Monday, March 31, 2008

Inflation AND Political Unrest!



Now that the Federal Reserve has grudgingly begun to acknowledge inflation—and how could it not, with oil over $100 a barrel, “beans in the teens,” and gold near $1,000 an ounce?—a different contingent of the Powers That Be may be forced to likewise pay attention to what’s happening with the food supply around the world.

That’s because rice is now in short supply. And that’s not even the bad news. The bad news is that a shortage of rice, unlike the recent shortage of corn in our Midwest, can, and is, causing political unrest.

Here are a few excerpts from the New York Times’ report this weekend.



High Rice Cost Creating Fears of Asia Unrest

By
KEITH BRADSHER
Published: March 29, 2008

HANOI — Rising prices and a growing fear of scarcity have prompted some of the world's largest rice producers to announce drastic limits on the amount of rice they export.

The price of rice, a staple in the diets of nearly half the world's population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.

Shortages and high prices for all kinds of food have caused tensions and even violence around the world in recent months. Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Protests have erupted in Indonesia over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.

Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days — meant to ensure scarce supplies will meet domestic needs — drove prices on the world market even higher this week.

There’s more—much more—to the story, including political panic in the Philippines and export reductions by Vietnam, India, Egypt, and Cambodia.

Good thing our Consumer Price Index excludes food as well as energy. Unfortunately, you can't adjust hunger for food, too.


Jeff Matthews
I Am Not Making This Up


© 2008 Not Making This Up LLC

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. The commentary in this blog 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, March 27, 2008

The Most Important Article You Probably Didn’t Read This Week


The most important article you probably didn’t read this week appeared in the Wednesday edition of the Wall Street Journal, Section C, page 10 (in our edition), buried in “The Property Report” next to a Caldwell Banker advertisement.

Now, it is true that the most important article you probably didn’t read contains all the usual hair-raising things you’d expect to see about the real estate market, including “developers under siege,” “signs of weakness in key markets,” developers “slashing prices,” and the head of a major builder advising “that people wait three to four years before purchasing a new home.”

But the most important article you probably didn’t read is not about real estate markets in Naples, Florida, or Sacramento, California.

It is about China.


Tables Turn Quickly on Chinese Developers
After Buying Up Land, Firms Can't Raise Enough Cash to Build

By JONATHAN CHENGMarch 26, 2008; Page C10


HONG KONG -- Just six months ago, Chinese property developers were on a shopping spree, dipping deep and borrowing heavily to snap up more, and more expensive, pieces of land.

How quickly things have changed.

Three months into 2008, China's property developers are under siege. Property prices are showing signs of weakness in many of the country's key markets, and capital markets have all but seized up for these -- and other -- offerings. The Chinese government is on a high-profile campaign to clamp down on new bank loans, hoping to curb inflation, rising at its fastest clip in a decade.

There follows fourteen more paragraphs with some of the most graphic detail on the currently imploding Chinese real estate market that has yet to appear in a major business publication, and most likely you didn't read it.

At least, we assume you didn’t read it because the article didn’t make the top 10 “Most Viewed” or even the 10 “Most Emailed” in the online version of the Wall Street Journal, thanks to its being buried in a bunch of boring real estate ads on Page C-10.

If we here at NotMakingThisUp ran the joint, the story would have been the entire front page, under a banner headline on par with the Apollo Moon Landing, Dewey Defeats Truman, and Hillary Dodges Bullets in Bosnia.

How the Journal’s front-page editors missed breaking the greatest new story of 2008 is beyond us. Maybe Rupert Murdoch doesn’t want to upset his friends in China, what with the Olympics coming and Tibet trying to escape Chinese suppression and all.

In any event, we urge you to stop reading this and head straight to the Journal’s web site. Read the article carefully and then print it out for your files.

Yesterday's article will be “Exhibit 1” in what will become, we suspect, a very fat file on the impending Chinese Real Estate Implosion.



Jeff Matthews
I Am Not Making This Up


© 2008 Not Making This Up LLC

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. The commentary in this blog 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, March 26, 2008

Wrong Again! Where’s Van Morrison When You Need Him?



