Monday, April 30, 2007

Least Helpful Call This Morning



This morning’s Least Helpful Research Call just crossed my screen via the indispensable Briefing.com. It concerns Cummins Engines, which recently reported terrific earnings, and it is brought to us by Longbow Research.


Cummins upgraded to Neutral from Sell at Longbow (96.14 )


Cummins’ stock was trading below $60 not quite four months ago.

I am not making this up.


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, April 27, 2007

Apple’s Secret Weapon: A Brainwave-Controlled iPod???



I doubt there’s another company on earth followed by as many outsiders engaged in so much speculation about what the company plans to do or not to do as Apple.

This is a function of two things: the company has already revolutionized the technology world twice, and may or may not be on the verge of a third revolution with the iPhone; and Steve Jobs understands that a secret is no longer a secret when you tell somebody else.

Hence the presence of web sites such as MacRumors.com, AppleInsider.com, MacRumors, MacOSRumors, MacScoop, MacTheKnife, Macca the Ex-Beatle and, of course, the MacUserEatingBreakfastAndWatchingILoveLucy Video Cam.

Actually, I made up the last three, but you get the gist: there are people out there who really need to get a life and find something else to do besides playing the pathetic remora to Steve Jobs’ relentless shark.

Besides, for all the Apple Kremlinologists find great pith and merit in every press release, conference call, Jobs-sighting and patent filing that comes out of Cupertino, there is one Secret Weapon they have not grasped, despite its being hidden in plain sight.

Even more remarkable may be the fact that Apple’s Secret Weapon comes courtesy of the monopoly that nearly put Apple out of business.

The Secret Weapon is, of course, Vista, the “next generation” operating system devised by the time-clock-punchers in Redmond which, to their befuddlement, has produced precisely the opposite its intended effect: rather than accelerate as the XP Monopoly upgrades to the Vista Monopoly, worldwide PC unit growth has actually stalled out.

That is because the prospect of upgrading to the clunky new “Vista”—Bloomberg offers a special ‘Help’ button for Vista users—is providing the excuse to finally leave Windows and buy a computer that already does everything Vista is supposed to offer, only safer, easier and intuitively, to boot.

I, for one, am breaking out of the Microsoft jail this week. My trusty Sony notebook finally bit the dust, and instead of buying a new notebook with Vista, I chose to go with the Mac.

Apparently I’m not the only one, for Mac unit sales were up 36% this quarter, more than triple the unit growth rate of PCs in the same period—a period that should have benefited from a mighty Vista upgrade cycle.

Instead, PC unit growth slowed down while the Mac's accelerated.

Which is why I say Apple’s Secret Weapon is not the iPhone or a new brainwave-operated iPod or anything else Steve Jobs may or may not be working on.

It is Vista.

Somebody in Cupertino ought to send flowers to Redmond and a nice 'Thank You' note.


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.


Wednesday, April 25, 2007

Same Coin, Different Sides



Two great headlines appeared on my Bloomberg in the last 24 hours.

The first came yesterday—Spain's Property Stocks Drop on Concern Bubble Burst—above a story carrying a rather stark reminder that all Bubbles end badly:

Spanish real-estate and bank stocks tumbled on concern the country's property boom is imploding.


Inmobiliaria Colonial SA dropped as much as 22 percent and Grupo Inmocaral SA fell as much as 19 percent in Madrid, leading the slump by developers of homes and offices. Banco Bilbao Vizcaya Argentaria SA, the country's second-biggest bank, declined as much as 3.2 percent on speculation bad loans will rise.

Inmobiliaria Colonial, S.A. "purchases, constructs, sells, and leases all types of real estate properties. The Company operates primarily in Barcelona and Madrid. Inmobiliaria Colonial owns 40 buildings, of which 38 are office buildings."

Grupo Inmocaral SA does basically the same thing.

And, as in the manner of all good Bubbles, the fates of Grupo Inmocaral SA and Inmobiliaria Colonial, SA are inextricably linked, because the former bought most of the latter just about a year ago.

Now, we all know that the Spanish Property Bubble is a unique situation entirely based on strong fundamentals that will never change.

Nevertheless, investors in both Grupo Inmocaral and Inmobiliaria, as well as the banks which have loaned them money to buy all those wonderful buildings, might want to read carefully the second great Bloomberg headline of the last twenty four hours, as well as the story beneath it, for a sense of things to come.

