May 292020
 

The largest 5 stocks by market capitalization are substantially outperforming the S&P 500 and the Dow Jones Industrial Average (DJIA) Year-To-Date (YTD) as of May 29, 2020.  The total market capitalization of these 5 technology stocks equals $5.6 trillion, approximately 20% of the total capitalization of the S&P 500 ($25 trillion).

(1) Microsoft ($1.39 trillion) —  +16.2% YTD

(2) Apple ($1.38 trillion) —        +8.3%

(3) Amazon ($1.22 trillion) —   +32.2%

(4) Google ($979 billion) —       +7.0%

(5) Facebook ($642 billion) — +9.7%

Also,

Netflix ($185 billion) —      +29.7%

 

S&P 500 —  -5.8%

DJIA     —   -11.1%

Nasdaq  —   +5.8%

Berkshire Hathaway ($451 billion)  —  -18.0%

 Posted by at 11:23 pm
May 282020
 

This is the 2020 Summer Reading List from the Robert H. Smith School of Business, University of Maryland.

The coronavirus pandemic may have thrown many of your summer plans into disarray, but there’s one much-loved activity you can still pursue: Losing yourself in a stack of engrossing books.

Maryland Smith’s faculty are there for you, with suggestions to get you through the summer break.

The 17th annual Summer Reading List for Business Leaders from the University of Maryland’s Robert H. Smith School of Business covers sports, history, startup scandals and successes, economics and a bit of fiction, too.

Happy reading!

Good Economics for Hard Times, Better Answers to Our Biggest Problems

Good Economics for Hard Times, Better Answers to Our Biggest Problems

By Abhijit V. Banerjee and Esther Duflo

The authors, winners of the 2019 Nobel Prize in Economics, address some of the most anxiety-provoking issues of our society, such as immigration and inequality, globalization and technological disruption. They explain the results of numerous field-based research studies, and suggest interventions to make for a better world. The book ends with a wonderful quote: “Economics is too important to be left to economists.”

Progyan Basu, clinical professor of accounting and information assurance
(Also recommended by Anil K. Gupta, Michael D. Dingman Chair in Strategy and Entrepreneurship)

The Path To Power

The Path To Power

By Robert A. Caro

So, you want to be the leader of the free world. You don’t come from money. Instead your hardscrabble roots are planted in the Hill Country of South Central Texas. You don’t have a network. So, you just abandon your political dream, right? Not if you’re LBJ. You hustle, plot and scheme your way into the corridors of power.

Henry C. Boyd III, clinical professor of marketing

Influence, The Psychology of Persuasion

Influence, The Psychology of Persuasion

By Robert B. Cialdini

A wonderful book about techniques that are used to persuade us to buy or to say ‘yes.’ An easy read, the book discusses numerous psychological studies on persuasion and provides principles on how to use persuasion techniques and defend against them.

Eugene H. Cantor, clinical associate professor of accounting and information assurance

How To Fail at Almost Everything and Still Win Big

How To Fail at Almost Everything and Still Win Big

By Scott Adams (the Dilbert guy)

This, quite simply, is a life-changing book. Scott Adams explains the concept of the ‘talent stack’ that plays an important role in success, systems versus goals, and staying fit.

Eugene H. Cantor, clinical associate professor of accounting and information assurance

When Pops Led the Family: The 1979 Pittsburgh Pirates

When Pops Led the Family: The 1979 Pittsburgh Pirates

Edited by Bill Nowlin and Gregory H. Wolf

If you want an escape from current affairs, baseball can be a nice refuge. The Society for American Baseball Research (SABR) is all things baseball and, among other things, published a book documenting practically every aspect of the World Series-winning 1979 Pittsburgh Pirates. With exceptionally in-depth articles on every player, coach, playoff game and more, it is easy to relax and enjoy a most glorious time in baseball history (at least if you are a Pirates fan!). If Pittsburgh is not your team, do not fret – SABR has commissioned numerous other books as well, including the 1986 New York Mets, 1975 Boston Red Sox, 1951 New York Giants, 1935 Detroit Tigers, 1929 Chicago Cubs, and 1919 Chicago White Sox, to name just a few.