XM, Sirius Move Closer To Improbable Merger
Justice Department Approves Joining Radio Companies; FCC Poses the Final Hurdle


By SARAH MCBRIDE and AMY SCHATZMarch 25, 2008; Page B1

The Justice Department approved the merger of satellite-radio companies Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., leaving one more major regulatory hurdle -- the Federal Communications Commission -- before a deal that was given little chance of success a year ago can be completed.

—The Wall Street Journal

In our continuing look-back at previous efforts to Not Make Things Up, we can’t help but include what we got wrong along with what we got right, all efforts to shade our batting average to the good aside.

And a prediction we made almost exactly one year ago—that the Sirius/XM merger effort would come to naught—looks about as wrong as you can get.

It is hard to fathom what the Justice Department looked at in reaching the conclusion that the two companies “simply do not compete” in “several important areas,” including this howler from Thomas Barnett, the assistant attorney general for antitrust:

At retail outlets like Best Buy and Circuit City, where consumers can choose one service or the other, he said investigators couldn't determine that customers were limiting their decision to just the two companies and not also choosing among other audio-entertainment options.

Precisely what “other audio-entertainment options” a consumer is going to “choose” for one’s automobile when shopping at Best Buy is not clear—unless Best Buy now offers, say, Van Morrison to ride with you and sing “Brown Eyed Girl” while you commute.

In any event, here’s how we looked at it not much more than one year ago:


Monday, March 12, 2007

No Thought Experiments for Mel

Speaking before an antitrust task force of the House Judiciary Committee, Mr. Karmazin said he was shocked by the very idea that anyone would see a monopoly as the logical result of merging the only two satellite radio broadcasters. “There is no monopoly or duopoly,” he told the hearing. “That’s the most bizarre thing I have ever heard.”
—The New York Times

You can’t blame him for trying.

“Him” is Mel Karmazin, the uber-salesman currently attempting to sell the deal of a lifetime to the relevant authorities, i.e. the merger of the only two satellite radio companies in America.

And Mel is pulling out all the stops—going so far as to unload the following whopper on a rightly suspicious Congress:

Mr. Karmazin’s essential message is that satellite radio is competing with all forms of audio entertainment and information — from commercial radio to iPod jacks in cars to Internet radio….

Anybody ever try sticking a desktop PC in the car and tuning into Internet radio while you’re whaling down a crowded freeway?

Me neither.

And I suspect at the end of the day—this is my opinion only, and for what it’s worth—the XM/Sirius deal will not go through for precisely the same reason the Dish/Echostar deal did not go through.

Still, to test Mel's own theory, it might be helpful to perform what is called a “Thought Experiment.”

The thought is this: would the Feds allow a single terrestrial radio company—Clear Channel, say—to buy every radio station in America, thereby owning 100% of the terrestrial radio business?

If the answer is “yes, because of all those iPods and Internet radio stations out there,” then one could suppose the Feds might allow a single satellite company to own 100% of the satellite radio business.

But I don’t think Mel is going to encourage anybody at the FCC to be doing that kind of thought experiment any time soon.

© 2007 Not Making This Up LLC


Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

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. The commentary in this blog 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, March 23, 2008

Britney’s Career Placed on 'Celebrity Watch' at S&P: “She May Be Less Popular than We Thought”



S&P Flags Goldman, Lehman
By JED HOROWITZMarch 22, 2008; Page A15

Standard & Poor's, in a continuing sign of loss of confidence in investment banks' profitability, Friday put Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. on negative outlook, lowering them from stable.

Although S&P didn't change the senior-debt ratings from AA-minus for Goldman and A-plus for Lehman Brothers, it brought its view of the likelihood of a precipitous decline in profits at the Wall Street firms during the next two years to the same negative levels it previously assigned to Merrill Lynch & Co. and Morgan Stanley…


—The Wall Street Journal

Gosh. That’s a shock.

Who would have thought something might be amiss, credit-wise, at two of the nation’s biggest investment banks—besides, oh, every sentient being on Earth including my dog Charlie, I mean.

Does S&P not read the papers?

Do they not know what has been going on for the last fifteen months, since HSBC first signified something might be dreadfully wrong in the mortgage world by writing off billions of dollars of sub-prime loans that it had only recently written?

Apparently they do not, for only now, even as the seeds of a recovery are being planted and watered by an eager Federal Reserve, does this particular rating agency start to worry about what might be lurking inside Goldman Sachs and Lehman Brothers, two of the bigger mortgage players in existence.

