lisasong.com

Just come across the concept of TED Spread: the spread b/w noncollateralized short term (3-month) loan and the rate of 3m T-Bill.

Related concepts: Eurodollar (see class notes from Fin576/Debra Glassman), LIBOR (see site FAQ), interbank loan wholesale market, LIBOR-OSI spread (collateralized loan rate)

Significance:

• Measurement of credit risk, particularly banking and financial system.
• Recent spike (see chart above).
• May be used against GDP per capita change and/or market charts to validate low correlation (see also delta in SP500).
• Further proof of no direct connection of financial market health with boarder economy: counter argument of Greenspan Put’s rationale

Other resources: Paul Krugman’s articles, Matt Ferris’s blog entry (Amazing kid. Where was I when I got out of college? Totally put me to shame, sigh …)

A friend of mine recommended an good article about sourcing issues (c) in China today. In summary:
1. Both buyers (clients) and the suppliers (manufacturers) share the blame for some of the quality issues.
2. A main driver behind the quality problems is the pressure on lowering prices.
3. Chinese are improving their QA at their own pace.
4. Competitive pressure, trade policy shift and now quality concerns may undermine China’s price advantage

It appears that the article was penned by a Chinese. It is well-written but just the POV is naturally defensive and sympathetic. I am surprised Wharton editors would let it out in verbatim.

http://english.peopledaily.com.cn/90001/90778/6282823.html
Household savings in the country grew by 762.1 billion yuan (101.6 billion U.S. dollars) in the first nine months, compared with an increase of 1.73 trillion yuan in the same period a year ago, according to latest statistics from the central bank.

A survey by the central bank showed a record high of 35.6 percent of the 20,000 respondents in the third quarter rated investment funds and stocks as their most important assets, while 50.4 percent thought so about bank deposits, down from 70.4 percent at the beginning of last year.

http://www.imf.org/external/np/speeches/2004/051904.htm
Second, banks need to be run on a fully commercial basis.
ceilings on lending rates need to be removed. This would enhance the ability of banks to intermediate funds;
maintaining China’s steady and gradual approach to capital account liberalization is appropriate.

About PetroChina IPO
http://www.livemint.com/2007/11/05104938/PetroChina-becomes-world8217.html
http://www.businessweek.com/globalbiz/content/nov2007/gb2007115_272997.htm

http://money.163.com/special/0025274H/2007zhengce.html
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http://www.reuters.com/article/governmentFilingsNews/idUSSHA10876520070927
“Securities, stock exchanges — are these things good or not? Are they dangerous? Are they something owned only by capitalism? Can socialism have these things?” he asked in 1992.

“A wait-and-see attitude is allowed, but we must resolutely experiment. If it is okay after a trial, let’s open it. Otherwise, we can close it — fully or partially, depending on circumstances,” Deng said at an internal meeting of officials.

May 2006 - Regulators say the state share reform is proving successful and they will now encourage large, high-quality companies to list domestically. Share prices surge.

May 2007 - The Finance Ministry triples the stock stamp duty to cool the market, which plunges as much as 21 percent by June 5.

September 2007 - The market fully recovers from the May stamp duty shock and hits repeated record highs amid signs that the government has not changed its policy for a steady, long-term rise in the stock market.

http://bbs.soufun.com/1010185823~-1~8389/52139735_52139735.htm
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http://www.scol.com.cn/focus/zlk/20050303/200533134528.htm
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http://www.samlong.cn/article/10/1615/2007/20070306163080.html
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http://www.bilinchina.com/china-blog-secret-foreign-capital-do-china-stock-market-maker.html
“Though the government’s monitor is strict,we have all kinds of ways to let foreign funds to enter into China stock market.”
At the end of 2005, with the oversea capital speeding up to enter into China stock market
Previously,oversea capital borrowed Hongkong as path to enter China,but now the rate of taking Taiwan as path is increasing. theoretically, Zhang is introducing Taiwan’s capital into mainland China. A great number of Taiwanese-owned enterprises in Jiangsu become Zhang’s floodwater storing pool for oversea capital entering China.
Oversea funds also register company abroad,and then setup WFOE (Wholly Foreign Owned Enterprise).Thus it’s convenient for capital entering China.
More than one billion us dollars distributed in more than 3000 companies and individual shareholder accounts. It’s a big project only to assign accounts for this several billion us dollars. There are too many stock brokerage firms which are close to “death”. To alive,they would like to provide any services for their customers.

http://www.iht.com/articles/2007/08/20/business/yuan.php
The Chinese government announced Monday that it would allow mainland Chinese citizens to invest in the Hong Kong stock market,

By making it easier for Chinese investment to leave the mainland, the government hopes to offset some of the money pouring into the mainland through corporate investments and China’s soaring trade surplus.

