Thursday, October 26, 2017

Empire of Dust (2011)

Posted by CP at 2:13 PM 6 comments

Tuesday, October 24, 2017

Hanover Foods Corp - 2017 Annual Report

We mentioned Hanover as a possibly cheap company in August. Nate at Oddball Stocks has written about this one four times (1,2,3,4) over the years and others have written up as well (CoBF, BB, TIE, etc). The company has been in business in Pennsylvania for a long time selling frozen and canned vegetables.

Check out these fantastic photos of green beans being harvested - apparently for Hanover!

Highlights from this annual report (FY 2017, they have a weird fiscal year):


 06/04/17
Cash 10,593
A/R 31,302
Inventories 117,021
Other assets 17,261
Current assets 176,177
Net PP&E 81,910
Other assets 25,505
Total assets 283,592
Current liabilities 40,864
Other liabilities 14,547
Shareholder equity 228,181


Series A $25 pref 156
Series B $25 pref 208
Series C $25 pref 250
Preferred liquidation pref 614


Common equity 227,567

Net current assets are $120 million.

Here's a summary of the capital structure - as best I understand it. I have never received a proxy statement so there is opacity as to who owns all the different layers of the capital structure.

Preferred Par Value Issued Outstanding Liq Pref
Series A 25 14,948 6,228 155,700
Series B 25 16,108 8,336 208,400
Series C 25 10,000 10,000 250,000
Total


614,100





Common
Issued Outstanding Price
A – nonvoting
349,353 285,174 98
B – voting
850,572 432,362 105



717,536

The preferred stock have $614,000 of liquidation preference, making them not very important for the valuation metric calculations. If you take the market value of the voting and nonvoting shares, then the market capitalization is $70.3 million.

That would make the price to net current assets ratio 0.59x, which means Hanover is a net-net play. In addition, the price to book ratio is only 0.31x.

Net sales for FY 2017 were $385 million, with $41.4 million of gross profit (11% gross margin). Net income to common stock is $4.9 million (1.3% net margin), which results in a poor return on common equity of 2.2%. Companies with low ROEs tend to trade at low price to book multiples, as Hanover does. Also notice that Hanover's market cap is only 0.18x sales!

A potential comp to Hanover is Pinnacle Foods - although much bigger, with a $6.7 billion market cap. Pinnacle's revenue for 2016 was $3.1 billion with $916 million of gross profit (30% gross margin). Net income for Pinnacle was $211 million, a 6.8% net margin. Thanks to much higher margins, Pinnacle trades at more than 2x revenue. Pinnacle has bigger scale than Hanover, plus they are selling more than just frozen vegetables: frozen complete bagged meals, frozen prepared seafood, frozen and refrigerated bagels, frozen pizza, full-calorie single-serve frozen dinners and entrées, and frozen pancakes/waffles/French toast.

There are two different ways you could look at Hanover's earnings power: net income to common shareholders, and also free cash flow.


 FY 2017 FY 2016 FY 2015 FY 2014 FY 2013 Average
Net earnings to common 4,917 9,825 5,616 5,685 12,053 7,619








FY 2017 FY 2016 FY 2015 FY 2014 FY 2013 Average
CFO 8,402 31,438 12,653 32,780 -12,414 14,572
CapEx -11,094 -7,084 -2,861 -5,115 -20,312 -9,293
FCF -2,692 24,354 9,792 27,665 -32,726 5,279

The CFO and CapEx fluctuate pretty wildly. If you sum them, you get a number that, over the past five years, has averaged $5.3 million, which is 30 percent less than the trailing five year average net income of $7.6 million.

If you take the average of the two averages (NI and CFO) for past five years, you get $6.4 million which could represent the current "earnings power" of the business. The market cap is just shy of 11x this earnings power figure.

So, you have a company that's trading at very low balance sheet metrics and low-to-reasonable earnings metrics. That and the low ROE mean that, as business analysts and investors, we need to ask: why doesn't Hanover earn a higher net income margin, which would translate to higher ROE and more normal P/S and P/B and P/TBV ratios.

The answer may be in two places: the history of minority shareholder litigation, and certain footnotes to the financial statements.

Note 5c discloses the Company's Employment and Deferred Compensation Agreements. Key officers get an annual raise that is the greater of 5% or CPI - generous! They also get five years of pay as a golden parachute. There are also supplemental pensions for these unstated key officers. The benefits are equal to 60% of final three years' pay payable for the life of employee after retirement. This is recorded on the balance sheet as a liability of $15.6 million as of June 2017.

The expected cash cost of the supplemental pensions for FY 2018 is $1.18 million. If I'm understanding this correctly, it means there were one or more top employees, now retired, who were making just shy of $2 million in salary and bonuses during their final three years, on average. That seems like a TON of money for a company earning only $5.3 million average cash flow and 2.2% ROE!

Until we find a better hypothesis, my guess will be that profits and ROE are being siphoned off by overpaid management.

Further evidence in support of this: the company owns (in its Sunwise Co. subsidiary) a 1999 Cessna Citation (Model 560XL) business jet that they keep at York Airport in Pennsylvania. According to one data source I have seen, this plane gets flown all the time - apparently 200 flights YTD in 2017 and 275 flights in 2016. I'm not sure whether that's all Hanover & executives flying or if they lease it out, but at normal hourly costs for a business jet this is quite an expensive way of visiting Rogers, AR for WalMart meetings. A diligent analyst might ask the company why the plane has been photographed in San Diego in February and at the Ohio State U airport on the same Saturday as a football game.

Here's another puzzle by the way. In note 3 (Capital Stock), the company discloses that,
"During fiscal year 2001, the Company established an Employee Stock Trust (the "Trust") to fund future stock-related and other obligations of the Company's compensation and benefit plans, including a concurrently established Employee Stock Ownership Plan ("ESOP"). For financial reporting purposes, the Trust is consolidated with the Company. On April 26, 2013, the Company purchased for its treasury, from the Trust, all 340,180 shares of Class B Common Stock owned by the Trust for $110 per share and issued a Promissory Note ("Note") for $37,419,800 representing the full purchase price. All proceeds of such Note are to be used by the Trust to fund and/or to facilitate the operations of Designated Employee Benefit Plans maintained or to which there is an obligation to contribute for the benefit of employees of the Company or any of its subsidiaries (regardless of tier) who continue after the date of the Note to remain beneficiaries of the Trust."
I haven't noticed any of the other authors of writeups commenting on this before. The $37.4 million Note amount does not appear as a liability on Hanover's balance sheet. If the only beneficiary of the Trust is the Company, then I can see how it would be eliminated as an intracompany payable from the consolidated balance sheet. But the footnote implies that there are other beneficiaries of the Trust. If so, then is the holding company shareholder equity overstated to the degree that not all of the $37.4 million liability is intracompany?