Most amusing of all is S&P's excuse for its delayed crisis-response: "the likelihood of a precipitous decline in profits" at both firms...nearly a week after both firms reported a precipitous decline in profits.

Ironically, of course, both Goldman and Lehman's bottom lines were not nearly as bad as Wall Street's Finest had begun to fear. And naturally both stocks rallied.

So what’s next?

Will S&P be putting CIT Group—which hit the fan last week—on some sort of “Companies We Are Feeling Less Optimistic About” List?

Are they going to downgrade Thornburg Mortgage to “Fretful ?

Cut the short-term paper on Countrywide Financial to “Worrisome”?

Slash Enron to “Might Not Survive”?

It’s a good thing S&P doesn’t make its living, say, rating pop stars. Otherwise, the headline of this piece might not be something we here at NotMakingThisUp did, in fact, make up.



Jeff Matthews
I Am Not Making This Up


© 2008 Not Making This Up LLC

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. The commentary in this blog 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, March 18, 2008

The Fed, Finally Gets a Grip...for $30 Billion



The Fed is finally getting a grip, and it's only costing $30 billion!

That's right: the U.S. sub-prime crisis, a wave that has been gathering strength and growing in dimension for at least a year, swept away Bear Stearns in a single weekend, forcing the biggest government intervention in history.

And while investors speculate there will be other, even bigger players disappearing shortly, we here at NotMakingThisUp suspect the worst of the liquidity crisis is past, or at least well-discounted by investors, here in the United States.

We believe nervous sights should, instead, be set on China, where the fallout of the greatest bubble of all time, the China Bubble, may be coming to a head.

By "China Bubble" we do not mean to imply that China's rise to power isn't real, and that the country has not become a great economic engine for the entire world, supplanting the United States.

But the fact of the matter is investors know far less about the true health of banks and brokerage firms in China than they ever did about Bear Stearns.

And if, as Warren Buffett says, a falling tide lets you see who has been swimming naked, our guess is that the vast majority of those naked swimmers will be found to have been incorporated in China.

Not Delaware.

Regardless of how the impending China Bust unfolds, we republish here last summer's imagining of what was going on behind the closed doors of Ben Bernanke's dithering Fed, which at the time seemed more concerned about sentences in press releases than about the rapidly unravelling sub-prime crisis.

The price of that dithering? $30 billion, as of Sunday night.

***

Monday, July 02, 2007

When Phil was Up-Looking ‘Un-Restrained,’ and other Tales from the Federal Reserve

The credit derivatives market is imploding.


There is no overstating the issue: it’s imploding as you read this.A phenomenon that was supposed to have been contained inside the definitional boundaries of “sub-prime” mortgages is spreading across all classes of debt, now that the formerly gluttonous consumers of dubious paper have reached their limit.

Stuffed to the proverbial gills, the former buyers have pushed away the scrap-filled mortgage plate on the table before them and are refusing offers of all sorts of paper, sub-prime or not.

Thus we read about the suspension of debt offerings by not just highly leveraged buyouts such as U.S. Foodservice and Myers Industries, but also proper corporate debt-issuers, such as steel giant Mittal's newest acquisition, Arcelor.

Even companies you’ve never heard of are having a hard time accessing capital.

One such is Magnum Coal, a West Virginia company about which we have no facts to report owing to the fact that the company has the least informative corporate website in the industry, hands down.

What we do know is that Magnum is a large Central Appalachian coal producer, and while Central Appalachian coal is wonderfully low in sulfur and high in BTUs, it also tends to be found underground. Thus, Magnum's key asset is only recovered by union workers toiling in dangerous environments.

The company recently delayed a third-of-a-billion junk bond deal.

Another lesser-known victim of the credit seize-up is Catalyst Paper, a Canadian company whose business has been in something of a down-cycle lately—last quarter’s $14 million (Canadian) EBITDA being less than the $18 million of interest expense reported on page 22 of a very lengthy press release.

Catalyst recently pulled a fifth-of-a-billion junk bond deal.

What happened in sub-prime has most indisputably not stayed in sub-prime.

