Monday, June 20, 2016

Review of Stop the Clock: The Optimal Anti-Aging Strategy by P. D. Mangan

Last year I reviewed economist Art De Vany's New Evolution Diet book, which is a 5/5 with good thoughts on paleo, low-carb, and power law effort distribution, and has his choice quote, "bread is the ultimate poverty food – it exists only because grain is cheap, easy to grow and is less perishable than other foods." 

Remember the key takeaway from De Vany was that early humans would have been exposed to practically no foods capable of triggering a massive insulin release, and each insulin spike puts wear on the body, and also lessens the insulin sensitivity of adipose tissue, which sets up an unpleasant positive feedback loop of metabolic syndrome.

Another excellent source for staying current on anti-aging/health/supplementation/diet research is P.D. Mangan (twitter/website), who also puts out short books from time to time like Stop the Clock

Mangan is helpful because he is synthesizing all the latest research and results on this stuff. A couple examples: many men are suffering from excess iron, and the beneficial antioxidant hypothesis is giving way to a phytochemical hormesis hypothesis.

Here are some examples of Mangan's thinking on diet:

  • Low carb: The better results on low-carb were likely due to two things, in my opinion. One is that insulin levels dropped. Insulin helps drive fat into cells, and lower insulin levels allow fat cells to release fat to be burned. The other reason is probably better compliance. This low-carbohydrate diet was unrestricted in calories, i.e. all-you-can-eat, therefore the participants on this diet were unlikely to get hungry and grab the nearest food available. The participants on the other, calorically restricted diets may have been much more likely to get hungry and cheat.
  • Fasting: The first treatment that Dr. Jason Fung uses for his diabetic patients is fasting, and by all accounts quite successfully. The treatment described in the paper was not fasting, but at 600 calories a day, was pretty close. All of this shows clearly that diabetes is a disease of over-nutrition, caused by too many or the wrong kind of calories, when those calories are not burned by exercise.
  • Protein leverage hypothesis: [H]umans and animals closely regulate the amount of protein in their diets, with the average human consumption of protein being around 15% of calories. The idea is that if available foods are low in protein, more food will be eaten until protein requirements are satisfied. If foods are relatively dilute in protein, containing, say, less than 15% protein overall, then more calories need to be consumed to make up for the lack of protein. If higher protein foods are eaten, then less calories are consumed and weight loss or maintenance follows.
Here are some hypotheses from Stop the Clock that you may not have heard before. Again, Mangan is not a primary researcher but he is an excellent synthesizer of research.
  • A theory of aging: "aging means a breaking down of capacity for renewal", caused by three main processes; an increase in oxidative stress, an increase in inflammation, and a decrease in autophagy.
  • Exercise (weightlifting to build muscle, not "cardio") is important because muscle strength is inversely correlated with cancer. [study]
  • Antioxidant supplementation may be harmful, blunting free radicals from exercise prevents beneficial adaptation from exercise. [study]
  • The high carb, low fat government nutritional recommendations were immensely destructive. Saturated fat is good for you.
  • The risks of obesity and adiposity to health have been underestimated. Flawed studies that use BMI at time of death instead of all time high BMI understate the risk. [study]
  • Low carbohydrate diets can quickly reduce insulin and blood glucose levels [study]
  • Coffee is an incredibly rich source of potentially beneficial phytochemicals.
Ultimately, Mangan's formula is pretty similar to De Vany's and consists of: building muscle with weightlifting, eating a low carb diet high in dietary phytochemicals, and practicing intermittent fasting.

5/5 for Mangan overall. I find it best to just follow him on Twitter and keep up with his blog that way. The books are good to buy and give away to friends or family who want to get healthier.

