FS UPCOMING EVENT

Semester Wrap Up: Financial Jeopardy

Date: Thursday, May 3rd, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society as we wrap up another great semester with a friendly (but competitive) game of Financial Jeopardy. Bring some friends and form a team to compete with the E-board’s winning team from last year. Winners get a prize!

Starbucks Ready for Huge Growth

Oh Starbucks. There's always those people who make fun of Starbucks lovers saying, "I'd never pay 5 bucks for a cup of coffee!" and, "What does a 'tall' even mean?" But despite these critics of one of the largest coffee brand in the world, there exists millions of people willing to dish out those 5 dollars because it is the little things in life that one truly appreciates. Starbucks has created its culture to do just that and please tired customers in the morning with sweet and energetic drinks.

Furthermore, many of the large corporations we hear about all the time, Apple and Starbucks being two of them, have begun realizing potential in Chinese markets. With recent expansion into China, Starbucks has been able to tap into a new market of millions of people. It plans on opening 400 new stores in the China/Asia Pacific region, which doesn't include what is already existing there. Even if, for example, 10% of China is willing to pay for a Starbucks cup, that's already over 100 million new people. Besides expansion into China, Starbucks also started diversifying to gain market power by selling juice, liquor, and its newest success the K-Cup.

Other signs of long term growth are apparent as well. Starbucks has given optimistic guidance towards its third quarter results, saying that its Tazo Tea will generate billions in revenue and the K-Cups will add close to 3 to 5 cents of earnings per share due to increased demand of them. It opened a total of 176 stores the past quarter for a grand total of 17420 stores worldwide. They reported income from China/Asia Pacific of only 69.5 million, but because of the new addition to stores, this number is likely to increase by several hundred million going into the next year. Also, the fact that they are able to pay dividends, which may be small, indicates that they are financially set for the near future.

And the last reason I believe Starbucks will grow is because now we can all buy Starbucks at Disney theme parks! It aims to open 6 new stores that will blend into Disney's themes and be noticeable to vacationers near the entrance of the park. Food prices at amusement parks are already overpriced, and since Starbucks is notorious for expensive coffee, we can only imagine how much a cup of joe will cost in Disney. Coupled with the price will be high demand from many tired parents from the previous day's adventures in Disney. If Starbucks becomes successful in Disney theme parks, it can then look to expand into other theme parks across the nation and even worldwide.


By Kunal Agrawal

Spain's Downgrade... Too Much or Not Enough?

Spain’s unemployment rate has reached an 18-year high of 24.4% as announced this Friday. This is up from the 22.9% reported last quarter and close to the highest level on record. The distribution of this rate is even more appalling, as more than half of those under 25 years old are unemployed. As a reflection of these dim economic times across the pond, Spain’s credit rating was downgraded to BBB+ on Thursday. What is ludicrous about this, however, is the fact that Spain’s debt is still considered investment grade despite all the structural issues it faces and an unemployment rate higher than the US unemployment rate going into the Great Depression, which maxed out at 21-22%.

This brings into question, once again, the accuracy and credibility of ratings agencies. In 2009 Moody’s issued a report stating that “Investor fears over Greek government liquidity was misplaced” six months before the country started seeking a bailout. Even more absurd were the ratings agencies AAA ratings of the debt that caused the subprime mortgage crisis just a few years ago. Last but not least concerning was the S&P’s $2 trillion miscalculation of US debt before downgrading it last August.

While politicians often criticize ratings agencies for jumping the gun on downgrading government bonds, back in 2008 they were much too late to downgrade the CDO’s responsible for the crisis. The problem is the conflict of interest these agencies face when rating sovereign or corporate debt and other securities. It can cost anywhere from $1500 to $2.5 million to be rated, so agencies have a strong incentive to give their clients the ratings they want versus the ratings they deserve.

Solving this problem is no simple task, however as Aditya Chakrabortty argues, “The obvious solution would be to take this public service into public hands. Let's have a ratings agency run by the UN, funded by pooled contributions from both lenders and borrowers ... Let's make the ratings business a utility, rather than a semi-cartel that intimidates elected politicians and rakes in excess profits. It's time to break up the bullying double-act." While the logistics and feasibility of this may take years to figure out, it’s a worthwhile solution to consider for our own good as future investors if no one else’s. 