Of course, nobody wants to shout ‘fire’ in a crowded movie theater, least of all the Federal Reserve Board, which, like Hitler in his bunker, appears to believe it is still in control of the forces unleashed by Alan Greenspan’s free-money policy of some years back, which triggered the whole you-too-can-afford-this-house mortgage mess now showing up on the balance sheets of major Wall Street brokerage houses.

Nevertheless, you might expect a bit more of a reaction out of the Federal Reserve Board than merely eliminating the word “elevated” from its interest rate policy statement.

Yes, while the Chinese call on natural resources takes commodities to new highs, and Russian oligarchs and Middle East sheiks bid up all manner of assets, both hard and soft, leaving U.S. consumers fully employed but tightly squeezed, the members of the Fed are literally tinkering with adjectives.

Herewith my reconstruction of the dialogue among Fed policy bigs as they prepared their most recent missive to the outside world:


Chairman: “Last month we said ‘economic growth was moderating.’ We have a motion before us to replace ‘moderating’ with ‘slowing.’ The motion has been seconded. The floor is open for discussion.”

1st Board Member: “Why ‘slowing'? Why not ‘moderating.’? I liked ‘moderating.’”

2nd Board Member: “I prefer‘slowing.’ We haven’t used it in a while.”

1st Board Member: “Well I don’t care for it. How about ‘restrained’?”

3rd Board Member: “Why ‘restrained’?”

1st Board Member: “Because we’ve never used ‘restrained’ and I’ve always wanted to use ‘restrained.’ (He lapses into a reverie, as if quoting from a book.) ‘She restrained herself as his strong hands grasped her heaving shoulders—’”

Chairman, interrupting: “Er, that’s fine, thank you. But I don’t care for ‘restrained.’ The markets might worry. They might think that we think that something is restraining growth that needs to be un-restrained.”

3rd Board Member: “Mr. Chairman, forgive my impertinance, but, is ‘un-restrained’ a proper word?”

Chairman, a bit testily: "Well I believe so. I'm almost certain... I recall we used it during the Barings crisis of '94..."

2nd Board Member: “I’ll look it up.”

4th Board Member, quite grumpy: “Jesus God, what are we doing here? Can’t we just say ‘The economy is okay and if things change we’ll let you know’?”

Chairman, calmly patronizing: “Please settle down. The discussion will continue while the word ‘un-restrained’ is being looked up.”

3rd Board Member: “Is ‘being looked up’ proper English?”

1st Board Member: “I think that depends on whether ‘up’ is being used as an adverb or preposition.”

4th Board Member: “This is absurd.” (He rises from the table, refills his coffee cup from a pot on the credenza, and stares out the window at the traffic on Pennsylvania Avenue.)

3rd Board Member: "Shouldn’t we really say, ‘being up-looked’?”

5th Board Member: “Frankly, I thought the proper usage was ‘Up which it is being looked’.”

4th Board Member, turning sharply away from the window: “How about ‘up yours, Charlie’?”

Chairman, banging his gavel: “Please! We will have none of that. Now, where were we?”

5th Board Member: “Phil was looking up ‘un-restrained.’”

3rd Board Member: “I’d prefer ‘Phil was up-looking ‘un-restrained.’”

4th Board Member: “How about ‘Phil was up-looking your big hairy nose’?”

Chairman, sharply: “Ladies and Gentlemen, I will not have this type of disrespectful behavior. The secretary will strike the previous remarks from the record.”

Secretary, reading from note-pad: “Starting where? Starting with ‘How about Phil was up-looking’? Or starting with ‘big hairy nose’?”

Chairman, stroking his beard: “Hmmm...where to begin the striking of the records. That is a conundrum. I recall a similar situation during the Asian crisis of '98. Do I have a motion?”

3rd Board Member: “Mr. Chairman, I move that we start with ‘How about Phil was up-looking.’”

Chairman: “Excellent! Is there a second?”

4th Board Member: “I move we all stick needles in our eyes, because that would be more fun than I’m having right now.”

5th Board Member, looking harshly at the 4th Board Member: “I second the previous motion, that we start with 'How about Phil was up-looking.'”

Chairman: “Moved and seconded.” He puts down his glasses and looks around the table. "Is there discussion?”

2nd Board Member: “Mr. Chairman, before we discuss that motion, I’d like to report that the term ‘un-restrained’ is not proper English.”