The agency released the text of a new regulatory proposal that it described as having been approved. The proposal allows Chinese citizens to open accounts at the Tianjin branch of the Bank of China, and then sell yuan and buy Hong Kong dollars without limit for the purpose of buying shares in Hong Kong.

Chinese citizens will also be allowed to use their foreign currency savings to buy shares in Hong Kong, using the Tianjin branch.

http://www.ce.cn/cysc/tech/07ityj/guonei/200711/16/t20071116_13612887.shtml
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http://www.p5w.net/newfortune/qianyan/200612/t667518.htm
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8%?

http://www.amoney.com.cn/cms.php?prog=show&tid=127832
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http://www1.cei.gov.cn/ce/doc/cen2/200601231486.htm
B-shares, were initially set up as a separate market to attract foreign investors without letting foreigners have too much influence over trading.
More importantly, foreign institutions have been allowed to invest in A shares through the qualified foreign institutional investor (QFII) program, making B shares even less relevant.
The B-share daily turnover in Shanghai is usually below the paltry sum of US$10 million and less than HK$100 million (US$12.8 million) in Shenzhen.
The total market capitalization of Shanghai B shares equals US$12.25 billion, compared with US$336 billion for Shanghai’s A shares.
QFII is a transitional program begun in 2004 and aimed at pulling institutional investors into the market under a quota system prior to a full opening.

http://ng2.mofcom.gov.cn/aarticle/chinanews/200701/20070104288180.html
The SAFE will likely replenish the total quota this year, industry observers said on Thursday.
China ushered in a QFII system in 2003. With the approval of the State Council, China’s cabinet, the total investment quota for QFII operations increased from four billion to ten billion U.S. dollars in September 2005.

Chinese ADR companies:
http://www.site-by-site.com/adr/asia/adr_chn.htm

Got this slide from Jennifer’s class.

He also likes the cruise lines: “If you survey people about vacations, almost everybody says they had a good time on cruises.” Cruises are relatively inexpensive, appeal across generations, and the companies pay almost nothing in taxes because they’re registered in tax havens. And like hotels, this is an industry with high barriers to entry. His favorites are Carnival Corp. (CCL) and Royal Caribbean Cruises Ltd. (RCL).

Steven T. Goldberg is an investment adviser and freelance writer.
http://www.kiplinger.com//columns/value/archive/2007/va0213.htm

LaFleur said factors contributing to the Caribbean weakness, according to management, include an unseasonably warm start to the winter, macroeconomic pressure, overcapacity, and higher prices and diminished capacity in the airline sector.
LaFleur, who has a “Neutral” rating on the stock, also noted risk related to Royal Caribbean’s purchase of tour operator Pullmantur for about $552.8 million, plus about $347.1 million in debt.

Carnival also has a cruise ship operating in the Chinese market, but it stated that results are running below its expectations, and moved the ship to serve the Hong Kong market. It believes it has the product offering right, but it’s working to build up a distribution network and better penetrate the marketplace. In other words, it is still learning, but it plans on sticking around and making further inroads into China as a future growth avenue.
http://biz.yahoo.com/ap/070129/travel_trend_cruises.html?.v=1
“Given reporting lags and more severe seasonality, Pullmantur will drag down Royal Caribbean’s earnings in the first half of the year and boost them in the second half.”
Royal Caribbean gave up $1.39, or 3 percent, to $42.12, and rival Carnival declined $1.77, or 3 percent, to $49.01, both on the New York Stock Exchange.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070208:MTFH33819_2007-02-08_15-05-31_N08491201&type=comktNews&rpc=44

Carnival and Royal Caribbean, the world’s two biggest cruise companies, are looking to grow in Europe with the Caribbean market suffering from weaker pricing after recent hurricane damage and expanded port capacity in the region.
Carnival, the No. 1 cruise operator, signed a letter of intent to form a joint venture with a unit of Spanish travel firm Orizonia Corporacion. The venture will operate and expand Orizonia’s Iberojet Cruceros cruise brand in Spain.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070208:MTFH33819_2007-02-08_15-05-31_N08491201&type=comktNews&rpc=44

Carnival Cruise Lines Names New 130,000-Ton Superliners ‘Carnival Dream’ and ‘Carnival Magic’
http://biz.yahoo.com/prnews/070209/clf064.html?.v=16

