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MonthlyNewsletter

December2010

Quick Links:

Video IndexAbstract Index

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• Initial Public Offering Explained

• Introduction to Dividend Yields

VIDEO INDEX

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*ABSTRACT INDEX

• Asian IPOs Overtake the U.S.• Google’s Tax Tricks• Lining Up for Free Apps• Mind-Reading Movies• Innovating with Open Books and Shared Profits• Ivy League Endowment Difficulties• Princeton University vs. Princeton Borough• Responsible Banking with CDFIs• Derivatives in Disguise• The Dangers of ETFs

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• Asian IPOs accounted for 66 percent of all money raised globally with $134 billion.

• The U.S. sunk to its lowest IPO share in history at 11 percent.

• A stagnant American economy and rapid

growth of Chinese and Indian companies led to the dramatic IPO role reversal.

Asian IPOs Overtake U.S.

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• Why are IPOs important to companies?

What do you think?

• What does the lag in the number of U.S. IPOs imply?

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• Only 2.4 percent of the $12.5 billion Google earned overseas since 2007 was taxed.

• Google routes all its global earning through its Dublin office, where it is then funneled through a shell company in Holland then on to Bermuda.

• While perhaps unethical, Google’s tax dodging

is entirely legal.

Google’s Tax Tricks

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• How is Google able to legally take advantage of such tax breaks?

What do you think?

• Is Google acting ethically in using different tax laws to its benefit?

Photo courtesy of Thomas Sommeregger

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• Two college grads devised a smartphone app to estimate line wait times, but initially lacked the data to make it work.

• Line Snob was released as a free app on the iPhone marketplace and rewarded users with coupons every time they updated a line time.

• The company makes money by charging hotels and casinos a monthly fee to use the app to announce line times for buffets or shows.

Lining Up for Free Apps

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• What key entrepreneurial characteristics seemed to drive Alder & Chabbott?

What do you think?

• What’s the major challenge for Line Snob going forward?

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• Developer NeuroSky uses MindWave technology for a product that allows the wearer to alter the outcome of a film using their brainwaves.

• NeuroSky tested the product with a version of Rocky IV in which users could change the outcome of the movie’s climactic fight.

• NeuroSky’s goal is to produce original films that operate based on the collective thoughts of an audience.

Mind-Reading Movies

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• Why would the film industry experiment with product customization?

What do you think?

• How long will a product like NeruoSky be in the introductory stage?

Photo courtesy of Cory Doctorow

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• Studies show that open-book management and profit sharing increase employee innovation.

• Once all employees are on a level playing field, great ideas can come from anywhere.

• Only 1 percent of American companies grant employees access to accounting records or participate in profit sharing.

Innovating with Open Books and Shared Profits

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• Why do employees react so favorably to open-book management?

What do you think?

• Why do companies restrict employee access to accounting records and profit sharing?

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• David Swensen’s management of Yale’s endowment grew substantially for decades, and other Ivies copied his methods.

• Once the financial crisis hit, elite universities had to borrow billions since most of their cash was tied up in complex investments.

• Harvard’s 27.3% nosedive prompted cuts at the student level, including reducing shuttle bus service and eliminating hot breakfasts.

Ivy League Endowment Difficulties

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• What lesson does this story teach us?

What do you think?

• What other important financial principle comes to mind from the abstract?

Photo courtesy of John Terhorst

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• As an educational institution, Princeton University’s land holdings are tax-exempt.

• Princeton Borough estimates the university could contribute more than $30 million to the community if taxed properly.

• The university claims the financial crisis took a big chunk out of its endowment, which still stands at a comfortable $12.5 billion.

Princeton University vs.Princeton Borough

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• Should wealthy universities like Princeton be exempt from local taxes?

What do you think?

• Are business practices different at private universities than at private sector businesses?

Photo courtesy of Doug Kerr

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• Community development financial institutions (CDFIs) provide loans and financial education to small businesses in impoverished areas.

• CDFIs take an active role in the businesses of their borrowers in order to ensure their loans get paid back.

• First Lady Michelle Obama based her healthy food initiative on a Pennsylvania CDFI that financed more than 85 health food stores.

Responsible Bankingwith CDFIs

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• What seems to be the winning formula for CDFIs success?

What do you think?

• As the economy improves, will CDFIs be able to survive?

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• Though instrumental in precipitating the financial crisis, derivatives can still be sold to individuals when bundled with bonds.

• Unsuspecting investors often buy these complicated securities thinking they are standard bonds.

• Investors are snatching up these structured notes, with sales of the securities jumping 58% to $31.9 billion through August.

Derivatives in Disguise

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• Should investors be told of all risks of investments sold by brokers?

What do you think?

• What lesson do investors need to remember from the financial crisis of 2008?

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• Exchange-traded funds (ETFs) are bundles of stocks, bonds or other investments that trade like a single stock.

• Though ETFs can be a safe way to diversify, their growing popularity is spawning confusing new ETFs that function unpredictably.

• ETFs can be closed if they fail to raise enough money and sometimes end up with returns far lower than the index they track.

The Dangers of ETFs

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• What’s the best advice for investors wanting to invest in ETFs?

What do you think?

• Do ETFs look like a fad investment?

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