The company owes a better explanation of the $37.4 million note and the Employee Stock Trust.

The other aspect of Hanover to know about is the history of bitter litigation with family and minority shareholders. In the case of Michael WAREHIME, v. John A. WAREHIME, the Superior Court of Pennsylvania summarized as follows:
These appeals concern the future control of the Hanover Foods Corporation ("HFC"). Michael Warehime appeals from the denial of his motion for preliminary injunction, through which he sought to enjoin certain actions of appellee John Warehime and HFC's Board of Directors that would perpetuate John's control of HFC. We must determine whether appellee John Warehime, the voting trustee of the Warehime voting trust, breached his fiduciary duty to the beneficiaries of that trust. As we conclude that this duty was breached, we reverse the orders entered by the trial court and remand for further proceedings.

The pertinent facts, as found by the trial court, are as follows. Alan Warehime is the father of appellee John Warehime, appellant Michael Warehime and Sally Warehime Yelland. He served as chairman and chief executive officer of Hanover Foods Corporation ("HFC") from 1956 to 1989. On May 26, 1989, by appointment of Alan Warehime, John Warehime became chairman and CEO of HFC.

The Warehime family established two voting trusts, dated April 5, 1988 and December 1, 1988, which controlled a majority of the voting stock (Class B) of HFC. The first trust was established by Alan Warehime and his three children; it controls 199,496 shares of HFC Class B voting stock.[1] The second trust was established by Alan Warehime and five of his grandchildren; it controls 15,025 shares of HFC Class B voting stock.[2] Until his death on March 24, 1990, Alan Warehime was the sole voting trustee of each voting trust. Thereafter, John Warehime, in accordance with Alan Warehime's designation, became the sole voting trustee of each trust. During his life, the voting trusts gave Alan Warehime complete control over HFC. By virtue of Alan Warehime's designation of John Warehime as sole successor trustee, he succeeded to and possessed the same power to control the voting trust and, consequently, HFC. The voting trusts expire in 1998, ten years after their respective creation.[3]

When the first trust expires in April of 1998, both Michael Warehime and Sally Warehime Yelland want to remove John Warehime as chairman of HFC. Although Michael Warehime would like to succeed John Warehime in this position, it is claimed that neither he nor the other plaintiffs have developed any future plans for the company or identified the management they intend to install. This uncertainty is said to have caused instability within the company and uncertainty about its future. To compound matters, John Warehime, Michael Warehime and Sally Warehime Yelland, do not communicate with each other and have not spoken in over three years.[4]

In late 1996, an Independent Directors Committee was formed by several of HFC's directors.[5] It was formed for the primary purpose of considering strategic alternatives for HFC in light of the pending expiration of the voting trust agreements in 1998. The decision to form this committee was made solely by its members without advice or input from counsel or John Warehime. As evidence of the directors' independence, in face of the fact that HFC's entire Board of Directors was elected solely by John Warehime, the trial court noted that the Board rejected proposals made by John Warehime on numerous occasions and will only continue to support John Warehime as chairman of HFC if he continues to perform well.

In considering the alternatives open to HFC, the Committee retained several firms and individuals to evaluate the company, including its employees, financial information, production facilities and business plan. This review acknowledged that HFC was a well-managed company and that it was equal or superior to its peer companies. It went on to recommend, however, that in order for HFC to sustain its business strategy of being the low-cost producer, it would require approximately $30 million in new capital. Because of the uncertainty raised by the 1998 expiration of the voting trusts, raising this capital would likely prove difficult, at least until HFC's governance structure stabilized. It was felt that if the present uncertainty would persist, HFC's business would likely deteriorate and it would be impossible to conduct business in a manner beneficial to the long-term interests of the company.

In light of this situation, the Committee considered three strategic alternatives for the future of HFC: (1) do nothing and allow the voting trust to expire; (2) sell the company or a control position in the company; or (3) adopt an amendment and restatement to HFC's Articles of Incorporation to provide a stable governance structure. Because of the substantial problems which would be caused by the persistence of an unstable governance structure, the Committee chose the third option.

The proposed amendments to HFC's Articles of Incorporation permitted the issuance of 10,000 shares of Series C Convertible Preferred Stock to be issued to the HFC 401(k) plan, provided that the majority of the trustees of that plan are "disinterested directors" of HFC as defined in § 1715 of the Pennsylvania Business Corporation Law ("BCL"). See 15 Pa.C.S.A. § 1715(e). In the event of a dispute among any of the five members of the Warehime family over the management of HFC, the amendments provided a method for resolution of such a dispute. The trial court summarized this mechanism:
 
In the event of a dispute among members of the Warehime family with respect to the election of directors or other related matters during the five years after the issuance of the stock, the Series C would be entitled to 35 votes per share. If there is no such dispute, the Series C shares are non-voting. The Series C Stock is convertible into Class A common stock.

The court also noted that the Series C shares must be voted by "disinterested directors" who have no relationship to John Warehime (who may not vote Series C shares) and who must vote as fiduciaries of the 401(k) plan. Finally, the court noted that the 350,000 votes the Series C shares control can be outvoted by approximately 80% of Class B stock and a majority of the Class A stock.[6] The outside consultants retained by the Committee opined that the amendments would provide a stable governance structure for the company and would permit the implementation of HFC's capital raising plan. The Board of Directors was further advised that adoption of the amendments would be consistent with their fiduciary duties under the Pennsylvania BCL. The factual findings of the trial court notwithstanding, the fact of John Warehime's control over the election of the Board of Directors, and the application of this mechanism clearly serves to perpetuate the total control of John Warehime over the corporation.

The shareholders of HFC were given formal notice of the proposed amendments. In response, Michael Warehime and several other shareholders immediately moved for a preliminary injunction, requesting that John Warehime be prohibited from voting the shares in the voting trusts in favor of the proposal. They maintained that the amendments were merely a device to extend John Warehime's control beyond the termination of the voting trusts to the detriment of the voting trust beneficiaries and the other shareholders of HFC. Following a hearing on the matter, the trial court denied the requested relief. The day after this ruling, John Warehime convened a meeting and voted all of the voting trust shares in favor of the proposed amendments. John Warehime was the only shareholder at the meeting and the only shareholder to vote for the amendments. This appeal followed. [...]
The litigation seemed to stem from the compensation desires of John Warehime (case):
Alan Warehime, the father of appellant Michael Warehime and appellee John Warehime, instituted two voting trusts in 1988 to control the majority of voting stock (Class B common stock) in Hanover Foods Corp. (HFC). Alan Warehime established the first trust with his three children[1] and the second with five of his grandchildren.[2] John Warehime succeeded his father as trustee upon his father's death in 1990. The trusts expired in 1998. John Warehime was appointed chairman and CEO of HFC in 1989. Since then, there have been a considerable number of disputes among the Warehimes, other shareholders, and the directors.

