Sometimes I wish I were paid for things nobody knew, and I would sit there, rich as Buffet, content as a fruit basket atop the head of a voluptuous woman (don't stop me when I am feeling literary), tsk-tsking like Solomon, and letting man's freewill and lack of judgement reign.
For example, nobody knew that when mortgage lenders or home buyers chose to lie or accidentally mistate qualifications for loans, thus increasing home ownership nationwide, that scores of companies would end up taking massive losses. Who knew that increased home ownership at astronomical pricing would become an inverse indicator of the success of certain financial firms?
We know that now.
Or take embryonic stem cells. Or maybe don't take them. The the recent, yet tentative, discovery (as reported in the N.Y. Times) that adding certain genes into skin cells reprograms them into embryonic stem cells--much to the delight of those concerned about using actual embryos--should point out the rewards of patience and due diligence. Who would have realized that we need not rush into creating massive medical farms filled with potential baby material redirected to curing the skin cancer of suburban moms? Did Bush know? Did those rushing to say that the death and diseases of those alive now are paramount above all other issues, did they know?
Well we seem to know a bit more now.
And in the same way that preventing death to the living was paramount to those in favor of any sort of stem cell solution, so too that mode of reasoning extended to views on Iraq. The mantra has been, "Bring them home, because they are dying".
I've oft imagined what some mothers in the southern states might have said come the Civil War's end. "Damn, we lost a lot of owa young'ins, 'n fer what? A bunch of "blacks" and Nowthen business interests. Lawd what a waste of beautiful lives."
Yet the news out of Iraq is changing, modifying, so that the facts are starting to sound louder and clearer than the ability of others to distort them. It becomes a surprise, and a problem, for some, when there is no fighting in Basra, in the western sands, in Kurdish regions, and now in Baghdad. Who could have imagined?
We are discovering now.
Such reversals ought to be enligtening. Often encouraging. At the point when we think we have it all figured out, and when everything has been done, with every bit of knowledge learned, every God rendered irrelevant, things unseen reveal themselves.
Tuesday, November 20, 2007
Wednesday, November 7, 2007
When Cheng Siwei Speaks, the Dollar Bindeezes
Today the market fell a whole bunch of 2.5%, or more, and you could pick your poison:
The more worrying factor is that people probably have not realized how iffy and topsy things can get. The last thing you really need, on the way to a financial meltdown, is the inability to do anything constructive, from a Federal Reserve action perspective. And yet, we are fast approaching that point.
If the dollar was stronger, and the United States was the only game in town, and it's not, and it's not... we might be able to be somewhat cavalier and contemplate more central bank liquidity drippings. The Fed could lower rates, and we could sit around and wait for everything to work itself out. Creating a comfort zone for financial firms might be the GED version of getting the economy to graduate to normal productivity, but it has been done before.
But we stand at the point now where the world is in competition, and where money not parked here, can be parked perfectly well in other places, like Euroland, in Europlaymoney. Other nations in Asia and the Middle East now have the types of pools of capital worthy of preservation and active management.
Which is to say, while we don't necessarily need their money (aside from its handiness in proping up our government budget, staving off complete collapse, and us all taking to the fields to eat grass for dinner), they are fast hitting the point where they don't need our money or investments, and that is new, and not entirely helpful given our nation's budget contraints and debt binges.
- Chinese officials making wise points about not putting your money (all 1.5 trillion of it) into depreciating assets (the dollar), while simultaneously selling us still more multipurpose toys (Bindeez) that you can either play with or comatize yourself.
- Various companies, from Washington Mutual to Morgan Stanley to General Motors announcing slightly massive losses, reaffirming a central thesis (as in, OUR central thesis) that the head of Merrill Lynch is owed a collective apology for not being uniquely incompetent, but well in line with the collective incompetence.
- Certain ambitious New York attorney generals deciding to put pressure on various financial firms for possible fraud in their evaluation and dispensation of loans to the masses (masses who, we might add, are all innocent, having had no hand in the massive body blow to our nation's financial posture).
The more worrying factor is that people probably have not realized how iffy and topsy things can get. The last thing you really need, on the way to a financial meltdown, is the inability to do anything constructive, from a Federal Reserve action perspective. And yet, we are fast approaching that point.
If the dollar was stronger, and the United States was the only game in town, and it's not, and it's not... we might be able to be somewhat cavalier and contemplate more central bank liquidity drippings. The Fed could lower rates, and we could sit around and wait for everything to work itself out. Creating a comfort zone for financial firms might be the GED version of getting the economy to graduate to normal productivity, but it has been done before.
But we stand at the point now where the world is in competition, and where money not parked here, can be parked perfectly well in other places, like Euroland, in Europlaymoney. Other nations in Asia and the Middle East now have the types of pools of capital worthy of preservation and active management.
Which is to say, while we don't necessarily need their money (aside from its handiness in proping up our government budget, staving off complete collapse, and us all taking to the fields to eat grass for dinner), they are fast hitting the point where they don't need our money or investments, and that is new, and not entirely helpful given our nation's budget contraints and debt binges.
Monday, November 5, 2007
Prince of the Citi Falls, Analysts "Rethink"
Well it took awhile, but the collective wisdom has finally turned its attention away from the Stanley O'Neal crucification process. Other companies are starting to do last-acknowledge losses and reprice portfolios- what Merrill and its CEO did first.
One was beginning to wonder about people's internals, as though isolating O'Neal as the worst CEO in the universe might somehow protect them from the fact that nearly everyone messed up, miscalculated, or mispriced, and that a blizzard of economic craziness is on its way.
