Of God, Politics, and National Sanity

Before any of you proceed with this piece, I would like for you take 30 seconds to view Texas Governor and GOP Presidential Candidate Rick Perry's latest campaign ad. The link is below.

Hail Mary

The United States was founded upon the concept of universal tolerance. Tolerance of religion, tolerance of personal choice, even so far as the tolerance of intolerance. Many argue that this foundation is derived from primarily Christian values, I would argue they are basic human tenets. Regardless, our constitution and legal system are converging towards a more tolerant union.

To say an ad like Mr. Perry's is intolerant would be a severe insult to its content–it is reprehensible. But beyond the shallow surface, the ad is representative of a certain class of political discourse, concentrated in America's bible belt and championed by the desperadoes of the Republican party. It is a faction that has made its aim to resurrect biblical analysis as a basis for rational litigation. To be conservative is one thing, but Mr. Perry and his almost cult-like army of neo-crusaders are regressive. There is nothing fundamental or "American" about their perspective.

Unfortunately for them, the public is beginning to realize the folly of their ways. In retrospect, the Christian Conservatism that carried Bush into the White House seems quite moderate. Today, the sensible public acknowledges that gays do not cause hurricanes, and health care reform is not an Islamic attempt to cripple the country (true statements). Every liberal is not lucifer, every homosexual is not misguided. Perry's poll numbers show that even Republicans realize who is at fault.

Amen.

Apple Faces Antitrust Investigations

Apple is in hot waters again with the European Union as antitrust regulators have launched a formal investigation regarding its pricing strategies in the e-book market and its possible collusion with publishers to raise e-book prices. Along with the tech giant, five major publishing houses are also listed under formal scrutiny, and they are France’s Hachette Livre, a unit of Lagardere SCA, Gemany’s Macmillan, owned by Verlagsgruppe Georg von Holtzbrinck, U.K.’s Penguin, part of Pearson Group, as well as U.S.’s Harper Collins under News Corp. and Simon & Schuster under CBS Corp. According to officials based in Brussels, the European Commission is probing into whether the six defendants “have engaged in illegal agreements or practices that would have the object or the effect of restricting competition”.

The EU investigation might have “sparked from a coordinated effort years ago between Apple and [various] publishers to abolish Amazon’s then-typical $9.99 e-book pricing,” noted Fortune’s Philip Elmer-DeWitt. More specifically, Apple launched a new pricing strategy called agency agreement, which allowed publishers to set the price at which online bookshops sell e-books to consumers. Previously, publishers only had the power to decide the wholesale price of e-books, and the retail prices at which readers purchased their e-books were set by each individual retailer. This move by Apple effectively reduced competition between online bookshops, since retailers could no longer compete by setting lower retail prices. Seattle-based Hagens Berman, the firm behind a new class action antitrust lawsuit filed against Apple and the same five publishers in the US in August 2011, further argues that this strategy had forced “e-book rival Amazon to abandon its pro-consumer discount pricing”.

The U.K. Office of Fair Trading, which had already started a similar inquiry earlier in February, has closed its own investigation to allow the European Commission to take over and broaden the scope of the inquiry to the whole of Europe. The British agency commented that it will continue to work closely with the Commission since its original investigation was triggered by several complaints, but it has not disclosed any names. Although there are arguments both for and against Apple following the announcement of an EU-wide probe, the tech giant itself has refused to offer a public response so far.

Jennifer Zhang

FS UPCOMING EVENT

Semester Wrap Up: Financial Jeopardy

Date: Thursday, December 8th, 2011

Time: 12.30pm - 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. This event is worth 2 attendance credits (for membership and e-committee) and winners get a prize!

