McCombs in the Media

Granof Suggests Cure for High Textbook Prices
The New York Times, Aug. 12, 2007
Accounting Professor Michael Granof proposed a solution to the high cost of college textbooks in an op-ed published in the New York Times. Excerpt: “By now, entering college students and their parents have been warned: textbooks are outrageously expensive. Few textbooks for semester-long courses retail for less than $120, and those for science and math courses typically approach $180. Perhaps these students can take comfort in knowing that the federal government empathizes with them, and in an attempt to ease their pain Congress asked its Advisory Committee on Student Financial Assistance to suggest a cure for the problem. Unfortunately though, the committee has proposed a remedy that would only worsen the problem.”
Read op-ed.
Read follow up story in Austin American-Statesman.

Texas MBA Team Defeats Columbia, Faces Yale for $200,000 in Finals of CNBC Show
In the second round of CNBC's “Fast Money MBA Challenge” Team Texas beat Columbia August 15. The team will go on to face Yale in the championship, which airs live from Nasdaq 8:00 p.m. CDT, August 22 in New York City. Ben Jones, Tim Killgoar, Justin Sander and Chris Semain are representing McCombs in this finance-themed game show. The winning team will take home $200,000 for educational expenses. In the first round, Texas defeated top-seeded MIT.

Prentice Analyzes Sarbanes-Oxley Act Five Years Since Passage
CIO Insight, July 30, 2007
IROM Professor Robert Prentice examined the Sarbanes-Oxley Act five years after its enactment in a column for CIO Insight. Excerpt: “SOX 404 undoubtedly imposes significant costs on firms that must install the required internal controls and pay auditors to inspect them. But by improving the flow and accuracy of information provided to investors, SOX 404 and other mandatory disclosure provisions reduce risk. When investor risk is mitigated, disclosing firms can raise more capital faster and at less cost than they can in the absence of such disclosure. Other, smaller firms, particularly those with poor internal controls or tenuous financial status, pay a high price. But overall capital market efficiency is improved.”
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Mabley Discusses Life as an MBA Admissions Director with ABJ
Austin Business Journal, Aug. 10, 2007
Tina Mabley, director of admissions for the full-time MBA program, recently sat down with the Austin Business Journal and talked about her job deciding who gets admitted to the McCombs School and who doesn't. Excerpt: “What's the hardest part of your job? Mabley: We receive 1,600 to 1,700 applications a year. The volume is high, yet each one of those is an individual person who's made a very big decision to go to graduate school. We try to give as much personal attention as we can. It gets hard sometimes with the volume, but we've put that as one of the priorities of our position in making sure we respect every applicant as they go through the process.”
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Brandl Says New Immigration Rules Would Destroy Texas Service Industry
KUT, Aug.3, 2007
The federal government is debating a law that would require employers to fire workers whose names and Social Security numbers reported on W-2 earnings reports don’t match the names or numbers on file. Preliminary estimates show the law would force employers to fire about 750,000 of the 11 million people in the state’s work force. Michael Brandl, senior finance lecturer, said these rules would have a big effect on the Texas economy. “If that [law] were to actually take place, you could expect to see the vast majority of restaurants across the state shut down,” he said. “You could expect to see a number of service-based firms simply going out of business simply because they cannot find people to do the work that is needed.”
Listen to the story (second in newspod).