This week we are graced with the retirement of one Charles Prince, who peeped not a peep while O' Neal was tarred blacker than black for having created Merrill's quarterly loss of about $2.5 billion. Now Citi has come forward, estimating writedowns and losses that match or exceed Merrill's, to date. Somewhere someone is doing a happy dance, while tossing $160 million dollars in the air, misery loving company.
Today the Wall Street Journal in their "Heard on the Street" column suggests that analysts are now coming to the conclusion that Merrill's write downs were not such an anomally after all. No kidding.
So now it's not O'Neal singular wrongness, it's the pricing models? He can come out of the corner with the dunce cap on, or, at least, be joined in that corner by a broad swathe of the financial industry as the days and weeks pass.
One was beginning to wonder about people's internals, as though isolating O'Neal as the worst CEO in the universe might somehow protect them from the fact that nearly everyone messed up, miscalculated, or mispriced, and that a blizzard of economic craziness is on its way.
This week we are graced with the retirement of one Charles Prince, who peeped not a peep while O' Neal was tarred blacker than black for having created Merrill's quarterly loss of about $2.5 billion. Now Citi has come forward, estimating writedowns and losses that match or exceed Merrill's, to date. Somewhere someone is doing a happy dance, while tossing $160 million dollars in the air, misery loving company.
Today the Wall Street Journal in their "Heard on the Street" column suggests that analysts are now coming to the conclusion that Merrill's write downs were not such an anomally after all. No kidding.
So now it's not O'Neal singular wrongness, it's the pricing models? He can come out of the corner with the dunce cap on, or, at least, be joined in that corner by a broad swathe of the financial industry as the days and weeks pass.
Friday, November 2, 2007
Cayne and O'Neal, Smoke and Mirrors
If one is not a rather deliberate optimist, of late it is rather hard to see that the sky is not fallen under foot. Chrysler is laying off thousands for somewhat unrelated reasons to the multitude of other firms laying off for mortgage related miscalculations. Of course, the way these things fall out, it is so easy to deride Stanley O' Neal, the former head of Merrill Lynch, for his one quarter of possibly understated losses, than it is to knock the years and years of mismanagement and mismanagers of the airline and car industries, or even others in the financial industry.
Stan is held up for a particular type of beating, namely because he let the firm drift into highly risky methods of making money while at the same time failing to be appropriately clubby with his underlings. One usually does not like to factor race into the ridicule, and when you have written down $8 billion, and with possibly more losses to follow, it's easy to leap to levels of anger not quite appropriate to Merrill's 3rd quarter loss of $2.5 billion or so. One might think, from the outcry, that Merrill has been unprofitable for the year thus far, or for the length of O'Neal's reign. One might also think that the head's of Citibank, Countrywide Financial, and Bear Stearns were never born.
One can read around and see the suggestions that O' Neal should not be allowed to depart with his stock grants intact, that he should somehow forfeit past pay, though all those investors in and out of the stock- the little people now complaining- invariably gained. Indeed, as of now, the stock remains above where it was when he first took charge.
But the comments have been withering, with those who know better in the industry applying a gleeful smirk to their criticism. Those less informed, the average individual, inclined to dislike the massive payouts of Wall Street to begin with, and without the knowledge of why Wall Street is even necessary or how much financial firms grease the economy, are quick to say that O'Neal is akin to Enron's Skilling and should have his pay revoked by government action. People, generally, being mentally hyperbolic and economically retarded, cannot tell the difference between legitimate business risk and outright fraud and are fully willing to judge a person's entire career via a snapshot of activity, or... by color of skin.
There are the veiled comments that suggest that nobody should be surprised at the loss, given affirmative action, and O'Neal's race, and this despite the evidence that the entire financial world was on its bum in the 3rd quarter of this year. If you disqualify O'Neal based on 3rd quarter results, you must logicially disqualify all the profits as well, and from every period, as the methods that created profits were largely the same.
Nobody blinks too much of an eye when the CEO of Bear Stearns, James Cayne, is portrayed by the Wall Street Journal (on Thursday in an article by Kate Kelly ) as being an avid pot user who found it easy to be down south playing in bridge tourneys as the firm went through its contortions rooking investors inside its two collapsed funds now under government investigation. Or that one of the two funds was so highly leveraged, that it in fact probably impacted other firms (like Merrill Lynch) as their values dropped to zero.
And even in an article that purports to critique Cayne's running of Bear, it is chock full of enough ego floating characterizations that one could, if Cayne, walk away thinking, "Yea baby, I'm a tough talking, weed smoking, chick getting, Mother Merrill F***ker" (as one can question whether the assets Merrill seized for debts owed could be offloaded at sufficient value).
That's how it goes. Stan takes the hit, and the new CEO, when someone has the courage to step up, will take the glory as assets are eventually revalued (upwards) or all the errors are corrected. Obviously Merrill was hitting on all cylinders in most of its businesses, and in previous years, but people have memories that are locked on the present.
They also have minds that are fixed on O'Neal, when in fact, there is every indication that a bunch of financial firms are scrambling to mask, delay, and otherwise ghost away potential losses on assets that should probably be accounted for in more obvious fashion. But why focus on the forest when one tree is so interesting.