Event Recap: TD Securities Mythbusting Campus Recruiting

This past week, we were proud to host several professionals from TD Securities - the wholesale banking division of Canadian TD Bank. We had panelists come in from Banking, Sales and Trading, and Credit Divisions to share their personal experiences during the recruitment process, along with many other valuable tips. We kicked off the event with Priya and Zeena presenting our weekly market updates. They discussed some financial headlines, specifically updating us on the equity market and American Airlines’ prospects post-bankruptcy.

After our updates, each of the panelists introduced themselves and their respective job segments. They began with some general recruitment tips, such as knowing the company and the job you’re interviewing for, watching out for common resume mistakes, and asking unique and pertinent questions during your interview. They lightened the mood with some brainteasers, teaching us that interviewers care more about your thinking process than the correct answer.

Lastly, they shared some technical questions for both the banking and sales and trading division. For banking, they broke down the common question of “Walk me through a DCF” into several helpful steps; as for sales and trading, the panelist focused more on how large, global events affect specific markets.

Overall, the event was a great success, offering worthwhile and honest insights into the often daunting recruiting process. We are extremely thankful to those of you that came out to our many professional events this semester, and we hope to see you at our final event, Financial Jeopardy, this upcoming Thursday.

The Finance Society

Event Recap- Goldman Sachs Global Investment Research

On the Monday before Thanksgiving, we were fortunate enough to have with us a panel of professionals from the Global Investment Research division at Goldman Sachs. The panelists represented both Equity and Credit research segments of the division, and offered us some great insight into Research as a prospective career path. Nona and Abhi kicked off the event with a market update, choosing to keep us updated on the Foreign Exchange Market and BP's new growth strategy.

After the update, Abhi moderated a great discussion with the panelists. They each gave us a brief introduction of themselves and explained why they chose to research their specific asset class and industry. In general, those who chose to focus on equity loved the everyday volatility of markets and weighing the influence of news related shocks with their fundamental analysis. Credit, on the other hand, uses a completely different set of formulas to evaluate companies (fixed income models and yield curves), which means that excitement comes from a different perspective than Equity analysis. Overall, the panel provided a ton of useful information on a path that very few consider against more conventional options in finance.

If you're interested in Research, of any type, be sure to follow up with Goldman Sachs about summer opportunities. Great event leading up to a most bountiful Thanksgiving.

The Chinese Plateau

It seems that China’s currency has hit a brick wall. President Obama has long pressured Chinese President Hu Jintao to curb inflation as the yuan has rapidly appreciated (gaining 3.5% this year alone, the second largest appreciation out of 25 emerging market currencies). Now however, it seems out of all emerging markets China has become a laggard. China’s currency is expected to perform the worst out of the BRIC countries during the current and following quarters.

Only a few weeks ago the reverse expectations were true. The yuan had indeed fallen, but with the Premier’s intervention to curb lending rates and plans to decrease reserve ratios, spending was predicted to increase. Bond yield spreads between short-term notes and 10-year securities were also at their highest since May, indicating an expected economic recovery to standard GDP levels (9-11%). Inflation has been the primary concern for the past few quarters. However, with the upcoming Chinese New Year in January it seems China is now appropriately worried about meeting consumer demands for loanable funds.

China now faces low demand for its renminbi-denominated bonds, extending the trend to a continuous six months. Investors clearly lack the strong backing of Chinese Dim-Sum bonds, and with good reason. If forecasters are correct and China’s exports are indeed significantly less than previous months, there is a possibility for currency depreciation. Trade surplus has already been decreasing, only $17 billion last month against 2010 October’s $27.2 billion.

The additional factor of $1.9 trillion dollars in Chinese debt accounting for 19% of GDP also has many investors worried. While it is far from U.S. debt holding 62% of GDP, China certainly seems to be on a well-worn path both the Americas and Europe are facing.

The numerous cases of beta convergence have certainly proved one fact, time-tested and proven in the U.S. itself: growth is only sustainable for so long. China’s “golden age” is subject to a plateau first-world countries now face, and with a global economic crisis it may arrive sooner than previously thought.

~Zeena Advani