- Vivien Sung

Blankfein to Stay at Goldman

            Goldman Sachs chairman and chief executive, Lloyd Blankfein has insisted that he has no plans to relinquish any of his current positions.  Appearing for the first time on a television interview in two years, he denied any speculation on abdication. Goldman has faced many recent charges for fraud, insider trading, and other scandals in the aftermath of the financial crisis.

On February 24, Goldman Sachs was notified that the charges could include its involvement in the disclosures made as an underwriter of about $1.3 billion of sup-prime mortgages. 

            This would be the second time that the investment bank faces the SEC for fraud charges.  Previously in 2010, the Securities and Exchange Commission filed a lawsuit against Goldman for securities fraud during the financial crisis.  The firm was accused of hiring John Paulson, a former executive member and hedge fund manager, to hand select the worst subprime to sell to investors and then bet that they would fail.  These bonds were packaged under the name ABACUS 2007-AC1.  Paulson and Goldman would then short on these options, secretly betting against their investors.  An analogy to this would be if one specifically sold cars with the least reliable brakes and then bought insurance on them.  In the end, Goldman paid $550 million in settlements and admitted to omitting disclosures and misleading investors. 

            However, out of the $12.9 billion worth of bonds Goldman underwrote in 2006, the SEC has not specifically defined which specific bonds the charges relate to.  The SEC has been faulted before for failing to clearly identify the exact reason for investigations.  With other budge bracket firms also facing charges for similar activities and the upcoming trial of an insider trading case involving Goldman director, the SEC has a lot of cases on its hands.  Currently, Goldman is filing an appeal to the SEC in defense of the charges.       

In the eyes of investors and the public, the firm immorally and deliberately lied to buyers in what was nothing less than thievery.  However, using these short sales, Goldman Sachs managed to cut losses during the recent financial crisis and keep the firm alive.  In terms of benefitting the company, the creators of these deals were absolute geniuses who saved their company from potentially sharing the same fate as Bear Sterns and Lehman Brothers during the worst economic crisis since the Great Depression.  In this case, the individuals responsible treated their professional duties and the enticement of money with more priority than the well-being of their clients.  This brings up the fundamental question of whether or not businesses should focus solely on maximizing profits for shareholders and disregard the common good of society.  Although the SEC has tightened its regulations since the crisis, the ineffective discipline of the major contributors to the recession reveal that the banks still have massive leverages over the government.  Wealth has become such a driving force in our society that, to many individuals, contractual obligations to companies have more of an influence in our lives than moral obligations.

-Jesse Chai

Burgernomics—the Mighty McDonald’s BIG MAC

So we all know about the Big Mac Index, which is based on the theory of purchasing-power parity and states that exchange rates should adjust until equilibrium—the market exchange rates that would equalize the price of an American Big Mac with an English Big Mac and a Chinese Big Mac.

Recently, another bright economist has come up with an intelligent way of comparing real wages across the world using McDonald’s Big Mac as well.  Orley C. Ashenfelter of Princeton University calculates real wages as how much of a Big Mac could an hour of work can buy.  He then flips the ratio over and compares the number of minutes a McDonald’s employee must work in order to earn enough to buy a Big Mac across countries. 

In his paper published by the National Bureau of Economic Research, Ashenfelter concludes that after his own preliminary analysis of the decade long project, “Wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000 – 2007, but with much less progress since the Great Recession.”

As we might expect, workers in less developed countries would have to work longer in order to earn a Big Mac.  For example, in 2011, a Chinese worker in McDonald’s  would have to work 85 minutes to afford a Big Mac, while an American worker only needs to spend 27 minutes. 

This measure has two major strengths.  The first one is, of course, the creativity underlying this measure.  We do not always need hundreds of simultaneous equations to solve an economic question.  By properly constructing measures that change over time, we can always use innovative and interesting methods to test the effects of public policies or economic shocks around the world.  Moreover, a lot of the past and current measurements only allow comparisons of wage rates within the same country, and today much emphasis has shifted to constructing measurements that would also permit cross country comparisons.  This MacWage measurement appears to solve the problem in a nice and intelligent way.  

Think Big and Be Innovative!

(P.S. If you are wondering what Maharaja Mac is, it is THE Big Mac in India!)