Hirst Says Selling Technology Solutions Nightmare for Accountants
Austin American-Statesman, Aug. 5, 2007
A recent report found that Motive CEO Scott Harmon disregarded proper accounting methods and used “excessive management pressure” to make sales targets. Motive, an Austin-based company that provides troubleshooting software to broadband companies, has been under formal investigation by the Securities and Exchange Commission since 2005. Eric Hirst, accounting professor and associate dean of graduate programs, said the key issue at Motive involves how the company accounted for revenue. “This is an area that many, many people could make many, many honest mistakes in,” he said. “When tech companies sell something, they sell what they call ‘solutions.’ They bundle products, services, warranties, upgrades over the course of many years. It’s a nightmare for accountants.”
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Customers Crave Variety, Mahajan Says
The Brownsville Herald, Aug. 3, 2007
With the recent opening of a second Chick-fil-A restaurant in Brownsville, Texas, other fast food chains in the neighborhood have been struggling. While lines at the nearby Church’s Chicken, Wendy’s and Quizno’s are sparse, Chick-fil-A’s drive-through line is normally 15 cars long during lunch. Vijay Mahajan, marketing professor, said once the excitement wears off the market will stabilize. “Ultimately people look for variety,” Mahajan said. “It’s like a multiplex movie hall. Many times if you don’t get into the movie you want to see, you see another. After a while people will grow tired of Chick-fil-A’s long lines and say to heck with it, I’m going to eat something else.”
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Magazine Survey Ranks McCombs Sixth for Meeting Needs of CEOs
Chief Executive magazine, April 2007
A survey of CEOs published in Chief Executive magazine ranked McCombs sixth among top business schools. The question posed to the CEOs: Based either on your experience or your perception of business schools, which best suits the needs of CEOs?
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AT&T Pledges $25 Million to McCombs for New Executive Education and Conference Center
At a ceremony held June 12 AT&T pledged a $25 million gift to the McCombs School to be applied to the construction cost of the new Executive Education and Conference Center. “We are grateful to be the recipients of this major gift from AT&T,” said Dean George Gau. “It is a credit to our faculty, staff and students that a company of this reputation, history and market standing has chosen to make such a significant investment in our executive education efforts.” The center, opening in August 2008, will be named the AT&T Executive Education and Conference Center for the next 25 years.
Read the press release.
Read the story in the Austin American-Statesman.
Read the story in the San Antonio Express-News.
Read the story in the Financial Times.

Dell Announces Layoffs
KVUE-TV, June 1, 2007
Round Rock-based computer giant Dell announced that it will cut 10 percent of its work force, about 8,800 jobs, over the next year. The cuts will vary across geographic regions and job functions. John Doggett, senior management lecturer, said there is strong reason for optimism though. Since Michael Dell retook the reins of the company, the CEO has helped reshape the company from the inside-out. “I’ve talked to a lot of people, from very senior members of his management team to new people who have just joined who are former students of mine, and they all say Michael is excited about what the company is doing.”
Watch the video.

Lifting the Veil on Tax Risk
The Wall Street Journal, May 25, 2007
Hundreds of companies could be on the hook to the Internal Revenue Service for tens of billions of dollars in back taxes due to transactions companies believe could be challenged, newly required regulatory disclosures show. Investors are getting a first peek into one aspect of the world of corporate taxes, thanks to a new accounting rule that took effect in January. Jennifer Blouin of the University of Pennsylvania, Cristi Gleason of the University of Iowa, and the University of Texas at Austin’s Professor Lillian Mills (photo) and Ph.D. candidate Stephanie Sikes, examined the newly disclosed tax liabilities at 100 large companies and compared those with their book assets. Merck’s total unrecognized tax benefit topped the list under that analysis, with an amount equal to 16.6 percent of its assets. By contrast, GE’s total unrecognized tax benefit was a similar size, but it represented about 1 percent of its total assets. GE’s reported $6.8 billion liability doesn't include $1.4 billion in accrued interest and penalties. An ExxonMobil spokesman said its unrecognized tax benefit of $3.7 billion represented a fraction of last year’s tax bill of about $30 billion.
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The Wealth of African Nations
Harvard Business Review, June 2007
Marketing Professor Vijay Mahajan contributed an article to the June edition of Harvard Business Review about his ongoing research on business and entrepreneurship across Africa. Mahajan, who is working on a book about Africa, writes, “Africa has some of the poorest nations in the world, but it is wealthier across the continent than India. That concentration of wealth represents a huge potential market for companies worldwide. Of course, serving this market means overcoming the myriad economic, political, legal, medical and social challenges. But businesses across Africa have already proved that this is possible, feeding a fast-growing demand for every conceivable type of consumer good and service.”