Subprime ‘Liar Loans’ Fuel Housing Bust With $1 Billion Fraud

April 25 (Bloomberg) -- Cheating on mortgage applications is so widespread and so seldom punished that it's fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans.


Borrowers and brokers commit fraud when they exaggerate the applicant's income, qualifying the borrower for a home he otherwise couldn't afford. Such fraud robbed lenders of an estimated $1 billion last year, according to data collected by the Washington-based Mortgage Bankers Association and the Federal Bureau of Investigation.

``Misstatements about employment and income are being made every day,'' Russell said. ``The brokers are just putting down on paper what the underwriters would require. There are borrowers providing false information as well.''

What do the excesses of one property bubble have to do with the other?

Everything, I think.

Google “Spain property bubble” and you get 1.75 million search results. Google “Spain property collapse” and you get 1 million search results.

My bet is that ratio is about to flip.



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, April 22, 2007

“Send Roughnecks, Rigs and Money…”


I went home with the waitress
The way I always do.
How was I to know
She was with the Russians, too?

I was gambling in Havana
I took a little risk
Send lawyers, guns and money
Dad, get me out of this—ha!

—Warren Zevon, "Lawyers, Guns and Money"



Ah, conference call season is upon us once more.

And once more it provides Wall Street’s Finest, and anybody with a telephone or a web connection, the chance to assess the world’s economic health from the ground up via the results, both good and bad, of the companies which, to paraphrase Jimmy Stewart’s “It’s a Wonderful Life” character, do most of the working and paying and growing and shrinking in the U.S. and abroad.

So far, generally speaking, so good—despite the fondest hopes of the bond market, which continues to expect the Federal Reserve to slash interest rates any day now, despite the presence of gold, oil, zinc, copper, aluminum, gasoline and labor rates at or near all-time highs.

(Just last week, New York City announced the lowest unemployment rate in its recorded history—i.e. since the high-inflation days of 1976.)

And, as usual, one of the most interesting perspectives thus far has come from perhaps the most truly international of companies—Schlumberger, the oil service giant that began operating in Africa in 1923 and what was then the Soviet Union in 1929.

As the Schlumberger CEO said in his opening remarks,


We continue to believe the most fragile element of current supply projections is the age of the existing production base and the consequent failure of current activity levels to slow decline rates. This environment, when coupled with delays in the increasingly complex projects that our operators are undertaking means the supply response to create adequate levels of spare production will take longer than we originally anticipated.

—Andrew Gould, Schlumberger CEO


If Gould is to be believed—and I think, at the very least, like Will Loman, attention must be paid to the CEO of the world’s most international oil service company—the world’s oil and gas reserve situation is not nearly as close to a Goldilocks supply/demand balance as the bond market appears to think.

Here’s how Mr. Gould expanded on those opening remarks, at the request of one of Wall Street’s Finest:

Mike Urban – Deutsche Bank:

You addressed this a little bit but wanted to dig a little deeper into your comments on the project delays and the supply response or lack thereof. This sounds like a step-up on your comments which were to date have been pretty bullish already. Just wanted to clarify exactly what you're getting at. I guess the question is are you suggesting that both the amplitude and the duration of the international cycle are extending or is is it that activity might be pushed out but that's okay because you're going to see supply disappointments and that means the oil price stays high or a little of both?



Andrew Gould – Schlumberger CEO:

…. In terms of the decline rate, our feeling is, and I think there are theaters of activity like the North Sea where you can see this very clearly, that because the resources that our customers have are very much tied up on new development projects, there is insufficient money being spent on stemming the decline rate in their existing production base, and it is not the unwillingness to spend it.

It is just that they don't have the rigs, equipment or people, particularly people, to do that. To the extent that not enough money is being spent on stemming the decline rate, it makes it that much more difficult to increase production. [Emphasis added.]


So in one sentence we have shortages of competent oil service workers, sufficient drilling rigs and the money to supply both labor and capital equipment to the world's most pressing economic issue: the supply of energy at economic prices.

If Warren Zevon were still alive, he might be revising his wonderful original lyrics thusly:

“Send roughnecks, rigs and money…”

Our readers can fill in the rest.




