The World Financial Markets A Peek into the Turbulence

View all blog posts under Online Healthcare MBA | View all blog posts under Webinars


Host: Today’s webinar, the World Financial Markets: A Peek into the Turbulence with Dr. Yang and also Dr. El Tarabishy and I’m your host for today, Annie Li.

So as we begin, I just want to go over a few housekeeping items. I want to remind everyone to remain in listen only mode by muting your device. Please feel free though to ask any questions. We have a check box on the right of your panel and it we’ll like answer any questions at the end of the webinar. And lastly, just letting you know that we are recording this event and the link to the recording will be shared in a couple of weeks by our enrolment advisors.

So today we will begin by getting to know a little bit about our panellists before the core presentation and then we’ll take any questions at the end.

So first off, I am delighted to introduce Dr. Yang who will take us through the core presentation today and discuss the impacts of financial market activities. Dr. Yang received his PhD from the Stern School of Business, New York University. He is currently the professional of international business affairs at GW. He joined GW in 1994 and has been teaching courses in international finance, economics for the global economy, and financial institutions management.

Dr. Yang has received the outstanding faculty awards for the World EMBA and other MBA programs over the past few years. His current research focuses on bank risk management, exchange rate pass through, and international transmission of monetary policies. His recent publications appeared in the “Journal of Banking and Finance” and other academic journals.

Dr. Yang is also author of many book chapters and co-author of two books on economic sanctions. He has served as a consultant to financial institutions, multinational companies, U.S. government agencies, and international organizations.

Next, we have Dr. El Tarabishy who is very involved in the healthcare MBA program. He will highlight how the healthcare MBA program integrates today’s topic and other various business topics including accounting, entrepreneurship and marketing to help students develop and apply better business models within the healthcare industry.

Dr. El Tarabishy is currently an associate teaching professor of management at the GW School of Business. He’s an award winning author and teacher, recently awarded the most outstanding faculty and voted by students four consecutive years.

Dr. El Tarabishy is the only faculty in the GW School of Business who teaches in two nationally ranked programs. He developed the first social entrepreneurship in innovation and creativity courses offered to MBA and undergraduate students through the school of business. Dr. El Tarabishy is also the executive director of the International Council for Small Business, also known as ICSB, the oldest and largest non-profit organization across the globe, devoted to advancing small business, research and practices. ICSB is a coalition of more than a dozen national organizations across the globe and represented in over 80 countries.

So thank you Dr. Yang and Dr. El Tarabishy for taking time with us and speaking with us today, and if you have any – a few words before we begin please do, otherwise, Dr. Yang, I’m going to pass the mike over to you.
El Tarabishy: Good afternoon everybody or good morning because I see some people are on the west coast here, and we’re very delighted to have a lot of you join us on this webinar here. And what we want to start with is kind of setting the context why this session, why this webinar, and why this topic in particular here.

So it really has to come from a couple of main reasons or kind of what we call serendipity of sorts happening here. And for instance, let me start with one thing real quick. How many of you have travelled to Europe before and exchanged a dollar to Euros? If you can tell us, Annie, how many people said they did that.

Host: Sure.

El Tarabishy: And can you tell me quickly how many did?

Host: Right now there’s two, three, four.

El Tarabishy: You’ve done that. Didn’t you sometimes wonder why the Euro’s so high and the dollar is so low and you end up paying more for hotels and meals and everything in Europe and Europe became very expensive? Do you all nod your head? Well, I can see you. Right? And you wonder wow, this was an expensive trip. I remember the dollar was equal to the Euro. And you all agree with this? What are they saying, Annie?

Host: Some of them are saying yes.

El Tarabishy: Yes. So what happened recently? Recently the dollar surged. You know, maybe it’s a good time to go to Europe, right? Because now the dollar’s stronger or it’s becoming stronger versus the Euro, but what caused this, you know. If we ask this question what’s causing all of this? And some of you maybe heard in the news or read in the paper that the Greeks are having a lot of drama. Are they in the Euro? Are they out the Euro? Do they have the money to pay back? Kind of seems like there’s a lot of things happening in Europe and in the world also.

