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| COURSE CONNECTOR |
| ARTICLE SUMMARIES AND QUESTIONS |
"Look Who Pays for the Bailout," pp. 80-90: While nearly everyone is focused on the economy and the presidential election right now, perhaps no group is paying attention as closely as the socioeconomic group dubbed the HENRYs (high earners, not rich yet). The HENRYs, defined as those households earning between $200,000 and $500,000, are taking a beating this year, particularly from Democratic candidates. On the campaign trail, Barack Obama regularly states his intent to pay for middle-class tax cuts and credits by raising taxes on the HENRYs. That probably sounds fair to a lot of folks, especially considering that the median family income in the U.S. stands at just $50,000, and the middle class is getting pummeled by rising costs and falling home and stock values. But in fact, the HENRYs are already pulling their weight, and then some. In 2006, the HENRYs represented 2.3% of all U.S. taxpayers, but they paid 17% of the country’s tax bill. Further, the HENRYs are the bulwark of the professional and entrepreneurial class that drives the economy, so it's reasonable to say that as the HENRYs go, so goes the struggling economy. Now that the government needs more revenue for bailouts and stimulus packages, is it fair or efficient to burden the HENRYs with even bigger tax bills? The answer to that will be left to the next administration.
Students take a closer look at the lives and interests of the HENRYs, the much-talked-about socioeconomic group being targeted in election talk for a tax hike.
Discussion Questions:- How do the HENRYs tend to apportion their income? How do those choices
affect their lifestyle? In your opinion, can HENRYs fairly be classified
as "rich"? Explain.
- What is the alternative minimum tax (AMT)? What was its original intent? How does the AMT impact HENRYs today? How would that change under John McCain’s tax plan? Barack Obama’s?
- Some of the HENRYs mentioned in the article are not concerned about the prospect of their tax burden increasing. Explain their point of view. If you were a HENRY, what position would you take on this issue? Why?
"Is Buy-and-Hold Dead?" pp. 94-100: For decades, regular folks have been advised that patient, consistent investment in stocks over a long period is the most effective strategy for creating wealth. It's a message that makes a lot of sense to people in normal circumstances. But lately, of course, the market has been anything but normal, and it begs the question of whether buy-and-hold is still the best investment strategy. For Jeremy Siegel, author of Stocks for the Long Run, the very question is crazy. After all, his analysis of 200 years' worth of U.S. market returns suggests that buy-and-hold is the way to go, even in a raging bear market like this one. Why? First, timing is everything. Investors frequently make the mistake of chasing performance and shifting money out of lagging funds into hot ones at the wrong time. Second, Warren Buffett is buying, which proves that opportunity abounds when stocks are cheap. Since the market historically roars out of downturns, long-term prospects remain promising. Finally, bargains can be found everywhere. This is a unique chance for investors to diversify at a relatively low cost and lock in fixed-income returns. Thus, the death of buy-and-hold has been greatly exaggerated, and while conditions are painful now, the outlook for those who can stomach the bumpy ride is, according to Siegel, extraordinary.
In this article, students read a strong argument in defense of the buy-and-hold investment approach, even in difficult economic times.
Discussion Questions:
- Why are some people — even a few investment experts — beginning
to question the buy-and-hold approach? How does Wally Weitz of Weitz
Funds advise clients concerned about buy-and-hold during a tumultuous
market like this?
- Rather than buying low and selling high out of panic, what fundamentals
of investing does the article suggest all investors should abide by?
What is "dollar-cost averaging"? What is the best way to may it work?
When does it fail?
- How has the massive stock selloff affected other assets around the globe? What opportunities has it created for investors?
"The Predator," pp. 122-132: Neal Blue is something of an anomaly these days. An old-school industrialist in the mold of Howard Hughes, Blue, the CEO of General Atomics Technologies Corp., has assembled assets worth billions of dollars through a combination of entrepreneurial instincts, bold legal maneuvers, and all-out bullying. Among other holdings, Blue and his younger brother, Linden, own an environmental cleanup firm in Germany, extensive uranium mines in Australia, real estate in Colorado, substantial oil and gas interests in Canada, and an airplane de-icing company in Iowa. But what Blue and his company are best known for is manufacturing one of the most important tools in modern warfare — the Predator, an unmanned spy plane that commanders in Iraq and Afghanistan credit with helping them fight insurgents. Blue is something of a Predator himself. A born opportunist, Blue is a razor-sharp businessman who will do anything to maximize profit, even if that means violating agreements with clients. Unsurprisingly, Blue has found himself in some legal hot water as a consequence. Nevertheless, he remains unapologetic. In the end, what matters to Blue is, as he says, "developing transformational technologies that could change the world. The rest of all this really doesn’t matter at all."
Students examine the blend of brilliance, tenacity, and hard-core stubbornness that define Neal Blue, one of the last businessmen of his kind in post-Sarbanes-Oxley corporate America.
Discussion Questions:
- Neal Blue's golden rule is "to always buy straw hats in the winter."
How do you interpret this tenet? Identify some areas of Blue's career
where this rule appeared to be in action.
- How did Blue come to control General Atomics? What possibilities did he see in the struggling company? How has he used it to pursue his personal obsessions?
- Describe the plan that Blue and his subordinates devised to renege on long-term contracts between General Atomics' uranium subsidiary, Heathgate, and its clients. What was Blue's response to the legal aftermath? Would you do business with him? Why or why not?
"The Player," pp. 134-142: How does business get done Ben Silverman style? That's easy — in perpetual motion, on the fly, at all hours, often far away from NBC's offices in Burbank, Calif., where Silverman serves as co-chairman of NBC Entertainment. But Silverman is more than just a television executive; he's a force of nature. A lifelong television devotee (his boyhood hero was former NBC chief, the late Brandon Tartikoff), Silverman made a name for himself in his early 30s as an independent producer, developing foreign show concepts for the U.S. market, and coming up with reality-TV shlock laden with product placements. He's already had some success in his new job; he elevated NBC to second from fourth place in the 18-to-49 demographic group it targets. But this year, as Silverman's first real slate makes its debut, NBC's new shows haven't generated nearly as much buzz as Silverman and his outsized persona have. The chatter around the ostentatious executive includes anecdotes about blowing off meetings, office absences, squishy business dealings, and party-animal behavior. Critics say that while he is a master salesman, he lacks the creative vision to restore NBC to its former glory. Will Silverman ultimately become a hero at NBC, as his own hero, the more conventional Tartikoff, once did? Stay tuned.
This article profiles Ben Silverman, the co-chairman of NBC Entertainment, who is nearly as compelling as the television shows he helps develop.
Discussion Questions:
- What marketing approach is Ben Silverman pursuing to restore NBC's
programming luster? Do you think it will work? Why or why not?
- What reasons does NBC Universal CEO Jeff Zucker cite for his hiring Silverman as co-chairman of NBC Entertainment in 2007? What experience did Silverman bring to NBC from his production company, Reveille? Why was it attractive to the network?
- Why does Zucker claim that he'd "rather be a more profitable No. 2 or 3 than a less profitable No. 1"? According to Silverman, why are traditional ratings an inaccurate measure of success in today's media environment?
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