Graziadio Business Report Blog

As a professional trader, you are confronted daily with all kinds of dynamics and situations that require a flexible and adaptive mind. You are faced with multiple variables constantly interacting with each other and your task is to process ever-changing information quickly and profitably. Valuations arbitrage, reflexive supply-and-demand dynamics, and structural changes are recurrent landmines in the typical day of traders and money managers.

We accept this “dangerous” line of work for only two reasons: monetary compensation and pride in being part of capital markets, that transmission mechanism without which innovation and creativity would be prisoners of their own ethereal state.

As a society, we are ready to strike compromises in return for a system that will allow the ethereal state of our creativity to turn into reality. We allow market insiders like market makers, broker-dealers, and others to have small advantages over us mortal investors in order to have them create the positive externalities that help us build a more sophisticated economic system. We give market makers and specialists a privileged look at the order flow (the supply and demand of stocks) in exchange for their commitment to maintaining orderly markets whenever an imbalance occurs. We give systemic firms like JP Morgan and Goldman Sachs privileged access to liquidity via the Federal Reserve so that the banking system and capital markets can continue to serve us in our quest to invent, produce, and distribute new products.

But sometimes things turn out more like a bad inland casino rather than a better market…

We may still be reeling from the systemic economic collapse of last year, but new structural changes with potential negative externalities are already at our door.

For months I have witnessed strange dynamics in the way markets behaved: liquidity issues, intra-day volatility, and a constant disconnection between technical, sentiment and fundamental inputs. Markets often go through periods of irrationality, but this time it felt different.

As a professional trader and an educator on markets, my sensitivity level is higher than normal and I immediately began conducting research to make sense of my discomfort. This process pointed consistently to one element: high frequency trading or as I like to call it “the rise of the machines.” Continue reading ‘High Frequency Trading: The Rise of the Machines’

Can’t see the above video? Click this link to watch or you can read the transcript.

Continue reading ‘What’s Next LA: The Road to Economic Recovery (A Preview)’

Can’t see the above video? Click this link to watch or you can read the transcript.

In this video interview, David M. Smith, PhD, Associate Dean of Academic Affairs and Associate Professor of Economics at the Graziadio School of Business and Management discusses the impact the proposed Employee Free Choice Act (EFCA) would have on employers, unions, and the workforce. Continue reading ‘The Employee Free Choice Act: Playing the Union Card’

The results of GBR poll #3 on the road to U.S. economic recovery are in!

• Half of participants think we’ll be back on track by 2010
• 20% think we’re already on the road to recovery
• 30% think all the initiatives to stabilize and grow the economy so far are only making things worse

The GBR Blog asked Peggy Crawford, PhD, Professor of Finance, and Terry W. Young, PhD, Professor of Economics at the Graziadio School of Business and Management, to comment on the results and offer some practical advice on how to take advantage of the current economy. They wrote: Continue reading ‘3 Tips on Surviving and Thriving in the New U.S. Economy’

This is the second in a series of posts reporting on the hot button issues discussed at the 2008 Entertainment Supply Chain Academy Conference. See the first post here.

Devendra Mishra, MBA

Since 2004, when the Czech Republic, Poland, and Hungary became members of the European Union, these countries have seen the emergence of an ever-growing middle class. Over the last four years, the changing home video market in these territories has presented Hollywood studios and their distribution partners with a set of unique challenges for market growth of DVD and video games. At the Academy, a group of executives shared their experiences with the video supply chains in Central and Eastern Europe. They highlighted the lack of retail infrastructure and information standards for trading in the supply chain and identified the following drawbacks to doing business there:

• vendor inventory management,
• rampant piracy,
• product pricing,
• gray market,
• unknown royalty payments for Blu-ray,
• limitations posed by copyright encoding in corporate businesses where content protection is unnecessary, and
• the difficulty of getting answers to intellectual property matters.

Continue reading ‘The Global Entertainment Market’

This is the first in a series of posts reporting on the hot button issues discussed at the 2008 Entertainment Supply Chain Academy Conference.

Devendra Mishra, MBA

Over 140 executives of the European and U.S. entertainment industries assembled in Prague, Czech Republic, in early October to address “The Future of Packaged Media in the Emerging Digital World.” Leaders of operations management at the home entertainment companies, retail behemoths, thought leaders and solution providers of the industry engaged in open information exchange, collaboration and networking, confirming that supply chain management is everyone’s business.

