Tuesday, September 12, 2006

Bringing the news to class

Several news stories today that could easily be incorporated into various finance classes:

* Nobel Prize winner Joseph Stiglitz has been in the news quite a bit over the past week. He is advocating more intevention (at least in the form of safety nets) when it comes to globalization. A look-in:
"Some countries have benefited from globalisation like China and India where the economy is booming. Other places like Africa have faired badly and measures may need to be put in place that are painful now, but might be best in the long run. Change is difficult, change has to be managed carefully, so even if the long run a change might be beneficial, we have to worry about, in the short there could be losers, and we have to figure out ways that we minimise the numbers of losers, ways we support the losers, by providing for example safety nets.""
* Another international finance story centers on transfer pricing. Transfer pricing is the price that firms charge themselves for internally transfering product within the firm. This gets particularly sticky when intellectual property is what is being transfered. While firms are "supposed to" charge a fair "arms length price", the temptation is always there to use transfer pricing to recognize gains in nations with a lower tax rate. Not surprisingly, the IRS is not a big fan of this (It is reported that nearly $10 Billion of pending court cases are based on transfer pricing). Yesterday the IRS and GlaxoSmithKline settled their transfer pricing case for $3.4 billion.

* HP is back in the news. Following their recent troubles Patricia Dunn the chair of the Board of Directors has stepped down. Interestingly, Mark Hurd the new chair is also the CEO. Which flies in the face of current conventional wisdom.

* Board shake-ups were also the main news at Bristol Myers Squib where at the urging of a court appointed "federal monitor" the board of directors replaced the Chair and the chief legal counsel. A look-in:
"The company confirmed reports that Judge Frederick B. Lacey, appointed the federal monitor under the company's deferred prosecution agreement in an accounting scandal, recommended the firings, and that Christopher J. Christie, U.S. Attorney for New Jersey, concurred....Lacey was appointed monitor of the company in June 2005 after Bristol-Myers settled federal charges for an accounting scandal that ended up costing the company $800 million. Under the agreement, charges would be dropped against the company if it met certain standards until 2007. The apparent last straw was Dolan's and Willard's conduct stemming from a failed agreement with Canadian drug maker Apotex to keep generic Plavix off the market."
* Need an institutions story? Rest assured that is in the news today too! There is a growing concern that financial institutions are overstating their trading to seem more important. (what, puffery, say it's not true!!!). From the NY Times Deal Book:
"On any given day, the difference between what Wall Street’s biggest firms say they trade and what the exchanges report is more than 30 million shares. Now, the widening disparity of data has prompted NASD to begin a preliminary investigation into whether brokerages routinely inflate their trading on behalf of customers.

“We’re concerned that firms might be providing misleading information into the marketplace that makes them appear as a bigger player than they are,” said Tom Gira, NASD’s executive vice president for market regulation.

and now it is time for me to get to class!

1 comment:

airborneintell said...

Good post. Love your site. Keep up the good work.
Andrey at stockforlife.blogspot.com