Food Services East, Inc., a company wholly owned by John Warehime, ran into financial difficulties in late 1992 or early 1993. John Warehime's ailing company owed approximately $4 million to HFC by June of 1993. However, John Warehime did not initially post sufficient collateral to cover the monies owed. In fact, the directors were not made aware of the money John Warehime's company owed to HFC until early 1993. The directors promptly remedied the situation by requiring John Warehime to post sufficient collateral for the loans. Plaintiff's Exhibit 26, Minutes from Directors' Meeting of 6/4/93, at 1.

Another dispute involved the compensation paid to John Warehime. On September 15, 1994, after months of negotiation, the directors of HFC approved a compensation package for John Warehime that he accepted under protest.[3] Plaintiff's Exhibit 50, Memo from Michael Warehime to John Warehime of 4/25/94, at 1; Plaintiff's Exhibit 68, Minutes from Directors' Meeting of 9/15/94, at 1-2. John Warehime, unhappy about the size of the compensation package and frustrated with several members of the board including Michael Warehime, stated in his notes on the situation that "[s]omething must be done." Plaintiff's Exhibit 69, John Warehime, Review Notes of My Compensation Employment Package with the Family at 1-5 (Sept. 21, 1994).

Shortly thereafter, a proposal to eliminate cumulative voting was drafted so that with the shares from the trusts, John Warehime could choose all the directors himself. On October 18, 1994, the shareholders voted on this proposal. While only John Warehime supported it, the proposal passed since he was able to vote the shares from the trusts. No longer constrained by cumulative voting, he immediately removed Michael Warehime, Sally Warehime Yelland, and an independent director from the board. The present action was initially filed in response to the loss of cumulative voting.

On June 12, 1995, the directors elected by John Warehime approved a new compensation package for him. Plaintiff's Exhibit 102, Hanover Foods Corp. Form 10-K at 93 (July 3, 1995). Under the new package, he received a $650,000 base salary adjusted for inflation along with significant bonuses.[4] Id. at 93-94. He was to receive 60% of his compensation for the longer of his life or his wife's life even if he were terminated. Id. at 99. Subsequent to another action initiated against John Warehime and HFC, this time led by the holders of the nonvoting common stock (Class A common stock), Stipulation, 4/25/97, at 15, John Warehime's compensation was reduced, Defendant's Exhibit 10, Amendment No. 1 to Employment Agreement Between Hanover Foods Corporation and John A. Warehime at 1-5 (Feb. 13, 1997).
This litigation is the most like Dickens' Bleak House of any micro cap I've ever looked at.

Interestingly, according to Oddball's first comment on the CoBF thread, when the company went dark in 2004 they paid $131 for the A shares. I found the details for the tender, and that price is correct. Note that the offer was only for holders of fewer than 15 shares as of November 22, 2004. Anyway, 13 years later the stock is offered at $93!

Here's what company performance was like back then:

(millions) FY 2000 FY 2001 FY 2002 FY 2003 FY 2004
Revenue 277 294 290 290 318
Net Income 9 7 7 10 11
NI % 3.1% 2.3% 2.5% 3.4% 3.6%

Sales have grown since 2004, but the net income margin has fallen.

I'd love to hear anyone else's opinion on this company. Hanover is still a net-net play but the ROE is low. The business doesn't seem to be getting any better, either.

