february edition of alpha

ALPHA THE ECONOMICS AND FINANCE NEWSLETTER

Volume IV Issue I

February 2011

MISSION STATEMENT In the world of modern finance, Alpha symbolizes excess portfolio return within the overall mar-

ket. Alpha is also the Greek alphabet equivalent to ―A‖, a letter in which academia symbolizes excellence

and integrity. This newsletter should be viewed as a portfolio of financial and economic thoughts, which

strives to provide its readers with the highest return in terms of opinion, knowledge and thought. It also

aims for academic excellence through its contributors, who represent top students, professors and busi-

ness professionals.

Interview with Vice Provost

Ken Bain

By: Stefan Genzor

Dr. Ken Bain is the Vice Provost for University Learn-ing and Teaching, a Director of the Research Academy for Uni-versity Learning, and a Professor of History at Montclair State University (Ph.D., University of Texas at Austin, 1976). He is the founding director of four major teaching and learning cen-ters: the Center for Teaching Excellence at New York Univer-sity, the Searle Center for Teaching Excellence at Northwestern University, the Center for Teaching at Van-derbilt University, and the Research Academy for Uni-versity Learning at Mont-clair. He came to Montclair in 2006. He was at NYU from 2001 to 2006, at North-western as director of the center and professor of his-tory from 1992 to 2001, and director and member of the history faculty at Vanderbilt from 1986 to 1992. In the 1970's and early 1980's, he was Professor of History at the University of Texas--Pan American, where he also served as director of that school's University Honors Program and as founding director of the History Teaching Center. Additionally he is the best-selling author of What the Best College Teachers Do, a publication that has enjoyed great success in the U.S. and abroad. When asked how his passion for education and history developed, he said that he was always interested in history, since history is the study of everything; ...Continued on page 3

Photo of Dr. Ken Bain

IN THIS ISSUE ………Interview with Provost Ken Bain

Page 2………Mr. Andrew Zezas, CEO of Real

Estate Strategies

Page 5………The Story of Monty Cerf,

a Veteran Financier

Page 6………Interview with Vice President

Pennington

Page 7……….Book Review: House of Cards

Page 8……….State of the Economy

Page 12……..Concentration in the Leisure

Industries and Tourism

Page 14……….Faculty Spotlight: Dr. Deniz

Ozenbas

Page 15……….Book Review: The Big Short

Page 16……….Faculty Spotlight: Dr. Vidya

Atal

Page 17……… Join FMES

Page 18…….. Acknowledgements, Feedback,

Games

Page 19……..Mr. Roger Salomon, Director of Technology Services

Page 19……..The New “New New Thing”

Page 22……..Meet Alpha Staff, Game answers

Page 23…….. Investor’s Corner: Technical

Analysis

Join the ALPHA Team

Alpha is currently looking for both highly motivated students and faculty members to write and contribute to the newsletter. Faculty members who are interested in contributing scholarly or opinionated articles on a current business topic are wel-come. For more information or to apply for a position please contact either Stefan Genzor, Editor in Chief or Dr. Susana Yu of the Economics and Finance Depart-ment.

Economics & Finance Department

Tutoring Schedule* - Spring 2011

Room PA 420

Mario Jarrett Dani Haddad Chris Quilici Rich Shi

Finance Micro/Macro

Economics

Finance Micro Economics

Monday 10:00 - 2:00 - - 2:00 - 6:00

Tuesday - 1:30 - 5:30 11:00 - 7:00 2:00 - 6:00

Wednesday 10:00 - 2:00 3:00 - 7:00 2:00 - 6:00 2:00 - 6:00

Thursday 3:00 - 7:00 1:30 - 5:30 - -

Friday - - - -

*Tutoring is also provided by the Center for Academic Development and Assessment (CADA) at Morehead

Hall room 139-145. Call 973-655-4476/4364/5425 or visit www.montclair.edu/pages/cada For group tutor-

ing please call to make an appointment at 973-655-7037.

PAGE 2 Volume IV Issue I Alpha

Interview with a Seasoned Entrepreneur:

Mr. Andrew Zezas, CEO of Real Estate Strategies

By: Matt Cartagena

This winter, after a snowy Christmas and the start of an exciting New Year, I had the great opportunity of speaking with Mr. Andrew Zezas, President of Real Estate Strategies Corporation and an alumnus of Montclair State University School of Business. After graduating in 1983, Mr. Zezas forged his path in real estate—where he developed into a dynamic and well-rounded business person. His journey to success makes for a good story, which I am happy to share with you.

An Entrepreneur’s Journey

When Mr. Zezas enrolled at MSU, he started out as a music major. Shortly afterward, his father passed away, and he felt he should pursue a more practical degree in finance and economics. In the mid-1980‘s he graduated from MSU and, unknown to him at the time, made the first steps of his long journey in the real estate industry. After obtain-ing a real estate license, he began his career as a ―cold-calling‖ account executive—asking homeowners, ―How are you? Have you thought about selling your home?‖ His interactions with impatient homeowners provided..Continued on page 4

Continued from the front page it is the study of the change of everything. His interest was fostered by many wonderful teachers in the earlier stages of his life. Many of them helped Provost Bain de-velop the ability to think historically. He said that it is one thing to memorize names, years, and events, but it is a completely different thing to think historically. Think-ing historically requires the ability to look at the present and then look back throughout history and search for similarities and differences. Provost Bain says that the past is different yet similar, and it is up to us to discern what is relevant. A historian must have the capacity to look outside of the box in the sense that history is not a book of answers, but rather provides perspectives that we can learn from. Provost Bain says that the key to learn-ing and studying history is to understand it first and then memorize the key facts. It is a highly interpretative disci-pline that focuses on changes over time and the nature of these changes.

Provost Bain serves as the director of the newly established Research Academy. Most of us probably did not know about this institution as it is only in its early years, but the areas that this Academy focuses on are quite intriguing. Altogether, there are five main areas of focus. The first is to promote conversations about teach-ing. Although this is mostly geared to teachers and pro-fessors, students are definitely encouraged to join. Pro-vost Bain says that these conversations are intended to help teachers devise better teaching plans, to help them learn new ways of presenting the material, and to help them learn new ways of getting through to the students so that a drive within the students to learn is formed. The second area of focus is to provide services to people that will help them assess their abilities to foster learning. These are feedback services done through small group analysis; more specifically small group interviews with the students. The third area of focus is to help, foster and support research on university learning. The goal of this area is to strengthen research at universities. The fourth area is to help departments and schools at the university with infrastructure issues. This includes areas such as the design of classrooms in ways that stimulate learning or provide students with a relaxed and comfortable atmos-phere that allows for better focus on the subject being discussed. The last area of focus for the Research Acad-emy is Large Service Learning. The main focus of this area is to integrate learning inside and outside of class. An example of this is the teaching fellow program, which is a year-long program for about twenty faculty members. Through this program, faculty members from Montclair can work on their teaching methods, redesign their class-rooms, and apply what they learn in the program in their classrooms.

Provost Bain says that the Research Academy will be beneficial in many ways to the University and the student body. Most importantly, it will improve the quality of learning environments and it will allow the

education environment to steadily improve partly by the application of best practice teaching. Provost Bain‘s vision for the Research Academy is for it to become a major re-search and development center to explore university learn-ing and help faculty integrate new ways of teaching. It will allow the faculty to reinvent higher education that utilizes what we have learned on how humans learn and how we can foster learning. This can immeasurably trans-form classrooms and the quality of education offered at Montclair State.

During our conversation I asked provost Bain what he enjoyed most about his job and what was the most difficult part of his job. He said that he enjoys working with faculty and colleagues. They are working towards the same end, to transform higher education in a very posi-tive way. The dialogues that he shares with many of his colleagues and faculty bring about useful information that he can then use when searching for new strategies or look-ing to implement new programs at the research academy. On the other hand, the most challenging part of provost Bain‘s job is the facilities they work in. He says that origi-

nally they were promised new facilities with a lot more space, but unfortunately they ended up with much smaller space than needed to make their presence felt throughout the university. Nonetheless, Provost Bain says that they are grateful for what they have and certainly try to make the best of it, even though it may hinder them in some ways. He says that they will continue to expand the op-eration of the center, an example of which is the Course on Creativity, which if everything goes as planned will first be offered at the end of next year. Provost Bain sees this course to be of the utmost importance for all MSU stu-dents. It can prove to be very useful when entering the workforce as most employers will welcome and seek out the ability to find creative solutions when dealing with complex problems, when building applications, or when dealing with critical, time sensitive situations.

