Yahoo's Yin and Yang

Yahoo's Yin and YANG

Blog Date: 11/21/11

Author: Eric Haslbauer, Accounting Major

Jerry Yang, Yahoo!'s co-founder and board director, is raising red flags. Some of Yahoo!'s top shareholders and other activist shareholders, such as Third Point LLC and P. Schoenfeld Asset Management LP, are concerned with Yang and his recent role in the possible sale of Yahoo!. Yang has discussed creating a new ownership group using his 3.6% stake in the company. The Wall Street Journal reported that Mr. Yang and other Yahoo! bankers have discussed the possibility of creating an ownership group which would collectively own about 10% of Yahoo!'s shares. With a buyer who would take another 20% stake, the company could essentially buy back its stocks, increasing the size of that stake. This basic explanation of Yang's possible plan is called "leveraged recapitalization."

These concerns of the shareholders are just the most recent indecent regarding Yahoo!'s corporate situation since the firing of CEO Carl Bartz in September. Since then, the company is still considering whether to sell all or parts of itself. According to the Wall Street Journal, Yahoo! is also currently searching for a new CEO as well as discussing possible solutions to their existing tribulations. However, it ultimately comes down to one question......What is Yahoo!'s next move?

In my opinion, Yahoo! has two options: 1) Sell or 2) carry out Yang's leveraged recapitalization idea. Yang is currently meeting with several private equity firms discussing which option is in Yahoo!'s best interest, according to people familiar with the matter. Nevertheless, Yahoo!'s fate still remains unclear. It has a huge decision on its hands, and all we can do as spectators is wait in anticipation. Hopefully, we will see some closure in the near future.

The American Dream: Maybe it's all in our Heads

The American Dream: Maybe it's all in our Heads

Blog Date: 11/18/11

Author: Joseph Antony, Accounting/Management Major

Edited by: Louis Lamonte, Accounting/Management Major

For many years, America has been the "place to be" if your dream is to prosper. Many people from many different countries throughout history have come to America seeking freedom, success, and just a better life in general. What many people don't realize is that an integral part of this "American Dream" is the strength of the middle class. The middle class, in many ways, is the reflection of all the values and ideals for which America stands. The typical middle class American has been the envy of the world-- he enjoys (for the most part) freedom, success and prosperity, especially in comparison to the citizens of many other countries. It is arguable that the middle class is what has made America so great; however, many statistics today show that the middle class in America is slowly being squeezed into two broad categories of citizens: the Haves and Have-Nots-- the wealthy, and everyone else.

Take a look at the market for consumer and retail goods. A key player in the retail of goods and services for the middle class has always been Wal-mart. When taking a look Wal-mart's performance in the past few years, we see that they haven't being doing so well. Instead, the companies that have seen the most growth are companies in the luxury end of the market, and companies that are-- for lack of a term-- on the opposite end of that spectrum. Family Dollar stores, which provide relatively cheap goods and products, have seen steady growth in the past few years, while companies such as Ralph Lauren and Tiffany & Co. have also seen significant growth. This demonstrates that during this recessionary time, the wealthy have been spending just as much as before, if not more, while the middle class has not. This growth in the high and low ends of the spectrum of consumer goods can be seen as one example of how the middle class is actually starting to disappear in America. In addition, a report by the Census Bureau states that the percentage of families under the poverty line is now at levels not seen since 1992. On top of that, average household income has fallen to levels not seen since about 1999. Again, this demonstrates the widening economic gap America is facing today.

However, this trend has not gone unnoticed. Clear proof of this is the Occupy Wall Street Movement. This is an indisputable signal that many Americans feel they are not being treated fairly. It is possible to see OWS, at its fundamental level, as an outcry against growing class disparity. I believe, as I am sure many of you do, that this trend is not positive at all. The things that have always made America great are disappearing. If this continues as it has been, we could (in an extreme scenario) see America being transformed into a country where the majority of the population is in poverty while only few are at the top. The standard of living we currently enjoy may severely drop. Though I do not think we will ever reach such a point, I believe it is important for everyone, including policy-makers, academics, and even the typical citizen to reassess the broad implications that this widening economic gap could possibly have on our great country's future.

Yahoo! Yard Sale

Yahoo! Yard Sale?

Blog Date: 11/11/11

Author: Eric Haslbauer, Accounting Major

Edited by: Louis Lamonte, Accounting/Management Major

Yahoo! is up for sale!!!! Several articles in both the Wall Street Journal as well as online have indicated that Yahoo! is selling itself. But the question on everyone's lips is.... to whom?

According to the Wall Street Journal, Google has met with private equity firms about potentially helping them finance a deal to buy Yahoo!. Of course, many say this deal would get a good look over by the Fed, and that the Government will never allow such a deal to go through. This belief stems from the hunch that the Fed would be hesitant to allow this acquisition due to fears of Google monopolizing the industry. Microsoft as well as the China Internet giant Alibaba has also reportedly been in talks with private equity firms to purchase Yahoo!.

