Bobby Bonilla Day

Every July 1st is Bobby Bonilla Day! You may not be aware that the now retired slugger signed a contract with the New York Mets in 2000 that deferred his $5.9 million salary in exchange for about $1.2 million per year from 2011 through 2035 on July 1st. And while this is a great payday, Bobby Bo recently announced that he was auctioning off his copy of the famous contract. The package includes a baseball signed by Bonilla, a game-used bat, a Zoom call, breakfast and dinner with Bonilla, and attending a Mets game with the slugger. The starting bid is $10,000, so it looks like he will make even more money from the contract.

Inventory Spikes

During 2021, much of the talk concerning inventory surrounded shortages due to a variety of factors. In response, many companies increased production and orders to combat supply chain disruptions and increased consumer demand coming out of COVID-19 lockdowns. Now, it appears that companies have overshot demand as inventories have surged. For example, inventories for global manufacturing companies reached a record $1.87 trillion. As a result, inventory turnover for manufacturers increased to 81.1 days. And retailers are no different: Inventory for Macy's, Target, Walmart and other large retailers has increased from 17 to 45 percent compared to last year. This increased inventory is a boon for off-price retailers like Ross and TJ Maxx, which have a larger supply from big retailers offloading excess inventory. For many corporations, the excess inventory will likely negatively impact the bottom line.

Bad Luck Investing

Hopefully you realize that the best time to invest is when stock prices are low and the worst time is when prices are high. But patience is a virtue and can have rewards. A recent article introduces Betty Badluck, who just happened to invest at the stock market tops during the past 35 years. So what happened to Betty? As you will see, while the returns were not fantastic, over time, the stock market has historically rebounded and she still has three times her investment in real terms. This is an important note on stock market history: While we can't predict the future, over the long-term, the stock market has historically provided positive returns.

Volatility And IPO Slowdown

When a company is undertaking an IPO, surprises are not good. The CBOE Volatility Index (VIX) is a measure of the market's 30-day expectation of future volatility. When the VIX is high, the market returns are volatile, which makes pricing an IPO very difficult. When this happens, IPOs slow down. During early 2022, the VIX has been rising due to uncertainty in both the global and domestic economies. As a result, the IPO market has slowed down. In fact, IPOs are only 75 percent of last year's pace.

NPV Analysis

It is always interesting to see a real-world application of concepts you have learned in class. Recently, Voyageur Pharmaceuticals Ltd. released the results of its capital budgeting analysis of a barium sulfate project in British Columbia, Canada. Notice the company repeatedly refers to the project NPV, but also calculates the IRR and payback period. The report includes the key variable assumptions and the NPV per share. What we also find interesting is the sensitivity figure near the bottom of the article. The company shows the sensitivity of the project to changes in operating costs, revenue, and capital. It appears that the NPV of this project is most sensitive to changes in revenue.

Century Bonds Issued

With the threat of an increase in interest rates, it appears to be a good time for borrowers to lock on interest rates for a long time. TTUN is the latest to do so, issuing $1.2 billion worth of century bonds, that is bonds with a 100-year maturity, at a coupon rate of 4.45 percent. At the same time, TTUN issued $800 million of 30-year maturity bonds at 3.5 percent. Other Big Ten universities, including the University of Minnesota, Michigan State University, Rutgers University, and THE Ohio State University have issued century bonds in recent years.

Onshoring

Which automobile company exports the most cars from the U.S.? Most people would probably guess Ford or GM, but for the 8th straight year, BMW is the U.S. auto export leader. During 2021, BMW exported 257,876 cars valued at $10.1 billion from the company's plant in the U.S. Although many are concerned with the negative effects of offshoring manufacturing, there are also benefits to onshoring.