Chairman, startled: “Is that right? Are you sure?”

2nd Board Member: "Quite sure."

4th Board Member: “Oh puh-leeze. I've had enough of this...” He is getting something out of his briefcase. It is a small, metallic object. The security guard at the door eyes him nervously.

Chairman, somewhat preoccupied: “Well then, all those in favor of starting the striking of the records at ‘How about Phil was up-looking,’ say ‘aye.’

A chorus of ‘ayes’ is heard.

Chairman: “All opposed?”

A gunshot rings out. The 4th Board Member slumps across the table. The security guard rushes over and checks for a pulse, then somberly shakes his head.

3rd Board Member: “Mr. Chairman, I note the presence of a dead body on the table. Would you like a motion to remove the body?”

Chairman, somberly: “First let me express my shock and surprise—(He pauses and clears his throat, amid solemn murmurs and nods around the table)—that the term ‘un-restrained’ is not proper English.”

Other Board Members: “Hear, hear.”

Chairman, more brightly: “As for starting the striking of the records at ‘How about Phil was up-looking,’ the secretary will note five in favor, none opposed, and a dead guy on the table.”

END


Jeff Matthews
I Am Not Up-Making This

© 2007, 2008 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, March 14, 2008

Well, He’s Back at Starbucks. Now What?


Yes, he’s back at Starbucks.

No, I do not mean Howard Schultz.

I mean Mark. Mark was a hard working, conscientious kid, and he worked at the local Starbucks for years. Mark left for various reasons a year or so ago and I had not seen him since.

Then this morning Mark appeared behind the counter. He’s come back, for various reasons, and it was good to see him. But the most interesting thing about Mark’s return is that he can’t yet make espressos until he’s done his training.

This is a guy who, at the rate of ten lattes, cappuccinos and other, foofier, beverages per shift, probably made at least 10,000 espresso drinks over a period of five years at Starbucks. If that sounds ridiculously high, do the math yourself. In fact it's probably low.

But Mark can’t make a single one until he’s finished his training again.

Now, no fall from grace—among the many that have occurred in Corporate America since the Housing Bubble burst—has been more visible and more welcome in more quarters than Howard Schultz’s Starbucks.

And I’m not sure exactly why—resentment at the fancy prices, resentment at the foofy names for cup sizes and what are essentially chocolate milk shakes, or resentment at the demise of local coffee shops at the hands of a Chain Store from Seattle.

Whatever the reason, now that Wall Street has mostly given up on it and McDonald’s is gloating over the boost to its business from an espresso roll-out of its own, Howard Schultz has returned to Starbucks and made a few changes.

Actually, he’s made a lot of changes—firing executives, firing employees, getting rid of the hot sandwiches that made the place smell like a Subway sandwich shop, and shutting all the stores for three hours for an all-hands training session all around the country.

I had my doubts about that much-hyped “training” session, but hearing Mark talk about his own experience coming back makes me wonder if Howard’s return won’t be a good thing—for the business, if not necessarily for the stock.

Sure, McDonald’s is now out there, along with Dunkin Donuts and Peet’s. And yes, traffic is down and the cost of milk is up and the price of coffee beans is through the roof.

But I recall a conversion I had long ago with John Bryan, who at the time ran Sara Lee, which, back then, was a well-run company.

Bryan had come out of the meat-packing business—an awful, commodity business—and he loved consumer brands. He still couldn’t quite get over the fact that consumers paid more for nothing but a label and the perceived quality behind that label.

And the consumer brand business that intrigued him above all was the tobacco business.

Now, this was in the days before Big Tobacco became a target of the government, and even before the toll of cigarette smoking on public health was as well known and widely accepted. Also, Bryan wasn’t actually looking to buy a tobacco company, what with the liabilities and public censure and all surrounding what was regarded in most quarters as a somewhat dirty business.

But as a business, he mused, it was the best model you could find: not only were cigarettes addictive, he noted, they were brand-addictive.

And coffee is like that, too. Except for the emphysema and lung cancer and all.

Starbucks drinkers drink Starbucks, for the most part. They’re not firing up Maxwell House at home, and they’re probably not altering their morning routine to go through the McDonald’s drive-thru instead of the Starbucks.

