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