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, April 20, 2007

What Happens in Vegas Eventually Gets Around



I really don't know. I think really more than anything out there, it's just most, there's several Markets in California which are still good but the northern part of California up in the Sacramento area and the San Diego area is just that we're struggling to find qualified buyers given the mortgage instruments that are available in the marketplace.


—Don Tomnitz, CEO D. R. Horton


Practitioners of the “What happens in Vegas stays in Vegas” school of economics, which holds that, like a husband's infidelity in Sin City, the subprime market fall-out will not spread beyond a limited and insignificant portion of the economy, ought to listen to a few conference calls to test their happy theory.

If they did, they would have heard the always-straightforward home-building Mr. Tomnitz, quoted above, discuss in detail precisely how the subprime liquidity squeeze has spread to all kinds of would-be home buyers:


And the real issue out there, frankly, is that four or five years ago almost 30% of the people in California could afford a home. And then that dropped to 11 or 12% affordability index. And unfortunately, the 11 or 12% was being supported by a lot of unusual mortgages -- Alt-A and subprime.

So what we're facing today in California is -- one, a very small pool of affordable buyers and that pool has been reliant largely on Alt-A and subprime mortgages, so we must get our pricing down, must get our costs down in order to move our number of units we want to move in California and that's what we're doing.


Time to get on the next call and hear what else happened in Sin City.



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.

Wednesday, April 18, 2007

“The Number is the Number”...Most of the Time



I had dinner recently with an old friend—he was chief financial officer of a company I followed years ago, and recently turned up as CFO of another company I keep an eye on.

We talked mostly of how his work has changed since Sarbanes-Oxley made daily life so miserable for some public company executives that they’ve taken their companies private.

Not my friend.

He loves being in a public company, and, like a lot of other executives I’ve talked to in the last couple years, says that while the Sarbox regulations went too far and were way too expensive to implement, the regimentation was something public companies needed to do eventually anyway: "We just never made the time."

Furthermore, as a CFO he likes the fact that there’s less uncertainty about the numbers, fewer shades of gray: everything has a rule behind it, and every quarter the numbers fall out where they fall out, unlike
the old days, when auditors gave companies more leeway with reserves, receivables and all manner of book-entries.

As he put it while looking down at an imaginary P&L next to his dinner plate:

“The number is the number, and that’s it.”

Which is why I found it so remarkable that IBM could report a bottom-line number last night that, at $1.21 per share, was exactly the same as the consensus earnings estimate from Wall Street's Finest: $1.21 per share.

Not a penny more, not a penny less.

You’d think that a company that generated $22 billion in revenue from all manner of product lines, in all manner of countries, with all manner of foreign exchange translation issues to deal with—not to mention amortization costs, stock-based compensation costs, restructuring costs and retiree benefit costs—might, in this Sarbox-restrictive environment in which “the number is the number,” have a hard time hitting the so-called consensus estimate to the penny.

But IBM hit the number on the screws.

And not even what management described on the conference call as a “fall off in the third month of the quarter” in IBM’s U.S. enterprise business, which is the source of this morning’s downgrades by a couple of Wall Street’s Finest, stopped IBM from hitting the number.

Just like the old days!



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, April 16, 2007

No Log-Rolling Here



One of the dangers of writing as frankly as we do in these pages is the risk of annoying not only the Bob Nardellis and Pactrick Byrnes of the world, but also friends and acquaintances, not to mention those who speak well of this blog.

And that includes Barron’s, which carried a favorable mention of Not Making This Up in its Electronic Investor column a year or two back.

However, we’d be making it up if we didn’t highlight a howler simply because it came in Barron’s, rather than, say, this morning’s research emails.

And Alan Abelson’s “attaboy” note about Fred Hickey’s supposedly spectacularly great call on Research in Motion was nothing if not a howler.

Says Abelson:

The stock started off the week at 145 and change, got as high as $148.3l and closed the week at $132.74, taking almost a 12-point walloping on Thursday after the company reported operating results that failed to meet its fervent fans' great expectations, and also disclosed it was under SEC scrutiny for alleged stock-options tomfoolery.

Score one for our favorite tech man and Roundtable member, Fred Hickey, who has been unshakably bearish on Research in Motion.