Long known as a leader in romance, Princess Cruises is stepping up its commitment to love. In celebration of the 30th anniversary of the hit TV series The Love Boat, famously set aboard a Princess ship, the company is debuting a new Department of Romance made up of a “dream team” of romance experts, and is launching a number of new “romantic pursuits” on its ships and on its web site.
http://biz.yahoo.com/prnews/070208/lath062.html?.v=74

Royal has been able to grow sales, earnings, and cash flow close to 10% on average over the past five years. I would characterize this growth as unspectacular but respectable, and operating cash flow exceeds reported net income by a wide margin, primarily because the cruise business is very capital-intensive and has high levels of depreciation and amortization.I do see some drawbacks for Royal, including a high amount of debt — something that Carnival hasn’t escaped, either, though that company posts much higher net margins. Both are also subject to high fuel costs, which they saw in 2006. In addition, the hurricanes prevalent in the core Caribbean markets can wreak havoc on bookings and cruise outings.
http://www.fool.com/investing/general/2007/02/06/royal-caribbean-submerged.aspx?source=eptyholnk303100&logvisit=y&npu=y

Carnival Freedom’s European Cruises: The Ultimate Family Vacation
http://biz.yahoo.com/prnews/070201/clth099.html?.v=20

If the explosion in family cruising hasn’t destroyed the stereotype of cruises as a vacation choice for older travelers, perhaps this will: Sixty-eight percent of Gen-Xers, those born roughly between 1965 and 1978, say they intend to take a cruise. That compares with 65 percent of baby boomers and 59 percent of seniors. The data comes from market research conducted online for CLIA last year among 2,000 people.
http://biz.yahoo.com/ap/070129/travel_trend_cruises.html?.v=1

Why Carnival is innovative:
https://www.bookccl.com/misc/todaysccl.asp
in-cabin amenities baskets, Carnival Comfort Bed sleep system, Try our new Georges Blanc Signature Selections , conference centers , fleetwide Internet cafes (including wireless Internet service) where guests can access e-mail and Web sites, Spa Carnival, the industry’s top-rated children’s program.

Carnival connections
http://www.carnivalconnections.com/?wt.mc_id=Hwhatsnewconnections

CRUISE INNOVATIONS
http://www.lowellsun.com/portlet/article/html/fragments/print_article.jsp?articleId=5156640&siteId=105

This quarter is perhaps one for the ages. I didn’t expect MBA program would be any more intellectually challenging than poli-sci, but I start to realize how wrong I was.

Although this quarter has been difficult for other reasons, I am amazed at how much I was able to drag myself out of emotional doldrums by holding on to my study in MBA.

For example, this is perhaps the fourth time I took Macroecon so I didn’t expect too much new stuff coming out of the class. But Karma is a great professor, very knowledgeable not only in theory but also in practice. I thought the Fed operation was an absolute eye openner for me. Now entering the FOREX operations, I realized how mechanical my prior econ knowledge has been. For the first time, capital becomes so alive to me. Interacting with Karma is a really stimulating exercise.

Marketing and strategy are not as glamorous as I hoped for, but my hope was very high. I was so happy that Porter was discussed in detail. With Levitt’s Myopia article before him and the Blue Ocean after, strategy becomes more of a discipline than a practice.

Finance … oh, I adore Jennifer–as much as I did Jane Kennedy. Although I didn’t do too well in the midterm (damn the arbitrage thing), I could have had a much worse life in B school without people like Jane and Jennifer.

I first heard of Porter when I read Huntington’s Culture Matters.

In the strategy class, we are assigned to his reading. The one I just read, “What Is Strategy?” is a great essay. Basically, Porter made the argument that Strategy is:
1. Being different;
2. Making trade-offs;
3. Building fit activities (to reinforce competitive edge/unique values);

It is hard to find fault with this kind of logic of course. My prof. said there are two things missing in Porter’s framework: the 5 force is a snapshot analysis that devoid of market trend or demand shifts (e.g. being totally exogenous).

What I see the biggest weakness in his theory is the lack of consideration of risks. His analysis only makes sense, his definition of strategy being true, if there is no significant risks involved in any of the three objectives.

However, in real life, this is far from the truth. Only startup companies can afford to take chances. Large companies, with a few exceptions, have to consider the risk involved.

Another thing he is missing in his work is a constrain line that is tangent to the position frontier. The constrain line is a combination of limitation of resources, aversion to risks (due to capital structure for example) and other organizational factors–which maps roughly to the “activity system” of his.

Then again, Porter has an IQ of 180… we are definitely on different intelligence frontiers.