Philip T. Evers, associate professor of logistics management

The Accidental President: Harry S. Truman and the Four Months That Changed the World

The Accidental President: Harry S. Truman and the Four Months That Changed the World

By A. J. Baime

Having grown up not far from the Truman library, I am admittedly biased. Nonetheless, with the whirlwind 2020 we’ve had, one cannot help but admire what I would call humble but strong leadership and informed decision-making under tremendous uncertainty during perhaps the most eventful four months in the history of mankind. This book whetted my appetite for David McCullough’s much longer (and older) Pulitzer prize-winning biography, which is on my own summer reading list, as one of those books that I’ve always been meaning to read.

Michael Fu, Smith Chair of Management Science

Bad Blood: Secrets and Lies in a Silicon Valley Startup

Bad Blood: Secrets and Lies in a Silicon Valley Startup

By John Carreyrou

Amazing true story of how so many smart people were duped by a charismatic persona (Elizabeth Holmes, a Steve Jobs wannabe) leading a Silicon Valley startup called Theranos, promising fairy tale dreams from just a pinprick of blood. Given the current rush to bring a vaccine to market, this could also serve as a cautionary tale. It also reminds us of the important role that the media has to play, as this was uncovered by an investigative reporter for the Wall Street Journal (the author, John Carreyrou).

Michael Fu, Smith Chair of Management Science

The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company

The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company

By Robert Iger

‘The Ride of a Lifetime,’ by former Disney CEO Bob Iger, is an inspiring book.

Bruce L. Golden, the France-Merrick Chair in Management Science
(Also recommended by Anil K. Gupta, Michael D. Dingman Chair in Strategy and Entrepreneurship)

Narrative Economics: How Stories Go Viral and Drive Major Economic Events

Narrative Economics: How Stories Go Viral and Drive Major Economic Events

By Robert J. Shiller

Shiller is a Nobel Prize-winning economist who describes how stories help drive economic events and why financial panics can spread like ‘epidemic viruses.’ Popular stories can drive the economy by influencing our decisions about how and where to invest, how much to spend and save, etc. These stories are increasingly being transmitted by social media.

David Kass, clinical professor of finance, senior fellow of the Center for Financial Policy

The Giver of Stars

The Giver of Stars

By Jojo Moyes

While a work of fiction, the book describes the experience of five women who were known as the Packhorse Librarians of Kentucky. These women rode on horses as traveling librarians into the hills surrounding a small town in Kentucky to deliver books to people who could not travel to town. Many of the recipients could not read, but looked at the pictures. The packhorse librarians were the ‘bookmobiles’ of the Depression era; that much of the story is true. Based on a true story rooted in America’s past, ‘The Giver of Stars’ is unparalleled in its scope and epic in its storytelling.

Elinda F. Kiss, associate clinical professor of finance

The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth

The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth

By Amy Edmondson

Psychological safety is seeing a new surge of interest these days, spurred partially by Google’s research on what makes great teams at Google. If you are interested in creating a culture that supports taking risks, speaking up, and even making mistakes, this is the definitive book. It explains the abstract concept of psychological safety from Edmondson’s rigorous peer-reviewed research, and adds to that a step-by-step framework for bringing psychological safety to life in your group, department, or organization. It’s a great next step for fearless leaders who want to create fearless organizations.

Neta Moye, clinical professor of management and senior fellow of Executive Development Programs

The Defining Decade, Why Your Twenties Matter - and How to Make the Most of the Now

The Defining Decade, Why Your Twenties Matter – and How to Make the Most of the Now

By Meg Jay

A great read for recent graduates and parents of recent graduates. Jay, a clinical psychologist writes, ‘Eighty percent of life’s defining moments take place by age 35.’ Jay encourages ‘twentysomethings’ to take hold of their own success in these pivotal years. She demonstrates how the decisions we make (or don’t make) in our twenties, impact the rest of our lives. I bought this book for all the ‘twentysomethings’ in my life, including two daughters and several nieces and nephews.

