland or, Microsoft and Google combined! Not surprisingly, the market is going crazy for Apple and stock prices are rising.

Unlike Microsoft, I believe Apple will be able to sustain its valuation to reach even greater heights. The electronic juggernaut still has much room for growth through its core businesses - Macs, iPhone and the iPad. Their product lines have been doing extremely well even in the face of aggressive competition, and has been gaining market share rapidly. Not to forget, Apple is intending to launching Apple TV late this year and with it comes even more opportunities. Steve Jobs may no longer be at the helm but the demand for Apple products still remains insatiable. With its brilliant engineers, reputable brand name, consistent stream of amazing products debuting every year, coupled with a loyal customer base - Apple might just take over the world. Where Apple is going, I know I want to be there. What say you?

Rui Shan Chin

EVENT RECAP: Goldman Sachs - Market Risk Management; Cover Letter & Resume Workshop

This week the Finance Society put on two events.

Last Tuesday, we welcomed professionals from the Market Risk Division in Goldman Sachs for an evening event. It was great to hear more about the elusive terms Value-At-Risk and how the new Basel Regulations impacts the various financial institutions on the street. Questions flew fast and furious about the industry and a career in risk management. We were especially honored by the presence of Wu Siwen, our former president who recently graduated in 2011.

On Thursday afternoon, members gathered for a resume workshop run by the board members. Meha and Susan went through the fundamentals of both resume and cover letter writing, stating things to look out for. After which, the E-Board gathered and helped the underclassmen with their resumes, giving specific pointers on how to improve them.

The Next "Warren"?

The shareholders of Berkshire Hathaway Inc. might want to reevaluate the stocks in their hand after last Saturday's annual letter. The 81-year-old CEO announced not only his achievements and mistakes during last fiscal year, but also that an unnamed successor of the company has been selected. Although he promised his health condition, people still kept raising question about the identity of the successor and if the company would prosper on the next generation as amazingly as it did in Mr. Buffett's hand. Belief used to be that Warren Buffett's son, Howard, is going to take his position yet the new declaration made this issue more mysterious.

From personal perspective, I am curious about the future life of Berkshire Hathaway as well. As all known, Warren Buffett is always a firm champion of value investment theory created by his professor, Benjamin Graham. He chose companies with potentially large profit margin and undervalued prices to invest such as Washington Post and Coca Cola. So here comes the problem. If his heir carries on his investment idea, is it still possible to find such undervalued stocks today with large capacity? Time has changed and investors' rationale has developed. It's almost impossible to redo Mr.Buffett's miracle on current market. If his successor does not agree to Buffett's value, can he maintain the size and yearly profit of Berkshire? As I said, time has changed. Berkshire is no longer one of the many investing companies as it was forty years ago. It holds rather huge share of the market which means it's really hard to earn a huge amount besides maintaining its regular dividend. If the new CEO holds different opinion, can he protect this huge monster as Buffett did?

Investors will never stop questioning. While Mr.Buffett refused to comment on these issues, whoever will take the position still have a long way to go.

Oscar Zhang

How to Stabilize High Frequency Trading?

Traders are already feeling the heat from the possible repercussions of the Volckers Rule. While the Volcker Rule struggles to stay alive amidst wave after wave of assaults from bank lobbyists, there is a new threat on the horizon for traders. SEC

Chairman Mary Schapiro is moving to impose fees on every single cancellation

executed on a buy or sell order. High-frequency trading has been under fire for quite some time and the May 6, 2010 “flash crash” did nothing to assuage the criticisms. On May 6, 2010 the Dow Jones fell almost 600 points in 5 minutes (almost nine percent) only to recover minutes later. This brief crash prompted the SEC to implement circuit breakers and ban stub quotes. For Schapiro, however, that is not enough, she wants to attack high-frequency trading at its core.

By levying fees on cancellation orders—which make up approximately 95-

98% of all trade orders—Schapiro hopes to induce trade that does depends

on “the fundamentals of the company that’s being traded” rather than “miniscule

aberrational price move[s].” High-frequency firms say that such regulation would

reduce liquidity in the market, which would drive up costs for borrowing and

acquiring capital. I think while that may be true, not all liquidity is created equal.

Where was this liquidity during the “flash crash”? It disappeared within five

minutes, setting off panic in the markets, which then drove equities even further

down. If anything, I believe it’s a great idea to regulate cancellation orders. It will

force traders to become more careful with their capital. And as Wall Street is apt

to do, they’ll find ways to make it more efficient, which will in return, bring the

liquidity that high-frequency firms fear losing. Hopefully, of a more stable nature.