To conclude, provost Bain offers very simple yet very valuable advice to students as they approach gradua-tion. He says remain curious and don‘t worry. Stay inter-ested in life and seek your internal motivation and passion.

Once you know what your passion is, pursue it.☺


Continued from page 2 him with experiences which, to say the least, did not make him feel welcome. His next opportunity appeared when one of his clients introduced him to a network of professionals that guided him into the second phase of his journey—the transition from residential to commercial real estate.

His strong ambition and drive provided the fuel needed to progress in this corner of real estate. He spent one year in Business Development at the MacPherson Agency, where he developed strong analytical ex-pertise. Shortly after this, he moved to the Cross and Brown Company, where he not only learned the business of commercial real estate, but also that the company was a ―sinking ship.‖ His awareness of the com-pany‘s decline led him to leave. In 1988, he entered into a position at Edward S. Gordon Inc. (ESG), where he spent 14 years in various roles. At ESG Inc., his experience was robust and progressive. The journey that had shaped his real estate career had also prepared him to become a Sen-ior Managing Director at ESG.

After his years at ESG, Mr. Zezas wanted some-thing different. He wanted to utilize his experience to-wards a new type of company that he envisioned. He un-derstood that there are risks associated with leaving a secure career, but he still believed that ―Success is not a question of if?, but merely a question of when?‖ With this in mind -- and despite the risks -- Mr. Zezas went on to establish his own company, Real Estate Strategies Corpo-ration. For nine years Mr. Zezas has led his company in a steady direction; garnering dozens of prominent clients such as Aetna and Texas Instruments, winning awards such as the Ernst and Young Entrepreneur of the Year Finalist and NJBiz‘s Executive of the Year, and closed some of the biggest commercial real estate deals in New Jersey.

With his academic roots at Montclair State Uni-versity, it is certainly an inspiration to hear of Mr. Zezas‘ successful career and entrepreneurship.

An Interview with the CEO

Mr. Zezas generously shared his memories as a growing businessman and offered priceless perspectives. From his role as Relationship Manager at Real Estate

Strategies Corporation, to his opinion on the current hous-ing market, Mr. Zezas provided powerful insights, fla-vored with timeless maxims.

Mr. Zezas is the Relationship Manager, Strategist, and President & CEO of his company. All business stu-dents know what a President & CEO role entails, and we can deduce the type of involvement a strategist may have in a real estate firm, but what exactly does a relationship manager do? He explained that the connection and trust that he has formed with his clients has been a vital part of his service. He said that, ―if the client allows us to service them, they must trust us.‖ Forming this trust is a holistic process; the client not only has to trust him, but must also feel respected and understood. Mr. Zezas likens his ap-proach with clients to the Japanese style of greeting, where in a formal occasion you bow deeper and longer to show respect and humility. A key competency that he at-tributes to being able to connect with people is his ability to ―speak their language.‖ In other words, you must know your audience and know how to speak to them.

When asked about the success of his entrepreneur-ship, Mr. Zezas stressed the importance of surrounding his ambition and goals with knowledge and planning. He quoted Mr. Miyagi from The Karate Kid in saying that ―ambition without knowledge is like a boat on dry land.‖ We all know how wise Mr. Miyagi is! Furthermore, Mr. Zezas stressed that entrepreneurs need to have courage and must envision their success (remember,―it’s a matter of when, not if!‖).

So what about the drive, the ambition? How did Mr. Zezas become so motivated? He described the origins of his motivation with a reference to the Greek Philosopher Plato, who is thought to have said ―necessity is the mother of invention.‖ Mr. Zezas always needed to succeed; it was-n‘t only a matter of wanting to.

When asked what he had learned outside of school that had helped him succeed, he referred to a timeless clas-sic, the Bible. He restructured the old saying of, ―it is bet-ter to give than to receive,‖ into ―it is wise to give, and then you will receive.‖ He broke this logic down to three choices: you can give nothing, you can give rubbish, or you can give something good and positive. In all cases, you will receive back what you give out. This logic is simple, powerful, and true—ideal traits of a guiding maxim.

Of course, a discussion with a real estate profes-sional cannot be complete without a perspective on the housing market! Is it a good time to invest in real estate? Mr. Zezas offers a provisional ―yes‖ to investing in the real estate market. He explains that although mortgage rates are low, many other variables also affect one‘s ability to make a return, such as large down payments, financing difficulties following the financial crisis, unknown recovery time for the real estate market, and time dedication needed for investors. He recommends that if you have ―patient money, the financing ability, and the dedication,‖ it is a

good time to invest in real estate.☺


Photo of Mr. Andrew Zezas

The Story of Monty Cerf, a Veteran Financier

By: Stefan Genzor

Mr. Monty Cerf is the Managing Partner of OCJ Capital, a private equity and venture capital firm which both invests in, and provides strategic and capital-related advice, to private companies. From 2001 to 2004, Monty was the Senior Managing Director at Bear Stearns, man-aging the firm‘s Global Private Equity Placement busi-ness. Before that he was at JP Morgan for 17 years, where he held a variety of positions including a five- year period in which he built and headed JP Morgan‘s Global Private Equity P l a c e m e n t Group. Monty holds a BA in g o v e r n m e n t from Cornell University, a Masters in Sci-ence from Lon-don School of Economics and Politics, and an MBA from the Yale School of M a n a g e m e n t . Additionally he serves as President of the Yale School of Management Alumni Association, among other non-profit activities.

When asked how he first became involved with finance, and more specifically investments and investment banking, he said that it was ―sort of an accident.‖ After graduating with a degree in political philosophy, Monty became a volunteer for the Peace Corps and went to Af-rica. There he became interested in developmental eco-nomics, understanding that it would enable him to posi-tively impact many people. To pursue this path he at-tended the London School of Economics, where he earned his master‘s degree. From there applied for a position at the World Bank. Unfortunately he was unsuccessful since he did not possess a PhD, a requirement for the World Bank. This however, did not make him any less determined: he then continued his studies at the Yale School of Management. After earning an MBA, he ap-plied for a position at the World Bank once more. How-ever, once again the requirement of a PhD prevented him from receiving the position. After spending many years in school, Monty saw many of his close friends and col-leagues begin and progress in their careers in finance. He decided to join them and work on Wall Street for a couple of years, and then see where life would take him.

He began his career at JP Morgan in the area of investment banking. His analytical skills, the ability to think clearly and to be a great team member made him very successful in this field. He was soon involved in other areas, including the fixed income and structured

products divisions. These involved international travel, something he had always wanted. Some of his job respon-sibilities with JP Morgan included privatization in Argen-tina, venture capital in China, oil and gas deals in Texas, and commodity deals in Switzerland. These gave him a very broad perspective of the world and enriched his pro-fessional experience.

Investment Banking

Having been involved in investment banking for many years, Monty has clear views on regulation of the industry. He is very positive on the idea of regulation, but cautions that we have to be very careful. He says that there are many areas that can and should be regulated and that the regulators are indeed well equipped for it. How-ever, areas such as compensation for management and the boards of directors should not be decided by the regulators but rather by the interested parties such as the bondhold-ers or venture capital investors. It is the role of the mar-ket to decide the proper level of compensation. Nonethe-less, if government gives money to the institution, only then can the government regulate compensation. There are two areas that Monty suggests could use more regula-tion. The first is capital adequacy and the other is trans-parency. He says that derivatives and other financial in-struments should be readily available to investors and listed on exchanges so that everyone has information and data needed for investment and trading.

One of the areas that Monty worked in was ven-ture capital and private equity hedge funds. His primary role was to run a department that raised private equity capital for partnerships and companies that needed money. Their general process was to evaluate multiple companies and then select the best based on the business plan and its future potential. One of the many deals that Monty worked on was Pixar back in the days before Apple Com-puter purchased it. Pixar came to Monty‘s department looking for some funding; however, the company did not succeed as Monty said at that time they did not have a sound, well-developed business plan. Nonetheless, years later Pixar did become a success. It is now a subsidiary of Walt Disney, which purchased it from Apple in 2006.