Look at Switzerland. What went on with the Swiss pound over there, you know. Swiss franc. I apologize. Right? And that’s kind of what began this. What’s going on in Europe? What goes on in these global markets and what does it relate to us and how does it relate to us in the United States? We’re a small world. Everything is interconnected. You know, think of it as the butterfly effect, right?

So I asked my colleague, Dr. Yang to come in and give us a little peak into this turbulence, tell us what’s going on, why is this all happening, and I even asked him some hard questions. What’s next? You know, I think I want to trade some on the currencies stuff so I was trying to get his insight on this.

So he gladly accepted my invitation and is going to share some of his experiences and knowledge in this and he’s going to tell us what’s going on. So next time you go out to a nice dinner with your friends or your colleagues or your significant other, you can sit down and explain to them a little bit about this turbulence that’s going on. Or you can start planning for her summer trip knowing very well how the currencies work.

So Dr. Yang, the floor is yours. We’re eager to listen to what you have to say about all of this.

Yang: Well, hello everyone. Thank you very much Annie, thank you Dr. Tarabishy for the introduction. I’m very happy to have this opportunity to talk to you about my understanding of the current financial markets, and particularly the foreign exchange markets.

So what I’m going to do is give you a very brief discussion of the development in the foreign exchange market and their impact on international financing, investments and operational management.

So I’m going to talk about a number of things. First, I’m going to look at some new developments in the Swiss franc exchange market, then the monetary policies adopted by the United States, the European Central Bank and Japan and how that’s affected the foreign exchange markets. And then last, I’m going to talk very quickly about how the turbulence in the international financial markets affect international capital flows including international financing and investments. And I’ll also talk about foreign exchange exposure. If you have any international operations actually, even if you do not have international operations, the changes in the exchange rate can affect all of us in different aspects.

So I’m going to start with the exchange rate regimes and the new developments with developments in the exchange rate regimes, and then monetary policies and the exchange rates. So these are the three major things in the recent developments in the global financial markets.

So first let’s look at the Swiss franc. You may have heard a lot in the last few weeks about the Swiss franc. What happened, happened in January, on January the 15th, the Swiss National Bank made announcements, kind of surprised the market, is that it’s going to renew the foreign exchange rate cap. So what were the cap? Then the cap was on one Euro was equal to 1.2 Swiss franc. So that was the cap. And then after the Swiss franc national – the Swiss National Bank made the announcement, then the Swiss franc surged significantly as I have highlighted in this slide. In just 13 minutes, from 9:30 AM to 9:52 AM the franc surged by 30 percent. And so the Swiss shares, the stock market, fell more than 12 percent. So that was the largest crash since 1987, and the stock market around the whole world, particularly in Europe, responded very, very dramatically.

So that was a major event at the beginning of 2015. Do you not wonder why the Swiss National Bank get a cap? So why was there a cap? Well, as I mentioned, the cap was 1 Euro equal to 1.2 Swiss franc. That means once this franc had to be equal to or less than 0.833 Euro. So the Swiss National Bank will not allow the Swiss franc to appreciate above that level.

So that is when the Swiss franc was lower than that, the central bank would do nothing, but higher, then the central bank would intervene in the foreign exchange market by selling the Swiss franc and buy Euro so as to keep the exchange rate at that level as I have highlighted here at 1.2 Swiss franc per Euro.

And you may ask why was there the cap? Well, that’s about three, four years ago when there was a debt crisis in Europe and the Eurozone and then Swiss Bank was considered a safe haven in times of stress, in times of crisis and so everybody rushed to the Swiss franc and the Swiss franc appreciated. But if the Swiss franc appreciated that will hurt the Swiss exports and so therefore the Swiss franc imposed a cap. Okay, you cannot go above this level. So that was the cap. However, over time because the Swiss National Bank had to buy Euros to keep the Euro high and keep the Swiss franc low, they accumulate a lot of foreign exchange. They accumulated a lot of Euros. And when they have a lot of Euros they have to reduce a lot of domestic currency so the monies apply interest. So there was potential risk of inflation.