Now, let’s look at Hickey’s "unshakably" negative case on the stock, made in an earlier Barron’s; January 2005, to be precise:

Hickey: Research in Motion makes BlackBerry hand-held devices. This momentum stock appears to be breaking down. Portfolio managers drove it up to 100 at year end, though it has come down to 74. People who work in financial services are the primary users of BlackBerries. Also, venture capitalists and Silicon Valley types. A lot of people are now addicted to what they call the CrackBerry, but there are cracks in the CrackBerry story.

The BlackBerry will end up competing with the whole cell-phone world. It sells for a few hundred dollars, but is now being discounted because of a possible glut. I see a recession, and this is a product companies may cut back on.


That “74” mentioned by Hickey was not a typo: RIMM’s share price at the time was indeed 74 bucks.

Now, we all make bad calls in this business.

But if you’re wondering what, precisely, is so spectacular about Hickey’s "unshakeably bearish" call on a stock that went from $74 to $148 and back to $133 that it deserves a column in Barron's…well, all I can say is, I am not making this up.

And I’m not log-rolling, either.



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.


Wednesday, April 11, 2007

Whose iPhone is it, Anyway? Some Answers



The day after Steve Jobs gave his near-messianic iPhone demo in early January, I ran into a hedge fund friend. His reaction to the “revolutionary and magical” (Jobs’ words) iPhone?

He’d sold his entire position in Research In Motion.

Now, my friend was clearly not alone: shares of RIMM had closed down eleven bucks the day Jobs Googled ‘Starbucks’ from his demo unit and ordered “4,000 lattes to go,” and it would drop another ten before bottoming a week later, on the theory that the iPhone was some kind of Blackberry-killer.

But my hedge fund friend’s reasoning was not so much that the iPhone would kill the Blackberry—he understood the products address entirely different end users. It was this:


“RIMM’s not going to beat numbers any more.”

In other words, overnight, Apple’s iPhone had rendered RIMM’s move into the consumer-friendly market with its Pearl something of a non-event. It wasn’t that RIMM was going to be threatened by the iPhone—it just took away the upside of RIMM’s move into the consumer side of the smartphone market.

Of course, RIMM’s stock has since recovered to pre-“4,000 lattes to go” levels, and analysts are universally convinced the company’s earnings report tonight will surprise on the upside, thanks largely to the Pearl.

While we offer no short-term opinions on earnings or stock prices, we have collected the reasoned, thoughtful views of nearly fifty of Not Making This Up’s sterling readers regarding the iPhone and its place in the wired world. And the outlook for RIMM may not be quite so tarnished as the market, and my friend, first thought. (For Palm, on the other hand, the news is less perky.)


We also discovered that what statisticians might call a statistically significant portion of our readers have issues with their wives. I am not making that up.


Let’s start with the obvious: our data sample is ridiculously small. Furthermore, it is skewed towards an older demographic than the iPhone will target. Nevertheless, if Apple wants to get somebody to shell out five hundred bucks for this thing, our readers are probably as good a sample of those somebodies as any other.

What kind of readers do we have?

Their cell phone carrier is apt to be Verizon, Cingular, or—surprisingly—T-Mobile. Sprint is a distant fourth, just ahead of Alltel.

For mobile email, they use Blackberrys or Treos, in that order. Fully one third of our responders do not use any mobile email at all—they use their laptops when they need to get connected.

Here’s how they responded.

1. Do you plan to buy an iPhone for $499 plus calling plan with Cingular the minute it is available, or soon thereafter?

85% have no plans to buy an iPhone, either on Day One of the New Era, or soon thereafter. Now, that number means absolutely nothing, of course; but the reasons tend to gravitate towards several distinct issues.

2. Why or why not?

The biggest single deterrent is that this will be the first generation of a product. Price is another issue—as Christian Warden points out, “I got my Blackberry for $50 after rebate.”

Cingular does not get high marks, either: to paraphrase the great Jack Nicholson line, a lot of potential iPhone users would rather stick needles in their eyes than use Cingular.

3. Which iPhone feature do you like the best? Which feature bothers you most?


Of our prospective iPhone buyers, it’s the all-in-one nature of the phone’s capabilities—phone, email, music, web browser—that has them ready and willing to pay the $500-plus-service-contract.

