Sunday, February 27, 2011

Buffett vs. Lampert: A Tale of Two Letters


Two significant shareholder letters were released this week.

The first was from Sears Holdings’ Chairman Eddie Lampert; the second from Berkshire Hathaway Chairman Warren Buffett.

And while it is certainly easier, and a lot more fun, to write about good news—as Buffett has been accustomed to doing over the years at Berkshire, in contrast to the kind of bad news that has issued forth from Lampert’s fading retail giant of late—there is, even so, a remarkable difference in both the substance and style of letters by two men who actually have a great deal in common.

For one thing, both started out as hedge fund managers. For another, both are without peer in their fields, and fabulously wealthy as a result. For a third, they each got into the position of writing annual shareholder letters as a result of taking control of a fading, once-giant, public company. Finally, they each spent years personally wrestling with how to turn the original business around.

In the end, of course, one (Buffett) decided the rational thing was to disinvest in the original business and re-create the company to his liking, while the other (Lampert) is still wrestling with Sears even as he extracts cash from “hidden” assets like real estate and minority-controlled subsidiaries.

Still, differences between the two men are legion (Midwest publicity-magnet versus East Coast recluse, for starters) and do not end with how they played the hand they were dealt: differences in how to hire, invest, manage and incentivize people are revealed in almost every sentence of the respective shareholder letters they have penned.

Indeed, so remarkably different are the letters that we here at NotMakingThisUp couldn’t help but compare the two, by topic.


On Investing Excess Cash:

“As we have done since we took control of Kmart in 2003, we will continue to evaluate alternative uses of the company’s cash flow and capital resources to generate long-term value for all shareholders. Each year brings with it different circumstances, and we expect to have a variety of opportunities to invest our cash in the years to come. Our discipline in evaluating opportunities leaves us prepared to weather difficult times as well as to prosper when economic conditions improve.”
—Edward S. Lampert

“Our elephant gun has been reloaded, and my trigger finger is itchy.”

—Warren E. Buffett


On Management:

“We continue to make changes in our broader leadership team, as we allocate more responsibility to leaders who have delivered results and seek to attract leaders who are capable of improving performance in areas that have lagged. In particular, we want leaders who are capable of transforming key aspects of our business, as retail is increasingly impacted by new technologies and social interaction.”
—ESL

“Our trust is in people rather than process. A 'hire well, manage little' code suits both them and me.”

—WEB


On Investing for the Long-Term

“We will continue to make long-term investments in key areas that may adversely impact short-term results when we believe they will generate attractive long-term returns. In particular, we have significantly grown our Shop Your Way Rewards program, improved our online and mobile platforms, and re-examined our overall technology infrastructure. We believe these investments are an important part of transforming Sears Holdings into a truly integrated retail company, focusing on customers first.”
—ESL

By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well…. That’s what allowed us to invest $15.6 billion in 25 days of panic following the Lehman bankruptcy in 2008.

—WEB


On Making a Key Hire

“Lou knows what it is like to be the 800-pound gorilla from his days at IBM, and he knows what it is like to compete against 800-pound gorillas from his days at Avaya. He also understands how technology can shape and change companies and industries. The profound changes that many industries, including retail, are currently experiencing require new thinking, new leadership and new business models. Information and technology have always been an important part of the supply chain in retail, but more and more it is becoming critical that we use information and technology in a much more profound way to deliver great customer experiences. Lou is a proven winner, and I am excited to have him as the leader of our company.”
—ESL

“It’s easy to identify many investment managers with great recent records. But past results, though important, do not suffice when prospective performance is being judged. How the record has been achieved is crucial, as is the manager’s understanding of—and sensitivity to—risk…. In respect to the risk criterion, we were looking for someone with a hard-to-evaluate skill: the ability to anticipate the effects of economic scenarios not previously observed. Finally, we wanted someone who would regard working for Berkshire as far more than a job.

“When Charlie and I met Todd Combs, we knew he fit our requirements.”