It is fitting to say “Miracles Do Happen” in the middle of the holiday season: our fellow 08er, Sean O’Henry finally regained consciousness from a weekend-long coma resulted from a freak incident outside the Boeing Auditorium (he was accidentally knocked unconscious by fellow autograph-seekers going after Peter Neupert).

What is more amazing, O’Henry claimed that he was dead for “a little while” because he first saw the “light at the end of the tunnel” then St. Peter himself. However, O’Henry’s tale turns bizarre from here on: he claims that the book in front of St. Peter actually looks a lot like the final exam of Organizational Behavior: “There is this list of things and sub-things that you have to do in your life. If you miss a point here and a point there, the next thing you know, you are sent to purgatory” as “what happened to a couple of guys ahead of me”.

O’Henry said he got a chance to peek into St. Peter’s book but did not remember what he saw. “All I remember afterwards was waking up seeing you guys.”

4. For those of you who ever wonder how Judith Kalitzki, PhD can keep a permanent smile on her face, the secret has been revealed! MBalmer has learned that Judi was the only trainee in the history of Constellation, the prestigious team building program, who completed rollercoasting, bungee jumping and sky diving in one day.

5. Tragic news hit campus yesterday. New Jersey police found the body of Yanni Samari, a first year MBA student from UW, in Hudson River a week ago. All indications point to a cold-blooded murder: Mr. Samari’s was bound and gagged and his legs were tied to a cement block.

The school has confirmed that Mr. Samari was in an internship program with a construction company, the Franco Brothers, in Piscataway, NJ. Although details are still sketchy at the moment, MBalmer has learned a bizarre twist in Mr. Samari’s death.

A source close to the investigation has told MBalmer that Mr. Samari was gagged with his own notebook full of strange but innocuous polling questions in the pattern of “Let me ask how many of you …” “These questions are typical beginning acts from sales people,” the source confided to MBalmer, “but why would anyone want to choke him with that stuff [the notebook and the questions] is really beyond me.”

6. Judith Kalitzki’s video-taping assistant was release of her duty today after a short video she was supposed to have destroyed found its way to YouTube. The video captured a dramatic moment during Prof. Christina Fong’s Creative Conflict Resolution class, when the presenting group, team 19 of the A/D section, was so carried away by role playing, they suddenly started slapping each other’s face spontaneously.

7. Earlier, when B/D Team 19 adopted the name “the marginal prophets”, the Iranians condemned the act as offensive and blasphemous: “There is only one Prophet, Mohammad, peace be upon him. And he is never marginal!” Today, MBalmer learned that a deal has been reached between the two sides. In exchange for the withdrawal of a fatwa on their lives, Dan, Jeff, Abi and Mohyun promised the Iranians that they will end each presentation with a cry of “Allahu Akba!” (God is great)

8. Top ten most boring internship jobs:
10. Elevator voice command trainer at Otis: tuning voice recognition software for every elevator Otis ships.
9. Transportation coordinator at Microsoft: chaffeuring homeless people in downtown to campus everyday to collect empty Coke bottles.
8. Regional quality assurance assistant at MacDonald’s: taste Big Macs from every franchisees in the region.

1. Students are alarmed when some saw lab rats dashing around on Balmer third floor. Pest control was later recalled, however, after Prof. Christina Fong recognized them as visiting perspective students in her class.

2. A crisis has been brewing among the 08ers: because the participation grade is proportional to number of questions asked and/or comments made during the class, students are rushing to fill in their quotas as the quarter draws near to an end.

Yesterday, MBA office was alerted that some students have resorted to flashing to get instructors’ attentions. The fad started innocently when Lisa Meyr yanked her parka off while asking a question. Soon the situation degenerated into some students going “full monty”. However, the effectiveness of such extreme measures remains to be seen. In Jane Kennedy’s Financial Reporting (in the published version it is Nolan and Kurma’s) class, for example, exposing students complained bitterly how the professor kept ignoring them until it was “too damn cold for me to go on like this.”

3. According to a press release from IT and Innovation Museum at Harvard Business School (ITIM@HBS), Professor Richard Nolan has just donated his recently retired laptop to the museum. This latest donation is the 37th IT artifacts from Professor Nolan. In an interview with the Crimson, Prof. Nolan reflected on his decision, “I used to hull every piece of IT artifacts I had since the 1970s to the class. One day I thought to myself, this is not right. This is not scalable. Why don’t I give them to a museum so EVERY student has a chance to see them? Then I said to myself, where is a better place than ITIM@HBS?” Also from the press release, the laptop involved is a three-year old Gateway with an Intel 1.4Ghz CPU, 512M of ram and 40G hard disk.