Nor will anyone currently castigating O'Neal lower the bar a bit, and hold the mirror to masses. One could argue that we are in the state we are in NOT because money was easy, or because Wall Street miscalculated how to value CDO's, but rather, because the average man on the street was far too greedy, and when handed the opportunity to buy a home beyond their means, grabbed the bull by the horns with all their might and gored themselves.
Of course, when you read the sad sack homeowner profiles in USA Today or your local paper, all the suffering homeowners, in over their heads and struggling to pay, claim personal ignorance and fraud on the part of their mortgage lenders. Apparently the ability to know your means, your income, and your monthly payment capabilities escaped the masses like a plague in reverse.
O'Neal will survive, and find something to do in eighteen months or so when his non-compete clause runs out. He was allowed to retire (fired) in part for approaching Wachovia for some kind of merger deal, among other options presented to the board. Cayne hopped his plane to China to exchange capital with a foreign firm via billion dollar mutual investments. Cayne will likely continue on, talking tough, telling folks to "Keep your Irish Down", as he calmly nagivates Bear Stearns next disaster from the comfort of his smoke filled bridge table. But let's hope not.
Stan is held up for a particular type of beating, namely because he let the firm drift into highly risky methods of making money while at the same time failing to be appropriately clubby with his underlings. One usually does not like to factor race into the ridicule, and when you have written down $8 billion, and with possibly more losses to follow, it's easy to leap to levels of anger not quite appropriate to Merrill's 3rd quarter loss of $2.5 billion or so. One might think, from the outcry, that Merrill has been unprofitable for the year thus far, or for the length of O'Neal's reign. One might also think that the head's of Citibank, Countrywide Financial, and Bear Stearns were never born.
One can read around and see the suggestions that O' Neal should not be allowed to depart with his stock grants intact, that he should somehow forfeit past pay, though all those investors in and out of the stock- the little people now complaining- invariably gained. Indeed, as of now, the stock remains above where it was when he first took charge.
But the comments have been withering, with those who know better in the industry applying a gleeful smirk to their criticism. Those less informed, the average individual, inclined to dislike the massive payouts of Wall Street to begin with, and without the knowledge of why Wall Street is even necessary or how much financial firms grease the economy, are quick to say that O'Neal is akin to Enron's Skilling and should have his pay revoked by government action. People, generally, being mentally hyperbolic and economically retarded, cannot tell the difference between legitimate business risk and outright fraud and are fully willing to judge a person's entire career via a snapshot of activity, or... by color of skin.
There are the veiled comments that suggest that nobody should be surprised at the loss, given affirmative action, and O'Neal's race, and this despite the evidence that the entire financial world was on its bum in the 3rd quarter of this year. If you disqualify O'Neal based on 3rd quarter results, you must logicially disqualify all the profits as well, and from every period, as the methods that created profits were largely the same.
Nobody blinks too much of an eye when the CEO of Bear Stearns, James Cayne, is portrayed by the Wall Street Journal (on Thursday in an article by Kate Kelly ) as being an avid pot user who found it easy to be down south playing in bridge tourneys as the firm went through its contortions rooking investors inside its two collapsed funds now under government investigation. Or that one of the two funds was so highly leveraged, that it in fact probably impacted other firms (like Merrill Lynch) as their values dropped to zero.
And even in an article that purports to critique Cayne's running of Bear, it is chock full of enough ego floating characterizations that one could, if Cayne, walk away thinking, "Yea baby, I'm a tough talking, weed smoking, chick getting, Mother Merrill F***ker" (as one can question whether the assets Merrill seized for debts owed could be offloaded at sufficient value).
That's how it goes. Stan takes the hit, and the new CEO, when someone has the courage to step up, will take the glory as assets are eventually revalued (upwards) or all the errors are corrected. Obviously Merrill was hitting on all cylinders in most of its businesses, and in previous years, but people have memories that are locked on the present.
They also have minds that are fixed on O'Neal, when in fact, there is every indication that a bunch of financial firms are scrambling to mask, delay, and otherwise ghost away potential losses on assets that should probably be accounted for in more obvious fashion. But why focus on the forest when one tree is so interesting.
Nor will anyone currently castigating O'Neal lower the bar a bit, and hold the mirror to masses. One could argue that we are in the state we are in NOT because money was easy, or because Wall Street miscalculated how to value CDO's, but rather, because the average man on the street was far too greedy, and when handed the opportunity to buy a home beyond their means, grabbed the bull by the horns with all their might and gored themselves.
Of course, when you read the sad sack homeowner profiles in USA Today or your local paper, all the suffering homeowners, in over their heads and struggling to pay, claim personal ignorance and fraud on the part of their mortgage lenders. Apparently the ability to know your means, your income, and your monthly payment capabilities escaped the masses like a plague in reverse.
O'Neal will survive, and find something to do in eighteen months or so when his non-compete clause runs out. He was allowed to retire (fired) in part for approaching Wachovia for some kind of merger deal, among other options presented to the board. Cayne hopped his plane to China to exchange capital with a foreign firm via billion dollar mutual investments. Cayne will likely continue on, talking tough, telling folks to "Keep your Irish Down", as he calmly nagivates Bear Stearns next disaster from the comfort of his smoke filled bridge table. But let's hope not.
Monday, October 8, 2007
Baubles for Business
Among the more interesting pieces about the thrill of the grilled cheese sandwich and the Koreas making coy eyes of love to each other, we can find two articles in the NY Times today that reveal a lack of substance at the heart of some internet business models. One can detect an almost fiddle while Rome burns on YouTube ethic to much of this, with seriously brilliant minds brought down to creating the perfectly useless, and timely (as in "not timeless") widget.
