February 12, 2013
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Business Finance Today
Fed warns of high-yield rally encouraged by monetary policy
Federal Reserve Governor Jeremy Stein warned that the speculative-grade debt market, which has expanded rapidly largely in response to the central bank's monetary policy, is overheating. "We are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit," he said. Bloomberg (2/11)
Treasury secretary nominee to face Citi questions at confirmation hearing
Jack Lew's work at Citigroup, before he joined the State Department in 2009, reportedly will be Republicans' focus during Senate hearings on Lew's nomination as Treasury secretary. "If taxpayers are going to prop up failed banks, they have a right to know what a key executive like Mr. Lew did at that time," said Sen. Orrin Hatch, R-Utah. Observers say Lew appears likely to be confirmed. "Mr. Lew has been confirmed by the Senate three times already," said Sen. Max Baucus, D-Mont. "I don't expect there to be any reason why he should not be confirmed this time around as well." Bloomberg (2/12), The Washington Post (2/11)
Your Bottom Line
A CFO is like a quarterback at early-stage companies
At the minimum, CFOs of early-stage ventures need to preen the company for follow-on financing, a task that about 1,000 startups will fail to achieve. More fundamentally, CFOs also need to take finance off the list of concerns for executives so they can concentrate on growth -- and have the gravitas to make high-level decisions, says Zenprise CFO Steve Valenzuela, who recently guided the company in an acquisition and has several similar feats under his belt. "You have to have the credibility to be able to say we should be spending 'X' on marketing, 'Y' on sales. Here's why we're making this investment, not this one," Valenzuela says. CFO.com (2/11)
Wunderlich Securities has doubts about nontrade-item accounting
Nontrade items on corporate balance sheets are increasing, and that could be a sign of hidden future margin or earnings exposure, according to a report by Wunderlich Securities. Nontrade items are typically receivables, usually a hybrid asset, and thus cannot clearly be defined as a receivable or inventory. Wunderlich speculates that some companies are managing them in a way that makes the balance sheet look healthier. "We believe understanding the accounting in this area can make investors more aware of how companies can manage amounts to make certain metrics like inventory days and receivable days look more favorable," the report says. Compliance Week/Accounting & Auditing blog (2/8)
In the C-Suite
2 questions to ask before you start problem-solving
Approaching innovation as a manager requires asking two questions to get a better idea of the problem, writes Greg Satell, a consultant and author of the Digital Tonto blog. Try asking, "How well is the problem defined?" and "Who is best-placed to solve it?" to get at the heart of your innovation issues. "Once we've asked the framing questions, we can determine which approach to innovation makes the most sense," Satell writes. Harvard Business Review online/HBR Blog Network (2/11)
What a gardener can teach you about competition
The same forces that guide a vegetable garden from planting to harvest can be applied to a competitive market, writes Howard Jacobson, emotional intelligence and empathic inspiration officer for Vitruvian. Vegetable beds need to be pruned and weeded and each seedling nurtured. If not, they will quickly become overgrown. "Just as the hyper-competitive annual bed will mature into a multi-species forest plot minus human intervention, competitors in a marketplace can also respond to competitive pressures by niching and thus reducing those pressures," Jacobson writes. Fast Company online (2/11)
On the Move
R. Dale Lynch
has been appointed senior vice president, CFO and treasurer of Federal Agricultural Mortgage. Lynch was vice president of finance at U.S. Silica Holdings. RTT News (2/11)
Off the Charts
Year of the Snake might bite stock market investors
Chinese New Year on Sunday ushered in the Year of the Snake, the one lunar year in which the Standard & Poor's 500 index has a losing record, according to Capital IQ. The index drops an average 2.9% in these years. Los Angeles Times (tiered subscription model) (2/11)
We treat [innovation] as a monolith, as if every innovation is the same, which is why so many expensive programs end up going nowhere."
-- Greg Satell, consultant and author of the blog Digital Tonto, writing for Harvard Business Review Blog Network
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