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.

January Employment Numbers: Don’t Believe The Hype

Employment statistics may be released, revised, rereleased, and revised again, but the importance of employment statistics in the financial markets remains undeniable. In fact, anyone paying attention to the news or the financial markets last week would have heard of the most recent employment statistics to take the world by storm. On Friday, February 3^rd, the Bureau of Labor revealed that for the month of January the unemployment rate made the giant leap down 0.2% to 8.3%, the lowest rate since February 2009’s 8.1%. And the crowds went wild! The NASDAQ saw a jump on to an eleven year high. The Dow closed just around its four-year high. The media spared no words of optimism. ABC news referred to the report as a “long-awaited surge of hiring” which “seemed to reinforce that the nation is entering a virtuous cycle”. Yahoo News called it a “hiring burst” and “the most impressive surge for the job market since early last year”. Now before jumping on the blissful bandwagon, make sure you understand what really lies inside that jobs report. The good news: widespread job growth in the private sector occurred as nonfarm payroll employment rose by 243,000; unemployment rates declined for both adult men and blacks; and unemployment fell from 8.5% to 8.3%. The small print: the participation rate in the labor force dropped from 64% to 63.7%. While this doesn’t sound like much the numbers are actually staggering: almost 1.2 million of the nearly 1.7 million people added to the Civilian noninstitutional population from December to January were not in the labor force. This means about 70% of the estimated additional population in the United States was not considered to be in the labor force. The Bureau of Labor had the following justification for the largest single month addition to the “not in the labor force” in history: “This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population. “ I am not in any position to make judgments on the statistical methods of the Bureau, but those numbers are not reasonable and the Bureau’s justification does not cut it. I urge you to realize the strong political pressure placed on the Bureau to release such good sounding numbers. I urge you to ask yourself whether all of the 70% of the increase in the population in January could have possibly not belonged in the labor force. And I urge you to take the most recent jobs report with a grain of salt.

-Kyle Cameron

LinkedIn Looking Forward to Another Strong Year

While Facebook is garnering more and more attraction as it takes a step closer to launching possibly the biggest IPO of the year, LinkedIn quietly reports only continual improvement. Unlike many other social networking companies that issued a 2011 IPO or dropped in stock prices, LinkedIn reported heavy earnings in the fourth quarter of 2011. Its earnings came in at $6.9 million, or 6 cents per share. Revenue was $167.7 million, a 105% up from just a year ago. For 2011 overall, LinkedIn posted revenue of $522.2 million, a 155% leap from its 2010 figures. All of these numbers topped analysts' estimates, according to FactSet. Moreover, LinkedIn looks forward to this year as it estimates a revenue of $170-175 million for 2012 Q1 and revenue of $840-860 million for the year 2012.

LinkedIn ended 2011 with over 9,200 corporate customers, up 139% from 2010. More than 60 million members joined, and it began testing Talent Pipeline, a new recruiting product that allows recruiters to easily connect and stay in touch with candidates. The company also grew by over 100% for the sixth consecutive quarter. This quarter, shares already climbed by 4% to $79.85 on the second of February.

With technology advancing incessantly and trends and taste changing so fickly, it is difficult for social media companies to meet the needs of customers at all times. However, as shown, LinkedIn seems to do a good job as it continuously boosts its stock prices and looks into the future with ambition. This year, we will need to keep an eye open as we continue to track the development of LinkedIn as well as the shift in power within the social media industry.

by Chris Kim