Wednesday, January 31, 2007

We All Know How This Story Ends



Chinese United by Common Goal: A Hot Stock Tip
—The New York Times


Anybody else remember the impact of Alan Greenspan’s “Irrational Exuberance” speech ten years ago last December?

I do: I was in a hotel room, back from a breakfast meeting, calling into a trading desk to find out what was going on pre-open.

What was going on, the trader told me, was the market was freaking out following remarks by Federal Reserve Chairman Alan Greenspan, who had given a speech the night before in which he used the somehow irresistible term “irrational exuberance” to describe a stock market still several years away from its ultimate peak.

Actually, the trader didn’t say the market was “freaking out.” Nor did he call Greenspan “Federal Reserve Chairman Alan Greenspan”: he used far more colorful words. He used the kind of words guys use when a driver cuts them off without looking—only angrier, and with more “Fs.”

In any event, I had a flashback to that morning while reading yesterday’s excellent New York Times story on the current state of so-called “investing” in China. The headline, shown above, only hints at the riches of this-must-be-a-top anecdotal evidence the reporter uncovered.

BEIJING, Jan. 29 — “Irrational exuberance” has no exact Chinese translation, but no explanation seemed necessary in the bustling lobby of GF Securities. Grungy-looking college students, office workers, retirees and even a pregnant woman in suede boots all jostled into the brokerage on a recent morning, eager to buy stocks and buy them now.

Wang Yu, 20, slouching on a black sofa in the lobby, said he had already doubled his initial investment of 100,000 yuan, or about $12,900, after jumping into the Chinese stock market barely a year ago. His parents had lent him the start-up money, but now he was feeling confident and mulling over a new investment. Commercial shipping containers, he predicted, could bring big profits.

“A lot of the older investors lost a lot of money, so they are not as optimistic,” Mr. Wang said. “I think it is going just fine.”

Less than two years after share prices collapsed, China’s stock markets are almost going mad, actually, with the leading Shanghai Composite Index approaching 3,000 and Chinese investors flocking to buy shares in record numbers. The bull market is so powerful — the Shanghai market hit a record high last week and was among the best performing in the world last year — that one senior Chinese official has warned against “blind optimism.”

That phrase, “blind optimism,” has reminded more than one observer of Greenspan’s “irrational exuberance” speech, with skeptics latching onto it as an indicator that the hour is late for the Great China Bull Market.

Of course, non-skeptics can point out that Greenspan was three years too early in his warning of impending disaster—if that is indeed what the famously opaque economist was trying to get across at the time.

I recall a widely-reprinted New Yorker cartoon of the era with the erudite, double-speaking Greenspan announcing interest rate policy as follows:

“’Twas brillig, and the slithy toves Did gyre and gimble in the wabe; All mimsy were the borogoves, and the mome raths outgrabe fifty basis points.”

Now, it is a fact that “irrational exuberance” did not peak in this country until roughly three years after Greenspan’s supposed warning, and “blind optimism” may indeed carry things ahead in China longer than that.

But the signs are not good, at least if the anecdotal evidence in the Times is any indication:

College students, young professionals, retirees and others are buying individual shares or investing in China’s swelling mutual funds. One mutual fund raised $5 billion in a single day. Day trading, meanwhile, is becoming popular with investors, many of whom monitor the market from home on personal computers.

Everyone seems to want a stock tip.

“When I go to the beauty salon, even the girls who give me a manicure are talking about stocks!” said Shirley Lei, a consultant in Shanghai who worries that inexperienced buyers could be cheated. “They ask me, ‘What should I invest in?’ They say they are doing research.”…

“Of course, the market in China is not as regulated as in America or Britain,” Mr. Lu said.
“The Chinese market is much younger, so you are going to have risk. But I think the government is trying to straighten things out so that the market will become stronger.”

His goal was simple. “I want to get rich,” he said.


Don’t we all?


Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Monday, January 29, 2007

The Not Making it Up Awards


The ritual of the quarterly earnings call is in full swing, as even the “Mad Money” denizens of Cramerica know, and it really does pay to listen in on these regular updates from corporate America.

For starters, a conference call provides a quick quarterly snapshot of a company—what’s happening, where and why.

But even beyond the dry basics of the business itself, an earnings call is a great way to assess the personality of the enterprise, which—as readers of this blog know—is frequently a direct reflection of the personality of the CEO who runs the place, for good or ill. And when you invest in a company, you'd better understand that personality or else, as they say, caveat emptor.