Posted by CP at 3:41 PM 4 comments

Thursday, October 19, 2017

Mid October 2017 Links

  • Typically, the loser of a bar fight who later initiates a lawsuit has been beaten up pretty badly, or at least has the medical bills to suggest significant personal injuries. The loser sues the bar on one of several theories — the most common ones being inadequate security, not having banned a patron known to have a history of fighting, bar employees initiating the violence, or bar employees responding to a situation with unreasonable force. [link]
  • High school debate today is basically an intellectual game, not an exercise in truth-seeking. It has been turned into something that can easily be scored. This eliminates the complexity and intricacy of real discourse about real issues. If debate is a game, then the execution of a "spread" is like a well-timed blitz in football. Convincing a judge that your opponents' arguments would cause human extinction is equivalent to a successful Hail Mary pass. [link]
  • Today, America ranks nineteenth in the world for commercial shipbuilding, accounting for approximately 0.35 percent of global new construction. Put another way, only one-third of one-percent of new commercial shipbuilding occurs in the United States, despite the fact that we are the world's largest economy. [Greenspun]
  • Duke is an Adams devotee and often cites his books and theories in conversation. But he also believed, after examining Adams’s online presence, that he looked like a "total dork." One image in particular, which Adams described to me as his "douchebag photo," is often employed to accompany negative coverage. (It was taken, Adams says, about 20 years ago, for a Playboy shoot; hands raised before him, eyes to the sky, he looks like a kind of crazed Sunday preacher.) So in one pose, Duke shot Adams close-up, in black and white, with an old flannel blanket draped over his shoulders. The photo looks like a cross between an Eddie Bauer ad and a Richard Avedon portrait. "It’s a whole level of visual persuasion," Adams told me, "above anything I had in my own inventory." [NYT]
  • The body has no means of removing excess iron, instead storing it as ferritin. Why would the body not evolve a mechanism through which to remove excess iron, given how reactive and potentially damaging the molecule can be? Well, it never had to. There were always parasites gradually removing it through blood loss. Helminths are well documented to cause anaemia if the parasite burden gets too high (Crompton 1993) and as we have seen, helminths are consistently prevalent in humans without access to modern sanitation. A situation that was the norm from our evolutionary conception up until a few generations ago. [WoA]
  • "Beyond the Pyrenees begins Africa. Once that natural barrier is crossed, the Mediterranean racial type in all its purity confronts us. The human phenomena is entirely parallel with the sudden transition to the flora and fauna of the south. The Iberian population thus isolated from the rest of Europe, are allied in all important anthropological respects with the peoples inhabiting Africa north of the Sahara, from the Red Sea to the Atlantic." [Wiki]
  • At Dollar General, a package of eight Pop-Tarts is $2, or 25¢ a tart. At Walmart, shoppers can buy the same eight-pack, but more often they save by spending $9.98 for a bulk package of 48—only 20¢ a tart. Dollar General doesn’t offer much bulk. A Dollar General store also has lower startup costs; it spends as little as $250,000 for a new store, vs. the more than $15 million Walmart puts into a new Supercenter. [Bloomberg]
  • "Virtue is rewarded in this world, remember. Natural law makes no false judgements. Its decisions are just and true, even when dreadful. The victor gets the gold and the land every time. He also gets the fairest maidens, the glory tributes. And - why should it be otherwise? Why should the delights of life go to failures and cowards? Why should the spoils of battle go to the unwarlike? That would be insanity, utterly unnatural and immoral." [WoA]
  • Bananacoin is founded by a team of professionals with more than 5 years of background experience in banana production in Laos, associated with software development experts and professional lawyers [BTCtalk]
  • One law firm is using their enterprise version to put all their legal precedents into smart contracts so they will earn subscriptions. [CoBF]
  • High computational power requirements translate into high transaction fees. And that’s a problem for a lot of the applications that have been proposed for the blockchain. Using bitcoin as a currency is the biggest obvious problem. Most banks for example process millions of transactions daily, and most of these transactions are almost free because running a nice secure sever that handles a million transaction a day isn’t a lot more expensive than one that handles just a few transactions. [Alpha Vulture]
  • One of the year’s biggest initial coin offerings, a $232 million token sale by Tezos, is embroiled in a management fight that is threatening the deal and highlighting the risks in this red-hot corner of finance. [WSJ]
  • I’m betting Trump will delay the Obama Jan 1 2020 ADS-B out transponder mandate for all planes to fly in most of the US airspace. By delays and feature stripping the transponder cost is down to about $1000 after Federal subsidy, but installation by competent aircraft mechanic is extra. 18% of mechanics seem incompetent because that’s the share of non performing ADS-B installs. [MR]
  • The newest developments feature large homes with all the latest bells and whistles, but their physical design is exceptionally limited. The front yard is a little green toupee between driveways. There’s a useless strip between the homes so they are “fully detached” in spite of the collective legal nature of the HOA. The back yard is a patio up against a concrete wall. These are actually luxury apartments by other means. The inhabitants may be proud “homeowners” but the bank owns these buildings and collects rent every month in the form of mortgage payments with interest. [Granola Shotgun]
  • Trade-offs are endemic in biology. Anything which isn’t carrying its own weight will be eliminated - organs which are no longer used will be stunted by evolution and within a lifetime, unused muscles & bones will start weakening or being scavenged for resources, as astronauts may find out the hard way. Often, if you use a drug or surgery to optimize something, you will discover penalties elsewhere. If you delay aging & lengthen lifespan as is possible in many species, you might find that you have encouraged cancer or - still worse - decreased reproduction as evidenced by the dramatic deaths of salmon or brown antechinus; if your immune system goes all-out against disease, you either deplete your energetic and chemical reserves or risk autoimmune disorders; similarly, we heal much slower than seems possible despite the clear advantage; if you try to enhance attention with an amphetamine, you destroy creativity, or if the amphetamines reduce sleep, you damage memory consolidation or peripheral awareness; or improving memory (which requires active effort to maintain) also increases sensitivity to pain and interferes with other mental tasks (as increased WM does, slightly); if a mouse invests in anti-aging cellular repairs, it may freeze to death, and so on. (What are we to make of inducing savant-like abilities by brute-force suppression of brain regions, or tDCS improving learning?) From this perspective, it’s not too surprising that human medicine may be largely wasted effort or harmful (although most - especially doctors - would strenuously deny this). "Hardly any man is clever enough to know all the evil he does." [Gwern]
  • We derive experimentally based estimates of the energy used by neural mechanisms to code known quantities of information. Biophysical measurements from cells in the blowfly retina yield estimates of the ATP required to generate graded (analog) electrical signals that transmit known amounts of information. Energy consumption is several orders of magnitude greater than the thermodynamic minimum. It costs 104 ATP molecules to transmit a bit at a chemical synapse... [Nature]
  • Charles Murray remarks in Human Accomplishment on the graphs of "great" artists or scientists (as measured by how many different textbooks or encyclopedias thought they were important enough to mention) that they exhibit - no matter how you try to recalculate or adjust them - an extraordinary imbalance with many minor figures and just a few universal figures, as Lotka’s law predicts; this is odd, since the distribution looks nothing like a bell curve or "normal distribution" as one would predict if greatness were based only on IQ or only on hard-workingness or only on wealth. Some of this is network or Matthew effects, but the simplest explanation is that greatness requires multiple traits: one must be intelligent and hard-working and not desperately poor and... Many of which are normal distributions or similar, and when the requirements multiply out, what is left is a fast-shrinking distribution - like Lotka’s law. [Gwern]
  • One of the requirements for great work in any field is that one must be motivated - one must think one’s work or the field vitally important. It’s hard to become a chess grandmaster if one has contempt for devoting one’s life to studying the minutia of an arbitrary set of rules whose mastery has no utility to anything else whatsoever. I believe this may lead to a paradox of expertise, a winner's curse: those most likely to have achieved world-class mastery of a topic are systematically the most likely to be self-deluding or badly mistaken about its value. The "grandmasters" of many fields claim their field is uniquely important, which of course cannot be true in general, or uniquely satisfying to them, which seems improbable as any person can have sampled but few of life’s wares. Dinosaur Comics, on the topic of world-class violinists starting in very early youth, asks "What are the odds a 6-year-old would know what a 30-year-old wants to do?" [ibid]
  • The degree of supervision, indeed, is often a more eloquent class indicator than mere income, which suggests that the whole class system is more a recognition of the value of freedom than a proclamation of the value of sheer cash. The degree to which your work is overseen by a superior suggests your real class more accurately than the amount you take home from it. Thus the reason why a high-school teacher is "lower" than a tenured university professor. The teacher is obliged to file weekly "lesson plans" with a principal superintendent, or "curriculum coordinator," thus acknowledging subservience. The professor, on the other hand, reports to no one, and his class is thus higher, even though the teacher may be smarter, better-mannered and richer. (It is in public schools, the postal service, and police departments that we meet terms like supervisor and inspector: the prole hunter will need to know no more.) One is a mid- or low prole if one’s servitude is constantly emphasized. Occupational class depends very largely on doing work for which the consequences of error or failure are distant or remote, or better, invisible, rather than immediately apparent to a superior and thus instantly humiliating to the performer. [Class: A Guide Through the American Status System]
  • Microblogging and mobile devices appear to augment human social capabilities, which raises the question whether they remove cognitive or biological constraints on human communication. In this paper we analyze a dataset of Twitter conversations collected across six months involving 1.7 million individuals and test the theoretical cognitive limit on the number of stable social relationships known as Dunbar's number. We find that the data are in agreement with Dunbar's result; users can entertain a maximum of 100–200 stable relationships. Thus, the 'economy of attention' is limited in the online world by cognitive and biological constraints as predicted by Dunbar's theory. [PLOS]
  • I believe that someone who has been well-educated will think of something worth writing at least once a week; to a surprising extent, this has been true. (I have added ~130 documents to this repository over the first 3 years.) There are many benefits to keeping notes as they allow one to accumulate confirming and especially contradictory evidence4, and even drafts can be useful so you Don’t Repeat Yourself or simply decently respect the opinions of mankind [Gwern]