Norman Bae

Gilded Silver

This past Saturday, I had the pleasure of watching my beloved Liverpool F.C take home the Carling Cup, their first trophy in seven years. Yet the manner in which they won, relying on a missed penalty kick by the opposing second-league team Cardiff seemed too close for comfort. It was the first trophy won by the team following its sale to John Henry and his Fenway Sports Group. And with this new owner, came a new policy of spending, akin to the “sabermetrics” strategy outlined in Moneyball. In the past two transfer seasons, Liverpool has spent over £150 million on new players. Yet they currently place seventh in the Premier League, and barely won the Carling Cup. This is the inherent flaw in association football. As a public, we criticize our respective governments for deficit spending and rising national debts; yet the moment our teams begin cutting costs to even out the balance sheet, we riot. Even for the likes of Manchester United, who have seen tremendous success for the past two decades, fans loathe the team’s owner, the Glazer family, for cutting spending. But I do not think that lack of spending is the problem.

If we look back to last year, for the second half of the season, Liverpool had the best record amongst all teams, rebounding from the bottom of the table to finish 6^th after Kenny Dalglish took over as manager. Following that infusion of £150 million? We’re one place below last year. Fenway Sports Group feels pressure to spend to appease fans, and thus tries to maximize spending by buying medium-skilled players at a discount with the occasional big spend like that of Andy Carroll for £35 million. Yet this spending came at a time when the team finally began gelling together, and ultimately broke up the growing chemistry of last year’s team. The same is happening all over England, with the likes of Arsenal, Tottenham, and Manchester United feeling pressure to spend the moment they have a dip in form. And what of their Spanish rival Barcelona, the best team in the world? The likes of Andres Iniesta and Xavi were developed in-house, saving them millions on transfer fees. English football’s youth system trails the Spanish youth academies, forcing English clubs to spend on international talent to cover up this gap. As long as the foundation is weak, English teams will continue racking up debts without success at the continental level. And as long as they continue to underperform against their European rivals, fans will demand more spending. I love Liverpool F.C and am still soaking in the trophy they won a few days ago; however, Fenway Sports Group needs to look only as far as the U.S government to know that spending, even if it is technically “efficient”, is not always the answer. If we look to Moneyball from which Liverpool’s new management molded its financial policies, the book outlines the unprecedented 20 game win streak of the Oakland Athletics under the sabermetric approach. Yet the team never won the World Series. And in the world of association football, it’s always about the silverware.

-Aureen Sarker (Photo Credit: Liverpool F.C)

FS UPCOMING EVENT

Inner Circle: Sports Investment Banking

Date: Thursday, March 1st, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Are you interested in sports, entertainment, and finance? Come listen to David Becker, Associate at Inner Circle Sports, a leading global investment and advisory merchant bank focused on the sports, media and entertainment industries. David Becker is responsible for sourcing and executing M&A advisory, capital raising, valuation, consulting, restructuring and investing transactions in the global professional sports industry. Co-sponsored with STEBA.

LTRO Part Deux

On February 29^th the European Central Bank will release the results of its second Long Term Refinancing Operation (LTRO) which provides low-interest loans to Europeans banks. Since the announcement of the first LTRO in early December, the S&P 500 has rallied over 8%. Analysts estimate that $668 billion will be dished out, higher than the previous round. The impact on the market likely will be negligible as this announcement has been planned while the first announcement was a pleasant surprise. The ECB has indicated that this likely will be the final round of easing to avoid making regional banks dependent on cheap capital. If this is the case, then the market might be headed for a drop from their current highs as another catalyst will be needed to push markets higher. After previous central bank interventions between QE I and QE II and between the end of QE II and the start of first LTRO, the S&P has lost about 20% which is a trend that does not bode well for the market.

~ Ravi Tamboli

Too Much Lending Eh?

Leading Canadian economists and government officials warned in a recent quarterly economic review that escalating consumer borrowing in the country may lead to financial instability in Canada. As a matter of fact, in the third quarter of last year, household debt was at 150% of personal disposable income. Economists believe that this increasing risk is only underpinned by the rising home prices that are largely due to immigration and high demand for homes by the immigrants. From a macroeconomic perspective, I share the same concerns. Assuming the rising house prices is truly due to the large influx of immigrants in recent years, a slight change to Canadian immigration laws may greatly affect the housing prices in Canada. Under the domino effect, the current household debt situation, if affected by the housing price, can lead to a drastic downturn for the Canadian economy.

On the other hand, the specificity rule states that an efficient government policy acts directly as possible on the source of an economic problem. Therefore, I believe it is in the best interest of the Canadian government to implement policies that directly tighten the criteria for lending to reduce risks in domestic financial stability.