The touch-screen is a highly polarizing issue. People either love the idea or hate it—but mostly they hate it. As CSS wrote: “Try dialing a phone number on a touch screen while driving and you'll see what I mean.”

One feature, however, seems to be one of those “why hasn’t anybody done this before?” Apple specialties that will in fact change the way people use their phone: the select-which-voicemail-you-want-to-hear-first voicemail feature.

As “Johnny” wrote:

"I Like the interface of answering select voicemails first, rather than first come first listen, clearly the wife can wait."

Clearly, Johnny has some issues at home that the iPhone may not resolve.

4. If price is the issue, would you pay, say, $299 for the iPhone, plus calling plan?

The answer to this question is probably the best news of all for Apple: the pool of our potential iPhone buyers doubled from 15% to 30%.

5. What kind of cell phone do you use every day, and who is your current carrier? Would switch your current cell phone number to Cingular and use it on the iPhone?

Cingular is a problem. Only one fifth of our respondents were willing to switch their phone to Cingular. Apple needs Verizon, eventually.

6. What kind of email device do you use every day, and who is your carrier? Would you switch your email to the iPhone and get rid of your current device?

There is good news for RIMM and bad news for Palm here: while Blackberry users are equally inclined to use an iPhone for their email, it appears that the iPhone would be for their personal email—leaving the Blackberry as their work email.

Treo users, on the other hand, appear willing to switch their email entirely to an iPhone. As Mark said,

"Apple has a reputation for making things that actually work-unlike the Treo that has more bugs than a swamp. Treo and Microsoft both like to force you to do shut down/restarts."

7. Did you buy an iPod when it first came out? Do you have one now?

This was a control question, to weed out the Mac-fanatic/Mac-hater contingent from regular folk, and also to get a sense of what might happen down the road if the iPhone price comes down and other carriers get their hands on it—and it shows more good news for Apple: while about a third of our respondents claimed to have been first-generation iPod buyers, more than two-thirds now own at least one.

Some, however, like Andrew, remain conflicted about their iPods:

"Bought one for my wife. She rarely uses it. Waste of money for us."

As I said, wives seem to be an issue for some of our readers.

8. Do you need a new iPod? Would you replace it with an iPhone?

This, in my view, provided the most interesting response of all. Roughly half of our eventually-will-probably-get-an-iPhone respondents would not replace their iPod with an iPhone.


For starters, the storage on an iPhone is incomprehensibly small to most heavy iPod users.

As Neal put it:

"The only issue with replacing the iPod entirely is storage. I currently have about 35 gig of music on my iPod. 8 gig on the iPhone is not going to be enough -- I will have to be making hard choices about what music travels with me."

And there are other, more personal reasons. This is from Yanor:

I wouldn't replace my ipod with an iPhone because the iPod Mini I use is all I need when I use it, usually around the house late at night when I'm working and my wife is sleeping. Like now.

As I said, wives are an issue. No word on the husbands, however. Perhaps we'll need another survey...




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, April 07, 2007

Catch-22 on Wall Street



"I'm sorry, sir. I'm afraid I don't understand your question."

"When didn't you say we couldn't punish you? Don't you understand my question?"

"No, sir, I don't understand."

"You've just told us that. Now suppose you answer my question."

"But how can I answer it?"

"That's another question you're asking me."

"I'm sorry, sir. But I don't know how to answer it. I never said you couldn't punish me."

"Now you're telling us what you did say. I'm asking you to tell us when you didn't say it."

Clevinger took a deep breath. "I always didn't say you couldn't punish me, sir.”

“That’s much better…”

—Joseph Heller, Catch 22


We have now reached the point where Wall Street's Finest will upgrade a company’s stock to a “buy”—or at the very least, no longer a “sell”—after the company has announced it is to be sold for a substantially higher price than when the same stock was rated a “sell.”


I am not making that up.


It happened just last week—as alert reader Greg Buchholtz brought to our attention—in the case of Tribune Company, the beleaguered media giant whose announcement of its sale to Sam Zell added 6% to the existing share price, and one Wall Street’s Finest promptly upgraded the stock from "Underweight," a euphemism for "Sell," to "Neutral," a euphemism for "We're Not Sure What To Do With This Thing," as follows:


TRB: TRIBUNE ACCEPTS OFFER TO GO PRIVATE. WE ARE RAISING OUR RATING TO NEUTRAL


The Prudential analyst also raised his price target on the shares to $34—which happens to be the very price at which Tribune’s board agreed to sell to Mr. Zell.