Now, how can a tightly scripted conference call reveal much of anything beyond a few numbers, you ask?

I'll tell you: no matter how tightly the corporate attorneys craft the CEO's introductory remarks and the CFO's recitation of the numbers, something happens when they get to the Q&A portion of the call and the conference operator tells the CEO, who is sitting in a conference room full of his or her peers with a speakerphone on the table and a couple hundred of Wall Street’s Finest and their clients on the other end of the line, “Your line is open for questions.”

I’ve heard grown men blame earnings shortfalls and business disruptions on everything from cows on the highway to an excessive number of organ transplants.

You think I’m making that up? Here are the quotes:

We actually have a truck full of important parts trucking in through -- coming in from L.A. through southern Utah, ran into a cow and tipped over the cab, and that actually, literally, has stopped the project for two weeks. But short of any more cows on the interstate, I don't see how that gets delayed.
—Patrick Byrne, Overstock.com 4/28/06

We have -- there are certain things that are beyond our control, for example the medical costs. We are reviewing them. We've got an outside company coming in to audit all the medical costs. As you know, we're pretty much self-insured and we had -- Bob Hensley can correct me on this -- I think we had like 12 organ transplants versus 3 last year. Is that right, Bob?
—Robert Wildrick, Jos. A. Bank Clothiers 6/8/06.

While the current batch of earnings calls hasn’t provided quite those levels of head-scratching or did-he-just-say-what-I-thought-he-just-said? queries from Wall Street's Finest, there have been a number of note-worthy items to “call out,” both in a positive sense and in a negative sense, as we will do here in the form of the first Not Making This Up Awards, to be handed out to anybody we deem worthy.


The Best Reprimand of Wall Street’s Finest Award:

Carl Camden, Kelly Services, Inc. - President and CEO

For the particular quarter, there has been -- we have this issue now for the last three years where the calendarization of some of the folks who follow us is just wrong. They overestimate how much earnings will pop in to the first quarter and underestimate what comes in the remainder of the year. And it's kind of spectacularly replayed itself again in the first quarter numbers this year.


The How Time Flies Award

Don Blankenship, Massey Energy (Coal)

...as we went through 2007 [sic], a lot of utilities have bought some strong volumes at large prices, as well as the met [metallurgical coal] customers, and as ’07 [sic] wound down, a lot of people were looking at lower prices and they have taken off volume.


The Why Interest Rates Are Not Going Down Any Time Soon Award

Dustan McCoy, Brunswick Corp. (Boats)

In addition, we are assuming that price increases will not fully offset inflationary pressures on our raw materials and labor costs. And while we will see the benefit of our restructuring actions, this, too, is offset by higher research and development spending and additional work on our strategic objectives.


The Most Frightening Euphemism Ben Bernanke Ever Heard Award

John Lundgren, The Stanley Works (Tools)

We got pricing in the quarter. We were pleased with what we got all-in…we are quite pleased with pricing. We’ve established pricing centers of excellence in the majority of our large businesses. We are getting quite granular on all forms of pricing, how to achieve it.


The Clearest Answer Award

Stephen Russell, Celadon (Trucking)

Chaz Jones, Morgan Keegan: And then maybe similar to the question that John asked…. The decline in utilization that we saw in the numbers, was that all purely demand driven or was there anything else in there related to whether it be drivers or mix shift or changes or any of those factors?

Stephen Russell, CEO Celadon Group: It was demand driven. There was less business from existing customers.


We’ll have more as earnings season winds down. Nominations from the floor are welcome.



Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Sunday, January 28, 2007

Weekend Edition: Page Six Comes to the Times



THE author’s beautiful live-in girlfriend is asleep upstairs, the author himself is relaxing in his workroom, having just returned from a recording session in New York City. His life looks pretty good.

So begins the article carried in Friday’s publication—and I leave it to readers to guess which publication we are talking about—titled, “A Life Lived in Fear, But Not Half Bad.”

The “author” in the article is Allen Shawn, a composer and professor at Bennington College who just wrote a book about his phobias.

The gist of the piece is that despite a turbulent upbringing and his fears of “open spaces, closed spaces, highways, subways, elevators, planes, tunnels,” Mr. Shawn is leading a good life: after all, as the reporter says right there in the first paragraph, the man has a “beautiful live-in girlfriend.”

What else could a guy want?