In the first piece, we are given the details of how Saturday Night Live created its second comedic hit video on You Tube, with over 300,000 downloads. In mocking Mahmoud Ahmadinejad, the president of Iran, and his statement that Iran is without homosexuals, the video managed to hit the right combination of humor and social commentary, with swipes at pop culture and its earnest yet contrived presentation of nonsense.
It is in fact a funny video, even if you are smart enough to read between Ahmadinejad's eyebrows to know that he is not stupid enough to believe that there are no homosexuals in Iran, but rather, that you will search long and hard before you find someone willing to admit they are. Thus, they don't exist.
In any case we have a laugh at the idea of the head of an oppressive regime brought down to the level of just another nice guy in love. The writers have used his own image-he of the casual jacket and "I love all the existing people" attitude- and taken it a step further, softening him up to the point of a cushion for various rhetorical pins.
Politics aside, we can't argue that with effort expended, and downloads done, this adds not a dime to NBC's bank. The article reminds us that ratings are no higher than the year before. Nobody is really laughing all the way to the bank, which, one would assume, should be the general idea with most business endeavors.
The same can be said about all those companies creating widgets and little add on features for Facebook. The whole world and their collective uncles have come to the conclusion that social networking is the apex of modern internet efforts. Some relatively smart minds are calculating that with just the right combination of luck, lightening, bridge buyers, sunny skies and general delusion, profits will roll in.
The problem is that the more that people are willing to reveal about themselves, the less they are going to want advertisers and others mucking around in their stuff. With Facebook, it offered a particular haven, combining the personal with a largely invisible advertising environment. In the case of the many companies making craplets for Facebook, they are faced with the difficulty of being unable to monetize their work. People will accept something that is free, but ultimately if you are going to make money you either have to offer them something they will gladly put a dollar value on, or convince them to look at your advertising.
To the extent Facebook allows its central interface to get cluttered up, they become just another Myspace. While that may appear to be good now, in the long run, and like every social network before, the fascination will fade. Facebook has the chance to embrace adults who stay with a product if it works, as opposed to the younger audience who will bleat their way to the next new thing out of boredom or the influence of equally bored peers.
In many ways the best minds and the managers of the biggest piles of cash are acting like a new mother spending tons of money on giving her five month old the best wardrobe ever. As if nothing changes and all the new clothes won't be outgrown. In a world with so many unsolved problems and so many possibilities, one wonders if businesses built on adding one more bauble to the crib are worth the attention they receive.
In the first piece, we are given the details of how Saturday Night Live created its second comedic hit video on You Tube, with over 300,000 downloads. In mocking Mahmoud Ahmadinejad, the president of Iran, and his statement that Iran is without homosexuals, the video managed to hit the right combination of humor and social commentary, with swipes at pop culture and its earnest yet contrived presentation of nonsense.
It is in fact a funny video, even if you are smart enough to read between Ahmadinejad's eyebrows to know that he is not stupid enough to believe that there are no homosexuals in Iran, but rather, that you will search long and hard before you find someone willing to admit they are. Thus, they don't exist.
In any case we have a laugh at the idea of the head of an oppressive regime brought down to the level of just another nice guy in love. The writers have used his own image-he of the casual jacket and "I love all the existing people" attitude- and taken it a step further, softening him up to the point of a cushion for various rhetorical pins.
Politics aside, we can't argue that with effort expended, and downloads done, this adds not a dime to NBC's bank. The article reminds us that ratings are no higher than the year before. Nobody is really laughing all the way to the bank, which, one would assume, should be the general idea with most business endeavors.
The same can be said about all those companies creating widgets and little add on features for Facebook. The whole world and their collective uncles have come to the conclusion that social networking is the apex of modern internet efforts. Some relatively smart minds are calculating that with just the right combination of luck, lightening, bridge buyers, sunny skies and general delusion, profits will roll in.
The problem is that the more that people are willing to reveal about themselves, the less they are going to want advertisers and others mucking around in their stuff. With Facebook, it offered a particular haven, combining the personal with a largely invisible advertising environment. In the case of the many companies making craplets for Facebook, they are faced with the difficulty of being unable to monetize their work. People will accept something that is free, but ultimately if you are going to make money you either have to offer them something they will gladly put a dollar value on, or convince them to look at your advertising.
To the extent Facebook allows its central interface to get cluttered up, they become just another Myspace. While that may appear to be good now, in the long run, and like every social network before, the fascination will fade. Facebook has the chance to embrace adults who stay with a product if it works, as opposed to the younger audience who will bleat their way to the next new thing out of boredom or the influence of equally bored peers.
In many ways the best minds and the managers of the biggest piles of cash are acting like a new mother spending tons of money on giving her five month old the best wardrobe ever. As if nothing changes and all the new clothes won't be outgrown. In a world with so many unsolved problems and so many possibilities, one wonders if businesses built on adding one more bauble to the crib are worth the attention they receive.
Thursday, October 4, 2007
Things Routinely Done Countrywide
In an article in today's New York Times by Gretchen Morgenson titled "Inside the Countrywide Lending Spree", we are given illuminating insight into Countrywide's aggressive lending practices.
Of course it's rather a billion dollars short, and several thousand days late, to call the company and its practices into question, but then again, if we are to learn anything, such stories are still worthwhile. Nevermind that the NY Times itself published its fair share of profiles of people reaching for what we now know is the impossible: the attainment of homes that could not have been achievable via normal methods of honest acquisition or reasonable lending practices.