—WEB


On How to Deal with a Cyclical Business:

“Given the large proportion of the Sears Domestic business which is in 'big ticket' categories and linked to housing and consumer credit, Sears is much more susceptible to the macro-economic environment than Kmart. But I don’t accept this as an excuse: our results at Sears in 2010 were completely unacceptable. The profit erosion at Sears Domestic occurred primarily in appliance-related businesses and in the Full-line Store apparel and consumer electronics businesses….

“When industry margins are shrinking, an organization must respond by adding new innovative products and bundling them with services and solutions that meet customers’ evolving needs….

“The new management in our appliance business has already taken actions to rebuild leadership in this area and to further reinvigorate the Kenmore brand….

“In parallel to the efforts that we are making to increase the productivity of our Sears stores, we are also looking at adding world class third-party retailers to our space. Earlier this year we announced that Forever 21 will be taking over 43,000 square feet of Sears space at South Coast Plaza in Costa Mesa, CA…”

—ESL

[Editor’s Note: We are not making this last part up; the author also discusses leasing out space to Whole Foods].


“Our businesses related to home construction, however, continue to struggle…. A housing recovery will probably begin within a year or so. In any event, it is certain occur at some point. Consequently: (1) At MiTeck, we have made, or committed to, five bolt-on acquisitions during the past eleven months; (2) At Acme, we just recently acquired the leading manufacturer of brick in Alabama for $50 million; (3) Johns Manville is building a $55 million roofing membrane plant in Ohio…; and (4) Shaw will spend $200 million in 2011 on plant and equipment, all of it situated in America. These businesses entered the recession strong and will exit it stronger. At Berkshire, our time horizon is forever.”

—WEB


On Wonderful Businesses vs. the Wonder of Financial Legerdemain

“I wouldn’t be surprised to see our share of Coke’s annual earnings to exceed 100% of what we paid for the investment. Time is the friend of the wonderful business.”
—WEB

“In April, we had the opportunity to purchase an additional 17% of Sears Canada for $560 million, increasing our ownership from 73% to 90%. In 2010, Sears Canada has paid two dividends, which returned $639 million of cash to Sears Holdings. Of course, of the cash we received in dividends, we would have received $518 million without the additional shares purchased (because we already owned 73% of Sears Canada), so in effect we received $121 million in dividends on behalf of the additional shares purchased in 2010.”

—ESL


On Reinvesting in the Business, or Not

"Furthermore, not a dime of cash has left Berkshire for dividends or share repurchases during the past 40 years. Instead, we have retained all of our earnings to strengthen our business, a reinforcement now running about $1 billion per month."
--WEB

"We invested more than $400 million in capital expenditures in 2010, including significant investments in stores in important markets, and contributed over $300 million to our pension and post-retirement plans. We invested just under $400 million in Sears Holdings share repurchases in 2010, a slight reduction from 2009....

"Share repurchases are not a panacea, nor are they a singular strategy. Yet they are more than just the return of capital to shareholders... As a form of discipline on alternative capital allocation strategies, share repurchases can magnify returns."
--ESL


Did He Really Say That?

“At Sears Holdings, we seek to create long-term value for our shareholders. Like Apple, we seek to do so by improving our operating performance, innovating, and delighting customers…”
—ESL

[Editor's Note: The first and last time you will see 'Apple' and 'Sears' in the same sentence, at least for some time to come.]

“As one investor said in 2009: ‘This is worse than divorce. I’ve lost half my net worth—and I still have my wife.’”

—WEB

[Editor’s Note: Buffett’s letters have always been suffused with a 1950’s-era Hugh Hefner-style male/female sensibility, but it never ceases to amaze us that he continues with the nagging-wife jokes]


On ‘Painting the Bull’s-Eye’ of Performance

“Charlie and I believe that those entrusted with handling the funds of others should establish performance goals at the onset of their stewardship. Lacking such standards, managements are tempted to shoot the arrow of performance and then paint the bull’s-eye around wherever it lands…. To eliminate subjectivity, we therefore use an understated proxy for intrinsic value—book value—when measuring our performance.”
—WEB

“Despite our challenging performance over the past several years, the difficult economic environment, and the dramatically changing retail environment, we have generated very attractive returns for shareholders since May 2003, when we assisted Kmart in its emergence from bankruptcy.”