~Sophie Tam

The Correlation between Humor and Success

How correlated are humor and success? It’s hard to imagine that anyone believes that exhibiting humorous and genial qualities act disadvantageously. In fact, in the business field, being humorous works to one’s advantage. It’s more enjoyable to talk to someone who can slip in a few jokes and be funny than someone who is always uptight and formal. Being respectful and serious can be important too, but it can sometimes come off as boring. Where conversing and networking is important, being funny can make the conversation lighter and more enjoyable, thus opening opportunities that may have never been created otherwise. Formal studies show that being funny can make others perceive you as more enjoyable and thus approachable. Michelle Gielan, expert in positive psychology and cofounder of the Institute for Applied Positive Research, explains that more dopamine is released when something makes us smile to reinforce creativity, productivity, and engagement. In an analysis of 225 academic studies, happy employees were found to have 31% higher productivity and 37% higher sale. Successful humor also improves personal and group productivity, and facilitates trust.

But this is all under the assumption that humor is successful. It’s crucial to say the right jokes at the right time and make sure no one is offended. Even if it does not necessarily offend anyone, a wrong joke can draw negative perceptions. It’s also important to consider what line of work you are in, for being funny may not be appropriate at all. For instance, humor is perhaps even desired in the advertising, media, or entertainment industry. But in fields related to medicine, finance, or engineering, squeezing in attempts to lighten the mood can be difficult. It’s all about saying the right things at the right moments. 

Chris Kim

Google Introduces GDrive

Earlier today, Google launched the long anticipated cloud storage platform that awards its users 5 gigabytes of free online data storage. Users can upload files in any format whenever, wherever they want. The unique thing about GDrive as an online storage service is that it’s part of the Google App Suite. The network effect of all Google users will essentially give GDrive leverage in not only getting the loyal Google users but also new users who might just want to try out this new service for its being part of Google. The way GDrive works is that it will operate as if it was a local file system. When users click the “save file” dialog box on Chrome OS, the system automatically leads the file to Google Drive. This feature is quite similar to the already existing Google Doc function (as a matter of fact it looks the same), but in switching to a new storage service, Google is aiming to better provide the transfer of files between all sorts of online applications.

--Rong Pang

Obama for the students, students for Obama

                As NYU students, we all know how painful our tuition is. Some of us have parents who have sold their first born (if not, an arm and a leg) for our education.  Others will simply have tens of thousands of dollars of student loans post-graduation. What’s worse is that our situation is not improving, as the US government plans on DOUBLING student loan interest rates from 3.4% to 6.8% on July 1^st, 2012. Statistics show that student loans are the second largest source of consumer debt, more than credit card debt and only behind home mortgages. The average student debt is over $25,000 and some even have over $100,000. The picture seems bleak, to say the least.

But fear not, Sternies, because we are fortunate to have a president that is extremely pro-education, as he reminded us with his 2011 State of the Union address. He is trying to convince congress to grant him a one-year reprieve, most likely to discuss the matter further before making such a critical change. It is clear that he does not want to make the choice of attending college restricted by financial insecurities, something he sees as trivial.

However, as the 2012 presidential election approaches, one might wonder if Obama is doing this because he cares about our wellbeing or if he just wants the college votes. The way I see it, it does not matter. His expression of concern and the fact that he is actually taking action is enough to win my, and undoubtedly every other NYUer’s, vote.  Moreover, as a country that has made higher education increasingly necessary for finding a job, he will grab many parents’ votes as they would do anything to make their children’s college decision as financially painless as possible. While some may argue Obama should be focusing on other issues such as political instability in other countries or taxes, I think that directing his attention towards students should definitely be high on the list. After all, we are the future of tomorrow.

Event Recap: General Catalyst Partners

Last Thursday, we invited Jon Teo from General Catalyst Partners to provide a general overview of the Venture Capital industry, speak about his past investments and experiences, and provide insight about how to enter to the industry. The event was a pure Q&A sessions, and Jon fielded all questions extremely well. One of the more interesting points of discussion was the ideal skillset for entering the VC industry and whether our traditional business school education places us at a substantial disadvantage. There are many who claim that engineers (such as Jon) are much better suited to work in Venture Capital due to the fact the industry gravitates toward companies who innovate primarily on a technological level; therefore, individuals with in depth knowledge of programming and web-based products are better suited to pass judgement on such firms. In addition, valuation and corporate finance skills found in banking, P/E, and the hedge fund industries isn't to core competency of an analyst. That being said, Jon expressed that business school students are not necessarily at a disadvantage. The main requisite for VC is creativity, an attribute not constrained to any specific type of education.