So there is blame to go around. In the article we learn that:
Then too, we cannot wholely blame the filthy lucrists at Countrywide, or the reflexively late reporting of the nation's journalists for the situation we find ourselves in.
We must look in the mirror. (We meaning, YOU).
We are either a nation chock full of extremely stupid people, able to be repetitively swindled and swonked, or (and more likely), we are a nation of extremely morally challenged people, willing to shave off a bit of our better judgement or jolly goodness in order to cut ourselves a slice.
Thusly:
Of course it's rather a billion dollars short, and several thousand days late, to call the company and its practices into question, but then again, if we are to learn anything, such stories are still worthwhile. Nevermind that the NY Times itself published its fair share of profiles of people reaching for what we now know is the impossible: the attainment of homes that could not have been achievable via normal methods of honest acquisition or reasonable lending practices.
So there is blame to go around. In the article we learn that:
- Countrywide routinely disregarded borrower assets in order to put them in a class of loans that garnered more fees. (Done no doubt to encourage pride of ownership since the more you pay, the more you value what you have overpaid for).
- Countrywide routinely charged blacks and hispanics more for the loans they received. (Because, well, the cost of pigmentation, like other commodities, has been rising around the world. Or, as one recently executed toy factory manager in China said, "Less pigmentation, more lead," when creating action figures).
- Countrywide avoided steering low income and new borrowers toward FHA government loans due to profit considerations. (And because the government has its hands full with Maliki in Iraq, poppies in Afghanistan, and a high number of congressman under investigation. Loan processing times would invariably slow, along with profits).
- Countrywide routinely charged more for mortgage related services than its competitors while verbally suggesting they provided the best loan possible "in the universe". (Or as they probably framed it during weekly team meetings, "High cost value-adds SHOULD cost an arm and a leg and your home")
- Countrywide's head, Mr. Mozilo, routinely purchased zero new shares in the last ten years, while at the same time routinely selling unpurchased shares (options grants) in order to remain highly diversified. (I imagine he will need the extra money to stay out of the big house. Then again, Mr. Mozilo will not suffer the fate of businessmen in China, who, when they mess up, get disposed of, and merely for poisoning the world's pets with funky food. (But oddly, not for poisoning the world's children with lead)).
- Countrywide routinely, right up into February and March, sold piggyback loans, sold loans covering 95% of the appraised price, and loans without income documentation. (Because trusting people is good, and them trusting you is even better, especially when they have no money).
- Countrywide routinely rewarded its employees in its incentive structure for selling high cost, riskier loans. (You cannot argue with compensating employees well, can you? Besides the extra income will be handy when they face the eventual individual and class action suits, or when they get laid off when Bank of America takes over and decides they like inventory and systems more than extra employees).
Then too, we cannot wholely blame the filthy lucrists at Countrywide, or the reflexively late reporting of the nation's journalists for the situation we find ourselves in.
We must look in the mirror. (We meaning, YOU).
We are either a nation chock full of extremely stupid people, able to be repetitively swindled and swonked, or (and more likely), we are a nation of extremely morally challenged people, willing to shave off a bit of our better judgement or jolly goodness in order to cut ourselves a slice.
Thusly:
- We are routinely willing to lie about our income, or expand on our income, or pretend money does not exist at all, in order to get what we think we deserve. (Proper accounting not being relevent to most things).
- We routinely take on risks under the assumption that income today will be no different tomorrow, except more, but not less. (Or that, all things working for good, the world will end or we will win the Powerball, or the rapture will come, or society will collapse, or our parents will die leaving us money, thus saving us from the decision we made when the mortgage broker ventured into undiscovered laws of math by assuring us that if we signed "here", that our non-income and lifestyle would not be adversely impacted by monthly mortgage payments of $300 that would reset to $4000 dollars after a year if and only if the rare occasion of 365 days in a row occured.)
- We routinely are too impatient to do close reading, perfectly willing to let preachers, teachers, neighbors, email forwards, and loan originators explain to us concepts in one sentence that are better read in full paragraphs and fine print. (Once undone, we mistily recall our long ago desire to graduate kindergarten and go straight to Harvard, only to be held back by dyslexia and complicated stuff like letters and numbers arranged in a sentece on a piece of paper signed by our blood in front of a horned mortgage lender trainee).
- We routinely find ways to cut corners, like piggy backing on other people's credit histories in order to find houses big enough to hold all the stuff we bought with our own credit cards. (Imagining that we can drive over to a bad neighborhood and sell it to the crack addicted for half price, or on Ebay for twice the price, if times get sketchy).
Monday, October 1, 2007
3:10 to Yuma
Ostensibly the writing here is supposed to be about our little financial adventure, maybe economics, with a little politics, personal fluff, and ax grinding thrown in, but today I will drift a bit.
When I left the office this afternoon I waited about an hour for the bus. I sipped on a lemon soda and watched the clouds and cars roll by. People were on their way to lunch, or taking walks down the quiet street trying to get in some exercise before heading back to the desk.
It was Phoenix, with the sun lurking, but not too hot, with most of the year's blaze starting to fade and a coolness swaying tree branches and brushing my face.
I was listening to my mp3 player as usual, and put my baseball cap on to remind myself I was free from work. Kelly Clarkson was singing about breaking away. I had added that one song of hers to my music rotation a few days back, though typically I am not a fan of female pop singers. I like bands,and usually male bands that play their own instruments.