Now, who, you might ask, has any interest in Allen Shawn? Well, superannuated old-timers such as yours truly are interested because his father was William Shawn, editor of The New Yorker during its long, post-Thurber slide into near-irrelevance.

(James Thurber, for you YouTube kids, wrote probably the best short story ever crafted: "The Secret Life of Walter Mitty". Google it some time.)

The senior Shawn, as the article later mentions, was a bizarre family figure who took phone calls from his mistress at home in a closet, and whose best moments appear to have been reserved for editing manuscripts, as opposed to hanging with his sons, Allen and Wallace.

Which leads to a second demographic that might be interested in Allen Shawn: twenty-somethings who recognize Allen’s brother, Wallace, a serious play-write (“The Designated Mourner”) and actor (“My Dinner with Andre”) in his own right.

But they would not recognize Wallace because of the serious stuff.

No, they would recognize him from his gigs as the nerdy Mr. Hall in the actually quite funny “Clueless,” and the sort-of-amusing villain in likewise funny “The Princess Bride.”

Yet with all this fodder—odd, famous father; famous and literate brother; plus Allen Shawn’s own career as a composer and author—the reporter seems obsessed with the pulchritude of Mr. Shawn’s “beautiful live-in girlfriend”:

A follow-up question: How did a guy who is afraid of his shadow end up with a beautiful girlfriend — who from the pictures around the house is a good deal younger?

“Oy, yoy, yoy,” Mr. Shawn says, using an expression that his late father, the longtime editor of The New Yorker, William Shawn, who did not exactly advertise that he was Jewish, is unlikely to have uttered publicly. “You didn’t mention short. Um, I really can’t account for it…. ”

Two paragraphs later, the reporter tells us more about another physical characteristic of a talented female writer than about that writer’s own career while mentioning Mr. Shawn’s previous marriage:

Mr. Shawn’s former wife, to whom he was married for 25 years and with whom he has a daughter and a son, is the writer Jamaica Kincaid, who at six feet tall towered over him….

This focus on the physical attributes of women would be par for the course if this were, in fact, Vogue, whose cover stories are generally given over to Tom Cruise or whatever Hollywood star is trying to resurrect his or her image via precisely crafted puff pieces that month.

But this is The New York Times that's telling us about a "beautiful live-in girlfriend" and a six-foot Amazonian ex-wife.

Maybe it's a lazy editor, or maybe in fact we’re seeing the final dissolution of the printed word at the hands of the Internet—now that the Wall Street Journal (as reported here last week in “Sergey and Larry Hit the Panic Button”) is moving to “scratch ‘n sniff” advertising...and the New York Times is trying to spice up "All the News That's Fit to Print" with Page Six material

Thurber himself would be turning in his grave.


Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Friday, January 26, 2007

Sergey and Larry Hit the Panic Button

.

'Wall Street Journal' to Offer ‘Rub ‘n Sniff’ Ads

That is the headline, and I am not making it up. Just in case you don't believe I'm not making it up, I'll quote the article itself:

NEW YORK (AdAge.com) -- And you thought the Small Street Journal was a new experience. The Wall Street Journal is on the verge of offering scented print-ad units that will appear on the regular pages of the paper. The technology takes "scratch 'n sniff" to a more refined level -- think "rub and sniff."

That was in yesterday’s online version of Advertising Age, and in case you are wondering, as I did at first, if this is a hoax by The Onion, it actually quotes not one of The Onion's regular “American Voices,” but the publisher of the Wall Street Journal itself:

"You actually have to rub some part of the ad," said L. Gordon Crovitz, publisher, The Wall Street Journal. "This won't be like the early days of magazine ads, where you picked it up and felt like you were walking through Bloomingdale's and spritzing you."

I hear from sources in Mountain View that Larry Page and Sergey Brin pulled an all-hands-on-deck all-nighter in the Googleplex last night to try to come up with a response to this latest salvo from the sinking ship otherwise known as the newspaper industry, which appears eager to capitalize on the raging success of its most recent killer idea, the smaller-sized newspaper.

Word has it that after racking their brains over pizza and Red Bull, the only response Larry and Sergey could come up with was,

Is this a hoax by The Onion?”




Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Tuesday, January 23, 2007

“Will That Be Private Equity Paper, or Plastic?”


Sara Michelmore, Cowen: "My question was specifically to the molecular business…I assumed if it had been available for sale that GE would have been interested in it."

Miles White, Abbott Labs: "That’s a good assumption."