  • There is also an old German medical proverb which reads: "Hässlichkeit stellt eine schlecte Prognose vor," while Dr. George Draper has this extremely significant passage: "If one notes the general appearance of hospital-ward inmates, the average standard of beauty in the ordinary accepted sense is surprisingly low. It is as though ugliness, being an expression of bad modelling in respect of features and body proportions, expressed in the morphological panel a sort of genetic bungling. In such folk, inadequacies in other phases of the total personality may not unreasonably be expected." [Ludovici]
  • If you have ever said something like, "You can’t win because the government has a land army and nuclear weapons," here is the moral of the story for you. You are an idiot. You haven’t thought through this well enough, and you need to see the second amendment for what it really is. It is the best guarantor of peace because tyranny is mutually assured destruction. Insurgent will be mixed with progressive statist, and there will be no SEAL teams or nuclear weapons to which you can turn because you won’t know one from another. There will be nowhere to target a nuclear weapon, and nowhere for a SEAL team to raid. All of their close quarters battle preparations will be for naught when their own families are in peril due to civil warfare. These aren’t Afghan tribesmen you’re dealing with. These are engineers, mechanics, fabricators and welders, chemists, and the world’s best machinists. If you think Afghanistan was rough, wait to see what civil war would look like in America. [link]
  • Could this lead to a three-way partition of the United States? Four western "blue" states (Hawaii, Washington, Oregon and California) form one country, the liberal Northeast (DC, Virginia, Delaware, Maryland, New Jersey, New York, and the New England states) forms a second country, and the remainder of the country becomes a solid conservative country with its capitol in Texas. [LoTB]
  • What "Shoe Dog" taught me, then, is that I’ve been naive to think there is anything esoteric one can learn from business books like this. It is my mistake for coming to a mass market piece of media and expecting to hear an honest telling, or even an interesting one. These books are written to entertain, glorify the egos of those who they are written about or nominally by, and perhaps even to some extent to distract, delude or otherwise throw off of the scent the would-be competitors who read them. [AHR]
  • When I founded Talk magazine in 1998 with Miramax, the movie company Harvey founded with his brother Bob, I also took over the running of their fledgling book company with Jonathan Burnham as editor in chief. Strange contracts pre-dating us would suddenly surface, book deals with no deadline attached authored by attractive or nearly famous women, one I recall was by the stewardess on a private plane. It was startling — and professionally mortifying — to discover how many hacks writing gossip columns or entertainment coverage were on the Miramax payroll with a "consultancy" or a "development deal" (one even at The New York Times). [NYT]
  • Self-reports of psychopathic traits reasonably aligned with the perceptions of informants (rs = .36 - .60) and both predicted various types of antisocial behaviors, although some associations were only significant for monomethod correlations. These findings suggest that participants are willing and able to disclose psychopathic personality traits in research settings under conditions of confidentiality. [Wiley$]
  • The family needed roughly $7 billion to fund the deal, and lenders demanded a steep interest rate, according to people with knowledge of the matter. After meeting at least nine different firms over the course of four months, the asking price came to about 13 percent, said the people, who requested not to be identified because the discussions were private. [Bloomberg]
  • We have found that age was the only factor that affected the ability to behave randomly. This ability peaked at age 25, on average, and declined from then on. We also demonstrate that a relatively short list of choices, say 10 hypothetical coin flips, can be used to reliably gauge randomness of human behavior. [PLOS]
  • Age-adjusted cancer incidence across the combined cohort (N = 2,304) was 840 cases per 100,000 person-years (1,020 per 100,000 person-years in the Lappe cohort and 722 per 100,000 person-years in the GrassrootsHealth cohort). Incidence was lower at higher concentrations of 25(OH)D. Women with 25(OH)D concentrations greater than 40 ng/ml had a 67% lower risk of cancer than women with concentrations less than 20 ng/ml (HR = 0.33, 95% CI = 0.12–0.90). [PLOS]
  • The prospective cohort study, named PURE, found that in >135,000 participants from 18 countries, nutritive carbohydrates increase human mortality, whereas dietary fat reduces it, requesting a fundamental change of current nutritional guidelines. Experimental evidence from animal models provides synergizing mechanistic concepts as well as pharmacological options to mimic low-carb or ketogenic diets.[Cell]
  • I remembered the words W.C. Fields had chosen for his epitaph: "On the whole, I’d rather be in Philadelphia." [link]
  • In Southern California, $55 is what it will cost to get a special cup at Klatch Coffee, which plans to roll out a particularly prized version next month, dubbed Esmeralda Geisha 601. The “601” refers to the price per pound that the coffee sold for at auction. [WSJ]
  • Donald Trump never had a list of men and women who are independent of the existing power base that runs this country. He would be a real threat to the powers that be if he had such a list. Agents of the powers that be are now rushing into the vacuum. By January 20, the deal will be done. [Gary North]
  • Socialists in the nineteenth century were equally silent about how the state can allocate production so as to create the good society. In the twentieth century, there was no major detailed theoretical treatise on the economics of socialism that went into detail about the actual operations of central planning agencies in a world where the state owned the means of production. [Gary North]
  • Stretching used to be something people squeezed in before or after a workout. It is now a one-on-one treatment with specialized equipment and trained helpers. Stretching services and studios are popping up nationwide, pulling in hard-core exercisers like Mr. Minichiello, who says stretching sessions help him run faster and prevent injuries. The studios are also attracting creaky office workers wanting to unwind tight spots. [WSJ]
  • Acrobats, gymnasts, yogis, contortionists, and martial artists have clearly been pushing the limits for centuries, sometimes achieving uncanny mobility. But these are highly motivated athletes with specific and exotic performance goals and stretching regimens that would definitely intimidate the rest of us, and with good reason: they often injure themselves along the way. Indeed, it may even be necessary to injure joints — to traumatize their capsules and ligaments — in order to get them to move that far. [PS]
  • Casper was on its way to becoming a 750-million-dollar company. It was the hottest of the bed-in-a-box disruptors, with investments from celebrities like Ashton Kutcher and Nas. And it was picking on some skinny blogger from Arizona? [FC]
  • The 1961 Single Integrated Operational Plan (SIOP) called for the delivery of 3,200 nuclear warheads to more than 1,000 urban, industrial and military targets in Communist countries. The planners estimated the resulting death toll at 285 million. [link]
  • One late afternoon as I drove into a village, the sun appeared to drop like a fireball into the fjord. Spectacular modern installations appeared on remote corners in the most far-fetched of places, that they sometimes seemed like a figment of my imagination. I have never seen a place so multifaceted in its geography and so unpopulated, except perhaps on the other side of the earth, in Patagonia. [NYT]
  • Over the course of millions of AlphaGo vs AlphaGo games, the system progressively learned the game of Go from scratch, accumulating thousands of years of human knowledge during a period of just a few days. AlphaGo Zero also discovered new knowledge, developing unconventional strategies and creative new moves that echoed and surpassed the novel techniques it played in the games against Lee Sedol and Ke Jie. [Deepmind]
  • The good investors, Lynch as an example, get around to the companies they own, stay in hotels, buy in stores etc. There are posters here who apparently don't do anything like that. If you had shopped Sears over the past decade or longer, you would know everything you needed to know to take your money far away. Keeping your eyes and ears open come before reading arcane financial documents. [CoBF]
  • While I focus on picking strong swimmers rather than predicting the tide, one potential mistake that can be made when deeply analyzing individual opportunities (in addition to over-reliance on ?exhaustive data collection rather than thoughtful decision making) is to get so wrapped up in company-specific details that you overlook the broader systemic context - the “and then what?” analytical step out of the reductionistically precise comfort of a spreadsheet into the messy, complex real world [...] A third and final example, coincidentally also retail-related, is the bull thesis on Seritage Growth Properties (SRG) - i.e. slicing up and redeveloping erstwhile Sears boxes at substantially higher rental rates. I’ve seen multiple detailed writeups, none of which addressed my basic system-level question: ? which tenants can generate sustainable profits in B/C space? Fellow big-box anchor J.C. Penney has issues, the venerable Macy’s is slashing jobs, and I don’t think new Barnes and Nobles are in the cards. The long list of smaller-format retailers that have gone from “hot” to “not” includes, but is not "Limited" to: Hot Topic, Quiksilver, Aeropostale, J. Crew, Express, and essentially all of Ascena’s brands. Even cleats and clubs aren’t safe: Sports Authority went so bankrupt that creditors chose to liquidate. And it’s not as if these stores are closing into a supply-constrained market - Jones Lang LaSalle notes the U.S. has as much retail space per capita as "France, Denmark, Finland, Portugal, Spain, Italy, and Germany combined." None of this is to say that Seritage couldn’t work. But imaginably, the counterparty (Simon?) to those other downsizing retailers' leases probably also wants to redevelop space... implying what for pricing and utilization in an oversupplied market with shrinking demand? This system-level view raises critical questions I consider "too hard" - i.e. unknowable and/or unpredictable. So I passed Seritage by in favor of a much more clearly under priced REIT I actually had an angle on. (A small position and not my favorite idea, but in an expensive market, I’ll take value where I can find it.) [Askeladden]
  • Retail is not the right industry for purists. The Starbucks of today is perhaps best known for frilly, ridiculously customized drinks (double-pump hazelnut cappuccino with soy milk and stiff foam, exactly 197 degrees) but there was a time when the company had a bitter internal debate about whether or not to offer non-fat milk because it violated the Italian coffee experience and the purity of their dark roast. [Askeladden]
  • There is excess capacity in too many areas (and not just commodities). Reinsurance, for example. Retail real estate spinoff dreams, for another (the Sears and Macy’s locations I’ve seen are fairly typical in their feeling quite dated and needing serious renovations while leaving me scratching my head about who would actually want to lease or own stores other than Amazon). [Steve Towns]
  • Your best bet if you do not have the tools to joint and plain is to purchase from a reputable lumber dealer. They will have lumber that is already acclimated to your climate. This will more than likley save you money in wasted material. [link]
  • Certain entrepreneur stories – Phil Knight’s Shoe Dog and Richard Branson’s Losing My Virginity come to mind – could be reductionistically expressed as, “I spent a lot of my young adulthood screwing around doing what felt right, and ended up becoming a billionaire.” It’s a compelling narrative, but also a dangerous one – it’s easy for someone who is a billionaire to look back and say ah, don’t be a corporate square, follow your passion and go on a mystical journey and everything will work out... but I’m almost certain that if you had access to aggregate statistics, the life outcomes (in pure financial terms rather than more holistic life satisfaction) for 20somethings who, at least at first, pursue serious corporate jobs to build a resume, experience, and a nest egg before branching out, are probably way beyond those who meander along without much direction and hope things will just fall into place. [Askeladden]