As I sat there waiting, I was thinking about emotions. (Well, actually, I was thinking about a lot of stuff, from bills, to money, to why am I in Arizona, to I'm hungry). But mostly I was thinking about emotions, and how for some people it takes disaster, even self induced, to feel like you are alive or in control.
Sometimes you walk through life and there is nothing particularly dramatic going on. You eat, work, sleep, and repetez, with never enough deviation in the day's events or the heart's emotions to make the next day slant off on a different more satisfying tangent.
If you drift long enough in that mode, and do not do something smart and make adjustments, you will find yourself doing something accidentally stupid, and with unintended consequences.
Later in the day I ended up at the Deer Valley AMC theatre seeing 3:10 to Yuma, the story of a humble farmer stepping out of his normal routine to do something slightly different today in order to change the arc of his life. Russell Crowe plays the outlaw, who, near the end and deadened by the pattern of his existence, decides to do something out of the ordinary as well. He chooses to do something good by wiping out his own posse, albeit a move I was not wholly fond of, given their loyalty to him. But he was trying to break a pattern, at least in his own heart, if not in his actual life.
Breaking patterns, removing the auto-pilot, is important, but the method chosen makes all the difference in the world. The right way to set off in a different direction is to plan the correct steps and calculate the cost. The wrong method is to let the subconcious mind or your emotions make you impulsive, where you do in fact change your life, but become like a bottle rocket without a stick, swirling around on fire and with no direction.
That is how it is with most things. There are ways and there are ways. So, for example, it is not enough to do good, but rather, to choose the right good that needs to be done (not all good being approrpiate to the time, the place, or your efforts). In changing your life it matters too how you go about doing it. Change can be good to the extent it is organized change and not merely emotionally driven responses to the status quo.
My bus eventually arrived and I got on, wondering if I was headed in a good direction.
When I left the office this afternoon I waited about an hour for the bus. I sipped on a lemon soda and watched the clouds and cars roll by. People were on their way to lunch, or taking walks down the quiet street trying to get in some exercise before heading back to the desk.
It was Phoenix, with the sun lurking, but not too hot, with most of the year's blaze starting to fade and a coolness swaying tree branches and brushing my face.
I was listening to my mp3 player as usual, and put my baseball cap on to remind myself I was free from work. Kelly Clarkson was singing about breaking away. I had added that one song of hers to my music rotation a few days back, though typically I am not a fan of female pop singers. I like bands,and usually male bands that play their own instruments.
As I sat there waiting, I was thinking about emotions. (Well, actually, I was thinking about a lot of stuff, from bills, to money, to why am I in Arizona, to I'm hungry). But mostly I was thinking about emotions, and how for some people it takes disaster, even self induced, to feel like you are alive or in control.
Sometimes you walk through life and there is nothing particularly dramatic going on. You eat, work, sleep, and repetez, with never enough deviation in the day's events or the heart's emotions to make the next day slant off on a different more satisfying tangent.
If you drift long enough in that mode, and do not do something smart and make adjustments, you will find yourself doing something accidentally stupid, and with unintended consequences.
Later in the day I ended up at the Deer Valley AMC theatre seeing 3:10 to Yuma, the story of a humble farmer stepping out of his normal routine to do something slightly different today in order to change the arc of his life. Russell Crowe plays the outlaw, who, near the end and deadened by the pattern of his existence, decides to do something out of the ordinary as well. He chooses to do something good by wiping out his own posse, albeit a move I was not wholly fond of, given their loyalty to him. But he was trying to break a pattern, at least in his own heart, if not in his actual life.
Breaking patterns, removing the auto-pilot, is important, but the method chosen makes all the difference in the world. The right way to set off in a different direction is to plan the correct steps and calculate the cost. The wrong method is to let the subconcious mind or your emotions make you impulsive, where you do in fact change your life, but become like a bottle rocket without a stick, swirling around on fire and with no direction.
That is how it is with most things. There are ways and there are ways. So, for example, it is not enough to do good, but rather, to choose the right good that needs to be done (not all good being approrpiate to the time, the place, or your efforts). In changing your life it matters too how you go about doing it. Change can be good to the extent it is organized change and not merely emotionally driven responses to the status quo.
My bus eventually arrived and I got on, wondering if I was headed in a good direction.
Tuesday, August 21, 2007
Blackstonecoldstupid
Is that the flavorful grease of a succulent goose I see dripping down the face of Stephen A. Schwarzman, the "boldly going where no private equity fund has gone before" head of the Blackstone Group?
He had to eat the whole thing, taking his firm public in a manner both ostentatious and foul, all in a bid, I assume, to accummulate the capital necessary to pursue deals big enough to make his competitors feel a bit inadequate.
Certainly this is not merely about money--personal money--as most private equity firms and hedge funds provide ample reward, and out of the site of the salivating jaws of congressmen and those with inclinations toward envy or conspiracy. (And we all know that type, who insist that every lawyer, politician, teacher, cop, wealthy person, or anyone remotely better off, more productive, or happy is part of a vast conspiratorial force that bends corners to achieve ends that will ultimately lead to... well, goodness knows what).
The problem-and there is one-is that this was a deal that need not be made, resulting in short term gain and the type of close government scrutiny that will inevitably put the kibosh on taking advantage of that new public status. Every now and again moneyed types on the Upper East Coast manage to forget that power in the form of your local Washington Congressman can beat the dickens out of your wad (of cash).