Looking at all of Monty‘s success and professional accomplishments, one can wonder what or who motivated him to pursue all his goals despite many obstacles. When I asked him what or who motivated him the most, he said that there is really not one single thing or one single per-son. However, he is highly motivated by people who can handle pressure, and more importantly by people who make sound ethical decisions under pressure. According to Monty in today‘s commercial world, one‘s reputation is the most important asset, and he will always admire people who protect and follow their reputation.

As we were concluding our discussion, I asked Monty for his advice for someone interested in finance, but who does not really know what area to focus on. He said ―Networking! Find fifty people to...Continued on page 6


Photo of Mr. Monty Cerf

Continued from page 5 have a cup of coffee with, and ask good questions. If you are interested in banking, then talk to a banker and see what their day-to-day work life is like. If you are in-terested in accounting, talk to an accountant. Have an ‗informational interview‘ so that you are better guided

when pursuing your career goals.‖ ☺

up for students. Since then it has become an attraction for students and has given life to the campus community. Not only the Recreation Center, but the myriad of other con-struction projects have beautified the campus and en-hanced students‘ experiences. Also, the switch from a 130-credit curriculum to a 120-credit curriculum has enabled students to graduate in the ―typical‖ four years, avoiding the dreaded ―five year plan.‖ The construction of the Heights is another progressive move by MSU that will enhance campus life. The campus body will be more inte-grated and involved, allowing more students farther from the NJ Metro-area to enroll at MSU.

A Commuter School?

MSU has often been thought of as a ―commuter school,‖ where the students are on campus for class during the weekdays, but are nowhere to be found on the week-ends or at nights. Ms. Pennington is very familiar with this perception and was able to shed some light on it. She explained that since more than 3,000 students live on cam-pus, MSU is not purely a commuter school. Still, the per-ception seems to persist for several reasons. For one, the large number of students who attend classes during the day tends to make the campus community seem ―vanished‖ at night and during the weekend. Also, students have cer-tain incentives to go home on the weekends and at night. She explained that course schedules at MSU are most heavily scheduled for the daytime, Monday through Thursday. With fewer classes in the evenings and on Fri-days, students often simply go home. Also, since MSU has not been able to guarantee bed space to all students, re-cruiting students from more distant counties and states has been limited in recent years. Because of this, there is little to keep students from traveling home on the week-ends. Last, Ms. Pennington mentioned a ―New Jersey anomaly,‖ where college students in NJ tend to avoid the post-high school separation that is more common else-where. ―New Jersey students tend to cling to high school friends and past activities,‖ Pennington said.

Moving Forward

With The Heights now under construction, it is clear that Montclair is taking steps that will enhance stu-dent life. What else might we expect? Ms. Pennington mentioned several new things, including renovation of the Student Center, construction of a new science building, and a new School of Communications building as some of the projects that are under discussion. What about cut-backs in state funding? Does this affect MSU‘s ability to enhance student development and campus life? Vice Presi-dent Pennington explained that, although they must ―do more with less‖ in most cases, the size and quality of fac-ulty has been maintained despite the loss of funding. Ide-ally, of course the SDCL department would benefit from more funding, but innovation, creativity, and leveraging technology has and will be instrumental moving forward.

Student Development and Campus Life is a critical function at any university, especially...Continued on page 7


An Interview with Vice President of Student

Affairs: Dr. Karen Pennington

By: Matt Cartagena

Montclair State University has 14,383 under-graduate and 4,019 graduate students. The University houses 20% of its student body and offers students over 120 clubs and organizations. Simply put, there‘s diver-

sity, size, and many opportuni-ties for involvement. This lively campus life is simply not possible without the guidance and sup-port of the Division of Student Development and Campus Life (SDCL). The SDCL is responsi-ble for most outside-of-classroom services and pro-grams. As the Vice President for Student Development and Cam-pus Life, Dr. Karen Pennington leads the department in its mis-sion to support students‘ personal growth and development.

Dr. Pennington earned her B.A. and M.A. de-grees in History from the University of Scranton, a Mas-ters in Education from Gannon University, and a PhD in Educational Administration from the State University of New York at Albany (SUNY). She worked as the Area Coordinator at Ohio University before coming to Mont-clair State University. She has been with Montclair State University as the Vice President for Student Develop-ment and Campus Life for 13 years. Her role is to pro-vide input into the decision making process as to how University policy/changes will affect student develop-ment, and to lead the SDCL in its mission to enhance and provide student development and campus life.

Campus Life Progress

Over the past decade, MSU has undergone growth in all corners: student body, campus life, educa-tion, and infrastructure. It would be hard not to notice this, especially for some of the upperclassmen who have been enrolled since the days of Panzer Gym or before Si-natra Hall. Of course, other changes have also affected campus life and student development. Ms. Pennington described some of the changes that have shaped MSU‘s student development. She reminded me that it wasn‘t too long ago that the Student Recreation Center was opened

Photo of Dr. Karen

Pennington

Continued from page 6 at MSU. The diversity and size of MSU creates a com-plex of ideas, opinions, and student needs. Ms. Penning-ton‘s role is to understand the students and help to en-hance their experiences outside of the classroom. She wants students to know that, ―MSU employs hundreds of people to serve the students. If you are having an issue, please, speak up. Don‘t think that you have to go at it

alone.‖ ☺

The book takes us through the lives of three Bear Stearns chief executives for the last six decades. It starts with the legendary Cy Lewis, who headed the firm for sev-eral decades. He was succeeded by Alan ―Ace‖ Greenberg, who subsequently passed the firm on to the now infamous Jimmy Cayne. The book takes us deep into the egos and greed that have dominated these banks, and hence, Wall Street. It has become a cliché following the sub-prime col-lapse, but the book describes the ―culture‖ of Wall Street. Cohan delves into the personal lives of Bear Stearns execu-tives and paints a picture of their lives for the reader. It

surely elevates the disgust that most of the public al-ready has towards Wall Street, but also shows how many of these executives have gradually grown. The book may challenge readers who do not have a strong financial background as it often descends into a lot of Wall Street jargon. Re-gardless, it‘s an amazing read for students in busi-

ness school. ☺


House of Cards: A Tale of Hubris and Wretched Excess on Wall Street

By: Parth C. Shah

The House of Cards, by The New York Times best-selling author William Cohan, is a tale of ―everything Bear Stearns.‖ Bear Stearns, the iconic Wall Street Bank in existence for 85 years, crashed during a single week in March, 2008. Well, ―crashed during a single week‖ is too simple of a statement. The story is much more complex than that, as explained in House of Cards. As the entire title suggests, ―it‘s a tale of hubris and wretched excess on Wall Street.‖

GAME CORNER There are 25 differences between these pictures...see if you can find them all

BOOK REVIEW

Answers can be found on page 22

STATE OF THE ECONOMY By: Stefan Genzor & Matt Cartagena

The purpose of this section is to provide an over-view of U.S. economy as it recovers after the recession.

The ISM INDEX (The Institute for Supply Management Index)

The ISM manufacturing index is an economic measure for the US business sector. The report attempts to gauge how the manufacturing sector of the US economy is doing. It is

based on five main indicators: production levels, new or-ders placed, inventory levels, supplier deliveries and the employment environment. Generally, an ISM value of 50 is considered neutral, a value of over 50 points signals an expansion of the manufacturing sector, and a value of less than 50 points to a decline in industrial production. The index has an average lead time of about three to six months before the actual industrial production responds. Nonfarm Payrolls

Non-Farm Payrolls refers to monthly employment survey data released by the U.S. Department of Labor Statistics. The report estimates the total number of paid workers in the US, excluding those working in: the government, pri-

vate household employees, non-profit organizations and farm employees. Together, "nonfarm" employees produce about 80% of U.S. GDP. Increases or decreases in nonfarm payroll data are used as an indicator of U.S. economic health, as the report shows whether American businesses are adding or shedding jobs.


Auto Sales

As the recovery picks up steam, the consumer's outlook has gotten notably rosier. As a result, auto sales have suc-cessfully bounced off their lows and are looking to move

up towards 12.5 million. Year-over-year sales compari-sons show that consumer demand continues to gain mo-mentum. Excluding Toyota, sales at the Big-Six auto manufacturers, Nissan, Honda, Ford, Chrysler Group, General Motors and Hyundai Group all posted double-digit gains.

