New Bookmarks
Year 2006 Quarter 3:  July 1 - September 30 Additions to Bob Jensen's Bookmarks
Bob Jensen at Trinity University

For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm
 

Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   
 

Bob Jensen's various threads --- http://www.trinity.edu/rjensen/threads.htm
       (Also scroll down to the table at http://www.trinity.edu/rjensen/ )

Click here to search this Website if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Home Page is at http://www.trinity.edu/rjensen/

Choose a Date Below for Additions to the Bookmarks File

August 31

July 31

September 30 

New Bookmarks on September 30, 2006

Bob Jensen's New Bookmarks on September 30, 2006
Bob Jensen at Trinity University 

Click Here for Tidbits and Quotations Between September 1 and September 30

Click Here for Humor Between September 1 and September 30

Foilage in New Hampshire's White Mountains --- http://www.nhliving.com/foliage/index.shtml
Fall Foilage --- http://gonewengland.about.com/cs/fallfoliage/l/blfoliagecentrl.htm
Foilage Pictures --- http://photo.net/travel/us/ne/foliage

For earlier editions of Tidbits go to http://www.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm
 

Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   
 

Bob Jensen's various threads --- http://www.trinity.edu/rjensen/threads.htm
       (Also scroll down to the table at http://www.trinity.edu/rjensen/ )

Click here to search this Website if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Home Page is at http://www.trinity.edu/rjensen/

Click Here for Tidbits and Quotations Between September 1 and September 30

Click Here for Humor Between September 1 and September 30

Bob Jensen's complete set of Enron Updates are at http://www.trinity.edu/rjensen/FraudEnron.htm#EnronUpdates

Bob Jensen's threads on the Enron scandal are at http://www.trinity.edu/rjensen/FraudEnron.htm

Everyone is entitled to their own opinion, but not their own facts.
Senator Daniel Patrick Moynihan --- FactCheck.org --- http://www.factcheck.org/

The way to do research is to attack the facts at the point of greatest astonishment.
Celia Green as quoted by Mark Shapiro at http://irascibleprofessor.com/comments-06-28-06.htm

Asked to define "truthiness," [Comedy Central's Stephen] Colbert tells [CBS Sixty Minute's interviewer Morley] Safer, "Truthiness is what you want the facts to be as opposed to what the facts are. What feels like the right answer as opposed to what reality will support." --- http://www.cbsnews.com/stories/2006/04/27/60minutes/main1553506.shtml

This is what makes "truthiness" a perfect word for postmodernism and its postpositive critical theory:

In particular, a dominant trend in critical theory was the rejection of the concept of objectivity as something that rests on a more or less naive epistemology: a simple belief that “facts” exist in some pristine state untouched by “theory.” To avoid being naive, the dutiful student learned to insist that, after all, all facts come to us embedded in various assumptions about the world. Hence (ta da!) “objectivity” exists only within an agreed-upon framework. It is relative to that framework. So it isn’t really objective....
Scott McLemee, "The Power of Postpositive Thinking," , Inside Higher Ed, August 2, 2006 --- http://www.insidehighered.com/views/2006/08/02/mclemee 

I have the honor of chairing the committee that will choose the recipient of the American Accounting Association’s 2007 AAA Innovation Accounting Education Award.

This award is doubly significant because of a $5,000 prize, courtesy of the Ernst & Young Foundation, and improved chances of publication in Issues in Accounting Education.

We encourage you to send in submissions via instructions now available at http://aaahq.org/awards/award6.htm

Members of the Selection Committee are shown below:

EC Liaison

Chair --- Bob Jensen rjensen@trinity.edu

Bob Jensen's Video Collection of Accounting Research at the University of Mississippi

Over the years I videotaped many presentations at meetings, particularly AAA meetings and some EAA meetings. Most of the presentations are by accounting professors and/or leaders from industry.

I've now donated these tapes to be archived at the University of Mississippi which seems to have the largest library of accounting history, particularly history of accounting in the U.S.

The tapes include some classic presentations and some real duds. In some cases the speakers like Ray Sommerfeld are now dead. Their presentations bring tears to the eyes of some old professors like me.

It may take a while for Dale to get these tapes cataloged, and eventually he may have digital copies of selected presentations available for distribution. In other cases, scholars may have to travel to Mississippi to view the presentations.

Except in the areas of technology, it's amazing how many problems in accounting are recycled without being able to solve systemic problems such as those illustrations listed at the following two links:

http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

http://snipurl.com/JensenTheory

-----Original Message-----
From: Dale Flesher [mailto:acdlf@olemiss.edu] 
Sent: Wednesday, May 31, 2006 2:20 PM
To: Jensen, Robert
Subject: RE: AAA Videos

Bob:

I have just received two boxes of videotapes from you (144 tapes to supplement the 50+ you sent a couple of months ago).  This looks like a gold mine of information.  You had mentioned earlier that you would recommend some for digitization.  I have discussed this possibility with the librarian in charge of our AICPA National Library of the Accounting Profession and he indicates there are no major problems in digitizing the videos and making them available to the general public, although he wasn't sure about copyright restrictions. 

To ease his initial fears about copyright, we might begin with some videos of you speaking, since you could grant copyright release from both the photographer and the provider of information.

Let me know your thoughts, and thanks for the donation.

Dale Flesher

Making Tutorial Videos From Computer Screens:  Camtasia versus Captivate

September 27, 2006 message from Bob Jensen

Hi Dan,

I have a Camtasia video tutorial on how to use Camtasia. It is one of the easiest video production programs I've ever used. Initially I did not like it because you could only produce avi files that could only be viewed by users having a Camtasia codec viewer. What changed my mind is later versions of Camtasia Producer that allowed us to compress the avi files into common video formats, including wmv MS Media Player videos that can be played by virtually anybody in the world. (I don't much care for Real Media compressions, but since this option preceded the wmv compressor, I produced some rm videos before Producer was capable of wmv compressions.)

My tutorial (badly in need of updating) on how to use Camtasia is at http://www.trinity.edu/rjensen/HelpersVideos.htm 

You can view some of my Camtasia tutorials that were produced under older and current versions of Camtasia at the following links:

Accounting Theory --- http://www.cs.trinity.edu/~rjensen/video/acct5341/ 

AIS (mainly MS Access and Excel tutorials) --- http://www.cs.trinity.edu/~rjensen/video/acct5342/ 

I've not yet tried the forthcoming upgrade (in October) that will allow us to do even more exciting things with Camtasia. One of the huge limitations of older versions of Camtasia was that only computer screen shots could be put into Camtasia videos. It is now possible to add other scenes to your computer-screen shots.

Bob Jensen

September 27, 2006 message from Richard Campbell [campbell@RIO.EDU]

Bob and others:

Let me summarize the differences and similarities between Camtasia and Captivate. I use both and I will upgrade to both Camtasia 4 and Captivate 2 next month. On Monday, I am allowed to talk about the features of Camtasia 4 and I will be doing a couple of web conferences about the new release.

Camtasia:

1. Full-motion video recording - records like a videocamera 2. Callouts can be added in post-production.

3. SCORM output is possible. This means that you can add a Camtasia-generated movie to a WebCT course and verify that a student has viewed the movie. In Camtasia 3.0, the quiz output does not properly record in the WebCT gradebook however.

4. Superior customer support. I am not saying that because I am a beta tester. They will freely admit any bugs and offer free updates to their software between releases.

 

Captivate:

1. Stop-action recording - records stop-action, individual frames. Like an early Disney animation.

2. Easier to add callouts and other actions to individual slides. Callouts are automatically added as you record screen activity. If you do a "File>Save As" that caption is automatically added.

3. In Respect to SCORM In Captivate 1.0, the quiz output does not properly record in the WebCT gradebook however.

4. Inferior customer support. After the Adobe - Macromedia merger, they fired a lot of the Captivate team and shipped development off to India.

5. Captivate is a superior tool in respect to SIMULATIONS. The simulation below was done in Captivate 2.0.

http://www.mark-fletcher.co.uk/cp-sample/sample.htm

More later. I'll show some stuff I have done in Camtasia 4.

Richard J. Campbell
School of Business
218 N. College Ave.
University of Rio Grande
Rio Grande, OH 45674
Voice:740-245-7288
http://faculty.rio.edu/campbell

"What’s a Couple of Hundred Trillion When You’re Talking Derivatives?" by Floyd Norris, The New York Times, September 23, 2006 --- http://www.nytimes.com/2006/09/23/business/23charts.html

Everett McKinley Dirksen, the Senate Republican leader in the 1950’s, is supposed to have said, “A billion here and a billion there, and pretty soon you’re talking real money.” What would he have thought of derivatives today?

The International Swaps and Derivatives Association, a trade group, reported this week that the outstanding nominal value of swaps and derivatives at the end of June was $283.2 trillion.

Compare that with the combined gross domestic product of the United States, the European Union, Canada, Japan and China, which is about $34 trillion. The total value of all homes in the United States is about the same amount.

To be sure, notional value is an exaggerated term as it greatly overstates the amount at risk in many contracts. But the growth rate is real, and in the fastest-growing area of swaps — credit default swaps — notional value is closer to the amount at risk, because such swaps promise to make up the losses if a borrower defaults on the notional amount.

The value of outstanding credit default swaps doubles every year — a trend that must eventually stop — and now equals $26 trillion. That is about the same as the total amount of bond debt in the United States, and corporate debt, on which most credit swaps are traded, comes to just $5.2 trillion.

The credit derivatives cover the risks of default by individual companies, and offer insurance against default for bond indexes and specified bond portfolios.

The growth of the market has forced the swaps and derivatives association to change the way its credit swaps work. It used to be that if a company defaulted, the writer of a credit swap would have to pay par value for the bond he had guaranteed, and could then sell the bond to reduce his losses.

But in some cases defaults led to bond rallies, as those who had purchased credit swaps scrambled to get bonds to deliver. Now traders can choose cash settlements, with the amounts to be paid determined through auctions.

Until 1997, the association provided separate numbers on currency and interest rate contracts, but innovations blurred the distinction between those categories, and now it publishes a combined total. At the end of June, the figure was $250.8 trillion, up 25 percent over the previous 12 months.

Growth in that market slowed markedly early in this decade, as worldwide markets cooled, and there was even one annual decline, from mid-2000 to mid-2001. But growth picked up in 2002 as economies began to recover.

The volume outstanding of equity derivatives is rising by about 30 percent a year, and now totals $5.6 trillion. It could go farther, with world stock market capitalization now about $41 trillion, according to Standard & Poor’s.

Robert Pickel, the chief executive of the association, said that the growth in derivatives enables “more and more firms to benefit from these risk management tools.” On the other hand, the situation allows more and more traders to load up on risk if they choose, and hedge funds have become major derivatives traders.

The combination of large unregulated hedge funds trading ever larger amounts of unregulated derivatives in nontransparent markets makes some people nervous. But so far, anyway, little is being done to change the situation, and nothing devastating has happened to markets.

Continued in article

Jensen Comment
One of the main differences between a "financial instrument" versus a "derivative financial instrument" is that the notional is generally not at risk in a "derivative financial instrument." For example if Company C borrows $600 million from Bank B in a financial instrument, the notional amount ($600 million) is at risk immediately after the notional is transferred to Company C. On the other hand, if Company C and Company D contract for an interest rate swap on a notional of $600 million using Bank B as an intermediary, the $600 million notional never changes hands. Only the swap payments for the differences in interest rates are at risk and these are only a small fraction of the $600 million notional. Sometimes the swap payments are even guaranteed by the intermediary, thereby eliminating credit risk.

So where's the risk of a derivative financial instrument that caused all the fuss beginning in the 1980s and led to the most complex accounting standards ever written (FAS 133 in the U.S. and IAS 39 internationally)?

Often there is little or no risk if the derivative contracts are held to maturity. The problem is that derivatives are often settled at fair values before maturity at huge gains to one party and huge losses to the counterparty. For example, if Company C swaps fixed-rate interest payments on $600 million (having current value risk with no cash flow variation risk) for variable-rate interest payments on $600 million (having cash flow variation risk but no market value variation risk), Company C has taken on enormous cash flow risk that may become very large if interest rates change greatly in a direction not expected by Company C. If Company C wants to settle its swap contract before maturity it may have to pay an enormous amount of money to do so either to counterparty Company D or to some other company who will take the swap off the hands of Company C. The risk is not the $600 million notional; Rather the risk is in the shifting value of the swap contract itself which can be huge even if it is less than the $600 million notional amount.

A tutorial on how swaps are valued is available at
http://www.trinity.edu/rjensen/acct5341/speakers/133swapvalue.htm
Illustrations of how this is accomplished are provided in the 133ex05a.xls Excel workbook at
http://www.cs.trinity.edu/~rjensen/ 

Perhaps derivative financial instrument risk is even better illustrated by futures contracts. Futures contracts are traded on organized exchanges such as the Chicago Board of Trade. If Company A speculates in oil futures on January 1, there is no exchange of cash on a 100,000 barrel notional that gives Company A the right to sell oil at a future date (say in one year) at futues price (say $80 per barrel futures price on January 1) when the beginning spot price (say $85) is greater than the forward price. The spot-futures prices differ by an amount called basis. Basis becomes zero at the settlement date. Futures prices on a given contract vary from day to day depending upon market price outlook. Basis is typically negative in what is termed a normal backwardation market. It can be positive for options contracts, however, in a contango market. The terms backwardation and contango are explained at http://www.trinity.edu/rjensen/acct5341/speakers/133glosf.htm 

Futures contracts are unique, relative to forward contracts and options contracts, in that futures contracts are settled in cash for daily changes in the futures price of a contract. Daily settlement is based on the changes in the futures price of the particular contract. If the futures price of this December 31 contract is $80 on January 1 and $75 on January 2, Company A must provide $500,000 = ($80-$75)(100,000 barrels) to its margin account (for the benefit of the counterparty) on January 2 even though the futures contract itself does not mature until December 31. On January 3 there may be more cash outflow or inflow depending upon how the futures price of this contract changes between January 3 and January 4.

Note that the risk is not the gross value of the entire notional of 100,000 barrels of oil. The risk is affected by the size of the notional, but the gain or loss is determined by the change in the futures prices rather than total spot price per barrel. The risk is in the change in the futures prices from day to day. In the case of futures contracts, the profit or loss is the netting of the daily settlements of cash inflows and outflows to the margin account.

I provide illustrations of futures contract accounting versus options contract accounting under FAS 133 at http://www.trinity.edu/rjensen/caseans/285case.htm
More illustrations are provided in the 133ex01a.xls through 133ex10a.xls Excel workbooks at http://www.cs.trinity.edu/~rjensen/

Hence, derivative contracts may have enormous risks even though the notionals themselves are not at risk. Prior to FAS 133 these risks were generally not booked or even disclosed. In the 1980s newer types of derivative contracts emerged (such as interest rate swaps) in part because it was possible to have enormous amounts of off-balance-sheet debt that did not even have to be disclosed, let alone booked, in financial statements. Astounding frauds transpired that led to huge pressures on the SEC and the FASB to better account for derivative financial instruments.

Most corporations adopted policies of not speculating in derivatives by allowing derivatives to be used only to hedge risk. However, such policies are very misleading since there are two main types of risk --- cash flow risk versus value risk. It is impossible to simultaneously hedge both types of risk, and hedging one type increases the risk of the other type. For example, a company that swaps fixed for floating rate interest payments increases cash flow risk by eliminating value risk (which it may want if it plans to settle debt prior to maturity). The counterparty that swaps floating rate interest payments for fixed rate payments eliminates cash flow risk by taking on value risk. It is impossible to hedge both cash flow and value risk simultaneously.

Hence, to say that a corporation has a policy allowing hedging but not speculating in derivative financial instruments is nonsense. A policy to only hedge cash flow risk may create enormous value risk. A policy to only hedge value risk may create enormous cash flow risk.

As the NYT article above points out that derivative financial instruments are increasingly popular in world commerce. As a result risk exposures have greatly increased even if all contracts were used for hedging purposes only. The problem is that a hedge only reduces or eliminates one type of risk at the "cost" of increasing the other type of risk. Derivative contracts increase one type or the other type of risk the instant they are signed.  Hedging shifts risk but does not eliminate risk per se.

You can read more about scandals in derivative financial instruments contracting (such as one company's "trillion dollar bet" that nearly toppled Wall Street and Enron's derivative scandals) at http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

You can download the CD containing my slide shows and videos on how to account for derivative financial instruments at http://www.cs.trinity.edu/~rjensen/Calgary/CD/

You can find links to all my tutorials and my glossary of FAS 133 and IAS 39 at http://www.trinity.edu/rjensen/caseans/000index.htm

From the Financial Rounds blog on September 23, 2006 --- http://financialrounds.blogspot.com/

Saturday Link Dump

Unknown Daughter and Unknown Wife are going away for an overnight with Unknown Niece and Unknown Sister-In-Law. So, it's a boy's couple of days for the Lad and I. I'm putting in a couple of hours at the office while the rest of my family is at my daughter's soccer game, so I thought I'd post a few things for your reading pleasure.
 

Tim Harford's Dear Economist columns are now available online here, with an RSS feed here. Browse through some of his back columns - he's one of the best comenters out there when it comes to applying economic principles to just about anything.

Calculated Risk reports on the implied probabilities that the Fed will either pause in their increases or even cut rates in December - they're increasing.

Truth On The Market adds his $0.02 to the back and forth on options backdating in the blogosphere. He's also got links to previous posts by others.

ProfessorBainbridge.com links to this violent (but funny, in a sick kind of way) online procrastination tool. You've been warned...
 

I'll probably post more later. After Unknown Son and I do some Guy Things, we'll probably go to my office for a bit -- I'll use my laptop, and he'll use my computer - he's got a lot of internet games he likes to play and I've got two 19'' monitors on my office system.

And yes, we're a couple of nerds. Not that there's anything wrong with that.

Thursday Link Dump

Here's the latest Link Dump:
 

DealBook comments on the growing popularity of the “buyout-hunting game” (i.e. predicting which firms are likely to be the next targets of P-E firms)

CXO Advisory Group reviews a study that compares "behavioral finance" run mutual funds to good old fashioned, value funds.

Here's the latest FOMC press release. The main news: no rate increases for now, since the housing market is tanking and inflation seems likely to slow down in the near term.

ProfessorBainbridge.com asks the question "Can Sarbanes-Oxley 404 Be Fixed?"

In other Sarbox news, The Financial Times has an opinion piece by the Chief Executive of the London Stock Exchange. She argues that the loss of U.S. IPO listing business to the LSE is due to the fact that it's simply a better exchange.

The Wall Street Journal (online subscription required) just published its annual ranking of MBA programs.
 

Statistical Modeling, Causal Inference, and Social Science reports on a paper by Alan Gerber and Neil Malhotra on the bias in journals towards papers that report "statistically significant" results.
 

Finally, Sound Money Tips has some good advice on saving money on toy purchases. I particularly liked the link provided for buying used toys.
 

Enough for now- time to get back to my "real" job. I've got referee reports to write and data to torture.

Piled Higher And Deeper Explains The Scientific Method
Jensen Comment: To see this module and the accompanying graphic, go to the September 21, 2006 module at http://financialrounds.blogspot.com/

Withdrawals from Section 529 tuition plans are now permanently free of federal taxes.

"Congress Clears Up Uncertainty Over 529 Plans," AccountingWeb, September 8, 2006 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=102539

Parents worried about huge college costs have one reason to breathe easier: Withdrawals from Section 529 tuition plans are now permanently free of federal taxes.

One line in the massive Pension Protection Act clarified the uncertainty about these college savings plans. A federal law that allowed tax-free withdrawals for qualified education expenses was put in place in 2001, but a sunset date of 2010 was also set. The pension legislation, which became law last month, removed the expiration date.

"To have that issue put to rest and know that your 529 programs are going to receive the same favorable tax treatment indefinitely is a real victory," said Doug Chittenden, vice president of institutional product management at TIAA-CREF, according to MarketWatch. TIAA-CREF runs 529 programs for several states including Connecticut, Minnesota, Georgia, Tennessee and Vermont.

A 529 plan is similar to a 401(k) retirement savings plan. Every state and the District of Columbia offer at least one 529 plan. There are two types, explains Washington Post columnist Michelle Singletary: prepaid tuition plans and savings plans. A prepaid tuition plan allows people to pay a child's tuition in advance. The savings plan, which is more popular, allows people to invest in a tax-free investment account, she wrote.

“I was a fan of the 529 savings vehicle even when it wasn't a sure thing that it would retain tax-exempt status. Now there's no question this should be an essential part of your college investment plan,” Singletary wrote.

The 529 plans have been popular savings vehicles. The College Savings Foundation estimates parents, grandparents and other investors have stoked 529 plans with more than $77 billion, the Pittsburgh Post-Gazette reported.

Tax experts advise investors to study the plans and be aware of unexpected consequences. For example, the pension bill did not change the existing rules on withdrawals, rules that many people, including CPAs, are not aware of.

“Withdrawals for college tuition and expenses are reduced by tax-free scholarships, fellowships and certain other financial assistance. If the remaining expenses are less than the qualified distributions, part of the earnings will be taxable,” MarketWatch reported.

Rick Darvis, president of College Funding, Inc. and founder of the National Institute of Certified College Planners, said, "You cannot blindly assume that just because you use a withdrawal for qualified expenses, that it's going to be tax free.”

The College Savings Plan Network ( www.collegesavings.org ) provides links to each state's 529 plan website with details about what plans each state offers.

"Rating 529 College Savings Plans," by Jan E. Eighme, Journal of Accountancy, September 2006 --- http://www.aicpa.org/pubs/jofa/sep2006/eighme.htm

 

EXECUTIVE SUMMARY

Section 529 college savings plans offer numerous advantages and have few disadvantages compared with other options. Their benefits include tax savings, estate planning benefits, high contribution limits and no income limitations. One of the few drawbacks to these plans is that investment products usually are chosen by the state treasurer’s office and the 529 program manager. Withdrawals used to pay for qualified educational expenses usually are free of federal taxes. With any other withdrawals, the earnings portion is subject to federal taxes and a 10% penalty. If a child doesn’t go to college, the funds generally can be used to pay for another family member. There are two types of plans: prepaid tuition plans and savings plans. The two most common asset-allocation options clients can choose for savings plans are age-based and static-investment allocation. Clients will want to consider which states have the best-performing plans. Unfortunately, because 529 savings plans are relatively new, it is difficult to determine their long-term investment performance. Because 529 plans invest in mutual funds, it is possible to use the long-term performance evaluations of these funds from a rating service such as Morningstar or Lipper in order to calculate weighted-average ratings for a state’s 529 portfolio options.

Also see "A College Savings Plan With One Less Worry," by James Pethokoukis, The New York Times, September 17, 2006 --- Click Here

Bob Jensen's taxation helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

The IRS tells you how to get in trouble with the IRS --- http://www.aicpa.org/pubs/jofa/sep2006/tax_ex1.htm

Bob Jensen's taxation helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

The Enron stuff is very sexy, but that type of fraud was not pervasive.
Backdatings of executive stock option frauds are another matter.

From Jim Mahar's blog on September 22, 2006 --- http://financeprofessorblog.blogspot.com/

The sleuth who exposed (stock option) backdating scandal

I always like to see finance professors in the news!

Philadelphia Inquirer | 09/21/2006 | Sleuth who exposed backdating scandal:

A few "look-ins":
 

"From his second-floor office at Iowa's Tippie College of Business, [Erik] Lie spent months analyzing data to demonstrate how companies were illegally and retroactively timing, or backdating, stock option grants to fatten bonuses paid to top executives.

 

"He's uncovered a scandal that has just mushroomed," said Adam C. Pritchard, a former attorney at the Securities and Exchange Commission and now a law professor at the University of Michigan.

and later in the article:
 

"'The Enron stuff is very sexy, but that type of fraud was not pervasive,' said Andrew Metrick, a professor of finance and corporate governance at the Wharton School in Philadelphia. 'This is widespread, pervasive. I think when this is all said and done, the total amount of dollars that we'll find have been stolen from the corporate till is larger here than any other case we've seen.'"

Bob Jensen's threads on abuses in accounting for employee stock options --- http://www.trinity.edu/rjensen/theory/sfas123/jensen01.htm

Bob Jensen's threads on why "Incompetent and Corrupt Audits are Routine" are at http://www.trinity.edu/rjensen/FraudConclusion.htm#IncompetentAudits

Once Again We Ask:  Where were the auditors?

"Union to Accounting Firms: Backdating?" SmartPros, September 13, 2006 --- http://accounting.smartpros.com/x54687.xml

The AFL-CIO, one of the largest shareholders in public companies, is seeking to learn about the role that big accounting firms may have played in the burgeoning stock options timing affair.

In letters Friday, the labor federation asked the Big Four accounting firms -- Ernst & Young, PricewaterhouseCoopers, KPMG and Deloitte & Touche -- to provide information on their potential involvement as outside auditors for companies now under federal investigation for possible rigging of option grants to boost their value to the recipients.

"Given the potential damage to shareholders due to options backdating, I am concerned about what role (name of accounting firm) may or may not have had in the backdating ...," the AFL-CIO's secretary-treasurer, Richard Trumka, said in the letters to the chief executives of the four firms, which were made public Monday. "I urge you to describe what steps are being taken to determine (name of firm)'s involvement in stock option backdating where it has occurred."

In backdating, options are issued retroactively to coincide with low points in a company's share price, a practice that can fatten profits for options recipients when they sell their shares at higher market prices. Backdating options can be legal as long as the practice is disclosed to investors and properly approved by the company's board. In some cases, however, the practice can break federal accounting and tax laws.

Spokesmen for PricewaterhouseCoopers and KPMG had no immediate comment on the AFL-CIO request. Ernst & Young and Deloitte & Touche spokesmen didn't immediately return telephone calls seeking comment.

Last week, government officials said they want to know what roles corporate directors as well as outside attorneys, accounting firms and compensation consultants might have played in helping executives manipulate the timing of option grants to enrich themselves and their colleagues.

More than 100 public companies, many of them in the technology sector, are under scrutiny by the Securities and Exchange Commission in the affair. The Justice Department is investigating scores of companies for possible criminal violations. And the Internal Revenue Service is looking at possible tax-law violations in option grants by some companies.

The potential cost to shareholders escalated Friday, when computer chip supplier Broadcom Corp. said it may need to boost a charge it takes to $1.5 billion or more for option accounting flaws -- double what it had estimated in July.

On Monday, chip maker Nvidia Corp. and software maker Wind River Systems Inc. both warned that they will miss regulatory deadlines for filing their most recent quarterly reports, joining a long list of tardy tech companies scrambling to clean up a stock options mess. The delay will expose both Nvidia and Wind River to being dropped from trading on the Nasdaq Stock Market. But that process takes several months, giving the companies time to comply with the SEC's reporting rules before getting bounced from the Nasdaq.

The AFL-CIO has some $400 billion in assets and is a major investor in companies, including many of those that are under investigation.

Cablevision awarded options to a vice chairman after his 1999 death but backdated them to make it appear they were awarded when he was still alive. Cablevision restated its results as an options probe escalated.
Peter Grant, James Bandler, and Charles Forelle, The Wall Street Journal, September 22, 2006; Page A1 --- http://online.wsj.com/article/SB115884346082669986.html?mod=todays_us_page_one

"Backdating Woes Beg the Question Of Auditors' Role," by David Reilly, The Wall Street Journal, June 23, 2006; Page C1 --- http://online.wsj.com/article/SB115102871998288378.html?mod=todays_us_money_and_investing

Where were the auditors?

That question, frequently heard during financial scandals earlier this decade, is being asked again as an increasing number of companies are being probed about the practice of backdating employee stock options, which in some cases allowed executives to profit by retroactively locking in low purchase prices for stock.

For the accounting industry, the question raises the possibility that the big audit firms didn't live up to their watchdog role, and presents the Public Company Accounting Oversight Board, the regulator created in response to the past scandals, its first big test.

"Whenever the audit firms get caught in a situation like this, their response is, 'It wasn't in the scope of our work to find out that these things are going on,' " said Damon Silvers, associate general counsel at the AFL-CIO and a member of PCAOB's advisory group. "But that logic leads an investor to say, 'What are we hiring them for?' "

Others, including accounting professionals, aren't so certain bookkeepers are part of the problem. "We're still trying to figure out what the auditors needed to be doing about this," said Ann Yerger, executive director of the Council of Institutional Investors, a trade group. "We're hearing lots of things about breakdowns all through the professional-advisor chains. But we can't expect audit firms to look at everything."

One pressing issue: Should an auditor have had reason to doubt the veracity of legal documents showing the grant date of an option? If not, it is tough for many observers to see how auditors could be held responsible for not spotting false grant dates.

"I don't blame the auditors for this," said Nell Minow, editor of The Corporate Library, a governance research company. "My question is, 'Where were the compensation committees?' "

To sort out the issue, the PCAOB advisory group -- comprising investor advocates, accounting experts and members of firms -- last week suggested the agency provide guidance to accounting firms on backdating of stock options. A spokeswoman for the board said, "We are looking to see what action they may be able to take."

To date, more than 40 companies have been put under the microscope by authorities over the timing of options issued to top executives. Federal authorities are investigating whether companies that retroactively applied the grant date of options violated securities laws, failed to properly disclose compensation and in some cases improperly stated financial results. A number of companies have said they will restate financial statements because compensation costs related to backdated options in questions weren't properly booked.

All of the Big Four accounting firms -- PricewaterhouseCoopers LLP, Deloitte & Touche LLP, KPMG LLP and Ernst & Young LLP -- have had clients implicated. None of these top accounting firms apparently spotted anything wrong at the companies involved. One firm, Deloitte & Touche, has been directly accused of wrongdoing in relation to options backdating. A former client, Micrel Inc., has sued the firm in state court in California for its alleged blessing of a variation of backdating. Deloitte is fighting that suit.

The big accounting firms haven't said whether they believe there was a problem on their end. Speaking at the PCAOB advisory group's recent meeting, Vincent P. Colman, U.S. national office professional practice leader at PricewaterhouseCoopers, said his firm was taking the issue "seriously," but more time is needed "to work this through" both "forensically" and to insure this is "not going to happen going forward."

Robert J. Kueppers, deputy chief executive at Deloitte, said in an interview: "It is one of the most challenging things, to sort out the difference in these [backdating] practices. At the end of the day, auditors are principally concerned that investors are getting financial statements that are not materially misstated, but we also have responsibilities in the event that there are potential illegal acts."

While the Securities and Exchange Commission has contacted the Big Four accounting firms about backdating at some companies, the inquiries have been of a fact-finding nature and are related to specific clients rather than firmwide auditing practices, according to people familiar with the matter. Class-action lawsuits filed against companies and directors involved in the scandal haven't yet targeted auditors.

Backdating of options appears to have largely stopped after the passage of the Sarbanes-Oxley corporate-reform law in 2002, which requires companies to disclose stock-option grants within two days of their occurrence.

Backdating practices from earlier years took a variety of forms and raised different potential issues for auditors. At UnitedHealth Group Inc., for example, executives repeatedly received grants at low points ahead of sharp run-ups in the company's stock. The insurer has said it may need to restate three years of financial results. Other companies, such as Microsoft Corp., used a monthly low share price as an exercise price for options and as a result may have failed to properly book an expense for them.

At the PCAOB advisory group meeting, Scott Taub, acting chief accountant at the Securities and Exchange Commission, said there is a "danger that we end up lumping together various issues that relate to a grant date of stock options." Backdating options so an executive can get a bigger paycheck is "an intentional lie," he said. In other instances where there might be, for example, a difference of a day or two in the date when a board approved a grant, there might not have been an intent to backdate, he added.

"The thing I think that is more problematic is there have been some allegations that auditors knew about this and counseled their clients to do it," said Joseph Carcello, director of research for the corporate-governance center at the University of Tennessee. "If that turns out to be true, they will have problems."

Suspected Fraud:  Attorneys, Auditors, Others Getting Attention In Options Timing Affair
"It's hard to believe ... that the executives did this all by themselves," Sen. Charles Grassley, R-Iowa, said at a hearing Wednesday. "And to be honest, the idea that all executives at different companies came up with this idea at the same time stretches the imagination." Grassley said he planned to write to "several major corporations" that have engaged in backdating of stock options, asking them to provide the minutes of board meetings in which directors discussed the matter as well as documents from attorneys, accountants and consultants who assisted. In backdating, options are issued retroactively to coincide with low points in a company's share price, a practice that can fatten profits for options recipients when they sell their shares at higher market prices. Backdating options can be legal as long as the practice is disclosed to investors and properly approved by the company's board. In some cases, however, the practice can run afoul of federal accounting and tax laws. "We need to understand and bring enforcement action against all the actors who were involved with this abusive scandal," Grassley declared.
"Attorneys, Auditors, Others Getting Attention In Options Timing Affair," SmartPros, September 11, 2006 --- http://accounting.smartpros.com/x54672.xml

Conrad W. Hewitt, chief accountant of the Securities and Exchange Commission, sought on September 19, 2006 to clarify the proper accounting for backdated options, reserving the harshest accounting for companies that followed a practice of reducing the exercise price after options were issued.
"S.E.C. Clarifies Accounting for Backdated Options," by Floyd Norris, The New York Times, September 20, 2006 --- http://www.nytimes.com/2006/09/20/business/20options.html

Mr. Hewitt offered some good news for companies, saying that if complete records were not available it would not automatically mean that companies had to restate their books, limiting the accounting damage for companies that issued backdated options.

Mr. Hewitt’s guidance also clarified that there was no accounting damage from “spring loaded” options, issued by companies that already know that forthcoming good news is likely to raise the stock price.

Such guidance is not officially blessed by the commission, but in this case accountants had expected it after Christopher Cox, the commission chairman, promised last week that “we will soon issue further accounting guidance that will help honest companies to avoid any problems with the law.”

The guidance also warned that companies that allowed executives to falsify the dates they exercised options might be required to restate their books as well.