And Friday it came, with Dems lining up to sock it to firms by converting carried interest taxed as capital gains (15%) into income taxed at rates (35%) beneficial not to government coffers necessarily, but to political campaigns.
Despite this, Schwarzman has spent a more than a prudent amount of time doing a happy dance with a bullseye mask on his face, and one can hardly believe that Kohlberg, Kravis, Roberts is going to join in this dance.
Then again, these masked men are smart, and perhaps the dance is a safety dance, and during a peak in the market, they are selling? Perhaps we are all thinking expansion, or bigger deals, when they are thinking the hustle is done and it's time for a rest.
Or do they believe the new status and access to extra cash will let them go after ever larger quarry? Maybe putting a bid on the United States itself? Buying all the U.S. debt in the hands of Chinese and others, taking America private, kicking out the citizens, and selling off the states piece by piece to countries looking for additional real estate. Japan salivates, Monaco drools, Mexico dreams of empire.
Really. What is the point, and was it particularly well thought out? It is hard to determine who will benefit the most from this turn of events: Washington, the firm owners, or the new investors. I tend to doubt anyone benefits.
I am betting having that fat goose in the quiet of your corner of Connecticut, and without consideration of third parties, will prove infinitely more rewarding. I don't at all underestimate the likelihood of Washington reaching down Schwarzman's throat to retrieve a perceived golden egg.
Oh Steven, sixty going on six, fatboy with goose on your face. Look what you have done.
He had to eat the whole thing, taking his firm public in a manner both ostentatious and foul, all in a bid, I assume, to accummulate the capital necessary to pursue deals big enough to make his competitors feel a bit inadequate.
Certainly this is not merely about money--personal money--as most private equity firms and hedge funds provide ample reward, and out of the site of the salivating jaws of congressmen and those with inclinations toward envy or conspiracy. (And we all know that type, who insist that every lawyer, politician, teacher, cop, wealthy person, or anyone remotely better off, more productive, or happy is part of a vast conspiratorial force that bends corners to achieve ends that will ultimately lead to... well, goodness knows what).
The problem-and there is one-is that this was a deal that need not be made, resulting in short term gain and the type of close government scrutiny that will inevitably put the kibosh on taking advantage of that new public status. Every now and again moneyed types on the Upper East Coast manage to forget that power in the form of your local Washington Congressman can beat the dickens out of your wad (of cash).
And Friday it came, with Dems lining up to sock it to firms by converting carried interest taxed as capital gains (15%) into income taxed at rates (35%) beneficial not to government coffers necessarily, but to political campaigns.
Despite this, Schwarzman has spent a more than a prudent amount of time doing a happy dance with a bullseye mask on his face, and one can hardly believe that Kohlberg, Kravis, Roberts is going to join in this dance.
Then again, these masked men are smart, and perhaps the dance is a safety dance, and during a peak in the market, they are selling? Perhaps we are all thinking expansion, or bigger deals, when they are thinking the hustle is done and it's time for a rest.
Or do they believe the new status and access to extra cash will let them go after ever larger quarry? Maybe putting a bid on the United States itself? Buying all the U.S. debt in the hands of Chinese and others, taking America private, kicking out the citizens, and selling off the states piece by piece to countries looking for additional real estate. Japan salivates, Monaco drools, Mexico dreams of empire.
Really. What is the point, and was it particularly well thought out? It is hard to determine who will benefit the most from this turn of events: Washington, the firm owners, or the new investors. I tend to doubt anyone benefits.
I am betting having that fat goose in the quiet of your corner of Connecticut, and without consideration of third parties, will prove infinitely more rewarding. I don't at all underestimate the likelihood of Washington reaching down Schwarzman's throat to retrieve a perceived golden egg.
Oh Steven, sixty going on six, fatboy with goose on your face. Look what you have done.
Sunday, June 3, 2007
Kick to Curb, Private Equity Style
I was sprawled out relaxing and reached for Friday's Wall Street Journal. On page C3 was an article on Blackstone Group's soon spewing of Orbitz back into the public markets after less than a year.
It hopes to "raize" up to $750 million, and I suppose they will spin out the remaining portions of Travelport, the parent company, in due time and at maximum reward. After all, they have $4.3 billion to recoup, which means they probably have more like $6 billion they would like to recoup.
But reading on, we find that Orbitz has a "history of operating losses and said it would continue to incur significant sales and marketing expenses."
So here we have Blackstone offloading a company they took over, after a brief period, and without furthering the company's prospects at all. On top of that, according to the Journal, Orbitz will not receive any of the proceeds once tossed back into the public world.
Seeing a problem here? Cause I really see a problem here. And in the same paper we read of the $17.6 billion buyout of Freescale Semiconductor holdings, and how the private equity firms who now control it (including Blackstone) must figure out a way to balance debt payments they loaded on the company with the company's actual business prospects and cash flow.
In reporting the news, it is not necessarily the Wall Street Journal's task to comment on the rightness of any of this. Though we imagine someone should have eyebrows appropriately raised to high heaven.
It hopes to "raize" up to $750 million, and I suppose they will spin out the remaining portions of Travelport, the parent company, in due time and at maximum reward. After all, they have $4.3 billion to recoup, which means they probably have more like $6 billion they would like to recoup.
But reading on, we find that Orbitz has a "history of operating losses and said it would continue to incur significant sales and marketing expenses."
So here we have Blackstone offloading a company they took over, after a brief period, and without furthering the company's prospects at all. On top of that, according to the Journal, Orbitz will not receive any of the proceeds once tossed back into the public world.