So what triggered the cap renewal? The trigger was really the quantitative easing on prospect of the European Central Bank. And in January, the European Central Bank made the announcement that it would go through another round of quantitative easing so as to [unintelligible 00:12:35] of the Euro and increase the economic activities to stimulate economy, and that means the Swiss franc would appreciate even further. That means the Swiss National Bank would back a lot more Euros to keep the Swiss franc below the cap and they could no longer do that so eventually they made the announcement okay, we’ll let it go.

So that was what happened to the Swiss franc. The end result of that was the Swiss franc appreciated significantly and the Euro depreciated significantly.

So we talk about the quantitative easing. I’m sure you have heard about quantitative easing. And so this is a non-traditional money trade policy. So what is the traditional money trade policy? Now, you may have heard that the central bank in the past, every time that economy was in a recession you’d lower the interest rate and to stimulate economy.

So by changing the interest rate according to the economic situation, then the central bank is conducting a traditional money trade policy. Traditional money trade policy is to address the interest rate. However, when an interest rate is going down to zero you can no longer rule the interest rate below zero traditionally. And then the [prising] tool of the central bank is no longer useful, is no longer valid, so they have to try a quantitative tool. So that’s why we get the term quantitative easing.

So quantitative easing is simply by increase the amount of supply of money in the market. And so as I mentioned this non-conventional money trade policy and they can expand the money trade base. How do they do that? The central bank can purchase long term securities. In the United States the [treasury 00:14:53] securities, [treasury 00:14:54] bonds. And they also buy [unintelligible 00:14:58] securities guaranteed by the government sponsored entities like Fannie Mae, [Fred Mack 00:15:05] and their [unintelligible 00:15:07] mortgage backed securities. And they can also lend to commercial banks more money and they can literally buy even stocks in the stock market.

So however the central bank is printing money, use the money to buy assets in the financial markets and so there is a lot of money is being flooded into the market. That’s what we call quantitative easing.

Okay. The United States had three rounds of quantitative easing. It’s called Tier 1, Tier 2 and Tier 3, and Tier 1 was from late 2008 to the first quarter of 2010. Tier 2 was from November 2010 to June 2011. Then Tier 3 was from September 2012 to October 2014, right? Just a few months ago. And so these was three rounds of quantitative easing in the United States.

And then you may have heard about paper tender. So what is that? That is the federal reserve in the United States started talking about papering quantitative easing slowing down the quantitative easing in the middle of 2013, particularly toward the end of 2013. And so the talk about papering for quantitative easing and the stop of quantitative easing had a significant impact on the value of the U.S. dollar. So the value of the U.S. dollar started to increase from the second quarter of 2014. So from then till now the U.S. dollar appreciated significantly.

So quantitative easing – the United States stopped quantitative easing, but the European Central Bank and Bank of Japan, they are still continuing their quantitative easing. And so in a sense, the U.S. money trade policy is to be tightened while the European money trade policy, the Japanese money trade policy, are still very loose and that’s the [problemental 00:17:52] reason why the dollar has appreciated significantly against the Euro and against the Japanese yen.

Now, this slide shows you the amount of quantitative easing in the major advanced economies as compared with their GDP. So by October 2014, the United States quantitative easing was about one-quarter of the U.S. GDP. In the Eurozone it’s about 20 percent. Japan was more than half, more than 50 percent. So Japan did a lot of quantitative easing after the 2008 financial crisis.

Now, as a result of the disparity in the money trade policies, that is the U.S. money trade policy tends to be tighter, the European money trade policy, Japanese money trade policy, then tend to become even looser, then the dollar appreciative. This slide just shows you from the middle of 2014 until March of 2015 the dollar appreciated against the yen, against the Swiss franc, against the British pound, and particularly against the Euro.

Now, you may have heard about a composite measure of the value of the dollar. When we talk about exchange rate, most often we talk about [unintelligible 00:19:37] so exchange rates. Yes, the exchange rate between two countries. But we have an [unintelligible 00:19:42] measure, a general measure of the value of the dollar that’s called the [basket 00:19:47] exchange rate. So the effect of its exchange rate is shown in this picture. As you can see here, the value of the dollar was about 76, 77 as an index value in July and August last year, but now it’s close to 95. Again, that just shows you how much the value of the dollar has changed against other major currencies but just within one year’s time.