In recent months it has become clear that many companies were not following the rules for issuing options and were getting the favorable accounting treatment that used to be available. But there have been questions about the proper accounting to use.

Under the normal accounting that then prevailed, companies did not have to show any expense for options issued to employees, so long as the exercise price was at or above the market price at the time of issuance.

Some companies followed a practice of adjusting the exercise price later if it fell. Mr. Hewitt’s guidance took the position that in such cases the option never had a formal completion time, and thus variable accounting was required. That means a company must record an expense as the stock price — and therefore the value of the option — rises, for the life of the option.

Some companies have used that variable accounting for all the backdated options they issued, something Mr. Hewitt said would often not be necessary.

In one common practice, employees were told the exercise price would be the lowest market price during the first month of their employment. In that case, the S.E.C. said, the only expense will be the difference between the price at the end of the period and the low price.

So for a company that issued 100 options at $30 each, when the end-of-the-month price was $32, there would be an expense of $200, which would be taken over the several-year period in which the options vested.

The practice of allowing options to be exercised retroactively was popular with executives because it could minimize the tax they owed. For example, if an option for 100 shares with an exercise price of $20 was exercised when the stock was at $30, that would create taxable income of $1,000. But if the executive was able to claim he or she had exercised it earlier, when the price was $25, the income would be only $500.

In such a case, Mr. Hewitt said, the company would have to record an additional $500 in compensation expense, because it would have given up a $500 tax deduction it had coming. (Companies normally get tax deductions equal to the taxable profit received by employees when they exercise options.)

The memo did not cover the most important tax issue for companies: the amount they owe. A deduction is allowed for only the first $1 million of compensation expenses for executives, but some categories — like the profits employees realize on options — do not count against that limit.

But Mark Everson, the commissioner of the Internal Revenue Service, has told Congress that profits on backdated options would count — and companies could lose millions of dollars in tax exemptions.

Also see http://accounting.smartpros.com/x54789.xml

From The Wall Street Journal Accounting Weekly Review on September 22, 2006

TITLE: SEC Accountant Issues Guidelines on Stock Options
REPORTER: David Reilly
DATE: Sep 20, 2006
PAGE: C3
LINK: http://online.wsj.com/article/SB115871130408368314.html?mod=djem_jiewr_ac 
TOPICS: Accounting, Fair Value Accounting, Securities and Exchange Commission, Standard Setting, Stock Options

SUMMARY: "The Securities and Exchange Commission's chief accountant issued guidance on how companies should account for employee stock options in light of regulators' probes into "backdating" of this type of compensation." Specific guidance issued in a letter by Chief Accountant Conrad Hewitt is developed from the SEC's observations from reviews of cases investigated during the options backdating scandal.

QUESTIONS:
1.) Through what mechanism is the Securities and Exchange Commission (SEC) issuing this new guidance on accounting for stock options? How does this guidance differ from that provided in statements of financial accounting standards issued by the Financial Accounting Standards Board (FASB)?

2.) Summarize the requirements currently in place to account for employee stock options. What accounting standard establishes these requirements?

3.) Refer to the related article. What were the political pressures that were put to bear on the FASB when it implemented changes in accounting for stock options?

4.) Define the terms "in the money", "at the money", and "out of the money" stock options.

5.) How do current accounting requirements differ from those that were in effect prior to issuance of this most recent standard? Relate this description to your definitions provided in answer to question 4

6.) Describe the issue of options backdating. Again, relate this answer to the definitions provided in answer to question 4.

7.) Based on comments in the main article, how has elevating the accounting for stock options to the face of the financial statements, rather than merely requiring disclosures of the fair values of stock options granted to employees, likely impacted the audit process over these activities?

Reviewed By: Judy Beckman, University of Rhode Island

--- RELATED ARTICLES ---
TITLE: FASB Appears in a New Light on Stock Options
REPORTER: David Reilly
PAGE:
C1 ISSUE: Aug 14, 2006
LINK: http://online.wsj.com/article/SB115552025107534780.html?mod=djem_jiewr_ac

"SEC Accountant Issues Guidelines On Stock Options," by David Reilly, The Wall Street Journal, September 20, 2006; Page C3 --- Click Here

The Securities and Exchange Commission's chief accountant issued guidance on how companies should account for employee stock options in light of regulators' probes into "backdating" of this type of compensation.

But chief accountant Conrad Hewitt made clear that in considering problems related to options accounting the commission would distinguish between honest mistakes, such as paperwork errors, and those that showed a company was trying to game accounting rules. Mr. Hewitt's tone echoed previous comments made by SEC Chairman Christopher Cox that indicated the commission would look closely at a company's intent when investigating possible backdating practices.

Stock options give employees the right to purchase stock at a preset price, known as the strike or exercise price, at a future date. Under accounting rules in place until the start of this year, companies didn't have to recognize any expense related to options grants if the exercise price was equal to the company's share price on the date the options were granted.

However, many companies retroactively picked a grant date to correspond with a low-point for their stock, in effect setting a lower bar for executives.

Under accounting rules in place at the time, such grants could have required companies to book an expense because the exercise price picked wasn't actually the same as the company's share price on the real grant date. Starting this year, companies have had to take an expense for all options grants.

Mr. Hewitt's letter laid out examples where questions have arisen over whether a company should have taken an expense for options under the old accounting rules. In cases where companies picked an exercise price over a 30-day period, for example, they generally should have recorded an expense for the options, the letter said. However, so-called springloading of options, where companies grant options ahead of good news, doesn't result in an accounting issue, the letter said.

The SEC guidance to companies follows an alert to auditors on backdating issues in July from the Public Company Accounting Oversight Board. More than 100 companies are under investigation in relation to backdating, according to recent congressional testimony from Mr. Cox. The agency has brought civil charges against executives from two companies in tandem with criminal charges by prosecutors.

Mr. Hewitt stressed that the guidance related only to accounting issues, not legal matters arising from backdating issues.

Bob Jensen's threads on abuses in accounting for employee stock options --- http://www.trinity.edu/rjensen/theory/sfas123/jensen01.htm

Bob Jensen's threads on why "Incompetent and Corrupt Audits are Routine" are at http://www.trinity.edu/rjensen/FraudConclusion.htm#IncompetentAudits

Sort of Knocks Your SOX Off:  Accounting Firms Post Double-Digit Growth Rates
The past year has been profitable for the majority of accounting firms, with an average growth rate of 16.5 percent, the highest reported growth since 2000, according to the CCH Public Accounting Report Top 100 list released Friday. Firms outside the Big Four posted stronger overall results than their larger counterparts, with non-Big Four firms growing their revenue at an average rate of 21.9 percent compared to 14.7 percent for the Big Four.
"Accounting Firms Post Double-Digit Growth Rates," SmartPros, September 5, 2006 --- http://accounting.smartpros.com/x54636.xml

Bob Jensen's threads on accounting careers are at http://www.trinity.edu/rjensen/Bookbob1.htm#careers

"The Accounting Cycle:  The Conceptual Framework for Financial Reporting Op/Ed,"  by J. Edward Ketz, SmartPros, September 2006 --- http://accounting.smartpros.com/x54322.xml 

The Financial Accounting Standards Board and the International Accounting Standards Board have joined forces to flesh out a common conceptual framework. Recently they issued some preliminary views on the "objectives of financial reporting" and the "qualitative characteristics of decision-useful financial reporting information" and have asked for comment.

To obtain "coherent financial reporting," the boards feel that they need "a framework that is sound, comprehensive, and internally consistent" (paragraph P3). In P5, they also state their hope for convergence between U.S. and international accounting standards.

P6 indicates a need to fill in certain gaps, such as a "robust concept of a reporting entity." I presume that they will accomplish this task later, as the current document does not develop such a "robust concept."

Chapter 1 presents the objective for financial reporting, and the description differs little from what is in Concepts Statement No. 1. This objective is "to provide information that is useful to present and potential investors and creditors and others in making investment, credit, and similar resource allocation decisions." The emphasis lay with capital providers, as it should. If anything, I would place greater accent on this aspect, because in the last 10 years, so many managers have defined the "business world" as including managers and excluding investors and creditors. To our chagrin, we learned that managers actually believed this lie, as they pretended that the resources supplied by the investment community belonged to the management team.

FASB and IASB further explain that these users are interested in the cash flows of the entity so they can assess the potential returns and the potential variability of those returns (e.g., in paragraph OB.23). I wish they had drawn the logical conclusion that financial reporting ought to exclude income smoothing. Income smoothing leads the user to assess a smaller variance of earnings than warranted by the underlying economics; income smoothing biases downward the actual variability of the earnings and thus the returns.

Later, in the basis of conclusions, the document addresses the reporting of comprehensive income and its components (see BC1.28-31). Currently, FASB has four items that enter other comprehensive income: gains and losses on available-for-sale investments, losses when incurring additional amounts to recognize a minimum pension liability, exchange gains and losses from a foreign subsidiary under the all-current method, and gains and losses from derivatives that hedge cash flows.

The purported reason for this demarcation between earnings and other comprehensive income rests with the purported low reliability of measurements of these four items; however, the real reason for these other comprehensive items seems to be political. For example, FASB capitulated in Statement No. 115 when a number of managers objected to reporting gains and losses on available-for-sale securities because that would create volatility in earnings. (I find it curious how FASB caters to the whims of managers but claims that the primary rationale for financial reporting is to serve the investment community.) Because one has a hard time reconciling other comprehensive income with the needs of investors and creditors, it would serve the investment community better if the boards eliminate this notion of comprehensive income.

Two IASB members think that an objective for financial reporting should encompass the stewardship function (see AV1.1-7). Stewardship seems to be a subset of economic usefulness, so this objection is pointless. It behooves these two IASB members to explain the consequences of adopting a stewardship objective and how these consequences differ from the usefulness objective before we can entertain their protestation seriously.

Sections BC1.42 and 43 ask whether management intent should be a part of the financial reporting process. Given management intent during the last decade, I think decidedly not. Management intent is merely a license to massage accounting numbers as managers please. Fortunately, the Justice Department calls such tactics fraud.

Chapter 2 of this document concerns qualitative characteristics. For the most part, this presentation is similar to that in Concepts Statement No. 2, though arranged somewhat differently. Concepts 2 had as its overarching qualitative characteristics relevance and reliability. This Preliminary Views expounds relevance, faithful representation, comparability, and understandability as the qualitative characteristics.

The discussion on faithful representation is interesting (QC.16-19) inasmuch as they distinguish between accounts that depict real world phenomena and accounts that are constructs with no real world referents. They explain that deferred debits and credits do not possess faithful representation because they are merely the creation of accountants. I hope that analysis applies to deferred income tax debits and credits.

Verifiability implies similar measures by different measurers (QC.23-26). I wish FASB and IASB to include auditability as an aspect of verifiability; after all, if you cannot audit something, it is hardly verifiable. Yet, the soon to be released standard on fair value measurements includes a variety of items that will prove difficult if not impossible to audit.

Understandability is obvious, though the two boards feel that users with a "reasonable knowledge of business and economic activities" can understand financial statements. I no longer agree. Such a person might employ a profit analysis model or ratio analysis on a set of financial statements and mis-analyze a firm's condition because he or she did not make analytical adjustments for off-balance sheet items and other fanciful tricks by managers. This includes so many of Enron's investors and creditors. No, to understand financial reporting today, you must be an expert in accounting and finance.

Benefits-that-justify-costs acts as a constraint on financial reporting. While this criterion is acceptable, too often the boards view costs only from the perspective of the preparers. I wish the boards explicitly acknowledged the fact that not reporting on some things adds costs to users. When a business enterprise engages in aggressive accounting, the expert user needs to employ analytical adjustments to correct this overzealousness. These adjustments consume the investor's economic resources and thus involve costs to the investment community.

In the basis-for-conclusions section, FASB and IASB explain that the concept of substance over form is included in the concept of faithful representation (see paragraphs BC2.17 and 18). While I don't have a problem with that, I think they should at least emphasize this point in Chapter 2 rather than bury it in this section. Substance over form is a critically important doctrine, especially as it relates to business combinations and leases, so it deserves greater stress.

On balance, the document is well written and contains a good clarification of the objective of financial reporting and the qualitative characteristics of decision-useful financial reporting information. I offer the criticisms above as a hope to strengthen and improve the Preliminary Views.

My most important comment, however, does not address any particular aspects within the document itself. Instead, I worry about the usefulness of this objective and these qualitative characteristics to FASB and IASB. To enjoy coherent financial reporting, there not only is need for a sound, comprehensive, and internally consistent framework, we also must have a board with the political will to utilize the conceptual framework. FASB ignored its own conceptual framework in its issuance of standards on:

* Leases (Aren't the financial commitments of the lessee a liability?) * Pensions (How can the pension intangible asset really be an asset as it has no real world referent?) * Stock options (Why did the board not require the expensing of stock options in the 1990s when stock options clearly involve real costs to the firm?), and * Special purpose entities (Why did the board wait for the collapse of Enron before dealing with this issue?).

Clearly, the low power of FASB -- IASB likewise possesses little power -- explains some of these decisions, but it is frustrating nonetheless to see the board ignore its own conceptual framework. Why engage in this deliberation unless FASB is prepared to follow through?

J. EDWARD KETZ is accounting professor at The Pennsylvania State University. Dr. Ketz's teaching and research interests focus on financial accounting, accounting information systems, and accounting ethics. He is the author of Hidden Financial Risk, which explores the causes of recent accounting scandals. He also has edited Accounting Ethics, a four-volume set that explores ethical thought in accounting since the Great Depression and across several countries.

Also see
"The Accounting Cycle: Herz Encourages Simpler Accounting: Again, Bah, Humbug!" by: J. Edward Ketz, SmartPros, December 2005 --- http://accounting.smartpros.com/x50933.xml

Bob Jensen's threads on accounting theory are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm

The following messages appear at the link http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#Replication

December 3, 2004 reply from Robin A Alexander [alexande.robi@UWLAX.EDU] 

Interesting. I too came from a math background and finally realized there was no accounting theory in the scientific sense. I also came to suspect it was not a system of measurement either because to be so, there has to be something to measure independent of the measuring tool. Rather it seemed to me accounting defined, for instance, income rather than measured it.

Robin Alexander 

December 3, 2004 reply from Bob Jensen

Hi Robin,

I think the distinction lies not so much on "independence" of the measuring tool as it does on behavior induced by the measurements themselves, although this may be what you had in mind in your message to us.

Scientists measure the distance to the moon without fear that behavior of either the earth or the moon will be affected by the measurement process. There may some indirect behavioral impacts such as when designing fuel tanks for a rocket to the moon. In natural science, except for quantum mechanics, the measurers cannot re-define the distance to the moon for purposes of being able to design smaller fuel tanks.

In economics, and social science in general, behavior resulting from measurements is often more impacted by the definition of measurement itself. Changed definitions of inflation or a consumer price index might result in wealth transfers between economic sectors. Plus there is the added problem that measurements in the social sciences are generally less precise and stable, e.g., when people change behavior just because they have been "measured" or diagnosed.

Similarly in accounting, changed definitions of what goes into things like revenue, eps, asset values, and debt values may lead to wealth transfers. The Silicon Valley executives certainly believe that lowering eps by booking stock options will affect share prices vis-a-vis merely disclosing the same information in a footnote rather than as a booked expense. Virtually all earnings management efforts on the part of managers hinges on the notion that accounting outcomes affect wealth transfers. In fact if they did not do so, there probably would not be much interest in accounting numbers See "Toting Up Stock Options," by Frederick Rose, Stanford Business, November 2004, pp. 21 --- http://www.gsb.stanford.edu/news/bmag/sbsm0411/feature_stockoptions.shtml

Early accounting theorists such as Paton, Littleton, Hatfield, Edwards, Bell, Chambers, etc. generally believed there was some kind of optimal set of definitions that could be deduced without scientifically linking possible wealth transfers to particular definitions. And it is doubtful that subsequent events studies in capital market empiricism will ever solve that problem because human behavior itself is too adaptive. Academic researchers are still seeking to link behavior with accounting numbers, but they're often viewed as chasing moving windmills with lances thrust forward.

Auditors are more concerned about being faithful to the definitions. If the definition says book all leases that meet the FAS 13 criteria for a capital lease, then leases that meet those tests should not have been accounted for as operating leases. The audit mission is to do or die, not to question why. The FASB and other standard setters are supposed to question why. But they are often more impacted by the behavior of the preparers than the users. The behavior of preparers trying to circumvent accounting standards seems to have more bearing than the resulting impacts on wealth transfers that defy being built into a conceptual framework. Where science fails accounting in this regard is that the wealth transfer process is just too complicated to model except in the case of blatant fraud that lines the pockets of a villain.

It is not surprising that accounting "theory" has plummeted in terms of books and curricula. Theory debates never seem to go anywhere beyond unsupportable conjectures. I teach a theory course, but it has degenerated to one of studying intangibles and how preparers design complex contracts such as hedging and SPE contracts that challenge students into thinking how these contracts should be accounted for given our existing standards like FAS 133 and FIN 46. One course that I would someday like to teach is to design a new standard (such as a new FAS 133) and then predict how preparers would change behavior and contracting. Unfortunately my students are not interested in wild blue yonder conjectures. The CPA exam is on their minds no matter where I try to fly. They tolerate "theory" only to the point where they are also learning about existing standards. In their minds, any financial accounting course beyond intermediate should simply be an extension of intermediate accounting.

Bob Jensen

September 26, 2006 reply from J. S. Gangolly [gangolly@CSC.ALBANY.EDU]

Bob,

Internal consistency seems to have become the holy grail of accounting. It is simply not attainable, and the earlier we recognise this fact the better.

If logic teaches us anything, thanks to Kurt Goedel, it is that no logical system can be complete, consistent and decidable all at the same time. Some thing has got to give.

In law, generally, consistency has been given up since legal principles are inherently conflicting. In accounting, we seem to be chasing "internal consistency" the way a dog chases its own tail.

Having given up consistency as an overriding principle, law has developed interesting, useful, and intellectually demanding theories of reasoning about law. In accounting, on the other hand, we have been caught up in this morass of consistency ever since accounting was divorced from common law.

Accounting is not science the way Physics is (even Physics recognises frailty of human reasoning these days). It is an endeavour to coherently but normatively interpret certain social exchanges.

Jagdish

More Than a Numbers Game: A Brief History of Accounting
Author: Thomas A. King
ISBN: 0-470-00873-3
Hardcover 242 pages
September 2006

Inspired by a 1998 speech by former SEC Chairman Arthur Levitt, this book addresses the why of accounting instead of the how, providing practitioners and students with a highly readable history of U.S. corporate accounting. Each chapter explores a controversial accounting topic. Author Thomas King is treasurer of Progressive Insurance.
SmartPros Newsletter, September 25, 2006

Jensen Comment
The Chief Accountant of the SEC under Arthur Levitt was one of my heroes named Lynn Turner.
Let me close by citing Harry S. Truman who said, "I never give them hell; I just tell them the truth and they think its hell!"
Great Speeches About the State of Accountancy
"20th Century Myths," by Lynn Turner when he was still Chief Accountant at the SEC in 1999 --- http://www.sec.gov/news/speech/speecharchive/1999/spch323.htm

It is interesting to listen to people ask for simple, less complex standards like in "the good old days." But I never hear them ask for business to be like "the good old days," with smokestacks rather than high technology, Glass-Steagall rather than Gramm-Leach, and plain vanilla interest rate deals rather than swaps, collars, and Tigers!! The bottom line is—things have changed. And so have people. Today, we have enormous pressure on CEO’s and CFO’s. It used to be that CEO’s would be in their positions for an average of more than ten years. Today, the average is 3 to 4 years. And Financial Executive Institute surveys show that the CEO and CFO changes are often linked. In such an environment, we in the auditing and preparer community have created what I consider to be a two-headed monster. The first head of this monster is what I call the "show me" face. First, it is not uncommon to hear one say, "show me where it says in an accounting book that I can’t do this?" This approach to financial reporting unfortunately necessitates the level of detail currently being developed by the Financial Accounting Standards Board ("FASB"), the Emerging Issues Task Force, and the AICPA’s Accounting Standards Executive Committee. Maybe this isn’t a recent phenomenon. In 1961, Leonard Spacek, then managing partner at Arthur Andersen, explained the motivation for less specificity in accounting standards when he stated that "most industry representatives and public accountants want what they call ‘flexibility’ in accounting principles. That term is never clearly defined; but what is wanted is ‘flexibility’ that permits greater latitude to both industry and accountants to do as they please." But Mr. Spacek was not a defender of those who wanted to "do as they please." He went on to say, "Public accountants are constantly required to make a choice between obtaining or retaining a client and standing firm for accounting principles. Where the choice requires accepting a practice which will produce results that are erroneous by a relatively material amount, we must decline the engagement even though there is precedent for the practice desired by the client." We create the second head of our monster when we ask for standards that absolutely do not reflect the underlying economics of transactions. I offer two prime examples. Leasing is first. We have accounting literature put out by the FASB with follow-on interpretative guidance by the accounting firms—hundreds of pages of lease accounting guidance that, I will be the first to admit, is complex and difficult to decipher. But it is due principally to people not being willing to call a horse a horse, and a lease what it really is—a financing. The second example is Statement 133 on derivatives. Some people absolutely howl about its complexity. And yet we know that: (1) people were not complying with the intent of the simpler Statements 52 and 80, and (2) despite the fact that we manage risk in business by managing values rather than notional amounts, people want to account only for notional amounts. As a result, we ended up with a compromise position in Statement 133. To its credit, Statement 133 does advance the quality of financial reporting. For that, I commend the FASB. But I believe that we could have possibly achieved more, in a less complex fashion, if people would have agreed to a standard that truly reflects the underlying economics of the transactions in an unbiased and representationally faithful fashion. I certainly hope that we can find a way to do just that with standards we develop in the future, both in the U.S. and internationally. It will require a change in how we approach standard setting and in how we apply those standards. It will require a mantra based on the fact that transparent, high quality financial reporting is what makes our capital markets the most efficient, liquid, and deep in the world.

Bob Jensen's overview of accounting history is at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#AccountingHistory

Especially note the module on "Controversies in Setting Accounting Standards" --- http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#MethodsForSetting

Question
How can you block out portions of a digital screen projection while lecturing?

September 25, 2006 message from Ramsey, Donald [dramsey@UDC.EDU]

I am getting the hang of using my new digital projector in the classroom, to display solutions to the homework. With our old overhead transparencies, I could show each individual journal entry, or whatever, by covering the unwanted material with a piece of paper, revealing each item progressively. (You know what I mean.)

But with the digital, I have not discovered any way to do this short of transferring each item to a PowerPoint slide show, which would clearly be a lot of work. Likewise, I could copy each item to a separate Word page; again a lot of work. Does anyone know of a better way?

It’s a real teaching problem, because the students tend to immediately begin copying the entire screen into their notebooks, and not pay attention to the one item under discussion.

Donald D. Ramsey, CPA,
Department of Accounting, Finance, and Economics,
School of Business and Public Administration,
University of the District of Columbia,
Room 404A, Building 52 (Connecticut and Yuma St.),
4200 Connecticut Ave., N. W., Washington, D. C. 20008

September 25, 2006 reply from David Fordham, James Madison University [fordhadr@JMU.EDU]

Donald, what application are you using to display your digital images?

If you are using Word, Excel, or some sort of picture viewer to view Word, Excel, PDF or JPG images, you might try this:

Create a rectangle the same color as the background of your image. Then, in the classroom, use the mouse to grab and move the rectangle, moving it out of the way as you want to "uncover" each portion of your solution.

I've used that trick successfully with several different projection applications. It's a sort of "high tech piece of paper covering". ;-)

A lot of "answer keys" from the publishers come in MS Word format, or Excel. The colored rectangle works great with those.

Some publishers actually provide the answer keys in PowerPoint format if you ask for them. Powerpoint is the way to go, if you have the option. You can create successive slides, each one adding a little bit (by copying and pasting the same slide several times, then eliminating the latter material from the earlier slides). Or you can add custom animation to have successive entries "enter" the view like bullet points.

If the material is not in PowerPoint format, often the publisher will provide it in a format that you can easily cut and paste into PowerPoint. Depending on how many solutions you display each day, cutting and pasting a half- dozen solutions might not be too onerous compared to your other preparation.

More specific suggestions might be available depending on what application you are using to display your material.

September 25, 2006 reply from David Coy [dcoy@ADRIAN.EDU]

I've used a digital projector for several years. The problem you speak of is not easily solved. I am fortunate in that I project images on a Smart Board, which allows me to draw on it in various colors.

Have you thought about increasing the size of the image you are projecting? This would limit the amount of material displayed.

Another possibility might be to distribute copies of the material you are discussing, and encourage them to embellish it with notes and commentaries derived from your presentation.

David Coy
Adrian College

September 25, 2006 reply from Bob Jensen

I've used a number of approaches to blocking out all our parts of answers in presentations.

At the low tech end, I've simply added blank lines where you can scroll down or use the navigation buttons to scroll down automatically. See the "View Answer" buttons at http://www.cs.trinity.edu/~rjensen/Calgary/CD/ExamMaterial/PracticeQuestions/  

If you are using files in software like Excel, MS Word, or Frontpage, it is easy to add blank rows and navigation buttons. Excel file navigation buttons (similar to what you can also do in MS Word) are illustrated in the 138ex01a.xls Excel workbook at
http://www.cs.trinity.edu/~rjensen/Calgary/CD/FAS133OtherExcelFiles/138bench 

(Of course these navigation buttons won't work if you turn off the macros before downloading the Excel file.)

I had a wonderful presentation pointer that would dim parts of a screen and light up where the mouse was pointing in expandable rectangles or circles. It would also magnify. I don't think this tool is on the the market these days.

There is a somewhat more limited magnifying Screen Pen described at
http://www.topshareware.com/Screen-Pen-download-41600.htm 

I think if you search around a bit you will find some more versatile presentation tools that do exactly what you want. Of course these entail software installation which may not be easy for you on classroom computers that restrict software installation.

Bob Jensen

September 25, 2006 reply from Robert Holmes Glendale College [rcholmes@GLENDALE.CC.CA.US]

I use two methods. One is to create Excel spreadsheets by putting the first line on a page. Then make a copy of the page and add the second line. In class you just go to the bottom of the page and click on each tab in succession. After you get the hang of it you can create the pages almost as fast as putting it on one page. Second I have a Gyro Mouse that came with a set of utilities. One of them is a screen that covers the whole page, then you click and drag and move the screen down a line at a time to reveal the information. The gyro mouse is held in the hand and as you move your hand from right to left or up and down, the pointer follows your motions. It has buttons to click and drag and several utilities that you can pop up in addition to the screen. It works anywhere in the classroom and lets you wander about as you control the screen. Gyration.com sells them these days.

Learning Accountability
The Spelling Plans for carrying the recommendations of her Commission on the Future of Higher Education
Education Secretary Margaret Spellings plans a many faceted campaign to carry out the recommendations of her Commission on the Future of Higher Education, including providing matching funds to colleges and states that collect and publicly report how well their students learn, building a “privacy protected” database of college students’ academic records, and streamlining the process of applying for federal student aid.
Doug Lederman, "The Spellings Plan," Inside Higher Ed, September 26, 2006 --- http://www.insidehighered.com/news/2006/09/26/spellings

Abolishing the Core Computer Science Curriculum in an Effort to Attract Majors
The Georgia Institute of Technology is today unveiling what some experts believe is a much broader approach to the problem. The institute has abolished the core curriculum for computer science undergraduates — a series of courses in hardware and software design, electrical engineering and mathematics. These courses, in various forms, have been the backbone of the computer science curriculum not just at Georgia Tech but at most institutions.
Scott Jaschik, "New ‘Threads’ for Computer Science," Inside Higher Ed, September 26, 2006 --- http://www.insidehighered.com/news/2006/09/26/gatech

The other, perhaps more costly alternative, is to maintain a core of required courses that are no longer silos in terms of specialized content --- http://www.trinity.edu/rjensen/HigherEdControversies.htm#Silos

Students may take the easiest way out in customizable curricula ---
http://www.trinity.edu/rjensen/HigherEdControversies.htm#CustomizedCurricula
 

Electronic Book Readers Update

"Review: Sony's Reader a step forward," PhysOrg, September 27, 2006 --- http://physorg.com/news78593741.html

Sure, there are electronic books available for download at Amazon and elsewhere, but they haven't really caught on. Sony Corp. is now tackling part of the problem with the U.S. launch of the first e-book reader that imitates the look of paper by using an innovative screen technology.

Is this the iPod for books? Not quite. But it is a step forward.

The Sony Reader is a handsome affair the size of a paperback book, but only a third of an inch thick. It goes on sale for $350 on Sony's Web site Wednesday, and in Borders stores in October.

The 6-inch screen can be taken for a monochrome liquid-crystal display at first glance, but on closer inspection looks like no other electronic display. It's behind a thin pane of glass, but unlike an LCD it shows no "depth" - it pretty much looks like a light gray piece of paper with dark gray text.

The display, based on technology from Massachusetts Institute of Technology spinoff E Ink Corp., is composed of tiny capsules with electrically charged particles of white and black ink. When a static electric charge is applied on the side of the capsule that faces the reader, it attracts the white particles to the face of the display, making that pixel show light gray. Reversing the charge brings the black pigments floating through the capsule to replace the white pigments, and the pixel shows as dark gray.

Like paper, the display is readable from any angle, but it doesn't look as good as the real thing, chiefly because the contrast doesn't compare well. The background isn't white and the letters aren't black. The letters show some jaggedness, even though the resolution is a very respectable 800 by 600 pixels. It will display photos, though they look a bit like black-and-white photocopies.

But it's still a more comfortable reading medium than any other electronic display. The text is easy on the eyes in almost any light you could read a book by.

The other major advantage of the display is that it's a real power sipper. Sony says a Reader with a full charge in its lithium battery can show up to 7,500 pages, an amazing figure that I unfortunately didn't have the time to test.

The reason behind this trilogy-busting stamina is that the display only consumes power when it flips to a new page. Displaying the same page continuously consumes no power, though the electronics of the device itself do use a little bit.

The Reader's internal memory holds up to 100 books, depending on their size. The memory can be expanded with inexpensive SD cards or Memory Sticks.

To load books, connect the Reader with a supplied cable to a Windows PC running the accompanying software. You can transfer Word documents or Portable Document Format files to the Reader, download blog feeds, or buy e-books at Sony's online store. It will also play MP3 music or audiobook files.

 The store is not live yet, so I was unable to test it, but the interface looks comfortably like that of iTunes. It should have 10,000 titles at launch, Sony said, with major titles from publishers like HarperCollins, Simon and Schuster and Penguin-Putnam. In keeping with the e-book market so far, there's no big price break: the electronic version will cost a dollar or so less than the printed book.

The Reader would be a perfect companion for the avid book reader, but for a few things.

First of all, navigation is fairly clumsy. You can't just enter the page number and jump to the page, nor can you enter a word or phrase to search for, as you can when reading a book on a PC. To get around, there are 10 buttons that will each take you a 10th of the way through text. You can also jump to chapter starts, or return to bookmarks. Still, this is very much a one-way device, designed for reading a book straight through from cover to cover.

This lack of interactivity is partly because the screen is slow to change, since it takes time for the pigments to move through the capsules. It takes about a second to display a new page. That means no scrolling through pages, and no note-taking on the screen - imagine having to wait a second for each letter you write to appear.

Secondly, and less importantly, the Reader handles PDFs poorly. It doesn't allow you to zoom in on them, so if they're formatted for standard 8.5-inch-by-11-inch pages, the text will be illegibly small.

Thirdly, the Reader doesn't have a built-in light source, unlike PCs and personal digital assistants. A small clip-on light of the kind sold for books should work well, though.

Because of these drawbacks, it's hard to see the Reader as something that will bust the e-book market open. But it deserves a much better reception than the generally small LCD-based devices that hit the market a couple of years ago, some of which are already discontinued.

Other competition comes from cell phones and PDAs, but none of them match the Reader for screen size, legibility and battery life. Laptops, Tablet PCs and tablet-style Ultra-Mobile PCs have the screen size, but are heavier, more expensive, take time to boot up and have short battery lives.

The real competition, though, will be printed books, which have so far defeated all digital contenders with their excellent "battery life" and "display quality." Sony's going to have to try a little harder before it can really start saving trees.

---

On the Web --- http://www.sony.com/reader

"Review: Sony's Reader uses e-ink for e-books," MIT's Technology Review, September 27, 2006 --- http://www.technologyreview.com/read_article.aspx?id=17550&ch=infotech

Books have been a bit of the orphan in the digital world. Music has the iPod. Video has YouTube. Books have, well, Amazon.com, where you can buy them printed on paper.

Sure, there are electronic books available for download at Amazon and elsewhere, but they haven't really caught on. Sony Corp. is now tackling part of the problem with the U.S. launch of the first e-book reader that imitates the look of paper by using an innovative screen technology.

Is this the iPod for books? Not quite. But it is a step forward.

The Sony Reader is a handsome affair the size of a paperback book, but only a third of an inch thick. It goes on sale for $350 on Sony's Web site Wednesday, and in Borders stores in October.

The 6-inch screen can be taken for a monochrome liquid-crystal display at first glance, but on closer inspection looks like no other electronic display. It's behind a thin pane of glass, but unlike an LCD it shows no ''depth'' -- it pretty much looks like a light gray piece of paper with dark gray text.

The display, based on technology from Massachusetts Institute of Technology spinoff E Ink Corp., is composed of tiny capsules with electrically charged particles of white and black ink. When a static electric charge is applied on the side of the capsule that faces the reader, it attracts the white particles to the face of the display, making that pixel show light gray. Reversing the charge brings the black pigments floating through the capsule to replace the white pigments, and the pixel shows as dark gray.

Like paper, the display is readable from any angle, but it doesn't look as good as the real thing, chiefly because the contrast doesn't compare well. The background isn't white and the letters aren't black. The letters show some jaggedness, even though the resolution is a very respectable 800 by 600 pixels. It will display photos, though they look a bit like black-and-white photocopies.