Posted by CP at 5:30 AM 0 comments

Tuesday, October 10, 2017

Seadrill News

  • Seadrill Ltd's official committee of unsecured creditors said it has hired an investment banker and is looking into transactions made by the global offshore drilling contractor before it filed for U.S. Chapter 11 bankruptcy protection in Texas last month. "We are looking at numerous pre-petition transactions that were described at least in part" in Chapter 11 filings by Seadrill on Sept. 12, the committee's lawyer, Douglas Mannal, of Kramer Levin Naftalis & Frankel LLP said at a hearing in Houston on Tuesday. [link]
  • Seadrill Shareholders Will Get a Day in Court to Object to Restructuring [WSJ]

Posted by CP at 4:34 PM 6 comments

Early October 2017 Links

  • "Bezos will charge monopoly prices. There will be no price signals. Shippers will be in the same position as 19th-Century farmers in counties served by one railroad. Eventually, there will be an Interstate Bezos Commission."
  • You’re probably using the wrong dictionary
  • The obvious benefit to working quickly is that you’ll finish more stuff per unit time. But there’s more to it than that. If you work quickly, the cost of doing something new will seem lower in your mind. So you’ll be inclined to do more. [Speed Matters]
  • America's idea of winning a strategic game is to accumulate the most chips on the board: bases in Uzbekistan and Kyrgyzstan, a pipeline in Georgia, a "moderate Muslim" government with a big North Atlantic Treaty Organization base in Kosovo, missile installations in Poland and the Czech Republic, and so forth. But this is not a strategy; it is only a game score. Chess players think in terms of interaction of pieces: everything on the periphery combines to control the center of the board and prepare an eventual attack against the opponent's king. The Russians simply cannot absorb the fact that America has no strategic intentions: it simply adds up the value of the individual pieces on the board. It is as stupid as that. [Asia Times]
  • Our trainers regaled us with tales of unruly robots. They told us how one robot had tried to drag a worker’s stepladder away. Occasionally, I was told, two Kivas—each carrying a tower of merchandise—collided like drunken European soccer fans bumping chests. [Wired]
  • The Hajnal Line is a geosociological concept. It’s a line that separates (more or less) NW Europe from Southern and Eastern Europe. Inside the line, White Euros (such as Germans and Englishmen) evolved extreme out-group altruism from selective pressures imposed by the manorial system and the Church’s ban on cousin marriage (out to the sixth cousin, I believe) [CH]
  • The Piper Malibu, especially the early Continental-powered version with the 4-blade MT prop (quiet inside!), is the ideal family airplane. As long as you have a letter from God promising that the stressed-to-the-limit turbocharged piston engine won’t quit, you can fly in pressurized air-conditioned comfort nearly anywhere in North America with just one stop and sipping gasoline at close to 20 mpg. [Greenspun] 
  • Recently, Puerto Ricans have primarily been migrating to cheaper Orlando in central Florida. Hillary’s campaign devoted considerable effort to registering Puerto Rican new arrivals to tip the crucial purple state of Florida blue.  That strategy failed to swing Florida in 2016. But Democratic strategists are hoping that an exodus exacerbated by Hurricane Maria will deliver Florida’s 29 electoral votes in 2020.  This kind of election rigging helps explain why Democrats have been so compliant in letting Puerto Rico fall apart. [Taki]
  • "How do I get out of the room as fast as possible without alienating Harvey Weinstein?" [NYT]
  • Map of tree canopy height. Redwoods! [NASA]
  • A sociopath would try to have a senior mining company buy out their company.  Some seniors may do this if they can pay for the purchase in overpriced shares (or they may simply do this because the CEO was duped into making a dumb purchase and surrounds himself with yes men).  The wonderful thing about this is that the senior miner has a vested interest in perpetuating the lies. [Glenn Chan] 
  • The most important risks of hypnotics include excess mortality, especially overdose deaths, quiet deaths at night, infections, cancer, depression and suicide, automobile crashes, falls, and other accidents, and hypnotic-withdrawal insomnia. The short-term use of one-two prescriptions is associated with greater risk per dose than long-term use. Hypnotics are usually prescribed without approved indication, most often with specific contraindications, but even when indicated, there is little or no benefit. The recommended doses objectively increase sleep little if at all, daytime performance is often made worse, not better, and the lack of general health benefits is commonly misrepresented in advertising. [NIH]
  • I would, for a four-week period, ruthlessly clear my diary and go on what we somewhat mysteriously called a “Crash”. During the Crash, I would do nothing but write from 9am to 10.30pm, Monday through Saturday. I’d get one hour off for lunch and two for dinner. I’d not see, let alone answer, any mail, and would not go near the phone. No one would come to the house. Lorna, despite her own busy schedule, would for this period do my share of the cooking and housework. In this way, so we hoped, I’d not only complete more work quantitively, but reach a mental state in which my fictional world was more real to me than the actual one. [Kazuo Ishiguro]
  • Russo traces the amazing course of Korshak's life—from his childhood on Chicago's Jewish West Side to his role as a mouthpiece for the Windy City's Mafia leaders and, eventually, as a major league fixer who brokered labor truces and other deals for politicians and Hollywood moguls (Korshak died, aged 87, in 1996). The list of his clients and associates reads like a who's who of the last 50 years, including Ronald Reagan, MCA president Lew Wasserman, hotelier Conrad Hilton and cosmetics king Max Factor. [Amazon]
  • Gompertz law, in cartoon form: your body is deteriorating over time at a particular rate. When its “internal policemen” are good enough to patrol every spot that might contain a criminal 14 times a day, then you have the body of a 25-year-old and a 0.03% chance of dying this year. But by the time your police force can only patrol every spot 7 times per day, you have the body of a 95-year-old with only a 2-in-3 chance of making it through the year. [Gravity & Levity]
  • Similarly we can extrapolate the maximum service time for a wooden utility pole. Half of them make it to 90 years, but if you have a large installed base of 110-year-old poles you will be replacing about one-seventh of them every year and it might make more sense to rip them all out at once and start over. At a rate of one yard sale per week, a 110-year-old pole will have accumulated 5,720 staples.[Plover]
  • “Tesla is a zero,” Spiegel declares, reiterating the theme of his short presentation at the Robin Hood investment conference last November — a thesis that boils down to the fact that Tesla has been burning through cash and losing hundreds of millions of dollars a quarter, and will face a slew of electric-car competitors over the next few years. These include rivals like Porsche, which is what he drives. “Tesla is losing a massive amount of money with no competition, and yet massive competition is coming,” he says. [II]
  • Pennsylvania and Ohio have the two largest white rural populations in the United States, despite only being the 5th and 7th largest states overall. Unlike some larger states like Texas and California, these states' non-metro areas are covered by prosperous small farms (especially since the big ag price run-up of 2006-2008) and small towns. Driving through, you encounter one quaint small town with a 2 block downtown area after another, sometimes under 10 miles apart. [SS]
  • Here’s how he described the [Chinese caffeine] plant in his book: "...half the windows were smashed, and rags streamed out. Bags of stockpiled chemicals sat inside the broken first-floor windows. The place reeked — a chemical stench to make you gag — and a tall rusty tank leaked a tarry sludge." [link]
  • The more perfumes and body lotions that are used, the higher the levels of synthetic fragrances – called polycyclic musks – that are in the blood, reports a new study that examined college students from Austria. [link]