Nasdaq Wants to Compete More Directly with NYSE
Houston Chronicle, June 14, 2007
The head of Nasdaq was in Houston recently, trying to lure companies to his market and away from the New York Stock Exchange. Traditionally the market of choice for technology and small and mid-sized companies, the Nasdaq has been stepping up efforts to compete head-to-head with the NYSE. Competition between the two exchanges has heated up because both are publicly traded and face increasing pressure from investors to demonstrate growth, said Sandy Leeds, senior finance lecturer.
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Experts React to Proposal for New Regulatory Body for Financial Products
Dallas Morning News, June 24, 2007
In a recent paper, Harvard Law Professor Elizabeth Warren proposed the creation of a Financial Product Safety Commission. Warren, a nationally respected expert on bankruptcy and consumer-finance issues, is calling for a new regulatory regime to review credit card offers, home mortgages, car loans and a host of other financial products for consumer safety issues. Creating a whole new federal regulatory agency would be expensive, said Robert Prentice, IROM professor, and regulators are “often only marginally competent. Unintended consequences abound when regulators enter the picture.” However, the proposal is worthy of consideration, Prentice said. “Well-regulated markets allow well-intentioned and fair firms to distinguish themselves and thereby prosper,” he said.
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In the News: Retailers are Turning Green—Even Wal-Mart and Home Depot
MarketWatch, May 17, 2007
The environment is a growing concern for retailers across the country as they feel pressure to cut energy use, curb carbon emissions and slash waste. In the process they encourage suppliers to develop eco-friendly products and practices, helping—or in some cases persuading—consumers to shop and live green. “Because of the nature of their size, and the challenges we have facing us, not just presented by global climate change but in terms of sustainability in general, Wal-Mart has a responsibility to make a difference and start taking steps in terms of the way they do business,” said Paula Ivey, McCombs marketing lecturer.
Get the full story.

Tetlock Op-Ed: When Gambling is Good
The Wall Street Journal, May 11, 2007
Assistant Finance Professor Paul Tetlock co-authored an op-ed for the Wall Street Journal in which he examines the value of information markets. Excerpt: “Imagine the president had a crystal ball to predict more accurately the impact of broader prescription coverage on the Medicare budget, the effect of more frequent audits on tax compliance—or even the consequences of a political settlement in Iraq on oil prices. Now, stop imagining: Such crystal balls are within our grasp. But they can’t be used without running a gauntlet of federal and state regulation. The crystal balls are called prediction markets or information markets, and they help forecasters, for example by allowing traders to vote with their money on the future unemployment rate or the winner of the next presidential race.”
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McCombs Grads Find Fertile Job Market
Austin American-Statesman, May 13, 2007
College graduates are heading out into the strongest job market in more than five years. Employers will hire 19.2 percent more new college graduates than they did a year ago, with salary offers up 4 to 10 percent, according to the National Association of Colleges and Employers. At the McCombs School of Business, the fall 2006 career fair was booked up by July—a month earlier than usual—with more than 150 employers, and more on a waiting list, said Velma Arney (right), director of undergraduate career services. In 2006, 92 percent of McCombs graduates got job offers, and Arney said she expects the figure to be as high or higher this year.
Get the full story.

Degrees of Debt: More Students Investing in Stock Market
KXAN, May 17, 2007
Interest in stocks has skyrocketed on college campuses, including here at The University of Texas at Austin. “Some of the students have their own portfolio from their summer earnings,” said Kelly Kamm, McCombs finance lecturer, who teaches an undergraduate class on how to analyze companies for investment opportunities. One of her students, Matthew Davis, BBA ’07, said, “If you’re going to put your money into something when you’re young, put it into stocks. You can take a loss when you’re young, but you can also afford bigger gains.”
Watch the story.