But it's still a more comfortable reading medium than any other electronic display. The text is easy on the eyes in almost any light you could read a book by.

The other major advantage of the display is that it's a real power sipper. Sony says a Reader with a full charge in its lithium battery can show up to 7,500 pages, an amazing figure that I unfortunately didn't have the time to test.

The reason behind this trilogy-busting stamina is that the display only consumes power when it flips to a new page. Displaying the same page continuously consumes no power, though the electronics of the device itself do use a little bit.

The Reader's internal memory holds up to 100 books, depending on their size. The memory can be expanded with inexpensive SD cards or Memory Sticks.

Continued in article

From Smart Stops on the Web, Journal of Accountancy, September 2006 --- http://www.aicpa.org/pubs/jofa/sep2006/news_web.htm

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CAREER BUILDING SITES

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Value for Your Business
http://bvfls.aicpa.org
The AICPA’s Business Valuation and Forensic Litigation Services Center offers members case studies on fraud schemes, a practice management toolkit and a definition of the month. Read the full text of an exposure draft on valuation service standards and get tips on how to conduct an inquiry interview or an interview with a CEO or CFO. Help your clients develop internal controls with a risk management checklist and a list of common auditing deficiencies.

Answers for Accountants
www.forensicaccounting.com
CPAs interested in switching to investigative and forensic accounting can get an overview here from Alan Zysman, CA and certified fraud examiner, of Toronto’s Zysman Forensic Accounting Inc. His to-the-point e-site offers a detailed explanation of what it takes to become a forensic accountant and how to approach assignments. Also get an overview of investigative accounting and litigation support.

A Valuable Site
www.bvresources.com
Looking for information and news on business valuation? Visit this Web stop for BVWire, a free weekly update with the latest valuation court cases, practice tips, a definition of the week and questions and answers on valuations of start-ups. There’s also free downloads of IRS BV guidelines, an international glossary of terms and free issues of the newsletter Business Valuation Update, as well as links to other BV associations such as the AICPA and the Appraisal Foundation.

What’s It Worth?
www.cbiz.com
The e-calculators here can help you determine cash flow, financial ratios and business valuation as well as estate tax, retirement planning, investment returns and 401(k) savings. The Tax section has a 1040 calculator and the Tax Planning Update newsletter offers advice on how to reduce estate taxes and draft buy-sell agreements. Users also can get marketing tips and links to franchise and small business opportunities.

M&A How-Tos
www.mergerplace.com
Free membership to this e-stop gets CPAs and their entrepreneurial clients a valuation guide with tips on business appraisals and pitfalls associated with them. Users can find a due diligence checklist, simple- and long-form nondisclosure agreements and a buyer profile. The Resource Center offers the M&A Advisor with archived articles on e-mail strategies during an M&A, “Lessons for Dealmakers” and tips on small business valuations. Business Planning Tools includes sample business and marketing plans and e-calculators to determine cash flow and start-up costs.

Tips for Tenderfoots
www.tannedfeet.com
Whether you’re starting an at-home business or just need a refresher course on the rules of the game, this entrepreneurs’ e-page offers checklists for starting a business, marketing plans, tips on how to write a contract and small business tax deductions you may be able to claim. Visitors also can find articles, links and discussions on immigration law and intellectual property, and advice on buying, building or leasing office space. Get a laugh or two in the Business Humor section as well.

Bob Jensen's career bookmarks are at http://www.trinity.edu/rjensen/Bookbob1.htm#careers

From Jim Mahar's blog on September 11, 2006 --- http://financeprofessorblog.blogspot.com/

Advice for learning finance (and pretty much anything else)

A student emailed me the following today. I figured I would share my answer.

"I wondered if you might have any advice for those of us in the MBA program who have undergraduate degrees not related to business?"

Of course I have advice, how effective it is may be up for debate ;)

I would start by saying to think about what you already know and use it to help process what you are learning. Research on how people learn is full of evidence that we learn best when we can form relationships between the new information and things we already know. (The way I was taught it is that we form semantic networks that help us to store and retrieve the new knowledge. In fact this is a big reason I try to use sports examples as many people have at least some experience with sports.)

How to use this? Students in any class (even non finance classes) should try to tie new information would be to tie things to what you know. For instance, think of business through the eyes of a customer. The next time you go shopping stop and visualize everything that must go into the shopping experience. That, in a nutshell is what we are trying to do in any business class. We aim to teach people how to meet customer needs in an efficient manner.

Now turn it around and think of starting a company to meet these needs. Imagine everything you need to satisfy a customer: a product or service (architectural plans, food, or whatever), employees, a means of delivering the product or service. Now consider where the money for these things must come from.

That is finance. We figure out ways to help firms raise money to meet customer needs. Of course this is not as simple as it may seem at first glance. We must know the various alternatives for raising money, where to do so, the tax implications of the alternatives, and how to value the claims we are selling to raise money. And that is just from the corporate side! We also look at things from the investors’ point of view: what do they demand for the use of their money, how do they view risk (can they change the risk with derivatives?), what alternatives exist for their money, how do taxes effect them, and much more.

This seems like a great deal to know, and it is, but when you keep the bigger framework (that is what you know) always in mind, you can go back and see where each topic fits into the bigger picture. And that makes learning (and remembering) new things much easier and usually much more fun as well!

Hope this helps!
Jim

 

September 8, 2006 message from Bob Jensen

I have questions about the formal distinction between a firm commitment (financial instrument) versus a forward contract (derivative financial instrument).

Those of us into FAS 133’s finer points have generally assumed a definitional distinction between a “firm commitment” purchase contract to buy a commodity at a contract price versus a forward contract to purchase the commodity at a contracted forward price. The distinction is important, because FAS 133 requires booking a forward contract and adjusting it to fair value at reporting dates if actual physical delivery is not highly likely such that the NPNS exception under Paragraph 10(b) of FAS 133 cannot be assumed to avoid booking.

The distinction actually commences with forecasted transactions that include purchase contracts for a fixed notional (such as 100,000 gallons of fuel) at an uncertain underlying (such as the spot price of fuel on the actual future date of purchase). Such purchase contracts are typically not booked. These forecasted transactions become “firm commitments” if the future purchase price is contracted in advance (such $2.23 per gallon for a future purchase three months later). Firm commitments are typically not booked under FAS 133 rules, but they may be hedged with fair value hedges using derivative financial instruments. Forecasted transactions (with no contracted price) can be hedged with cash flow hedges using derivative contracts.

There is an obscure rule (not FAS 133) that says an allowance for firm commitment loss must be booked for an unhedged firm commitment if highly significant (material) loss is highly probable due to a nose dive in the spot market. But this obscure rule will be ignored here.

While I was consulting yesterday with an oil trading company, a need arose to definitively distinguish a firm commitment to buy fuel versus a forward contract to buy fuel. My client deals heavily in what I view as firm commitment contracts between buyers and sellers of fuel. Future settlements are totally independent of future spot prices since the contracted price dictates the eventual purchase price of any given contract. However, my client’s customers commonly (more than half the time) pass on (clearing) these contracts when physical delivery is not needed.

My client is fearful that its customers’ contracts will be deemed forward contracts where the forward price is deemed the contracted price. Since actual physical delivery is very uncertain, the Paragraph 10(b) NPNS exception is not available if these are deemed forward contracts.  

One distinction between a firm commitment contract and a forward contract is that a forward contract’s net settlement, if indeed it is net settled, is based on the difference between spot price and forward price at the time of settlement. Net settlement takes the place of penalties for non-delivery of the actual commodity (most traders never want pork bellies dumped in their front lawns). Oil companies typically take deliveries some of the time, but like electric companies these oil companies generally contract for far more product than will ever be physically delivered. Usually this is due to difficulties in predicting peak demand.

A firm commitment is gross settled at the settlement date if no other net settlement clause is contained in the contract. If my client does not want a particular shipment of contracted oil, the firm commitment contract is simply passed on to somebody needing oil or somebody willing to offset (book out) a purchase contract with a sales contract. Pipelines, for example, typically have a clearing house for such firm commitment transferals of “paper gallons” that never flow through a pipeline. Interestingly, fuel purchase contracts are typically well in excess (upwards of 100 times) the capacities of the pipelines.  

The contentious FAS 133 booking out problem was settled for electricity companies in FAS 149. But it was not resolved in the same way for other companies. Hence for all other companies the distinction between a firm commitment contract and a forward price contract is crucial.

In some ways the distinction between a firm commitment versus a forward contract may be somewhat artificial. The formal distinction, in my mind, is the existence of a net settlement (spot price-forward price) clause in a forward contract that negates a “significant penalty” clause of a firm commitment contract.

 The original FAS 133 (I still have this antique original version) had a glossary that reads as follows in Paragraph 540:

Firm commitment

An agreement with an unrelated party, binding on both parties and
usually legally enforceable, with the following characteristics:

a. The agreement specifies all significant terms, including the
quantity to be exchanged, the fixed price, and the timing of the
transaction. The fixed price may be expressed as a specified
amount of an entity's functional currency or of a foreign
currency. It may also be expressed as a specified interest rate
or specified effective yield.

b. The agreement includes a disincentive for nonperformance that is
sufficiently large to make performance probable.

The key distinction between a firm commitment and a forward contract seems to be Part b above that implies physical delivery backed by a “sufficiently large” penalty if physical delivery is defaulted.  The net settlement (spot-forward) provision of forward contracts generally void Part b penalties even when physical delivery was originally intended.  

Firm commitments have greater Part b penalties for physical non-conformance than do forward contracts. But in the case of the pipeline industry, Part b technical provisions in purchase contracts generally are not worrisome because of a market clearing house for such contracts (the highly common practice of booking out such contracts by passing along purchase contracts to parties with sales contracts, or vice versa, that can be booked out) when physical delivery was never intended. For example, in the pipeline hub in question (in Oklahoma) all such “paper gallon” contracts are cleared against each other on the 25^th of every month. By “clearing” I mean that “circles” of buyers and sellers are identified such that these parties themselves essentially net out deals. In most cases the deals are probably based upon spot prices, although the clearing house really does not get involved in negotiations between buyers and sellers of these “paper gallons.”

This is an illustration of where the literal interpretation of a contract (with a huge non-performance penalty) has been virtually negated by a market clearing mechanism. My client provides a clearing mechanism on the 24^th of every month for about half of what the pipeline charges for clearings on the 25^th of each month. Some customers are now worried that if they clear these things with my client they may encounter FAS 133 booking requirements (a Big 4 auditor took this position) that they will not encounter if they clear though the pipeline company even though the pipeline company is in the same clearing business as my client. It makes no sense to me why a Big 4 auditing firm would claim that clearings of “paper gallon” purchase contracts through the pipeline company are firm commitments whereas the same service performed by another company makes them forward contracts. It should be noted that the pipeline company itself only brings buyers and sellers together for these “paper gallons” in which not one drop of fuel passes through the pipeline.

1.
Is there an authoritative reference on the finer points of distinction between firm commitments and forward contracts?  

2.
Why would it really matter whether the clearings take place with a pipeline company versus any other company that performs an identical clearing service for “paper gallons”?

3.
And (my client won’t like me to ask this), why should companies be allowed to keep firm commitments off the books and put forward contracts on the books when a clearing mechanism is virtually negating the Part b distinction above? This seems to be form over substance when applying an accounting rule.

New FAS 157 Standard
On September 15, 2006 the FASB released its new standard providing guidance for, especially definitions, for fair value accounting. This is a much watered down standard relative to the original exposure draft that initially proposed the firms have the option of using fair value accounting for virtually all financial instruments that are now accounted for on a historical cost basis under FAS 107 and FAS 115. 

FAS 157 can be downloaded free at http://www.fasb.org/st/index.shtml#fas157

I recently completed the first draft of a paper on fair value at http://www.trinity.edu/rjensen/FairValueDraft.htm
Comments would be helpful.

"FASB Enhances Guidance for Measuring Fair Value," AccountingWeb, September 18, 2006 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=102586

The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, providing enhanced guidance for using fair value to measure assets and liabilities. More than 40 current accounting standards within generally accepted accounting principles (GAAP) require or permit entities to measure assets and liabilities at fair value. Prior to last week’s issuing of this standard, the methods for measuring fair value were diverse and inconsistent.

“Today’s [sic] Statement establishes a market-based framework for measuring assets and liabilities at fair value if a particular accounting standard calls for it,” Leslie F. Seidman, FASB member, said in a statement announcing the issuing of the Statement. “Moreover, by requiring companies to provide expanded information about the assets and liabilities measured at fair value, investors and other financial statement users will be able to make more informed decisions about the potential effect of those measurements on a entity’s financial performance.”

The standard, which is effective for financial statements issued for fiscal years beginning after November 15, 2007, also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances.

Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted price in active markets and lowest priority to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.

“The standard clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, not just the company’s mark-to-model value,” said Linda MacDonald, FASB director and fair value measurements project manager. “The standard also requires expanded disclosure of the effect on earnings for items measured using unobservable data.”

The International Accounting Standards Board (IASB) intends to issue this statement to its constituents in the form of a preliminary views document.

"Will Fair Value Fly? Fair-value accounting could change the very basis of corporate finance," by Ronald Fink, CFO Magazine September 01, 2006 --- http://www.cfo.com/article.cfm/7851757/c_7873404?f=magazine_featured

Much has changed in financial reporting since Andrew Fastow and Scott Sullivan, the finance chiefs of Enron and WorldCom, respectively, brought disgrace upon themselves, their employers, and, to a degree, their profession. Regulators and investors have pressed companies to be more open and forthcoming about their results — and companies have responded. According to a new CFO magazine survey, 82 percent of public-company finance executives disclose more information in their financial statements today then they did three years ago. But that positive finding won't quell calls for further accounting reform.

The U.S. reporting system "faces a number of important and difficult challenges," Robert Herz, chairman of the Financial Accounting Standards Board, told the annual conference of the American Institute of Certified Public Accountants in Washington, D.C., last December. Chief among those, said Herz, is "the need to reduce complexity and improve the transparency and overall usefulness" of information reported to investors. ad

Critics contend that generally accepted accounting principles (GAAP) remain seriously flawed, even as companies have beefed up internal controls to comply with the Sarbanes-Oxley Act. "We've done very little but play defense for the last five to six years," charges J. Michael Cook, chairman and CEO emeritus of Deloitte & Touche LLP. "It's time to play offense."

Cook, a respected elder statesman in the accounting community, goes so far as to pronounce financial statements almost completely irrelevant to financial analysis as currently conducted. "The analyst community does workarounds based on numbers that have very little to do with the financial statements," says Cook. "Net income is a virtually useless number."

How can financial statements become more relevant and useful? Many reformers, including Herz, believe that fair-value accounting must be part of the answer. In this approach, which FASB increasingly favors, assets and liabilities are marked to market rather than recorded on balance sheets at historical cost. Fair-value accounting, say its advocates, would give users of financial statements a far clearer picture of the economic state of a company.

"I know what an asset is. I can see one, I can touch one, or I can see representations of one. I also know what liabilities are," says Thomas Linsmeier, a Michigan State University accounting professor who joined FASB in June. On the other hand, "I believe that revenues, expenses, gains, and losses are accounting constructs," he adds. "I can't say that I see a revenue going down the street. And so for me to have an accounting model that captures economic reality, I think the starting point has to be assets and liabilities."

More than any other regulatory change, fair value promises to end the practice of earnings management. That's because a company's earnings would depend more on what happens on its balance sheet than on its income statement (see "The End of Earnings Management?" at the end of this article).

But switching from historical cost would require enormous effort from overworked finance departments. Valuing assets in the absence of active markets could be overly subjective, making financial statements less reliable. Linsmeier's confidence notwithstanding, disputes could arise over the very definition of certain assets and liabilities. And using fair value could even distort a company's approach to deal-making and capital structure.

A Familiar Concept Fair value is by no means unfamiliar to corporate-finance executives, as current accounting rules for such items as derivatives (FAS 133 and 155), securitizations (FAS 156), and employee stock option grants (FAS 123R) use it to varying degrees when recording assets and liabilities. So does a proposal issued last January for another rule, this one for accounting for all financial instruments. FASB's more recent proposals to include pensions and leases on balance sheets also embrace fair-value measurement (see "Be Careful What You Wish For" at the end of this article).

While both Herz and Linsmeier are careful to note that they don't necessarily favor the application of fair value to assets and liabilities that lack a ready market, they clearly advocate its application where there's sufficient reason to believe the valuations are reliable. Corporate accounting, Herz says, is the only major reporting system that doesn't use fair value as its basis, and he points to the Federal Reserve's use of it in tracking the U.S. economy as sufficient reason for companies to adopt it.

The corporate world, however, must grapple with its own complexities. For one, fair value could make it even more difficult to realize value from acquisitions. Take the question of contingent considerations, wherein the amount that acquirers pay for assets ultimately depends on their return. Under current GAAP, the balance-sheet value of assets that are transferred through such earnouts may reflect only the amount exchanged at the time the deal is completed, because the acquirer has considerable leeway in treating subsequent payments as expenses.

Under fair value, the acquirer would also include on its balance sheet the present value of those contingent payments based on their likelihood of materializing. Since the money may never materialize, some finance executives contend those estimates could be unreliable and misleading. "I disagree with [this application of fair value] on principle," James Barge, senior vice president and controller for Time Warner, said during a conference on financial reporting last May. ad

Barge cites the acquisition of intangible assets that a company does not intend to use as a further example of fair value's potentially worrisome effects. Under current GAAP, their value is included in goodwill and subject to annual impairment testing for possible write-off. But if, as FASB is contemplating, the value of those assets would be recorded on the balance sheet along with that of the associated tangible assets that were acquired, Barge worries that an immediate write-off would then be required — even though it would not reflect the acquiring company's economics.

Fair value's defenders say such concerns are misplaced. The possibility that a contingent consideration won't materialize, for starters, is already reflected in an acquirer's bid, says Patricia McConnell, a Bear Stearns senior managing director who chairs the corporate-disclosure policy council of the CFA Institute, a group for financial analysts. "It's in the price," she says.

As for intangibles that are acquired and then extinguished, the analyst says a write-off would not in fact be required under fair value if the transaction strengthens the acquirer's market position. That position would presumably be reflected in the value of the assets associated with those intangibles as recorded on the balance sheet under fair-value treatment.

"It may be in buying a brand to gain monopolistic position that you don't have an expense," McConnell explains, "but rather you have the extinguishment of one asset and the creation of another." Yet McConnell, among others, admits that accounting for intangibles is an area that would need improvement even if FASB adopted fair value.

Deceptive Debt? Another area of concern involves capital structure, with Barge suggesting that fair value may make it more difficult to finance growth with debt. He contends that marking a company's debt to market could make a company look more highly exposed to interest-rate risk than it really is, noting during the May conference that Time Warner's debt was totally hedged.

Barge also cited as problematic the hypothetical case of a company whose creditworthiness is downgraded by the rating agencies. By marking down the debt's value on its balance sheet, the company would realize more income, a scenario Barge called "nonsensical." He warned of a host of such effects arising under fair value when a company changes its capital structure.

Proponents find at least some of the complaints about fair value and corporate debt to be misplaced. Herz notes fair value would require the company to mark the hedge as well as the debt to market, so that if a company is hedging interest-rate risk effectively, its balance sheet should accurately reflect its lack of any exposure.

What's more, fair value could also improve balance sheets in some cases. When, for instance, a company owns an interest in another whose results it need not consolidate, the equity holder's proportion of the other company's assets and liabilities is currently carried at historical cost. If, however, the other company's assets have gained value and were marked to market, the equity holder's own leverage might decrease.

A real-life case in point: If the chemical company Valhi marked to market its 39 percent stake in Titanium Metals, Valhi's own ratio of long-term debt to equity would fall from 90 percent (at the end of 2005) to 56 percent, according to Jack T. Ciesielski, publisher of The Analyst's Accounting Observer newsletter. ad

Still, even some fair-value proponents share Barge's concern about credit downgrades. As Ciesielski, a member of FASB's Emerging Issues Task Force, wrote last April in a report on the board's proposal for the use of fair value for financial instruments, it is "awfully counterintuitive" for a company to show rising earnings when its debt-repayment capacity is declining.

Herz and other fair-value proponents disagree, noting that the income accrues to the benefit of the shareholders, not to bondholders. "It's not at all counterintuitive," asserts Rebecca McEnally, director for capital-markets policy of the CFA Institute Centre for Financial Market Integrity, citing the fact that the item is classified under GAAP as "income from forgiveness of indebtedness." But Ciesielski says investors are unlikely to understand that, and that fair value, in this case at least, may not produce useful results.

Resolving the Issues Even some of FASB's critics agree, however, that the current system needs improvement, and that fair value can help provide it. "Fair value in general is more relevant than historical cost and can lead to reduced complexity and greater transparency," Barge admits, though he has noted that the use of fair value may also lead to "soft" results that "you can't audit."

For much the same reason, Colleen Cunningham, president and CEO of Financial Executives International (FEI), expressed concern in testimony before Congress last March that "overly theoretical and complex standards can result in financial reporting of questionable accuracy and can create a significant cost burden, with little benefit to investors." In an interview, she explains that her biggest concern is that FASB is pushing ahead with fair-value-based rules without sufficient input from preparers. "Let's resolve the issues" before proceeding, she insists.

Herz concedes that numerous issues surrounding fair value need to be addressed. But important users of financial statements are pressing him to move forward on fair value without delay. As a comment letter that the CFA Institute sent to FASB put it: "All financial decision-making should be based on fair value, the only relevant measurement for assets, liabilities, revenues, and expenses."

Meanwhile, Herz isn't waiting for the conceptual framework to be completed before enacting new rules that embrace fair value. "In the end, we're not going to get everybody agreeing," Herz says. "So we have to make decisions" despite lingering disagreement.

Ironically, one fair-value-based proposal that FASB issued recently may have created an artful means of defusing opposition. The Board's proposal for financial instruments gives preparers of financial reports the choice of using historical cost or fair value in recording the instruments on their balance sheets. That worries some people, who say giving companies a choice of methods will make it harder to compare their results, even when they're in the same industry.

Continued in article

From The Wall Street Journal Accounting Weekly Review on September 22, 2006

TITLE: FASB to Issue Retooled Rule for Valuing Corporate Assets
REPORTER: David Reilly
DATE: Sep 15, 2006
PAGE: C3
LINK: http://online.wsj.com/article/SB115828639109763950.html?mod=djem_jiewr_ac 
TOPICS: Accounting, Advanced Financial Accounting, Fair Value Accounting

SUMMARY: On 9/15/2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. The standard "...provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors' requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings." (Source: FASB News Release available on their web site at http://www.fasb.org/news/nr091506.shtml) This new standard must be used as guidance whenever reporting entities use fair value to measure value assets and liabilities as a required or acceptable method of applying GAAP.

QUESTIONS:
1.) What is the purpose of issuing Statement of Financial Accounting Standards No. 157? In your answer, describe how this standard should help to alleviate discrepancies in practice. To help answer this question, you may access the FASB's own news release about the standard, available at http://www.fasb.org/news/nr091506.shtml or the new standard itself, available on the FASB's web site.

2.) From your own knowledge, cite an example in which fair value is used to measure an asset or liability in corporate balance sheets. Why is fair value an appropriate measure for including these assets and liabilities in corporate balance sheets?

3.) What is the major difficulty with using fair values for financial reporting that is cited in the article?

4.) Define the term "historical cost." Name two flaws with the use of historical costs, one cited in the article and one based on your own knowledge. Be sure to explain the flaw clearly.

5.) How does this standard help to alleviate the issue described in answer to question 3? Again, you may access the FASB's web site, and the news release in particle, to answer this question.

6.) The article closes with a statement that "The FASB hopes to counter some of [the issues cited in the article] by expanding disclosures required for all balance sheet items measure at fair value..." What could be the possible problem with that requirement?

Reviewed By: Judy Beckman, University of Rhode Island

"FASB to Issue Retooled Rule For Valuing Corporate Assets New Method Repeals Limits Spurred by Enron Scandal; Critics Worry About Abuses," by David Reilly,  The Wall Street Journal, September 15, 2006; Page C3 --- http://online.wsj.com/article/SB115828639109763950.html?mod=djem_jiewr_ac

Accounting rule makers have wrapped up an overhaul of a tricky but important method of valuing corporate assets, despite some critics' warning that the change could reopen the door to abuses like those seen at Enron Corp.

The overhaul, contained in an accounting standard that could be issued as early as today, will repeal a ban put in place after Enron collapsed into bankruptcy court in late 2001 amid an array of accounting irregularities. The ban prohibited companies immediately booking gains or losses from complex financial instruments whose real value may not be known for years.

The Financial Accounting Standards Board's new rule will require companies to base "fair" values for certain items on what they would fetch from a sale in an open market to a third party. In the past, firms often would use internal models to determine the value of instruments that didn't have a readily available price.

FASB prohibited that practice after Enron used overly optimistic models to value multiyear power contracts in a bid to pad earnings. The ban was meant to give the board time to come up with a new approach to determining fair values.

The accounting rule makers say the new standard will give companies, auditors and investors much needed, and more nuanced, guidance on how to measure market values. Companies will have to think, "it's not my own estimate of what something is worth to me, but what the market would demand for this," said Leslie Seidman, an FASB member. While clarifying how to come up with appropriate values for some instruments, the new standard doesn't expand the use of what is known as fair-value accounting.

Critics say the new rule reopens the door to manipulation and possibly fraud by unscrupulous managers. Requiring market values for instruments where there isn't a ready price in a market can be "a license for management to invent the financial statements to be whatever they want them to be," Damon Silvers, associate general counsel for the AFL-CIO, said at a meeting of an FASB advisory group this spring.

Jousting over the standard reflects a deep rift within accounting circles. For decades, accounting values were mostly based on historical cost, or what a company paid for a particular asset. In recent years, accounting rules have moved toward the use of market values, known as fair-value accounting. In some ways this reflects the shift in the U.S. from a manufacturing to a service economy, where intangible assets are more important than the plant and equipment that previously defined a company's financial strength.

Starting in the mid-1980s, companies also began using ever-more-complicated financial instruments such as futures, options and swaps to manage interest-rate, currency and other risks. Such contracts often can't be measured based on their cost. This spurred the use of market values, thought to be more realistic. But these values can be tough to determine because many complex financial instruments are tailor-made and don't trade on open markets in the same way as stocks.

Of course, valuations based on historical cost also have flaws. The savings-and-loan crisis of the late 1980s, for example, was prompted in part by thrifts carrying loans on their balance sheets at historical cost, even though the loans had plummeted in value.

Robert Herz, the FASB's chairman, acknowledges the difficulty in coming up with a market, or fair, value for many instruments. In discussions, he often asks how a company could reasonably be expected to come up with a fair value for a 30-year swap agreement on the Thai currency, the baht, which is a bet on the future value of that currency against another.

The answer, according to Mr. Herz and the FASB, is to base the value on what a willing third-party would pay in the market and possibly include a discount to reflect the uncertainty inherent in the approach.

In an interview earlier this year, Mr. Herz said this valuation approach would reduce the likelihood of a recurrence of problems such as those seen at Enron. "The problem wasn't that Enron was using fair values, it was that they were using 'unfair' values," he said.

Still, "the bottom line is that fair-value accounting is a great thing so long as you have market values," said J. Edward Ketz, an associate accounting professor at Pennsylvania State University, who is working on a book about the FASB's new standard. "If you don't, you get into some messy areas."

The FASB hopes to counter some of these issues by expanding disclosures required for all balance-sheet items measured at fair value, the board's Ms. Seidman said.

I recently completed the first draft of a paper on fair value at http://www.trinity.edu/rjensen/FairValueDraft.htm
Comments would be helpful.

http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#FairValue

http://www.trinity.edu/rjensen/roi.htm

http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#UnderlyingBases

http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#TheoryDisputes 

http://www.trinity.edu/rjensen/acct5341/speakers/133glosf.htm#F-Terms

Interest Rate Swap Valuation, Forward Rate Derivation, and Yield Curves for FAS 133 and IAS 39 on Accounting for Derivative Financial Instruments ---
http://www.trinity.edu/rjensen/acct5341/speakers/133swapvalue.htm

Principles-Based Versus Rules-Based Accounting Standards

"Standing on Principles In a world with more regulation than ever, can the accounting rulebook be thrown away?" byAlix Nyberg Stuart, CFO Magazine September 01, 2006 ---
http://www.cfo.com/article.cfm/7852613/c_7873404?f=magazine_featured

As Groucho Marx once said, "Those are my principles, and if you don't like them...well, I have others."

Groucho would enjoy the heated stalemate over principles-based accounting. Four years after the Sarbanes-Oxley Act required the Securities and Exchange Commission to explore the feasibility of developing principles-based accounting standards in lieu of detailed rules, the move to such standards has gone exactly nowhere. ad

Broadly speaking, principles-based standards would be consistent, concise, and general, requiring CFOs to apply common sense rather than bright-lines. Instead of having, say, numerical thresholds to define when leases must be capitalized, a CFO could use his or her own judgment as to whether a company's interest was substantial enough to put a lease on the balance sheet. If anything, though, accounting and auditing standards have reached new levels of nitpickiness. "In the current environment, CFOs are second-guessed by auditors, who are then third-guessed by the Public Company Accounting Oversight Board [PCAOB], and then fourth- and fifth-guessed by the SEC and the plaintiffs' bar," says Colleen Cunningham, president and CEO of Financial Executives International (FEI).

Indeed, the Financial Accounting Standards Board seems to have taken a principled stand in favor of rule-creation. The Board continues to issue detailed rules and staff positions. Auditors have amped up their level of scrutiny, in many cases leading to a tripling of audit fees since 2002. And there is still scant mercy for anyone who breaks the rules: the annual number of restatements doubled to more than 1,000 between 2003 and 2005, thanks to pressure from auditors and the SEC. The agency pursued a record number of enforcement actions in the past three years, while shareholder lawsuits, many involving accounting practices, continued apace, claiming a record $7.6 billion in settlements last year and probably more in 2006.

Yet the dream won't die. On the contrary, principles are at the heart of FASB's latest thinking about changes to its basic accounting framework, as reflected in the "preliminary views" the board issued in July with the International Accounting Standards Board (IASB) as part of its plan to converge U.S. and international standards. Principles-based accounting has been championed by FASB chairman Robert Herz, SEC commissioner Paul Atkins, SEC deputy chief accountant Scott Taub, and PCAOB member Charlie Niemeier in various speeches over the past six months. And they're not just talking about editing a few lines in the rulebook.

"We need FASB, the SEC, the PCAOB, preparers, users, auditors, and the legal profession to get together and check their respective agendas at the door in order to collectively think through the obstacles," says Herz. "And if it turns out some of the obstacles are hardwired into our structure, then maybe we need some legal changes as well," such as safe harbors that would protect executives and auditors from having their judgments continually challenged. Even the SEC is talking about loosening up. Most at the agency favor the idea of principles instead of rules, says Taub, even knowing that "people will interpret them in different ways and we'll have to deal with it."

Standards Deviation Why lawmakers are so set on principles and what exactly those principles would look like is all a bit hazy right now. "Post-Enron, the perception was that people were engineering around the accounting rules. We looked around the world and saw that England had principles-based accounting and they didn't have scandals there, so we decided this was the way to go," recounts CVS Corp. CFO David Rickard, a Financial Accounting Standards Advisory Committee (FASAC) member.

But Rickard considers the approach "naive." His firsthand experience with principles-based accounting, as a group controller for London-based Grand Metropolitan from 1991 to 1997, left him unimpressed. "We had accounting rules we could drive trucks through," he says.

Would such a change be worth the trouble? A recent study that compared the accrual quality of Canadian companies reporting under a relatively principles-based GAAP to that of U.S. companies reporting by the rules suggests that there may be no effective difference between the two systems. The authors, Queen's University (Ontario) professors Daniel B. Thornton and Erin Webster, found some evidence that the Canadian approach yields better results, but conclude that "stronger U.S. oversight and greater litigation risk" compensate for any differences.

U.S. GAAP is built on principles; they just happen to be buried under hundreds of rules. The SEC, in its 2003 report on principles-based accounting, labeled some standards as being either "rules" or "principles." (No surprise to CFOs, FAS 133, stock-option accounting, and lease accounting fall in the former category, while FAS 141 and 142 were illustrative of the latter.) The difference: principles offer only "a modicum" of implementation guidance and few scope exceptions or bright-lines. ad

For FASB, the move to principles-based accounting is part of a larger effort to organize the existing body of accounting literature, and to eliminate internal inconsistencies. "Right now, we have a pretty good conceptual framework, but the standards have often deviated from the concepts," says Herz. He envisions "a common framework" with the IASB, where "you take the concepts," such as how assets and liabilities should be measured, and "from those you draw key principles" for specific areas of accounting, like pensions and business combinations. In fact, that framework as it now stands would change corporate accounting's most elemental principle, that income essentially reflects the difference between revenues and expenses. Instead, income would depend more on changes in the value of assets and liabilities (see "Will Fair Value Fly?").

For its part, the SEC has also made clear that it does not envisage an entirely free-form world. "Clearly, the standard setters should provide some implementation guidance as a part of a newly issued standard," its 2003 report states.

The catch is that drawing a line between rules and principles is easier said than done. Principles need to be coupled with implementation guidance, which is more of an art than a science, says Ben Neuhausen, national director of accounting for BDO Seidman. That ambiguity may explain why finance executives are so divided on support for this concept. Forty-seven percent of the executives surveyed by CFO say they are in favor of a shift to principles, another 25 percent are unsure of its merits, and 17 percent are unfamiliar with the whole idea. Only 10 percent oppose it outright, largely out of concern that it would be too difficult to determine which judgments would pass muster.

A Road to Hell? As it stands now, many CFOs fear that principles-based accounting would quickly lead to court. "The big concern is that we make a legitimate judgment based on the facts as we understand them, in the spirit of trying to comply, and that plaintiffs' attorneys come along later with an expert accountant who says, 'I wouldn't have done it that way,' and aha! — lawsuit! — several billion dollars, please," says Rickard.