Christine M. Schaaf, marketing lecturer

Evicted

Evicted

By Matthew Desmond

A good read but a bit older. It is a great book about capitalism gone astray, even more relevant in the current situation. Please also see: this video.

Michel Wedel, Distinguished University Professor and PepsiCo Chair in Consumer Science

Mission in a Bottle

Mission in a Bottle

By Seth Goldman and Barry Nalebuff

This is a 280-page inspirational comic book – sorry, graphic novel – about entrepreneurship. The pair, student and professor at Yale University, founded Honest Tea, starting out by making a few thermos bottles or organic tea. Their book details their amazing success story. The firm had $250,000 in sales in its first year in 1998, $500 million in sales when it was bought by Coca-Cola in 2011 and around $1 billion in sales in 2019. TeaEO Seth Goldman has moved on to other business ventures and is a frequent inspirational University of Maryland speaker. The book is filled with advice and insights for entrepreneurs, including their trial-and-error first years. It’s the book they said they would have liked to have had before starting their own ventures.

Susan White, clinical professor of finance

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ABOUT THE EXPERT(S)

Progyan Basu

Dr. Basu has over 30 years of experience teaching accounting at the undergraduate and graduate levels. He has also taught accounting courses and seminars for professionals in the US and abroad. His research interests include financial accounting, and he has had a number of academic presentations and publications. He has been recognized for his contributions to the undergraduate and EMBA programs at Smith School and received the Allen C. Krowe Teaching Excellence Award for the (2012), CIBER Award for Teaching Innovation Global Learning (2018), and Distinguished Teaching Awards for multiple years (2013-14, 2014-15, 2015-16). At the University of Maryland level, he has been recognized for his contributions to improving the learning experience of University of Maryland students by being selected as a Philip Merrill Presidential Scholars Program Outstanding Faculty Mentor (2013-14), Teaching and Learning Transformation Center Elevate Fellow (2014-15), and UMD Undergraduate Studies Faculty Fellow (formerly, Lily Fellows) (2014-15). Basu also received several teaching awards and recognitions at his previous appointment at the Terry College of Business at the University of Georgia.

Henry C. Boyd is a Clinical Professor in the Marketing Department at the Robert H. Smith School of Business. He is also a managing director and principal at Ombudsman LLC, a diversified consultancy. He is licensed to practice law in Maryland, Wisconsin, and the U.S. District Court, Western District of Wisconsin.

Eugene H. Cantor

Eugene Cantor retired in 2015 after 31 years of federal service to return to his alma mater the University of Maryland to teach on a full-time basis. He served 25 years as an attorney with the Securities & Corporate Practices Division of the Office of the Comptroller of the Currency, an office of the United States Treasury Department.

EversPhilip

Dr. Philip T. Evers is an Associate Professor of Logistics Management at the Robert H. Smith School of Business, University of Maryland, College Park. Joining the faculty at Maryland’s main campus in the fall of 1993, he received his B.S. in transportation and logistics from Tri-State University in 1987, his M.B.A. from the University of Notre Dame in 1988, and his Ph.D. in logistics management from the University of Minnesota in 1993.

Michael Fu

Dr. Fu has a joint appointment with the Institute for Systems Research and an affiliate appointment with the Department of Electrical and Computer Engineering, both in the A. James Clark School of Engineering. He was named a Distinguished Scholar-Teacher at the University of Maryland for 2004-2005. His research interests include simulation modeling and analysis, operations management, applied probability and queueing theory, with application to manufacturing and finance. He received an S.B. in mathematics and S.B./S.M. in electrical engineering & computer science from MIT in 1985 and a Ph.D. in applied mathematics from Harvard University and 1989.