Gas Hits New Highs, But For How Long?
Austin American-Statesman, May 22, 2007
If you have filled your tank recently, you have felt the pain. Average gas prices in Austin set a record of $3.03 a gallon Monday. Economists say that any sudden increase on a basic good such as gasoline always affects lower-income families more heavily because they have less money to spend on rising gas prices and related costs. “You are going to be taxing people at the lower end more heavily because they spend a larger fraction of their disposable income on gasoline,” said Ehud Ronn, McCombs finance professor. Ronn called the gasoline price increase disappointing because it isn’t tied to any shift in the underlying price of oil, which has declined from its latest peak last summer. “It is not a problem with storage or with the availability of crude,” he said. “Mainly it is a matter of getting refineries cleaned up and working better.”
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Auditing Rule is Put at Risk by Texas Bill
The New York Times, May 18, 2007
Texas lawmakers are on the verge of rejecting a requirement that state and local governments disclose the cost of the healthcare they have promised to retired employees. Until now, most governments have been using pay-as-you-go accounting, which does not show the benefits’ total cost. This method shows only how much a government spends each year to buy health care for its retirees—not the value of the benefits coming due in the future. “Politicians don’t want to deal with the problem,” said Michael Granof, McCombs accounting professor. Granof said state lawmakers were betting that by the time rising health care costs became unmanageable, they would no longer be in office and could not be held accountable.
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Proposed Immigration Reform in U.S. Congress
KUT Radio, May 22, 2007
Proposed immigration legislation in the U.S. Congress will affect illegal workers in many ways. Asked if illegal workers will see wages drop after they begin paying federal taxes, Michael Brandl, a senior lecture in finance, said they are likely to make more. “Right now, what is happening is there is a risk premium for hiring an undocumented worker,” Brandl said. “It’s risky from the employer’s standpoint. And what they do because of that risk premium, is they pay those workers even less. If you reduce that risk premium, these workers can get paid more.”
Listen to the story (final segment in newspod).

MBA Student Mabry Plays “Grade the Trade” on CNBC
First-year MBA student Nelson Mabry appeared on CNBC’s Fast Money program May 4. In a segment called “Grade the Trade,” Mabry and three additional MBA students from other leading business schools were given hypothetical scenarios and asked to suggest stock trades based on the information. Appearing via Web cam, Mabry, a manager of the MBA Investment Fund was asked what trades he would make if “Spider-Man 3” cleared $180 million the first weekend and Disney’s “Pirates of the Caribbean: At World’s End” flopped later this summer. Nelson said he didn’t believe Disney would get hurt if “Pirates of the Caribbean” was a bust because the company generates revenue from many other places. He also said he’d buy Hasbro based on strong “Spider-Man 3” toy sales. The hosts gave Mabry an “A-” for his trades.
Watch the segment (registration is required).

MBA Alum Builds Robots to Protect Soldiers
Boston Globe, May 14, 2007
After the death of his son in Iraq, Brian Hart, MBA ’84, and his brother Richard started Black-I Robotics Inc. to find ways to save soldiers’ lives. His latest invention is the LandShark, a six-wheeled, 250-pound robotic vehicle that can remotely detonate a bomb or probe a roadway for booby traps without risking a soldier’s life. His robot costs half as much as robots currently used by the military. “Richard and I started this company when we watched on CNN a lance corporal push a bomb off the road with his Humvee, and it blew up,” Hart said. “That was it. We started buying parts the next day.”
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McCombs Alumni Make Up Half Female and Minority CEOs in DFW
Dallas Morning News, May 13, 2007
A recent study by the Dallas Morning News found that among CEOs at the 100 largest public and private companies in Dallas and Fort Worth, only three are women and just one is a member of a minority group. Two of those CEOs are McCombs School graduates: Kathy Harless, BBA ’72 and chief executive of Idearc, Inc.—the spinoff from Verizon Communications—and Carlos Sepulveda, BBA ’79 and CEO of Interstate Battery System International, Inc. Harless and Sepulveda discussed the barriers that keep women and minorities from reaching top executives positions as well as the keys to their own success.
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BBA Student Appears on CNBC
CNBC, May 15, 2007
Mark Tait, BBA ’07, appeared on CNBC’s Fast Money program in a segment called “Face 2 Face.” Tait questioned the show’s hosts about buying stock in Posco, the world’s third-largest steelmaker.
Watch the segment (registration is required).