Massive shareholder lawsuits were a concern for 36 percent of CFOs who oppose ditching rules, according to CFO's survey, and regulators are sympathetic. "There are institutional and behavioral issues, and they're much broader than FASB or even the SEC," says Herz, citing "the focus on short-term earnings, and the whole kabuki dance around quarterly guidance."

Continued in article

Bob Jensen's threads on the controversies over standard setting in accounting are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#MethodsForSetting

From The Wall Street Journal Accounting Weekly Review on September 8, 2006

TITLE: Where Accounting Meets Language
REPORTER: Michael Rapoport
DATE: Sep 01, 2006
PAGE: C3 LINK: http://online.wsj.com/article/SB115707661813251432.html?mod=djem_jiewr_ac 
TOPICS: Accounting Changes and Error Corrections, Cash Flow, Financial Accounting

SUMMARY: The article discusses research by two accounting professors at Georgia Institute of Technology, Chares Mulford and Eugene Comiskey, into classifications of cash flows from dividends in equity investments. Dividends received that are in excess of earnings by the investee companies (returns on investments) may be shown as operating cash flows in the investor company's statement of cash flows while cash flows from dividends that exceed the underlying earnings by the investee firm (returns of investments) may not. These latter cash flows must be shown in the investing activities section of the statement.

QUESTIONS:
1.) Access the FASB's Statement of Financial Accounting Standards (FAS) 95, Statement of Cash Flows. Cite the definitions of investing cash flows and operating cash flows. Explain how those definitions lead to the issues described in this article and the research undertaken by Professors Mulford and Comiskey at Georgia Institute of Technology.

2.) As noted in the article, the reported amount of total cash flow will not be affected regardless of the classification issue described in this article. Why then is it important to consider classification of cash flows at all, into any of the three categories?

3.) Continue with your comments in answer to question 2 to particularly address the importance of the operating cash flow amount shown in the statement of cash flows. From your understanding of the article or from other sources, identify financial statement users particularly interested in the amount of operating cash flows generated by a company.

4.) Why do you think so many companies receiving returns on investments in equity securities classify them entirely as cash flows from investing activities? In your answer, comment on the timing of Schnitzer Steel Industries' reclassification of cash flows into the operating cash flows section and its restatement of prior financial statements.

Reviewed By: Judy Beckman, University of Rhode Island

Transfer Pricing of Intellectual Property Rights --- http://www.buildingipvalue.com/05_TI/031_034.htm

Bob Jensen's threads on intangibles accounting are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#TheoryDisputes

From the FinancialRounds Blog on September 4, 2006 --- http://financialrounds.blogspot.com/

This Week's Carnival of The Capitalists

This week's COTC is up at The Business of America is Business, compliments of our host Professor Starling Hunter. He's hosting for the second time in a month (talk about a glutton for punishment). He's got a great format for this week's Carnival - he starts with the question each article answers. As usual, here are my picks of the week:
 

Dan Melson of Searchlight Crusade answers the question Why Is There Money in Fixer Properties?

Debt Free provides The Three Strategies to Maximize Your Financial Success.
 

Here's the usual disclaimer: My tastes are probably different from yours. So look around - There's always lots of good stuff at a Carnival.

Monday, September 04, 2006

Ben Stein Punts One on Management Buyouts

I almost always enjoy reading whatever Ben Stein's writes - he's an old school kind of guy who generally hits most nails he aims at right on the head. But I got a kick out of his recent New York Times piece where he rails against the injustice of Management Buyouts (MBOs). Unfortunately, the reason I got a kick out of it is that his arguments are both over the top and incredibly off base.

He mentions MBOs in the same breath as segregation and housing discrimination, and says that "...by every standard I can see, they are yet another sad sign of how our corporate trustees have lost their moral compass."

Read the full piece here (Note: online subscription required)

The basic premise behind his screed (and I think it's an appropriate word) is that it's wrong for management to use their private information to buy up corporate assets on the cheap.

I have at least a couple of problems with his analysis:

First, what evidence I've seen on MBOs seems to show that the stockholders of the parent company make out about as well when a division is taken private in an MBO as they do when the division is sold to a third party (i.e. in an arms-length asset sale). So, managers on average seem to offer shareholders the same deal as they would have gotten elsewhere.

Second, I think Stein is guilty of "cherry picking." He may not be aware of it, but his cases are most likely not a representative sample. He gives some examples of MBOs where the management made a huge profit. However, the appropriate metric would be the returns for ALL MBOs, not just the successful ones.

Third, even if MBOs on average are extremely successful, the managers doing them bear a huge amount of risk. They typically take large equity stakes in these firms, and therefore end up holding an extremely undiversified position. If the MBO fails, they stand to lose what often represents a major portion of their personal wealth. And as we all know (at least, if we've taken an introductory finance class), bearing higher risk should be compensated by a higher expected return, or people won't take the risk.

Finally, in MBOs, managers typically pay a premium above the current perceived value of the division. And the shareholders APPROVE the deals (or at least the board of directors does). A evidence, the abnormal return to the firms selling the division are positive in most cases (and are statistically quite significant). If managers are making such a killing, it should show up in the returns to the parent company. It doesn't. And if it' such a good deal for the managers, why doesn't another firm swoop down and outbid them?

All in all, a disappointing piece, and not up to Stein's usual standards.

Oh well, everyone has an occasional off day. He does so many things so well that I guess he's due for one, too.

Update: For further commentary on the topic, be sure to read what Equity Private (Going Private) and Larry Ribstein (Ideoblog) have to say.

As usual, they say it better than me (damn!)

From IAS Plus on September 21, 2006 --- http://www.iasplus.com/index.htm

We have posted the September 2006 Edition of EITF Roundup (PDF 178k), which provides an overview of the issues discussed, consensuses reached, and administrative matters discussed at the 7 September 2006 meeting of FASB's Emerging Issues Task Force. You will find past issues Here. Issues covered in the September 2006 edition include:
 

• Issue No. 06-1, Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service From the Service Provider
• Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split- Dollar Life Insurance Arrangements
• Issue No. 06-5, Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance
• Issue No. 06-6, Debtor's Accounting for a Modification (or Exchange) of Convertible Debt Instruments
• Issue No. 06-7, Issuer's Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
• Issue No. 06-8, Application of the Assessment of a Buyer’s Continuing Investment Under FASB Statement No. 66, Sales of Real Estate, for Sales of Condominiums
• Issue No. 06-9, Reporting a Change in (or Elimination of) a Previously Existing Difference Between the Fiscal Year- End of a Parent and a Consolidated Subsidiary or Equity Method Investee

From The Wall Street Journal Accounting Weekly Review on September 8, 2006

TITLE: Revisiting Executive-Pay Law
REPORTERS: Charles Forelle and Kara Scannell
DATE: Sep 06, 2006
PAGE: C1
LINK: http://online.wsj.com/article/SB115750781181554697.html?mod=djem_jiewr_ac 
TOPICS: Compensation, Stock Options, Tax Laws, Taxation

SUMMARY: Senator Charles Grassley, chairman of the Senate Finance Committee, opened hearings on options and executive compensation today. In a related interview, Sen. Grassley said that Congress may consider a change to tax law to do "...away with the deduction for performance-based pay entirely...[or may] at least [tighten] it up." The tax law in question has been in effect since 1993 and disallows deductions for compensation to top executives in excess of $1,000,000 except for performance-based compensation.

QUESTIONS:
1.) In general, what is the maximum amount that corporations may deduct on tax returns for an individual executive's annual compensation? Why does tax law establish this maximum amount?

2.) What exception is established in the tax code to the limitation described in answer to question 1? Why is that exception allowed?

3.) Why may Congress want to avoid dealing with this issue outside of the upcoming lame duck period? How many groups are critical of Congress having established the limitation to executive pay deductibility in 1993? Cite all that you find mentioned in the article, or others that you are aware of.

4.) Why may Congress find dealing with this issue to be a way of addressing other concerns at the same time? How does this possibility make it clear that tax law is driven by more than just the desire to tax U.S. entities equitably?

Reviewed By: Judy Beckman, University of Rhode Island

From The Wall Street Journal Accounting Weekly Review on September 8, 2006

TITLE: Determining Board Independence
REPORTER: Kaja Whitehouse
DATE: Sep 06, 2006
PAGE: C3
LINK: http://online.wsj.com/article/SB115750647533654660.html?mod=djem_jiewr_ac 
TOPICS: Accounting, Board of Directors, Corporate Governance, Disclosure, Disclosure Requirements

SUMMARY: Image Entertainment, Inc., disclosed in its proxy statement that certain directors have relationships and related transactions with the company, "even though those five are also billed as 'independent directors...'

QUESTIONS:
1.) Define the terms "corporate governance" and "related party transactions." Cite your source for your definitions.

2.) Who establishes rules regarding the required independence of members of companies' Boards of Directors? Why is it important to assess independence of corporate board members?

3.) What financial reporting standard addresses issues with respect to disclosures about related party transactions in general? What are the required disclosures?

4.) Access the SEC's web site at www.sec.gov. Proceed to a November 4, 2003, SEC release entitled "NASD and NYSE Rulemaking: Relating to Corporate Governance" located at http://www.sec.gov/rules/sro/34-48745.htm or search the SEC's web site using the phrase "board independence" to locate this document. Proceed to the section B, part 2, on the NYSE regulations for determining independence of board members. Compare the transaction descriptions in the article to those requirements and make an assessment of your comparison.

5.) As evidenced by discussion in the article, regulations and disclosure requirements do not prevent businesses from undertaking transactions with related parties or hiring board members who are not independent. How do the required disclosures help financial statement users to assess business operations of entities that engage related parties in transactions or as board members?

SMALL GROUP ASSIGNMENT: Access the SEC's web site at www.sec.gov . Proceed to a November 4, 2003, SEC release entitled "NASD and NYSE Rulemaking: Relating to Corporate Governance" located at http://www.sec.gov/rules/sro/34-48745.htm or search the SEC's web site using the phrase "board independence" to locate this document. Read the release and discuss the following points in groups:

1. What is the history behind the implementation of these NYSE and NASD rule changes?
2. Describe the process for implementing changes in stock exchange regulations.
3. Given the points made in the WSJ article, how effective have these regulatory changes been? What would you propose to improve the rules' effectiveness?

Reviewed By: Judy Beckman, University of Rhode Island

September 3, 2006 message from Melissa at colormefun2003@yahoo.com

Hello,
I went to: http://www.trinity.edu/rjensen/book98q4.htm  to check out accounting research links.

the web page I found said "Please notify me when you find broken links. My email address is rjensen@trinity.edu  ."

I was particularly interested in the following links which are not working, or are too old to access. Wondered if you had any ideas?? I searched and couldn't find a working link. bamboo.tc.pw.com   - Vastly simplifies access to SEC filings by public companies http://bamboo.tc.pw.com  I'm looking for a useful site for inter-firm analysis - one that will also allow you to prepare graphs like this one was supposed to.

The SEC has a very useful publication at: http://www.sec.gov/news/handbook.htm  (this link is no longer useful either) What strikes me as significant about this handbook is that it is not based on deduction from principles of good writing; rather, it is based on testing out alternatives on readers and seeing which they find easiest to understand.

I just thought I would try since you made a statement to let you know if there were any broken links.(i'm sure that was awhile ago though). I'd appreciate it if you could either send me this info, send me a link, or let me know where I can access similar info.

thanks,

Melissa

September 4, 2006 reply from Bob Jensen

Hi Melissa,

The 1998 document is a dated newsletter, and I typically don’t update these old newsletters. However, I do have various documents that I do update.

The Bamboo document for company comparisons was taken over by PwC EdgarScan --- http://edgarscan.pwcglobal.com/servlets/edgarscan

You should check out my bookmarks at
http://www.trinity.edu/rjensen/Bookbob1.htm

In particular note the following link
http://www.trinity.edu/rjensen/Bookbob1.htm#BooksAndCases

For national and international accounting rulings and online research, it is best to subscribe for a fee to one of the leading services shown below:

PwC Comperio --- http://www.pwcglobal.com/comperio

CCH Accounting Research Manager --- http://www.accountingresearchmanager.com/ARMMenu.nsf/vwHTML/ARMSplash?OpenDocument

AICPA FARs (marketed by Wiley) --- http://www.fasb.org/fars/

For looking up filings with the SEC, there are two major sources:

EDGAR --- http://www.sec.gov/edgar/quickedgar.htm

PwC EdgarScan --- http://edgarscan.pwcglobal.com/servlets/edgarscan 

O'Keefe Accounting Library Searches http://library.sau.edu/bestinfo/Majors/Accnt/accindex.htm

It is possible to do comparative company financial analyses using the core earnings databases --- http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#CoreEarnings

Many IFRS and multiple nation standards and reviews are available from Deloitte's IAS Plus --- http://www.iasplus.com/index.htm

Comparisons of National and International accounting rules --- http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#FASBvsIASB

Bob Jensen's summary of accounting theory --- http://www.trinity.edu/rjensen//theory/00overview/theory01.htm

Top Ten Emerging Technologies According to CFO Magazine in October 2002

THE NEED-TO-KNOW LIST
1. XBRL
2. Business Intelligence
3. Wireless Connectivity
4. Grid Computing
5. Multivariable Testing (MVT)
6. Digital Cryptography
7. Rich Media
8. Internet2
9. Biometrics
10. Small Technology

 XBRL tops the list.  Bob Jensen's threads on XBRL are at http://www.trinity.edu/rjensen/XBRLandOLAP.htm#XBRLextended 

 You can order back issues or relevant links management and accounting books and journals from MAAW --- http://maaw.info/

Free Access to Back Issues of The Accounting Review --- http://maaw.info/TheAccountingReview.htm 

International Accounting News (including the U.S.)

AccountingEducation.com and Double Entries --- http://www.accountingeducation.com/
       

Upcoming international accounting conferences ---
http://www.accountingeducation.com/index.cfm?page=79   

Thousands of journal abstracts and other library links ---
http://www.accountingeducation.com/
(look at the menu on the left). 

Deloitte's International Accounting News --- http://www.iasplus.com/index.htm
Association of International Accountants --- http://www.aia.org.uk/ 
WebCPA --- http://www.webcpa.com/
FASB --- http://www.fasb.org/
IASB --- http://www.fasb.org/
Others --- http://www.trinity.edu/rjensen/bookbob1.htm

Gerald Trite's great set of links --- http://iago.stfx.ca/people/gtrites/Docs/bookmark.htm 

Richard Torian's Managerial Accounting Information Center --- http://www.informationforaccountants.com/ 

Bob Jensen

September 5, 2006 reply from Ed Scribner [escribne@NMSU.EDU]

Bob,

A couple of online accounting/financial analysis databases:

Mergent Online ( http://www.mergentonline.com/ ) (access depends on whether the researcher’s university library has a license for it).

10k Wizard ( http://www.10kwizard.com/ ) (gives free access to educators and students, but the student access is more restricted). Cited by Bill Mister at http://www.trinity.edu/rjensen/fraud072402.htm  under Bob Jensen’s fraud links.

Ed

Ed Scribner
New Mexico State University
Las Cruces, NM, USA

 

August 30, 2006 message from Paul Clikeman [pclikema@RICHMOND.EDU]

My friend Joe Hoyle is the David Meade White Distinguished Teaching Fellow at the University of Richmond. Joe spent much of the last year writing more than 30 short essays on college classroom teaching. The essays present a wide range of practical tips for improving student learning.

The essays can be read or downloaded for free at the following URL:

http://oncampus.richmond.edu/~jhoyle/ 

Paul M. Clikeman, Ph.D.
Associate Professor of Accounting
Robins School of Business
University of Richmond
Richmond, VA 23173
pclikema@richmond.edu 

 

Free Statements on Management Accounting (SMAs) and Tutorials for Management Accounting

From the Institute of Management Accountants --- http://www.imanet.org/publications_statements.asp

Statements on Management Accounting (SMAs) present the views of IMA regarding management accounting and financial management issues. In their development, the Statements are subjected to a rigorous exposure process.

SMAs are classified based on the 5 research practice areas:

• Leadership Strategies and Ethics
• Technology Enablement
• Strategic Cost Management
• Business Performance Management
• Enterprise Risk & Controls

As well as the area of Practice of Management Accounting.

All SMAs are available for free download after completing a short information form. Coming soon: Order all the SMAs on one compilation disc. Check back in October 2006 for details.

SMAs are copyrighted by the IMA.

Bob Jensen's threads on free textbooks and other learning materials are at http://www.trinity.edu/rjensen/ElectronicLiterature.htm#Textbooks

From The Wall Street Journal Accounting Weekly Review on September 15, 2006

TITLE: Two More CEO Ousters Underscore the Need for Better Strategizing
REPORTER: Carol Hymowitz
DATE: Sep 11, 2006
PAGE: B1
LINK: http://online.wsj.com/article/SB115793795734759067.html?mod=djem_jiewr_ac 
TOPICS: Budgeting, Cost Accounting, Managerial Accounting

SUMMARY: This article compares "traditional strategic planning" mechanisms based on yearly strategic plans from business units to systems which "spotlight a few priorities and regularly hold strategy discussions." It is useful for a beginning cost or managerial accounting course.

QUESTIONS:
1.) Compare a traditional, or "antiquated" as described in the article, strategic planning system to a modern system. In your discussion, comment on cycles of planning, executing, and evaluating and discuss the role of budgeting in the process.

2.) What role do accounting information systems play in enabling this shift in methods for strategic planning? What economic and other factors make it necessary to change planning systems?

3.) Autodesk is a company still using a traditional annual review system for strategic planning as well as other methods. What role does traditional budgeting and strategic planning continue to play in effective management strategies?

4.) Ford Motor Company's new CEO Alan Mullaly is expected to bring about change in the way that he did at Boeing. How did his planning system have an impact beyond giving top managers good information and data to work with in decision making?

5.) One study referred to in the article measured the impact of decisions made by top management who use traditional strategic planning method versus those who do not. Why is the number of decisions with significant impact important to assessing business management? What industry factors also might impact this measure?

6.) Do you think that the need for updating strategic planning methods varies by industry? Support your answer.

Reviewed By: Judy Beckman, University of Rhode Island

TSA Luggage Locks Are a Waste of Money

September 19, 2006 message from David Fordham, James Madison University [fordhadr@JMU.EDU]

If you travel much, you might want to be aware of the following situation.

On my wife's trip to Mexico last summer, her luggage got misrouted, and by the time it arrived, it had been significantly pilfered. All electronics including her laptop, PDA, outboard disk drive, even her diabetic blood- sugar monitor, were gone. The airlines claimed they were not responsible for anything since the luggage had been unlocked. After she raised all the Cane she was Able to, they did end up paying her a $100 goodwill gesture, a tiny fraction of the value of the stolen luggage.

Alas, before travelling abroad again, she did some investigating, and purchased a rather expensive set of luggage locks that claimed to be "TSA approved". She used the locks last week on our trip to Belgium and back.

On the way back, once again, her luggage got waylaid, this time in Newark airport. She arrived home on time, her luggage didn't, but was delivered to our home the next day. Upon arrival, she discovered that all the TSA locks had been cut off and were found inside the luggage.

Nothing was missing, but the locks were completely destroyed.

Upon inquiry to the airline, she was told that U.S. Customs was probably the one who cut the locks.

Customs, she was told, does not have the codes or keys that TSA uses to remove the locks! So if the luggage is locked, they simply cut the lock off.

This is one of those "darned if you do, darned if you don't" dilemmas.

I thought everyone on the list might want to be aware of this. Buying TSA locks does not appear to accomplish anything. We won't be wasting our money again on TSA- approved locks.

David Fordham

From Jim Mahar's blog on September 19, 2006 --- http://financeprofessorblog.blogspot.com/

SSRN-102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas) by Pablo Fernández

Want to practice your Spanish while studying Finance as well? This paper provides you the opportunity! It examines common mistakes that we tend to make in valuation.

I won't try to translate it for you (I actually surprised myself as I could read most of it!) but fortunately the abstract is in English.

SSRN-102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas) by Pablo Fernández:

"This paper contains a collection and classification of 96 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company acquisitions, sales, mergers, and arbitrage processes.

We classify the errors in six main categories: 1) Errors in the discount rate calculation and concerning the riskiness of the company; 2) Errors when calculating or forecasting the expected cash flows; 3) Errors in the calculation of the residual value; 4) Inconsistencies and conceptual errors; 5) Errors when interpreting the valuation; and 6) Organizational errors"

September 19, 2006 message from Bob Deily, MBAWare [bdeily@mbaware.com]

Dear Dr. Jensen,

First off, let me compliment you on an absolutely exhaustively researched web site. There is an incredible amount of information contained on the various pages, and I can’t imagine how long it has taken to compile and separate the “wheat from the chaff.”

I am writing to request a review of my company's offering of software for Finance/Accounting ( http://www.mbaware.com/finandacsof.html  ) and for business valuations ( http://www.mbaware.com/busvalsof.html  ) for possible inclusion on various web pages on your site. We are a retailer of a variety of specialized, high-quality, off-the-shelf financial software including software for amortization, accounting, business plans, business strategy, business valuations, financial statement analysis, forecasting, payroll, Sarbanes-Oxley compliance, treasury management and much more. Our specialties are financial and business valuation software.

From my review of the site, it looks like the best fit might be our valuation software and data page ( http://www.mbaware.com/busvalsof.html  ) which would be a good fit on your “Threads on Return on Business Valuation, Business Combinations, Investment (ROI), and Pro Forma Financial Reporting” page ( http://www.trinity.edu/rjensen/roi.htm  ) under the “BUSINESS VALUATION SITES” section.

Thanks very much for your consideration, and please let me know if you have any questions.

Best regards,

Bob Deily, President
MBAWare - The Business Software Source
(703) 875-0660
E-mail: bdeily@mbaware.com 
www.MBAWare.com

Bob Jensen's threads on Business Valuation Blunders by the Pros are at http://www.trinity.edu/rjensen/roi.htm#Blunders

Bob Jensen's threads on valuations are at http://www.trinity.edu/rjensen/roi.htm

September 9, 2006 message from the Institute of Management Accountants (IMA)

September 2006  

Attention Educators:

Let the Institute of Management Accountants (IMA^®) help you start the academic year off right. Here are the top 5 reasons why IMA should be your professional partner.  

1. Tools for your classroom
IMA has a wide array of resources to help you pump up the volume on accounting and finance topics. Here are just a few examples:

Strategic Finance Magazine  Our award winning publication keeps students and educators current on the latest developments in the management accounting arena. Encourage your students to read and discuss the articles in class. The magazine is sent to members directly or can be ordered on a subscription basis.

Inside Talk Webinars - IMA sponsors a free monthly Webinar series for members called Inside Talk. The archived Webinars are a great resource for the classroom. Topics include XBRL, Budgeting, SOX, Financial Reporting, Valuation, Balanced Scorecard and Ethics. Click here for a complete listing.

Case Studies  IMA has developed a variety of case studies to support your management accounting curriculum. They are available free of charge in electronic format. Visit IMA's Instructor Resources Web page for more information. Teaching notes are available by contacting Jodi Ryan at jryan@imanet.org.

Statements on Management Accounting (SMAs)  SMAs present the views of IMA regarding management accounting and financial management issues. IMA has published SMAs on a variety of topics. New topics are being introduced, including Lean Accounting and Lean Enterprises. SMAs will become available free of charge on the IMA Web site this fall. Click here for more information.

2. Receive funding for your research
The IMA offers a variety of research grants through its Foundation for Applied Research. Through excellence in research, IMA provides business decision makers with information of strategic importance. IMA has funded more than 500 researchers, who have produced more than 250 studies.

3. Get connected with your profession.
IMA has a vast network of chapters and councils throughout the world. Click here to find out more about the active groups in your area. This is also a great way to find local professionals to be guest speakers in the classroom.

4. Help your students
You can volunteer as an IMA Academic Mentor on your campus, help establish a local student chapter, and promote careers in finance and management accounting. Click here for more information.

Competitions and Scholarships
Let your students know that IMA offers an array of scholarship opportunities for undergraduate and graduate students to help offset the cost of education.

IMA Student case competition  Teams of students can respond to a published hypothetical case study appearing in the August 2006 edition of Strategic Finance magazine by submitting a videotaped presentation. Four finalist teams will be invited to make live presentations at IMA's Annual Conference & Exposition in Phoenix in June 2007.

IMA Student Leadership Conference  Held each November, this conference offers students a chance to learn about hot topics in management accounting from experts in the profession.

5. Develop yourself- take the CMA exam for free
Did you know full-time faculty members teaching at accredited U.S., Canadian, and Mexican universities are permitted to take the CMA exam one time at no charge? Visit the Certification section of our Web site for more information.

Join today!
If you're not already an IMA member, consider the benefits of membership. With its network of nearly 65,000 members worldwide, IMA is the voice of the management accounting profession. Educators can join IMA at a reduced rate of $93 per year! Click here to learn more about the value of membership.

From The Wall Street Journal Accounting Weekly Review on September 1, 2006

TITLE: Google Asks SEC for Exemption from Trading Rule
REPORTER: Tony Cooke
DATE: Aug 25, 2006
PAGE: A2
LINK: http://online.wsj.com/article/SB115646222596645014.html?mod=djem_jiewr_ac 
TOPICS: Accounting, Cash Flow, Financial Statement Analysis, Investments, Securities and Exchange Commission

SUMMARY: "Under the Investment Company Act of 1940, a company with more than 40% of its assets in certain types of securities is subject to different disclosure and operating rules." Google has had to ask the Securities and Exchange Commission to exempt it from these regulations--typically applicable to a mutual fund--because the company is holding $4 billion in cash and $5.8 billion in marketable securities out of a total of $14.4 billion in assets. The company apparently is holding these liquid assets because it wants to diversify its investment strategy. The related article describes Google's most recent public offering. Questions relate to the use of financial statement ratios; the use of the statement of cash flows; and to definitions of the current assets cash, cash equivalents, and marketable securities.

QUESTIONS:
1.) Define the terms marketable securities and investments and comment on the difference between them.

2.) Define the term "cash equivalents" and compare it to cash. Cite the authoritative financial accounting standard which allows for presentation of "cash equivalents." (Hint: look in the literature in the area of the statement of cash flows.)

3.) Access Google's most recently filed quarterly financial statements at the following web link, http://www.sec.gov/Archives/edgar/data/1288776/000119312506167945/d10q.htm

or by linking through the WSJ on-line article, clicking on Google on the right hand-side of the page, on SEC filings on the left hand side of the page, then searching for Form 10-Q under the SEC filings. Find the footnote entitled Cash, Cash Equivalents, and marketable equity securities. How does Google's management decide between categorizing assets as cash equivalents or marketable securities? Is Google's classification consistent with authoritative literature?

4.) How does Google account for realized and unrealized gains and losses on marketable securities? Cite the authoritative financial reporting standard for this treatment and describe how the disclosures in the Google footnote are based on the requirements of this standard.

5.) Google may be viewed as similar to a mutual fund by one measure cited in the article. How does this measure demonstrate use of financial statement analysis for purposes of enacting regulation in financial markets?

6.) Does Google have any other investments besides marketable securities? What is it (are they)? How does this investment relate to their strategy for use of excess cash described in the company's explanation to the SEC?

7.) Refer to the related article. How do you think Google amassed the cash and short-term investments that comprise so much of their balance sheet?

8.) Again examine Google's 10-Q financial statement filing to find support for the answer you gave to the previous question. Describe the support that you find.

Reviewed By: Judy Beckman, University of Rhode Island

--- RELATED ARTICLES ---
TITLE: Slice of Pi: New Google Mystery Centers on $4 Billion Share Sale
REPORTER: Kevin J. Delaney
PAGE: A1 ISSUE: Aug 19, 2005
LINK: http://online.wsj.com/article/SB112436235632816530.html?mod=djem_wrjie_ac 

TITLE: Google's Stock Sale Mystery Is Simply Solved: There Are Buyers
REPORTER: Alan Murray
PAGE: A2
ISSUE: Aug 24, 2005
LINK: http://online.wsj.com/article/0,,SB112484195945721307,00.html?mod=djem_wrjie_ac

From the Financial Rounds blog on September 12, 2006 --- http://financialrounds.blogspot.com/

What with getting up to speed on my new classes and the usual beginning of semester "big ball-o-crazy", I've been a bit pressed for time. So instead of posting at length, I thought I'd just put some links up to interesting stuff I've recently come across:
 

The AAO Weblog links to a great article on CFO.com titled "Is Spring-Loading Wrong? " It contains a phrase (at least to me)--“bullet-dodging.” This refers to the phenomenon where a firm delays the granting of options until after bad news has been revealed.

Barry Ritholtz of The Big Picture refers to brokers of exotic mortgage as "the new boiler rooms." In case you don't understand the reference, rent this movie.

Evangelical Outpost has their latest in their continuing Yak Shaving Razor series.

Vikas Bajaj from the New York Times reports on this interesting (to me, at least) combination of facts: default rates on mortgages are rising, but they're more popular than ever with investors.

And finally, from the Wall Street Journal (online subscription required), Peter McKay reports on recent insider trading indicators. He notes that the ratio of insider sales to insider purchases at large-cap companies is low by historical standards - a bullish indicator.

And that's the way it was on September 30, 2006 with a little help from my friends.

 

Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm

 

Facts about the earth in real time --- http://www.worldometers.info/ 

Jesse's Wonderful Music for Romantics (You have to scroll down to the titles) --- http://www.jessiesweb.com/

International Accounting News (including the U.S.)

AccountingEducation.com and Double Entries --- http://www.accountingeducation.com/
        Upcoming international accounting conferences --- http://www.accountingeducation.com/events/index.cfm
        Thousands of journal abstracts --- http://www.accountingeducation.com/journals/index.cfm
Deloitte's International Accounting News --- http://www.iasplus.com/index.htm
Association of International Accountants --- http://www.aia.org.uk/ 

Free Harvard Classics --- http://www.bartleby.com/hc/
Free Education and Research Videos from Harvard University --- http://athome.harvard.edu/archive/archive.asp

 

I highly recommend TheFinanceProfessor (an absolutely fabulous and totally free newsletter from a very smart finance professor, Jim Mahar from St. Bonaventure University) --- http://www.financeprofessor.com/ 

 

Bob Jensen's bookmarks for accounting newsletters are at http://www.trinity.edu/rjensen/bookbob1.htm#News 

News Headlines for Accounting from TheCycles.com --- http://www.thecycles.com/business/accounting 
An unbelievable number of other news headlines categories in TheCycles.com are at http://www.thecycles.com/ 

 

Jack Anderson's Accounting Information Finder --- http://www.umsl.edu/~anderson/accsites.htm

 

Gerald Trite's great set of links --- http://www.zorba.ca/bookmark.htm 

 

The Finance Professor --- http://www.financeprofessor.com/about/aboutFP.html 

 

Walt Mossberg's many answers to questions in technology --- http://ptech.wsj.com/

 

How stuff works --- http://www.howstuffworks.com/ 

 

Household and Other Heloise-Style Hints --- http://www.trinity.edu/rjensen/bookbob3.htm#Hints 

 

Bob Jensen's video helpers for MS Excel, MS Access, and other helper videos are at http://www.cs.trinity.edu/~rjensen/video/ 
Accompanying documentation can be found at http://www.trinity.edu/rjensen/default1.htm and http://www.trinity.edu/rjensen/HelpersVideos.htm 

 

Click on www.syllabus.com/radio/index.asp for a complete list of interviews with established leaders, creative thinkers and education technology experts in higher education from around the country.

 

Professor Robert E. Jensen (Bob) http://www.trinity.edu/rjensen
190 Sunset Hill Road
Sugar Hill, NH 03586
Phone:  603-823-8482 
Email:  rjensen@trinity.edu  

 

 

 

 

 

 

Quotations and Tidbits Between September 1 and September 30, 2006

During the August 2000 Annual Meetings of the American Accounting Association, the President of the AAA that year was Professor Jan Williams from the University of Tennessee. The President of the AAA has discretion in choosing plenary session speakers. Generally these speakers are from academe in accountancy, the profession of accountancy, or some related field of business or government --- often dull stuff as you can imagine. Jan departed from tradition that year by inviting an inspirational speaker named Captain Gerald Coffee who had no connection to the academic world of accountancy. Captain Coffee is a retired U.S. Navy Pilot who was shot down over North Viet Nam and spent seven years plus nine days virtually in solitary, between beatings, in a  3'-by-6.5' cement accommodation inside what is cynically called the Hanoi Hilton ---
http://www.nationwidespeakers.com/speaker/343/captain-gerald-coffee/vietnam-pow-creating-and-maintaining-a-positive-attitude 

A free video (approximately 60 minutes) by Captain Coffee is available online at http://www.nationwidespeakers.com/video/343
This is the exact, and I mean really exact, presentation that we received in the Year 2000 plenary session arranged by Professor Williams.

I have just a few comments for those of you who decide to watch this one-hour video (downloading will require broadband):

1. Even though Captain Coffee made a lot of money from his oft-repeated presentation before huge audiences, he's also making his presentation available free on the Internet.  His 1991 book soon went out of print, and I doubt that he made much money from his book (I could be wrong about this).
2. The video gets better and better such that, if you begin it, please watch it to the end.
3. Think of how long seven years plus nine days must be in a 3' by 6.5' cell that is miserably hot most of the time.
4. Smile or chuckle or weep at the irony of having to listen repeatedly to propaganda blaring for seven years from a speaker high up the wall of your cell haranguing against the evils of capitalism and free enterprise knowing full well that Viet Nam, like China, is now promoting free enterprise and seeking more and more trade pacts with the United States.
5. Listen to how Captain Coffee sometimes wrote poetry to restore his sense of humor
6. Learn how prisoners developed tap codes and coughs to communicate through cement walls.
7. Learn about the infinite strength of faith in one's self, friends, nation, and a god (of one's own choosing) to keep faith in living and hope that one day you will be returned to the joys of being alive, free, and having your "cup overflowing."
8. Be thankful every day that you are free to speak your mind and choose how you want to live to the extent you are healthy and determined.
9. Try not to let hate for your perceived enemy (probably terrorists these days) and fear consume your being and take away your joy in being alive. If your body is consumed with hate and fear your enemy has already been victorious over you.

