I was perusing through the website for one of my favorite periodicals, The Economist, and came across a most curious article. Now, this was not your ordinary article, it was one that defined an index that the world renowned magazine used to gage inflation and monitor the economy.
Just to provide some background before I go any further let’s define two key terms as such:
Inflation—the rise in price of goods and services
Consumer Price Index—the measure of the average price of a basket of goods and services as compared to a base year (i.e. the price of groceries in 1992 versus how much it would cost today)
By having defined inflation and the CPI, let us also recognize the fact that the CPI is used to gage inflation.
The way The Economist measured the change in inflation and the CPI was by creating an index or basket of good and services of one simple good and tracked its change in price over a specific period of time. In this case, this good was the Big Mac. That’s right, our friends over in Britain, at The Economist, thought that the change in price of the famed McDonald’s hamburger was a good enough indicator of the change in our world economy by using it a measure of the change in the purchasing power parity between two currencies. In addition, the appropriately named this index “The Big Mac Index” and it has been in inception since September of 1986.
It has been reported that a woman in Tauton, Massachusetts took her life this past Tuesday because she was unable to cope with having her home foreclosed. The woman was 53 years old, happily married and was a mother.Her home was schedule to be auctioned last Tuesday as she had not paid the mortgage on her and her husband’s three bedroom home. The company that issued the mortgage, PHH Mortgage, reported that she had not made payments for the past 42 months.
The auction was scheduled for 5:00 PM that day. However, instead of finding an empty home the mortgage company found the woman’s body and immediately notified the police that she had shot herself to death with her husband’s rifle. When her husband and family were interviewed, they indicated that they had no idea that the home was going to be auctioned as the woman had hid all notices of foreclosure from her family.
Before the suicide, she faxed a letter to the mortgage company notifying them that she would be dead by the time they came to foreclose her home later that day. She also left a note for her family that instructed them to use the insurance money to save the house. The home was worth $232,000 and it is uncertain if her husband will be able to file a claim for the insurance policy he had on his wife.
It looks like recent MBA grads aren’t the only ones feeling the bite of the economy—even those that have found employment are feeling the pain.
Several Wall Street firms, including my own, have disbanded their 2007 incoming MBA classes. For those of you unfamiliar with this term, a class is basically a group hiring that investment banks and other firms in the financial services industry from leading undergraduate and business schools. Analyst classes are filled with the brightest students from the top undergraduate institutions and associate classes are filled with the smartest MBAs from the nation’s best business schools.
Could you imagine graduating from a Harvard, MIT, Stanford or Wharton with around $80,000 in debt and having no way to find a job because no one is hiring (except may McDonald’s of course). Well, this is what recent 2008 MBA graduates are currently facing. However, the bite is extremely more severe when you have recently graduated from a top MBA program and are told that you no longer have a job six months down the line. To make it even worse, it’s not only you; but, the other one-hundred or so members of your associate class plus thousands more at other firms all around the city. Let’s not forget to mention that those student loan payments have just started to kick in and you have to pay enormously over-priced rent of $1,800 for your converted two-bedroom apartment that you are sharing with a roommate. Well, this exactly what happened to a young lady that I had the opportunity to meet today.
Today I had lunch with a spring 2007 graduate of one of the top Ivy League MBA programs. She had previously worked for a firm (which will not be disclosed for legal reasons) where she performed credit research. Due to the market conditions of the industry her group covered, head began to roll with massive lay-offs not only within her division; but, within the entire firm. It was brutal as nearly all middle-management was let go and even lifers at the firm with over twenty-five years of service and only two years away from retirement were let go. Eventually, budget cuts came down to recent hires into the associate programs. Instead only axing a few and retaining the best employees, the entire program was discontinued.
So now we have all of these freshly graduated MBA’s who are yet to land their first gigs looking for jobs, then you have a ton of seasoned employees that were recently laid off and now you have this group of MBAs that have had six months of experience, have just gotten settled into their living situation and cannot get a job. This is exactly why I chose NOT to go to business school. Too often have I heard this, and similar stories, about job offers being rescinded and classes being shrunk or discontinued.
This is just proof to show you that an MBA is yet nothing more than a BULLSHIT degree that holds little value. It’s not like holding a medical or law degree, where you learn a specific skill that you can use. To become a doctor you must obtain an M.D., to become a lawyer you obtain a J.D.; however, to become an employee at a firm you do not need an MBA. If you ask me an MBA should not be classified as a “professional” degree because it simply not required in order for one to do his or her job.
Graduating from business school does not automatically make you the CEO or President of a firm. A one point in time, in a galaxy far far way, an MBA was like a ticket into an exclusive “old boys” club that landed you the opportunity to get a real sexy job (trader, investment banker, etc.) and potentially make a good chunk of change. However, this trend has definitely been changing as everyone and their mother are going for MBAs while the number of available jobs is dwindling to a pittance.
