Intersecting Minds: Education, Business and Technology at the North Carolina State Jenkins Graduate School of Management

Study Abroad Discussion

February 22, 2010
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On Friday, I had an opportunity to sit down with two first-year MBA’s who are planning to study abroad this fall. The conversation is in the YouTube below:

Listening to Derek and Emily talk about their excitement and what they hope to get out of the program was nice for me, too. Their thoughts reminded me again why I was so excited to go to Denmark and what I gained out of the trip on the other end. Cross-cultural immersion is a powerful experience, one that opens your eyes to just how big the world is, and how relativistic expectations and happiness can be. I’m a better, more thoughtful person for having gone through it, and I’m sure that while those two will have their own unique experiences, they will report similar conclusions when they return.

Derek and Emily are in for an amazing trip, and I wish them both the best.


Thursday Quick Links

February 4, 2010
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Today is all about jobs, jobs, and the complete lack of jobs:

– The Bureau of Labor Statistics revised the number of jobs lost during the recession up by 824,000 bringing the total job losses to nearly 8 million people. Mike Shedlock has a nice analysis of the BLS’ Birth-Death model and why this happened over at his website, Global Economic Analysis.

Jobless claims also rose to 480,000 in January, another sign that the employment situation is not improving. Employment will be the biggest drag on any type of economic recovery America hopes to experience. If employers don’t start hiring soon, expect this miraculous bull run in equities to end soon enough.

Royal Dutch Shell announced it will cut 1,000 more jobs on slightly disappointing 4th quarter numbers.

Greece’s debt troubles are continuing to worsen, according to the Wall Street Journal.

Tuesday Quick Links

February 2, 2010
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– The Obama Administration is set to make $30B available to community banks for small business lending. The proposal comes as part of a broader package of ideas to boost job creation amongst small businesses.

– Former Treasury Secretary Henry Paulson explains the necessity of TARP and other government bail-outs in the wake of Lehman collapsing: “We easily could have had unemployment of 20 percent,” he said. “That would have meant millions of additional jobs lost, millions of additional homes lost, trillions more lost in savings. It would have been terrible.” I know I supported the stimulus on this blog, and this is precisely why I did. The alternative was too terrible to contemplate.

– As the global economy improves, more focus will shift to rising oil prices.

McKinsey agrees with me that deleveraging has the potential to be both a very painful process and a long-term drag on our economy.

Some Thoughts on the Economy

January 28, 2010
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Last night, President Obama made his State of the Union speech to the nation, during which he spent nearly 30 minutes talking about jobs, the economy and our financial situation. He also outlined a number of initiatives to help create job and to begin reforming the financial system. Instead of breaking down those proposals though, I’d rather talk a bit about why I’m fundamentally pessimistic about any sort of near-term economic recovery.

It’s obvious to anyone who has been paying attention that the American economy is in real trouble. We are burdened by a debt level that will soon reach 100% of GDP. Unemployment is very high at 10% and not likely to come back anytime soon. The real estate market is still relatively unstable. While the stock market has had a nice bull-run, many analysts believe the Dow is oversold. And there are several advanced foreign economies (the P.I.I.G.S) who are also facing a pile of debt and the real possibility of becoming insolvent.

Lets break these down a bit. The debt in and of itself isn’t a direct or immediate threat to our situation, but as it continues to grow unabated, it will continue to exert more and more pressure on everything the United States wants to do, from funding services to fighting wars. While the debt level does not have an immediate impact on economic recovery, it sets the stage for later points.

The fallout from the financial crisis has devastated the American workforce. These massive lay-offs capped a decade that had net negative job growth. In other words, many of these jobs are gone forever. The manufacturing sector has been pummeled, but other service sectors have shed jobs as well. These jobs aren’t coming back.

Even worse, the financial crisis exposed a hard truth about America. We are broke. At every level of society, we are out of money. The federal government is broke. The states are broke. Individual consumers are broke. One direct consequence of this situation is that consumers aren’t spending money. Consumer spending is the engine behind the American economy, accounting for up to 70% of our economic output. Now people aren’t spending money, and if they aren’t spending money, then businesses can’t grow and hire more people. We are witnessing the deleveraging of 30 years of out of control spending, and it’s not a pretty picture to watch unfold.

This alone would be enough to make me pessimistic, but there’s more. The real estate market is still in a highly volatile state. Once the Obama administration pulls out the tax credits and the Fed stops buying Mortgage-Backed Securities, there will be a vacuum of demand created. Oversupply is still the primary threat to the housing market, and I wouldn’t be surprised to see further falls in real estate prices as those policies expire. Another real estate collapse would have a hugely detrimental impact on the recovery. More homes underwater, and more borrowers trapped with payments they can’t afford.

Finally, activity in foreign economies poses a real threat to our recovery. There are five countries in Europe, Portugal, Italy, Ireland, Greece, and Spain, collectively known as the P.I.I.G.S, whose debt situation has become critical. Greece in particular is dangerously close to declaring insolvency. Spreads on their short-term bonds relative to the German bund have grown to nearly 350 basis points, a clear indicator that the country is in financial ruin. If Greece were to collapse, it would send shockwaves through the financial system. A meltdown in Greece could have a domino effect on other advanced economies featuring a cycle of ratings downgrades, higher yields and even more printing of money to pay for all the interest. Rapid inflation is a real threat in this scenario.

Other advanced economies are in creaky shape too. The UK has a well documented debt problem. And Japan’s debt is now at 220% of GDP, and they have experienced over twenty years of anemic economic growth. This is why our national debt matters. We are more vulnerable now to financial and economic shocks than we have been in decades. It’s a scary situation.