GoldenBruce

Bruce Golden received his bachelor’s degree in mathematics from the University of Pennsylvania and his masters and doctoral degrees from the Massachusetts Institute of Technology. He joined the faculty of the University of Maryland Business School in 1976 and served as a Department Chairman from 1980 to 1996. Currently, Bruce is the France-Merrick Chair in Management Science in the Robert H. Smith School of Business at the University of Maryland.

GuptaAnil

Primary Research Areas

  • Emerging Markets (especially China and India)
  • Frugal Innovation
  • Global Strategy & Organization
  • Corporate Innovation and Entrepreneurship
David Kass

Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Sophomore Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), FOX TV, Bloomberg Radio, Wharton Business Radio, KCBS Radio, American Public Media’s Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by The Wall Street Journal, Bloomberg News, The New York Times and The Washington Post, where he has primarily discussed Warren Buffett, Berkshire Hathaway, the economy, and the stock market.

KissElinda

Professor Elinda F. Kiss’ primary areas of research include Bank Regulation, Finance and Banking Crises and Fixed Income Securities. She teaches Corporate Finance, and Banking in both the undergraduate and MBA programs. Prior to teaching at the Smith School Professor Kiss has served as Associate Professor in the Departments of Finance and Accounting at Rutgers University and as Assistant Professor or Lecturer at the Wharton School, Wellesley College, and Temple University.

Neta Moye

Dr. Moye has over 25 years of experience in the field of human resources with particular expertise in helping individuals develop leader skills. She has spent the last 10 years focused on the practice of leadership development across academic, industry, and government settings. She has experience both designing and delivering leadership development solutions across the full range of development activities including formal classroom curricula, experiential development activities, executive coaching, and leader assessments and debriefs.

Christine M. Schaaf

Christine Schaaf is a Full-Time Lecturer in Business Communication and Marketing at the Robert H. Smith School of Business at the University of Maryland. She teaches in the newly-formed Dean’s Office Business Communication Initative in the MS, MBA, Executive MBA and Undergraduate Programs. She also teaches Integrated Marketing Communications in the Undergraduate Program. In addition to teaching, Christine is developing the newly-formed Business Communication Initiative for the Smith School. This initiative will focus on preparing Smith students with the business communication skills needed to succeed in today’s business environment. Prior to joining the Smith School, Christine taught for thirteen years as an Adjunct Professor of Marketing at John Hopkins Carey School of Business and Loyola University of Maryland Sellinger School of Business in the MS and MBA Programs.

Michel Wedel

Michel Wedel was named a Distinguished University Professor in July 2015. He holds the PepsiCo Chair in Consumer Science at the Robert H. Smith School of Business at the University of Maryland. His main research interest is in Consumer Science: the application of statistical and econometric methods to further the understanding of consumer behavior and to improve marketing decision making. Much of his recent work has measured the effectiveness of visual marketing using eye-tracking technology. He teaches models for Marketing decision making for MBA students, advanced Marketing analytics for MS students, and Bayesian statistics for Ph.D. students.

Susan White is a Clinical Professor at the University of Maryland, College Park, teaching corporate finance for undergraduates and MBAs. She received my undergraduate degree from Brown University, MBA from Binghamton University and PhD in finance from the University of Texas, Austin. Her primary area of research is case studies, with cases and articles published in the Business Case Journal, CASE Journal, Case Research Journal, Journal of Financial Education, Journal of Financial Research, International Journal of Financial Education, a restructuring case book and personal finance collection.

 Posted by at 11:33 pm
May 232020
 

The largest 5 stocks by market capitalization are substantially outperforming the S&P 500 and the Dow Jones Industrial Average (DJIA) Year-To-Date (YTD) as of May 22, 2020.  The total market capitalization of these 5 technology stocks equals $5.6 trillion, approximately 20% of the total capitalization of the S&P 500 ($25 trillion).