If the Ivy League kids’ MBA: degree can’t save them in this market then who is safe? But hey, to all you struggling MBAs out there that are regretting wasting the time, halting your careers and amassing major debt, at least you can light your degree and start a fire to keep you warm in Central Park if it ever came down that.
My $0.02
After reporting less than stellar earnings on Tuesday shares of American Express have taken a dive. What is causing the charge card giant to fall on hard times? Well, the short and sweet answer is simply the economy.American Express is suffering due to a combination an increase in defaults and a decreased use of cards. This signals that the recession could be creeping its way into the lives of wealthy, as American Express has traditionally catered to the upper-crust of American society.
The Tokyo Stock Exchange was shot down for several hours on Tuesday due to a computer malfunction.
Trading was suspended from about half an hour past nine to almost two o’clock in the afternoon. Mostly the trading of derivatives and futures was halted by the Tokyo Stock Exchange as a result.
Many investors alike are seeing record decreased in the overall performance of their portfolios. Despite expert advice from financial advisors and the sophisticated asset management techniques exercised by leading asset management firms, mutual funds and hedge funds your average investor is getting mauled by the Bear.
Yes, we are in a recession and trailing close behind or leading the way of the ailing economy is the proverbial Bear Market. Now, if you’re an ex-boy scout such as myself; or, you have been camping at least once or twice you know not leave food around lest you inadvertently lure these creatures into your campsite. Well, when it comes to the financial markets you can throw that malarkey out of the window!
One way to steer the Bear away from eating away at your precious portfolio is load up on some McDonald’s stock. That’s right, I said McDonalds—the fast food joint made famous by Ronald McDonald, Grimace, Hamburglar, The Fry Guys and Chicken McNuggets.
The Wall Street Journal reports that it expects the mega burger joint to increase its earnings per share by 21% when compared to last year. While most stocks have been hit by the receding economy, McDonalds has seen an increase in sales do to penurious behavior exercised by the common consumer as workers opt for an “extra value meal” over the $8 hero found in most gourmet delis. In addition, The Journal reports that increased sales overseas stemmed by a weakening dollar at more power the punch as the higher valued foreign currency is converted to U.S. currency.
These, along with other factors make the purchase of shares of McDonalds look quite appetizing to the Bullish investor.
As part of my every day ritual I immediately turn flip through the major cable news networks (minus Fox, of course) and catch up what is going in the world around me. I truly believe that we should always be knowledgeable of current events around the world, in national news and within our local communities. Just opening our minds and horizons makes us more interesting individuals and better citizens as result. During my daily digest of current news information I couldn’t help but overhear a segment on the rising price of gas. It appears that a chief economics, or economic agency (can’t remember what is was) projected that with the skyrocketing prices of crude oil we could gas prices in the U.S. elevate to a whopping $10 a gallon!
YIKES! How are we supposed to live when, what segment described as being nearly thirty percent of the average working class American’s household income will go toward paying for gas? The experts say that with gas selling at these levels people will be forced to pay more for gasoline than they would for groceries! This also doesn’t include the impact caused by the inflation of other goods as companies are forced to raise their prices due to an increase in production costs. Obviously, we know who will be hit the hardest—the middle and poor working class.
Consider a friend of mine that I new from my days of attending high school in rural South Carolina. She is twenty-three years old and has three small children to care for. Being that she lives over sixty miles from the city (Charleston, SC) she must rely on using her car to travel to school, to work and back home again. When you count the total distance she has to travel each day this comes up to about two-hundred miles a day and about one-thousand miles a week. I could only imagine how much of her weekly earning, which is somewhere in the neighborhood of $325 a week after taxes, is sucked up at the gas pump. Imagine how it would affect her when the price for a gallon of gas encroaches the five dollar mark, let alone ten.
The question I pose is this: With all of this superior technology in the world today, why did we not try to find an alternative fuel source to oil? It seems kind of outdated to use a fuel source that is expensive to obtain, refine and transport when we have the technical knowledge to use natural resources as primary fuel sources (i.e. the sun, water, wind, etc.). Even nuclear energy could be more thoroughly researched so we can use it as a safe and efficient source of fuel that has greater lifespan than fuel and doesn’t harm the environment. For that matter, even electricity seems like a viable option. It is simply wasteful to not only be dependent on oil, a fuel source that is destroying the planet, but to also be dependent on a foreign entity that practices collusion to obtain it.
It seems to me that the greed and voracity of corporate America and has gotten us into a bit of a quagmire. I believe the only reason why we are still dependent on oil as a nation is because the large multi-national oil companies (BP, Shell, Sunoco) are making big bucks off of oil and are too lazy or cheap to change their business models and develop a more efficient fuel source.