Okay. So let’s look at Japan. And Japan, as I mentioned earlier, has a lot of quantitative easing, released a lot of significant amount of money into their economy, but Japan is very different from the United States. Now, in the U.S. quantitative easing was mainly used to purchase government securities like the treasury bond and the mortgage backed securities, and basically in the bonds market and debt market. However, Japan has been following a somewhat different path and Japan used the money to increase bank lending to commercial banks. So commercial banks got a lot of money from the Japanese Central Bank and in addition, the Japanese Central Bank used the money or print the money to buy stocks directly in the stock market. And so you may have heard in the last few months the Japanese stock market just surged significantly and part of reason of that and the main reason for that was quantitative easing in Japan.

Okay. Now let’s get to the European Central Bank. So in the European Central Bank actually this slide shows to you the evolution of the new round of quantitative easing in Europe. Now, as back as in May last year, the governor, the head of the European Central Bank talked about how the value of the Euro was serious concern about economy because at that time one Euro was about $1.40, that is $1.40 per Euro. As you know, now it’s about 1.1 dollar per Euro. So the dollar appreciated significantly, Euro went down significantly as shown in this graph. And then in September last year, the European Central Bank capped their interest rates. Again, the head of the Central Bank was talking about the prospect of quantitative easing. And then on January the 27th this year, the European Central Bank officially announced that they’re going to pursue another round of quantitative easing, and expected the size of this round of quantitative easing would be somewhere between 850 billion Euros to 1.1 trillion Euros. And so what do they do with the money? They’re going to buy public and private sector securities. And what’s the – what the average amount of purchase every month is up to 50 billion Euros. Actually, I just read in a report they have done that by now. For the first month of quantitative easing they already spend 60 billion Euros on securities. And the timeframe work is between March 2015 and September 2016. So as I mentioned, already started on March the 9th so now it’s almost a month. They have spent 60 billion Euros.

So that’s the reason around for quantitative easing by European Central Bank. As I already mentioned, I would like you to compare the money trade policy in Europe, in Japan and the United States, particularly the difference. The U.S. is tightening or expected tightening, but the European Central Bank is still releasing a lot of money into the market. And again, this slide just shows you how much the value of the Euro has changed within the last year, particularly since the middle of 2014 and then it went down dramatically. And so last month there was a lot of talk about parity, that is one Euro would be equal to one dollar. Actually did not get to that point. I think the Euro went as low as 1.05 dollars per Euro and then bounced back a little bit. So that’s the Euro.

Then related to the depreciation of the Euro because money trade policy is so loose, then the significant impact in the financial markets, particularly the interest rate. So the interest rate in the European economies become historically low, very low. How low? Well, first let’s look at the deposit rates. We know that commercial banks have to deposit reserves for the central bank. There are required reserves and assets reserves. And so for assets reserves, that is if commercial banks put more money with the central bank, then the central bank would charge them an interest rate.

So you might be somewhat surprised just like you and me, when we put our money in the bank if we don’t earn interest – at this we’re not going to pay the bank interest. However, in the situation in Japan – I’m sorry, in Europe among the Eurozone economies if commercial bank more money than required in the central bank they have to pay an interest. As I show in the slide, right now the United States, the federal reserve pays commercial banks half – a quarter percent on their reserves. And in the Eurozone it’s a negative .2 percent on the excess reserves. And in their markets it’s a negative .75 percent. In Switzerland it’s a negative .75 percent. In Sweden it’s a negative .85 percent. Again, that means if commercial banks put money, excess money in the central bank they have to pay the central bank for putting money in their account.

So that’s about deposits. And then just look at the two year government bonds. In the United States right now it’s low, but it’s still positive. It’s somewhere between half a percent and one percent. That’s for two year government bonds. In Sweden it’s negative. In Germany it’s negative. In Denmark it’s even more negative. So the interest rate becomes very inactive.