  • The fact that no such brawls ever happen in the American parliament is good evidence for how the idea that both parties are really just one uniparty is correct. For such a divided country how else can one explain that politicians never come to trading punches with each other? [SS]
  • This lesson is particularly important, as a lot of foreign policy thought in powerful nations today look at the world exactly in this matter: invade here, stare down enemy there, expand sphere of influence, control world. Neoconservatism is probably the worst example, but far from the only one. The Bronze Age collapse provides a grisly object lesson in how devastating these delusions can be. Borders are something only humans acknowledge, problems usually don't care. It can happen very quickly: In such a strained environment, all that needed to occur was a trigger: the dice just had to come up wrong one year and everything began going to shit. Society's more fragile than it looks, and disconnected elites + taxed treasuries + disaster can easily send things spiraling into chaos. [The Fire Last Time]
  • Nevertheless each life style must be able to turn in an energy profit sufficient to survive, reproduce and make it through tough times. There are few, if any, examples of extant species that barely make an energy profit – for each has to pay for not only their maintenance metabolism but also their “depreciation” and “research and development” (i.e. evolution), just as a business must, out of current income. Thus their energy profit must be sufficient to mate, raise their young, “pay” the predators and the pathogens and adjust to environmental change through sufficient surplus reproduction to allow evolution. Only those organisms with a sufficient net output and sufficient power (i.e. useful energy gained per time) are able to undertake this through evolutionary time, and indeed some 99 plus percent of all species that have ever lived on the planet are no longer with us – their “technology” was not adequate, or adequately flexible, to supply sufficient net energy to balance gains against losses as their environment changed. Given losses to predation, nesting failures and the requirements of energy for many other things the energy surplus needs to be quite substantial for the species to survive in time. [Energy Return on Investment: A Unifying Principle]
  • We can either have one large national border, or millions of smaller borders within the disintegrating state. There will never be a borderless world; like water, borders will find their level. And that level is usually contoured by race and ethnicity.[CH]
  • General Kelly, Trump's Chief of Staff, has put Trump on a establishment-only media diet. Further, staff members are now prevented from sneaking him stories from unapproved sources during the day (stories that might get him riled up and off the establishment message). The impact has been immediate. [GG]
  • Applebee’s has said it will close 135 locations this year; Buffalo Wild Wings will shed at least 60.Ruby Tuesday closed 109 restaurants last year, and put the whole company up for sale in March. Friendly’s, Bennigan’s, Joe’s Crab Shack, and Logan’s Roadhouse have all filed for bankruptcy. [Eater]
  • chicken (whole breast filet, seasoning [salt, monosodium glutamate, sugar, spices, paprika], seasoned coater [enriched bleached wheat flour {with malted barley flour, niacin, iron, thiamine mononitrate, riboflavin, folic acid}, sugar, salt, monosodium glutamate, nonfat milk, leavening {baking soda, sodium aluminum phosphate, monocalcium phosphate}, spice, soybean oil, color {paprika}], milk wash [water, nonfat milk, egg], peanut oil [fully refined peanut oil, with Dimethylpolysiloxane, an anti-foam agent added]), bun (bleached, enriched wheat flour [wheat flour, barley malt, niacin, iron, thiamine mononitrate, riboflavin, folic acid], water, sugar, yeast, soybean oil, wheat gluten, salt, vinegar, calcium sulfate, citric acid, ascorbic acid, enzymes), butter oil (soybean oil, palm oil, salt, natural butter flavor and beta carotene for color), pickle (cucumbers, water, vinegar, salt, calcium chloride, alum, potassium sorbate [preservatives], natural flavors, polysorbate 80, yellow 5, blue 1). [Chick-fil-a]
  • The big sci-fi ideas today are mainly in novels. Liu Cixin’s Three Body Problem trilogy, Neal Stephenson’s Seveneves, and Kim Stanley Robinson’s Aurora tower over recent sci-fi movies. There’s a Chinese movie adaptation in the works for the first book in the Three Body trilogy though. [SS]
  • Yesterday someone asked my cleaning lady to invest in Bitcoin. Now if someone had asked her to accept payment in Bitcoin, or send payment in Bitcoin, then this would be compelling evidence that one should invest in Bitcoin. But when cleaning ladies are asked to invest in Bitcoin, not a good investment. [Jim]
  • A century of reliable valuation evidence indicates that the S&P 500 is likely to experience an outright loss, including dividends, over the coming 10-12 year horizon, and we presently estimate likely interim losses on the order of -60% or more. A rate of return of even 1% in cash is a much more desirable option than investors may imagine. [Hussman]
  • On my previous flight to the space station, a mission of 159 days, I lost bone mass, my muscles atrophied, and my blood redistributed itself in my body, which strained and shrank the walls of my heart. More troubling, I experienced problems with my vision, as many other astronauts had. I had been exposed to more than 30 times the radiation of a person on Earth, equivalent to about 10 chest X-rays every day. [link]
  • The valley is the world’s largest patch of Class 1 soil, the best there is. The 25-degree (or so) temperature swing from day to night is an ideal growing range for plants. The sun shines nearly 300 days a year. The eastern half of the valley (and the western, to some extent) uses ice melt from the Sierra as its water source, which means it doesn’t have the same drought and flood problems as the Midwest. The winters are cool, which offers a whole different growing season for plants that cannot take the summer heat. [NYT]
  • In 1988, Robert Jackall wrote a book called Moral Mazes published by Oxford University Press. He said organizations today follow this code: You never go around your boss. You tell the boss what he wants to hear, even though your boss claims that he wants dissenting views. If your boss wants something dropped, you drop it. You are sensitive to your boss’s wishes so that you anticipate what he wants; you don’t force him, in other words, to act as boss. Your job is not to report something that your boss does not want reported, but rather to cover it up. You do what your job requires. You keep your mouth shut. [JTR]
  • Making extraordinary amounts of money takes time and risk. Even the richest man on earth only has 24 hours in each day. Time spent making money takes away from family, friends, health. And when you have enough, you should use your money to CUT risk, not to make more. [JTR]
  • Portugal now has debt that is 130 percent of GDP, a level that, prior to 2008, would have been considered crippling (Estonia is at about 10 percent, for comparison to a country that is at the top for tax competitiveness; New Zealand is at about 25 percent; the U.S. is just over 100 percent). [Greenspun]
  • The power of a work of art to prime emotions and actions changes over time. Perhaps, initially, the audience isn't ready for it, then it begins to impact a few sensitive fellow artists, and they begin to create other works in its manner and talk it up, and then it become widely popular. Over time, though, boredom sets in and people look for new priming stimuli. For a lucky few old art works (e.g., the great Impressionist paintings), vast networks exist to market them by helping audiences get back into the proper mindset to appreciate the old art (E.g., "Monet was a rebel, up against The Establishment! So, putting this pretty picture of flowers up on your wall shows everybody that you are an edgy outsider, too!"). [SS]
  • What started as wonky geochemical mechanisms were sequentially replaced and fortified by biological ones, the authors believe. "Think of life like an onion emerging in layers, where each layer functions as a feedback mechanism that stabilizes and improves the ability to fix carbon," says Braakman. [SF]

