Last week I was remembering an old incident that happened in 1987 or so. My mother had a big fight with me, and took the rant to my father. She was incredibly upset because I spent all the day outside my house and I would stay out and return at odd and late hours.

What is very funny is the fact that I was not hanging out with friends, in the pub, or drinking, but working on what was then one of the first accounting consulting firms with a CP/M networking systems running compiled Basic accounting programs (batch processing back then…)

I started to work half-days but was immediately drawn into the mist of programming.  I would spend all day learning how to extend the power of the language, building complete new curse libraries to liven the other way bare screens of the time. I did not mind working 12 hours straight if that meant learning something new about sending ASCII codes to the printer to make the invoicing scheme better or faster, or using my first ever relational database, DATAFLEX.

But my mother was shocked. She considered that if I got paid for working 5 hours, I should not spend one minute more inside the office. She would rather have me inside the pub drinking beer, or going out with friends at night. The fight got so bad, my father wanted to go talk to the owners of the office so they would keep me away from the place after my five hours.

These are common traits of mediocre Latin America heritage. It is only now that the new generation is learning the advantages of passionate work, no matter how long the day gets. I love spending 14 hours straight working, and I loathe 2 hours of meaningless chat at a party where I hate the music, the people, and the environment. I was lucky enough to avoid giving up to my parent’s whims. Had they worked harder when they were young, they would not be in such a tight position now (they are basically retired on a minimum pension.)

Who thought my parents working over 8 hours was demonic (I find no other way to put it, it felt as bad as if my parents found me drunk)? I wonder why complete generations grew on these beliefs. The side effect is the actual state of Latin America, and only recently have we been able to break the mold and get people excited and proud about giving 100% no matter what the clock says…

written by Administrator

I feel the end on an era coming close. I had this feeling for quite some time, and now I think I see clear signals of it materializing. Panama is changing, and the economy is giving turns for the better and for the worse. Yet it is relative to which side you are on.

Panama had six past semesters of unprecedented growth. This year GDP will surely be above 7%, with financial services, tourism, telecommunications and construction leading the way. However, the economic growth and market liquidity brought along inflation, and the first ones to feel it were the lower classes.

Let me give some clear examples.

I used to make a supermarket buy every week. If I wanted to save money, I would go low and buy basic staple food (rice and beans…) I would buy cheap local ice cream and maybe local cookies. I could probably do it all within the 25 to 35 dollar range. When things got better, I started buying wine from Chile and Hagen Daze ice cream and I would spend around 80 dollars on a supermarket. But I did not complaint since I would enjoy my Spain paella and Greek olive oil.

Nowadays I buy a modest supermarket for 70 dollars. My expensive supermarket visit goes well over a hundred dollars. If you compare, the rich people are spending 20% more, from 80 to 100. But the poor people went from 35 to 70. That’s a 100% increment, which wasn’t met in salary increases.

The same goes for cars. In 1998 I bought a Daewoo Racer for 7,900 dollars. It was a great car and I loved it. The day I sold it I cried, and I would by a Daewoo anyday since I had two and they never broke down.

Ten years later, I can’t find a brand new car for less than 13,000 dollars. That’s around a 90% increment for the lower classes. Of course, the new BMW series 3 is around 35,000 dollars; it actually went down in price! So the young executive gets a saving cut, but the lower class worker gets a hefty increment he or she might not pay.

The last exhibit is Panama’s department stores. The ones with fancy names like “Madness” or “The Crazy Goose”. In the old day, a place like “The Cost” would have cheap beds for 89 dollars. It was fine. I planed my first home with a 500-dollar budget, which is not much but it did fine. I did not buy fancy stuff, but I got a bed, a fridge, an oven, etc.

Nowadays a place like “Conway” has elite furniture from India at two thousand dollars or more price tag. Even the cheaper furniture from China is getting a little to steep for the common worker.

No wonder the SUNTRAC, Panama’s construction union, went on strike. I can understand the predicament of poor people, yet I think closing down venues is not the answer.

Sadly for the average Panama person, the answer is meeting the new benchmark with more work and more savings. The era of spending it all and wasting it all in parties (I love Panama, but even Panamanians will agree to this) will be over soon. Those who do not step up to the challenge will be left behind.