Sunday, June 19, 2016

Paper: "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers"

Highlights:

  • Payouts to shareholders reduce the resources under managers’ control, thereby reducing managers’ power, and making it more likely they will incur the monitoring of the capital markets which occurs when the firm must obtain new capital. Financing projects internally avoids this monitoring and the possibility the funds will be unavailable or available only at high explicit prices.
  • Managers have incentives to cause their firms to grow beyond the optimal size. Growth increases managers’ power by increasing the resources under their control. It is also associated with increases in managers’ compensation, because changes in compensation are positively related to the growth in sales. The tendency of firms to reward middle managers through promotion rather than year-to-year bonuses also creates a strong organizational bias toward growth to supply the new positions that such promotion-based reward systems require.
  • Debt creation, without retention of the proceeds of the issue, enables managers to effectively bond their promise to pay out future cash flows. Thus, debt can be an effective substitute for dividends, something not generally recognized in the corporate finance literature. By issuing debt in exchange for stock, managers are bonding their promise to pay out future cash flows in a way that cannot be accomplished by simple dividend increases. In doing so, they give shareholder recipients of the debt the right to take the firm into bankruptcy court if they do not maintain their promise to make the interest and principal payments.
So what does this suggest could be done to improve capital allocation? The debt solution is probably a pretty good one since it is also tax efficient. On the other hand, we are so anti-debt that it's worth looking at a couple other possibilities.

Require shareholder approval to spend funds on new capital projects. For example, an S-corp might already have a stipulation that some or all taxable earnings be dividend-ed to shareholders (so that they can meet their tax obligations). That would require management to try to raise new capital through some other means, for example a rights offering (which seems like a fair tool to use). The rights offering might be improved upon by requiring shareholder approval before implementation.

Perhaps the organizational bias towards growth could be defeated by increased profit sharing or employee ownership instead of rewarding strictly via promotion.

Friday, June 17, 2016

Dockets for Recent Bankruptcy Cases

Correspondent Comment on Brexit

The EU was the mini-empire established for Germany to keep it from reconciling with Russia and to keep it within the US Empire for the benefit of the Rothschild private banking nexus.

The British common people never wanted to be part of the EU. It was in their face all the time. For example, the British were forced to let many of their cherished varieties of apples go because they were not listed in a Brussels directive. This sort of aggression happened all over Europe until people were fed up.

Now, Britain is going to exit. See this map of British search queries about Brexit.

The actual Brexit may be delayed temporarily by electoral fraud, but it will come soon because of the flooding of Europe with Muslims.

France does not like being a junior partner of Germany. It is attracted to Russia. It will exit the EU soon after Britain. So will Italy and Greece.

All of these will begin integrating with an entity extending from the Atlantic to the Pacific.

Energy XXI Unsecured Creditors' Motion to Adjourn Disclosure Statement Hearing

[T]he Committee requests that, pursuant to section 105 of the Bankruptcy Code, the Court (a) adjourn the Hearing with respect to the Disclosure Statement Motion by at least three (3) weeks (to a date that is not earlier than July 14, 2016) to afford the Committee and the Debtors an appropriate opportunity to engage in settlement discussions related to the Plan, and (b) extend the applicable objection deadline with respect to the Disclosure Statement Motion to a date that is not more than five (5) days prior to the date this Court sets for the adjourned hearing on such motion. The Committee submits that the foregoing limited extension will not unduly prejudice any party in interest, and may result in significant benefits to the Debtors and their estates, especially if this negotiation is fruitful and can redirect these chapter 11 cases toward a consensual, rather than litigated, resolution. [...]

Indeed, at the June 10, 2016 hearing on the Committee’s Motion to Compel, the Court expressed concerns regarding the disclosure of insider transactions and related releases and instructed the Debtors to make more fulsome disclosures. This request resulted in the Debtors filing an amended Plan and Disclosure Statement on June 14, 2016 [Docket Nos. 502 and 503].

While the Debtors’ amended Disclosure Statement now includes some discussion of certain potential causes of action that could be brought by the Debtors’ estates involving Mr. Schiller, Mr. Louie, and the board of directors generally related to the personal loans made to Mr. Schiller and various transactions between the Debtors and the parties making such loans (and takes the position that such claims do not have merit), the Committee submits that the disclosure is still missing material facts. [For instance, the Debtors should include: (a) (i) the timing, amount, maturities, and parties providing the vendor loans, and (ii) whether and when the vendor loans were or will be repaid; (b) (i) when Mr. Louie’s appointment as a director of the Debtors was first discussed with the board, (ii) when Mr. Schiller received the loan from Mr. Louie (and the amount and terms thereof), (iii) when Mr. Louie was asked to join the board, and (iv) whether and when Mr. Schiller repaid the loan to Mr. Louie; and (c) (i) the date when the Debtors’ officers first considered entering into the acquisition of M21K, LLC (“M21K”), (ii) when the M21K acquisition was first discussed with the board, (iii) the amount of the obligations assumed in the M21K acquisition, and (iv), the valuation, if any, the Debtors made of the assets obtained at the time of the transaction.]