When I put all these pieces together in my mind, I see a bleak situation. These are not short-term problems that can be worked out in a matter of months. Paying off debt takes time. Building new economic sectors that can provide real long-term job growth takes time. Letting the oversupply on the housing market readjust will take time. The 2000’s were a rough decade, but the 2010’s could be even worse.

Wednesday Morning Quick Hits

January 27, 2010
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An exciting day lined up:

Apple is making a big announcement at the Yerba Buena Center in San Francisco later today. Many expect Steve Jobs to introduce the Tablet computing device. According to CNN, Jobs has been heard to say that this is, “the most important thing I’ve ever done.” Pretty big news.

The debt situation in Greece continues to worsen as spreads on Greek 10-year notes have reached new highs. This is definitely a situation to keep an eye on as Greece defaulting on its debt would send financial shockwaves throughout the global markets.

The Federal Reserve may consider halting its program to buy mortgage-backed securities in March. If this happens, it would be a huge test of the strength of the economic recovery.

– Toyota is dealing with a major body blow to its earnings recovery after announcing an unprecedented stoppage of US sales due to a faulty gas pedal. The recession hurts, but self-caused failure hurts even more, especially for a company whose reputation is built on quality.

– And oh yea, the President of the United States is delivering some little speech tonight. I think it’s called the State of the Union?? You can bet I’ll be watching that closely, and you probably should be too!

Tuesday Morning Quick Hits

January 26, 2010
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A mixed bag of news today:

S&P warned that Japan’s debt rating could be cut. This comes after the agency downgraded Greece’s debt earlier this year. Concern is growing that several advanced economies, including the United States, are in a bad situation with the amount of debt they are facing.

– On the bright side, Ford announced that it is adding 1,200 jobs to a plant in Illinois to gear up for production of its 2011 Explorer model.

– Also on the good news side, consumer confidence in the US is rising over hopes that the job market is improving. As the Bloomberg article notes, increased consumer confidence generally leads to increased consumer spending, a major driver of the economy.

– And on the downside, Verizon plans to cut 10,000 jobs after missing analyst’s fourth quarter sales expectations.

– Continuing with the jobs theme, Senate Democrats are considering a second jobs-focused stimulus bill valued at $80B. Of course there is controversy on whether or not the bill will actually create any jobs.

Almost There

December 19, 2009
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My head is completely full of ideas to write about: COP15 and the Great Debate; Lunch with the Danes; all the developments in the economy, health care legislation and financial reform. But right now all of us are a little overwhelmed with the finale of this trip.

We’ve been saying goodbye to people for almost a week now, and as each person leaves a part of the experience leaves with them. For the next 48 hours I’m going to stay away from the computer and just soak the last of it in. There will be time to write over the Holiday Break, and I’ll fill in those stories then, but for now, Merry Christmas, Happy New Year, Glædlig Jule og godt Nytår!

Nearing the End

December 6, 2009
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I’m coming home in 2.5 weeks. Wow. I’ve been living in Copenhagen for four months, just long enough to get into a groove here, and now I’m preparing myself to leave.

Nobody here really wants to think about it. We’ve all been having so much fun learning about each other and from each other, and as a result, the weeks have flown by and it’s already December 6th.

This experience has encompassed so many aspects of my life the last four months. I know that there will be a period when I need to unwind and decompress and digest the whole thing: the places, the people, the experiences, the knowledge, the joy and sorrow of meeting wonderful people and then having to say goodbye before you are ready. It’s a jumble right now, and one I still can’t quite wrap my head around.

In the meantime, I still have two finals to focus on. It’s surreal to have these real world concerns nagging at you while you’re in the middle of this strange adventure that has dislocated you from your natural environment. But the work needs to get done, the tests taken and passed and the papers written.

And then it will be time to go home. There is sweetness in that too. I know many of us are looking forward to seeing our friends and our families and our cultural comforts. But we also know that we won’t be the same, that Copenhagen will have impacted us and changed us for the better. We realize that we aren’t just Brazilians or German or Danish or Thai or Korean or Italian or French or American, but that we are global citizens. Even though we have differences, we are also connected by our humanity and our values and our goals. We have been living it every day for the last four months.

I know this blog post is a bit disjointed and all over the place, but I think that’s a reflection of my mind and my thoughts right now. I’m just trying to sit back and take it all in for the next several days.

The Home Stretch

November 30, 2009
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I’m back in Copenhagen after an amazing 5 day trip home to San Jose, CA for Thanksgiving break. We’re now down to just 3 weeks left in the semester, and it’s become very obvious that our time here is coming to an end. The final exams are coming in droves, and the Facebook invites to semester end parties are landing at an even more furious pace.

It’s very bittersweet to even contemplate the end of this experience. It’s been so jam packed with eventfulness, emotion and learning that it’s hard to digest it all, and I don’t think I’ll really come to terms with it until I’ve been back in the States for awhile.

But in the meantime I’ll be focusing on enjoying every hour I can here (even if I have my head buried in books at the library, which is quite likely over the next 10 days). After my brief excursion to the States, those aspects of Denmark that I really enjoy: biking to school, flødekartoffler, the library at CBS, and most importantly, my friends have come into sharper focus than ever. I couldn’t be happier with my decision to study here, and now I just want to sit back and enjoy it while I can.

Quick Update

November 19, 2009
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I know I’ve let this blog go silent for too long, but work has really piled up on top of me, and on top of that, I will be traveling for the next several days. It probably wasn’t the best idea to book all my trips at the end of the semester. D’oh.

But it is what it is, and I have to make the best of the situation. In any case, I’m off to Amsterdam in a few hours, and I promise to have a long blog post detailing our exploits complete with pictures of the experience.

Our time here in CPH is winding down. We only have about a month left to go, and I’ll be doing my best to document as much of it as I can. Have a great weekend everybody!

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