What I fear is that discomfort among popular sectors will push fascism. Panama is notoriously known for its hate of the left. Popular sectors will gladly search for answers in the right wing fascist parties (such as the Arnulfismo, since Arnulfo Arias studied in Germany and was an eloquent believer of the German Miracle of 1936). The first wave of xenophobia against the Colombian immigrants is beginning to gain crescendo.

The ending of the golden era of affordable material items is over. Sadly the next era might be one of polarization where one sector of society grows ever more wealthy while another is weighed down by its own lack of education, drive and desire to evolve.

written by Administrator

Although unusual in me, I have a moderate rant on professors in Panama who teach the Modigliani-Miller theorems. Let us first refresh what this theorem addresses (and these excerpts are from www.ifa.com):
The Modigliani-Miller Theorems concern decisions about aspects of the accumulated savings stock. The basic model was formulated in Modigliani’s and Miller’s essay, “The Cost of Capital, Corporation Finance” and “The Theory of Investment” (1958). Two other important essays followed in 1963 and 1966. Using this basic model, Miller and Modigliani derived two so-called invariance theorems, now known as the MM theorems. As Peter Bernstein asserts, “You have only to mention these letters to finance people, and they know what you mean.”

The Model of Portfolio Choice and the Capital Asset Pricing Model focus on financial investors, while Merton Miller, initially in collaboration with Franco Modigliani, established a theory for the capital market relationship between the capital asset structure and dividend policy of production firms and firms’ market value and costs of capital.

The main message of the MM theorems is as follows: a firm’s value is unrelated to its dividend policy, and policy is an unreliable guide for stock selection. The MM theorems have become comparative norm for theoretical and empirical analyses in corporate finance. Merton Miller, who died in 2001, is the researcher who has dominated these analyses during the last two decades. He has made a unique contribution to modern theory of corporate finance.

In the latest particular case of a college professor at a graduate course, the assignments revolved around establishing fictitious cases where the students had to resolve the MM theorem using given assumptions of the likely outcome of different investment, their expected pay-offs, and the cost of a fixed pay-off with insurance. This is an exercise that involves basic non-linear programming, and most problems are also solved using simple matrix multiplication.

The problem begins when the professor makes the assignment tedious, by making most of the numbers variables. When I saw the problems I recognized an equation easily solved with substitution. The problem was all of them gave me negative solutions, and negative outcome solutions in the system of equations meant the solution had no mathematical solution within the positive real numbers, so it could not be solved.

Now, I was puzzled. I did not study mathematics, but a majored in finances and have resolved more complicated problems using complex non-linear programming in Python and Java. So I was either having a very unlucky day, I had sudden amnesia, or all the problems indeed gave solutions outside the expected positive real number realm.

The student in question returned to class with an empty solution assignment, frustrated, and I was left to ponder why it had happened. No matter how hard I searched the Internet I could not find a solution to these problems.

It turned out the professor had indeed made all the problems unsolvable, and the rest of the class was spent making assumptions as to what the finance teams would have done in real life.

Is it me or this seems the most idiotic class in the world? I already have a big enough problem in Panama, where colleges graduate MBA’s who are hardly fit to manage a hot dog stand, let alone a more complex business. Why on earth would the professor spend so much time teaching problems without a solution? I could understand explaining one or twice of these in class so students would know what to expect in real life, but the whole class teaching unsolvable equations? I would think explaining non-linear programming to solve systems of equations is a much better topic. Or even explaining how to correctly rate given probability rates using statistics is also a valuable choice. But I fail to understand why a professor would show off his (lack of) knowledge of the matter with the poor selection of assignments.

I tend to find fault with the deans of these colleges, who barely look at the curriculum of their professors, and at the professors, who confuse a pile of papers stacked together from different sources with real college course material that coherently address a subject. Our colleges are full of said individuals, to whom form is more important than content, and who are more interested in using a suit while lecturing than the innate content of the lecture.

Mediocre professors produce a constant batch of mediocre students who later become mediocre businessmen and women. As the value of a college degree lessens every day, colleges will resort to softening doctorate programs as students are desperate to obtain another degree to make a difference in their resumes. Colleges will respond with doctorate programs of inadequate quality, but easy enough to keep the college income high and the students from dropping out. When money and not quality of education dictates the standards of society, the result is a mass of poorly prepared individuals who will surely fail when the benchmarks of market dynamics became unachievable to the ignorant and uneducated.

Sadly we might not have the students to blame, but the institutions and educators who were in the first place also ill-prepare to teach.

written by Administrator