In regards to Alibaba's possible purchasing of Yahoo!, Jack Ma, the CEO of the company, was quoted saying, "We are very interested in Yahoo. Our Alibaba group is important to Yahoo and Yahoo is important to us ... All the serious buyers interested in Yahoo have talked to us." According to Techrunch.com, Those buyers include: Alibaba Group investor Silver Lake Partners, Microsoft, Hellman & Friedman and Andreesen Horowitz.

Why Alibaba, you may ask? An article in the New York Times explains that Mr. Ma's history with Yahoo! goes back several years, when Yahoo! acquired a 40 percent stake in Alibaba. The relationship between the two companies, however, have some "bad blood", and Mr. Ma has said repeatedly that he wants to buy back Yahoo's 40 percent stake in his company. By buying Yahoo!, he would get that stake back.

Chris Lau summarizes the whole situation very clearly in an article he wrote on October 26th which can be found on Seekingalpha.com. Lau states, "Yahoo's business feels dated, and this showed up in its most recent results. With the exception of Yahoo Finance and original video content offered by Yahoo!, there is little reason to be excited about the company. Investors would disagree: Yahoo! is up 50.68%, closing most recently at $16.71 on speculation that Google Inc. is in the running for buying Yahoo!." Lau further explains that Google's only problem is that regulators will most likely not allow the internet giant to purchase Yahoo!, for Google has a 68% share of the market. With the acquisition of Yahoo!, Google's share would increase to about 88%, says Lau. This induces fears of monopolization, lowering Google's chances to acquire Yahoo!. Lastly, Lau closes his argument defending his opinion. He says, "Yahoo! shares already rallied to $16.71 [due to Google's perspective purchase of Yahoo! which was mentioned earlier in this article], which is within its 2011 trading range price of between $16 and $18. Buying Yahoo! now is purely speculative, and any takeover discussion may easily fall apart. The European crisis will further remind investors that "risk-off" will reduce the trading premium already priced in Yahoo's shares."

In summation, I have to agree with Lau, for he proposed the most logical argument I've read so far. However, only time can tell what is in store for Yahoo!. We will have to wait and see how this company's fate will unveil itself.

Christmas in November

Christmas in November?

Blog Date: 11/11/11

Author: Eric Haslbauer, Accounting Major

Edited by: Louis Lamonte, Accounting/Management Major

So you are driving down Hempstead Tpke. And you pass a row of stores on your right. There is a shimmer of light and your eyes naturally glance toward the light. Christmas wreaths, tinsel, and holiday lights are bedecking the faces of the buildings, creating that "magical" and "butterfly" feeling in your stomach. You smile, and continue driving. Then a thought sparks. You ask yourself, "What is today's date?" and notice that it is November 1st. That "butterfly" feeling disipates as it is replaced with a twinge of sadness. "Christmas is over two months away," you disappointedly say to yourself, for the decorations implied it was much closer. Now this little story brings us to one question...................................................

"When is too early to put up Christmas decorations?" This is a question that has been debated a countless number of times. Many retailors, for example, decorate their stores once Halloween is over! On the other hand, some people wait until after Thanksgiving to decorate for Christmas. Personally, I believe that Christmas decorations should not be put up until after Thanksgiving. Simply put, it's unfair to do it earlier! Why is it that Christmas totally overshadows Thanksgiving and in a sense, takes it over? I understand Christmas is arguably the most popular holiday (it is in fact my favorite holiday), but it should not overshadow Thanksgiving. Thansgiving deserves to be fully celebrated. Secondly, it deceives people. Decorating for Christmas early creates that disappointing feeling as described above. So then, why do several stores decorate almost a month in advance? After doing some research, I've discovered that stores do this in order to promote sales, i.e. Christmas shopping. Many people do most of their Christmas shopping in November anyway, but this "pre-decorating" elongates the Christmas shopping spirit. It increases sales for many companies, therefore, beneficial to the business. Essentially, it comes down to preference. So which do you prefer? What do you do? Decorate before or after Christmas? Why?

Market Misconceptions

Market Misconceptions

Blog Date: 11/09/11

Author: Eric Haslbauer, Accounting Major

Despite all of the negativity presented in the media, there seems to be little attention focused at the positive. For instance, many don't even know that the Dow Industrial Average finished the month of October with its biggest advance since 1987!!!! The Dow finished at about a 14% increase for the month!