* Book Title:  Beyond Survival: Reaffirming the Invincibility of the Human Spirit
* Author:  Gerald Coffee
* ISBN: 0425124428
* Pub. Date: February 1991
* Publisher: Penguin Group (USA)
* Status: Probably only available in used copies these days. I bought a used copy from Amazon.

"The war that won't go away," by John Christensen, CNN Interactive --- http://www.cnn.com/SPECIALS/2000/vietnam/story/America.at.25/

A U.S. Navy pilot who was shot down over North Vietnam in 1966 -- his co-pilot was killed -- (Gerald) Coffee can appreciate these moments better than most. He spent seven years and nine days in Hoa Lo, the infamous North Vietnamese prison known as "the Hanoi Hilton," where he was beaten, tortured, interrogated and subjected to relentless communist indoctrination

Since his liberation in 1973, Coffee has written a book ("Beyond Survival: Reaffirming the Invincibility of the Human Spirit") and turned his private nightmare into a highly profitable business. In giving 50 to 60 motivational speeches a year for the past two decades, Coffee has mined a vein that shows no sign of giving out.

"I thought the gig would have a shelf life to it," Coffee said recently, "but there's a huge void in our knowledge about Vietnam, especially among the younger generation. There are so many unanswered questions."

. . .

"It was an end to the American century," says Peter Kuznick, an associate professor of history at American University, and himself an anti-war protester. "It was an end to the sense of American triumphalism, of American exceptionalism. We thought our culture was different, that we were altruistic and only interested in the welfare of mankind. Those delusions were pretty much eliminated for most people."

. . .

Coffee tells his audiences that the 10 years the U.S. spent in Vietnam halted the march of communism through Southeast Asia. 

But Mitchell K. Hall, associate professor of history at Central Michigan University, says historians agree that "it was the wrong war in the wrong place at the wrong time."

Continued in article

Jensen Comment
In spite of the tragedy, carnage, death, and our seeming defeat in Viet Nam (defeat is a relative term now that Viet Nam is our trading partner), I'm glad that I have the freedom to disagree with Professor Hall. I think the tragedy of Viet Nam convinced China and the Soviet Union and the United States about the futility of winning the world with military worldwide takeovers using blazing armies and army occupation in every nation with no intent to allow people to freely govern themselves. And I do believe that we want, in spite of mistakes that got us there, our wounded butts out of Iraq as soon as we can leave without turning it over to Iran and engulfing the entire Middle East in sectarian war that might well ignite a devastating world holocaust. There's more than soaring fuel pricing at stake in Iraq at the moment!

I do not see good things happening if we cut and run in Iraq like we cut and run in Viet Nam. I honestly believe that the message (of military futility) of Viet Nam came across to opposing communist and capitalist factions of the world --- our head-bowed departure did not alter lessons already learned during that miserable war where we dropped more bombs than in all previous wars. Lessons learned do not extend to the secular ambitions of religious and cultural factions of the Middle East. Apart from Rumsfeld's jibberish about Neville Chamberlain and 1930s fascism in Europe, jibberish that does not apply to deeply divided 2006 secular factions in the Middle East, there's a looming problem of a power vacuum in Iraq that will fuel a colossal secular war across the entire Middle East if we simply let Iran have Iraq by cutting and running.

By taking out Saddam we created this power vacuum, and Iran is the only force powerful enough in that part of the world to take over Iraq if we cut and run. A power vacuum did not exist in Viet Nam when we departed; this is not the case in Iraq today where there will be a huge power vacuum to be filled by Iranian forces bent on taking over the entire Middle East. By knocking out Saddam we created this power vacuum. Now we have a responsibility to Muslin moderates throughout the Middle East to not abruptly turn Iraq over to Shiite fundamentalists who ignite Jihad extremism with each perceived victory over the west.

Tidbits on September 1, 2006
Bob Jensen

For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   
 

Click here to search this Website if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Home Page is at http://www.trinity.edu/rjensen/

Online Video, Slide Shows, and Audio
In the past I've provided links to various types of music and video available free on the Web. 
I created a page that summarizes those various links --- http://www.trinity.edu/rjensen/music.htm

Inside Cancer --- http://www.insidecancer.org/

Zwishhinspeichern (Guitar like never before) --- http://video.google.de/videoplay?docid=6007768965488299182
(Be patient this takes a while to load even with broadband.)

Propaganda Video Gallery --- http://www.propagandacritic.com/gallery/
This is behind the times on terrorism's frightful propaganda!

Gratuitous Pleasures --- http://www.gratuitouspleasures.com/

Free music downloads --- http://www.trinity.edu/rjensen/music.htm

In the past I've provided links to various types of music and video available free on the Web. 
I created a page that summarizes those various links --- http://www.trinity.edu/rjensen/music.htm

New from Jessie
In the Garden --- http://www.jessiesweb.com/inthegarden.htm
If the sound does not commence after 30 seconds, scroll to the bottom of the page and turn it on

Leadbelly's 'Old Man' and the Work Song Tradition --- http://www.npr.org/templates/story/story.php?storyId=5686572

Exploring the Soul of Raul Midon --- http://www.npr.org/templates/story/story.php?storyId=5730869

Music for the Morning After, and Beyond --- http://www.npr.org/templates/story/story.php?storyId=5698627

A Protest Anthem That Rocks and Stomps --- http://www.npr.org/templates/story/story.php?storyId=5705665

Ray LaMontagne, Back with 'Sun Turns Black' --- http://www.npr.org/templates/story/story.php?storyId=5704463

Ordinary Songs Become Memorable Events (if you liked Bob Dylan then you will probably like Karen Dalton) --- http://www.npr.org/templates/story/story.php?storyId=5691531

Photographs and Art

Online Books, Poems, References, and Other Literature
In the past I've provided links to various types electronic literature available free on the Web. 
I created a page that summarizes those various links --- http://www.trinity.edu/rjensen/ElectronicLiterature.htm

Bartleby's Great Books Online --- http://www.bartleby.com/titles/

The Poison Belt by Arthur Conan Doyle (1859-1930) --- Click Here

Underwoods by Robert Louis Stevenson (1850-1894) --- Click Here

Short Stories --- http://www.short-stories.co.uk/

Classic Short Stories --- http://www.classicshorts.com/ 

All-Story Short Stories --- http://www.all-story.com/

Albert Einstein Quotations --- Click Here

The Experience of Technology in Literature and Art --- http://commhum.mccneb.edu/PHILOS/techlit.htm

A recent Harris Interactive poll of 1,002 adults in the United States found that 85 percent would trust their doctors to tell them the truth, up from 77 percent in 2002, the last time the survey was conducted. Accountants made the most significant gains in the ranks of professionals most trusted by the public, with 68 percent of the respondents saying they would trust their accountants, compared with 55 percent in 2002 . . . Stockbrokers, lawyers and actors ranked at the bottom of the list, with less than 30 percent of those questioned saying they would trust them to tell the truth.
Accounting Web --- http://www.accountingweb.com/cgi-bin/item.cgi?id=102481
Jensen Comment
Keep in mind that most legislators are lawyers.

When it comes to flying, the fly reigns supreme. This two-winged insect’s sophisticated flying behavior enables it to make sharp turns, aim at targets and hover – traits which make the insect an ideal prototype for tiny micro air vehicles (MAVs). However, the same flying finesse also presents challenges for scientists trying to investigate, observe and understand these complex creatures in their natural environments. Now, scientists from the U.K. demonstrate that mathematical modeling may provide adequate complementary information for advances in MAV technology.
"Flies provide aerodynamic model for tiny flying vehicles," PhysOrg, August 28, 2006 --- http://physorg.com/news75969014.html

Cynic: a blackguard whose faulty vision sees things as they are, not as they ought to be.
Ambrose Bierce (1842 1914) --- http://en.wikipedia.org/wiki/Ambrose_Bierce

The difference between genius and stupidity is that genius has its limits.
Albert Einstein

Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.
Albert Einstein

The significant problems we face cannot be solved at the same level of thinking we were at when we created them.
Albert Einstein

Economists and other academics that study the movie industry say most marquee names in Hollywood are simply not worth the expense.
Eduardo Porter and Geraldine Fabrikant, "A Big Star May Not a Profitable Movie Make," The New York Times, August 28, 2006 --- Click Here

All the glory of the world lies in a grain of corn.
José Martí (1853-1895) --- http://en.wikipedia.org/wiki/Jos%C3%A9_Mart%C3%AD
(They still claim this in Iowa where bigger ears are better.)

I'll give up my cell phone when you pry it from my cold dead hand!
Bumper Sticker

Sen. Hillary Clinton is prepared to be the first female president of the United States, according to a new FOX News poll.
Fox News, August 31, 2006 --- http://www.foxnews.com/story/0,2933,211562,00.html
Jensen Comment
Then again Fox may just be being clever like a fox.

Any fool can make things bigger, more complex, and more violent. It takes a touch of genius--and a lot of courage--to move in the opposite direction.
Albert Einstein

This is how Ghazi Hamad, spokesman for the Hamas-controlled Palestinian Authority government and a former newspaper editor, described the situation in the Gaza Strip in an article he published on Sunday on some Palestinian news Web sites. . . . "We're always afraid to talk about our mistakes," he [Ghazi Hamad] added. "We're used to blaming our mistakes on others. What is the relationship between the chaos, anarchy, lawlessness, indiscriminate murders, theft of land, family rivalries, transgression on public lands and unorganized traffic and the occupation? We are still trapped by the mentality of conspiracy theories--one that has limited our capability to think." . .
Khaled Abu Toameh, "'Gaza caught in anarchy and thuggery'," Jerusalem Post, August 28, 2006 --- Click Here

The WSJ's Opinion Journal on August 29, 2006 refers to the two Fox News forced "conversions to Islam" while kidnapped and then reminds us of al Qaeda and insurgency prisoners who supposedly have endured insults to their religion by U.S. interrogators.

Blogging Under The Radar
As War Raged, Lebanese and Israelis Found Common Ground
"I think it's the start of something. In a way, it's a revolution," said Mustapha Hamoui, the blogger behind Beirut Spring. "Communication is never bad. It's better to tell someone, 'I hate you.' Then you have to ask, 'Why do you hate?' Then you have to have a conversation." The Lebanese government forbids its citizens contact with Israelis. But keeping a lid on the Internet is a bit like trying to shovel sand with a sieve. And in the midst of war, scouring online for views from the other side has been one way for Lebanese and Israelis to alleviate the terrible sense of the impotence of standing by as their countries bled. Thousands of people, often posting in English, seem compelled to try to make some sense of the chaos -- or, through personal narratives, to help debunk stereotypes and misperceptions.
Delphine Schrank, "Blogging Under The Radar As War Raged, Lebanese and Israelis Found Common Ground," The Washington Post, August 28, 2006 --- Click Here

Bias in the News Media: Hizbollah's Counterfeit Hizdollas
Did the major news outlets hide the fact that much of the Hizbollah distribution money was counterfeit?

"Counterfeit News," by David Frum, Canadian National Post, August 26, 2006 --- Click Here

This scene and dozens more like it flashed around the planet. Only one thing was missing -- the thin wire security strip that runs from top to bottom of a genuine US$100 bill. The money Hezbollah was passing was counterfeit, as should have been evident to anybody who studied the photographs with due care.

Care was due because of Hezbollah's history of counterfeiting: In June, 2004, the U.S. Department of the Treasury publicly cited Hezbollah as one of the planet's leading forgers of U.S. currency.

But this knowledge was disregarded by the news organizations who queued up to publicize Hezbollah's pseudo-philanthropy. The passing of counterfeit bills was detected not by the reporters and photographers on the spot, but by bloggers thousands of miles away: SnappedShots.com, MyPetJawa and Charles Johnson's Little Green Footballs. These sites magnified photographs and showed them to currency experts and detected irregularity after irregularity in the bills. (Links to all the sites mentioned here can be found at frum.nationalreview.com )

. . .

"A Lebanese man counts U.S dollar bills received from Hizbollah members in a school in Bourj el-Barajneh, a southern suburb of Beirut, August 19, 2006. Hizbollah handed out bundles of cash on Friday to people whose homes were wrecked by Israeli bombing, consolidating the Iranian-backed group's support among Lebanon's Shiites and embarrassing the Beirut government. REUTERS/Eric Gaillard (LEBANON)"

This scene and dozens more like it flashed around the planet. Only one thing was missing -- the thin wire security strip that runs from top to bottom of a genuine US$100 bill. The money Hezbollah was passing was counterfeit, as should have been evident to anybody who studied the photographs with due care.

Care was due because of Hezbollah's history of counterfeiting: In June, 2004, the U.S. Department of the Treasury publicly cited Hezbollah as one of the planet's leading forgers of U.S. currency.

But this knowledge was disregarded by the news organizations who queued up to publicize Hezbollah's pseudo-philanthropy. The passing of counterfeit bills was detected not by the reporters and photographers on the spot, but by bloggers thousands of miles away: SnappedShots.com, MyPetJawa and Charles Johnson's Little Green Footballs. These sites magnified photographs and showed them to currency experts and detected irregularity after irregularity in the bills. (Links to all the sites mentioned here can be found at www.frum.nationalreview.com  )

How quickly we forget
The French defence minister would repeat it like a chant. It was 1995. In Srebrenica, a United Nations so-called safe haven in Bosnia, 8,000 men had been slaughtered by Bosnian Serbs. Gorazde was another enclave that the UN had promised to defend. But the French and British forces in the region were many miles away. As participants in a UN humanitarian mission they were lightly armed. They had lorries, not tanks, and no aircraft. So the idea of pushing through to Gorazde was fanciful. It had been a French general, Philippe Morillon, who as head of the UN forces in the former Yugoslavia had first pledged to protect Srebrenica. He did not have the resources to keep that promise and Dutch UN forces in the city did nothing to prevent the massacre. We (the other Nato defence ministers) found a word to describe the French habit of making impressive statements with no means to put them into effect. We called it “grandstanding”.
Michael Portillo, "France about-turns into a bigger military mess," London Times, August 27, 2006 --- http://www.timesonline.co.uk/article/0,,2088-2330259,00.html

After shaping the ceasefire resolution and proposed stabilization force on the basis of its commitment to lead with several thousand troops, France appeared suddenly to reverse course, announcing that it would send only a token force. The outcry — across France, Europe, and the world — seemed to rush Chirac into reversing himself again . . .
Mario Loyola, "Too Clever for Their Own Good:  How Jacques Chirac and Kofi Annan tricked themselves into helping Israel," National Review, August 30, 2006 --- Click Here

We will have peace with the Arabs when they will love their children more than they hate us.
Golda Meir

In March 2002, Israeli Defense Forces discovered a bomb in a Palestine Red Crescent Society ambulance near Jerusalem. The bomb, packed in a suicide belt, was hidden under a gurney carrying a Palestinian child.
Michelle Malkin, "No more ambulances for terror," Jewish World Review, August 30, 2006 ---
http://jewishworldreview.com/michelle/malkin083006.php3

In its August 18, 2006 edition, the Egyptian weekly Roz Al-Yusuf featured an investigative article by Mirfat Al-Hakim titled "Hizbullah's Children's Militias." The article reveals that Hizbullah has recruited over 2,000 children aged 10-15 to serve in armed militias, and that the Hizbullah-affiliated Mahdi Scouts youth organization is training them to become martyrs . . . Hizbullah has customarily recruited youths and children and trained them to fight from a very early age. These are children barely 10 years old, who wear camouflage uniforms, cover their faces with black [camouflage] paint, swear to wage jihad, and join the Mahdi Scouts [youth organization]... "The children are selected by Hizbullah recruitment [officers] based on one criterion only: They must be willing to become martyrs."According to the article, Na'im Qasim, deputy to Hizbullah Secretary-General Hassan Nasrallah, said in an interview on Radio Canada: "A nation with child-martyrs will be victorious, no matter what difficulties lie in its path. Israel...
Memri, September 1, 2006 --- http://memri.org/bin/opener_latest.cgi?ID=SD127606 

Where are the Muslim mothers for peace?
There was, for me, an additionally odd, circular sense of disbelief about this particular journey. Last summer, a few days after the terrorists’ July bombings in London, I was interviewing the fatwa-reprieved Salman Rushdie in New York. A year later, on the very day of the Heathrow drama, I was interviewing his great mate Martin Amis, also in New York, albeit in a secluded enclave in the Hamptons. On both occasions, current events inevitably featured in our discussions. If you believe, as I do, that literature can help to make sense of the life we are living, then the response of these guys should certainly command some attention . . . And where are the voices of the ordinary mothers and daughters and aunts from the Muslim community saying, “Enough. No more violence. No more deaths”, as did all those courageous women who helped to bring peace to Ireland? And if they, our Muslim sisters, are mute slaves to — or, worse, themselves in thrall to — the siren call of the death-wish culture, is there any hope for the rest of us?
Ginny Dougary, "Where are the Muslim mothers for peace?" London Times, August 26, 2006 --- http://www.timesonline.co.uk/article/0,,1072-2326888,00.html 

Where are the Anti-Bush mothers for peace?
Answer:  Crawford, Texas --- http://www.gsfp.org/article.php?list=type&type=21 

Al-Qaida sending terror cell seedlings across the Rio Grande
Al-Qaida reportedly integrating into Mexican society Border sheriff says Middle Easterners paying coyotes to smuggle them into U.S.
Fox News, August 25, 2006 --- Click Here
Jensen Comment
The term "coyotes" in this context refers to criminals who, for a fee, help smuggle illegal immigrants across the border.

Research in the Homeland Security Program supports the Department of Homeland Security and other agencies charged with preventing and mitigating the effects of terrorist activity within U.S. borders. Projects in this program will include critical infrastructure protection, emergency management, terrorism risk management, border control (particularly ports), first responders and preparedness, domestic threat assessments, domestic intelligence, and manpower and training.
RAND:  Homeland Security --- http://www.rand.org/ise/security/

You cannot prevent and prepare for war at the same time.
Albert Einstein

It is appallingly obvious that our technology exceeds our humanity.
Albert Einstein

Game of Nuclear Chicken Diplomacy:  Then and Now
Just hours after Iran opened a new plant capable of making plutonium “for peaceful purposes”, U.S. President George Bush assured his Iranian counterpart that any B-2 bombers that appear over Tehran in the near future would also serve peaceful purposes. President Mahmoud Ahmadinejad cut the ribbon on the new heavy-water nuclear plant Saturday as part of a month-long Iranian tribute to the effectiveness of the United Nations. Mr. Bush hailed Iran’s “transparent diplomacy” and said, “I called President Ahmadinejad today to congratulate him, and I told him that if he happens to notice one of them Stealth bombers going over...
Scott Ott, "Bush: B-2 Flights Over Tehran for ‘Peaceful Purposes’," ScrappleFace, August 25, 2006 --- http://www.scrappleface.com/
Jensen Comment
I recall a game of chicken that was played by macho teens in the 1950s. Two speeding cars bore down on each other aimed at a head-on collision to see which driver "turned chicken" by swerving away at the last instant.

The last game of nuclear chicken was played out to the very brink of holocaust in the 1962 Cuban Missile Crisis --- http://en.wikipedia.org/wiki/Cuban_Missile_Crisis
Fortunately none of the key players (John Kennedy, Nikita Khrushchev, and Fidel Castro) was a religious fanatic in search of martyrdom and/or heavenly virgins.  Nikita Khrushchev eventually swerved to avoid thermonuclear collision. Earlier in 1961 President Kennedy had really screwed up with the Bay of Pigs Invasion, but that was not a game of nuclear chicken --- just chicken --- http://en.wikipedia.org/wiki/Bay_of_Pigs

Iran has commenced a new game of nuclear chicken even if its latest submarine missile photographs were probably propaganda photographs of some older Chinese missile tests.

The president of Iran has recently been trying to suck up to the German Chancellor Angela Merkel. He sent her a letter in which he asks for support and writes that both the Germans and the Iranians have been screwed over by the Jews and the west.
"Iranian President Mahmoud Ahmadinejad sends letter to German Chancellor Merkel," SammyNews, August 29, 2006 --- http://www.freerepublic.com/focus/f-news/1691950/posts

Question
Where did Israel purchase two of its new frightening submarines in this game of nuclear chicken?
Hint: It was not the United States

With the purchase of two more German-made Dolphin submarines capable of carrying nuclear warheads, military experts say Israel is sending a clear message to Iran that it can strike back if attacked by nuclear weapons. The purchases come at a time when Iran is refusing to bow to growing Western demands to halt its nuclear program, and after Iranian President Mahmoud Ahmadinejad has called for Israel to be "wiped off the map." CountryWatch: Israel The new submarines, built at a cost of $1.3 billion with Germany footing one-third of the bill, have diesel-electric propulsion systems that allow them...
"Israel Adds 2 Nuke-Capable Submarines," Fox News, August 24, 2006 --- http://www.foxnews.com/story/0,2933,210373,00.html

Iran is said to have successfully tested an upgraded, indegenious, guided surface-to-sea missile, media reports confirmed on Saturday The missile was tested at the Persian Gulf and Sea of Oman during the 'Blow of Zolfaqar' military exercises which began last Saturday.
"Iran tests upgraded surface-to-sea missile," India Defence, August 26, 2006 --- http://www.india-defence.com/reports/2408

Question
What nation has the fourth largest air force in the world?

$18B bolstering just a startAir Force head: 75 aircraft on order: Planes in service now will need replacing soonChris Wattie National Post Friday, August 25, 2006 The head of the Canadian air force says that $18-billion and 75 new aircraft are only a start at rebuilding an air force that was at one time the fourth largest in the world. Lieutenant-General Steve Lucas told the National Post yesterday the purchases of new heavy transport planes, fleets of new helicopters and replacements for the military's Hercules cargo planes are a good beginning, but more will soon be needed.
"$18B bolstering just a start," National Post, August 25, 2006 --- Click Here

Flashback from The Wall Street Journal, August 28, 1990
Speculation about a possible diplomatic resolution to the Mideast crisis sent stock prices soaring in the biggest rally this year. The Dow Jones Industrial Average rose 78.71, or 3.11%, to 2611.63. Contributing to the gain was a $4 drop in the price of crude oil to $26.91 a barrel.

America grows weary of black leader ingratitude for the good things we do from the heart!
Perhaps most sad is that in four hours Lee has nothing positive to say about America and Americans. No mention is made of the $700 million from private citizens and churches that were committed in the first few days of the tragedy. No mention is made of the thousands of homes across the nation that welcomed evacuees. No mention is made of the tens of thousands who have successfully rebuilt their lives. (No mention is made of the thousands of fire fighters, electricians, plumbers, carpenters, cement workers, and others who spent their own money to go down to Louisiana and Mississippi to help clear debris and rebuild.)
"Katrina, lies and videotape," by Star Parker, WorldNetDaily, August 26, 2006 --- http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=51687

Spike Lee took his cameras and crew to New Orleans to film a documentary about Hurricane Katrina and its aftermath. The four-hour production, which aired on HBO, is, unfortunately, about as destructive as was the disaster it depicts.

At a time when we need light and understanding, Lee has delivered darkness, anger and hatred. Those who will be hurt the most by the distorted and untruthful picture that Lee has concocted are the poor blacks he purports to want to help.

. . .

Central to the Katrina story is the failure of the levees. Indeed, Lee's film is called "When the Levees Broke."

But who is responsible for ignoring the warnings over the years that the levees protecting New Orleans were inadequate? Bush? Of course not.

It was Louisiana's congressional delegation that was responsible to ensure that their constituents' interests were being represented and that funds were being appropriated to fix sub-standard levees. But not a single Louisiana senator or congressman is ever mentioned or appears in "When the Levees Broke."

William Jefferson, New Orleans' congressman for the last 16 years, has been under FBI investigation over the last year under bribery charges. However, Jefferson is a Democrat and a member of the Congressional Black Caucus. To shine a light on his possible, and likely, neglect of representing his constituents' interests would have distracted from the single message that Bush was the evil genius behind this tragedy.

Of course, no mention is made of Jefferson's trip home, when he commandeered a National Guard truck in the middle of rescue efforts to take him to his house to retrieve personal property.

. . .

I have written previously of the love of affair of the black left, particularly the Rev. Jesse Jackson, with Third World dictators. There is virtually no freedom of the press and speech in Venezuela. If Lee were a citizen of Venezuela and made a similar film attacking Chavez, he would disappear forever after the first showing.

Perhaps most sad is that in four hours Lee has nothing positive to say about America and Americans. No mention is made of the $700 million from private citizens and churches that were committed in the first few days of the tragedy. No mention is made of the thousands of homes across the nation that welcomed evacuees. No mention is made of the tens of thousands who have successfully rebuilt their lives.

Spike Lee clearly has little affection for the country that gives him free expression and has made him wealthy. He has produced a self-indulgent, deceitful and exploitive film about a tragedy. His message will give poor blacks more reasons to feel powerless, to feel lost, to feel that others bear responsibility for their lives, to hate, and to stay poor.

Continued in article

The extreme left does seem to have abandoned any idea of creating 
a socialist utopia; today it is devoted solely to uncreative destruction.
Opinion Journal, February 11, 2005
The extreme left has a different, but no less ungrateful, take in its review of Spike Lee's Katrina movie. Lee has been criticized for reducing "Katrina to a black problem," as Nicholas Kulish wrote in the New York Times. But Richard Kim defends this as justified and is critical mainly that Spike Lee did not go far enough in trying to destroy business enterprise. What Kim does not answer below, like most critics of business enterprise, is how socialism with big government would have done so much better. It's easy to criticize, but it's far more difficult to find a improved solutions.
"Doing the Right Thing," by Richard Kim, The Nation, August 25, 2006 ---
http://www.thenation.com/blogs/notion?pid=116164

Where Lee falters is not in his multi-faceted account of race and class, but in his examination of the politics and economics that set in play this unnatural disaster and continue to mangle New Orleans' reconstruction. The usual suspects are, of course, deliciously skewered: George Bush's sinister disinterest, Michael Brown's incompetence (he gets roasted by Soledad O'Brien who asks how her 23-year-old research assistant can have better intelligence than FEMA), Chertoff, Cheney, Condi and her Blahniks, Barbara Bush (the "President Momma" as Al Sharpton puts it), the insurance industry, the Army Corps of Engineers. But others, like Nagin who has consistently sided with business and property interests in the reconstruction, are largely absolved or made into heroes. With the exception of a brief query into Louisiana's oil and gas industry, the film seems to suggest that Hurricane Katrina happened because bad people made bad decisions, rather than because of the systematic gutting of urban infrastructure and the heartless pursuit of neoliberal economics.

Katrina spending is five times larger than past disasters
New Orleans' plight is not the result of federal underspending. Uncle Sam has spent some five times more on Katrina relief than any other natural disaster in the past 50 years. Both parties in Congress and the White House opted for the status quo by relying on federal bureaucracies to oversee the rebuilding effort. If Uncle Sam were deliberately trying to waste these funds, it is hard to imagine a better way than to funnel the money through the Department of Housing and Urban Development, the Small Business Administration and the Federal Emergency Management Agency. Both HUD and the SBA have been on the chopping block back to the early Reagan years . . . For all the finger-pointing this week, Congress hasn't spent much more than a dime to clear away the debris of corruption, patronage, welfare dependency, high taxes and racial division of decimated neighborhoods. What is still lacking in the life of New Orleans is the vital architecture of local capitalism.
"The Tragedy of New Orleans:  Katrina spending is five times larger than past disasters," The Wall Street Journal, August 29, 2006 --- http://www.opinionjournal.com/editorial/feature.html?id=110008860

Spike Lee Fails to Fault Louisiana Political Corruption Where Katrina's Worst Fault Lies,
Before and After the Storm

Sneaky Intelligent Design Republicans?
I am writing to express concern about the exclusion of "evolutionary biology," a core component of the biological sciences, from the eligibility rules for the new federal "National Smart Grant" program. According to a recent account in the Chronicle of Higher Education, the list of college majors for which students may be eligible to receive the Smart Grants has only a blank line where the listing for evolutionary biology would be expected to appear.
Democratic Senator Henry A. Waxman in an August 24, 2006 letter to the Secretary of the Department of Education --- http://www.freerepublic.com/focus/f-news/1690283/posts

After all the negative media publicity, evolutionary biology mysteriously reappeared on the grant list ---
http://www.newscientist.com/article/mg19125673.800-evolutionary-biology-reappears-on-federal-grant-list.html

Politics purportedly is not a bell-shaped curve that peaks in the center
"The Vitiated Center:  The successful failures of right and left intellectuals," by Brian Doherty, Reason Magazine, August/September 2006 --- http://www.reason.com/0608/cr.bd.the.shtml

Welfare Reform That Costs More Today for, Gulp, Welfare

"The Amazing Colossal Poorhouse:  Ten years after welfare reform, the welfare state is even larger than before," by Jesse Walker, Reason Magazine, August 22, 2006 --- http://www.reason.com/links/links082206.shtml

People on the rolls.
If you focus narrowly on the program known until '96 as Aid to Families with Dependent Children, and known since then as Temporary Assistance for Needy Families, you'll get the impression that welfare is disappearing. In a time when the country's population was growing, the number of families receiving AFDC/TANF subsidies dropped from 4.6 million a decade ago to under 2 million today. There were several reasons for this, including a booming economy in the late '90s, but the chief factor was welfare reform, which established new time limits and work requirements for the program's clients.

But if you look across the spectrum of federal social programs, a more ambiguous picture emerges. As Douglas Besherov of the American Enterprise Institute pointed out last week in The New York Times, some of the families booted from TANF simply move to different sources of assistance: "food stamps (an average of more than $2,500), the Women, Infants and Children program (about $1,800 for infants and new mothers), Supplemental Security Income (an average of over $6,500), or housing aid (an average of $6,000). Their children also qualify for Medicaid. In reality, these families are still on welfare because they are still receiving benefits and not working—call it 'welfare lite.'" It's not clear what makes this arrangement "lite," given that all five forms of aid have seen their budgets increase since Bush took office.

In March, USA Today examined 25 programs, from Medicaid to the Earned Income Tax Credit. In nearly all of them, enrollment grew. Congress expanded eligibility for several, usually with the proviso that the recipients also work. But for the most part, this growth was a matter of the existing programs stretching to take on more clients as they fell below the poverty line. That doesn't necessarily constitute an increase in the number of people getting benefits: USA Today calculated that overall enrollment increased 17 percent from 2000 to 2005—"the biggest five-year increase in 40 years"—but that double-counts people who joined more than one program. But it certainly isn't the unambiguous contraction you see if you look at TANF alone.

Lest we forget, incarceration expanded considerably during this period as well. It is not true, as some leftists have suggested, that the people who left the welfare rolls simply moved en masse to jail. But there is an overlap; and, at any rate, any measurement of the number of Americans who depend on the government for sustenance should account for the 2,186,230 people incarcerated in the country's prisons and jails—up from 1,630,940 in 1996.

Money spent.
Again, a narrow focus on TANF gives the impression that welfare outlays are down. Spending on that one program dropped severely in Clinton's second term, and has remained roughly flat under his successor. But overall spending on transfer payments has increased radically, particularly under Bush. That shouldn't be surprising, given that government spending overall has increased radically under Bush. The tricky issue—particularly for those of us who are inclined to regard any transfer payment as welfare, whether the recipient is a single mom or a multinational corporation—is discerning which spending does not fall into the welfare category.

I'm not going to go through every item in the budget. I'll just note that even by the narrowest definition of welfare spending—programs aimed at fighting poverty—the figure has gone up 39 percent during the Bush presidency. There isn't any ambiguity here. The government is spending more money on welfare—and with the coming explosion in entitlements, you can expect it to spend even more in the future.

Continued in article

From the Scout Report on August 25, 2006

Policy experts, politicians, and others debate successes and failures of welfare reform 10 years of welfare reform assessed http://www.post-gazette.com/pg/06234/715333-85.stm

On and off the rolls, women work to get ahead
http://www.kansascity.com/mld/kansascity/news/local/15329233.htm

NPR: Legislator Offers First-Person View of Welfare [Real Player]
http://www.npr.org/templates/story/story.php?storyId=5689095

In Focus: Ten Years of Welfare Reform [pdf] http://www.brookings.edu/comm/infocus/welfare.htm

NPR: Where the Welfare Law Failed Fathers
http://www.npr.org/templates/story/story.php?storyId=5671231

Fact Sheet: The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 http://www.acf.dhhs.gov/programs/ofa/prwora96.htm

Some sixty years after its introduction during the New Deal era, the essence of social welfare in the United States was dramatically transformed with the passage of The Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Despite its cumbersome name, the Act effectively placed a five- year time limit on welfare assistance, and also required a significant commitment on the part of recipients to find work. As various groups and individuals reflected on the past ten years, some were quick to note that the number of people on welfare has dropped 60 percent. Others have been more sanguine, noting that these reforms continue to inadequately address deeper problems, particularly those of single mothers with few job qualifications or education. Some critics continue to suggest that these problems are related to structural changes in the economy, and others continue to blame the so-called "culture of poverty". The debates over what to do in order to solve the problems of working families continues to be intense, with some groups pushing to encourage marriage as a solution, and others seeking to provide more money for child care and higher minimum wages. [KMG]

The first link will take users to a piece from the Pittsburgh Post-Gazette’s own Steve Levin that takes a closer look at the effects of welfare reform on several local residents. The second link leads to a similar piece which looks at women’s experience with the welfare system in and around Kansas City. The third link leads to a provocative piece from National Public Radio which features Montana legislator Mary Caferro talking about her own first- hand experience as a welfare recipient. Moving right along, visitors will find a diverse set of scholarly writings on welfare reform at the fourth site, offered courtesy of The Brookings Institution. The fifth link offers commentary by two scholars (Ron Haskins and Ronald Mincy) about how public policy should be adjusted over the next decade to meet the needs of poor families. Finally, the last link leads to a basic fact sheet on The Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
 

 "Schwarzenegger Gives Up," by Shikha Dalmia, The Wall Street Journal, August 28, 2006; Page A13 --- Click Here

The real issue, however, is what this bond measure will do to California. Few doubt the need for California to invest in its crumbling infrastructure. But this is an infrastructure bond in name only. The four big-ticket items in the bond -- which is two times bigger than the biggest bond in the state's history -- are $2.6 billion for housing, $10.4 billion for K-12 schools and universities, $3.1 billion for levee repairs and $19.2 billion for transportation.