Surprise in the French Presidential Election

The French Presidential Election will proceed to a second round after both Francois Hollande and Nicolas Sarkozy failed to win 50 percent of the vote on Sunday. Hollande took 28.6 percent of the vote, while Sarkozy achieved 27.1 percent. However the day belonged to anti-immigrant, anti-euro advocate Marine Le Pen of the National Front party, who achieved a strong 18.1 percent of the vote. Le Pen’s performance highlights the French people’s frustration with the political elite and economic problems in the world’s fifth largest economy and Eurozone’s second largest economy. The unemployment rate, at nearly 10 percent, is a 12-year high and the country lost its AAA credit rating for the first time in January. After the vote the euro declined to $1.32 against the dollar while 10-year bond yields rose 5 basis points over fears that France could undergo further radicalization. Sarkozy, the first incumbent not to win in the first round since 1958 must gain the support of the more radical right in order to win, while Hollande must make up for a generally poor showing for the left where communist Jean-Luc Melenchon only gained 11.1 percent of the vote. Surveys predict that Hollande will beat out Sarkozy by a 56 percent to 44 percent margin in the next round, scheduled to take place on May 6. Investors hope for a strong showing by one of the candidates to avoid risking further destabilization in the Eurozone.

-Ashish Sathe

FS UPCOMING EVENTS

Professor Series: Ed Melnick - Statistics in Finance

Date: Thursday, April 26th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Come and check out Finance Society's last Professor Series event of the Year as Professor Ed Melnick discusses the growing role of Statistics in Finance. Melnick is a Professor of Statistics and the former Chair of the Department of Statistics at Stern. He will be discussing the vital role probability plays within the world of Finance and some of his research. Professor Melnick is a great lecturer and this is definitely an event you don't want to miss!

Wall Street Tour

Date: Friday, April 27th, 2012
Time: 1:30 pm
Location: Meet at Stern

Take a tour of the Wall Street area with Finance Society on Friday, April 27th. We'll be visiting spots such as Trinity Church, the grave of Alexander Hamilton, the NYSE, the Wall Street Bull, the Federal Reserve and various other financial centers of downtown NY. Limited spots are available for this tour so make sure to RSVP by this Wednesday at noon! We will be meeting at Stern at 1:15pm while the tour is scheduled to begin at 1:30pm and run for a little under 2 hours. Attendance will be confirmed a few days before the tour.

Disney in Danger of Falling Behind Major Studios

Rich Ross, the Chairman of the film unit at Wald Disney Co. resigned after the company’s devastating $200 million loss on John Carter, a figure rumored to be the biggest ever for a single movie. And because of Ross’s resignation, Disney CEO Robert Iger’s franchise-focused film release strategy is placed in even further doubt.

This year, Disney has cut its number of film releases in half to only 12 because of this strategy of releasing fewer, larger-budget, and what they speculate to be extremely popular, films that have the potential to become long-lived, consumer franchises. Essentially, Disney is betting big on every single movie they come up with. The strategy seemed promising at first, as most of these big-budget movies are built around marketable characters from Pixar and Marvel, except that it failed spectacularly with John Carter, which led to a quarterly operating loss of $120 million for the studio, the first since Ross succeeded Dick Cook as Chairman back in October 2009.

Currently, Disney ranks seventh among studios, with domestic ticket sales of $186.7 million as of April 15. This number and ranking puts Disney the last among major studios and also behind Lions Gate, a rising star in Hollywood with the biggest hit of 2012 so far, The Hunger Games.

With Marvel’s Avengers making its debut on May 4 worldwide, Disney is expected to regain some strength in the competitive industry of media and entertainment as this movie is expected to be among 2012’s top-grossing pictures with an estimated $370 million in domestic ticket sales alone. Further down the line, Disney is set to release Pixar’s Brave in late June. Let’s hope these franchise-focused films can help put Disney back in the run for being the leader among the Hollywood studios.

Jennifer Zhang

Intelligent Fraud

An intelligent internet fraud was uncovered by SEC on Friday. A pair of British brothers marketed Marl, a fictitious “stock-picking robot,” and earned $1.2 million from 75,000 investors buying newsletters and home “robot software” used to access Marl’s stock picks. Since “Marl” did not really perform analyses, the Hunters were earning at least $1.87 million from stock promoters. What makes this incident more interesting is that the brothers are now 21 years old only, and they started the alleged scheme in 2007, which means they were just 16 years old.