MBA Alum Helps Musician Revive Band’s Profits
The New York Times, May 16, 2007
As a musician and road manager with Steve Riley and the Mamou Playboys, Peter Schwarz, MBA ’01, was surprised to learn how his wife’s MBA education could be applied to running a band. He left the Playboys and went to the McCombs School to get an MBA degree of his own. Now Schwarz’s job is to apply “straight M.B.A. stuff” to Ray Benson’s 37-year-old western swing band Asleep at the Wheel. “My job is to guide him in what ideas are going to stick,” Schwarz said. “How big is the audience? Is there money in it? In the music business, there really isn’t that rigor.” Since he became the band’s business manager, Benson credits Schwarz, with helping his band find a new audience, winning new critical acclaim and reinvigorating its music sales. “We are still pinching ourselves that we are in a growth stage,” Schwarz said. (Editor's note: The New York Times story says Schwarz got his MBA at Harvard, however, he is in fact a Texas MBA alum. He attended Harvard as an undergraduate.)
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The Cost of Peace of Mind
Yahoo! Finance, April 26, 2007
Jim Schenke is a married 40-year-old home owner with a toddler. He makes an extra payment each year toward his fixed-rate, 30-year mortgage. But he doesn’t contribute to his employer’s 403(b) plan. “The only company I owe money to is my mortgage lender, and I’m going to be beholden to them for as short a time as I can be,” he said. But a new study suggests Schenke might be better off putting that extra cash into his company’s retirement plan. Researchers, including Jennifer Huang, McCombs assistant finance professor, found that at least 4 in 10 homeowners would build more wealth by putting additional mortgage payments into a tax-deferred retirement plan, such as a 401(k) or 403(b). Switching the money to retirement savings would save U.S. households up to $1.5 billion a year, they estimate. “We’re not telling people they should save more—the study is about making optimal use of savings,” said Gene Amromin, financial economist with the Federal Reserve Bank of Chicago, and Huang’s co-author.
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How Can Public Business Schools Compete with Private Schools?
BusinessWeek Online, April 30, 2007
Many state business schools are having a tough time competing for top talent with their private rivals. At the McCombs School, Dean George Gau (left) has succeeded by putting an added focus on for-profit endeavors, most notably, non-degree executive education. When Gau became dean at McCombs in 2002, 15 percent of the school’s budget came from the Texas Executive Education’s open enrollment programs. Today, that figure has doubled to 30 percent. “A big chunk of my faculty’s salaries is being paid by the customers of executive education,” Gau said.
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Dallas Griffin: Longhorn Footballer and Future McCombs MBA
Austin American-Statesman, April 22, 2007
Dallas Griffin, finance and BHP senior, is the starting center for the Longhorn football team. Instead of impressing co-eds on Sixth Street with the number of tequila shots he can throw down, this 22-year-old is preparing for the nationally ranked McCombs School of Business MBA program, which accepted him last month. He and former Longhorns swimmer Sean Foley, MBA ’08, are the only two UT athletes among the 510 students in the program. 
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KPMG Details Widespread Breakdown in Management of City of San Diego
San Diego Union-Tribune, April 20, 2007
A new assessment of San Diego’s internal checks against fraud and error-filled financial statements shows management breakdowns have been more widespread than previously stated by city officials and outside consultants. The report, from accounting firm KPMG, was recently made public after the firm finished a three-year audit of the city’s 2003 books. Michael Granof, McCombs accounting professor, reviewed it and said, “Frankly, I’ve never seen a list this long.” Granof said the city has time to correct the problems because it’s still three years behind on releasing its annual audits. “They haven’t had a chance to correct it,” Granof said. “Let’s see what 2006 looks like.”
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Texas Leaves Taxpayers in Lurch Over $50 Billion in Benefits
Bloomberg, April 19, 2007
Texas owes state workers $50 billion in future retirement benefits and refuses to acknowledge the obligation. Texas Comptroller Susan Combs says she won’t follow a new national accounting standard that requires states and cities to disclose the estimated costs of benefits promised to retired workers, such as health care and life insurance. The government would need to set aside $4 billion a year over the next decade to keep from falling short on what it owes, according to a report by the state’s Legislative Budget Board. Disclosing its future costs may force Texas to raise taxes, increase borrowing, sell assets or cut programs to come up with the money. Refusing to recognize them may jeopardize the ratings on $22 billion of outstanding bonds and prompt investors to demand higher yields when they lend to the state. “If they don’t report it, they don’t have to do anything about it,” Michael Granof said. “It’s much easier to just push it off to the next generation.” 
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Waterloo Records Celebrates 25 Years
KUT Radio, April 13, 2007
Since opening its doors in 1982, Waterloo records has been a part of the musical landscape in Austin, and the store celebrated its 25th anniversary April 15 with a big bash at its downtown location at 6th and Lamar. Jim Nolen, senior finance lecturer, said one reason Waterloo has been able to thrive while national chains have faltered in Austin is Waterloo has always highlighted Texas music. “There’s a culture in Austin to buy locally,” he said.
Listen to the story.