Of course, by the time the upgrade appeared, it was already too late to do anything about it.

If, upon reading about the after-the-fact upgrade, Prudential’s clients, particularly those who had already sold their Tribune stock for something less than $34 a share on the basis of the previous “Underweight” rating, felt the need to hunt down a familiar old book (quoted here at the beginning) and leaf through it to try to grasp exactly what logic prevailed behind such a move, they might have settled on this passage:


There was only one catch and that was Catch-22, that specified that a concern for one's own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn't, but if he was sane, he had to fly them. Yossarian was moved very deeply by the absolute simplicity of the clause of Catch-22 and let out a respectful whistle.


"That's some catch, that Catch-22," he observed.

"It's the best there is," Doc Daneeka replied.


Of course, that was in war time. Here on Wall Street, Catch-22 means investors should not buy a stock until after it has gone up to the price it is being sold for.


Or, as Clevinger might have written the upgrade for Pru,

"I always never said you shouldn't buy Tribune stock until it didn't get to $34."



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.





Wednesday, April 04, 2007

Politicians Doing More Harm than Good


Sometimes in the annals of things-that-strike-us-as-mind-boggling, an example comes along that is so clearly mind-boggling—no matter what an observer’s age, politics or religious beliefs might be—that it requires no commentary on our part to highlight how very mind-boggling it is.

Today’s example comes about three-fifths of the way through a front page New York Times story titled “New Jersey Diverts Billions, Endangering Pension Fund,” and if you ever thought your tax dollars were spent wisely, or, at the very least, not incompetently, you ought to read the entire hair-raising piece—not just the following excerpt.

And, no, I am not making this up.


…Mr. Beaver and Mr. Megariotis recounted a bit of history. In 2001, the Legislature voted to increase teachers’ pensions by 9 percent, raising the plan’s total cost by an estimated $3.1 billion. Because New Jersey’s Constitution forbids creating debts without creating a funding source, the lawmakers needed to pay for it. They looked back to June 30, 1999, the height of the bull market.

Records showed that the pension investments were worth $5.3 billion more on that day than the plan’s actuary showed, because actuaries phase in gains and losses slowly to avoid sudden swings in market value. The lawmakers seized on this paper gain of $5.3 billion, and voted to channel it as an actual windfall into a new reserve in the pension fund, to pay for the new benefits.

I.R.S. officials said that a company would not be permitted to do this with a pension fund.

By the time the Legislature did this in 2001, of course, the stock market had tumbled and much of the $5.3 billion had melted away. That appeared not to have concerned the Legislature. An election was looming, and the teachers’ union was complaining bitterly about past failures to put money into their pension fund.



Too bad the 2005-2006 batch of sub-prime home buyers can't set their home's current value at its peak a year and a half ago...


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, April 02, 2007

New Word Department


The company has completed a wage management initiative that will result in the separation of approximately 3,400 store Associates. The separations, which are occurring today, focused on Associates who were paid well above the market-based salary range for their role. [Emphasis added.]


“Separations.”

That’s how Circuit City, perennial also-ran to Best Buy in the electronics superstore wars, chose to describe ‘people getting fired’ when revealing yet another turnaround plan last week in a press release quoted above.

“Separations” certainly sounds much softer than “firings” or “layoffs.”

Even “downsizing,” which has for years been the euphemism of choice among corporate officers taking, on the one hand, multi-million dollar option packages for their own good while, on the other hand, “downsizing” the hourly work force and shifting production elsewhere, now appears too harsh.

Could be that The Office has made “downsizing” a much scarier word by revealing, in its hip, sardonic way, that “downsizing” means real human beings lose their jobs.

In any event, “separations” may become the new euphemism of choice. After all, as with marriages, “separations” is optimistic: it implies a temporary split, intimating a possible reconciliation at some future point.

Perhaps those Circuit City employees who have been “separated”—fully 8% of the entire work force—will indeed come back to Circuit City after a time. Like a contrite, philandering spouse, they may come to admit they had it too good for too long, and will accept their old jobs at newer, lower wages.

In which case, “separations” would be entirely accurate.

But I suspect it is not.


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.