The housing bond is simply welfare masquerading as a capital project. A bulk of its money won't fund general infrastructure -- an acceptable use of general-obligation bonds like these -- but such things as cheap multifamily dwellings for low-income families, and down-payment assistance for first-time home buyers.

The education bond is equally misguided, given that 40% of the state's $94 billion general-fund revenues are already constitutionally earmarked for education. Moreover, California voters approved a total of $25 billion for school-construction bonds in 2002 and 2004 to reduce overcrowding. If there is still not enough money for new schools, it is not because of lack of state spending, but abject waste by individual districts. If anything, this handout will encourage more waste by undercutting districts' need to explore the kind of public-private partnership responsible for Inderkum High School in Sacramento being completed a month early and $2.5 million under budget. In this case, a private developer built the school and district authorities used their public dollars to lease the facility from him.

In contrast to schools, California has genuinely underinvested in its levees and transportation. Yet it is unclear that general-obligation bonds that mortgage the wallets of all future taxpayers are the best remedy. To the extent that levee repair, for instance, would benefit mostly those living in the flood plains, at least part of the cost ought to be recovered through special assessments on them.

California has also been routinely raiding the transportation dollars it raises from gas taxes for other general fund needs -- a fact obvious to anyone who has ever battled traffic on the San Diego Freeway. Yet only about half of this bond's revenues are slated for actual road building. Instead, $4 billion is going to mass transit even though mass transit's share of commuters, never large, has dropped by 9% since 2000.

Even after the proposed $19 billion transportation bond and the $384 billion in planned transportation spending by the state's biggest three regions (Los Angeles, the Bay Area and San Diego), California's traffic congestion will actually be worse in 2030 than it is today because the state is choosing pork and pet transit projects instead of prioritizing and adding much-needed highway capacity.

There are better ways of generating steady revenues to fund transportation and other needed infrastructure that don't involve giving Sacramento's politicians a ready excuse to dip into the pockets of future taxpayers. Among them, notes Donna Arduin, Mr. Schwarzenegger's former finance director, are things like privately built toll roads and congestion pricing. "These were things that were recommended to him back when he first took office," she says.

It is disheartening that the governor -- who claims to have been inspired to enter political life by the small-government ideas of Milton Friedman and Adam Smith -- has ignored these measures, especially now when government spending in California is touching the stratosphere. Indeed, despite the fact that California's economy has rebounded after the dot-com bust, pouring $7 billion more than expected into the state's coffers this year, the state's 2006-07 budget still shows a deficit of $7 billion. California has the dubious distinction of being one of only eight states showing deficits instead of surpluses right now.

Continued in article

Jensen Comment
Governor Schwarzenegger is now following the George Bush Mortgage-the-Future playbook of balancing the books with billions upon billions of  new debt rather than the Ronald Regan playbook of fiscal responsibility ink in the veto pen. The problem is that California, unlike the Feds, cannot print more money when needed to pay back debt with inflated dollars.

Finland Did Not Cave In to Bureaucracy and Education Unions
Taking Finland as an example, the following key lessons can be drawn. Education, skills and lifelong learning must be at the center of an innovative economy. Far from being a consistent top performer -- in the mid-1980s, secondary school students in Finland performed only slightly above the OECD average in science tests -- the country pursued comprehensive reforms in spite of a deep recession in the 1990s. Finland's policy makers were determined to rid their schools of the bureaucratic inertia and myriad of responsibilities that hobble other European school systems to this day. Through decentralization and holding teachers and schools accountable for their students' performance -- unthinkable in much of the rest of Europe -- the reforms instilled in educators a sense of professional pride and unprecedented empowerment. Today, Finland is the top performer in the OECD's high-school study. A second area where Finland is leading by example is in shifting its resources toward future-oriented projects. In 2004, Finland spent 3.41% of its GDP on R&D. Even more important, industry contributed the lion's share, 2.41%. Much of Europe, on the other hand, is trying (unsuccessfully) to reach the 3% target through more public spending. Finland realized that attracting private-sector investment is not only more productive but also more likely to yield commercially viable innovative products.
Ann Mettler, "Innovation, Innovation, Innovation," The Wall Street Journal, August 28, 2006 --- Click Here

Public school teachers in Detroit voted yesterday to reject a contract offer and to not report for their first day of work today. School is scheduled to start Sept. 5 for the 129,000 students in the Detroit Public Schools.
"Detroit Teachers Vote to Not Report to Work," The New York Times, August 28, 2006 --- Click Here

College Leaders in Michigan Push Hard to Defeat Vote to Bar Affirmative Action in Colleges
A federal judge on Tuesday refused to block a Michigan referendum this fall to bar affirmative action by public colleges and universities and other state agencies, The Detroit Free Press reported. The judge was harshly critical of the initiative, and said he believed that many people who signed petitions to place the measure on the ballot had been misled. But the judge said he lacked the authority to remove the measure from the ballot. College leaders are pushing hard to defeat the measure.
Inside Higher Ed, August 30, 2006 --- http://www.insidehighered.com/news/2006/08/30/qt

Here's What Happened in Washington State
Minority enrollments have lagged in Washington State, relative to the state’s population for the last eight years — ever since the state’s voters barred the use of affirmative action in public higher education, the Associated Press reported.
Inside Higher Ed, August 30, 2006 --- http://www.insidehighered.com/news/2006/08/30/qt

Bob Jensen's threads on both affirmative action for faculty hiring/pay and affirmative action on student admissions/aid are available in separate categories at http://www.trinity.edu/rjensen/HigherEdControversies.htm

As much as I criticize the biased news media, for me the newspaper industry's financial woes are saddening
“Our investment in newspaper stocks continues to cause concern for some clients,” Mr. Sherman wrote in a letter to clients earlier this summer. “Given the disappointing returns thus far, we understand their consternation. In some regards, it would be easier for us to abandon the investment theme than to continue to argue the point.” While Mr. Sherman’s firm has been shedding some of its newspaper stocks, largely at the direction of dissatisfied clients, about 10 percent of his portfolio remains invested in newspapers. (As of June 30 his firm owned 13 percent of the common stock of The New York Times Company.) Despite the industry’s woes, some in the newspaper industry have sharply criticized Mr. Ridder for not fighting harder to save his company. He had been acquiescing to Wall Street for years, they say, and his sale of the company was only the final, most striking, example.
Katherine Q. Seelye, "What-Ifs of a Media Eclipse," The New York Times, August 27, 2006 --- Click Here
Jensen Comment
Television news reporters and correspondents are more visible, but it's an army of newspaper reporters worldwide that are truly bringing us the daily news. I don't think anybody is predicting an abrupt shutdown of the presses. But draconian cost cutting will greatly degrade newsgathering.. Much of the problem arises from the shifting of advertising, including classified advertising, from local newspapers to the Internet in such outlets as CraigsList, eBay, Google, Yahoo, etc. Newspapers moved to the Internet, but competition for advertising revenue is intense relative to the virtual monopoly powers newspapers enjoyed at one time in their communities.

Academic Freedom at the Dawn of a New Century:
How Terrorism, Governments, and Culture Wars Impact Free Speech

Q: In the essays in the book, which issues raised were the most surprising to you? Which were of the greatest concern?

A: I think what surprised me the most was how grave the situation is regarding academic freedom in many countries around the world. I certainly knew that there were problems in other countries, but until you actually read about all of the examples of people being beaten, imprisoned, and even killed for their views, I don’t think you quite understand how dire the situation is.
Matthew J. Streb in an interview with Scott Jaschik, "New Analysis of Academic Freedom," Inside Higher Ed, August 28, 2006 --- http://www.insidehighered.com/news/2006/08/28/streb

The essays in a new book, Academic Freedom at the Dawn of a New Century: How Terrorism, Governments, and Culture Wars Impact Free Speech (Stanford University Press), explore attacks and defenses of professors in countries all over the world. The editors (who also contribute to the volume) are Evan Gerstmann, chair of political science at Loyola Marymount University, and Matthew J. Streb, assistant professor of political science at Northern Illinois University. Streb responded to questions via e-mail on the themes of the book.

And now a few words about academic freedom from New Hampshire's Democratic Governor
and Former Dean of the Harvard Business School, John Lynch
"Although academic freedom is important," the governor said, "if the UNH professor is promoting that view, it reflects a reckless disregard for the true facts and raises questions as to why such a professor would be teaching at the university in the first place." Woodward is a member of Scholars for 9/11 Truth, an organization that maintains the Bush administration permitted the terrorist attacks to occur, and may even have planned them, so as to rally the public around its policies.
Scott Brooks, "Lynch calls teacher's theories crazy as UNH stands behind 9/11 prof," Union Leader, August 29, 2006 ---
Click Here

The University of New Hampshire is refusing to fire a tenured professor whose views on 9/11 have led many politicians in the state to demand his dismissal. William Woodward, a professor of psychology, is among those academics who believe that U.S. leaders have lied about what they know about 9/11, and were involved in a conspiracy that led to the massive deaths on that day, setting the stage for the war with Iraq. The Union Leader, a New Hampshire newspaper, reported on Woodward’s views on Sunday, and quoted him (accurately, he says) saying that he includes his views in some class sessions.
Scott Jaschik, "Another Scholar Under Fire for 9/11 Views," Inside Higher Ed, August 29, 2006 --- http://www.insidehighered.com/news/2006/08/29/woodward

"Stretching the Definition of Academic Freedom," by John Friedl, Inside Higher Ed, August 31, 2006 --- http://www.insidehighered.com/views/2006/08/31/friedl

Academic freedom is under attack on college campuses across the country. The “Academic Bill of Rights,” authored by David Horowitz, seems to be motivated by a concern that some professors are turning their classrooms into personal forums in which they force-feed their students a liberal political dogma unrelated to the subject matter of the course.

Horowitz’s attempt to involve legislatures in addressing what is clearly an academic issue is not only a dangerous precedent, but unnecessary as well. It is dangerous because it threatens the freedom of inquiry and critical thinking that we strive to achieve through open discussion of controversial issues. And it is unnecessary because we have in place institutional guidelines and professional standards that, when properly applied, provide balance without destroying the spontaneity and intellectual stimulation that is currently found in our classrooms.

The real problem that needs to be addressed is the growing gap in the understanding of the concept of academic freedom shared — or more often not shared — by faculty and administrators. Matters of institutional policy proposed by academic administrators are increasingly — and frequently without justification — condemned by professors as infringements on their rights.

A few examples provide an enlightening illustration. These examples involve what are mistakenly seen as academic freedom issues, providing a sense of how broadly many faculty interpret the concept and the rights it creates.

My current university for many years has provided an e-mail list service open to all faculty and staff for virtually any purpose: to post notices, advertise items for sale, express opinions on any topic, and to disseminate official university announcements. As the volume of garage sale ads grew and the expression of opinions became increasingly vitriolic, many faculty and staff members elected to filter out messages from the list service, with the result that they did not receive official announcements.

As a solution to this problem, university administrators created a second list service limited to official announcements, in which all employees would participate without the option of unsubscribing. The original open list remained available to all who chose to participate. In response to this action, one faculty member sent a message to the entire university (on the pre-existing list service) denouncing the change as a violation of academic freedom and First Amendment rights, because the “official” announcements would first be screened by the University Relations Office before being posted.

A second example: At my former university, in response to concerns over a high rate of attrition between the freshman and sophomore year, the deans proposed a policy whereby each instructor in a lower division course would be required to provide students with some type of graded or appropriately evaluated work product by the end of the sixth week of a 15-week semester. The stated purpose of the policy was to identify students at risk early enough to help them bring their grades up to a C or better. (The original proposal also included the suggestion that faculty members work with students to develop a plan to improve their performance, but that was quickly taken off the table when faculty complained of an increase in their workload without additional compensation.)

When this proposal was discussed among the faculty, several complained that the scheduling of exams was a faculty prerogative protected by academic freedom, and that any attempt by university administrators to mandate early feedback to students was an infringement upon that right. Those who spoke out did not object to the concept of early feedback — they just didn’t want to be told they had to do it.

Another example: At the same institution, in preparation for its decennial review by the regional accrediting body, the vice president for academic affairs began to assemble the mountains of documents required for that review, including a syllabus for every course offered. The accrediting organization guidelines list 11 items recommended for inclusion in every course syllabus, and the vice president duly notified the faculty, through the deans and department chairs, of this recommendation.

The response of a surprising number of the faculty members was to argue that what goes into their syllabus is a matter of academic freedom, not subject to the mandate of the vice president or the accreditor. Again, their complaints did not seem to be directed at the suggested content, but rather they were opposed to being told what they must put in their syllabi.

The concept of academic freedom is often viewed as an extension of the rights granted under the First Amendment, applicable within the limited context of the educational system. One of the earliest definitions of academic freedom is found in the AAUP’s 1915 Declaration of Principles on Academic Freedom and Academic Tenure. The discussion is framed in terms of the freedom of the individual faculty member to pursue his or her research and teaching interests without interference from “outsiders,” whether they be members of the institution’s governing body or the public at large.

As an indication of how far the pendulum has swung in the 90 years since the AAUP Declaration was written, in 1915 the authors expressed concern that “where the university is dependent for funds upon legislative favor, ... the menace to academic freedom may consist in the repression of opinions that in the particular political situation are deemed ultra-conservative rather than ultra-radical.” But the authors correctly point out that “whether the departure is in the one direction or the other is immaterial.”

As appealing as the principle embodied in the AAUP Declaration may be to many academic administrators and to most, if not all, professors, that principle has not found favor in American jurisprudence. Academic freedom is not mentioned directly in the U.S. Constitution or in any federal statute. It was first recognized by the U.S. Supreme Court in the 1957 case of Sweezy v. New Hampshire, when Justice Felix Frankfurter defined the four elements of academic freedom as: “the freedom of an institution to decide who may attend, who may teach, what may be taught and how it shall be taught.” Note that this definition places the bundle of rights that make up academic freedom in the institution, not the individual faculty member.

It is a huge leap from the AAUP Declaration to the contention that a policy requiring a graded work product by the sixth week or mandating 11elements in every syllabus is an abridgment of the faculty’s constitutional rights, not to mention the claim that university administrators have no right to screen what goes out to the campus community as an official university announcement.

The problem, of course, goes much deeper. The real difficulty is that on many campuses throughout the country, the expanding concept of academic freedom has created an expectation of total individual autonomy. Our concept of faculty status seems to have evolved from one of employee to that of an independent contractor offering private tutorials to the institution’s students using the institution’s resources, but unfettered by many of the institution’s policies.

Lest any of us grow accustomed to this new order, it is instructive to see what one federal court has said about the limits to academic freedom. In the case of Urofsky v. Gilmore, a prominent legal scholar challenged a state policy aimed at restricting the use of state-owned computers by public employees to visit pornographic Web sites. The faculty member made the by now familiar claim that access to such information for teaching or research is constitutionally protected under the First Amendment, and falls within the scope of the individual faculty right to academic freedom.

The U.S. Court of Appeals disagreed, saying that academic freedom is not an individual right, but one that belongs to the institution, and in this case the institution (Virginia Commonwealth University) is an extension of the state. In the court’s words, “to the extent the Constitution recognizes any right of ‘academic freedom’ above and beyond the First Amendment rights to which every citizen is entitled, the right inheres in the university, not in individual professors....” The U.S. Supreme Court declined to review this decision, thereby allowing it to stand. And while it is binding legal precedent only for federal courts in the Fourth Circuit (Maryland, North Carolina, South Carolina, Virginia and West Virginia), this decision will serve as a powerful influence on other courts throughout the country.

The court’s conclusion was a shock to many of us, administrators and faculty members alike. Even more troubling is the court’s statement that “the [Supreme] Court has never recognized that professors possess a First Amendment right of academic freedom to determine for themselves the content of their courses and scholarship, despite opportunities to do so.” But as offensive as this statement may seem to some, it could have an unintended and beneficial consequence of bringing faculty and administrators closer together in recognizing their common bonds and in working toward achieving common goals for the good of their colleges and universities.

When faculty members recognize that there are limits to academic freedom, and that the rights ultimately reside with the institution, there is a powerful incentive to work with academic administrators to reach consensus on policies that will achieve important goals. And even if administrators feel emboldened by what may at first be perceived as a weakening of the individual faculty member’s freedom, every seasoned academic administrator knows that without faculty cooperation and support, even the most well-intentioned policy cannot succeed.

Cider apples have high levels of phenolics –
antioxidants linked to protection against stroke, heart disease and cancer
The saying goes that an apple a day keeps the doctor away but now scientists at the University of Glasgow are looking into whether a pint of cider could have the same effect. Researchers have discovered that English cider apples have high levels of phenolics – antioxidants linked to protection against stroke, heart disease and cancer – and are working with volunteers to see whether these health benefits could be passed onto cider drinkers.
"Could a pint of cider help keep the doctor away?" PhysOrg, August 28, 2006 --- http://physorg.com/news75964425.html
Jensen Comment
The fresh cider is outstanding up here in apple country this time of year. Alas --- don't forget that cider, like all fruit juice, is extremely high in calories. Persons drinking a pint of cider each day should probably drink one less pint of Guinness or Châteauneuf-du-Pape. Sigh!

Still Rotten to the Core:  Unethical and Sneaky Cigarette Companies Behind the Scenes
The level of nicotine that smokers typically consume per cigarette has risen 10 percent in the past six years, making it harder to quit and easier to be addicted, said a report that the Massachusetts Department of Health released on Tuesday. The study shows a steady increase in the amount of nicotine delivered to the smokers’ lungs regardless of brand, with overall yields increasing 10 percent. Massachusetts is one of three states to require tobacco companies to submit information on nicotine testing to its specifications and is the sole state with data as far back as 1998.
"Nicotine Levels Rose 10 Percent in Last Six Years, Report Says," The New York Times, August 31, 2006 --- Click Here

Forget the biscuits:  Pass the berries Miranda, I'm as forgetful as sin
If humans are anything like rats, scientists at Tufts University in Boston may be on the road to discovering the fountain of youth for the human brain. Reporting in the online edition of Neurobiology of Aging, Tufts psychologist Barbara Shukitt-Hale and her colleagues say a diet rich in berries improved the brain function of aging rats, WebMd reports.
PhysOrg, August 25, 2006 --- http://physorg.com/news75730536.html

Blueberries rank among the healthiest foods on the planet (good oxidizers)
Chef Rob Evans' Blueberry Recipes --- http://www.npr.org/templates/story/story.php?storyId=5716453

Related NPR Stories

The University of Illinois Plans a Huge New Online "Campus"
Faculty Seeking Tenure Need Not Apply

Remember the impressive SCALE study?

"The New State U," by Scott Jaschik, Inside Higher Ed, August 31, 2006 --- http://www.insidehighered.com/news/2006/08/31/illinois

The University of Illinois is in many ways a classic state university system. Urbana-Champaign is a flagship, with a history of Nobel laureates and competitive admissions. The Chicago campus has been very much on the rise in the last 10 years, expanding research and graduate programs and attracting academic stars. Springfield has more of an undergraduate and liberal arts focus.

All three campuses have some distance education programs, but the university system is now getting ready to launch a whole new campus, creating an online division that could eventually rival the individual campuses in enrollment levels, operating in a very different environment. The University of Illinois Global Campus would be operated as a separate for-profit entity, have almost entirely part-time faculty members (and none with tenure), and focus on a relatively small number of degree programs.

The idea, according to Illinois officials, is to learn from a variety of models out there that are growing rapidly (UMass Online, University of Maryland University College, and the University of Phoenix), while also learning from some of the failed attempts of the dot-com boom, when many colleges started online, for-profit spinoffs with much hype — only to see them go nowhere.

“This could be extremely significant in the online landscape,” said Trace Urdan, who tracks education ventures for the Signal Hill Capital Group. The Illinois effort reflects a number of key trends, he said: the continued growing popularity of online education, the desire of many adults to study not only online but with an institution they know well, and the realization of many public universities that they need different types of models to compete for these students — while not promising the moon overnight, as some institutions did 10 years ago.

“This is part of a continuing trend where the traditional schools and state institutions are becoming much more competitive in the areas that have been dominated by the for-profits,” he said. “Their online programs are becoming more relevant, and even the ones that aren’t spending effectively have boosted the amount of money they are spending.”

Richard Vedder, an Ohio University professor who has been an outspoken critic of traditional higher education and who is a member of the U.S. education secretary’s commission studying higher education, has been praising the Illinois plan as a “bold innovation” that could shake up public higher education.

But not everyone at Illinois is in love with the plan, which is expected to receive final board approval next month. Faculty leaders from the three existing campuses are working on a letter to express concerns about the idea. One faculty leader who asked not to be identified said that the plan risked the university’s values. “Tenure is a very critical concern because it is a hallmark of the academic freedom that is needed for intellectual inquiry,” said the professor. “If people are all part-time and non-tenure track, is that a university? Is that a faculty? It’s certainly the University of Phoenix, but it’s not traditionally what has been the University of Illinois.”

The Illinois plan was the result of nearly a year of work by a committee that included administrators and faculty members (while some professors question the direction of the plan, even critics praise the administration for having been inclusive in planning).

Chet Gardner, who led the effort as vice president for academic affairs and is now leading the drive to create the new campus, said that the committee came to believe that distance education needed to grow, and that it couldn’t do so with existing models. Currently, online enrollments are about 6,900, or 2 percent systemwide “and that just can’t scale up,” he said. Under the new structure, Illinois wants to have 10,000 students enrolled in 5 years and up to 50,000 in 10 years. Programs would be limited — largely business, technology, education and similar fields in which there is strong demand by adult learners. “This will not be a traditional university where you have 100 or more academic programs,” he said.

By raising money privately — about $15-20 million for starters — Illinois plans to create the new university without state funds (which have generally been in short supply for the last decade for higher ed in the state). As a private, for-profit institution, without tenure, the new campus will seek independent accreditation, and expects to have the freedom to create (and discard) programs quickly. Courses will be starting every few weeks, not just on a traditional semester schedule. And while most students are expected to be Illinois residents, there will be no differential between in and out of state rates.

Despite all of those very non-traditional characteristics, Gardner insisted that this “isn’t about profit,” but is about the university’s historic mission. “What’s driving this is that we are a land grant university. It’s our core mission to provide access to high quality education first and foremost to the people of Illinois,” he said, adding that adult students who can’t enroll full time on an Illinois campus “aren’t well served today.”

One contention of Illinois officials is that while the online market is in some ways national or international — since anyone online can enroll anywhere — there is increasing evidence that online customers still want to root for the home team. UMass Online is one of the entities Illinois has studied — and its figures suggest a strong desire to enroll at a local institution online. During the last academic year, the institution’s enrollments increased by 23 percent, to 21,682 — in a state with no shortage of colleges and where many experts have warned that students could become scarce as the U.S. population shifts out of the Northeast. Revenues from those students were up 32 percent, to nearly $23 million.

Only 28 percent of UMass Online students are from out of state.

“There is a lot of regionalism in online education,” said David Gray, CEO of UMass Online. “I think Illinois will find a lot of receptivity in its own backyard.”

Peter Stokes, executive vice president at Eduventures, an education research firm that has advised Illinois on its plans, agreed. “State sponsorship is very positive” as potential students are considering where to enroll — in person or online, he said. Whatever people imagined about the worldwide market for distance education, “most enrollments are local.”

Stokes said that the Illinois plans reflect a maturation of the way traditional universities are thinking about starting new online ventures, some of them with for-profit models. “Everyone knows the failures of NYU Online or Fathom,” he said. “I think that going back, universities thought they could access a tremendous amount of venture capital,” and then ended up “putting their own money in, without real business models in place for the time.”

The survivors of that era — he cited eCornell as an example — are “more modest in focus.”

Stokes said it was significant that Illinois was talking about raising serious amounts of money, but not outrageous sums, and that its emphasis was on serving its own state. “The motivation to go for-profit today isn’t to raise capital, but to free themselves from constraints of traditional university governance. With traditional governance, it’s hard to make the kinds of quick decisions you need.”

Several other major public universities are currently considering an approach similar to what Illinois is planning, Stokes said, although he declined to name them. While places like UMass Online, the University of Maryland University College, and Penn State World Campus have a head start, not to mention the advantages the University of Phoenix enjoys, Stokes said that there was probably room for more players — provided they maintain a focus on their states.

Urdan of Signal Hill agreed. “The opportunity to be as big as Phoenix is gone,” he said. The opportunities that remain for state university systems are closer to home.

Not all supporters of online education, however, favor the for-profit model. UMass Online is “firmly nonprofit,” Gray said, even though it is making plenty of money. It turned over $8 million in what would have been profit to the university system last year, and Gray said he expects that to rise to $10 million this year — even with extensive growth in programming.

Gray said that UMass Online’s success relates to a degree of independence it does enjoy — while it works with individual faculty members and professors at UMass campuses, the online program can add offerings or eliminate them quickly, set up marketing efforts, and generally “operate on its own schedule,” Gray said.

“I think there was a recognition here that we needed independence to pump some energy into this initiative, that something very distinctly different had to be done,” he said.

So why stay nonprofit? Gray said that another key to success has been faculty support. New offerings are designed and taught by regular university faculty members. He said that any move to for-profit status would put that support at risk. “We never got into the arguments about profit-making,” he said. “We needed engagement to occur for this to work, and this model isn’t threatening. We got the engagement we needed because we didn’t spend a lot of time on the arguments about being a commercial enterprise.”

Gray said that there’s no doubt that “some things can be easier by adopting a for-profit model,” but he said that university leaders need to remember that “there are tradeoffs.”

Pat Langley, chair of the Campus Senate at the University of Illinois at Springfield, said that her campus is providing a model of how distance education can work well — and that she’s skeptical of the new model being proposed. Springfield has received support from the Alfred P. Sloan Foundation to put traditional liberal arts courses online, and Langley said that professors have embraced the idea. “You always find computer science and business being offered online, but we’re working to get philosophy and English up as well,” said Langley, a professor of women’s studies and legal studies.

The reason faculty members like the program — which has resulted in Springfield having a larger share of its enrollment online than the other Illinois campuses — is that quality is the same, Langley said. “We received a commitment that the people who would teach these courses would be the people who teach them on the ground, and as a result, the quality is indistinguishable online or in the classroom, and the professors are enjoying teaching these courses,” she said.

Is a new model needed to offer more courses? “It depends what your goal is,” Langley said. “In our model, students are getting a very high quality education and I’m sure that it’s at least as good as if they were sitting in the bricks and mortar classroom,” she said. “We don’t think the model needs to be changed.”

Some faculty members are supportive of the new online effort — with a few conditions. Elliot Kaufman, chair of the University Senates Conference of the Illinois campuses, said that while “a lot of faculty are concerned, I don’t share those concerns.” Kaufman, a professor of biochemistry and molecular genetics at the Chicago campus, was on the committee that prepared the plan.

He noted that the university uses part-time faculty members now and that the quality of instruction by adjuncts can be very high, provided they are adequately supported. “We can’t scale up what we are doing right now with the existing model, and I think we need to use adjuncts,” he said.

“The trick is to make sure everyone is highly qualified and trained,” Kaufman said. “I understand the concerns some people have about this model, but I don’t think we should say we don’t like this model. We should say we’ll do this, and do it well.”

Jensen Comment
The University of Illinois conducted one of the first scholarly "SCALE" experiments of onsite versus online learning using resident on-campus students --- http://www.trinity.edu/rjensen/255wp.htm#Illinois

Bob Jensen's threads on distance training and education alternatives are at http://www.trinity.edu/rjensen/crossborder.htm

Free from Temple University
COW:  Calculus on the Web (plus linear algebra) --- http://www.math.temple.edu/%7Ecow/

Bob Jensen's threads on free math tutorials are at http://www.trinity.edu/rjensen/Bookbob2.htm#050421Mathematics

Learnthat.com: Free web training for computer courses ---
http://www.learnthat.com/courses/computer/default.asp

Free From the University of Utah
Learn Genetics Online (for teachers and students) --- http://learn.genetics.utah.edu/

The Genetic Science Learning Center is an outreach education program located in the midst of bioscience research at the University of Utah. Our mission is to help people understand how genetics affects their lives and society.

To achieve this mission, we present education offerings for various audiences, including:

• This website, which delivers interactive and print-based resources, free of charge, to Internet users worldwide. The website has two main components:
  
   
  • Information and activities: These address standards for science education, and are accessible to all users from the homepage.
  • Teacher Resources and Lesson Plans: These are accessible from the top right of any page. They include PDF-based Print-and-Go™ classroom activities and teacher guides for all materials.
• Professional development programs that update K-12 teachers' expertise in bioscience topics. See our list of upcoming courses and workshops, accessible through the Teacher Resources and Lesson Plans section of this site.
• Public education programs that highlight topics of current interest and research underway at the University of Utah.

Our educational resources provide accurate and unbiased information about topics in genetics and bioscience. Designed for non-research audiences, our materials are interactive and jargon-free, target multiple learning styles, and often convey concepts through visual elements. Our newest materials are being developed with our Exploragraphic™ design methodology.

Some topics in genetics and bioscience research are controversial. The Learning Center does not take sides in politically or ethically charged topics. Rather, our goal is to provide comprehensive information that promotes a lively discussion of these topics, so that individuals can arrive at their own informed decisions.

Bob Jensen's threads on online education and training alternatives are at
http://www.trinity.edu/rjensen/crossborder.htm

Question
If homework does not significantly (on average) improve learning in grade school, how does it impact learning in higher education?

"The Myth About Homework:  Think hours of slogging are helping your child make the grade?" by Caludia Wallis, Time Magazine, August  27, 2006 --- Click Here

Both books cite studies, surveys, statistics, along with some hair-raising anecdotes, on how a rising tide of dull, useless assignments is oppressing families and making kids hate learning. A few highlights from the books and my own investigation:

• According to a 2004 national survey of 2,900 American children conducted by the University of Michigan, the amount of time spent on homework is up 51% since 1981.

• Most of that increase reflects bigger loads for little kids. An academic study found that whereas students ages 6 to 8 did an average of 52 min. of homework a week in 1981, they were toiling 128 min. weekly by 1997. And that's before No Child Left Behind kicked in. An admittedly less scientific poll of parents conducted this year for AOL and the Associated Press found that elementary school students were averaging 78 min. a night.

• The onslaught comes despite the fact that an exhaustive review by the nation's top homework scholar, Duke University's Harris Cooper, concluded that homework does not measurably improve academic achievement for kids in grade school. That's right: all the sweat and tears do not make Johnny a better reader or mathematician.

• Too much homework brings diminishing returns. Cooper's analysis of dozens of studies found that kids who do some homework in middle and high school score somewhat better on standardized tests, but doing more than 60 to 90 min. a night in middle school and more than 2 hr. in high school is associated with, gulp, lower scores.

• Teachers in many of the nations that outperform the U.S. on student achievement tests--such as Japan, Denmark and the Czech Republic--tend to assign less homework than American teachers, but instructors in low-scoring countries like Greece, Thailand and Iran tend to pile it on.

Success on standardized tests is, of course, only one measure of learning--and only one purported goal of homework. Educators, including Cooper, tend to defend homework by saying it builds study habits, self-discipline and time-management skills. But there's also evidence that homework sours kids' attitudes toward school. "It's one thing to say we are wasting kids' time and straining parent-kid relationships," Kohn told me, "but what's unforgivable is if homework is damaging our kids' interest in learning, undermining their curiosity."

Continued in article

Jensen Comment
I think homework is like any other learning tool that can be used effectively or ineffectively depending upon the context of where and how it is used. Homework may enhance or suppress creativity. Homework may increase or stifle motivation. One problem is that too much homework is the mechanical exercise of merely looking up and copying answers. Another problem is that too much homework is graded mechanically such that creative answers that take time to ponder and evaluate by instructors are probably overlooked. For example, written assignments may be graded for grammar without comment on the content itself. I think some topics are better suited to homework. I can't imagine mathematics courses without homework. I learned most of the mathematics I ever mastered because of homework. In science lab exercises are a form of homework that are, in my viewpoint, indispensable. 

Economics and Banking Tutorials Free from the Federal Reserve Bank of St. Louis

Inside the Vault --- http://www.stls.frb.org/publications/itv/default.html
This is a newsletter that explains the banking system, international economics, deficits, etc.

Bob Jensen's threads on free math tutorials are at http://www.trinity.edu/rjensen/Bookbob2.htm#050421Mathematics

Bob Jensen's threads on free textbooks and other learning materials in various fields, including literature, economics, history, statistics, and  accounting --- http://www.trinity.edu/rjensen/ElectronicLiterature.htm

Bob Jensen's writing helpers --- http://www.trinity.edu/rjensen/Bookbob3.htm#Dictionaries

SAT Scores Down While ACT Scores Up
Mean scores on the SAT fell this year by more than they have in decades. A five-point drop in critical reading, to 503, was the largest decline since 1975 and the two-point drop in mathematics, to 518, was the largest dip since 1978.
Scott Jaschik, "Lower Scores, Fewer Students," Inside Higher Ed, August 30, 2006 --- http://www.insidehighered.com/news/2006/08/30/sat

Gaps among racial and ethnic groups continued to be significant on the SAT, including the new writing test, for which the first mean scores were released at the College Board’s annual SAT briefing on Tuesday. The board also reported a small decline in the total number of people who took the test, and while board officials insisted at a news conference that the decline was across the board, they acknowledged later Tuesday that the board’s own data suggest that the decline appears to be among students from the lowest income families.