—ESL

[Editor’s Note: While SHLD stock has more than quadrupled from the aforementioned May 2003 "bull's-eye," it is in fact down more than 50% from its 2007 peak.]


What Happens to the Wrong Managers

“This requires us to part ways with some who have given great effort, but who have fallen short of the performance required for us to be competitive.”
—ESL

“Our compensation programs, our annual meeting and even our annual reports are all designed with an eye to reinforcing the Berkshire culture, and making it one that will repel and expel managers of a different bent.”

—WEB


What Happens to the Right Managers

“We will continue to provide great opportunities for talented individuals to run businesses, while holding them accountable for performance.”
—ESL

“Many of our CEOs are independently wealthy and work only because they love what they do. They are volunteers, not mercenaries. Because no one can offer them a job they would enjoy more, they can’t be lured away.”

—WEB


On Throwing Good Money after Bad

“At Berkshire we face no institutional restraints when we deploy capital… When I took control of Berkshire in 1965…the dumbest thing I could have done was to pursue 'opportunities' to improve and expand the existing textile operation—so for years that’s exactly what I did. And then, in a final burst of brilliance, I went out and bought another textile company. Aaaaaaargh! Eventually I came to my senses, heading first into insurance and then into other businesses.”
—WEB

“We have a need to manage the scale of our operations at the same time as we transform them. The activities required for transformation are vast and time-consuming. As the retail industry is reinvented, we intend and expect Sears Holdings to be a significant player in this reinvention.”

—ESL


Sentences We Didn’t Want to Read

“By aligning our associates with our customers, not with our stores or products, we believe this reinvention will play out in our favor.”
—ESL

[Editor’s Note: That was perhaps the most astonishing sentence we have ever seen in a Chairman’s Letter—the runner-up being the one that follows.]

“To update Aesop, a girl in a convertible is worth five in the phone book.”

—WEB


Jeff Matthews
I Am Not Making This Up

© 2011 NotMakingThisUp, LLC

The content contained in this blog represents only 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 investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


Thursday, February 17, 2011

Best Buy: Time for the Ackman Rumor Again!


“The question I get most often is, what’s the next new thing that’s going to save the consumer electronics industry? And my answer is, it’s not any one single thing, but rather the connection of all the things that we have, both to each other, to the content that we love…and to be able to be mobile and move that around any place where we are.”


—Michael Vitelli, EVP Best Buy, Oppenheimer Conference, July 15, 2009

“We have to move rapidly in recognizing the transparency of pricing.”

—Michael Vittelli, EVP Best Buy, Bloomberg, “Best Buy May Switch to Wal-Mart-Style Everyday Prices,” February 9, 2011


Poor Best Buy.

The company—which navigated the consumer electronics store-wars so cannily it become the Last Man Standing among “Big Box” retailers—now watches the non-box likes of Amazon.com grow electronics and general merchandise revenues 71% in its just-ended quarter, while Best Buy’s U.S. brick-and-mortar sales actually declined in December.

All things considered, of course, this should come as no surprise, what with software, music, movies, TV shows and even video games going digital…not to mention the fact that computers have shrunk into book-sized tablets and pocket-sized smart-phones that can be ordered and delivered online, without the need to shlep to a Big Box retailer like Best Buy.

Yet Best Buy’s own online business rose only 13% in the month of December—a still far cry from Amazon’s online domestic growth in electronics.

Now, to Best Buy’s credit, the company did not become the Last Man Standing among consumer electronics chains by standing still. Indeed, ever since 1983, when it changed its name from “Sound of Music” and opened its first superstore, the company has moved ahead of trends in the business.