ISM Services

This report attempts to gauge how the service sector of the US economy is doing. For example, it covers activity at hotels and restaurants rather than at manufacturers like Ford. The Institute of Supply Chain Management sends out surveys every month to these businesses that consist of a few simple questions. The survey is not just sent to random managers, but those involved in purchas-ing and hiring. The market often does not pay much at-

tention to the services index because this sector is less cyclical than the manufacturing sector. During the reces-sion, the service index held steady around 50.0% through September 2009 before bottoming at 37.4% in November 2008. Since then, the service index has slowly risen, par-tially because businesses are having a hard time passing on higher commodity and other input costs directly to the consumer. As a result, the areas most likely to contribute to inflation growth are commodities, such as gasoline or possibly food.

Continued on page 9

http://www.wikinvest.com/wiki/GDP

http://www.wikinvest.com/wiki/U.S._economic_health

STATE OF THE ECONOMY (cont’d)

Continued from page 8

Consumer Credit

Consumer credit is credit referring specifically to credit extended for personal or household use by individual con-

sumers and their families. This differs from, say, business or bank credit, which is used by corporations or banks.

Wholesale Inventories

Inventories are the raw materials, unfinished and finished goods held in stock by a company for future sale. They constitute one of the most important assets for a company because the turnover of inventory represents a primary source of revenue generation for the company and subse-quent earnings for shareholders. Possessing a high amount

of inventory for long periods of time is usually looked down upon because of the associated storage, obsolescence and spoilage costs. Similarly, possessing too little inven-tory is also looked down upon because of the potential loss of sales and market share. Wholesale inventories are just one component of total business inventories. Manufactur-ing and retail inventories make up the rest. Improved in-ventory management in recent years has reduced the eco-nomic swings associated with inventories and has helped produce a long-term downtrend in the inventory-to-sales ratio making data related to wholesale inventories less relevant as a gauge of economic recovery.


Unemployment Rate

The unemployment rate is the number of unemployed as a percent of the labor force. The labor force consists of employed and unemployed persons. It is sometimes called the ―civilian labor force‖ because it excludes people in the

armed forces. A low rate of unemployment often raises inflation fears, due to potential labor shortages. High un-employment raises fears of recession. Strong job growth means prosperity.

CPI

The Consumer Price Index (CPI) provides data on the month-over-month and year-over-year changes in the prices paid by urban consumers for a representative bas-ket of goods and services. It is the main inflation report for the futures and financial markets. Unexpected rises in

this indicator usually lead to falling bond prices, rising interest rates, and increased market volatility. CPI is one of the most frequently used statistics for identifying peri-ods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation and large drops in CPI during a short period of time usually mark periods of deflation. As long as in-come growth remains subdued, businesses will have a difficult time passing on higher commodity and other in-put costs directly to the consumer. As a result, the only areas of expected inflation growth are areas where con-sumers buy commodities, such...Continued on page 10

http://www.wikinvest.com/wiki/Credit

http://www.wikinvest.com/wiki/Recession


Continued from page 9 as gasoline or possibly food, directly.

GDP

A country's Gross Domestic Product is the total value of the goods and services it produces in one year. GDP is a measurement of the size of a country's economy, and GDP growth is used as a measurement of economic growth - for example, in the US, two consecutive quarters of negative

GDP growth is the official definition of a recession. GDP = C + I + G + NX, C = Consumer Spending, I = Business Expenses and Spending, G = Government Spending, NX = Net Exports

Construction Spending

The U.S. housing market includes the construction, sale, and resale, of all residential properties. Even though it's only focused on housing, conditions in the housing market are indicative of the state of the economy as a whole. Homes are durable goods, meaning that new home con-struction and sales are often highly correlated with eco-nomic cycles; people tend to buy new homes only when they are confident that they will have enough income to pay for it, so economic downturns can depress the housing market considerably. In addition to the buildings them-selves, homes require appliances, furniture, utility services,

and any number of other secondary goods and services. When a new home is built and purchased, the financial impact of that sale continues on indefinitely. As of the sec-ond quarter of 2008, the U.S. housing market is unstable,


due largely to the collapse of the subprime lending indus-try and as the figure above shows construction spending is still very low.

Personal Income and Spending

Personal income and the consumption sector are off their recession lows, however, the outlook remains weak. High unemployment will put heavy downward pressures on wage growth. Since consumption has a direct relationship

with the amount of income a consumer has to spend, lower incomes will cause consumption growth to be weak. There seems to be pent up demand for more con-sumable goods, but until the employment situation stabi-lizes consumers will hold on spending.

PPI

The Producer Price Index (PPI) measures prices at the producer level. PPI is a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller. The mar-ket is primarily interested in two aspects of the PPI re-

port: how fast the prices are rising and whether producers are passing along any price increases to the consumers. The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies. Currently firms are having an extremely diffi-cult time passing higher prices up the production pipeline (crude to intermediate to final production) and onto the consumer. It is not just final...Continued on page 11

http://www.wikinvest.com/wiki/New_home_construction

http://www.wikinvest.com/wiki/Economic_cycles


Continued from page 10 producers who must absorb higher costs by failing to pass them through to the consumer, but firms at the intermedi-ate and crude level are also noticing that firms at a higher production level are trying to squeeze prices as well. This raises the profit margin risk for firms lower on the produc-tion chain. Commodity prices have strengthened over the last few months as global economies have entered an accel-erating recovery period. U.S. producers are going to bear most of the brunt of the price increases as the consumer‘s ability to take-on higher prices remains constrained by weak income growth.

Retail Sales

This is the total sales from the company's retail segment, where the company sells products to consumers from re-tail stores. Retail sales have surpassed pre-recession highs

and provide another indication that the economic recovery is on track. Furthermore, the sales numbers may have been deflated a bit as snow storms in the east prevented many consumers from frequenting retailers toward the end of the month.

Industrial Production

Industrial Production measures the real or inflation-adjusted output produced by the manufacturing, mining, and electric and gas utilities industries. The data published

includes the total capacity utilization rate and month-over-month and year-over-year changes for industrial produc-tion and manufacturing output. The change in industrial


production is measured monthly using the industrial pro-duction index, with year 2002 as the reference period. The Industrial Production Index is sensitive to consumer demand and interest rates. As such, Industrial Production

becomes an important tool for future GDP and economic performance forecasts. Industrial Production figures are also used to measure inflation by central banks as high levels of industrial production may lead to uncontrolled levels of consumption and rapid inflation. The industrial production data have sprung back since the start of the economic recovery and look to be on stable footing. How-ever, the recession resulted in such a severe downturn in manufacturing and production that the industry will need many more months if not years of continued accelerated growth before reaching more normal levels.

Treasury Budget

The U.S. Treasury releases data on a monthly basis on the surpluses or deficits of the federal government. Treas-ury budget data tracks the changes in monthly balances

as an indicator of budget trends and the direction of fiscal

policy. ☺

References:

The information above was obtained at:

I. etrade.com

II. https://www.wikinvest.com/?type=classic

http://www.wikinvest.com/wiki/Manufacturing

http://www.wikinvest.com/wiki/Electric_Utilities

http://www.wikinvest.com/wiki/Manufacturing_Output

http://www.wikinvest.com/wiki/Interest_Rates

https://us.etrade.com/e/t/home/beta-a?PageName=n2oi-laurels?PageName=hp_beta

https://www.wikinvest.com/?type=classic

Concentration in the Leisure Industries and

Tourism:

The Department of Marketing

By: Dr. Jack Samuels

The Leisure Industries and Tourism concentra-tion prepares students for management and marketing positions in the industry of hospitality, leisure, and tour-ism. It is the only MSU business school concentration to prepare students for all segments of the Leisure/Hospitality Mega Sector, as defined by the US Depart-ment of Labor. According to projections for coming years by the Department of Labor, this mega sector will grow at a rate of 15% a year for the next several years, compared to 8% for all employment, just 5% percent for hotels, and 8% for restaurants.

The Leisure Industries and Tourism Program is quite distinct from many standard hotel and restaurant programs, including MSU‘s own Hospitality Manage-ment Program, in two important ways. First, most of

those programs prepare students only for the hotel/restaurant portions of the broader mega-industry. Thus, the Leisure Industries and Tourism Program opens up a wide array of employment possibilities that is many times larger in terms of employment opportunities and work venues. Second, the Program covers all aspects of ser-vices management and marketing, as opposed to more narrowly-focused industry technical skills. Moreover, it focuses on delivery systems, marketing, and customer service, all with an emphasis on key component indus-tries.