Texas Fights Accounting Rules to Disclose Future Retiree Benefit
Associated Press, April 6, 2007
Proposed legislation in Texas seeks to block new national accounting rules that require state and local governments to disclose for the first time the projected costs of future retiree health care and other benefits. State lawmakers arguing that the measurement methods for these debts are flawed seem to be forgetting that financial statements are littered with estimated numbers, said Michael Granof, accounting professor at McCombs. “Just because sometimes an estimate for liability might be $80 million and another time it could be $90 million, both are a lot closer to the actual value than zero, which is how much the state officials would like reported,” Granof said.
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New Century files for Chapter 11 Bankruptcy
CNN Money, April 3, 2007
New Century Financial Corp. said Monday it will immediately cut 3,200 jobs, or 54 percent of its work force, as part of its Chapter 11 bankruptcy reorganization. The Irvine, Calif.-based company also said it agreed to sell its servicing assets and platform to Carrington Capital Management LLC for $139 million, subject to bankruptcy approval. Greg Hallman, a lecturer on real estate finance at McCombs, said the New Century bankruptcy put an exclamation point on the era of investing in securitized subprime debt. “It’s probably over for the time being,” said Hallman. “That market worked for as long as investment banks provided funding. The banks have cut the money off.”
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Best Business Recruits Revel in Perks
USA Today, March 27, 2007
Times are good for top business graduates. Employers are raising their recruiting efforts to include incentives, such as education assistance, time-off flexibility, casual dress—even pet insurance. McCombs PPA student Jeremy Gottlieb won’t graduate until May, but he has already acquired a job and a sizeable signing bonus with Ernst & Young in Houston. Gottlieb has been wooed by various corporate suitors since his sophomore year at The University of Texas at Austin but chose Ernst & Young because he wanted a larger company with more training opportunities. “It’s a candidate-driven market, and there are so many jobs available,” Gottlieb said. “It's exciting to have so many opportunities to work at so many companies.”
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Austin to Remain Relatively Unscathed During Subprime Mortgage Crisis
Austin American-Statesman, March 25, 2007
As if Austin’s excellent economy wasn’t impressive enough, new reports indicate that it has also managed to dodge the worst of the “subprime bullet” afflicting other cities. Prospective home buyers possessing poor credit are finding it increasingly difficult to get a mortgage in many U.S. cities, including Houston. This causes builders to put up fewer entry-level homes as the pool of buyers shrinks, which affects the resale market. Lenders are going to look for a better credit score and more income, and that’s going to hurt the housing market, said Greg Hallman, finance lecturer. “The degree to which it’s going to hurt—that’s what we don’t know yet.” Despite Austin’s remaining relatively unscathed by this phenomenon, it won’t be totally impervious. Whatever the effect, “we are going to feel that in Austin,” Hallman said. “We are going to feel that all over.”
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In the News: Alumni Alter Hours to Peddle Products to High-End Housing Market
Houston Chronicle, March 24, 2007
Changing store operating hours was the first order of business for Tolar Hamblen, BBA ’76 and James Cozby, BBA ’73 and MBA ’75, when they purchased Houston’s Kiva Kitchen & Bath in 1998. Hoping to cater to custom home builders, interior designers and architects rather than retailers, their hours changed from 9 a.m. to 9 p.m., to 8 a.m. to 6 p.m. The switch was smart as they’re now competing in the upper 50 percent of the market. “The best thing about our store is that people walk in and find experts all in one location. Instead of the customer running around for three to four days, trying to line up appointments, they can come here for three to four hours,” Hamblen said.
