Money WhizDom: Is this stimulus package for real?

Adhvith Dhuddu, CT regular columnist

Wednesday, February 20; 12:00 AM

We all know that chugging a Red Bull to stay awake on exam night only works temporarily to make us more sluggish later on; this is exactly what the stimulus package will do to the economy. Exactly a week ago, President Bush signed into law a $170 billion "stimulus" package in an effort to avert an economic downturn.

Packed with housing subsidies to boost the ailing housing sector (which many say triggered this slump) and tax rebates checks to fuel consumer spending, the administration is hoping its delayed action will prevent a recession in the second half of the year.

Our economy experienced monumental expansion in the 1990s, and its primary drivers were low to minimum inflationary fears, moderate interest rates, extremely high productivity levels, an across-the-board explosion in investment activity, high levels of consumer spending and strong local currency. The environment was so conducive to growth it led to "irrational exuberance" and an eventual bust in late 2000.

This was exactly when a similar "stimulus" package was announced, and history tells us this did little to prevent a recession. Although it did stimulate the economy temporarily, we experienced a recession for a brief period.

It is unfortunate that the same administration is adopting a failed strategy again and is not focusing on long-term economic stability. A good economic stimulus package should help develop long-term stability and create an environment like that of the 1990s. This package fails to achieve that.

Inflation is already at scary levels, and with more than $150 billion entering the economic system, we can expect higher inflation very soon as more money will chase the same goods and services. The low interest rates (which will continue to decline) are only adding fuel to fire (more borrowing, more spending, more inflation). Investment is slowing down drastically, with more money finding its way to developing nations and BRIC countries. This in turn is hurting productivity levels, which are either remaining constant or inching up at a snail's pace. The only good one can see is a boost in consumer spending, which is temporary.

One thing is for sure: This stimulus package will without doubt stimulate the Chinese economy. Close to 60 percent of the $150 billion of tax rebate money in the consumer's hand will be used to purchase goods manufactured in China (electronics, clothes, toys, etc.). That's appalling considering our huge debt to China and the proposed $3 trillion budget for the coming year. This stimulus package is sure to strain us financially, but I assume there is no need to worry because we can continue to borrow — from China.

The topic of the weak dollar has been beaten to death, and in no way is the stimulus package helping the dollar's perilous path. Though it has received some praise, seasoned economists and forecasters don't see how this stimulus package can prevent a recession or assist long-term growth.

Removing your clothes from the washing machine in the middle of a cycle will only get you wet, soapy and messy clothes; this is exactly what happens when one tries to manipulate and maneuver a business cycle when it enters a healthy temporary downturn. The result will be a bigger mess that needs to be cleaned up later. In every crisis lies an opportunity, and in this case the administration should have put forward a more comprehensive plan to support the economy and facilitate long-term growth.

Unfortunately, none of the presidential candidates are proposing an economic plan that touts long-term stability. The presidential candidates should outline economic plans that stimulate and increase investment, decrease inflation, increase productivity, increase savings, strengthen the dollar and should in no way be a growth deterrent.

Not so long ago, an economy on the other side of the planet experienced something similar. Drawing these scary parallels might be pushing the argument too far, but the similarities are so vivid that the U.S. should learn from its mistakes. I am of course talking about the Japanese economy from the 1980s and 1990s.

They experienced a stock market boom, a real estate boom, a credit crisis, a cleanup of the banking sector, regular stimulus packages and extremely low interest rates for years to try to stimulate the economy, and only now, 15 years later, is the economy getting back on its feet.

Online link to this article:

http://www.collegiatetimes.com/stories/2008/02/20/is_this_stimulus_package_for_real_

Calling all business majors: Chart your financial career

Adhvith Dhuddu, CT regular columnist

Wednesday, February 13; 12:00 AM

An undergraduate degree is only the first step toward a successful career in finance, accounting or business. Investment bankers, stock brokers and accountants who stand out and flourish early in their careers often equip themselves with additional certifications and credentials. They go on to earn specialized qualifications such as CFAs and CPAs to better comprehend their realm. It's important for everyone entering a career in finance to know about these programs and the potential boost they can have on your career.

The Chartered Financial Analyst program is a three-year, graduate level self-study program offered by the CFA institute headquartered in Charlottesville. The program primarily suits students looking at careers in investment banking and financial analysis. The CFA is an extremely rigorous and highly selective program requiring the candidate to pass three exams in a period of three years.

Early last year, the Pamplin College of Business was named a CFA Program Partner of the CFA Institute, giving both the College and students an upper hand for the CFA. This move indicated that the curriculum covers over 70 percent of the CFA syllabus and encourages many students to pursue the CFA. More information on how to register for the exam, eligibility criteria, study methods, etc., are detailed in the CFA's official Web site (www.cfainstitute.org).

Although not very mainstream, the Chartered Alternative Investment Analyst program is gaining credibility amongst private equity, venture capital and alternative investment management firms. Alternative investments cover a broad category of advanced financial instruments such as private equity, real estate, art, hedge funds, commodities and venture capital. This program has attracted many students (in the investment management and personal finance management fields) lately and has gained tremendous reputation for its curriculum and rigor.

The CAIA requires a candidate to clear two extensive exams either within a year or two years. After passing the exams, all qualified candidates earn official CAIA charters and other member benefits, such as eligibility to attend international chapter meetings, CAIA seminars, exclusive high-profile job offers from fellow CAIA associates, and much more. Information about this program can be found on its official Web site (www.caia.org).

An accountant cannot survive merely with an undergraduate degree and has to get certified via the Certified Public Accountant program. This certification is essential for an accountant's success and many times is a basic requirement to garner employment at reputed accounting firms (fresh accounting recruits often go through a program that trains them to take CPA).

Eligibility for the CPA exam varies from state to state, and students from Virginia Tech become qualified to take the Virginia CPA exam by taking a minimum of 150 credit hours, 30 of which must come from accounting classes. The CPA is given by the American Institute of Certified Public Accountants, a world-class institute that helps set many accounting standards here and around the world. Accounting students can also pursue other certifications, such as the Certificate in Management Accounting exam, Certified Internal Auditing exam and Certified Information Systems Auditor exam if they plan to specialize in a certain field. Two informative Web sites for the CPA exam are www.cpa-exam.org and www.aicpa.org.

Almost all financial analysts and stockbrokers have to get the Series 7 General Securities Representative Exam to be able to buy and sell various securities legally on behalf of their clients. The Series 7 is given by the National Association of Securities Dealers, which also conducts other certification exams for compliance, operations and legal representatives in the securities arena.

As the CPA, obtaining the Series 7 license is the first step toward becoming a licensed stockbroker. Many high profile Wall Street firms sometimes require both the Series 7 and Series 63 exam. Unlike other certifications, one has to be sponsored by an NASD member representative just to take the exam. More information about this and other securities-related certifications can be found at www.finra.org.

Online link to this article:

http://www.collegiatetimes.com/stories/2008/02/13/calling_all_business_majors__chart_your_financial_career