Graduates from this program have a thirty-year track record of obtaining outstanding positions in a wide range of areas:

events management and marketing, including corporate sponsored events, weddings, birth-day parties, world's fairs, sports and enter-tainment events, and corporate meeting plan-ning,

theme park management,

snow sports areas,

tourism development,

chambers of commerce and visitors and con-vention bureaus,

cruise ships,

restaurants,

leisure facility management,

museum and tourist attraction management and marketing,

youth agencies,

public and private recreation agencies, includ-ing governmental agencies, colleges and uni-versities and other private leisure service pro-viders such as the YMCA,

sports and entertainment management and marketing,

travel and tour companies, and

resort/lodging management.

Our graduates are an amazingly successful group and are perhaps some of the best MSU has to offer. Many work with the Walt Disney Company (our program is the home of the Walt Disney College Program at MSU for over 25 years!) Hilton, Sheraton, New Jersey Nets, The New Jersey Red Bulls, The Museum of Modern Art, Con-tinental Airlines, Enterprise Car Rentals, The Meadow-lands Chamber of Commerce and many, many more.

This is a brief introduction to just a few of our dis-tinguished alums and some of our current students. As you‘ll quickly see in what follows, their career paths are quite varied, but whatever their career path, we are so proud of them!

Raphael Gordon, one of our recent graduates, is a famous motivational speaker and is mak-ing a movie.

Steven Urbanowycz has had a distinguished career with the New Jersey Sports and Expo Authority, Madison Square Garden, and is currently the General Manager of the Red Bulls Stadium in Harrison, N.J.

Richard Schubach has worked for a variety of different companies including Norwegian Cruise Lines and is currently a food manage-ment area manager in Liberty Square at the Magic Kingdom of Walt Disney World. Rich-ard will just be completing his degree this year and is an excellent example of how we try to blend practical experiences with the classroom in our program.

Continued on page 13



Kathy Van Tassel is a retired ex-Disney World Education Manager, and retired a sec-ond time after having very successful career as a private consultant.

Martin Druda recently completed his 21st year with the Disney Company at Walt Dis-ney World and is now a senior manager in computer support. He says he owes his suc-cess in the computer area from learning about the operational areas of the industry in our program, which enables him to better under-stand how computers interface with manag-ers and guest-contact cast members at Dis-ney.

Christopher Macaluso started with his in-ternship at the Newark Airport Marriott and retired after twenty years with great financial security already in place – a great achieve-ment in this financial environment!

Our faculty includes Dr. Jack Samuels, program coordinator, who is an honorary citizen of Walt Disney World and a founding faculty member of the Walt Dis-ney World College Program. Drs. Weston and Wang, along with Dr. Samuels, proudly advise and consult with students, making our program a personal development

and learning experience. This helps insure success both during a student‘s University experience and after graduation.

The course of study for the Leisure Industries and Tourism program and a description of the courses can be found on the Marketing Department's web page. This program is strongly focused on business manage-ment and marketing skills as they relate to the services industries. We‘ve even had graduates working in other service industries such as financial services. Included in this group is Douglas Todd, a highly successful personal

financial planner whose business is located in Randolph, NJ.

The Program consists of five required courses, and students are aided in, and highly encouraged, to complete internships throughout their course of study. The Pro-gram begins with LITM 201, an introduction to the mega-industry group which orients students to every industry segment, from hotels, to cruise ships, to private and not-for-profit recreation, sports and events management and marketing, etc. This is also where students learn how to set career horizons and plan for their future and that you must start from the bottom and work your way up. But don‘t worry, the ―up‖ usually happens very quickly for most of our grads!

The next course is LITM202, the only course in the MSU School of Business that focuses on service deliv-ery systems and customer service. It is a keystone course for this program and sets a sound philosophy for service delivery for our students.

LITM301 is a general operations class setting the philosophies and systems in place for services that are util-ized throughout our mega-industry, including games and game rooms, hotel operations, food service marketing and management, retail (gift shop) operations and marketing, travel and tour marketing and operations, and casino gam-ing.

LITM401 teaches critical marketing and analyti-cal skills as they apply to the hospitality, tourism and lei-sure mega-industry. The fifth class includes a broad orien-tation to the building and maintenance of facilities which are very important to your success in the entire industry.

We offer additional specialized elective courses in Sports Management and Marketing and Events Manage-ment and Marketing, and will be developing additional specialized courses in the future. Students may also take course in the Hospitality Management Program to get more technical skills in Hotels and Restaurant Manage-ment, but these classes are not necessary for most of the excellent positions our students have acquired in these industries to date.

The Leisure Industries and Tourism Program goes extremely well with most other MSU School of Busi-ness concentrations as a second concentration and can be completed with good advising with as little as 12 addi-tional academic credits. Regardless of whether your con-centration is retailing, finance, management, marketing, accounting or international business, you should consider this concentration because of its thirty-year track record of opening doors to success for MSU grads!

For more information, please contact Dr. Jack Samuels or Dr. Avi Mukherjee at (973) 655-4254, or email Dr. Samuels at [email protected]. We look for-ward to hearing from you, and wish all students the best of

luck and success! ☺


mailto:[email protected]

Faculty Spotlight: Dr. Deniz Ozenbas

By: Andre A. Sigismondo

Dr. Deniz Ozenbas is an associate professor in the Department of Economics and Finance at Montclair State University. She brings a direct and concise approach to teaching as well as a powerful understanding of not only

market dynamics and analytics, but also topics such as market volatility and market microstruc-ture. Professor Ozenbas teaches several different courses in the Economics and Finance Depart-ment, including Funda-mentals of Finance (321) and Advanced Corporate Finance (423).

Professor Ozen-bas is originally from Turkey. When asked how her career in finance began, she explained that finance and eco-nomics were always a

relatively big part of people‘s daily lives in Turkey. The country has pronounced economic and recessionary peri-ods and is also known for chronic high inflation in its past. Nonetheless in the recent years inflation has been stable. She took many finance and economics classes dur-ing her undergraduate studies in Turkey, and upon graduation she won a scholarship to pursue a PhD at Ba-ruch College, CUNY in the United States.

Market Micro Structure and Market Efficiency

So what is Dr. Ozenbas interested in outside of class? When we spoke, she explained that her interests in market microstructure and market efficiency began dur-ing her PhD studies. Market microstructure deals with the intra-day patterns in securities markets such as vola-tility or volume trends. When asked about her opinion on the volatility of the market over this past summer, she explained that the market has recovered and that it should not experience dramatic volatility until the next crisis. During her PhD studies, she realized that most previous academic research dealt with financial data of a daily frequency and there was so much to research and investigate in the intra-day market. Professor Ozenbas feels that an important tenet of a healthy and efficient financial market is its ability to absorb news and other unexpected and stressful events without increasing its short-term volatility. Because Treasury yields are in-creasing, she also feels that future inflation is likely to be higher.

Honors and Awards

Throughout Professor Ozenbas‘s career, she has received a number of honors and awards. Some of these include being invited as a presenter and grant recipient at the Doctoral Student Seminar of the Financial Manage-ment Association annual meeting. One award that she is most proud of is receiving the NASDAQ Dissertation Fel-lowship award. The main reason for this is the fact that NASDAQ is very selective about the recipients of the award. They have a good established team which includes some well known academics that select recipients among an international pool of applicants. Only one other appli-cant won this award during the same year as Professor Ozenbas. She explained that the reward was not only great because of the prestige, but also because it also came with a cash reward. Additionally, it was fantastic in that NASDAQ establishes a great relationship with the recipi-ents. More importantly, Professor Ozenbas not only fo-cused on the volatility of the NASDAQ to receive the award, but also focused on the London Stock Exchange, Paris Bourse, and the Deutsche Boerse exchanges.