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Gray Area: Idle Assets Lead to Accounting Questions for Company
The Wall Street Journal, March 20, 2007
Like many businesses, Martek Biosciences Corp. believes its products will soon be the next big thing. So it has ramped up its capacity to make food additives based on the omega-3 fatty acid found in fish. The problem is that it has struggled to gain market share, and now one of its accounting practices has raised concerns—specifically Martek’s treatment of what it calls “idle” assets. Martek noted in its fiscal-first-quarter results that it has $94.3 million of property, plant and equipment “being held for future use.” Martek, however, doesn't depreciate these assets. Such an approach is pretty rare because companies typically depreciate assets they are either using or could be using. Robert N. Freeman, accounting professor, said the company’s approach may find support in accounting principles laid down in the early 1950s that say depreciation should occur when an asset is used. “You’re in a gray area,” he added.
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Research from McCombs’ Griffin Finds Hedge Fund Returns Unimpressive
BusinessWeek Online, March 19, 2007
John Griffin, associate professor of finance, and his co-author have some bad news for proponents of hedge funds in their new paper “How Smart Are the Smart Guys?” After reviewing the quarterly stock holdings of about 300 hedge fund firms against equity mutual funds from 1980 through 2004, the researchers found that hedge funds failed to deliver except during the Internet bubble. On average, hedge funds outperformed mutual funds by 1.4 percentage points per year, but three-quarters of the outperformance was due solely to inflated technology profits during 1999 and 2000. The remainder without those years is statistically insignificant. The hedge fund returns are also measured before fees, so after the hedge funds’ greater fees, the outperformance would be even smaller.
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McCombs MBA Students Meet with Minister of Indian Railways in New Dehli
The Hindu, March 17, 2007
During the 50-minute interaction with MBA students on a global trip for the McCombs School, Railway Minister Lalu Prasad “bowled them over with his rustic humbleness combined with witty humour” while sharing the success story of the Railways. Prasad interacted with the students in a mix of Hindi, English and Bhojpuri often giving them examples of how the Railways managed to turnaround and post a huge profit this year.
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Texas Lawmakers Seek to Avoid New Accounting Rule
The New York Times, March 12, 2007
McCombs Accounting Professor Michael Granof has been a critic of proposed Texas legislation that would allow government officials to sidestep a new national accounting rule that takes effect this year. The rule calls for state and local governments across the country to report obligations for future costs for medical and related benefits that their employees will receive when they retire. Texas, however, is looking to opt out of the process. “Our legislature does crazy things,” said Granof in The New York Times. “We have a law for blind hunters. This is probably the dumbest bill since that.” In an op-ed published in the Austin American-Statesman (March 13, 2007), Granof wrote, “The pending legislation is especially pernicious because it will undermine the authority of the independent accounting board to objectively establish standards. Each state will then be free to set its own rules. Just imagine how reliable financial statements will be when it is the politicians who determine our accounting principles.”
Read the New York Times story.
Read Michael Granof’s Austin American-Statesman op-ed.
Read follow-up story in Austin American-Statesman.