Crunch Time for Greece

Greece, which is scheduled to pay about 14.5 billion euros, could potentially default on its bonds as early as March 20th if its neighboring European nations and the Central Bank do not act quickly. The Hellenic Republic, if an agreement is reached, would most likely write down the value of private sector bonds up to seventy percent. Although the Greek government passed more pay cuts and reduced pensions, it will not make up for the hundreds of billions in debt due to years of over-consumption. Ultimately, the nation cannot sustain itself solely on bailout funds and bonds; it needs to cut more funds regardless of public outcry to balance out years of spending beyond their means. While the European Central Bank, which owns about thirty to forty-five billion euros worth of Greek debt, will most likely pass the next bailout fund, austerity will be the deciding factor of its fate.

-Jesse Chai

FS UPCOMING EVENTS

Goldman Sachs Market Risk Management:
Regulatory Capital and Value-at-Risk

Date: Tuesday, February 21st, 2012
Time: 6:40 pm - 7:45 pm
Location: KMEC 5-80

Join Finance Society this Tuesday evening as it hosts professionals from Goldman Sachs. The discussion will center around the topics of regulatory capital and Value-At-Risk (VaR), which have been extremely relevant in the news. Bring your questions and come to learn more about how these rules are affecting financial institutions in the world.

Resume & Cover Letter Workshop

Date: Thursday, February 23rd, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join Finance Society Thursday during common hour for the Resume & Cover Letter Workshop! We will be walking through some great pointers and tips on how to make your Resume and Cover Letter effective and stand out. Be sure to bring your resumes and cover letters as members from the Finance Society's e-board will be available to sit down and go through resumes individually after the presentation!

Competition for Netflix?

Many of us lived through the drama that was the Netflix-Qwikster debacle last year. Since then, however, Netflix has recovered and shot up almost 70% in 2012. It delivered over 2 billion hours of streaming, cleverly began focusing on TV-shows for their addicting factor, and partnered with EyeIO to develop a video encoding system requiring only half the current bandwidth in order to expand into more developing countries. Now it faces a new threat according to news sources. But does it really? Last Monday a $450 million Verizon-Coinstar joint venture was announced that seeks to compete in the online streaming and DVD rental business in the US. For an alleged $6 a month customers will get unlimited streaming and one DVD at a time from Redbox kiosks, which Coinstar operates. Meanwhile, Netflix charges $7.99 for each service and $15.98 for both. While the 62% savings are bound to attract an audience, Verizon/Redbox will more importantly be competing with Netflix, Amazon and other online streaming services in terms of content. With advanced recommendation systems and relatively high switching costs, the breadth and depth of their selections will largely determine whether people jump on board or stick with their current service. Investors are justifiably skeptical. Netflix has 24 million subscribers, spends up to $1 billion a year on content and has video licensing commitments of over $3.9 billion, and even so people are consistently dissatisfied with the limited selection. It seems unlikely that Verizon/Redbox will be able to match this with a ‘mere’ $450 million. For now at least, this is looking more like a box office flop than a blockbuster deal in the making.

-Vivien Sung

Event Recap- Superstar Senior Panel

Last week's event was a showcase of a few of Stern's exceptional seniors, who provided us insight into the recruiting process, different positions in finance, and life. We had representatives from investment banking, sales and trading, asset management, and capital markets roles at top financial services institutions. Although each person advocated on the behalf of their specific function, everyone agreed that freshman and sophomore years should be seen as a period of exploration. Overwhelmingly, they expressed that Stern students pigeonhole themselves into a certain career path without determining which options truly correlate with their specific skills and interests. The panel served as a great reminder that this more often then not leads to an unfortunate post-graduation experience. Thanks a ton to all the seniors who participated in our panel and feel free to reach out to Finance Society members with any questions or concerns you may have about the recruiting process!

Kung Fu Panda for the Kung Fu Creators

In addition to doing some “relationship building” with President Obama, Vice President of China Xi Jinping visits the U.S. to commence a new relationship with… Hollywood. DreamWorks Animation, responsible for creating the box-office hits Kung Fu Panda and Shrek, will partner with Shanghai Media Group and China Media Capital to produce Chinese films, television shows and live stage productions in China. This deal serves as a significant stepping stone into the Chinese film industry, which has been rapidly growing, while the U.S film industry declines. DWA hopes to piggyback off the success Kung Fu Panda 2 had in China (which raked in about $100m in 2011) to secure a strong position in Chinese film due to the predicted success of this industry over the next several years.

While professionals predict Chinese Hollywood to be successful in the future, one major consideration to keep in mind is also China’s highly lucrative and expansive counterfeit industry. Notorious for imitating everything from iPad 2s to Louis Vuitton bags, duplicating and distributing physically AND electronically DVDs is a piece of cake compared to the technological and aesthetic intricacies that Apple products and designer bags entail. Although situating DWA in a growing film market could be profitable in the short run, the long run seems relatively bleak as the strength of the internet and duplication technology increases.