The same thing holds true with Dunkin Donuts regulars. And doubly-so with the snootier coffee drinkers who swear by Peet’s and wouldn’t be caught dead with a Starbucks cup in their hands.

So maybe there’s something to this turnaround at Starbucks. Perhaps, if and when the commodity inflation that's hurting margins subsides, and the lending crisis that's hurting store traffic is over, the business will come back.

After all, a non-lethal, brand-addictive product can’t be too bad a business, in the long run.


Jeff Matthews
I Am Not Making This Up


© 2008 Not Making This Up LLC

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, March 11, 2008

The Least Helpful Call You Will Get Today


The least helpful call coming out of Wall Street’s Finest today might just be from Merrill Lynch, and it is a reduction in the price target of Suntech Power Holdings—ticker STP, last trade $32.07—from $100 to $55.

And while we no strong opinion either way on Suntech, its prospects, or its current market valuation, the analyst concludes with what surely goes down as the least comprehensible paragraph in our email inbox:


While weak macro sentiment could still de-rate solar further, we believe near-term industry concerns are mostly in price; STP is our top pick; Stress-testing new strategy suggests favorable risk/reward; lack of an ’09 consensus view provides buying opportunity.

Which is why this gets our vote at the Least Helpful Call You Will Get Today.

Of course, as always, the day is still young.


Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

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, March 09, 2008

Weekend Edition: A Modest Proposal



Woman With a Mission: Keeping Tabs on Sex Offenders

By COREY KILGANNON
Published: March 8, 2008


STONY BROOK, N.Y. — After a quick aerial survey of Long Island and the sites where its 1,200 registered sex offenders reside, Laura Ahearn used her computer’s mouse to swoop down on the Nassau County village of Hempstead, dotted with 50 icons resembling pushpins: green for Level 2 offenders, blue for Level 3. She headed east over Brentwood in Suffolk County, home to about 60 offenders, and zeroed in on the thickest cluster: the Gordon Heights section of Coram, with 69 pushpins, more than a dozen crowded onto a single block.

—The New York Times


Seems like a great idea, doesn’t it—using modern technology to keep tabs on perpetrators of one of the world’s oldest crimes after their release back into society?

Not to the Civil Liberties Union.

“Mapping out sex offenders makes them greater social lepers than they already are,” said Seth Muraskin, executive director of the Suffolk County chapter of the New York Civil Liberties Union. “You’re fostering punishment, not rehabilitation, and you’re leaving them very vulnerable to mob justice. You’re basically challenging vigilantes to come to their doors.”

Mr. Muraskin’s spin here—which makes the criminal the victim—is not quite as nauseating as the crime in question. But it is close.

After all, the median age of victims of “imprisoned sexual assaulters,” according to the Justice Department, is less than 13 years old; the median age of rape victims, about 22 years.

Does Mr. Muraskin not know any 13 year old children he’d personally be distraught over to know they'd been abused by a recidivistic sex offender?

Furthermore, of released sex offenders who commit another sex crime, 40% do it within a year of prison discharge. With about 60% of convicted sex offenders out of jail and under “conditional supervision in the community,” is it any wonder Ms. Ahearn wants to keep tabs on them?

So we here at NotMakingThisUp have a modest proposal. Let all the members of the New York Civil Liberties Union take sex offenders into their homes following release from prison.

What’s good for the goose, after all, must surely be great for the gander.


Jeff Matthews
I Am Not Making This Up


© 2008 Not Making This Up LLC

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, March 07, 2008

Lost in Translation? Oh, About $3 Billion



Harry’s Helpline
Some sit it out, but GM Bldg bids top $3B



So reads today’s business page headline in the New York Post, the official newspaper of record here at NotMakingThisUp.

The headline refers, of course, to the frenzied bidding now in progress for the storied General Motors Building, a skyscraper coveted for its fantastic views of Central Park.

Outside observers, however, may well wonder what the excitement is all about: the leases apparently won’t cover the cost of borrowing $3 billion, and the thing just looks completely unexceptional with one exception: it has a very cool Apple Store more or less in its lobby.

Oh, and Wall Street, on whose shoulders most commercial real estate properties in Manhattan ultimately rest, is not exactly going through an up-cycle right now.