“Mad Money” a Hit With McCombs Students 
Austin has long been known as the capital of the Republic of Texas, but for a couple days this week Austin—or at least the campus of The University of Texas—became the official center of Cramerica, a nation headed by Jim Cramer and populated by fans of his hit stock-picking show “Mad Money” on CNBC. The effusive Cramer brought his passion for investing and for engaging college students (plus a whole lot of sound effects) to Austin as a part of the show’s “Back to School” tour, which culminated with a taping at the Hogg Auditorium March 20 in front of 800 students, mostly from the McCombs School of Business.
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Wal-Mart Protest Follows Uncommon Pattern
Houston Chronicle, March 5, 2007
Wal-Mart is once again the object of protest, but not for the usual reasons. Residents of Seguin, Texas, are protesting the retailing giant’s decision to replace its fabric section with “celebration centers” featuring party supplies. Because of the dearth of fabric stores in such a small town, the absence of Wal-Mart’s fabric center means residents won’t have a local source for fabrics. “In an open market, if Wal-Mart exits, then somebody else ought to be able to come in and take care of it,” said Mark Alpert, marketing professor. “In a way, there’s an irony here. The same people who criticize Wal-Mart for driving out small business are now saying, ‘Darn it, now you’ve got to keep providing this stuff.’ It's actually an opportunity for small business.”
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New Austin Buyout Fund Looks to Invest in Smaller Companies
Austin American-Statesman, March 2, 2007
At a time when all eyes are on gargantuan private equity funds and deals, a new Austin-based buyout firm is going to play small ball. After more than two years of pounding the pavement for money, the Southwest Opportunity Fund is expected to close its first round of investment—$108 million—by mid-March. Southwest Opportunity’s size can work for it, said Jim Nolen, senior finance lecturer. Southwest Opportunity plans to invest in small to midsize companies, a market Nolen said “has gotten left behind” in the buyout frenzy. “The big funds keep raising bigger and bigger funds, and that forces them to do bigger and bigger deals. That means someone is not looking at the middle market and some opportunities there.”
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India Might Soon Be Sweeter
The Patriot News (PA), March 1, 2007
The Hershey Co. may acquire a majority stake in an India’s Godrej Beverages & Foods Ltd., which makes tea and confectionery products. The unconfirmed reports follow Hershey’s desire for growth in emerging markets. India has proven its sweet tooth with the success of Nestlé, according to Vijay Mahajan, marketing professor, who added that India’s growing economy and youthful population represent an excellent market for candy makers. “Sweet products are not unusual for the Indian population,” he said. “Nestlé is already there. Nestlé has been there for many, many, many years. So the chocolate is not unusual.”
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Equity Office Property’s Status a Source of Speculation
National Real Estate Investor, Feb. 15, 2007
Equity Office Property Trust’s packed portfolio was the recent source of struggle in the biggest buyout in American real-estate history. The Blackstone Group conquered the competition to take over EOP, causing market observers to question how Blackstone will deal with EOP’s assets. “I would be surprised if [EOP] stays independent,” said Jay Hartzell, associate finance professor and associate director of the Real Estate Finance & Investment Center at McCombs. “As a portfolio manager, it wouldn’t make much sense to leave this as a stand-alone. You would want to integrate all you could with whatever other assets you were considering holding.”
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Selling the Texas Lottery?
KUT, Feb. 12, 2007
Gov. Rick Perry’s idea to sell the Texas lottery to a private firm isn’t winning a lot of followers in the state legislature. Perry’s plan would have the state taking a lump sum payment of about $14 billion from a company to run the lottery for 40 years. That money would then go into three endowments to support education and health care. Perry’s idea counts on about a 9 percent return rate on the money in the endowment. Jay Hartzell, associate professor of finance, believes “8 to 10 percent as a rough gauge for a rate of return to me is not unrealistic.” But the problem is most endowments reinvest a portion of the returns so future payouts will keep up with inflation. If you don’t reinvest, “you are going to end up with the same size checks 10 years from now that can buy half as much,” Hartzell said.
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Lottery Sale is Risky Business
Houston Chronicle, Feb. 9, 2007
Gov. Rick Perry’s plan to sell the Texas lottery to a private company hasn’t met with rousing approval, even from fellow conservatives. While Perry’s camp disputes claims that he is catering to a lobbyist friend, others claim the sale would not be in the best interest of Texans. From a business perspective, selling the lottery would be risky because the state would have to bank on a 9 percent yearly return, said Michael Granof, McCombs accounting professor.
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Thanairongroj’s MBA Journal Emphasizes Involvement and Balance
BusinessWeek Online, Feb. 7, 2007
In the third installment of his MBA Journal for BusinessWeek Online, David Thanairongroj, MBA ’08, gives prospective MBA students advice on balancing school, sports and socializing. With bachelor’s and master’s degrees in computer engineering, Thanairongroj started two businesses in 2003. He enrolled at McCombs to take his software engineering company to the next level. “I'm beginning to find that balance between work and play and continuing to make the most out of my business school experience,” Thanairongroj writes. “I would like to graduate knowing that I challenged myself in every way possible, shared my experiences, learned from my classmates, gave back to my school and community, and made a few long-lasting friendships.”
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MacuClear Wins at Texas Moot Corp
Austin Business Journal, Feb. 13, 2007
Macular degeneration may soon be a problem of the past thanks to MacuClear Corp. The pharmaceutical firm won the Texas round of Moot Corp Feb. 9 an