(1) Microsoft ($1.39 trillion) —  +16.4% YTD

(2) Apple ($1.38 trillion) —        +8.6%

(3) Amazon ($1.21 trillion) —   +31.9%

(4) Google ($965 billion) —       +5.5%

(5) Facebook ($670 billion) — +14.5%

Also,

Netflix ($189 billion) —      +32.7%

 

S&P 500 —  -8.5%

DJIA     —   -14.3%

Nasdaq  —   +3.9%

Berkshire Hathaway ($426 billion)  —  -22.5%

 

 

 Posted by at 10:59 am
May 202020
 

The Federal Reserve Board and the Federal Open Market Committee today released the minutes of the Committee meeting held on April 28-29, 2020.

The highlights were:

(1) “The staff’s baseline assumptions that the current restrictions on social interactions and business operations would ease gradually this year, real GDP was forecast to rise appreciably and the unemployment rate to decline considerably in the second half of the year”

(2) “Under the baseline assumptions, economic conditions were projected to continue to improve, and inflation to pick back up, over the next two years. The staff observed that uncertainty regarding the economic effects of the coronavirus outbreak was extremely elevated.”

(3) “A more pessimistic projection was no less plausible than the baseline forecast. In this scenario, a second wave of the coronavirus outbreak, with another round of strict restrictions on social interactions and business operations, was assumed to begin around year-end.”

(4) “Participants commented on potential risks to financial stability. Participants saw risks to banks and some other financial institutions as exacerbated by high levels of indebtedness among nonfinancial corporations which increased these firms’ risk of insolvency.”

(5)  “The activities of some nonbank financial institutions presented vulnerabilities to the financial system that could worsen in the event of a protracted economic downturn and that these institutions and activities should be monitored closely.”

(6) “A number of participants emphasized that regulators should encourage banks to prepare for possible downside scenarios by further limiting payouts to shareholders, thereby preserving loss-absorbing capital.”

 

 

 

 

 Posted by at 9:11 pm
May 192020
 

I am quoted in this Bloomberg article on Berkshire selling 84% of its stake in Goldman Sachs.

“He has this historical relationship with Goldman, so maybe there’s some sentimental value,” said David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business. “But of course, Buffett’s primary concern is efficient allocation of capital.”

“He’s always been a little skittish about investing in investment banks after getting somewhat burned in the Salomon experience,” Kass said.

 

 Posted by at 7:51 am
May 172020
 

Federal Reserve Chairman Jerome Powell was interviewed on 60 Minutes. The highlights are:

(1) We have the tools to avoid the risk of long run damage by supporting households and businesses to avoid insolvencies over 3 – 6 months.

(2) The Federal Reserve by lending and Congress by spending may have to do more ($3 trillion)

(3) If employees are out of work for long periods their skills will atrophy

(4) The economy will be on the road to recovery in the second half of the year

(5) We should expand unemployment insurance beyond its expiration date

(6) We should deal with the problem of how to pay for the debt after the economy is strong once again

(7) The economy will recover through the end of 2021 assuming there is not a second wave of the coronavirus

(8) The economy will not be fully recovered until people are confident to return to their previous activities — when we have a vaccine.

(9)This will not likely be a another Great Depression since we had a strong economy before and the Central Banks around the world are providing the necessary liquidity. This is a sharp downturn but will be shorter in duration vs. the 1930’s

(10) We will get through this. The U.S. is the home of great technology.

 Posted by at 7:42 pm
May 162020
 

The largest 5 stocks by market capitalization are substantially outperforming the S&P 500 and the Dow Jones Industrial Average (DJIA) Year-To-Date (YTD) as of May 15, 2020.  The total market capitalization of these 5 technology stocks equals $5.2 trillion, approximately 20% of the total capitalization of the S&P 500 ($25 trillion).