—Abbott Conference Call, 1/18/07


I don’t know about anybody else who listened to that call, but the folks at Abbott sure sounded to me like they pulled off a good one by selling the least valuable bulk of their clinical diagnostics business to GE for a cool $8 billion.

Certainly Abbott CEO Miles White, as the above dialogue demonstrates, made it clear on the call he thought he was keeping the good, faster growth stuff and selling the plain-vanilla, lower growth stuff.

Funny thing is, that’s exactly what Jeff Immelt was telling Wall Street’s Finest the very next morning, during a conference call to discuss earnings and some details on the multiple acquisitions he recently pulled off, including the aforementioned deal with Abbott.

Now, the $8 billion Immelt agreed to pay amounts to roughly three times 2006 sales for the Abbott businesses, and a whopping 25 times their 2006 operating income, based on numbers provided by Abbott and later massaged by Wall Street’s Finest—yet nowhere in the GE earnings conference call did the phrase “25 times operating income” come up.

Of course, Jeff Immelt didn’t get to where he is by being an easy mark for companies desperate to sell their losers, and his healthcare team made a good case for getting sales and margins of the acquired Abbott businesses up substantially by “Year 3,” to the point where the deal price would look like a more comforting 11 times operating income, based on my math.

Furthermore, Immelt certainly knows a great time to sell the dregs of his own portfolio when he sees it.

Private equity buyers need to do deals, if only for the sake of doing deals, so why not swap a cyclical, low-multiple-from-Wall-Street business (GE Plastics) for a stable, value-added, long-term grower (Abbott’s diagnostic business) for roughly equal multiples of future operating income?

But Jack Welch’s successor better hope for two things:

1. His healthcare team comes through with those “Year 3” numbers on the Abbott business, and;

2 The buyers of GE Plastics don’t make the same kind of quick killing the Hertz buyers did when they picked off poor Bill Ford.

Otherwise, Immelt’s own words from last week’s conference call could come back to haunt him:

When you see us do or see me do $15 billion in two weeks, sometimes you say is he crazy? But this is all part of a 5-year disciplined, diligent, long-term focus on the company and I just want to give you a sense for that. And basically on strategy. You know, redeploy from slow growth into high growth and a real target on health care and infrastructure.


Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Sunday, January 21, 2007

Weekend Edition: Mandatory Dog Treats for All


HILLARY CLINTON SAID she was forming an exploratory committee for the 2008 presidential race, embarking on a widely anticipated campaign for the White House. (Clinton's statement) 9:49 a.m.

• New Mexico Gov. Richardson Sets Committee


• Sen. Brownback Declares Presidential Bid

• Road to 2008: See Who's in the Race

— Wall Street Journal, online edition



I appear before you today to announce that yet another newcomer has formed an exploratory committee to investigate a potential candidacy for the 2008 presidential race.


The candidate is my dog, Lucy, and the committee consists of her sibling, Rosie, and three cats: Marvin, Ralph and Kitty.

I admit to being somewhat surprised by this development: Lucy is a mutt whose major concern in life has been, until today, primarily limited to the Universal and Unrestricted Availability of Affordable Dog Treats to all canines regardless of age, creed or mixed heritage, not to mention getting scratched on the rump once in a while.

Nevertheless, Lucy wants me to tell the world, to paraphrase the memorable words of Senator Dole when he quit his Senate seat to prepare for his doomed Presidential bid,


"I sit here, more or less still except when one of the cats walks by and swats my nose, just a dog."

Lucy apparently reached her courageous decision after hearing about the inordinate number of politicians who have likewise announced their plans for the World’s Most Powerful Office without having the faintest chance of making it to the first meaningful party caucus—Iowa—yet for some reason feel compelled to call the press together and make an announcement such as this:

"Search the record of history. To walk away from the Almighty is to embrace decline for a nation… To embrace Him leads to renewal, for individuals and for nations."

That comes from Senator Brownback, a Kansas Republican who may in fact be the best candidate of any candidate who ever threw his or her metaphorical hat into the ring for any political office ever created...but if it's any indication of how he plans to run for President, I can’t see how the good Senator from Kansas has any better shot at reaching the White House than my dog Lucy from the Humane Society.

Certainly, not being electable to an office doesn’t mean a person shouldn’t try for it. This is, after all, America: Abe Lincoln famously tried and failed many times before his moment came, and he is now widely acknowledged as the greatest President we've ever had.

