Boston College Finance Academy

Weekly Update
November 29, 2010

this issue

This Month in Markets

We hope you had a great Thanksgiving! Term of the Week
This Month in Business
The Finance Academy
What to Watch For
Executive Board

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source of general information, advice and networking. www.twitter.com/bcfa

Irish Central Banker Sees

Important Bailout

The market rose in Pre-market Thurs-

day on expectations of E.U. aid to Ire-
land. The Irish central bank governor
said he expected a "very substantial
loan" and the U.S. deputy Treasury
Secretary said he was confident the

This Week in Business Irish would struggle through their fi-

nancial problems.
Mortgage Rates Rise, Utility Stocks Energized—
-Tom Lagendorf
Applications Fall to Four Not Just for Dividends
Month Low Historically, utility stocks were the go-to Read This Article
Over the past four months, mortgage investment for conservative investors
applications have been down 14.4% after looking for slow and steady growth and a
mortgage rates rose to 4.46%, up from 4.28% in high dividend yield. However, lately many
the previous week. This is attributed to strong investors are flocking to the utilities industry
Chip Shares Rise as Market
economic data, and uncertainty following the
due to companies’ rapidly growing Week Ends Flat
Fed’s decision to buy $600 Billion of Treasuries
profits. This growth is fueled mainly by the
to stimulate growth. Rates have become more
increasing need for electricity in the
volatile as investors have started selling off Wall Street was on course for a second
mortgage-backed securities. Mortgage rates emerging market economies. Looking
week of losses as markets pulled back
are closely tied with Yields of the 10-year forward, utilities may be a great place for
from an autumn rally, largely taking
Treasury note, which has climbed over the past investors to allocate money, as these
cues from overseas. U.S. stocks were
week. companies are beginning to provide both
lower on Friday, after the People's Bank
-Kyle McDonough rapid growth and a large dividend. Stocks to
of China raised bank reserve
Freshman Representative 2012-2011 consider in this industry: Wisconsin Energy
requirements for the second time in
Read This Article (WEC, $59), CMS Energy (CMS, $18), Sempra
two weeks, stepping up its fight to rein
Energy (SRE, $51), Cemig (CIG, $17), and
Obama Defends Deficit Panel in prices, a move that could temper
NextEra Energy (NEE, $54).
growth.
President Obama highly favors a taming of the -Andrew Jankowski
increasing deficit, which has now reached over 1 Freshman Representative 2010—2011 -Riley Wilson
trillion dollars. Both President Obama and
Read This Article Read This Article
speak of the house, Nancy Pelosi encourage
notifying the American people of the increased
debt and publicizing their efforts by presenting
the truth and facts to the public. In an effort to
continue the spur of economic growth as well as
control intense government spending, the
Oil Softens on China Move
president comments that defeating the deficit Oil prices finished slightly lower on Friday, as traders focused on monetary tightening in China
and debt will be very difficult. The defense has and euro-zone jitters. Light, sweet crude for December delivery settled down 34 cents, or
suggested greater spending cuts, higher ages
0.4%, at $81.51 a barrel on the New York Mercantile Exchange. Trading volume was light,
required for Medicare, and tax increases that
with Friday marking the December contract's expiration. The January contract settled down
are not entirely too heavy.
44 cents, or 0.5%, at $81.98.
-Christina Fusilli
Freshman Representative 2010-2011 -Kelvin Ng
Read This Article Read This Article

Foreclosure Mess Prompts

At HCA, Debt Markets Yield Big Payday
Call for Stress Tests
Blue-chip corporations are not the only players taking advantage of record-low interest rates.
The Congressional Oversight Panel
Recently, large private equity firms have been using low borrowing rates to execute transactions
called for US banks to undergo a
known as “dividend recaps.” In the somewhat controversial transactions, PE-owned companies pay second round of stress tests to see if
their owners substantial dividends financed with funds received from bond offerings. Dividend recaps they have enough money to counter
have been an alternative way for some buyout shops to realize returns from portfolio companies that losses that could stem from
they have struggled to exit by more traditional means. Hospital giant HCA (partially-owned by Bain investigations into their faulty
foreclosure processes. Recent
Cap and KKR) is the latest example of a company to announce plans for a dividend recap.
allegations have risen that banks and
-Steve Schmitt loan services such as Bank of America
Read This Article have filed thousands of inaccurate
documents in foreclosure this year. If
proven guilty, consequences could be
Cracks Emerge in New-Issue Market severe and result in major losses for the
perpetrators.
Despite the success of the General Motors IPO, problems still remain in the new-issue market.
Multiple firms have either delayed or abandoned new offerings due to weak investor demand. -Kyle McDonough
The troubles are a result of investor confidence, as many being to question whether stocks and
bonds can continue their strong rally. Moreover, concerns about Ireland have only weakened the Read This Article
market in recent days. This environment has proven to be a setback for private-equity firms
looking to take a company public. For TPG and Apollo, two of the largest private-equity shops, the
problems in the new-issue market have caused them to delay the $532mm IPO of Harrah's, the
largest casino company in the world.
-Parin Shah