Publications

Most professors certainly have published many articles, books, and papers. Professor Ozenbas is most proud of things that she is currently working on such as her 2010 publication in the Journal of Portfolio Management titled ―Accentuated Intra-Day Price Volatility.‖ Its main focus is on accentuated volatility in large cap versus small/mid cap stocks. She shows that volatility has become higher at the opening bell for large cap stocks. This hap-pens because the current market structure is unable to handle the stress of all of the new information following the overnight non-trading period. She says that this is what everyone witnessed during the May 6th flash crash, and the new rules implemented by the SEC are geared to fix and prevent future flash crashes. One example of such a rule is stock circuit breakers. These would break the interconnection of markets, if a stock declines 10% in a five minute interval, stopping the trading of the security. Al-though they did have market circuit breakers on May 6th, the exchanges all had their own rules. While some ex-changes stopped trading a particular stock, others didn‘t.

Professor Ozenbas also has published many other articles and papers with Professor Portes. Some of the topics they have covered are stock market volatility, GDP volatility, and additional papers that combine both finance and macroeconomics.

Market Volatility

Professor Ozenbas loves the topic of volatility. She says that VIX is a very strong volatility index, and is becoming more popular by the day. Continued on page 15


Photo of Dr. Deniz Ozenbas

Dr. Deniz Ozenbas (cont’d)

Continued from page 14 However she also feels that one has to incorporate other volatility measures based on the exposure in their portfo-lios. If you are concentrating on only a few industries in your portfolio, the VIX index may be too broad. Accord-ing to her the most important use of VIX is that it pro-vides a way for investors to hedge against excessive vola-tility by taking a short position on the VIX index or on the futures/options contracts written on the index. Last VIX always tends to rise when stock prices are declining so it may give some clues about market timing.

High Frequency Trading

Today‘s market structure is certainly filled with a lot of high frequency trading. This can be both good and bad. Professor Ozenbas feels that it is a natural conse-quence of more advanced technology, and the high fre-quency traders definitely provide more liquidity to the market. However, there are also traders who try to ma-nipulate the market by using strategies such as posting multiple orders every millisecond and then canceling 99.9% of them to show what they really are trying to do. Many traders in this market tend to push the prices up and then cancel them prior to placing their orders to sell the same stock.

Outisde Reading

In order to continue to up on the economy and news, books are a key asset. To keep up with news on a day-to-day basis, Professor Ozenbas recommends the Wall Street Journal or the Business Section of the New York Times.

On the other hand, if you want to have a more classic view of investing, reading the writings of Warren Buffett are your best bet. She also recommends Fault Lines: How Hidden Fractures Still Threaten the World Econ-omy by Raghuram G. Rajan. This book has won the 2010 Financial Times and Goldman Sachs Business Book of the Year Awards, and is an excellent read about the causes of the recent crisis and what to expect in the future.

CFA or MBA?

When asked about graduates pursuing a MBA or a CFA, Professor Ozenbas explained that graduates should obtain a Level 1 CFA as soon as possible. Level 1 should be easy material for a recent finance graduate. Levels 2 and 3 are more challenging, but are all useful to earn soon because they are quite valuable in the job mar-ket. As far as an MBA, she explains that a graduate should get two to three years of work experience before they pursue it. This way they will be accepted to a better

MBA program and it will be easier to find a job after. ☺

The Big Short: Inside the Doomsday Machine

By: Parth C. Shah

The Big Short, by legendary author Michael Lewis, provides a unique view into the 2007-08 crash of the hous-ing bubble. Contrary to most impressions, the book does not focus on the rise and fall of the sub-prime mortgage market -- or even the macro-economic events that helped create this monster. The book is a story about the misfits who dared to bet against the big banks, institutions – and it wouldn‘t be an exaggeration to say -- the entire financial world. This instant classic takes us into the lives of char-acters like Steve Eisman and Dr. Michael Burry. Lewis‘s beautiful narrative makes us fall into love with these mis-

fits. For example, D r . M i ch a e l Burry, who was literally one of the first few people to realize that this was a bubble, is also a socially awkward, medical school dropout from Stanford who suffers from autism and has only one eye. The book also a c k n o w l e d g e s other not-so-traditional char-acters of the fi-nancial world like the now famous Meredith Whit-ney, who pre-

dicted the fall of Citigroup and Lehman Brothers. Another is A. K. Barnett-Hart, a Harvard undergraduate who wrote her thesis on CDOs before the collapse.

In short, The Big Short is about characters. It‘s a story, and more than anything, it‘s a book meant for the financial geeks as well as anyone else. The movie rights for the book were bought by Brad Pitt‘s company even before it was published in March, 2010. Perhaps reading it will give you the right to say ―I read the book‖ when you and your friends go to see it transformed into a block-buster movie. Lewis‘s book is a beautiful read meant for everyone, and no one should be intimidated for not know-

ing what a CDO is. ☺


BOOK REVIEW

Faculty Spotlight: Dr. Vidya Atal


Dr. Vidya Atal is an Assistant Professor in the

Department of Economics & Finance at Montclair State

University. Dr. Atal began teaching at MSU in Fall

2010. She currently teaches Principles of Microeconom-

ics and Macroeconomics. Previously she was a teaching

assistant in the Department of Economics at Cornell Uni-

versity. There she taught

many courses on game

theory. She began her

undergraduate studies at

St. Xavier‘s College in

Kolkata, India. There she

received Bachelor‘s in

Economics. In 2005 Pro-

fessor Atal earned her

Masters in Quantitative

Economics at the Indian

Statistical Institute. She

later decided to further

her education in the

United States by studying

for her Master of Arts in

Economics at Cornell University. Two years later she

completed her education after receiving a PhD at Cornell

University.

―When I attended School in India all I wanted to

do was accounting‖ she explained. However St Xavier

College‘s policy wouldn‘t allow for women to study ac-

counting. When Dr. Atal found this out, she decided to

take the placement test for the Economics program. She

passed the placement test and realized that this would be

the route she would take. What inspired her to go for a

PhD was that she wanted to learn and use specific eco-

nomic models to assess economic intricacies.

Economics is something this professor lives for

when the topic game theory is discussed. Game theory is

a branch of applied mathematics that is used in the social

sciences, particularly economics. Professor Atal‘s main

interests are split between industrial organization, and

developmental economics. She is intrigued by industrial

organization because she enjoys studying economic mod-

els and assessing strategic behavior of two firms in the

market and how they are competing. Developmental eco-

nomics on the other hand involves constructing new poli-

cies for developing economies such as India and China.

She gives a perfect example of this when talking about In-

dia and female power. She explains how -- unlike in the

United States -- men are highly favored over women in

India. Dr. Kaushik Basu was her advisor, and is someone

who had a dramatic influence on her. A goal of hers is for

a developing economy to one day make use of her research

on economic policy.

One of Professor Atal‘s most recent and best pub-

lications is her paper entitled ―Do Journals Accept Too

Many Papers?‖ She explains that she likes it the most be-

cause it is ―short and sweet.‖ She loves the models pre-

sented in the paper, and feels that they can be very useful.

Dr. Atal has two papers in the works now, entitled ―A

Theory of Female Labor Supply,‖ and ―Patent Quality and

a Two-Tiered Patent System.‖

Throughout Professor Atal‘s career, she has at-

tended many different workshops and conferences. One of

her favorite and most productive was when she presented

papers in the Advanced Graduate Workshop on Poverty,

Development and Globalization. During this three-week

workshop, there was broad discussion on game theory

amongst various excellent speakers.

When I asked Professor Atal about the current

state of our economy, she mainly gave an answer that most

people give. ―It will be a long time before it recovers.‖

Her opinion on why the economy got to this point is that

so many people lost confidence, and just didn‘t care about

what would happen next. She believes that within the

next 3-5 years we should hopefully out of this mess, and

have an increase in employment, consumer confidence,

GDP, and housing. An MBA degree would certainly be

helpful for graduates within this time frame. This way

when employment rises, your percentage of being hired

really increases. Professor Atal feels that graduates should

have at least two years professional experience before they

begin an MBA program. She states ―unlike in the U.S.,

people in India who get jobs usually don‘t go back to

school at all.‖ ☺


Photo of Dr. Vidya Atal

Financial Management and Economics Society

Join Us!!!

The Financial Management and Economics Soci-

ety is a business student organization that of-

fers insights into the financial perspectives to

the MSU community and Visitors.

We welcome you to attend our weekly meeting

in University Hall 1030 on Wednesdays from

2:30 -03:45pm

Or

feel free to contact us via email.