In fact, the layoffs around the Street are happening fast and furious. Just yesterday I got a call from a veteran trader whose only mistake was working for a broker owned by a bank whose risk managers utterly failed to manage the risk of lending money to non-credit-worthy individuals when money was cheap and the lending was easy.

In other words, what happened in sub-prime is now making its way down Wall Street.

Still, Harry Macklowe, who acquired the GM Building along with a bunch of other properties at the precise top in the commercial real estate cycle last year, needs to sell it, quickly, to pay off one of the biggest margin calls in history.

And, by all accounts, it looks like a deal may get done.

But are we here at NotMakingThisUp the only observers pondering the GM Building’s fate who can’t help thinking “Rockefeller Center” every time we read a story on this latest bidding war for a high-profile New York City property at a time of financial collapse on Wall Street?

Back in late 1989—two years after the Crash of ’87, well into a declining real estate cycle and apparently way before the current crop of bidders on the GM Building deal were born—Rockefeller Center was sold at what everybody in the then-free world knew was an absurd price to a Japanese group that appeared not to give a rap about cap rates, the health of Wall Street, and other such petty details.


Armed with cheap money from home, they wanted Rock Center.

And they got it.

Of course, as history shows, they subsequently lost it.


And while we have absolutely no financial interest in the matter, we here at NotMakingThisUp are willing to bet that after the ink dries on the contracts and the last toast has been drunk at the closing dinner, the GM Building Deal of 2008 will go down in commercial real estate lore right alongside the Rockefeller Center Deal of 1989.

History doesn’t repeat itself, but it rhymes,” Warren Buffett likes to say (quoting Mark Twain, as our readers subsequently pointed out).

In this case, however, we think history is indeed repeating itself. It's only been translated into a different language.


Jeff Matthews

I Am Not Making This Up

© 2008 Not Making This Up LLC

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, March 05, 2008

Name That Company!



Hands down the most surprising commentary on any conference call this earnings season—at least to the ears of NotMakingThisUp—came during the question-and-answer session of a publicly traded company that has been going through the earnings wringer for the last two years, sells a product that requires an immense amount of borrowed money, and is almost universally dismissed, investment-wise, by Wall Street’s Finest.

Rather than name the company ourselves, let’s see how carefully our readers pay attention.

The first reader to name the company, and the CEO who spoke the following words, gets the NotMakingThisUp award for meritoriousness in the realm of Not Making Things Up.


What we saw in Naples was a very high rate of sales compared to where we've been for the last year and a half. Shockingly so.

And even selling, as opposed to getting rid of spec inventory, selling some to-be-built product again in the Naples market. That rang a bell for us and indicated that we could be, it's only a four-week time period that I'm discussing with you, we could be on track for better times.

Washington, D.C. I think I was quoted as saying we were dancing off the floor. That was about a year ago, by recollection, and it faded. This time I'd characterize it as a glimmer of hope. We did get much stronger in the D.C. market and we got extremely strong in the Maryland-D.C. marker as opposed to the northern Virginia-D.C. market. But I'm not willing to say as of this call that we're back.

It's a glimmer and let's hope that the good times stick for those markets.




Jeff Matthews

I Am Not Making This Up

© 2008 Not Making This Up LLC

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, March 03, 2008

It’s Worth $47! No, Wait, It’s Worth $22!


The least helpful call you will see today from Wall Street’s collective Finest surely comes from Pali Research and has to do with Cablevision.

Now, Pali may in fact be a fine organization, with terrific moneymaking ideas to its credit. But we have to call them as we see them, which, in this case, is none too helpful for investors who have owned the stock since last fall, when it was trading close to $40 on the heels of a Dolan Family takeover bid, subsequently rejected by the Cablevision board.


Seems that, owing to doubts about the intentions of the Dolan family raised on last week’s earnings call, in which James Dolan admitted to grand intentions of buying music venues as opposed to trying to buy the company again, Cablevision shares rate a “Sell” as opposed to “Buy,” and the research firm’s target price for those shares, which was $47 per share last week, today drops to $22.

The Dolans, last we checked, have been running Cablevision pretty much since the Dolan family founded the company. Thus, we here at NotMakingThisUp nominate the Cablevision Call the Least Helpful Call You Will See Today.

Of course, the day is still young.



Jeff Matthews

I Am Not Making This Up

© 2008 Not Making This Up LLC

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.