So some of you may wonder why do people buy these bonds if you get a negative interest rate, that is you have to pay to let money to somebody else. And you may have heard about the functions of money. So just if I ask you a question what are the roles of money, why do we need money, right? So very often money has three fundamental functions. So [unintelligible 00:28:32] , that we use money to pay for purchase and the unit of account, that is we use money to measure the prize, to measure wealth, measure GDP, to measure things. And then another major function of money is store of value. That is we try to keep a wealth in particular accounts. It’s just like a storage. So you have a storage room. You put your stuff in storage for things, for commodities, for things that we use, and then money. You have to store your money somewhere and nowadays the cost of storage becomes so high. It’s higher than the return so that’s why – and people are still willing to pay an interest to store the money somewhere in a safe place because government bonds are supposed to be safe.

I just read something more recently. This is a report Wall Street Journal yesterday and it says a new development in the financial market. And [unintelligible 00:29:45] and they’re paying you government bonds of the [unintelligible 00:29:51] interest rate. So in previous discussion two year government bonds for several [unintelligible 00:29:57] the interest rate is negative. For five year government bonds for Germany, for Switzerland has been debited and now since yesterday and the Swiss government bonds become the first to offer a negative deal and that is basically a very, very new development in the global financial markets.

So how do these events affect the international business, international capital flows? Well first, since the Euro depreciated a lot and particularly the Euro interest rate became so low so therefore a lot of companies, particularly the European companies and the U.S. companies and they started to finance in Euro. I have a few examples here like [Total 00:31:03]. Total is a French company, oil and gas company, and they issued five billion Euro or perpetual notes, perpetual meaning [unintelligible 00:31:16] to pay some kind of interest effect. There’s no near the maturity now for their bonds. So that again for those of you who are interested, you can just look at the bonds market. And Mexico yesterday then offered a 100 year maturity bonds and that was not the level just a few years ago but now they have this long maturity or no maturity depth in the financial markets. And then Coca Cola just not long ago issued 8.5 billion Euro bonds at very low interest rates. And Warren Buffet, his company also plan to offer 3 billion Euros debt. And Kinder Morgan 1.25 billion Euro. And Chinese companies, they also increased their borrowing in the Eurozone in Euros.

So then financing in Swiss francs as I just mentioned, the Swiss franc, interest rate was so low and a few companies issued that in Swiss franc like [Ethel 00:32:38] issued 1.25 billion Swiss franc debt. For ten year maturity the interest rate was only about a quarter percent and for 15 years it’s less than three-quarters. And together with the capital flows with the borrowings and there’s a lot of capital flowing into the United States. You may have heard about – you have noted that you have stock market has been rising. Part of the reason was of inflows into the Unites States. So capital flowing all over the world into the United States are trying to take advantage of the [unintelligible 00:33:31] nature of the U.S. dollar and the economic recovery in the United States.

Okay. So the dollar appreciated, the Euro depreciated. As we all know that most of the commodities primary goods prices are measured in U.S. dollars. And the dollar surged, then correspondingly the prices of commodities went down [unintelligible 00:34:04]. And you may have heard by now the oil price has come down by more than 50 percent since last year and part of the reason is because the dollar surged. It’s not always. The supply storage, the demand storage also played an important role. And of course the oil priced decrease hurt a lot of companies, the oil companies in the United States, across the world and their stocks went down significantly and then went up another cost, their capital spending and lower their earnings forecast. And in particular countries you might heard – you have might heard with Russia, Venezuela and some other OPEC countries their revenue from their oil of course went down significantly. And other examples of commodity prices like gold prices and prices of some metals and so on, they were also significantly affected by the dollar surge.

Okay. So when the exchange rate changed dramatically, remember what happens to companies, to business, to you and to me, to everybody else, okay. The dollar surge increases foreign exchange exposure. And you might say well, how does that affect me individual? I’m not in Europe. I’m not in Japan. I’m not anywhere else. But as professor Tarabishy mentioned to you earlier, that if you go to Europe now it’s a lot cheaper than before. So if you have travel plans then that will be – have an impact on you and me for travel expenses. And also, if you goods produced in European countries, in Japan and it’s that the price of that in U.S. to be somewhat lower. However, for U.S. companies if they have a lot of [unintelligible 00:36:27] in the Eurozone there’s going to be a net income on their earnings. So that’s why a lot of U.S. companies are forecasting their earnings to be down from abroad.