Read This Article

Deal Gives Amazon a Fresh Attack on Fed Facebook Unveils Messaging

Diaper Strategy Move Service
Republicans are ordering Ben Bernanke Facebook announced that it will offer a new mes-
The New York Times reported Monday that
to drop his plan to buy $600 billion in saging service to users to be unveiled over the
Amazon has made a $500 M cash bid for
additional U.S. Treasury bonds. The upcoming year. The move comes as a huge threat
Quisdi, the parent company of both to rivals such as Google's Gmail, Yahoo Mail, and
Republicans have suggested that the
Diapers.com and Soap.com. This most Microsoft's Hotmail services. With over 500 mil-
original plan to purchase treasury
lion members, Facebook already holds a competi-
recent acquisition follows last year’s $1.2 B bonds will no longer help employment,
tive advantage in the number of users compared
acquisition of Zappos, the #1 online shoe thus only increasing inflation. Most the other web-based email services with Hotmail
retailer. Amazon is traditionally known for economists suggest the use of greater at 361 million, 273 million for Yahoo, and 193
its long term, organic growth business fiscal policy to increase economic million Gmail users. The new Facebook service will
growth is necessary. In response to this provide users with an @facebook.com account
model, but the Zappos and Quisdi deals
that would provide a melting-pot of information
indicate it is willing to grow through other intense criticism from several political
containing email, instant messaging, and SMS
ways as well, especially through niche parties, many are uncomfortable with messages. The service will also have a "Social
online stores where specialization has the idea of congress controlling Inbox" which would only contain messages from a
monetary policy. user's friend database or social network. The
allowed a competitor to gain an
-Christina Fusilli wealth of information Facebook has on its users
advantage. -Charlie Witmer and their connections allows for special filtering of
Read This Article
Read This Article the messaging service to provide a more personal
experience and put the company in a prime posi-
tion to become the leader in web-based email
users.

Web Start-Ups Search History -Andrew Steichen

New web start-ups such as Yelp and Groupon are following the footprint laid by predeces- Read This Article
sors such as Yahoo, eBay and Google on how effectively establish a presence in foreign
markets. New firms are studying the blueprint left behind by replicating successful strate-
gies such as using acquisitions and partnerships in countries where strong competitors Terms of the Week
already exist. Executives have found that understanding an area's culture can be the
difference between success and failure. Yahoo partnered with the established Softbank Mortgage backed security—Debt
Corp. in Japan that helped the company eventually become the top web portal in the coun-
try. Many of the new start-ups are cautious and hesitant to enter the Chinese market fol-
instrument secured by a mortgage or a pool
lowing the struggles of Google, which has a contentious relationship with the government, of mortgages (but not conveying a right of
and eBay, which fled the country amid competition of TaoBao unit of Chinese website ownership to the underlying mortgage).
Alibaba.com. Unlike unsecured securities, they are
-Andrew Steichen
considered 'investment grade,' and are paid
Read This Article out of the income generated by principle
and interest payments on the underlying
mortgage. It is a type of mortgage
This Month in Markets derivative. Also called mortgage backed
certificate
November 8th—November 26th 2010
Blue-chip - Large, prestigious, prosperous,
Over the 3 week trading period from the week of November 8th through the and stable corporation. Blue chip firms have
week of November 22nd, stocks fell as the Dow Jones Industrial Average a solid record of earnings and dividend
dropped 278 points (2.45%) and the NASDAQ dropped 35 points (1.36%). Sizea- payments in both good and bad times, and
ble gains from early November remained fairly level until the middle of the have a strong long-term growth potential.
week of the 15th, when global concern concerning debt in Europe and growth The term comes from the game of poker in
policy in Asia led to a pronounced stock drop. The last full week in November which the highest value chip is blue.
saw stocks staying at a marginally lower level, as Korean tensions hurt DJIA
As defined by businessdictionary.com
futures. - Ryan Crowe

DOW Drops 278.29 (2.45%)

»Weekly Gain: [11,370.29 to 11,092.00]

NASDAQ Drops 34.95 (1.36%)

»Weekly Gain: [2,569.51 to 2,534.56]

Upcoming Events
Goldman Sachs Q&A—Thursday, December 2nd, 4:00 pm
Goldman Sachs will be hosting an informal presentation that will provide you with information about career opportunities at Goldman
Sachs. Juniors and Sophomores who are interested in summer internship opportunities are encouraged to attend.
This event will be held on Thursday, December 2 in Fulton Honors Library at 4:00pm. Juniors and Sophomores only. Please RSVP at
bc.edu/bcfa.
Upcoming Externship Opportunities for Sophomores

Goldman Sachs—2011 Americas Securities Division Quantitative Opportunities

Winter Workshop—Jan 4th, 2011

Application Deadline: Sunday December 12th

Contact: Abigail Meyer, Securities Division Undergraduate Recruiting, Goldman
Sachs
Goldman Sachs is hosting a Securities Division Quantitative Opportunities Workshop Check out our Website!
for sophomore and junior candidates interested in expanding their technical and
analytical skill-set through learning about the various quantitative roles within the Please see bc.edu/bcfa for new updates
Securities Division. Interested sophomores should submit resumes via Eaglelink. and additional resources added weekly.
More information provided at the Information Session Thursday.

Information Technology Group (ITG) - Jan 5th-6th, 2011, NYC Weekly Newsletter
Application Deadline: Monday December 6th
November 29, 2010
Contact: Sheryl Weaver, Vice President, Graduate Recruitment, Training &
Development, Investment Technology Group ([email protected])
ITG’s Externship Program offers outstanding sophomore students a
unique opportunity to gain exposure to the Financial Markets and Boston College Finance Academy
jump start their careers. Over the course of two days, students will
have the chance to job-shadow, network with individuals at all levels of the
organization, and learn more about rewarding career paths in buy-side firms. Linda Vitale
Interested sophomores should submit resumes via email. See www.bc.edu/ Secretary
bcfa for more information (WebMail please disregard duplicate images.)
www.bc.edu/bcfa