The Wall Street Journal contained two rather interesting articles which discussed this topic. The first, entitled "Brighter Mood Buoys Dow Rally", was published on October 22, 2011, and it discussed how the Dow finished that week in positive territory, its longest such run since January. The article discussed that hope was the main reason for the Dow's success. It explained that US companies that have impressed analysts by surpassing profit expectations as well as the meetings of the EU involving the Greece crisis have contributed to this growing hope in the market. Rebecca Patterson, the chief markets strategist for JP Morgan, summed it all up saying, "There are a few factors at work here, and they're all hope-based." At the start of October, stocks were falling to there lowest in over a year (close to a bear market which is defined as a 20% decline from a recent high). The S&P 500 finished the week of 17th up 9.4%. The article centered upon the aspect of attitude and how it is a key to success. Without the thought of success or even the belief of the possibility of success, you have already counted yourself out before the "race" even started. Being an avid runner, I can really relate to this statement. While anxiously standing on the line for the gun to go off, you must genuinely believe you are going to run well. If I don't believe in my abilities and have a poor attitude about the race, I can count myself out before the race even starts because of my mental perception. Success is partially a mental game requiring physical performance as well as psychological aptitude. The article concluded with another quote by Rebecca Patterson which clearly illustrates the situation, "I wouldn't claim victory yet. I would love for hope to stay around for a while and there's a good chance that it could, but until I see the details from Europe, I'm convinced that the trend has not changed."

The second article in the Wall Street Journal was entitled "Stocks Cap a Big Week with Gains." It was published on October 29, 2011 and also discussed the surprising gains in the Dow. It explained how the week's gains came just after the 300 point surge which investors claimed was due to the European plan to combat Greece's debt issues, expand a bailout facility, and recapitalize the region's biggest banks. Investors are also shifting their attention from Europe to the U.S. and how 300 plus companies on the S&P 500 have reported earnings well above analysts' expectations. Likewise, the focus has migrated toward Congress's so-called super committee on deficit reductions which is supposedly going to decide on budget cuts by Thanksgiving weekend. All of these facts have contributed to the Dow's success as the article explained. Similarly, the S&P 500 is on pace to reach its first month without a back-to-back decline since October 2006.

Overall, these two articles exhibit how the Dow is still experiencing success despite the negativity in the media. However, despite all of these positive gains in October, questions still remain regarding how Europe will implement its plans and whether these plans will be enough to resolve the debt crisis. As spectators, all we can do is wait and see how the current situation unfolds.

Is Facebook REALLY Worth it?

Is Facebook Really Worth It?

Blog Date: 11/08/11

Author: Edwin Ayala, Management Major

Edited by: Louis Lamonte,  Accounting/Management Major

Even with the constant hype and push of the date of Facebook's IPO, people haven't been nudged toward purchasing the largest social media company's stock. But is it really worth it, anyway? Is Facebook such a national-- or furthermore-- worldwide phenomenon that people should put thousands upon thousands of dollars into it? Many would say "yes;" but how long will the success last? With all the format changes that Facebook has made (and plans on bringing to the website in the near future), I don't think users will have enough patience to deal with the site. They barely have enough patience to handle the new "stalker bar" on the layout (a vertical list of people online who you can "chat" with), let alone all the other changes that are planned for the future. It's not to say that the company won't make any money, but for how long will they make it? How long will Facebook last? It might crash, and if it does, much of the money put into the site will obviously be lost. Take a look at the out-of-date social networking sites, like MySpace. A website somewhat similar to Facebook in layout and purpose, MySpace fell off the grid with the creation and growth of Facebook, only within 10 years of it creation. Now, other networking sites like Google+, Twitter and Tumblr are looming and taking aim at Facebook. And who's to say that one of these sites won't follow Facebook's footsteps and wipe the social media monster off the map before-- or even during-- the time that Facebook goes public? This possibility certainly lessens the chances of actually making money off the networking phenomenon. So let me ask you this: Is Facebook really worth it?

Is GREED good?

"Is GREED good?"The notorious question presented to us by the fictional yet infamous Gordon Gekko. Although we know Gordon Gekko as the villainous, self-indulging narcissist, his theory of “Greed is good” is in fact true, sort of. In arguably Gekko’s most memorable quote he states; “Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”

The true essence of this quote, although boisterous and highly controversial, is feasible. Greed when contained and used competently can be a practical commodity. It is greed that fueled the Westward Expansion and the California Gold rush. From the years 1848-1855 300,000 Americans saw ample opportunity to “strike gold” (literally) and upend their lives and move west. If those “forty-niners” didn’t possess greed for gold, the state of California would certainly not be the state it is today. Means of transportation such as steamships and trans-continental railroads expanded and as a result towns literally developed over night. In 1846, San Francisco had a population of 200, by 852 the population inflated to 36,000.

The ideology of Free Market Capitalism is an exemplary illustration of greed being good. We are our own competition, we dictate how far we want to go in life and how much we want to make. (Ideally) Our nation prides itself in our Capitalistic values and the idea that our potential for success is limitless. We are encouraged to start our own businesses, to work hard and make excess amounts of money if we so desire. It is greed that inspires us to work hard and gives us the utmost sense of jubilation when we see 7 digit numbers in our bank accounts. Greed when in it’s pure from is one of the main reasons for not only our personal success but for the success of the United States.

This idea of greed being good is highly controversial, as there are a surfeit amount of examples I can use to show greed’s catastrophic power. However, if greed can be harnessed into its pure form and used proactively, well I can’t help but agree with Mr. Gordon Gekko’s infamous quote “Greed, for lack of a better word, is good.”

Daniel Soares