Still, one would think a savvy pol such as Bill Richardson, the politically ambitious Governor of New Mexico whose main claim to fame is that he could not get the streets plowed after a recent snow storm hit his state, would know that Hillary Clinton is going to be the Democratic Presidential candidate in 2008—period, end of story.

Yet here he is, announcing the formation of yet another Committee to Yadda-Yadda-Yadda:


"I am taking this step because we have to repair the damage that's been done to our country over the last six years…. Our reputation in the world is diminished, our economy has languished, and civility and common decency in government has perished."

I will go on record here and say that as highly as they may think of themselves, there is not a declared or undeclared Democratic candidate, Mr. Richardson included, who has a chance of beating Hillary for the nomination.

Not “Fighting Joe” Biden, nor our own “Senator Forehead”—Chris Dodd—or the earnest John Edwards, the curiously bloated Al Gore, the humorless John Kerry, the frighteningly incompetent Dennis Kucinich, or the I-don't-know-enough-about-him-to-precede-his-name-with-a-remark Tom Vilsack.

Not even—and I say this strictly as a matter of political reality—Barack Obama has a chance to win the nomination, although I would put money on Obama to be Hillary’s Vice Presidential candidate, which is, I imagine, what the current the posturing is about.

As for the Republicans, I’d be likewise willing to bet Mitt Romney is the candidate in 2008. Not for nothing, but Bill Clinton and George Bush before him were each terrific fundraisers and former Governors. Plus I hear Mitt gets people excited...and this is from people who don't usually get excited about politicians.

Unfortunately, when it comes to the chances for my dog Lucy, I must tread lightly on these pages, for w
hile I admire her stance on Mandatory Dog Treats for All, I must admit the rest of her platform is pretty thin.

Still, Lucy has promised to flesh out her positions on Iraq, global warming, energy independence and tax-code reform…so long as I give her more treats, and keep scratching that itch.



Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Thursday, January 18, 2007

Get Yer Microsoft Vista™ Model-Train Enthusiast Edition Today!



Vista is much prettier than previous versions of Windows. Its icons look better, windows have translucent borders, and items in the taskbar and in folders can display little previews of what they contain. Security is supposedly vastly better; there are some new free, included programs; and fast, universal search is now built in. There are hundreds of other, smaller, improvements and additions throughout the system, including parental controls and even a slicker version of Solitaire.

—Walter Mossberg, Wall Street Journal

So reads the second paragraph of computer-usability-guru Walter Mossberg’s review of Microsoft’s newest version of Windows in today's Wall Street Journal.

For those of you who can’t wait to get their hands on “a slicker version of Solitaire,” now’s your chance. Only it will not, according to Mossberg, come cheaply:

To get the full benefits of Vista, especially the new look and user interface, which is called Aero, you will need a hefty new computer, or a hefty one that you purchased fairly recently. The vast majority of existing Windows PCs won't be able to use all of Vista's features without major hardware upgrades. They will be able to run only a stripped-down version, and even then may run very slowly.

In fact, in my tests, some elements of Vista could be maddeningly slow even on new, well-configured computers.

Furthermore, seems Microsoft still hasn’t solved the security problems that drive users batty trying to keep track of which version of Norton or McAfee they bought to protect their Microsoft computer and why that version of Norton or McAfee no longer protects this particular computer from whatever security problem they thought it was aimed to stop when they bought the software, which turns out to be six years ago, forcing them to buy yet another version of Norton or McAfee...

According to today's review:

Also, despite Vista's claimed security improvements, you will still have to run, and keep updating, security programs, which can be annoying and burdensome.

Summing up Mossberg’s conclusions—although I heartily recommend reading the real thing, for it is an excellent and eye-opening piece—is this priceless sentence:

Nearly all of the major, visible new features in Vista are already available in Apple's operating system, called Mac OS X, which came out in 2001

There you have it: five years in the making, at a cost of who knows how many billions of dollars, and we have a newer, less secure version of what you can already buy with a Mac.

But the best part of all? In keeping with Microsoft’s past tendencies to flood the market with all kinds of confusing product upgrades and special editions, Vista comes in six—six, count ‘em—versions, including “Home Premium” and “Home Basic.”

My suggestion? Wait for Microsoft to introduce the version that fits your own special needs—the Microsoft Vista ™ Model-Train Enthusiasts’ Edition, for example.

Meanwhile, stick with your Mac.



Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Monday, January 15, 2007

Walking in Memphis


“Walking in Memphis” is a catchy, emotive song that everybody’s heard but nobody quite knows what it’s about, other than a guy who ends up walking in Memphis while having a vaguely religious sort of music-inspired, soul-stirring experience.

The irony is this: while in Memphis not long ago, I was advised by the porter at the hotel not to go walking in Memphis.

And I am not making that up.

It was the day after a conference had ended and I was planning to walk to The National Civil Rights Museum, a mere six blocks down South 2nd Street from the hotel, in broad daylight. When I asked the porter for directions, he shook his head somewhat apologetically and told me to take the trolley instead.

Now, I know Memphis is no Disneyworld, but not since Giuliani cleaned up New York City can I recall somebody advising me not to walk a few blocks in a big city in broad daylight, so I wasn’t sure I’d heard him correctly. He said I had. “Take the trolley,” he repeated, pointing up the block.

So I took the trolley, which was actually pretty cool, being a rickety, ancient, wood-paneled affair out of the 1930’s—the Lexington Avenue subway this was not. There were only a handful of other tourists on board, and the windows were down, letting in a warm breeze from the bright sunny street. We rocked along at a fast walk without seeing much of anybody, threatening or otherwise. I got off at the museum stop and walked another block to the museum itself.

If you’ve never seen it, The National Civil Rights Museum isn’t your basic museum with huge drafty rooms lined with statues of dead Romans or glass cases filled with Anglo-Saxon farming tools. It is, rather, a modern structure grafted onto the actual Lorraine Motel where Martin Luther King, Jr. was shot and killed. And it is entirely dedicated to the events leading up to, including, and resulting from, that day.

“That day” was April 4, 1968—as any school child would know, not because they read their history books but because they’ve heard the other song about Memphis, the one from U2:

Early morning, April four
Shot rings out in the Memphis sky
Free at last, they took your life
They could not take your pride.

Being a rock star and all that, Bono got the date right but the time wrong—the shots in fact rang out in the early evening, April fourth: just after 6 p.m. local time (7 p.m. Eastern Standard Time), to be precise.

King was standing on the balcony outside his second floor room at the Lorraine Motel, with Jesse Jackson and Ralph Abernathy. He was talking to Andrew Young, who was in the parking lot just below with some associates who were going to take King to dinner.

And that is when James Earl Ray, one of those strange losers who make American history what it is, fired a rifle from the bathroom window of a second floor boarding room on the other side of a vacant lot across the street from the Motel, killing King with a bullet in the neck.

Now, earlier in the week I'd made the pilgrimage to Graceland, which sits in a somewhat swankier neighborhood only 7 or 8 miles south of the Lorraine Motel, and had been thoroughly disappointed by the experience.

The ghost of “Fat Elvis,” as John Lennon referred to Presley’s declining years, hung over Graceland like a sequined jacket: everything from the parking lot to the peeling skin of the Elvis jet parked behind a chain-link fence seemed worn and unkempt, and a decrepitly cheesy atmosphere permeated the souvenir shops and the three—three!—fast food places at the visitor center..

(For some weird reason—Graceland is not much more than 10 minutes from the hotels and restaurants of downtown Memphis—the availability and supply of fast food appears to be as much an overriding concern of visitors to Graceland as it was to Elvis himself.)

I got out of there as fast as possible, with a pair of Elvis keychains for my daughters.

Yet the Graceland-infused trepidation I carried into The National Civil Rights Museum vanished immediately upon passing through the ticker counter and entering the very first room, which could in no way be confused with the Rockabilly Diner in the food court at Graceland.

That first room contains—and I am not making this up—a photo gallery of people who have been shot. Not shot and killed, but shot and still alive. Disfigured faces and disfigured bodies are presented plainly to the camera, while below each photograph is a page of text in which the victim tells his or her story first-hand.

The victims are women shot by their boyfriends, young men shot by gangs, innocent middle-aged bystanders shot by thieves—maybe 20 or 30 in all, but you lose count as you become immersed in their stories, which are graphic, brutal, and astonishingly detailed. After not at first wanting to actually read them but to get on with the museum itself, you want to read them all. The point—that people with guns destroy lives in the most random, unexpected, shocking, painful ways—is emphatic.

Next, there is the small auditorium with the obligatory introductory film about Martin Luther King Jr.’s times—a modest disappointment after the powerfully graphic photo gallery, being long on stirring words and short on details.