In fact the company’s most important—and gutsy—move came in 1989, when management shucked the commissioned-sales model of computer and TV-selling, letting consumers shop for themselves and making Circuit City’s high-pressured sales model obsolete. Furthermore, as consumer electronics became an ever-larger piece of the American home, Best Buy moved to ever-larger store formats.

One more thing Best Buy did to distinguish itself from its peers, and boost margins: it entered the private label business with both feet, creating its own Dynex and Insignia brands, whose blue (Dynex) and green (Insignia) boxes containing everything from 55 inch LED High Def TVs to clock radios and boom-boxes can be seen all around the store.

Largely as a result of those moves, Best Buy caught the previous decade’s cathode-ray-tube-to-flat-panel tsunami from start to finish.


Outside the Big Box, however, Best Buy’s moves haven’t always been so prescient.

A Fiscal 2000 “comprehensive strategic alliance” with Microsoft involving “significant co-marketing between Microsoft Network of Internet Services, BestBuy.com and Best Buy’s retail stores” was never much heard about again.

In 2001, the company paid $696 million for Musicland, “to continue its revenue growth beyond fiscal 2005,” as the 10K said at the time. Unfortunately, Musicland didn’t make it past fiscal 2004—at least under the Best Buy umbrella.

The company sold Musicland for “no cash consideration” in the summer of 2003.

By then Best Buy had also bought Magnolia Hi-Fi, with the stated goal of growing the high-end home theater purveyor from 13 stores to “up to 150 stores nationwide.” And while Best Buy stores today do indeed have Magnolia departments (in the corner near the TV displays), there were all of 8 free-standing Magnolias across the land, according to last year’s 10K.

Similarly, Best Buy bought Geek Squad in 2002, with the goal of making it “North America’s largest provider of in-home computer installation services,” and in 2005 announced plans to open 20 to 50 stand-alone Geek Squad stores “in the next 12 to 18 months.” (One of Wall Street’s Finest actually told Fortune Magazine around that time Geek Squad could earn more than a quarter-billion in operating income on a billion in sales in 2007.)

And while Geek Squad—like Magnolia—has been rolled out in Best Buy stores, the count of stand-alone Geek Squad stores was 7 as of the Fiscal 2010 10K.

In 2006 Best Buy bought Pacific Sales Kitchen and Bath Centers, saying “we expect to expand the number of Pacific Sales stores in order to capitalize on the rapidly growing high-end segment of the U.S. appliance market,” and although the Pacific Sales store count has more than doubled since then, according to the 10K, sales have not nearly kept pace.

In 2007, Best Buy spent $89 million to buy Speakeasy, an “independent broadband voice, data and IT service provider” to help make Best Buy the “one-stop shopping” destination for small business customers. And a year later the company paid a reported $121 million acquisition for file-sharing pioneer Napster “to reach new customers with an enhanced experience for exploring and selecting music and other digital entertainment products over an increasing array of devices.” A much-ballyhooed 2010 move into the video game trade-in business dominated by GameStop has submerged without much of a ripple.



Along the way, the Best Buy Big Box kept getting bigger, eventually reaching 45,000 square feet, which seemed barely big enough to hold everything in those pre-Amazon.com, pre-Internet days, when a product needed to be sitting on a shelf in order for the consumer to see it, learn about it and evaluate its strengths and weaknesses.

But at least one retailer proved that a brick-and-mortar store could compete in a dot.com world.

In 2001, Apple began opening retail stores that would average only 6,000 square feet, and although the move was initially dismissed by nearly every techno-commentator in Silicon Valley, by fiscal 2010 each one of those tiny stores was selling, on average, a whopping $34 million a year of Apple products.

And that is roughly the same average annual sales figure as a domestic, big box Best Buy.