And so yes, goods and services. The dollar surge make U.S. goods and services more expensive and therefore it’s going to cause U.S. price competitiveness laws. And goods and services produced elsewhere, particularly in the Eurozone will become less expensive to U.S. consumer so we expect our imports from these economies are going to rise. So we are going to expect our trade balance to deteriorate because of the dollar surge.

That’s from the U.S. And then for emerging markets, I’m sure you have heard about the various problems from emerging markets, financial prices, you may have heard about the debt crisis in Latin America in the 1980s, the peso crisis in the 1990s, the Asian financial crisis and so on. Emerging markets are very, very vulnerable to exchange rate changes. So there’s a lot of talk now is about Brazil. And Brazil borrowed a lot of dollar debt in the past few years because after the 2008 financial crisis Brazil and a few other emerging economies took advantage of low interest rates in the United States in the dollar and they borrowed in dollars, and now the dollar appreciated. And so their debt borrowed increased significantly and so therefore if the dollar continues to surge and you might expect some borrowers in emerging markets will have significant financial difficulties and that has been called the dollar damage to the emerging markets.

Now let’s look at this point exchange exposure to the parties of U.S. companies and this is again taking from Wall Street Journal. So the different industries are affected somewhat differently. According to this data, the information technology, energy, materials and healthcare, these industries, okay, have their revenues more than 50 percent coming from abroad so therefore have significant foreign exchange exposure, the dollar surge and then you have in [fact debt 00:39:27]. But for healthcare think it’s about 51 percent. Of course that includes a lot of multinational companies like Johnson & Johnson, pharmaceutical companies, however you – I’m sure you know that a lot of U.S. healthcare providers – we have a lot of patients from other countries and will the dollar value affect this? Well, it depends on the demand [elasticity 00:40:01]. I believe the demand elasticity for healthcare is not very sensitive. That is when somebody needs to come to the United States to see a doctor to have a particular treatment, the value of the dollar definitely affects their expenses, but are they going to hesitate? Are they going to refuse? And that I don’t know. And you know better than I do so …

So that’s something you might look at how the foreign exchange market, the value of the dollar, the Euro, affect our services in healthcare, about the revenue and the number of patients visiting U.S. hospitals.

Okay. Now I’ve just given you a very brief discussion of the financial market’s development, the interest rates, the foreign exchange exposure. However, I would like to mention one very important aspect in the foreign exchange market. We are all very concerned about the dollar surge in the last few months and there’s a lot of talk about the low interest rate, a lot of talk about the Euro, about the Swiss franc. However, I’d like you to look at the long run; the short run and the long run.

So I’m going to show you a number of slides of exchange rates in the short run and long run. This slide shows you the dollar’s value in the long run. That is from 1973. Now, why 1973? 1973 was the year when the [Bretton Woods] system or the fixed exchange rate system ended or collapsed. Since then the value of the dollar became very volatile.

So as you can see from this slide, at that time the value of the dollar was at 100 as an index number. So the level – the value of the dollar had 100 in 1973, then it went down dramatically in 1985. It went up by 45 percent, more than almost 50 percent at that time. So the dollar increased significantly. And then in the next few years it went down almost 50 percent. As you can see in this graph here it went down to a level in 1989 and then again in 1995. So 1995 was the lowest point in that part of the time period. So as low as about from 145 in 1985 to about 80 in 1995, and then it went up again in 19 – in 2003. So there was a significant increase. And then in the next few years it went down significant, particularly during the 2008 financial crisis. As you can see here in 2008 that the dollar went to a historical low. Then from then it went up in 2009, went down again in 2011, again at a historical low. So from 2011 to now then we have a relatively big increase.

So the question here is yes, the dollar has appreciated significant now. Will that continue in the next few years? So from a historical perspective, the value of any particular currency as long as it is floating can change dramatically within a relatively short time period.

So that’s the dollar. Now let’s look at the Euro. And the Euro started in 1999. As we know, the Euro replaced the Eurozone economies domestic currencies like the German marc, French franc, Italian lira, and that was at the beginning of 1999. At that time the value of the Euro was 1.18 dollars per Euro, and then in the next few years it went down dramatically. So in 2000, October 25, 2000, it went down as low as 0.827 dollars per Euro, just below one dollar. However, after that it went up, up, up and then all the way till 2008 it became almost 1.60 dollars per Euro. Then after that the value of the Euro went down and up, down and up, but now – and this is the lowest point since 2003, 2004. However, it’s not the historical low.