The brothers made creative claims on their websites. According to the complaints received by SEC, the website pronounced that Marl could pick out distinct trading patters “in split second timing” and could process 1,986,832 mathematical calculations per second. Therefore, trading according Marl’s picks could earn investors 34% a week.

In fact, Marl’s picks did skyrocket in price once the newsletters were out. Since Marl picked penny stocks that often had a low trading volume, the robot’s choice would experience a surge in price before it fell back to earth.

Several aspects of discussion come up from this story. First, the anonymity on the internet allows unethical behaviors like lying to the investors. Second, investors should clearly understand the background, prospects, and drivers to prices before investing. It is important that they do not blindly follow any one of the millions newsletters that claim to bring definite profits. Third, if we believe in the efficient market hypothesis, the equilibrium stock prices in general should reflect the fundamental value of the stocks. As we can see from the fluctuations of the prices of Marl’s picks, they rise due to the irrational behaviors of investors, and then fall back to the original prices, which are their fundamental value, because investors realize that the stocks themselves do not worth the trading price.

~Sophie Tam

FS UPCOMING EVENTS

General Catalyst: Introduction to Venture Capital

Date: Thursday, April 19th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as we welcome Managing Director Jonathan Teo from General Catalyst Partners. General Catalyst is a private equity/venture capital firm based in Cambridge, MA. They specialize in venture capital and growth equity investments in Clean Energy, Consumer & New Media/Internet, and Software/System Services. Jonathan Teo, head of their New York office, will come in to introduce what venture capital is, speak about the work he does, and discuss some of General Catalyst's investment strategies. Read more about the firm at www.generalcatalyst.com, and be sure to join us for this exciting event!

Bloomberg Assessment Test

Date: Friday, April 20th, 2012
Time: 12:00 pm - 3:00 pm
Location: Tisch 200

Join Finance Society and Bloomberg Institute this Friday and take the Bloomberg Assessment Test (BAT). The BAT is a standardized exam for students to demonstrate a mastery of business-related concepts. The BAT also allows students the opportunity to gain exposure to global employers. Bloomberg Institute maintains an anonymous database of BAT performance and showcases these results to over 20,000 global employers. Be sure to register for the exam at www.TakeTheBAT.com by this Thursday.

Benson Stings the Competition

Four days ago, the New Orleans Hornets were bought by Tom Benson, the owner of the NFL New Orleans Saints, for a deal valued at a reported $338 million. The troubled basketball team has been in administration by the NBA for over a year now due to an unsustainable business model, and so this new deal seems to be bringing some new life back into a team that saw its star player, Chris Paul, leave for the L.A Clippers earlier this season.

The problem now becomes what Benson can due as owner to leverage his team back into playoff contention like last year, when the Hornets almost bested the Lakers. The financials do not bode well for Benson. Benson paid a 19% premium for a team that has run three years of consecutive losses. In addition, his current fortune, estimated at about $1.1 billion according to USA Today puts his investment into the Hornets at about 25% of net worth; even if he was able to finance a large portion of the deal with debt, a question remains whether Benson can shore up enough assets to purchase new talent to offset the loss of Paul. The Hornets sit at the bottom of the West Coast standings with only six games left in the regular season. With this year being a lost cause, Benson at least has time until next season to develop a plan of attack for the future. Don't count the Hornet outs in the next few years to come.

-Aureen Sarker (Photo Credit: Yahoo Sports)

Event Recap: Contrarian Investing

This past Thursday we invited Steven Jon Kaplan, author of the newsletter truecontrarian.com, a popular investment strategy newsletter with over 600 subscribers (some of them actually came to the event!). Mr. Kaplan focused his discussion on the history and progression of technical analysis, and why he believes technical analysis is obsolete in todays financial markets. After his presentation, Finance Society members had the opportunity to engage in discussion with not just Mr. Kaplan but his subscribers as well. We heard some great discussion about investment strategies, Apple and Facebook, and the recent economic crises. Thanks to all those who attended the event and we hope to see you at our event with General Catalyst Partners this Thursday.

Recap of Q&A w/ JC Chandor

Last Wednesday, we were fortunate enough to welcome JC Chandor, the writer and director of the Academy Award nominated film "Margin Call" for a Q&A session about his creative process, inspirations, and unique perspective on the financial services industry. Mr Chandor provided a personal background, but focused the majority of the discussion on his perceived transformation of the industry away from client-firm relationships towards short-term profits. Other topics include parallels of film details to real world events and people, growing up in New York, and his next film starring Robert Redford. Overall, it was a great event and a interesting alternative view on the industry.