Our Events for spring 2011 include:

Field trip to the Federal Reserve

Bank of New York /NYSE

Business Jeopardy

Investment Challenge

Bake Sales

Email:

[email protected]

Facebook group:

Financial Management and

Economics Society

Executive Board

President: Yisell Rodriguez

Vice President (I)– Lacy-Ann Dean

Vice President (E) -Rushira J. Solanki

Treasurer– Parth Shah

SGA Rep/ Secretary.– Milizenh Caraballo

Publicist– Paola Becerra


ACKNOWLEDGEMENT

We would like to thank Dr. Richard Lord for taking

his time to read all of the articles and providing edit-

ing recommendations.

We would also like to thank Dr. Susana Yu for her

organizational and motivational support that made

this edition of Alpha Newsletter possible.


FEEDBACK

Please complete a quick survey by

clicking on the link below and provide us

with any feedback and/or recommendations

on how we could improve Alpha newsletter.

CLICK TO PROVIDE FEEDBACK

Answer can be found on page 22

GAME CORNER

http://www.surveymonkey.com/s/WSLRS3H

Mr. Roger Salomon, Director of Technology

Services for the School of Business


As Director of Technology Services for the School of Business, Mr. Salomon is a part of the Depart-ment of Instructional Services & Technology. He earned a bachelors degree in communications from the State

University of New York at Buffalo. Later, he decided to return to New Jersey to study for his MBA in man-agement from Montclair State University. Roger‘s main role in the department is to support technology for faculty, staff, and students of the School of Business. One of his most important goals is to strengthen the connec-tion of the School of Busi-ness to the rest of the uni-versity.

Mr. Salomon discussed some of the projects that he and his staff are working on. He explained that the new

business building is being planned very carefully to incor-porate new technologies that will enhance both teaching and learning. For instance they plan to have a new pro-jection and control system in which writing on a black-board can be saved to any laptop or computer. This will allow students to have easy access to notes, videos, and PowerPoint‘s.

Mr. Salomon explains that current technology is where it should be in the classrooms on a basic level. Moving forward, he feels that a faster network needs to be developed for out-of-class access. Also he hopes to assist the university in making Blackboard and any other course management system a lot more stable and not have as many interruptions as it does at times. This can certainly affect student‘s academic performance.

Mr. Salomon feels that there is room for techno-logical improvement at MSU. Like other colleges, MSU can improve its central database to better support depart-mental and student needs. An example of this is mobile devices. He explains that mobile access to Montclair da-tabases is difficult at times, but can be extremely useful if improved.

As director of Technology Services for the School of Business, Mr. Salomon certainly has had many enjoy-able experiences -- as well as some difficult ones. At times working on multiple projects can be tough. How-ever he does his best to manage his time wisely and effi-ciently. Mr. Salomon explains that the most enjoyable

parts of his job are keeping the school websites updated, the content management system up to date, and always having an upgraded wireless network. Overall he appreci-ates working with faculty that are innovative in the use of technology in instruction.

As far as students using technology, Mr. Salomon explains that students are already using the available tech-nology effectively. However he does note that when it comes to technology, business students should learn to be professional specifically in texting. For example, students should spell out full words and avoid abbreviations in text messages. This is much more formal and business matter.

☺


Photo of Mr. Roger

Salomon

The New “New New Thing”

By: Parth C. Shah

In late 2009, a secondary market auction of shares of Facebook (FB) had a minimum offer price 77% higher than three months earlier. This is just one of the eye-popping indications floating around the new and upcoming sector of social media startups. FB of course leads the pack with a massive $50 billion valuation following a re-cent $450 million investment from Goldman Sachs. Many of us are looking forward to the ultimate public ―outing‖ of

a company that ironically thrives on other people sharing. However, many other social media startups are also very likely to go public in next 18 months, including Twitter, LinkedIn, Zynga, and Groupon. Each of these internet startups is valued in billions of dollars. As of now, these firms are thriving and expanding on a very liberal inflow of venture capital.

The New New Thing: A Silicon Valley Story, one of Michael Lewis‘s many bestsellers, captures this movement. Published in 2000, the focus of this book is the blitz of Sili-con Valley tech startups, more...Continued on page 20

Continued from page 19 famously known as the beginning of the ―dot com‖ bubble in the mid 1990s. What we are witnessing now deserves to be defined as a momentous growth sector itself. For once, this new sector of social media has created some-thing so unique that it has crept into almost every aspect of our life in very subtle ways. As a group, these firms have created a virtual world where thinking about future possibilities is overwhelming. From a purely financial point of view, all of them have already achieved impres-sive success.

As many of us have seen, all five firms have been making headlines in financial markets for quite a while now. However, the most recent headlines have followed one theme, ―come out already!‖ Yes, the wait for the IPOs is getting jittery. Traditionally, these sorts of start-ups want to issue their IPOs while the optimism is so high that there aren‘t many skeptics. Cashing out with IPOs is a virtually a right for these entrepreneurs.

―For many of these companies, an IPO seems more like a bar mitzvah,‖ said an investor to The New York Times regarding Zynga. All five companies are overly cautious -- and rightfully so. One theory is that

they are all waiting for FB to go public or do something shocking. They are counting on the belief that FB‘s fi-nancial statements will show such an impressive outlook that they will be able to benefit from the hype. However, that belief is a very wild speculation that is discounted among more sober observers. If this is one of the alterna-tives for the four smaller firms, then it may be quite a while until we see any action. FB and its founder Mark Zuckerburg have repeatedly denied an IPO until 2012. Especially with the current infusion of cash from Gold-man Sachs, the claim doesn‘t seem like a diversion.

Another theory is that Zynga, Groupon, and LinkedIn are very likely to go public before the end of 2011. Just recently the news has broken about big Wall Street banks‘ executives traveling to Illinois to present Groupon with underwriting bids. At about the same time, Groupon also made headlines by declining a $6 bil-lion buyout bid from Google. The bold leaders of Grou-pon might have some second thoughts now that Google is coming out with its own version of discount coupon site. Hence, Groupon is preparing for an approximately $15 billion IPO launch to raise cash and finally go public.

Zynga is another firm that shows prospects for an IPO before the end of 2011. Zynga is thriving in the internet gaming business; most notably with Farmville,

one of the most popular games online. Zynga is also run-ning on cash from venture capital and its stock is trading in secondary markets. Based on recent trades, Zynga is

valued at around $5 billion. In addition, the company has acquired a few small gaming companies around the US and has also surpassed the largest publically-traded online gaming company Electronic Arts with over 320 million subscribers. Despite the sound picture that these numbers show, Zynga has its share of risks, starting with some con-troversies regarding the nature of their ads. Buzzing blo-gosphere about Zynga and FB having conflicts regarding Farmville on FB is another significant add-on to the risk. Despite its share of risks, the secondary market seems to be optimistic looking forward.

LinkedIn is the oldest of the bunch with its launch in 2003. LinkedIn is also a fairly smaller bet with around 90 million users, who use it mainly for professional net-working. Currently LinkedIn is seeking advice from JP

Morgan & Chase and Morgan Stanley regarding an IPO. It's almost certain that LinkedIn will file papers for an IPO in very near future. In addition, LinkedIn stock is also being traded in the secondary market, which values the company at $3 billion. Again, LinkedIn would fall in the category of early IPOs, possibly before the end of 2011.

Then there is Twitter, which is very likely to take a different path. Twitter is another social phenomenon,

with about 175 million users. Twitter has surged in popu-larity and has also become an intriguing part of the social media culture. However, Twitter...Continued on page 21


Continued from page 20 and its leaders aren‘t anticipating an IPO. On the con-trary, Twitter is looking forward to an easy way out with a buyout. Many venture capitalists – including FB itself -- have shown interest and valued the company at nearly $3 billion. Twitter is also shows tremendous growth considering its very recent birth.

Finally, FB is the eight hundred pound gorilla in the room. FB for a long time has received great interest from investors. The moment to remember was of course

the gesture of immense confidence that the gurus at Mi-crosoft showed by investing $250 million and valuing FB at a whopping $15 billion. Although $15 billion looks like a bargain now, it was a shocking gesture in late 2007. There are some secondary stock trading data to support the optimism. More than half a dozen sources have con-firmed FB‘s revenues at around $800 million for 2009 and $1.9 billion for year 2010. Some financial data leaked just recently showed that FB‘s profit margin is around 30%. Again, since this is all unofficial data, there is no way to confirm them due to FB‘s ironic shyness for its own pri-vacy. Another thing to remember is that FB is very, very unlikely to have its ―bar-mitzvah‖ until 2012. Mark Zuckerburg, founder of FB has said that repeatedly.