(1) Microsoft ($1.4 trillion) — + 16.1% YTD

(2) Apple ($1.3 trillion) —         +4.8%

(3) Amazon ($1.2 trillion) —   +30.4%

(4) Google ($937 billion) —       +2.5%

(5) Facebook ($601 billion) —   +2.7%

Also,

(6) Netflix ($200 billion) —       +40.4%

 

S&P 500 —  -11.4%

DJIA     —   -17.0%

Nasdaq  —   +0.5%

Berkshire Hathaway ($411 billion)  —  -25.4%

 Posted by at 3:59 pm
May 092020
 

The largest 5 stocks by market capitalization are substantially outperforming the S&P 500 and the Dow Jones Industrial Average (DJIA) Year-To-Date (YTD) as of May 8, 2020.  The total market capitalization of these 5 technology stocks equals $5.25 trillion, approximately 20% of the total capitalization of the S&P 500 ($25 trillion).

(1) Microsoft ($1.4 trillion) — + 17.1% YTD

(2) Apple ($1.3 trillion) —         +5.6%

(3) Amazon ($1.2 trillion) — +28.8%

(4) Google ($945 billion) —     +3.3%

(5) Facebook ($605 billion) — +3.5%

 

S&P 500 —  -9.3%

DJIA     —   -14.7%

Berkshire Hathaway ($430 billion)  —  -21.9%

 

 

 Posted by at 6:03 pm
May 092020
 

At the Berkshire Hathaway annual meeting on May 2, the eternally optimistic Warren Buffett displayed an unusual amount of caution about both the near term and intermediate term outlook for the U.S. economy.  Indeed, it was the first time in over 50 years, since 1969 when he liquidated his partnership, that he has demonstrated a large degree of concern.

Born in 1930 and growing up during the Great Depression did not discourage Warren Buffett from buying 3 shares of Cities Service Preferred in 1942 during the early days of World War II when the U.S. was initially losing the war. At age 11, young Warren was demonstrating his belief in the the future of America.  Whether it was the stock market crash of 1987, the 9/11 attacks, the Great Recession and Financial Crisis of 2007-09, Warren Buffett’s spirit could not be extinguished. But something changed by April 2020 with the COVID-19 pandemic. This is a once in a century event. The last similar pandemic impacting the United States occurred in 1918, the Spanish Flu, where an estimated 50 million people died worldwide, including 675,000 in the United States.

Previously, Warren Buffett had been exposed to the financial crises of the 1930’s and 2007-2009 which were preceded by excesses in the economy including large amounts of debt being used to purchase stocks in the 1920’s and likewise in the housing market prior to the Great Recession. These speculative bubbles built up over time but were observable. Similarly, the onset of both World War I and World War II were visible on the horizon.  But the COVID-19 pandemic was an unpredictable event prior to its apparent initiation in China in December 2019. Unlike World War I and World War II which were fought in Europe and Japan (World War II), COVID-19 is  a war against a virus that is being fought on the homeland of the United States, and in virtually every other country.  The required social distancing and virtual lockdown of the population has resulted in a forced sharp downturn in the U.S. economy and around the world.  As a result, the U.S. unemployment rate of 3.5% in February 2020, representing a 50 year low, has skyrocketed  to 14.7% in April and is likely on its way to the 25% level that has not been seen since 1932.

Although the U.S. economy will likely return to its pre-coronavirus level over time, how long will that take, how much damage will be done? Treatments and testing and tracing of contacts of those who test positive for this virus will permit a gradual economic recovery until we have a vaccine. However, a vaccine is estimated to be at least 12 -18 months away.  Will the virus subside over the summer? Will it re-emerge in the Fall?  These are unpredictable outcomes. There is an expression in epidemiology: “Once you have seen one pandemic…you have seen one pandemic.”

Against this backdrop, where the expert epidemiologists do not know what will happen, Warren Buffett faces an investment landscape that can result in a very large range of outcomes from very good to very bad. Being the very conservative investor that he is, he has  rationally chosen to hope for the best but prepare for the worst. Therefore, Berkshire’s cash of $137 billion on March 31, 2020 will probably be allowed to expand until we are on the other side of the pandemic and a vaccine is readily available for all.

 

 Posted by at 12:31 am