Strike

Last week, a fellow E-Committee member, Mehyar Afkari, wrote a poignant piece on the over $2 billion dollar deal by Guggenheim Baseball Management to purchase the L.A Dodgers. The main question Mehyar brought up was just how this mammoth deal that makes the Dodgers the most valuable franchise in the world would be financed?

Earlier in the semester, Finance Society had the pleasure of bringing in David Becker of Inner Circle Sports to discuss this world of sports investing. Becker used the Dodgers as his primary example in explaining how teams are purchased or sold. Now I do not pretend to have a technical knowledge of investment banking, however, one concept seemed simple: when a person or entity purchases a new sports team, they pile on the maximum debt a team's balance sheet can handle and then pay the difference amongst a group of investors. So with a $2 billion purchase price that analysts believe is $800 million too much, the amount of debt taken on must be staggering. So what's next for the Dodgers?

With the enormous debt that stems from an inflated price-tag, the Dodgers have little room for team investments, the types of investments that win games and fill stadiums. Even with a reported $3 billion regional sports network deal in the works, the team must first win over land rights to refurbish its stadium, rights that were NOT included in that $2 billion figure. Magic Johnson may be loved in L.A; however, without proper investment in the right players, the fans will rebel. The "most valuable team in the world," will be expected to win multiple World Series titles, but with lack of extra funding, the Dodgers will be unable to attract stars that are demanding 6+ year contracts in the $100 million range. With the new management still in its infancy stage, perhaps I am being a little too critical. But for now, I'm calling this deal a strikeout.

-Aureen Sarker (Photo Credit: Fox)

Groupon's Little Brother Might Get Adopted

By Matthew Giacobbe

While the buzz coming out of the social media sector this week is Facebook’s acquisition of Instagram, investors should keep an eye on the recent news out of Travelzoo (TZOO). Travelzoo, which is the so-called Groupon (GRPN) of travel, has announced that it is putting itself up for sale this week. Travelzoo offers its users exclusive deals to destinations around the world. However, Travelzoo is more sophisticated than Groupon’s daily burger deals; it offers deals to stay at destinations like the world-renowned Ritz-Carlton hotels. What has sparked a flurry of interest around this company is that Amazon (AMZN) and Google (GOOG) have been rumored to be actively pursuing acquisitions to strengthen their own daily deal businesses. Travelzoo is especially appealing to Google, which recently acquired the restaurant review company, Zagat. Combining Zagat’s ability to recommend high-quality restaurants and Travelzoo’s ability to provide luxury deals related to travel and food would appeal to a similar demographic. Although Amazon’s deal business has been largely related to clothing it could easily expand their offerings and user base through such an acquisition. Additionally, LivingSocial could also be in the hunt in order to strengthen its deal portfolio and differentiate itself against its main competitor, Groupon. One thing is for sure though; the battle for Travelzoo will be fierce, as competitors vie for dominance in the daily deals marketplace.

Japanese Pharmaceutical Companies Continue to Expand Overseas

Takeda Pharmaceutical announced its decision to purchase the Philadelphia-based URL Pharma Inc. for $800 million this past Wednesday. This is a deal that follows Asahi Kasei Corp's $2.2 billion acquisition of the Massachusetts-based Zoll Medical Corp that took place last month. Japan is seeing a trend in expanding the horizons of its health care sector. The high price of yen, low cost of drugs, and losses of patents in the United States are driving the country to look overseas, the Wall Street Journal says.

It's interesting to see that Japan, a country known for its global detachment that stems from a historical background of geographic seclusion, (most Japanese can speak only Japanese, refrain from studying overseas, and are highly traditional in their beliefs) is making an attempt to extend its presence overseas. The recent deals raise attention to future acquisitions and large-scale involvement of Japanese companies. It will be intriguing to follow Japan, already one of the world's top superpowers, as develop its health care sector. The deal is expected to close by June.