Well again, I’m showing you here that the value of the Euro can change dramatically within a couple of years’ time. Again, what do I mean here? A lot of companies, as I mentioned to you, borrowed in Euros. Are they going to take advantage of the low interest rate? Now, what if the Euro appreciates, for example, in the next year or two by ten percent? So their cost of borrowing would be significantly higher than the dollar. I’d like you to look at the long run as well as the short run.

So finally, the Japanese yen. And the Japanese yen in 1973 was almost 300 Japanese yen to the dollar. And you see a long term that the yen appreciates or the dollar depreciates. Then the highest value of the yen was in 2012, but in 2012 till now the dollar has appreciated against the yen more than 20 percent, but if you compare the historical trend this is still at a relatively low level of the U.S. dollar. And what’s going to happen in the next few years? Is the trend going to continue?

So these are the questions, the type of issues, I’d like you to consider. That is, when we are making international investment decisions, international financing decisions, when we talk about foreign exchange exposure, we should think about the long run and as well as the short run.

Okay. So … And that is my discussion about the foreign exchange market and the development in the financial markets and I may take a few questions if time permits. Thank you.

El Tarabishy: Thank you, Dr. Yang. Annie – is there any questions being asked by the students? Oh, by the students. By the prospective individuals.
Host: Right now I think we’re – I think we’re okay right now. If the attendees, they have anything they want to ask online as well, over the phone or just typing it in. I’m just waiting for some of the questions to come in.

In the meantime, Dr. Tarabishy, I don’t know if you guys have any more last words in terms of –

El Tarabishy: I have a question for Dr. Yang. Dr. Yang, one question I have here, with all this interconnectivity of the currencies that are happening and what’s currently going on between Europe and the U.S. and the whole concept of exporting versus important, okay, what’s your general reaction currently about the U.S. manufacturers in the U.S. or business individuals and actually buying or acquiring products and services from Europe based on the currencies that you discussed?

Yang: Okay. Thank you very much, Professor Tarabishy. Currently the value of the dollar and the Euro should have significant impact on U.S. manufacturing and on U.S. imports and exports. But U.S. manufacturing is – it is for domestic consumption the impact may not be a significant, but there is still an impact because you face competition from imports from Japan and from Europe and so that really depends on what we discussed in economics is the price elasticity of demand and how sensitive people are to prices. And in a more differentiated products, things not easily replaceable by imports so they can hold onto their prices. For anything that’s more competitive they might have to lower the prices.

So that’s for domestic manufacturing. However, as I mentioned in the discussion, a lot of U.S. companies generate revenue from abroad. Even healthcare industry as a whole generates more than 50 percent of the revenue from outside the United States and that can lower the profits of these companies if the dollar continue to surge.

But there is another point of it, the bright spot of the exchange rate. Let’s suppose Johnson & Johnson, if they produce things in Europe, in Japan, in other parts of the world and then they sell back to the United States, that’s going to increase their price competiveness because their production costs in Europe become lower, they can lower their price and increase their sales in the United States. So that can help them actually. It depends on where they’re producing.

So generally speaking, when the dollar surges it hurts U.S. exports and helps U.S. imports.

El Tarabishy: Thank you. And Annie, is there any questions from anyone?

Host: Everyone just wanted to know also like, you know, is there anything within the program, the MBA program will further – how does this further expand on economics and finance and what they can get out of it to apply back into the healthcare program further?

El Tarabishy: Great. So let me take the first crack at this, at the answer apparent to this question. So the healthcare MBA program is basically what we saw today in this session and other sessions we have, right? Is we’re talking MBA. We’re talking Business 101. We’re talking, explaining, teaching, making you aware of all the information, data and more important, the knowledge that comes in in the business world. We give you everything that you need to know in terms of business, for you the healthcare professionals, and it can be any type of healthcare professionals: doctors, nurses, physicians, administrators. You need to understand the business world. You need to understand that when a dollar surges what happens around the world as Dr. Yang mentioned.