Finally, however, you leave the theater and enter a long, twisting, gently-sloping corridor that slowly takes you to the second floor of the Lorraine Hotel as it was when King died there. Along the walls, the story of the Civil Rights movement slowly unfolds through black-and-white pictures, recorded speeches, newspaper stories, the voices of those who participated, and key documents.

There are the famous Life Magazine photographs of police dogs and fire hoses being turned on young men and young women, of sweating Civil Rights marchers, firey speech-makers, and smiling KKK men facing trial in friendly courtrooms; and then there are the more gruesome photographs that didn't make Life: lynched bodies slouching from nooses tied to tree branches. There is, as well, the burned out Freedom Rider bus itself and a life-size recreation of the famous lunch counter scene. The cumulative effect of all this is to enumerate the hardships, setbacks, atrocities and small breakthroughs of the era in a way no A&E documentary can do.

Finally, on the second floor, you come to King’s own room and the balcony beyond, the voices of Andrew Young and others with him at the end ringing in your ears.

You emerge from the motel blinking and dazed, shocked to recall how this country was dragged kicking and screaming into some semblance of tolerance and legal notions of equality.

But that’s not the end of the museum.

Across the street and through a tunnel beneath the vacant lot is an elevator that takes you up inside the boarding house where Ray sat by a window, waited for his moment and shot King. After the powerful images of the Lorraine Motel, the displays of James Earl Rays’ personal effects and the story of his two month flight and subsequent capture at Heathrow Airport are mundane, banal and pathetic—and therefore easily as striking as the images of the movement he thought he could stop.

After spending far more time than I’d planned to spend at what is commonly called the King Shrine, I emerged into a bright sun, walked the six blocks back to my hotel on hot, mostly empty sidewalks, and left for the airport.

Go to Graceland if you must, but visit the Lorraine Motel for sure.


Jeff Matthews
I Am Not Making This Up


© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.



Thursday, January 11, 2007

“Plant a Tree, Save My Company!”



Michael S. Dell, who made his name building computers, has a new goal: planting trees.

In a speech Tuesday at the Consumer Electronics Show here, Mr. Dell urged the electronics industry to foster the planting of trees to offset the effect on the environment of the energy consumed by the devices they make.

—New York Times


While Steve Jobs was, once again, changing the known world—this time with a device whose major flaw may be its name (the “iPhone” is no more a mere “phone” than it is a tomato)— Michael Dell, who once dominated the personal computing world with his low cost, low reliability, low service business model, was rather desperately attempting to change his company’s image with a challenge:

“I challenge every PC vendor in the industry to join us in providing free recycling.”

What Mr. Dell means to do is to recycle the carbon emissions generated by the electrical demand from computers through the founding of a program called “Plant a Tree for Me.”


Nice as the thought is that one of our Captains of Industry is interested in something other than building the biggest house in Portola Valley or sending paying customers on rocket-based joy rides to the outer atmosphere from the Texas flatlands, there does not appear to be a whole lot of thought behind this notion.

According to the Times:

Customers would donate $2 for every notebook computer they buy and $6 for every desktop PC. The money would be given to the Conservation Fund and the Carbonfund, two non-profit groups that promote ways to reduce or offset carbon emissions, to buy and plant trees.


Now, if you’re thinking what I’m thinking, you’re thinking “What kind of tree does six bucks buy, let alone two?”

Answer: a Dell Tree.

Let’s just hope the Conservation Fund and the Carbonfund have better customer service reps than the folks at Dell. They’re gonna need ‘em.


Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Saturday, January 06, 2007

The Tragedie of Home Depot



DUNCAN
Is execution done on Cawdor? Are not
Those in commission yet return'd?

MALCOM
My liege,
They are not yet come back.
But I have spoke
With one that saw him die; who did report
That very frankly he confess'd his treasons,
Implored your highness' pardon and set forth
A deep repentance: nothing in his life
Became him like the leaving it...

—William Shakespeare


So Shakespeare describes the death of Cawdor in The Tragedie of Macbeth, a play whose title character engaged in what some might regard as only a slightly more aggressive form of corporate ladder-climbing than modern investors have seen from the likes of Dennis Kozlowski, Jeff Skilling and Bob Nardelli.

.

Which is to say Macbeth actually physically murdered his enemies, with knives and stuff, instead of killing them off through other, bloodless means.