(Anyone who has shopped at an Apple Store and a Best Buy knows that at an Apple Store, you'll be surrounded by students surfing the internet on Macs and iPads, toddlers playing games on iTouches, and slightly uncomfortable Baby Boomers talking to thin, black-shirted, ear-ringed Apple people carrying iPhones that can swipe your credit card and get you out of the store in minutes.

(The Best Buy experience, by comparison, is no longer so much fun, what with all those non-commissioned "Blue Shirts," as the ex-Blue Shirt CEO himself likes to refer to them, pushing extended warranties and unwanted software on customers it formerly left alone to browse, as anybody who accidently bought the Kasperksy AntiVirus product along with their notebook computer at a Best Buy knows.)


Meanwhile, the drive to satisfy Wall Street and carry the Best Buy brand around the world led to larger moves than buying Napster, Geek Squad and the rest.

The company spent $3.5 billion on one of those “return-value-to-shareholder” buybacks in 2007, when the stock traded in the $40s...good for both those who sold to the company and for—who else?—Goldman Sachs, which served as the counterparty to the accelerated share repurchase program.

More strategically, the company spent $1.1 billion in 2008 on a 50-50 joint venture with Carphone Warehouse in Europe, which has indeed helped Best Buy roll out well-staffed mobile phone desks in its own stores—although plans for a fleet of big box Best Buy stores across stodgy old England haven’t materialized as fast as Wall Street’s Finest expected.

Indeed, when the original deal was announced in May, 2008, the Carphone CEO said “we will have stores trading in 2009,” but the first UK Best Buy big box actually opened in May, 2010, and the company recently—according to press reports—backed out of a deal for its first north-east England store near Newcastle.

It may be a coincidence, but shortly after that deal fell through, Scott Wheway, CEO of Best Buy Europe, resigned his post, although he is staying with the company for a period of time. This came all of 18 months after Wheway got the job, at which time Robert Willett, then chairman of Best Buy Europe, announced the appointment by saying “Scott is the consummate retailer,” among other nice things.


Now, in case you’re wondering why Mr. Wheway’s change of position didn’t make much news, it may have something to do with Wall Street’s rumor mill.

Shortly after the Wheway news hit on the morning of February 1, a report popped up on the indispensible Briefing.com:
“Best Buy shares spiked following a rumor that Pershing Square could take a position in the stock.”

Pershing Square, of course, is the hedge fund vehicle of Bill Ackman, the genius who, among other things, saw value in General Growth Properties when it had been left for dead, and helped create billions of dollars of value for his investors and General Growth shareholders at the same time.

Why an Ackman-for-Best Buy rumor got so much credence as to add nearly half a billion in value to Best Buy’s market capitalization—and wipe the Wheway resignation off the news page—probably relates to Ackman’s reputation for taking positions in real estate laden-retailers like JC Penney and Target, and then agitating for the unlocking of its value from the more mundane retail operation sitting on top of it.

And JC Penney, whose board Ackman recently joined, is indeed loaded with real estate.

Penney owns 416 of its 1,100+ stores (with 119 of those located on ground leases), as well as 3 million square feet of distribution space, 1.8 million of warehousing space, 6.5 million of direct fulfillment center space, its 1.9 million square foot home office in Plano, Texas, and 240 acres of adjacent property.

Best Buy, on the other hand, seems not so encumbered with the stuff Ackman seems to love.

According to the Fiscal 2010 10K, Best Buy owns 24 US store locations and 32 buildings on leased land, out of 1,000+ US store locations, plus 3.1 million square feet of distribution center space (out of 10 million total) and a 1.45 million square foot corporate office.


So, real estate-wise, Best Buy looks to be somewhere in-between Borders Group (another Ackman investment, but one that did not work out as well as General Properties), which leased all its stores and owned only some of its headquarters building, and JC Penney.

Nonetheless, the Ackman rumor seems too good for Wall Street types to resist.

It appeared on Briefing.com back on January 5th (“Best Buy jumps on increased volume; Hearing rumors that Bill Ackman is targeting BBY”), and, in slightly different form, on January 3rd (“It was rumored that Best Buy could be seeing private equity interest.”)