So when you join our program, the healthcare MBA program, we treat you as individuals coming into the business world, but we relate a lot of the teachings that we do and the many courses that we do to healthcare examples so you can say, “Oh, now I understand that 50 percent of businesses in the healthcare domain are also interconnected with the world.” So when a dollar surges things change relatively quick. There’s this turbulence that’s happening and it has nothing to do with the product or the service, it has to do with qualitative easing. It has to do with the Swiss Central Bank or the European Bank, right? And this is where you start kind of seeing the globe from a whole different perspective, right? You start becoming aware. There’s recognition that this is a part of a bigger game, a bigger cosmopolitan of sorts.

And the courses that we teach in the program, some are required courses: finance, accounting, marketing and, you know, operations management. And some are electives, right? That you start picking and choosing the ones that interest you. I teach a course in entrepreneurship so my course on entrepreneurship is for those that are thinking or toying with an idea for a new business or a new service within a company or just as a standalone. So they say, “Well, how do I put this business together? What do I need to know?” So you take a course with me. You’re really into finance and you really want to get into financing but related to the healthcare field so you take a course with Dr. Yang or you take another course on marketing with Vanessa Perry or another faculty or Dr. Dyer and so on.

So again, it’s your building a whole new skill set, right? And I divide it up into three parts and this is very important for everybody to understand. The first part is we teach you about the system, the system of business, what you need to know in the business world, right? And what is the best practices and worst practices. And so that’s first “S” which is the system.

The second part which is as critically important is we bestow upon you based on knowledge and theory and practice a certain set of skills, business skills that you need to continue your entrepreneurial endeavours within the industry or outside; promotions, you know, you make a parallel move, you switch to a different industry yet in the healthcare domain.

So there’s a set of skills that you acquire with us within the school of business. And third and most important, and that’s the third is we kind of really hammer the point about the self, you the individual. What you are you doing now and why are you interested in this program and how this program can help you to the next level?

So a lot of it is questioning your mindset and your aspirations and kind of saying where you want to head with this and what are the skills that you need to do this. So three S’s: self, skills and system. And Dr. Yang, did you want to jump in a little bit about this course as well in healthcare so just going to give an example?

Yang: Yeah. I think that this is a very good discussion of the courses. I teach also economics, microeconomics and macroeconomics in healthcare. So the most important thing is to understand how the consumers or the users of the healthcare services – how price sensitive they are. So it’s called the supply and demand. I look at how they are sensitive to the prices. So this is a later aspect of our analysis. We look at the market. We look at a supply, look at the demand and look at the price sensitivities and for healthcare it’s a very different industry because when people need healthcare they may not be very sensitive to price changes.

Now, related to the exchange rates, as I mentioned, that when patients from other countries come into the States for healthcare are they sensitive to the dollar’s value? Are they sensitive to expenses? Again, we may look at this and there’s a few who are working in the frontline may have a better idea. So I heard that increasingly we have more patients coming from other countries to the United States and so the change in the exchange rate, a change in the market can affect the services, the demand and the revenue and the management of our healthcare industry.

El Tarabishy: Thank you. And we’re at 1 PM now Eastern Standard time. So I promised that we’ll stay on time. And Annie, you want to close the session and then please make sure that everybody has our email addresses in case they want to reach out to us or reach to your office and then reach out to us.

Host: Yup. For sure .And I was just going to say yeah, we are on the hours so we do have a couple of other questions and I will ask that offline.

El Tarabishy: Well, why don’t we take a couple of more –

Host: – No. I can ask it offline and then we get the enrolment advisors to follow up with them directly just so then we are – we kind of stay on the schedule. And again, so thank you to both Dr. Yang and also Dr. Tarabishy for this informative session and I think the answers were really well put.
So for anybody who has any further questions from this webinar or have interest in this program do contact our enrolment advisors or look into our website and the details are on the screen here with you. And then just a reminder that we do – we have been recording this session so then the recording of this will be provided to you through our website and also through our enrolment advisors in a couple of weeks and that’s about it.

So if there’s any questions, again let us know, but otherwise thank you everyone and have a wonderful afternoon or morning.