The Committee seeks the adjournment because these cases must now either change direction or become mired in expensive, time consuming litigation. The Committee submits that these cases should be placed, at least for a short time period, on a track of negotiation and asks the Court to adjourn the June 23rd hearing for three weeks to nudge the Debtors and the Second Lien Noteholders to engage with the Committee on serious negotiations for a consensual plan. As noted above, the Plan described in the Disclosure Statement cannot be crammed down and the changes necessary to make it potentially acceptable to unsecured creditors would be too fundamental to allow for modification rather than re-solicitation if the current Disclosure Statement were approved.

Moreover, the Committee is not alone in its view that even the amended disclosure is inadequate. At the recent June 15, 2016 Equity Committee Hearing, following testimony provided by, among others, a representative of PJT Partners (the Debtors’ investment banker and financial advisor), the Court expressed serious concerns regarding, among other things, (a) allegations of misrepresentations by the Debtors’ management, (b) the personal loans provided to the Debtors’ CEO, and (c) proposed distributions under the Plan to management pursuant to a management incentive plan contemplated by the Plan.

In furtherance of the exercise of its fiduciary duties, the Committee, through its professionals, has been diligently investigating the foregoing (and other) prepetition conduct and transactions. In the event the Court grants the adjournment sought in this Motion, the Committee intends to use the adjournment period to negotiate with the Debtors and the Second Lien Noteholders to arrive (hopefully) at a consensual resolution of their differences regarding the Plan. The Committee is hopeful that the parties will arrive at a Plan structure that will provide for treatment that is capable of consensual confirmation in place of the terms provided under the current Plan, specifically: (a) removal of the impermissible “death trap” structure; (b) appropriate allocation of the value of unencumbered estate assets among creditors, including unsecured creditors; and (c) tailored releases to avoid prejudice to creditors and interest holders.

Wednesday, June 15, 2016

Arch Coal Amended Disclosure Statement

Debtors have continued to seek to obtain support for a plan that would provide holders of General Unsecured Claims with enhanced distributions and would also be supported by more than 80% of the Consenting Lenders, in accordance with the RSA. However, the Debtors, the Ad Hoc Committee Lenders and the Creditors’ Committee have been unable to reach consensus regarding plan distributions to General Unsecured Creditors. Accordingly, the Plan that the Debtors have filed provides that holders of General Unsecured Claims will receive their pro rata share of the Debtors’ unencumbered assets in the form of (i) cash, subject to reductions for certain fees and, potentially, adequate protection claims and (ii) shares of Prairie Holdings, Inc., which is the Debtor that owns a 49% interest in Knight Hawk Holdings, LLC, but only if it is judicially determined that Prairie Holdings’ interests in Knight Hawk Holdings, LLC are unencumbered.

Further, as discussed in detail in this Amended Disclosure Statement, the Plan is premised on a global settlement and compromise of certain claims and causes of action that could be asserted by the Debtors against certain of the First Lien Lenders for actions taken in connection with the Debtors’ prepetition exchange offers and certain of the Debtors’ employees. The consideration for the global settlement is to be provided by the holders of First Lien Credit Facility Claims, who will waive the Prepetition Lender Adequate Protection Claim in respect of any diminution in the value of the Prepetition Collateral from the Petition Date through and including June 22, 2016 and, potentially, through the Effective Date, subject to certain exceptions.

Energy XXI Amended Disclosure Statement

"The Debtors expect the Chapter 11 Cases to proceed quickly. Should the Debtors’ projected timelines prove accurate, the Debtors could emerge from chapter 11 by September 2, 2016. No assurances can be made, however, that the Bankruptcy Court will enter various orders on the timetable anticipated by the Debtors."