Archive for March 24th, 2009

“Mark to market” … what ? so what?

March 24, 2009

I finally heard an understandable definition of “mark to market” accounting as it applies to the so-called toxic mortgage backed securities that banks are holding:

‘Mark to market’: setting a book value for an asset that you have no intention of selling based on the price that a third party — who doesn’t want to buy it — is willing to pay for it. (I think it was Harvey Pitt, former SEC commissioner who said it)

Since the asset is what it is, why is the accounting such a big deal? 

First, because of basic financial reporting  — on which people decide whether to invest in a company or not.  But, that can be handled by using another valuation scheme (say, net present value of expected cash flows) and footnoting the differences to mark to market

Second, because — by government regulation —  banks have to keep a specified ratio of capital to loans.  So, if some non-sellable assets are undervalued. a bank has to raise other capital or reduce the amount of loans it has on the books.  That causes a credit squeeze.

There seems to be some momentum to easing the strict mark to market accounting rules, allowing banks to loan more money while staying in regulatory compliance.

Makes sense to me … especially since it’s free.

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Starbucks New Mission? Shed image as "poster child for excess"

March 24, 2009

Excerpted from Ad Age, “Starbucks: Not as Expensive as You Think”, By Emily Bryson York, March 18, 2009

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Distressed that Starbucks has become the “poster child for excess,” CEO Howard Schultz said the coffee company plans to run an ad campaign proving its coffee isn’t expensive.

“There’s a myth out there that there’s this $4 cup of coffee at Starbucks,” Mr. Schultz told shareholders … “For whatever reason, Starbucks has become the poster child for excess, and if you want to be really smart, you should cut out that $4 cup of coffee.”

Mr. Schultz, noting that half of the chain’s beverages cost less than $3 and one-third are priced less than $2, admitted that Starbucks has been defined by its competitors … “We’ve been silent about these issues, but I can assure you we’re not going to be silent for too long.” Starbucks has also launched “value pairings,” such as a breakfast sandwich or muffin and a drink, for $3.95.

Forthcoming advertising will attempt to convince consumers that Starbucks products aren’t as expensive as they are perceived. Mr. Schultz said to expect social-media efforts, internet advertising, and more and sporadic TV ad buys he refers to as “brand sparks” …

Mr. Schultz also gave some insight into Via, the company’s foray in instant coffee … Via, he hopes, will lure some people to convert from brewed coffee. Of the 65 billion cups of coffee brewed in the U.S. every year, Starbucks has only about 4% of the market. The company will attempt to change consumer behaviors at home, where 25% to 30% of coffee is wasted, and at work, where many people don’t like the coffee that is sometimes offered free of charge in company kitchens.

Starbucks is testing Via in Seattle, without advertising, and in Chicago, with TV ads, in-store displays, and an outdoor push … Via will launch nationwide this fall and internationally next year.

Starbucks is, of course, attempting a complicated turnaround. In January, the company reported earnings were down 69% to $74 million, due largely to restructuring charges and same-store sales down 10% in the U.S. alone. At the time, Mr. Schultz said the company was beginning to see improvement in its business. Starbucks reports earnings again next month.

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135361

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Starbucks New Mission? Shed image as “poster child for excess”

March 24, 2009

Excerpted from Ad Age, “Starbucks: Not as Expensive as You Think”, By Emily Bryson York, March 18, 2009

* * * * *

Distressed that Starbucks has become the “poster child for excess,” CEO Howard Schultz said the coffee company plans to run an ad campaign proving its coffee isn’t expensive.

“There’s a myth out there that there’s this $4 cup of coffee at Starbucks,” Mr. Schultz told shareholders … “For whatever reason, Starbucks has become the poster child for excess, and if you want to be really smart, you should cut out that $4 cup of coffee.”

Mr. Schultz, noting that half of the chain’s beverages cost less than $3 and one-third are priced less than $2, admitted that Starbucks has been defined by its competitors … “We’ve been silent about these issues, but I can assure you we’re not going to be silent for too long.” Starbucks has also launched “value pairings,” such as a breakfast sandwich or muffin and a drink, for $3.95.

Forthcoming advertising will attempt to convince consumers that Starbucks products aren’t as expensive as they are perceived. Mr. Schultz said to expect social-media efforts, internet advertising, and more and sporadic TV ad buys he refers to as “brand sparks” …

Mr. Schultz also gave some insight into Via, the company’s foray in instant coffee … Via, he hopes, will lure some people to convert from brewed coffee. Of the 65 billion cups of coffee brewed in the U.S. every year, Starbucks has only about 4% of the market. The company will attempt to change consumer behaviors at home, where 25% to 30% of coffee is wasted, and at work, where many people don’t like the coffee that is sometimes offered free of charge in company kitchens.

Starbucks is testing Via in Seattle, without advertising, and in Chicago, with TV ads, in-store displays, and an outdoor push … Via will launch nationwide this fall and internationally next year.

Starbucks is, of course, attempting a complicated turnaround. In January, the company reported earnings were down 69% to $74 million, due largely to restructuring charges and same-store sales down 10% in the U.S. alone. At the time, Mr. Schultz said the company was beginning to see improvement in its business. Starbucks reports earnings again next month.

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135361

* * * * *

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Outliers’ KFS … find a satisfying job

March 24, 2009

This is one of several posts extracting some key points from the book Outliers: The Story of Success by Malcolm Gladwell, Little Brown, 2008

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Gladwell’s Observation

The ingredients to a satisfying job:

Autonomy … “a long leash”, “room to roam”

Complexity … varied experiences, sufficiently challenging

[Meritocracy] … strong connection between effort and reward

The more you like your job, the more likely you are to succeed at it. [No kidding, Malcolm]

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Posted in Book Summaries, Success Factors | 3 Comments »