Posted by CP at 10:19 AM 0 comments

Passacaglia Cm J.S. Bach, arr. TOEAC

Posted by CP at 10:09 AM 0 comments

Saturday, October 7, 2017

Bach - Toccata and Fugue in D minor BWV 565 - P. Barton, harmonic pedal piano

Posted by CP at 12:02 PM 0 comments

Thursday, October 5, 2017

Electric Light Orchestra - Sweet Talkin' Woman

Posted by CP at 8:28 PM 0 comments

Latest On Seadrill Restructuring

Here are some thoughts from Chris Hughes on the Seadrill restructuring:

The left-behind bondholders are a fragmented bunch of institutions and retail investors. While bigger by weight, they couldn't mobilize to the same effect.

The bankruptcy court can impose this plan on bondholders even if they vote it down. To be sure of a better deal, they need an alternative plan for injecting $1.1 billion in partnership with Fredriksen. But it's hard to see them dislodging Centerbridge.

Their most realistic bet may be to gum up the process in litigation. Seadrill would doubtless prefer their support and so may tweak the terms. A sweetener could come from giving the disgruntled bondholders more than just a nibble at the fundraising. The 2 percent of equity being kept for the existing shareholders is another source of top-up. Despite this possibility, the shares are currently worth $188 million, implying a ridiculous $10 billion valuation for the equity post restructuring, and demonstrating how unreliable the stock market can be in a bankruptcy.

The losing bondholders may as well fight. But they need to remember that the spoils of restructurings tend to go to those who start punching at the beginning, not the end.
The "losing" bondholders may be low energy, but they outnumber the plan-supporting bondholders 60-40.

Posted by CP at 1:38 PM 0 comments

Monday, October 2, 2017

Compendium of Credit Bubble Stocks Book Reviews

Note our Theory of Books.

5/5 - "Hall of Fame" - timeless

5/5 - These are just "Must Read"
4.5/5
4/5
3.5/5
3/5
2/5
1/5

Posted by CP at 8:18 PM 0 comments

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