The percentage of SAT test takers with family incomes up to $30,000 was 19 percent for the high school class of 2006, down from 22 percent a year ago. The share of SAT test takers from families with incomes greater than $100,000 was 24 percent, up from 21 percent a year ago.

Gaston Caperton, president of the College Board, provided a generally upbeat assessment of the year’s results, saying that the new writing test was off to a strong start, both strengthening the SAT and encouraging high schools to focus on writing skills. He attributed the drops in SAT scores to a decline in the number of students who took the test more than once. Fifty-three percent of students did so, down from 56 percent the previous year. Repeat test takers tend to improve their scores, Caperton noted, and students tend to alter their test-taking behavior in years when the SAT undergoes major changes, as was the case this year.

n light of these changes, he said he wasn’t concerned about the one-year drops, although he remained seriously concerned that too many students are not taking rigorous courses in high school that lead to their doing well on the SAT and in college. He said that the average drops in SAT scores didn’t even amount to a single additional question being answered incorrectly.

A reporter at the briefing asked Caperton why in previous years — as SAT scores inched upward — he had implied that those increases were signs of real progress, while he was playing down the impact of larger decreases. Caperton said that “I think we tend to overemphasize a few points here or there.”

Christine Parker, who runs the SAT and ACT preparation programs for the Princeton Review, said that she was struck by the tone of the College Board’s materials on this year’s scores. “It’s pretty clear that the board is on the defensive about these decreases,” she said. She thinks that one reason the retesting totals are down is that more students are taking the ACT and the SAT and figuring out which score will help them the most with colleges, rather than simply retaking the SAT.

Many high school guidance counselors — not to mention SAT test takers — complained that the addition of the writing test made the SAT too long, and there has been much discussion of whether “SAT fatigue” contributed to the decline in scores.

But Wayne Camara, vice president for research and psychometrics at the board, said that the duration of the test had “no impact” on student scores, and that College Board officials have examined the rates at which students answer questions correctly or incorrectly or don’t answer at all during all portions of the test. No link is evident between how long a student has been taking the test and the quality of answers, he said. The College Board has said that it will study the idea of letting students take different parts of the SAT at different times, and Camara said Tuesday that any determination on that idea was at least a year away.

As has been the case in past years, clear gaps were evident by racial and ethnic groups, with Asian and white students doing much better than other groups.

Mean SAT Scores by Ethnicity, 2006

Group	Critical Reading	Mathematics	Writing
American Indian	487	494	474
Asian	510	578	512
African American	434	429	428
Mexican American	454	465	452
Puerto Rican	459	456	448
Other Hispanic	458	463	450
White	527	536	519
Other	494	513	493
Race unknown	487	506	482
All	503	518	497

Also consistent with past years, men outscored women — 505 to 502 on critical reading and 536 to 502 on mathematics. But women had higher mean scores — 502 to 491 — on the new writing test. In some areas, subgroups of women outperformed men. For example, black women outscored black men on critical reading.

In most recent years, the total number of people taking the SAT has generally increased, but that was not the case this year, when there was a slight drop — of just under 10,000 students — out of a total of more than 1.4 million students who took the exam. During the press briefing, College Board officials insisted that the decline was not significant and that data indicated that it was across the board and not linked to any demographic group.

College Board data, however, show that the share of SAT test takers from the lowest income groups declined this year, while the share from the highest income group increased.

SAT Population by Income Level, 2005-6

Income Level	% of Test Takers 2005	% of Test Takers 2006
Less Than $10,000	5	4
$10,000-$20,000	8	7
$20,000-$30,000	9	8
$30,000-$40,000	10	10
$40,000-$50,000	9	8
$50,000-$60,000	9	9
$60,000-$70,000	8	8
$70,000-$80,000	8	9
$80,000-$100,000	13	13
More than $100,000	21	24

The shares of test takers for those in the three categories up to $30,000 as well as those in $40,000-$50,000 declined this year, while there were increases for $70,000-$80,000 and those from families with incomes over $100,000.

The ACT — which has been seeing increases in test takers, many of them people who also take the SAT — uses slightly different income levels for its demographic comparisons. But ACT data show that there have not been notable changes among the share of test takers from various income groups, and that a much smaller share of students (10 percent) comes from families with incomes greater than $10,000.

Camara, in an interview after the briefing, acknowledged that the numbers are striking enough to suggest that the decline in test takers may be primarily from certain economic groups, but he said more study would be needed. He said that many students incorrectly report family income so he is skeptical of reading too much into answers on that question. Camara said he pays more attention to the question about parents’ educational background.

But there too, the College Board’s data suggest that the disappearing test takers are not coming from a broad cross section of the population. From 2005 to 2006, the percentage of SAT test takers whose parents’ highest degree is a high school diploma or an associate degree declined while the percentage of SAT test takers whose parents have bachelor’s or graduate degrees increased.

Camara said it was important to figure out what these drops mean because of the need to avoid having “students fall through the cracks.”

One reason that economic demographics are important to the College Board is that the SAT mean scores follow a consistent pattern in which increases in family income correlate directly with scores.

SAT Mean Scores by Income Level, 2006

Income Level	Critical Reading	Mathematics	Writing
Less Than $10,000	429	457	427
$10,000-$20,000	445	465	440
$20,000-$30,000	462	474	454
$30,000-$40,000	478	488	470
$40,000-$50,000	493	501	483
$50,000-$60,000	500	509	490
$60,000-$70,000	505	515	496
$70,000-$80,000	511	521	502
$80,000-$100,000	523	534	514
More than $100,000	549	564	543

This year was the first with the writing test, with the most interest in the essay portion of that test. Essays are graded by two readers, providing scores on a scale of 1 to 6 for a maximum of 12. The College Board released the following information about the first year of essays and their scoring, based on overall averages and an in-depth study the board conducted of a sample of essays:

• Most essays received very similar scores from the two readers, with 97 percent of essays having scores that differed by one point or less. (Those with larger gaps had third readers.)
• The average essay score was 7.2 out of 12, with women leading men 7.4 to 7.1.
• Longer essays on average received slightly higher scores.
• Half of the essays used first person, but average scores were slightly higher for those who did not use the first person.
• Only 8 percent of essays used the standard five-paragraph essay structure.

Question
What U.S. city is the binge drinkinest?
Hint: sometimes called "The Nation's Watering Hole"

"Milwaukee tops U.S. cities for drinking," PhysOrg, August 25, 2006 --- http://physorg.com/news75739577.html

Milwaukee, sometimes called "The Nation's Watering Hole," has been named the hardest-drinking city in America in a new Forbes.com ranking.

"America's Drunkest Cities" evaluated 35 candidate cities based on availability of data and geographic diversity, Forbes said, with the candidates chosen from among the largest metropolitan areas in the continental United States.

The study ranked each city on the basis of state laws, number of drinkers, number of heavy drinkers, number of binge drinkers and alcoholism. Each area was assigned a score based on its ranking in each category and Milwaukee came out No. 1.

Data from the Centers for Disease Control and Prevention's Behavioral Risk Factor Surveillance System Survey 2004 show more than 70 percent of adult Milwaukeeans reported they had had at least one alcoholic drink within 30 days. Twenty-two percent said they had engaged in binge drinking -- having five or more drinks on one occasion -- and 7.5 percent were reported as heavy drinkers.

As we approach another academic year, I want to remind professors of the following fraud that is somewhat commonplace in academe, fraud exacerbated by the need to pad annual performance reports and resumes.

Academic Conferences that Rip Off Colleges ---
http://www.trinity.edu/rjensen/FraudReporting.htm#AcademicConferences

I love it when jokesters intentionally submit utter nonsense, albeit clever nonsense, that passes through the pretense of having acceptance/rejection filters by some conference sponsors who in reality accept virtually every submission.

I discovered that some of my best friends go to these rip-off conferences and pay enormous registration fees using travel funds of their respective universities. Sadly, these friends are among the most popular teachers in their universities each year, teaching professors who produce virtually nothing in the way of research. They present scholarship, not research, at these phony "research" conferences and sometimes publish in the sponsor's phony journals. That way they get credit for "research" publications and "research" presentations on their resumes. Typically they show up for an hour or so to make a half-hearted presentation to an audience of three other presenters, all of whom disappear to other parts of Europe or elsewhere as soon a possible. This way they have a reimbursed vacation and two new modules on a resume (one for the presentation and one for the publication in a conference proceeding). The problem is that Donald Duck could easily be accepted for a presentation accepted for these phony conferences as long as Donald Duck pays the huge registration fee.

Even when the conferences meet, they may be fraudulent.  Generally these conferences are held in places where professors like to travel in Europe, South America, Latin America, Las Vegas, Canada, the Virgin Islands, or other nice locations for vacations that accompany a trip to a conference paid for by a professor's employer.  The professor gets credit for a presentation and possibly a publication in the conference proceedings. 

Here are some warning signs for a fraudulent conference:

1. Even though there is a high registration fee, there are no conference-hosted receptions, luncheons, or plenary sessions.  The conference organizer is never called to account for the high registration fee.  The organizer may allude to the cost of meeting rooms in a hotel, but often the meeting rooms are free as long as the organizer can guarantee a minimum number of guest who will pay for registered rooms in the hotel.
    

2. All or nearly all submissions are accepted for presentation.
    

3. The only participants in most presentation audiences are generally other presenters assigned to make a presentation in the same time slot.  There is virtually no non-participating audience.  Hence only a few people are in the room and each of them take turns making a presentation.  Most are looking at their watches and hoping to get out of the room as soon as possible.
    

4. Presenters present their paper and then disappear for the rest of the conference.  There is virtually no interaction among all conference presenters.
    

5. The papers presented are often journal rejects that are cycled conference after conference if the professor can find a conference that will accept anything submitted on paper.  Check the dates on the references listed for each paper.  Chances are the papers have few if any references from the current decade.
    

6. These conferences are almost always held in popular tourist locations and are often scheduled between semesters for the convenience of adding vacation time to the trip.  They are especially popular in the summer.

August 31, 2006 reply from Bob Jensen to a professor who proposed rating conferences.

Hi XXXXX,

Publishing ratings of conferences will be almost impossible due to endless debates that will arise over defining criteria.

I wish you luck if you carry through with this effort, but I think that it will be very difficult to shut down fraud conferences. Organizers of fraud conferences are very good at their craft, and the professors who attend them are desperate for new lines on dusty old resumes. The professors who attend are often very good teachers frustrated with blank spaces each year by blank spaces for evidence of research in their performance reports.

Hence, the "teachers" who attend fraud conferences will continue to do so even if you take the time and trouble to warn them. These professors want the lines on a resume and an expense-paid vacation in a terrific tourist locale. Interestingly, many of these professors justify this by truly believing that they are badly underpaid and are fully justified for reimbursed travel for R&R if nothing else.

Since you are only listing the good conferences, college deans and administrators will not necessarily be forewarned of the bad conferences since you can't be expected to list 100% of the good conferences in all fields of business, finance, and economics. Most fraud conferences in our discipline are very generic and cover all fields of business and economics. It will be very difficult to track over 1,000 conferences (most legitimate) across such a wide path.

I think the best we can do is plead with the academy, and possibly our reimbursing colleges, to demand accountability of registration fees for conferences. They should be treated a bit like charitable organizations where conference organizers must give an expense accounting and disclose how much of the conference revenues go to personal profit and "administrative expense."

Bob Jensen

Question
What are the two most heavily endowed university research chairs in the United States?

"BMW Professors," by Scott Jaschik, Inside Higher Ed, August 25, 2006 --- http://www.insidehighered.com/news/2006/08/25/clemson

Clemson University’s two new BMW endowed chairs are among the most well endowed chairs there are. The auto giant — which while based in Germany has a major plant in South Carolina — contributed $5 million for each one. The state matched those dollars, creating endowments for each chair to support a professor’s salary, lab, graduate students and more.

The chairs are part of BMW’s support for the Clemson University International Center for Automotive Research, which includes research park facilities for the university and companies and a new graduate program in automotive engineering, which enrolled its first Ph.D. students this month. An article in the International Herald Tribune Thursday used the Clemson center as an example of the increasingly close connections universities are making with businesses.

Clemson officials objected to much of the article, saying that it overstated BMW’s influence and ignored Clemson’s land grant role of promoting economic development. But the university did not dispute a brief mention in the piece to a practice that was news to the university’s Faculty Senate and is unusual in academe: letting donors of endowed chairs interview all finalists for the position.

The university portrayed the practice as perfectly normal, but many others see it as dangerous to institutional independence and academic freedom.

Chris Przirembel, Clemson’s vice president for research and economic development, said that the new automotive center, on 250 acres in Greenville, is based on a new model of university-business cooperation. “The fundamental concept that we are trying to develop is to have a research campus that is anchored by an academic program and research facility and then have land surrounding that academic anchor that will attract private sector R&D and testing facilities.” He said automotive research was important because South Carolina has attracted a number of such businesses, making the industry vital to the state.

As for the endowed chairs, Przirembel said that there was nothing inappropriate about requiring finalists to be interviewed by BMW because the final decisions were made by a university search committee. “The company does not have the opportunity to say Yes or No” on candidates, he added, just to conduct an interview and share its views with the search committee.

While the BMW chairs may not be identical to more traditional chairs, which Przirembel termed “philanthropic” chairs, Clemson has let other donors of chairs have the right to interview finalists, he said. Przirembel repeatedly expressed surprise that anyone would find it unusual that BMW got the right to hold interviews with all finalists for the chairs it endowed. He said that the chair of the search committee would verify that there was no inappropriate influence by BMW, but that chair could not be reached.

Thomas R. Kurfess, the first person hired as a BMW professor, came from the Georgia Institute of Technology and said he wasn’t bothered by the interview with the company. “This is a different model,” he said. Kurfess noted that many federal agencies want to back university research that is linked to economic development and support for industry. “It’s nice to be able to show that it’s not just the name behind the chair,” he said, but that you have “real ties to industry.”

M. Elizabeth Kunkel, the chair of Clemson’s Faculty Senate, said she was surprised that any corporate donor would have the right to interview candidates for an endowed chair. Kunkel, a professor of food science, said that faculty members were generally on board with the new automotive research program, and that industry-sponsored research is hardly unusual or controversial at the university.

Kunkel said that many parts of a faculty search process are wide open — anyone could go to a lecture by a job candidate, for example, she said. And it wouldn’t bother her if BMW showed up for such a lecture. But she said she was not aware that all finalists had to be interviewed by BMW for the endowed chairs. If true, she said, “it would cause me some concern.”

Rae Goldsmith, vice president of the Council for Advancement and Support of Education, said that she had heard of colleges allowing donors to interview endowed chair candidates “as a courtesy.” Goldsmith said that she did not have data on how widespread the practice is, but said it was not the norm. Typically, donors of endowed chairs do select the subject matter of the chair (mechanical engineering, French literature or whatever) but not the person who will hold the chair.

“The donor can’t have any say over the final decision,” Goldsmith said. Even if the university retains that control, she added, requiring an interview with a donor “raises perception issues” such that colleges “should be very careful.”

Added Goldsmith: “There can be real risks in perception among the candidates and the members of the search committee. Is there implied control of the choice by the donor because of the capacity to make future gifts?”

Roger Bowen, general secretary of the American Association of University Professors, called the Clemson arrangement with BMW “very worrisome and inappropriate” in that it “adds another dimension to the corporatization of the academy: letting corporate donors influence what should be a purely academic decision.” Such a policy, he said, “is not a good idea unless you are indifferent to academic integrity.”

Told that Clemson administrators described the arrangement as normal, Bowen said, “This approach may work in Bavaria, but it should not be condoned here. Donors may designate the academic discipline they wish to fund, but the decision on who to hire should be left to a search committee composed of faculty members.”

"BMW’s Custom-Made University," by Lynnley Browning, The New York Times, August 30, 2006 --- http://www.nytimes.com/2006/08/29/business/worldbusiness/29bmw.html

In return for the largest cash donation ever received by the school, Clemson gave the company some unusual privileges, including a hand in developing a course of study. Clemson’s president drives a silver BMW X5 sport utility vehicle, compliments of BMW, whose only North American plant is 50 miles away.

At Clemson’s urging, BMW in large part created the curriculum for an automotive graduate engineering school. The company also drew up profiles of its ideal students; it gave Clemson, a state-supported university, a list of professors and specialists to interview, and even had approval rights over the school’s architectural look.

With its first students to be in class this fall, the project, known as the Clemson University International Center for Automotive Research, is a particularly rich example of cooperation between a multinational corporation and a university. Several automotive suppliers, including Michelin, the tire company, and the Timken Company, a maker of bearings, have also contributed financing to the project, in part by endowing professorships at the new graduate school.

But BMW is the lead player. Details about the arrangement between Clemson and BMW have emerged from a lawsuit brought last year by a Florida developer who claims the university had signed a deal with him to start an automotive center.

Continued in article

Does freezing while still alive improve the odds of ultimate revival? (Answer not given in the study below)
An Australian biologist has won approval from health authorities to build the region's first cryonics centre for freezing people when they die in the hope of revival in the future, reports said Sunday.
PhysOrg, August 27, 2006 --- http://physorg.com/news75883023.html

Debunking Conventional Wisdom on Student Borrowing
A report issued Tuesday by the Project on Student Debt finds that conventional wisdom isn’t necessarily correct when it comes to how much students borrow. The project sponsors research that tends to be highly critical of policies that result in high borrowing levels. The report’s theme is that paying attention to debt issues — through generous state aid programs, or rethinking the mix of loans and grants in financial aid packages — can seriously reduce debt levels, even at high tuition institutions.
Scott Jaschik, "Debunking Conventional Wisdom on Debt," Inside Higher Ed, August 30, 2006 --- http://www.insidehighered.com/news/2006/08/30/debt

I always suspected that I only had one memory molecule
"Scientists Find Memory Molecule," PhysOrg, August 27, 2006 --- http://physorg.com/news75883856.html

Earth Tilted to Keep It's Balance?: Drunks have long known about balance tilting maneuvers
Imagine a shift in the Earth so profound that it could force our entire planet to spin on its side after a few million years, tilting it so far that Alaska would sit at the equator.
"Planet Earth may have 'tilted' to keep its balance," PhysOrg, August 25, 2006 --- http://physorg.com/news75725492.html
Jensen Question
Is it too soon to plant palm trees in my New Hampshire lawn?

From The Washington Post on August 29, 2006

Which Web brand had the fastest growth between July 2005 and July 2006?

A. CNN
B. Partypoker.com
C. HSBC
D. Wikipedia

Can you hear the grumble all the way from Redmond?

"Google Releasing Package for the Office," PhysOrg, August 28, 2006 --- http://physorg.com/news75965059.html

Gmail is headed for the office - officially. Starting Monday, Google will offer Google Apps for Your Domain, a free package of programs for businesses, universities and other organizations.

Workers will be able to send e-mail with Gmail, Google's two-year-old Web-based mail service, but messages will carry their company's domain name. The package also includes Google's online calendar, instant-messaging service, and Page Creator, a Web page builder.

Information technology administrators can make some customizations. "But really, the applications are exactly what you'd experience as a consumer if you use them," said Dave Girouard, VP and general manager of Google Enterprise, a division of Google Inc.

The free edition of Apps for Your Domain is, like Google's main site, supported with ads. By the end of the year, the company also plans to launch a paid version that will offer more storage, some degree of support, and likely, no ads. A price for this edition hasn't been set.

Providing e-mail and other applications for businesses moves Google closer into what has traditionally been turf occupied by Microsoft Corp. Earlier this year, Google released a program that builds simple Excel-type spreadsheets but lets users access them on the Web.

Now, with e-mail, Google appears to be targeting Microsoft's Outlook and Exchange franchises - although the company plays down any such views.

"We don't see our products as an either/or thing right now," Girouard said. "Smaller businesses, it may be the case where this is the preferred e-mail and messaging solution. In larger companies, it may well be used alongside."

In February, Google launched a beta test with San Jose City College in California; by the end of the beta, the company said hundreds of universities had signed up, along with one-person businesses, medical and legal practices, even some companies with tens and hundreds of employees.

For all of Google's side projects - spreadsheets, shopping, maps - its revenue is almost entirely based on its search advertising.

While Girouard said the market for enterprise e-mail and other products is very large, he declined to speculate on the financial implications. "We tend to focus first on user adoption," he said. "The business model follows pretty successfully."

For businesses, Google hopes the suite of applications will relieve some of the cost and annoyance of administering e-mail servers and the like - and hopefully, fewer calls to internal help centers.

After AOL's recent data privacy debacle, businesses may have qualms turning their employees' data over to Google.

"Third-party hosting providers aren't necessarily any more risky than their own companies," said Girouard. "Google has hosted applications and information for individuals, and is starting to do it for organizations. We do have a very good track record," he said.

"China's Ministry of Commerce Releases Trade Plan," International Accountant, August 25, 2006 --- http://www.aia.org.uk/InternationalAccountant.htm?News/IAfullStory.php?id=50974

The Ministry of Commerce recently issued the 11th Five-Year Plan (2006-10) on China's trade development, aimed at promoting foreign trade.

According to the plan, during the five-year period the annual average growth rate of sales revenue for both consumer goods and production is forecast at about 11 percent.

The annual average growth rate of sales for retail, wholesale and the catering industry is estimated at about 9 percent, while sales revenue from retail, wholesale and the catering sector is expected to account for about 10 percent of the country's gross domestic product.

By 2010, China's foreign trade sector is expected to employ 71 million people, accounting for 5.2 percent of the nation's population.

The annual average growth rate of local chain stores is expected to reach 21 percent, while the proportion of their sales compared to consumer goods is expected to be 25 percent.

The report also predicts that about 15 to 20 local trade companies will become national and international influential brands by the end of 2010, while a slew of regional giants are expected to emerge.

Students Who Attempt to Murder Their Professors
Police have charged a former graduate student, who was forced to leave a program at Loyola College in Maryland, of setting fire to a former professor’s home Thursday night, The York Daily Record reported. The professor and his family were asleep at the time, but escaped unharmed. While attempts by disgruntled students and former students to kill professors are rare, they do happen, and typically the murderers are male.
Inside Higher Ed, August 28, 2006

Richard Sansing sent a link reminding of us an even worse murder scene in 1991 at the University of Iowa --- http://www.uiowa.edu/~fyi/issues/issues2001_v39/10192001/november.html

August 28, 2006 reply from MacEwan Wright, Victoria University [Mac.Wright@VU.EDU.AU]

It doesn't have to be USA or a PhD student. An undergraduate honours student attending his last tutorial at Monash University in Melbourne shot up his fellow students in the tutorial room, late October, 2002 killing two and wounding four, and the Professor, who then disarmed him. He is now in a Psychiatric hospital, and will probably end his days there.

Kind regards,
Mac Wright

August 29, 2006 reply from Roger Collins [rcollins@TRU.CA]

And not just students either...

I left Concordia University in Montreal for my present position in July 1992. Just over a month later an engineering prof at Concordia walked up to the 9th floor and shot four other profs dead - a secretary was wounded but survived.

See http://en.wikipedia.org/wiki/Concordia _University under Fabrikant Affair

What the Wikipedia doesn't say is that Fabrikant had a history of making threats which the University had not (in retrospect) dealt with effectively; also, he had accused others of plagiarising his work. A report on the incident was scathing in its criticism of senior University administrators.

Roger

Roger Collins
TRU School of Business

 

Common Investment Mistakes

From Jim Mahar's blog on August 24, 2006 --- http://financeprofessorblog.blogspot.com/

Could almost be called "Behavioral Finance in Practice" by the Wall Street Journal's Jonathan Clements from MoneyWeb:

Some look-ins:

• ""People tend to buy the investments they wish they had bought last year," says Terrance Odean, a finance professor at the University of California at Berkeley. "Partly, people simply extrapolate the past trend. But also, people feel that the markets are more predictable than they really are."

If we were rational, we would grow leery as an investment rises in price, because we are now paying more for the same investment. Instead, however, we are drawn to hot stocks and hot mutual funds, because we assume that the future will look like the immediate past."
 

• "Rather than accepting that market conditions have changed, home sellers today are often fixated on the price they paid or the price they could have gotten at the market peak. Indeed, whether it is real estate or stocks, folks like to "get even, then get out."
  
  This, of course, is partly about making money. But it is also about avoiding regret"

• "According to the Commerce Department's Bureau of Economic Analysis, the U.S. savings rate turned negative over the three months through June 2005 and it has remained that way ever since.
  
  Partly, this reflects our struggle with self-control. Instead of rationally socking away money on a regular basis, we prefer to spend today and put off saving until tomorrow.
  
  I suspect the negative savings rate, however, is also driven by our overconfidence"

As always Clements offers some good advice in a readable fashion.

Just Another in a Long Line of Prudential Rip-Offs
Prudential to Cough Up $600 million to settle charges of Improper Mutual Fund Trading

"Brokerage unit admits criminal wrongdoing, DOJ says," by Alistair Barr & Robert Schroeder, MarketWatch, August 29, 2006 --- http://www.the-catbird-seat.net/Prudential.htm

Prudential Financial Inc.'s brokerage unit agreed on Monday to pay $600 million to settle charges that former employees defrauded mutual fund investors by helping clients rapidly trade funds.

The payment -- the largest market-timing settlement involving a single firm -- ends civil and criminal probes and allegations by the Department of Justice, the Securities and Exchange Commission and several other regulators including New York Attorney General Eliot Spitzer.

Prudential Equity Group, a subsidiary of Prudential Financial (PRU) admitted criminal wrongdoing as part of its agreement with the Justice Department. Prudential Equity Group was formerly known as Prudential Securities.

Prudential will pay $270 million to victims of the fraud, a $300 million criminal penalty to the U.S. government, a $25 million fine to the U.S. Postal Inspection Service and a $5 million civil penalty to the state of Massachusetts, according to the Justice Department.

"Prudential to Pay Fine in Trading," by Landen Thomas Jr., The New York Times, August 29, 2006 --- Click Here

Prudential Financial, the life insurance company, agreed yesterday to pay  with federal and state regulators that one of its units engaged in inappropriate mutual fund trading.

The payment, the second-largest levied against a financial institution over the practice, may bring to a close a three-year investigation into the improper trading of mutual funds that has ensnared some of the largest names on Wall Street and the mutual fund industry.

The settlement with the Justice Department, which covers trades totaling more than $2.5 billion made from 1999 to 2000, is also the first in the market timing scandal in which an institution has admitted to criminal wrongdoing.

Such a concession by Prudential, part of a deferred prosecution agreement that will last five years, underscores the extent to which the improper trading practices were not only widespread at Prudential Securities, but also condoned by its top executives, despite repeated complaints from the mutual fund companies.

Bob Jensen's "Rotten to the Core" threads are at http://www.trinity.edu/rjensen/FraudRotten.htm

Wall Street Remains Rotten to the Core
The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem. It is against the law to trade on inside information about an imminent merger, of course. But an analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40 percent were possible.
Gretchen Morgenson, "Whispers of Mergers Set Off Suspicious Trading," The New York Times, August 27, 2006 ---
Click Here

Bob Jensen's "Rotten to the Core" threads are at http://www.trinity.edu/rjensen/FraudRotten.htm

The Investment Banker Who Got Away to Start Another Day
The (Frank Quattrone) deal marks the end of a sorry chapter in American business history. While high-profile white-collar crime persists, the dramatic criminal cases that were launched just after the dotcom economy fizzled are now mostly completed. The icons of massive, turn-of-the-century corporate fraud--Ken Lay and Jeff Skilling of Enron, Bernie Ebbers of WorldCom, Dennis Kozlowski and Mark Swartz of Tyco--are convicted and, in Lay's case, dead. Even Martha Stewart has served time. And many, if not most, of the cases the feds brought against smaller fish--to help assuage a share-owning public that had been scammed by phony accounting and overhyped stock--are resolved. The government claims that since mid-2002 it has won more than 1,000 corporate-fraud convictions, including those of more than 100 CEOs and presidents.
Barbara Kiviat, "The One Who Got Away:  The decision to abandon a high-profile case against a dotcom poster boy marks the end of a sorry era,"  Time Magazine, August 27, 2006 --- Click Here

Mr. Quattrone's rise shows how some who were on the inside during the tech boom piled up huge fortunes in part through special access, unavailable to other investors, to the machinery of that era's frenzied stock market. But now he faces a crunch. The steep yearlong downturn in tech stocks has hurt the profits of his technology group. And in recent weeks, the group he heads has come under scrutiny in connection with a federal probe into whether some investment-bank employees awarded shares of hot IPOs in exchange for unusually high commissions, and whether those commissions amounted to kickbacks.
Susan Pulliam and Randall Smith, The Wall Street Journal, May 3, 2003 --- http://online.wsj.com/article/0,,SB988836228231147483,00.html?mod=2_1040_1

Bob Jensen's threads on investment banking scandals are at http://www.trinity.edu/rjensen/FraudRotten.htm#InvestmentBanking

It appears that thousands of CEOs were allowed by their boards to bet on yesterday's horse race
In theory, directors are supposed to help keep wayward practices like options backdating in check at most companies, but at Mercury it was the directors themselves — who received a final seal of approval from the company’s compensation committee — who kept the backdating ball rolling. Now, as federal investigations of possible regulatory and accounting violations related to options backdating have expanded to include more than 80 companies. Mercury’s pay practices — and the actions of the three outside directors on its compensation and audit committees — have come under scrutiny. In late June, the Securities and Exchange Commission advised the three men that it was considering filing a civil complaint against them in connection with dozens of manipulated options grants.
Eric Dash, "Who Signed Off on Those Options?" The New York Times, August 27, 2006 --- http://www.nytimes.com/2006/08/27/business/yourmoney/27mercury.html

Bob Jensen's threads on executive options compensation scandals are at http://www.trinity.edu/rjensen/theory/sfas123/jensen01.htm

Macalester College Math Problem of the Week --- http://mathforum.org/wagon/

Stan Wagon, a professor in the Mathematics and Computer Science Department at Macalester College, poses a mathematics problem to his students every week. The Problem of the Week tradition was started in 1968 by the late Professor Joe Konhauser. Professor Wagon took over in 1993. Since the problems are meant to be accessible to first-year college students, very little background is needed to understand or solve them.

These problems are also sent out by electronic mail. To join the mailing list, send a message to:

majordomo@mathforum.org

with just the words

subscribe macpow

in the body.

In addition to the Problem of the Week, Professor Wagon also organizes the annual Konhauser Problemfest.

Student votes are largely symbolic on campus
I'm a bit surprised this vote to fire Ward Churchill was even taken.
The University of Colorado student union voted Thursday in support of firing tenured ethnic studies professor Ward Churchill.
Anna Uhls, "CU student union votes to fire Churchill," County News, August 25, 2006 --- Click Here

Bob Jensen's threads on the saga of Ward Churchill are at http://www.trinity.edu/rjensen/HypocrisyChurchill.htm
 

SUVs and trucks have relatively high fuel efficiency if they have diesel engines
 "Early in 2007 Ford will begin selling diesel versions of its F-250 and F-350 pick up trucks that will use the new cleaner diesel fuel,according to the Detroit News. Ford also announced a larger diesel engine for its Super Duty line. The optional 6.4-liter Power Stroke diesel engine but will have be more fuel efficient than its predecessor . . . We'd be saving lots of oil if we did like the Europeans and drove as many of the more fuel efficient diesels as gasoline vehicles. I'd also like to see some diesel SUVs that could get closer to 30 mpg.
"Ford Picks Up Diesel Pace," Wired News, August 23, 2006 --- http://blog.wired.com/cars/#1543816

"From India business schools to top of world's boardrooms," International Herald Tribune, August 24, 2006 --- http://www.iht.com/articles/2006/08/23/bloomberg/bxindia.php

Two Irishmen Claim They've Invented Perpetual Motion and Unlimited Free Energy
In Steorn's theory, fixed magnets could act upon a moving magnet in such a way as to make it a virtual perpetual motion generator. In an electrical appliance - a computer, kettle, mobile phone or toy - that would provide all the power for its lifetime. Of course, free-energy cars, power plants and water-pumping systems could follow. A better world indeed. So, as they prepare to demonstrate this wonder of science to me at their modest offices near the Liffey, I feel all the excitement of Christmas Day. There is a test rig with wheels and cogs and four magnets meticulously aligned so as to create the maximum tension between their fields and one other magnet fixed to a point opposite. A motor rotates the wheel bearing the magnets and a computer takes 28,000 measurements a second. The magnets, naturally, act upon one another. And when it is all over, the computer tells us that almost three times the amount of energy has come out of the system as went in. In fact, this piece of equipment is 285% efficient. That's a lot of "free energy" and, supposedly, a slap in the face for one of physics' most basic laws, the principle of conservation of energy: in an isolated system (the planet, say), energy can be neither created nor destroyed; it can only be converted from one form into another.
"These men think they're about to change the world," Guardian, August 25, 2006 --- http://www.guardian.co.uk/science/story/0,,1858134,00.html
Jensen Comment
John Kenneth Galbraith once said that the Irish should stick to poetry.

From the Scout Report on August 18, 2006

Boston African American Project http://www.bostonafricanamericana.org/ 

Several years ago, the Boston Athenaeum received a generous grant from the Institute of Museum and Library Services to create an online digital archive of materials related to the lives of African Americans in the 18th, 19th, and early 20th centuries. Drawing on their own holdings, along with those of The Massachusetts Historical Society and The Bostonian Society, they proved up to the task, and this lovely website is proof of their substantial labors. First-time visitors will want to look at the project overview description to get a sense of the materials that are available here, and after that, they should dive right into the "Collection at a Glance" area. Here they can look over abolition-era broadsheets, political cartoons, illustrations, and some rather evocative portraits of urban life.