Chris Kim

Facebook has agreed to a deal to buy the photo-sharing-application company Instagram for $1 billion. This is the social network’s largest ever acquisition in a move that many see as an attempt to bolster the company’s value before its impeding Initial Public Offering. This is a huge price tag to pay for a company previously valued at around $500 million that has very little revenue. The factor that may have caused Facebook to pay so much for Instagram is its rapid growth. Facebook decided that the best way to prevent a possible competitor from continuously growing in market share was to buy it out completely. Facebook also has wanted to make a push to increase its revenue stream from mobile site usage, which is rapidly outpacing the website’s growth. This is a huge departure from Facebook’s normal strategy of buying out small companies and signals a change in mindset for Facebook’s top executives. How will investors judge this move by the social media giant? In what is expected to be Silicon Valley’s largest-ever IPO, investors will have to decide if Facebook is making this acquisition in order to grow or if it was just a move to eliminate potential competition.

Michael Felicetta

The Latest Trend: Social Networking, Mobile Commerce

If 10 years ago someone asked you to join on with Facebook and become a partner, would you do it? Mark Zuckerberg’s roommate had the option but declined. Right now, everyone is trying to get a piece of Facebook once they become a public company valued at 10 billion dollars.

What if in 1995 when the Internet was just getting started and someone asked you to join Amazon, would you do it? 17 years later, they are a multibillion dollar company posting record sales and growth.

These two sites caught on to an early trend, the Internet. Back in the 90s, it used to be an exclusive privilege, one that those who had it found very frustrating. Not being able to use a household phone and the Internet at the same time was a common complaint, but also the speed of the network was unbearably slow. However, if you invested in Amazon when it was worth $1.50 a share and cashed in when it reached its high of 246.71, you could have potentially made a 16400% gain in a matter of approximately 15 years. Pretty amazing if you ask me.

Like all trends, it appears that Amazon seems to have reached its pinnacle and now is on the decline. Its release of the Kindle has not been very successful as it has been competing with Apple’s iPad for the market. However, these past 5 or 6 years have been the prime of Internet expansion. I remember the days when people, such as parents and friends, told me that putting credit card information on Internet shopping websites would lead to your information being stolen and such various rumors. Now days, people have multiple credit cards signed up on different websites, and everyone checks the box, “I have read and understood the terms and conditions,” without ever reading the terms and conditions. Clearly, the Internet is in its prime as millions of people blindly trust online websites with their privacy and require it for almost any everyday activity.

Looking forward, I see growth and expansion in the mobile industry. If you observe people today, what are two things that they always turn to with free time? Facebook, or their cell phone. What do people go on when they open their cell phones? Facebook. The power of Facebook is completely underestimated. When Jeremy Lin became a star, I didn’t find it on the news first; at least 20 Facebook statuses informed me about him. Similarly with the smartphone industry, the use of the Internet from phones has exponentially grown as companies such as AT&T have to limit the amount of data people can access from their phones. The once prized unlimited data plan is now being capped at a certain level, and people who exceed the limit will be penalized.

Because of the recent explosion in social networking sites and use of applications on smartphones, it appears that the next big trend will be with mobile commerce and Facebook commerce. Zynga has already integrated itself on iPods, Androids, and Facebook, while other companies shift gears to target the 800 million subscribers of Facebook. Imagine a shopping website where one can have a credit card stored on Facebook and a cell phone to shop from. You don’t have to be sitting at home for this, nor do you have to take trips to stores on your way back home. While sitting in class or at a meeting, people can press a few buttons and buy whatever they need and want. That’s powerful.

By Kunal Agrawal

FS UPCOMING EVENTS

Bloomberg Assessment Test Information Session

Date: Tuesday, April 10th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch LC-25

Join Finance Society and Bloomberg Institute this Tuesday and learn more about taking the Bloomberg Assessment Test (BAT). The BAT is a standardized exam for students to demonstrate a mastery of business-related concepts. The BAT also allows students the opportunity to gain exposure to global employers. Bloomberg Institute maintains an anonymous database of BAT performance and showcases these results to over 20,000 global employers. The BAT will be held on April 20^th.

Steven Jon Kaplan: Contrarian Investing

Date: Thursday, April 12th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as it welcomes Steven Jon Kaplan. The primary topic of his talk will be "Why Technical Analysis No Longer Works, and What to Do About It". He will describe the history of technical analysis, how most of its methods were designed shortly after World War II, and why it began to become progressively less successful during the past few decades. He will also discuss his own method, which takes advantage of the fact that so many people are attempting to use charting and other momentum strategies in their trading. You can learn more at http://truecontrarian.com/.