Wall Street Loses Significantly for the First Time in 2012

On Tuesday, the Dow dropped 1.57%, its first significant loss in 2012. While it was widely expected by analysts that the huge gains to start 2012 would slow down because stocks were overbought, the true culprit was Greece. Fears of a possible default in Greece brought the market to a halt, lowering the three major indices by over one percent each. A Greek default could cause over one trillion euros of damage to Europe. In addition to Greece, both China and Brazil showed slowing growth that added to the fears of the global economy. Because of these global issues, the dollar gained and the euro/dollar dropped to 1.3115. The last time the Dow dropped over 200 points was on November 23, ending a run of over three months without a major loss. Also, the S&P 500 dropped over one percent for the first time since December. The markets have started off hot in 2012, but fears in Europe and in the global economy as a whole finally took precedence over Wall Street optimism. Only time will tell if this is just a minor pullback or if Wall Street has major worries that lie ahead.

Michael Felicetta

The Geneva Motor Show

The 82nd Geneva Motor Show opened its doors today for the press, while the public can only start entering on the 8th. The Geneva Motor Show is one of the many annual auto shows where carmakers from around the world can show off new designs, models, and technologies for the cars of tomorrow. This is a great marketing scheme on the carmakers end because their new cars will receive much hype, especially the ones that are due to be released soon, like the new Mercedes Benz A-Class line or the new Audi A3. What's important about these annual shows is that carmakers, although hurt from the recession, are still heavily investing in new technologies for their cars in order to make their cars more efficient and advanced, thus benefiting all types of technology sectors. For example, Apple's stock price went up today, after Mercedes announced that its new A-Class line was fully integrated with Apple's Siri technology.

Vincent Tang

EVENT RECAP: Inner Circle - Sports Investment Banking

Last Thursday, we had the pleasure of inviting in David Becker, from Inner Circle Sports, to discuss his career path and some of the things that differentiate sports investment banking from standard investment banking. The event was co-sponsored with STEBA, and we had an attendance of over 90 students!

Smit Purohit and Kunal Agrawal, two E-Committee members, began the event by presenting our weekly market update and discussing some of the recent headlines in the financial world. Mr. Becker then took over to introduce the firm, and discuss the basics of sports investment banking. Above, you can see him discussing the various valuation methods used in investment banking, and then narrowing down to the ones that apply specifically to sports teams. The discussion then turned to some recent activity in the space including the restructuring of the LA Dodgers, as well as Inner Circle's recent work with FC Liverpool.

This week we're going to switch the focus by beginning our Professor Series for this semester. Professor Robert Whitelaw will be coming in to discuss his recent research regarding exchange rates. Definitely be sure to come to this event, Thursday from 12:30 to 1:45pm!

Executive Board

FS UPCOMING EVENT

Professor Series: Robert Whitelaw
Chair of the Finance Department

Date: Thursday, March 8th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Come and check out the first in our Professor Series as Professor Robert Whitelaw discusses his latest research topic, Exchange Rates. This will also be a great opportunity for those of you who are taking FFM next semester as Professor Whitelaw is the chair of the Finance Department and one of the main FFM professors!

O’Neill to Replace Parsons as Citigroup Chairman

(Photo of Richard Parsons, current chairman of Citigroup)

Citigroup announced yesterday that its current chairman Richard Parsons will be stepping down at Citi’s shareholder meeting in April. As part of a pre-existing succession plan, Michael E. O’Neill, former chief executive of the Bank of Hawaii Corp., will succeed Parsons as the head of Citigroup.

Parsons, 63, became chairman of Citi since 2009 and played an important role in leading the firm’s recovery coming out of the crisis. Previously, he had been on the board for over a decade and a half and took over the chairman position shortly after a $45 billion bailout by the U.S. government. Parsons is known for his political connections and close relationships with officials, according to Mike Mayo, the author of “Exile on Wall Street”, who thinks that this change will be good for Citigroup.

Parsons was quoted earlier saying that “Citi still faces a challenging environment, as do all the large banks, but the crisis is behind us. Given the strong position that Citi is in today, I have concluded that the time has come for me to leave.” Last year, Citi reported a net income of $11.3 billion, up from the $10.6 billion from 2010 and the total losses of $29.3 billion from 2008 and 2009 combined.

Parsons has probably chosen a smart time to leave now, as Citi’s revenue fell 9.5% from a year earlier while expenses increased by 7%, leaving the shares tumbling down 44%. O’Neill will be taking over when the board is trying to deal with lower revenue, higher costs, and unfamiliar regulation as the Vikram Pandit, CEO of Citigroup, continues to push the firm into emerging markets. We can only hope that O’Neill can translate Pandit’s vision into positive returns for Citigroup.

- Jennifer Zhang

Yelp's Rise (and Fall?)

In what will surely be the year of the Internet IPOs, another Web 2.0 offering debuted on Friday. Yelp, the go-to site for local business reviews and advertisements initially priced its shares at $15—above its initial $12-14 filing range. At opening, it jumped up to 73% and is currently priced at $24.43 (roughly 63% up). While it may have a smaller valuation at $1.6 billion than other Internet companies, it does seem a little expensive (as much as I love Yelp).

Keep in mind that Yelp lost $16.7 million last year. Another important fact to consider is how saturated its market is becoming. Yelp will need to compete with Open Table and Groupon as well as upcoming web companies Angie’s List, LivingSocial and Google’s Zagat. These competitors are well-equipped to take on Yelp in the reviews and local business deals arenas. Of course it is too early to tell how the stock price will change in the coming weeks. I believe that Yelp does stand a good chance against its competitors but it will need to differentiate itself further. If it brings something unique to the table, things can only go up from there. What else do you think has investors going crazy about Facebook?

Norman Bae

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