Seeing a problem here? Cause I really see a problem here. And in the same paper we read of the $17.6 billion buyout of Freescale Semiconductor holdings, and how the private equity firms who now control it (including Blackstone) must figure out a way to balance debt payments they loaded on the company with the company's actual business prospects and cash flow.
In reporting the news, it is not necessarily the Wall Street Journal's task to comment on the rightness of any of this. Though we imagine someone should have eyebrows appropriately raised to high heaven.
Shaking Wendy's
Let's chat about the Wall Street Journal for a moment. Monday's paper (4/30)--under the guise of financial insight--takes a look at Wendy's International, and how activist investors are once again trying to massage the stock upwards. This process is all sinister touch rather than loving care.
The problem with many of these activists, and hedge fund/private equity activists in particular, is that they are not always concerned about the long term viability of the business, but rather, a short term burst in the stock, or a method by which they can take control of the company, manipulate the balance sheet a bit and cash out, leaving the average bloke with not much more than what he had, perhaps a bit more efficient, with the efficiences going to pay off greater debt.
And it pains me to see Wendy's being mishandled in such a manner. Fundamentally it has a good product, and one I have been consuming for years. Never have spicy chicken sandwiches deserved such a precarious future.
The article mentions an investor who in 2005 built up a large enough position to push the company to sell off it's Canadian donut unit. That individual, founder of Pershing Square Capital, walked away with a 70% increase in the stock's price.
And yet here we are again, with people agitating for Wendy's to do something. Too often doing something financial (or something that causes immediate financial readjustments) is valued above doing something that actually creates long term benefit.
This time it's suggested that maybe Nelson Peltz, owner of Triarc, owner of Arby's, might have his hands around Wendy's, feigning a loving embrace.
One might think the Journal, or the commentary they allow in their paper, would be more suspect, or circumspect, about whether selling Wendy's to Arby's is actually good for Wendy's, or whether the immediate run up right now due to buyout speculation might ultimately mean ten years of failure or mediocre returns once sold.
The fact that the stock rose some 70% (according to the article) from April 2005 to late 2006 in the first activist moment, and is now still assumed to be ailing, with the original activist long gone, is rather telling. Nobody seems willing to let management focus on actually running the business.
Granted, management can do both, working on the actual product while seeking efficiences in its structure that reward shareholders. One certainly imagines that they can bite burger and sip shake in the same breath.
The bigger issue here is the reporting, the analysis. The idea of a sale to Triarc would surely--as it has been doing--loft the share price. But a sale to Triarc does not necessarily solve any problems in the fundamental business. Indeed if we are to recommend Triarc, the burger universe would have to have begun in September 2006 so as to remain oblivious to Triarc's mediorce performance in the preceding years.
Triarc can certainly bid for Wendy's and raise the share price, making nice returns for stockholders, but will the company's actual business be any better? Perhaps we should find Bill Ackman at Pershing. Maybe he has some answers, but I doubt it.
Our stock market is peaking, and it might be nice to have a monumental correction, if only to put the breaks on those who like to take companies into their own hands and for their own dark pleasure.
The problem with many of these activists, and hedge fund/private equity activists in particular, is that they are not always concerned about the long term viability of the business, but rather, a short term burst in the stock, or a method by which they can take control of the company, manipulate the balance sheet a bit and cash out, leaving the average bloke with not much more than what he had, perhaps a bit more efficient, with the efficiences going to pay off greater debt.
And it pains me to see Wendy's being mishandled in such a manner. Fundamentally it has a good product, and one I have been consuming for years. Never have spicy chicken sandwiches deserved such a precarious future.
The article mentions an investor who in 2005 built up a large enough position to push the company to sell off it's Canadian donut unit. That individual, founder of Pershing Square Capital, walked away with a 70% increase in the stock's price.
And yet here we are again, with people agitating for Wendy's to do something. Too often doing something financial (or something that causes immediate financial readjustments) is valued above doing something that actually creates long term benefit.
This time it's suggested that maybe Nelson Peltz, owner of Triarc, owner of Arby's, might have his hands around Wendy's, feigning a loving embrace.
One might think the Journal, or the commentary they allow in their paper, would be more suspect, or circumspect, about whether selling Wendy's to Arby's is actually good for Wendy's, or whether the immediate run up right now due to buyout speculation might ultimately mean ten years of failure or mediocre returns once sold.
The fact that the stock rose some 70% (according to the article) from April 2005 to late 2006 in the first activist moment, and is now still assumed to be ailing, with the original activist long gone, is rather telling. Nobody seems willing to let management focus on actually running the business.
Granted, management can do both, working on the actual product while seeking efficiences in its structure that reward shareholders. One certainly imagines that they can bite burger and sip shake in the same breath.
The bigger issue here is the reporting, the analysis. The idea of a sale to Triarc would surely--as it has been doing--loft the share price. But a sale to Triarc does not necessarily solve any problems in the fundamental business. Indeed if we are to recommend Triarc, the burger universe would have to have begun in September 2006 so as to remain oblivious to Triarc's mediorce performance in the preceding years.
Triarc can certainly bid for Wendy's and raise the share price, making nice returns for stockholders, but will the company's actual business be any better? Perhaps we should find Bill Ackman at Pershing. Maybe he has some answers, but I doubt it.
Our stock market is peaking, and it might be nice to have a monumental correction, if only to put the breaks on those who like to take companies into their own hands and for their own dark pleasure.
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