I could go on forever documenting wild and some not-so-wild speculations regarding these companies; and it‘ll probably change in the next minute, day, or week. Originally, I had planned to write an informational and factual article on this new sector; but, based on my re-search, I realized just how much of this information is wild speculation. For one, we don‘t have an administra-tive business plan for any of these companies. Second, we don‘t have enough data to estimate future growth or cash flows to value the company. The last and most important thing to remember is the fear of ―Old G‖ in the business. Yes, we can‘t ignore the threat Google poses to these companies.

Each of these five companies bites into Google‘s market share directly or indirectly. Google and FB‘s competition is fairly obvious and apparent with FB now getting more hits than Google. Silicon Valley has its own

way of measuring rivalry between two companies: by ob-serving who is picking up the most talented and the brightest stars in computer programming, engineering, math, and science. And according to that measure, FB is snatching away the best of the potential talent out there. It‘s almost like the most recent team that won a national championship picking up the best football talent coming out of high schools. However, Google isn‘t going to fade. Google is involved in many different sectors and is funda-mentally sound, with a very profitable business plan, cur-rent expansion in smart phones‘ market, and some great acquisitions like YouTube. Google is of course also in competition with every single one of these social media startups. Google is a like a big dog that‘ll bite away their share if they aren‘t careful. The prospect of Google‘s com-petition poses considerable risk for future investors.

It is also clear that business networks like Bloomberg and CNBC aren‘t making strong claims re-garding these companies. It‘s probably a good thing that most institutional investors and industry pros are being cautious about making any such claims. During a recent encounter on CNBC, for example, a proponent of FB‘s valuation at $50 billion actually denied buying FB stocks at the current high price for his own portfolio.

In the end, I emphasize that most of the numbers and beliefs described in this article are speculative. Yet, my research has led me to two key conclusions. First, it‘s an extremely open subject and is needs to be studied by future financiers. The fact that this new sector has its own unique dimensions not experienced in the past tells us that this is ―the NEW NEW thing." Secondly, and most im-portantly, I learned that this can quite possibly be the boom or the bubble of the next coming decade. I am as-suming many of you like myself have wondered what it would have been like to experience the housing or the dot-com bubbles first hand and have a perspective on it. Hav-ing an original thought because the market doesn‘t have a lot of past data or events to forecast on is an exciting thing. Having an educated perspective on this is a great learning opportunity for myself and most of us finance and

business related students. ☺


Find the differences answers: ALPHA Staff

Editor in Chief

Stefan Genzor

[email protected]

Assistant

Editor

Matt Cartagena

[email protected]

Contributing Writers

.

Andre Sigismondo

sigismondoa1@mail.

montclair.edu

Parth Shah

[email protected]


Crossword Puzzle answers:

Down:

I. Economy

II. Profit

III. Risk

IV. WallStreet

VII. Bernanke

VIII.Dollars

X. Derivatives

XIV. Alpha

XV. China

Across:

V. Madoff

VI. Cost

IX. Market

XI. Entrepreneuer

XII. Debt

XIII. Finance

XVI. Arbitrage

XVII. GDP

XVIII. S&P500

mailto:[email protected]

INVESTOR’S CORNER

TECHNICAL ANALYSIS

Indicators and Oscillators

On-Balance Volume

The On-Balance Volume Indicator (OBV) is used to measure the positive and negative flow of volume in a security, relative to its price over time. It is a simple measure that keeps a cumulative total of volume by add-ing or subtracting each period's volume, depending on the price movement. The idea behind this indicator is that

unusual volume often precedes price movement, so if a security is seeing an increasing OBV, it is a signal that volume is increasing on upward price moves. Decreases mean that security is seeing increasing volume on down days. Continued on pg 24


By: Stefan Genzor

What is Technical Analysis? Technical Analysis is a method of evaluating securities by analyzing statistics on market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical analysis is based on three assumptions:

1.The market discounts everything 2. Price Moves in trends 3. History tends to repeat itself

The Market Discounts Everything

A major criticism of technical analysis is that it only con-siders price movements, ignoring the fundamental factors of the company. However, technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price move-ment, which technical theory views as a product of the supply and demand for a particular stock in the market.

Prices Move in Trends

In technical analysis, price movements are assumed to fol-low trends. After a trend has been established, the future

price movements are likely to repeat the trend than not. Most technical trading strategies are based on this as-sumption.

History Tends to Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movements. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to react consistently to similar market stimuli over time. Technical analysts use chart patterns to analyze mar-ket movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate pat-terns in price movements that often repeat themselves.

http://www.investopedia.com/university/technical/techanalysis1.asp

INVESTOR’S CORNER

TECHNICAL ANALYSIS (cont’d) Continued from page 23

Accumulation/Distribution Line

One of the most commonly used indicators to determine the money flow of a security is the Accumulation/

Distribution Line (A/D line). It is similar to OBV Indica-tor but, instead of only considering the closing price of the security for the period, it also takes into account the trad-ing range for the period. This may provide a more accurate picture of money flow than of balance volume. An upward trending line is a signal of increasing buying pressure, as the stock is closing above the halfway point of the range. A line trending downward is a signal of increasing selling pressure in the security.

Average Directional Index

The Average Directional Index (ADX) is a trend indicator used to measure the strength and momentum of an exist-ing trend. This indicator's main focus is not on the direc-

tion of the trend, but with the momentum. When the ADX is above 40, the trend is considered to have a lot of direc-tional strength - either up or down, depending on the cur-rent direction of the trend. Extreme readings to the upside are considered quite rare compared to low readings. When the ADX indicator is below 20, the trend is considered to be weak or non-trending.


Aroon Indicator

The Aroon Oscillator is a technical indicator used to measure if a security is exhibiting a trend, and the magni-tude of that trend. The Indicator can also be used to iden-

tify when a new trend is set to begin. The indicator is comprised of two lines: an Aroon-up line and an Aroon-down line. A security is considered to be in either an up-trend or a downtrend when the Aroon-up line is above 70, along with being above the Aroon-down line.

MACD

The Moving Average Convergence Divergence (MACD) is one of the most well-known and widely used indicators in technical analysis. It is used to signal both the trend and momentum behind a security. The indicator is com-

prised of two exponential moving averages (EMA), cov-ering two different time periods, often a 12-period and 26-period EMA, which help to measure momentum in the security. The idea behind this momentum indicator is to measure short-term momentum compared to long-term momentum to help determine the future direction of the asset. The MACD is simply the difference between these two moving averages. Continued on pg 25

http://www.investopedia.com/terms/m/moneyflow.asp

http://www.investopedia.com/terms/t/trend.asp

http://www.investopedia.com/terms/a/aroon.asp

INVESTOR‘S CORNER

TECHNICAL ANALYSIS (cont’d) closing near the lows of the trading range. When this occurs, it signals continued momentum and strength in the direction of the prevailing trend. The Stochastic Os-cillator is plotted within a range of zero-100, and signals overbought conditions above 80 and oversold conditions below 20.

The goal of every short-term trader is to deter-

mine the direction of a given asset's momentum and to

attempt to profit from it. There have been hundreds of

technical indicators and oscillators developed for this spe-

cific purpose. While we have covered only a few, they can

certainly help you when picking your buy/sell points.

Now you can go forward and learn more - you are one

step closer to being able to incorporate powerful technical

indicators into your own strategies. ☺

References:

The information above was obtained at:

http://www.investopedia.com



Relative Strength Index

The Relative Strength Index (RSI) is used to signal over-bought and oversold conditions in a security. The indica-tor is plotted between a range of zero-100, where 100 is the highest overbought condition and zero is the highest

oversold condition. The RSI helps to measure the strength of a security's recent up moves, compared to the strength of its recent down moves. This helps to indicate whether a security has seen more buying or selling pressure over the trading period.

Stochastic Oscillator

The Stochastic Oscillator is another well-known momen-tum indicator used in technical analysis. In an upward

trend, the price should be closing near the highs of its trading range. In a downward trend, the price should be

http://www.investopedia.com/terms/o/overbought.asp

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