What Malcom famously says of Cawdor—that “nothing in his life became him like the leaving it”—cannot, however, be said of Bob Nardelli, if the Wall Street Journal’s excellent account of his recent leaving of Home Depot is even halfway accurate:

Mr. Nardelli submitted a one-page list of perks he was willing to drop, including personal use of the six corporate jets, according to one person involved in the matter. But he dug in his heels about his guaranteed $3 million annual bonus and his hefty supplemental pension arrangement.

Were Shakespeare alive to rework Macbeth in a more modern corporate setting, where the price of utter failure is no longer death by sword but rather, using Ovitz, Grasso and Nardelli as the new benchmark, a $200 million severance package, that key scene might look a little different than Shakespeare wrote it...


DUNCAN, Board Chairman
Did we fire his sorry you-know-what yet?

MALCOLM, Lead Director
Well, sir,
Not exactly.
The lawyers say he has us by the you-know-whats.

DUNCAN
But he’s an idiot!
He almost destroyed our franchise
With that stupid Six Sigma crap…
(Pouring a scotch although it is only 10 a.m.)
I’d like to Six Sigma his sorry you-know-what…

MALCOM
Sir, there’s no time for that.
We need a decision.

DUNCAN
What is it this time?

MALCOM
He wants the corporate jets.

DUNCAN
He wants to use the jets???
Son of a…
(Downing the scotch and exhaling slowly.)
What for—he can’t fly home to Nantucket on Delta?

MALCOM
I think he actually lives on St. John’s Island, sir.

DUNCAN
Whatever.
(Pouring another scotch.)
You want one?

MALCOM
No thank you, sir.
We need a decision, sir.

DUNCAN
(Stirs ice with fingers reflecting on something.)
He looked so good on paper.
Number two at GE!
MBA!
Football player!
What the hell went wrong?

MALCOM
Sir, our lawyers need an answer.

DUNCAN
About what?

MALCOM
About the jets.

DUNCAN
Oh, right.
(Tasting the scotch.)
Well, we have three freaking jets, right?

MALCOM
Six, sir.

DUNCAN
Six? Jesus. Well, see if one of 'em is free.

Tell the pilot to take that S.O.B.'s sorry Six Sigma you-know-what wherever it has to go.
And good riddance.

MALCOM
Sir, you don’t understand.
He wants the jets.

DUNCAN
He wants the freaking jets????

MALCOM
Yes Sir. All six of them.

DUNCAN
(Shouting.)
Tell him to go pound sand!
Tell him to go pound Six Sigma sand!
Tell him I’m sure a Six Sigma guy like him
Can pound sand better than anybody else ever pounded sand!
Tell him I said that!!!!

MALCOM
Sir, it’s in the contract.

DUNCAN
What contract?

MALCOM
The one you signed when we hired him.
If he gets fired for cause, he gets the corporate jets.

DUNCAN
(Pouring another scotch.)
I hate this job.

End of Act I



Jeff Matthews
I Am Not Making This Up


© 2007 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

In memory of Jack Woodward.

Wednesday, January 03, 2007

The Wall Street Journal Reports: Fred Fillmore Wants to Make YOU Rich!


Is it my imagination, or does the new, thinner, Wall Street Journal look less like the Wall Street Journal and more like Parade Magazine?

Sure, there’s some great content in today’s new, thinner paper—first and foremost a behind-the-scenes look at how Abbott jacked up the price of an AIDS drug by 400% for no other reason than to get people infected with AIDS to switch to a new Abbott AIDS drug, and also to hurt Bristol-Myers.

Not for science, not for their customers, not for people’s lives, but because it helped their P&L.

Plus there’s a timeless quote from Henry Kravis about the perils of doing private equity deals simply for the sake of doing private equity deals in an era of almost-endless private equity deal-making:

“Any fool can buy a company,” says Mr. Kravis. “You should be congratulated when you sell.”

But for some reason my eyes have a hard time focusing on the real stuff, like Abbott’s shenanigans and the wisdom of Kravis, because everything is so scrunched together—like Parade Magazine, which people only notice because it comes in the thick stack of color inserts that makes your Sunday newspaper heavier than a car.

Even the legit stories in today's B Section have that cheap, desperate appearance of one of those “Fred Fillmore Made a Fortune in Mortgage Backed Securities…and Now He Wants to Make YOU Rich!” fake testimonials in Parade.

So now I have even less reason to read the physical copy and more reason to do what I’ve been doing for the last year or two. Which is to say, read the online version.

Progress marches on.


Jeff Matthews
I Am Not Making This Up

© 2007 Jeff Matthews


The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.