---

U.S. Environmental Protection Agency: Ecosystems Research Division --- http://www.epa.gov/AthensR/ 

Located in Athens, Georgia, the U.S. Environment Protection Agency's Ecosystems Research Division performs research on "approaches to multimedia modeling for landscape, nutrient and chemical stressors of ecosystems." While all of this may sound tremendously complicated, their site does a great job of explaining their work in jargon-free language, along with providing access to their scholarly and research-minded endeavors. On their homepage, visitors can view their latest press releases, take a look at some general EPA resources (such as a chemical contamination calculator), and information about their public seminars. Their "Highlighted Research" area is the one that will be of most interest to the general public, as it contains information on their latest work on such matters as oil spills, gasoline consumption, and brownfields reclamation efforts around the country.

---

Playing House: Homemaking for Children http://digicoll.library.wisc.edu/History/subcollections/ChildHomeEcAbout.shtml 

The world of American domesticity in the late 19th and early 20th century was one that placed a premium on oversight of many aspects of the home. While many instructional devices (such as books and manuals) were created to instruct women in the fine arts of cookery, laundry, and other areas, there were equivalent materials created for young girls. As part of their ongoing work, the University of Wisconsin Digital Collections project has created this digital collection that brings together several of these manuals from this period. All told, the collection contains five such works, including Elizabeth Hale Gilman's "Things Girls Like To Do" from 1917 and her oft- cited work from 1916, "Housekeeping". Each work can be viewed in its entirety, and visitors can also perform searches across the entire collection.

---

Hotel & Motel Management: Human Resources/Training http://www.hotelmotel.com/hotelmotel/article/articleList.jsp?categoryId=1235 

The world of hotel and motel management is one that has its peaks and valleys, much like any other part of the tourism industry. A number of print publications have been expanding their online offerings as of late, and Hotel & Motel Management is definitely part of this trend. Recently, they began to place some of their archived articles online, including those that deal with on-site dining operations, pest control, and transportation. Another section that is most intriguing is the area of the site that contains the well-written and timely articles on human resources and training in the industry. With pieces on the benefits of training front desk staff and taking advantage of a diverse staff, this resource could be well used by instructors in a hospitality classroom setting or for those seeking professional development updates.

---

Mozilla Firefox 1.5.0.6 --- http://www.mozilla.com/firefox/ 

Users who may have never tried Mozilla Firefox may want to give this latest version a go, and those who already know the browser well will find several noteworthy new features here. Along with features designed for sophisticated web-browsing, this version of Firefox allows users to reorder tabs by dragging and dropping them. Additionally, cleaning up one's surfing history has gotten even simpler. Of course, users will still find such popular features embedded in the application, including RSS feeds and a download manager. This version of Firefox is compatible with computers running Windows 95, 98, Me, NT, 2000, and XP.

SharpReader 0.9.7.0 ---  http://www.sharpreader.net/ 

Many savvy computer users use RSS aggregators on a regular basis, and SharpReader may be yet another such device that is worth examining. Along with performing the normal wrangling task of keeping various feeds in order, SharpReader also detects and shows connected items together in a threaded fashion. Finally, the application can also group subscribed feeds into custom categories. This version is compatible with computers running Windows 98, Me, NT, 2000, and XP.

Links for Immigration Studies from the Scout Report on August 18, 2006

Report reveals immigrants coming to live in a wider range of locales throughout the United States Immigrants now head all over the U.S. --- http://www.contracostatimes.com/mld/cctimes/news/15276948.htm

Area immigrants top 1 million--- Click Here

More foreign-born calling Indy home ---
http://www.indystar.com/apps/pbcs.dll/article?AID=/20060815/NEWS01/608150456/-1/ZONES04

NPR: Pennsylvania Town Takes Stand Against Immigrants ---
http://www.npr.org/templates/story/story.php?storyId=5649838

Census Bureau Data Show Key Population Changes Across Nation --- http://www.census.gov/

Pew Hispanic Center  --- http://pewhispanic.org/

Forum: How has the influx of immigrants to the U.S. changed the political and cultural landscape?http://news.blogs.nytimes.com/?p=22#respond

From the Mayor's Desk --- http://www.hazletoncity.org/illegal_immigration_petition.htm

Where do you look first when things are stolen in New Orleans?
In its mostly abandoned Lower 9th Ward, New Orleans is building a memorial to Hurricane Katrina victims. On Aug. 16, more than $100,000 worth of construction equipment was delivered to the site; by the morning of the 19th, it was stolen from under the noses of National Guardsmen assigned to protect it. Authorities haven't a clue who stole the machinery or where they took it . . . New Orleans is scheduled to dedicate its Katrina memorial today. If it isn't soon destroyed or stolen, it will stand as a monument to the madness of people who believe if they throw enough money at America's Atlantis, they can defeat the merciless forces of geology, meteorology and time.
Editorial, Republican American, August 27, 2006 --- http://www.rep-am.com/story.php?id=11751
Jensen Comment
When something gets stolen in New Orleans the first place to look is in the police department. I think some "authorities" have a clue.

We're not talking little kids here when we read that "kids" embarrass their parents on blogs
"Many of them don't think they are committing public acts by posting a blog, but the power of search is that it makes it pretty darn easy to find," said Lee Rainey, founding director of Pew. Parents and increasingly school systems are warning children about the implications of posting things on MySpace, for example, he said. But parents are only starting to become aware of their own vulnerability, he said. "Things that used to be inside familiars or within a small audience now have a global audience."
Yuki Noguchi, "Kids Say the Darndest Things in Their Blogs For Parents, It Can Be Embarrassing," The Washington Post, August 22, 2006 --- Click Here 

Somehow this University of Texas study outcome does not surprise me since I think writing about many things helps me appreciate them more. But negative things that I write about something probably increase my negativism.

"Study shows writing about a romantic relationship may help it last longer," PhysOrg, August 22, 2006 --- http://physorg.com/news75484695.html

Writing about one’s romantic relationship may help it last longer, researchers at The University of Texas at Austin report in this month’s issue of Psychological Science.

In a study titled “How Do I Love Thee? Let Me Count the Words,” Psychology Professor James Pennebaker and graduate student Richard Slatcher analyzed writing samples from 86 couples. One person from each couple was instructed to write for 20 minutes a day for three consecutive days. Volunteers in one group wrote about their daily activities while those in the second group wrote about their deepest thoughts and feelings about the relationship. The participants’ dating partners did not complete any writing task.

The researchers found that 77 percent of volunteers who wrote about their relationship were still dating their partner three months later. In contrast, only 52 percent of people who wrote just about everyday activities stayed with their partner.

The study also showed that those who wrote about their relationship used more words expressing positive emotions such as “happy" and "love" in Instant Message (IM) exchanges with their dating partner during the days following the writing.

“These results demonstrate that people who express more emotion, both in their writing and to their partner, may have the power to improve their relationship’s longevity,” Pennebaker says.

Monitoring IM conversations allowed the researchers to examine the ebb and flow of the participants’ daily conversations in their natural setting, and provided insight into the progression of the relationships after the writing. For example, couples who used more words expressing positive emotions in their IMs after the writing period were more likely to stay together down the road.

Pennebaker and Slatcher believe the connection between writing and improving one’s relationship may extend beyond the realm of dating couples.

“That people may enhance their romantic relationships by simply writing down their thoughts and feelings about those relationships has clear implications,” Pennebaker says. “The use of expressive writing as a tool for relationship enhancement could be applied to those in families, circles of friends and even work groups.”

There's certainly no surprise in this Iowa State University study outcome.
Democratic presidential prospects have targeted the world's largest retailer for its business and employment tactics. Last week, Wal-Mart posted its first profit decline in a decade. But according to an Iowa State University professor who has researched the chain's grocery division, Wal-Mart remains as strong as ever in grocery because of its efficient supply chain management strategies that allows it to offer lower prices to consumers. The retail giant is known for driving down prices throughout an area, and driving out some local competition in the process.
"Wal-Mart can be good news, bad news to communities, ISU researcher says," PhysOrg, August 22, 2006 --- http://physorg.com/news75483161.html
Jensen Comment
And just guess what happened to most New Hampshire Wal-Mart parking spaces when Vermont put the kabash on building of new Wal-Mart stores? Nothing but green license plates as far as the eye can see! And Wal-Mart is building new stores in New Hampshire alongside states like Maine and Massachusetts that did not deliberately put the kabash on new Wal-Mart stores. But guess what? New Hampshire is the only state that did not up the legal minimum wage when all other New England state set minimum wages much higher than the Federal requirement.

"More Than Ivy in U.S. News’ College Rankings," AccountingWeb, August 22, 2006 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=102486

Breaking a three year tie with Harvard, Princeton ranked first among National Universities in U.S. News and World Report’s annual guide “America’s Best Colleges”. It is the seventh straight year Princeton had been at least tied for the top ranking. National Universities are only one of the four categories of colleges and universities ranked by the guide.

College presidents pay close attention to the annual rankings but question how much they actually say about the quality of education at any institution. Betsy Muhlenfeld, president of Sweet Briar College, a liberal arts school in Virginia, told the Lynchburg News and Advance that in many ways the rankings miss the point. “It says nothing about whether the college actually delivers or whether student learning is actually taking place.” But, she added, “We want to make sure that the public perception of the college does not fall.”

The comprehensive guide ranks 248 National Universities with undergraduate, masters and doctoral programs, 217 Liberal Arts Colleges, 557 Masters Universities, which have masters’ degree programs and 320 Comprehensive Colleges which grant fewer than 50 percent of their degrees in the liberal arts. The Master’s Universities, Liberal Arts colleges, and Comprehensive Colleges are also given rankings by region.

The model for ranking assigns weighted values to peer assessment, graduation and retention rates, faculty and financial resources, selectivity and alumni giving. The most important ranking, given a weight of 25 percent of the total, is the peer assessment, U.S. News says.

Liberty University’s founder, the Reverend Jerry Falwell, was pleased that the school was included in the ranking this year for the first time. The university in Lynchburg, Virginia, was ranked 105th in the Southern Region among the Master’s universities and is also profiled in U.S. News and World Report. “We have worked for years to build our numbers, to build our finances, to build our athletic programs and to erect our buildings,” he said, according to the News and Advance.

Other schools that were less happy with their ranking included the University of Arkansas, which remained in the third tier of National Universities this year, a category assigned to the lowest ranking quarter of each group, according to a report in the Northwest Arkansas Morning News. The third tier is not numbered. Arkansas has had a low six-year graduation rate, 56 percent, and high acceptance rates, admitting 87 percent of applicants. While faring somewhat better, with a numbered ranking in the first tier, the University of Arizona was tied for 98 with several other schools, hurt this year also by low retention and graduation rates, the Arizona Republic says.

“Overall, private colleges and universities do better on several measures in our ranking model,” U. S. News and Report says, “including student selectivity, graduation and retention rates, and class size.” The top-ranked public university was the University of California at Berkeley.

Graduate programs in business and engineering are ranked separately. The top business schools among the national universities were University of Pennsylvania (Wharton), Massachusetts Institute of Technology (Sloan), University of California – Berkeley (Hass) and the University of Michigan at Ann Arbor. The last two schools are public universities.

All of the top colleges, nationally and regionally, in the Comprehensive Colleges and Master’s Universities categories offer accounting programs, although these programs are not ranked. Villanova University in Pennsylvania, Rollins College in Florida, James Madison University in Virginia, Calvin College in Grand Rapids, Michigan, and Carroll College in Montana are among the highest ranking schools in these categories. Most national universities also offer accounting programs.

Brigham Young University (BYU) was cited for its undergraduate accounting program, which ranked fifth among the unspecified specialty categories, deseretnews reports. BYU also ranked 12th nationally with students and graduates having the lowest debt burden. “This is something we take very seriously at BYU,” spokeswoman Carri Jenkins said. “We even provide a program for our students that that can analyze their financial situation and determine if it is wise for them to go into debt and how much, looking to how much they’ll make when they graduate and the cost of the debt when they graduate.”

BYU ranked 19th on a separate national universities list of “Great Schools, Great Prices,” along with Harvard, Princeton, Yale, MIT, Stanford, Duke and Brown, deseretnews reports. “We are particularly pleased in the company we share on that list,” Jenkins said.

U.S. News sends out an extensive questionnaire each year to all accredited four-year colleges and universities, and schools report their information directly to the publication.

Bob Jensen's threads on the controversies surrounding media rankings of colleges are at http://www.trinity.edu/rjensen/HigherEdControversies.htm#BusinessSchoolRankings

More Ivy at Yahoo: Future Depends on Fundamental Research by Academics

"Lab Test:  Hoping to Overtake Its Rivals, Yahoo Stocks Up on Academics Economists and Search Gurus Fill New Research Team; Data-Rich Fantasy Land Looming Privacy Concerns," by Kevin J. Delaney, The Wall Street Journal, August 25, 2006; Page A1 --- Click Here

Yahoo was blindsided by Google's sophisticated Web search. One of Yahoo's advertising-sales techniques also underperforms its rival's, and when Yahoo said last month that a revamp would be delayed, the company's stock fell 22%, its largest-ever one-day drop. Despite having one of the world's biggest user bases, Yahoo hasn't fully benefited from hot phenomena such as online video and social networking, a service offered by sites such as MySpace.com.

The research push, "has huge consequences for the business if we do things right," says Usama Fayyad, Yahoo's chief data officer.

Central to Yahoo's goal is its ability to record what millions of consumers do every day, and to study how changes to the company's Web services affect their behavior. Internet companies in the past have largely lacked the systems and focus to mine data for research, but now they're viewing it as a key competitive pursuit. For economists, Web operations are data-rich fantasy lands where they can observe in real-time the behavior of millions of consumers in varied marketplaces far more effectively than ever before.

One potential obstacle to collecting and analyzing a vast amount of data is customer privacy, particularly in the wake of concerns stirred up by Time Warner Inc.'s AOL unit earlier this summer. It inadvertently released a slew of information relating to users' search queries.

In addition, tech companies have a mixed record of translating research into profit. Xerox Corp.'s Palo Alto Research Center is widely credited with inventing several key features of modern computing in the 1970s. But it was Apple Computer Inc. and others that capitalized. Google, with such cautionary tales in mind, sprinkles researchers through its product groups, supplementing a small, standalone research unit. Some Yahoo staffers question whether the company's engineers have the time or inclination to implement ideas from the research team.

Continued in article

I hope there's a special place in hell for Bruce D. Hopfengardner

"Ex-officer admits kickbacks in Iraq," Fredericksburg.com, August 26, 2006 ---  http://fredericksburg.com/News/FLS/2006/082006/08262006/216968

A former U.S. Army Reserve officer from Spotsylvania County admitted yesterday that he steered millions of dollars in Iraq-reconstruction contracts in trade for jewelry, computers, cigars and sexual favors.

Bruce D. Hopfengardner, 46, pleaded guilty to conspiracy to commit money laundering and wire fraud.

Hopfengardner served as a special adviser to the U.S.-led occupation, recommending funding for projects on law-enforcement facilities in Iraq.

He admitted conspiring with Philip H. Bloom, a U.S. citizen with businesses in Romania, Robert J. Stein Jr., a former Defense Department contract official, and others to create a corrupt bidding process that included the theft of $2 million in reconstruction money.

Hopfengardner is the first military officer to plead guilty in the conspiracy. Bloom and Stein already have pleaded guilty to charges stemming from the scheme.

Hopfengardner's role was to recommend that the Coalition Provisional Authority fund projects to demolish the Ba'ath Party headquarters, rebuild a police academy and construct various other facilities.

Bloom, who controlled companies in Iraq and Romania, bid on projects using dummy corporations. Stein ensured that one of the firms was awarded the contract, according to court documents.

The businessman allegedly showered Hopfengardner and Stein with cash, cars, premium airline seats, jewelry, alcohol and even sexual favors from women at his Baghdad villa.

"A lieutenant colonel in the U.S. Army today admits to a disturbing abuse of his position, in scheming with others to defraud the government for their own personal and financial gain," Assistant Attorney General Alice S. Fisher said in a statement.

Court papers said Hopfengardner demanded that Bloom pay for a white 2004 GMC Yukon Denali with a sandstone interior. At Hopfengardner's request, Bloom also allegedly paid the air fare for Hopfengardner and his wife to travel from San Francisco to Fort Lauderdale, Fla., while he was on leave in January 2004.

E-mails that prosecutors made public in April show that Bloom told his employees to spare no expense in satisfying the officials who controlled contracts in the CPA's regional office in Hillah, about 50 miles south of Baghdad.

As part of the plea agreement, Hopfengardner surrendered a car, a Harley-Davidson motorcycle, camera equipment, a Breitling watch valued at $5,700 and a computer. He also agreed to forfeit $144,500, prosecutors said.

Bob Jensen's fraud updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Updates from WebMD --- http://www.webmd.com/

Latest Headlines on August 25, 2006

• Asthma Drug Combo Could Be Dangerous
• Enzyme May Help Memory in Alzheimer's
• 1 Honey as Good as Another
• New Stem Cell Method Safe for Embryo
• Berries May Help Keep Brain Sharp
• Morning-After Pill Is Over the Counter
• Overweight Boomers Risk Early Death
• How Roughage Keeps You Regular
• Teen Sex Unsafe Even With Main Lovers
• RSS WebMD Health News

Latest Headlines on August 26, 2006

• Asthma, Allergies Up in Poor Countries
• Guarding Against Gridiron Concussion
• Asthma Risk for Wheezy, Allergic Kids
• Health Week in Review
• Diabetes Prevention: 6 New Guidelines
• Controlling Diabetes: Black-White Gap
• Asthma Drug Combo Could Be Dangerous
• Enzyme May Help Memory in Alzheimer's
• 1 Honey as Good as Another
• RSS WebMD Health News

Latest Headlines on August 29, 2006

• Possible Painkiller Link to Birth Defects
• Long Hours Up High Blood Pressure Risk
• Fog of Alcoholism Clears With Sobriety
• Obesity May Worsen Ovarian Cancer
• Resilience Buoying Katrina Survivors
• 2 Out of 3 Americans Don't Wash Hands (makes shaking hands a questionable form of greeting)
• Asthma, Allergies Up in Poor Countries
• Guarding Against Gridiron Concussion
• Asthma Risk for Wheezy, Allergic Kids
• RSS WebMD Health News

Latest Headlines on August 30, 2006

• 'Just for Teens' Cholesterol Analysis
• Brain's 'God Spot' Hard to Pin Down
• Mississippi Tops State Obesity Ranking
• PSA Predicts Prostate Cancer Survival
• Over 46 Million Lack Health Insurance
• Pomegranate Helps Diabetic Hearts
• Possible Painkiller Link to Birth Defects
• Long Hours Up High Blood Pressure Risk
• Fog of Alcoholism Clears With Sobriety
• RSS WebMD Health News

 

News Flash:  Epilepsy Seizures May Become a Thing of the Past
Researchers at MIT are developing a device that could detect and prevent epileptic seizures before they become debilitating. Epilepsy affects about 50 million people worldwide, and while anticonvulsant medications can reduce the frequency of seizures, the drugs are ineffective for as many as one in three patients. The new treatment builds on an existing treatment for epilepsy, the Cyberonics Inc. vagus nerve stimulator (VNS), which is often used in patients who do not respond to drugs. A defibrillator typically implanted under the patient's collar bone stimulates the left vagus nerve about every five minutes, which has been shown to help reduce the frequency and severity of seizures in many patients.
"Epilepsy breakthrough on horizon," PhysOrg, August 31, 2006 --- http://physorg.com/news76257854.html

News Flash:  Baldness (at least some kinds) May Become a Thing of the Past
In a finding that could help treat an inherited form of baldness, a research team in Britain said Wednesday it has discovered a protein "code" that instructs cells to sprout hair. By sending the code to more cells than usual, the scientists at the University of Manchester in northwest England say they were able to breed mice with more fur -- a feat that could potentially be replicated in humans.
"Scientists in Britain report baldness breakthrough," PhysOrg, August 31, 2006 --- http://physorg.com/news76183228.html

Sunscreens can damage skin, researchers find
Are sunscreens always beneficial, or can they be detrimental to users? A research team led by UC Riverside chemists reports that unless people out in the sun apply sunscreen often, the sunscreen itself can become harmful to the skin. When skin is exposed to sunlight, ultraviolet radiation (UV) is absorbed by skin molecules that then can generate harmful compounds, called reactive oxygen species or ROS, which are highly reactive molecules that can cause "oxidative damage." For example, ROS can react with cellular components like cell walls, lipid membranes, mitochondria and DNA, leading to skin damage and increasing the visible signs of aging.
"Sunscreens can damage skin, researchers find," PhysOrg, August 29, 2006 --- http://physorg.com/news76031408.html

Early warning for schizophrenia found in spinal fluid
There is currently no diagnostic test for schizophrenia, which affects around one in every 100 people. Diagnosis of the condition through clinical interviews and patient observations can be difficult and time-consuming, due to its wide range of symptoms and its similarity to other mental disorders . . . The study, published today in PLoS Medicine, shows that newly diagnosed schizophrenic patients have higher levels of glucose in their brain and spinal fluid than healthy individuals. Scientists hope these findings could be used for early diagnosis and treatment of the condition and could help them to develop more effective drugs.
PhysOrg, August 22, 2006 --- http://physorg.com/news75475660.html

Self-harm 'most pressing health issue for teenage girls
In the survey of more than 6,000 pupils aged 15 and 16, girls were four times more likely to have engaged in self-harm than boys. Three per cent of boys were harming themselves last year, compared with 11 per cent of girls.
Sarah Womack, "Self-harm 'most pressing health issue for teenage girls'," London Telegraph, August 23, 2006 --- Click Here

"Health Tip: Soothe the Itch of Hives:  How to stay comfortable until they go away," HealthDay, August 23, 2006 --- http://www.healthday.com/view.cfm?id=534449

Hives are red, welt-like bumps that appear on the skin as a result of an allergic reaction to a drug, food or other substance. While they should go away without treatment, hives can be very irritating, itchy and even painful.

The National Library of Medicine offers these tips on how to reduce discomfort while waiting for hives to heal:

* An over-the-counter antihistamine will help control itching. Your doctor may also prescribe an antihistamine or give you a shot.

* Dab calamine lotion on the welts. This should help your skin feel cooler, less irritated, and reduce some itching. * Place a cool compress over your skin to soothe pain, itchiness and swelling. Try taking a cool bath if the hives cover your body.

* Don't take a hot bath or shower -- the hot water may only irritate the skin.

* Wear comfortable, loose-fitting clothing.

Question
What do we call many snuff addicts?

Answer
Fatsos!

"Study: Snuff users tend to obesity," PhysOrg, August 25, 2006 --- http://physorg.com/news75739621.html
Jensen Comment
Of course this begs the age-old correlation research question of whether snuff causes obesity or whether obese persons tend to turn to other cravings like snus to reduce their desire to constantly eat. This makes a good example to use in class when explaining cause versus correlation if Yate's stork-birthrate correlation in Denmark example is growing stale.

Question
Study finds tea more healthy than water, but was this a truly independent study?

"Tea seen as healthier than water," PhysOrg, August 25, 2006 --- http://physorg.com/news75646716.html

British researchers say consuming tea is healthier than drinking water not only for hydration but for other benefits. They recommend drinking three or more cups of tea a day, the BBC reports.

The findings by health nutritionist Dr. Carrie Ruxton and colleagues at Kings College London appears in the European Journal of Clinical Nutrition.

The BBC report said the study helps dispel the popular notion tea dehydrates. It said tea not only re-hydrates as well as water, but claimed it also protects against heart disease because of its health-promoting flavonoids, which helps prevent cell damage.

Ruxton said tea replaces fluids and also contains antioxidants.

"Studies on caffeine have found very high doses dehydrate and everyone assumes that caffeine-containing beverages dehydrate. But even if you had a really, really strong cup of tea or coffee, which is quite hard to make, you would still have a net gain of fluid," she said. "Also, a cup of tea contains fluoride, which is good for the teeth."

The BBC report said the Tea Council provided funding for the work, but Ruxton said the study was independent.

Bob Jensen's threads on "Appearance Versus the Reality of Research Independence and Freedom" are at
http://www.trinity.edu/rjensen/HigherEdControversies.htm#ResearchIndependence

From the Scout Report on August 25, 2006

Selections from the Naxi Manuscript Collection http://international.loc.gov/intldl/naxihtml/naxihome.html 

Residing today primarily in the northwestern part of China’s Yunnan province near the Tibetan and Burmese borders, the Naxi people are one of China’s fifty-six ethnic national minorities in the country. Their kingdom flourished for close to a thousand years, and along the way they created a language that used primarily pictographs. Recently, the Library of Congress completed cataloging their tremendous collection of Naxi manuscripts, and since that time, they have also created this online presentation. The materials available here include 185 manuscripts, a 39 foot funerary scroll, and an annotated catalog. Visitors may wish to start by reading the overview of the collection, then continue on to search all of the documents here by subject, keyword, or title. Visitors should not miss the lovely “Warrior riding a white cow” or the fragmentary, yet powerful, “Serpent King”.

---

Doing Business --- http://www.doingbusiness.org/ 

Several years ago, the World Bank became concerned about the business climate and environment in different countries around the world. After a time, they decided to embark on the creation of a database that would provide indicators of the cost of doing business in various countries. With a keen eye towards looking at existing laws and regulations in each country, their team of researchers looked at such topics as starting a business, protecting investors, paying taxes, getting credit, among others. Visitors with an interest in such matters can download their annual reports, view country specific reports (such as “Doing Business in Brazil”), and also take advantage of 155 printable country data profiles. Additionally, visitors can view the study’s complete methodology and also compare economies on various metrics.

---

National Academy of Sciences: InterViews ---
http://www.nasonline.org/site/PageServer?pagename=INTERVIEWS_Main 

The National Academy of Sciences has over 2000 members, and they have all distinguished themselves in one of the many learned fields, ranging from biology to geography. In an attempt to offer the general public insights into the lives and careers of some of their members, they have created the InterViews website. As its name implies, the site consists of “first-person accounts of the lives and work of National Academy of Sciences members.” Each interview is about an hour long, and visitors can view the currently available interviews alphabetically or by subject area. There are a number of revealing moments here, such as Roger Beachy’s recollections of his father’s love of nature and Robert Kirshner’s work on supernovas.

---

Electronic Privacy Information Center  
(Last reviewed in the Scout Report on June 13, 1997)
http://www.epic.org/ 

When the Electronic Privacy Information Center (EPIC) was started in 1994, there were already substantial privacy issues surrounding the collection and use of electronic data at play. Since that time, such issues have grown exponentially in their scope, and EPIC continues to perform valuable research in the area. A good place to start exploring their site is right on the homepage, namely their collection of resources on domestic surveillance. Here visitors can read white papers, view letters from government officials on these programs, and also listen to speeches on the subject. For their own personal protection, visitors may want to look over the practical privacy tools offered here, such as anonymous surfing applications and secure instant messaging. Additionally, the “Policy Issues” section contains helpful resources and news updates on free speech, voting, and a privacy “A to Z” primer.

---

MyTunes RSS 2.2.3 [iTunes] --- http://www.codewave.de/products/mytunesrss/ 

As more and more music listening and storage applications continue to tout their competitive advantages, users are drawn closer to some of them than others. iTunes is a popular choice for some, and this latest application will allow persons using that program to access their iTunes library from any computer connected through a network. Visitors can create RSS feeds in their browser, and of course, just browse and search their libraries as they see fit. This application will work on any system that utilizes iTunes and Java Runtime 1.5.

---

SurveillizCam Lite 1.14 --- http://www.novosun.com/ 

For users with a web cam or video capture card, SurveillezCam 1.14 will be a real find. With this application, users can use their home computer as a way to monitor their home or office while they are away. The application has the ability to detect motion and log surveillance video into AVI as well. Visitors will also be monitored of abnormal motion via a sound alarm or live videos. This version is compatible with computers running Windows 2000 or XP.

---

August 25, 2006 message from Cyndi

Bob,
I just wanted to thank you for your website of the SpaceGirl song. I have 14 year old twin boys and taught them the song when they were 5 but could never find the record or artist. It was a 45 I had in my childhood collection that disappeared. I was floored when I simply typed in some of the lyrics to the song and it brought up your web page on the search engine. After some investigating I found your webpage and I have to compliment you on your layout. So many interesting links and surprises! Keep up the good work. I just wanted to let you know you've put a smile on my family!

Sincerely,
Cyndi

August 26, 2006 reply from Bob Jensen

Hi Cyndi,

Messages like the one above make my life worthwhile.

Thank you for the nice words. I highlight new additions to video, music, photographs, art, and electronic literature in my weekly editions of Tidbits at http://www.trinity.edu/rjensen/TidbitsDirectory.htm 

Bob Jensen

Book Recommendation:  A Sound Like Thunder (if you liked To Kill a Mockingbird)

The reclusive Harper Lee rarely blurbs books, but she has done so now, praising Sonny Brewer's "A Sound Like Thunder" as "memorable," among other things. We would all do well to believe her. The author of "To Kill a Mockingbird" may be taken as an authority on the kind of coming-of-age story that Mr. Brewer has written so well. The setting of "A Sound Like Thunder" is Fairhope, Ala., just across the bay from Mobile. The time is the eve of World War II. The sensitive narrator is the teenage Rover MacNee, whose life, when we meet him, is centered on the water and the commercial culture surrounding it. He is ardent about sailing and about learning to throw a cast net -- there is a certain art to the bay's saltwater fishing. Rove's father is himself a formidable commercial fisherman, stoic and physically imposing. The novel picks up just as he has fallen into a violent stupor of alcoholism, something that puzzles his son and frightens him.
"A SOUND LIKE THUNDER," The Wall Street Journal, August 25, 2006 --- Click Here
 

Behavior Unbecoming of an Auditor

Forwarded on August 25, 2006 by Jagdish S. Gangolly [j.gangolly@ALBANY.EDU]

BEIJING (Reuters) - A 25-year-old auditor in China apparently ate and drank himself to death while he was supposed to be inspecting a government department, a state newspaper said Friday.

Zhang Hongtao went to many banquets organized by a power company in northern China's Hebei province in April, and instead of working did little else but eat, drink, play cards and enjoy massages, the official China Daily said.

He collapsed and died following one of the banquets, after which "his team and two officials from the electricity bureau traveled for a sightseeing tour around east China," the report said.

"Zhang's colleagues said most of them were too upset over the death to stay in the office, so they went to Yangzhou to relax," it added, referring to a city in eastern Jiangsu province renowned for its gardens.

The National Auditors' Office said the incident had "marred the image and influenced the public's trust" of the government body, which is supposed to be at the forefront of a high-profile campaign against corruption.

Auditors are not allowed to be entertained by departments or companies they are inspecting, according to a 2000 rule, the report said.

From The Washington Post on August 25, 2006

What does the name of the Linux operating system, Ubuntu, mean in both the Zulu and Xhosa languages?

A. Humanity toward others
B. Cloudless sky
C. Liberty for all
D. Peace be with you

Forwarded by Dick Haar

According to the source of the original e-mail, every year college English teachers from across the country submit their collections of analogies and metaphors found in essays to a competition. Here are the winners from a couple years ago ...

01. Her face was a perfect oval, like a circle that had its two sides gently compressed by a Thigh Master.

02. His thoughts tumbled in his head, making and breaking alliances like underpants in a dryer without Cling Free.

03. He spoke with the wisdom that can only come from experience, like a guy who went blind because he looked at a solar eclipse without one of those boxes with a pinhole in it and now goes around the country speaking at high schools about the dangers of looking at a solar eclipse, without one of those boxes with a pinhole in it.

04. She grew on him like she was a colony of E. Coli and he was room-temperature Canadian beef.

05. She had a deep, throaty, genuine laugh, like that sound a dog makes just before it throws up.

06. Her vocabulary was as bad as, like, whatever.

07. He was as tall as a six-foot, three-inch tree.

08. The revelation that his marriage of 30 years had disintegrated because of his wife's infidelity came as a rude shock, like a surcharge at a formerly surcharge-free ATM machine.

09. The little boat gently drifted across the pond exactly the way a bowling ball wouldn't.

10. McBride fell 12 stories, hitting the pavement like a Hefty bag filled with vegetable soup.

11. From the attic came an unearthly howl. The whole scene had an eerie, surreal quality, like when you're on vacation in another city and Jeopardy comes on at 7:00 p.m Instead of 7:30

12. Her hair glistened in the rain like a nose hair after a sneeze.

13. The hailstones leaped from the pavement, just like maggots when you fry them in hot grease.

14. Long separated by cruel fate, the star-crossed lovers raced across the grassy field toward each other like two freight trains, one having left Cleveland at 6:36 p.m. Traveling at 55 mph, the other from Topeka at 4:19 p.m. At a speed of 35 mph.

15. They lived in a typical suburban neighborhood with picket fences that resembled Nancy Kerrigan's teeth.

16. John and Mary had never met. They were like two hummingbirds who had also never met.

17. He fell for her like his heart was a mob informant and she was the East River.

18. Even in his last years, Granddad had a mind like a steel trap, only one that had been left out so long, it had rusted shut.

19. Shots rang out, as shots are wont to do.

20. The plan was simple, like my brother-in-law Phil. But unlike Phil, this plan just might work.

21. The young fighter had a hungry look, the kind you get from not eating for a while.

22. He was as lame as a duck. Not the metaphorical lame duck, either, but a real duck that was actually lame, maybe from stepping on a land mine.

23. The ballerina rose gracefully en Pointe and extended one slender leg behind her, like a dog at a fire hydrant.

24. It was an American tradition, like fathers chasing kids around with power tools.

25. He was deeply in love. When she spoke, he thought he heard bells, as if she were a garbage truck backing up.

More Tidbits from the Chronicle of Higher Education --- http://www.aldaily.com/

Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm
For earlier editions of New Bookmark s go to http://www.trinity.edu/rjensen/bookurl.htm 
Archives of Tidbits: Tidbits Directory --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Three Finance Blogs

Jim Mahar's FinanceProfessor Blog --- http://financeprofessorblog.blogspo