As conference chairman, I was pleased to see that this year’s Academy not only reflected the overwhelming success of last year’s event but also a keen understanding throughout the executive suites of studios and their supply chain partners that we are facing extraordinary opportunities and challenges.
The operational agenda for the industry was to:

• Launch Blu-ray and unleash web-enabled connectivity, including figuring out how to embrace digital distribution to satisfy consumers and be profitable,
• Grow the business in the emerging Eastern European market,
• Ensure sustainability of the environment, while reducing the overall cost in the supply chain.

This is the first in a series of posts, each devoted to discussing one of the issues above and what came out of the Academy. The relevance of supply chain management thinking and practice has never been greater than in our current circumstances with the global economic crisis we now find ourselves in. At the heart of it all is the potential to reduce inventory and time in the supply chain through collaboration where waste and redundancies are further eliminated.

Continue reading ‘How Blu-Ray is Driving the Entertainment Industry’

Kurt K. Motamedi, PhD

Once more in my lifetime we are going through an upheaval. This time it is the financial markets and economic condition. There is a great deal of pain and many of our students and communities are fearful and suffering. I would like to share with you an experience of the past and request your reply.

In the early 90s when the market was down and the world was facing another real estate crisis, many of my students had lost their jobs and people all around were economically struggling. It was a time of Charles Keating’s excesses and REOs. In one late night class, the spirits were down and many of my students uncertain about their futures felt hopelessly down.

I asked the students to respond to a hypothetical situation. I asked them to assume that they were rich and well-to-do, but had lost their respective right arms in a recent car accident. Luckily, new technology and medical science would enable the replacement of the arm through cloning. The new arm would be perfect and as good as the old and with absolutely no shortcomings. It would be identical to the lost arm.

Continue reading ‘Life is (still) Good’

Joetta Forsyth, PhD

Listeners from across the country submitted questions to Graziadio School faculty during the conference call on America’s Financial Crisis this Tuesday.

With over 200 participants on the call, there were too many questions for the panel to answer in the short time.

Below are responses from panelist, Dr. Joetta Forsyth, Assistant Professor of Finance, to just some of these questions. (Read why she believed a bailout was necessary)

Now that Congress has passed the bailout plan, we are working on answering more of these questions and posting the responses shortly.

1. The Bush Tax Cuts mixed with a boom economy and lack of fiscal leadership led to the largest deficit of our time and the current economic condition.  What would you do as the incoming President to improve our situation?

I have a different interpretation of what happened. There are a number of factors that lead to this crisis, and the list is staggering:

Continue reading ‘Questions on the Financial Meltdown Answered (1)’

John Paglia, PhD

The recently approved bailout is yet another attempt to prop up the markets with an election around that corner that will only delay and worsen the inevitable pain ahead…

There is definitely a lack of trust and confidence in the markets, but it is due to the blatant lies and unethical representations. How many times have we heard an NAR (National Association of Realtors) economist call the bottom in housing? How many times have we heard the reporters on CNBC call a bottom in the equity markets? How many times have we heard phrases like “subprime is contained,” “we’re comfortable with our capital position,” “we have adequate liquidity,” and “the economy is fundamentally sound?”

The benefits of this package are being oversold to Main Street. And many don’t realize that a large part of this funding will be channeled to foreign banks through our domestic institutions. Furthermore, distribution of funds will not be exclusively through reverse auction; therefore preferential distribution—both in funds provided and responsibilities assigned to select agents—is a negative consequence. It is a disaster in the making and we will be left with a really bad hangover in a few months once we realize what happened.

Continue reading ‘Why I’m Against the Bailout’

Joetta Forsyth, PhD

The United States is facing the greatest financial crisis since the Great Depression. Financial institutions are failing, as is confidence in the financial system.

U.S. Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson have testified that Congress must act immediately to bail out troubled financial institutions, or we could face a financial collapse. There is much furor over the proposed $700 billion bailout, which didn’t get the required number of votes today to pass the House. Why, taxpayers ask, should people who were responsible and didn’t buy a house that they couldn’t afford, pay to bail out people who did, along with Wall Street fat cats? Exacerbating the problem is the fact the some of the people who are viewed as contributing to the crisis are now asking Americans to trust them to solve the crisis, using what could be an enormous amount of taxpayer dollars.

I share the same fury. And there is plenty of blame to go around. However, I would like to focus on the immediate problem. We are being told that something has to be done immediately, or we might have a financial collapse.

The key questions are:

• Are we really facing a financial collapse?
• Will this collapse happen rapidly or can we intervene if necessary later?
• What would be the consequences of a financial collapse?

Continue reading ‘America’s Financial Crisis’