And while we have absolutely no idea what view of Best Buy, if any, Ackman actually possesses, based on the once-every-four-week schedule it looks like the rumor should crop up again—especially if the kind of startling disclosures contained in the recent Bloomberg story quoted at the top are anywhere close to reality.

Here’s how the story began:

Feb. 9 (Bloomberg) -- Best Buy Co., the world’s largest consumer electronics retailer, may curtail three decades of tactical discounting and move instead to its own version of the everyday prices pioneered by Wal-Mart Stores Inc.
With Americans increasingly using smartphones to comparison shop, consumers are unwilling to wait for sales if they find better deals elsewhere, said Mike Vitelli, executive vice president and co-head of the North America division.
“We have to move rapidly in recognizing the transparency of pricing,” Vitelli, 55, said in a Feb. 7 interview at Best Buy’s headquarters in Richfield, Minnesota. Internal discussions about making the switch are at an early stage, he said.

There was more, with the kind of thought-provoking detail you don’t get in the usual quarter earnings-per-share reportage from Wall Street’s Finest:

During a Best Buy staff meeting, Vitelli was willing to say out loud: “Why do we carry inventory when we train consumers only to buy it’” on sale, said Rick Rommel, a senior vice president who helps run a unit that tests new concepts.
“If the pricing isn’t everyday, the consumers just wait,” Rommel said in an interview. “Our inventory sits and waits for that next promotional moment.”
Switching to consistent pricing would “be very powerful,” said Barry Judge, Best Buy’s chief marketing officer. “It makes our pricing much more transparent than it is today.”
Best Buy’s weekly newspaper circular would be “a whole lot easier to lay out” with prices easier for consumers to understand, Judge said.
“The prices are the prices,” he said.
The retailer is also reducing the number of items it sells to focus on products that sell well, Vitelli said. By the end of the year the company will carry fewer than 100 TV models in the average store, down from about 140 a year ago. Slower-selling products will continue to be sold online, Vitelli said.

—“Best Buy May Switch to Wal-Mart-Style Everyday Prices," By Chris Burritt and Clifford Edwards, Bloomberg February 9, 2011.


It will be interesting to see how Best Buy handles what Bloomberg calls “the switch”—especially with all those Dynex and Insignia products sitting on Best Buy shelves in stores across America…and all those Ackman rumors sitting on trading desks across America.



Jeff Matthews
I Am Not Making This Up

© 2011 NotMakingThisUp, LLC

The content contained in this blog represents only 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 investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.




Sunday, February 06, 2011

Weekend Edition: “Norman Rockwell, American Monster”


The worst interview we ever saw—and that includes anything Jay Leno ever did—was a Deborah Solomon interview of Steve Martin for the New York Times’ television magazine a few years ago.

Solomon is—or was, until recently—the Sunday Times Magazine columnist who made a career of short, sharp, solipsistic interviews with subjects chosen mainly as a means of injecting Solomon’s own uber-liberal world-view into whatever topic on which she wanted to vent.

You had to cut through Solomon’s annoying technique of twisting each question-and-answer into a validation of her own personal demons (as opposed to the subject’s), but the interviews were lively and interesting, and worth reading—although this appears to have been due as much to good editing as they were to good questioning, a factor made clear by the aforementioned videotaped interview of Steve Martin (see our Weekend Edition column, “Wisdom of Solomon?” from February 2008.)

Shorn of the ability to manipulate words on paper, Solomon’s maniacal self-absorption came across, on camera, less clever than obnoxious. Of many low-points, the lowest came when Martin was explaining that he had stopped performing stand-up altogether because comedians need to be on the road constantly in order to stay sharp, and Solomon said in complete, clueless seriousness, “Can’t you practice at home?”

But that was when she was writing a column for the New York Times.

Today she is, as she says, working on a “long overdue, almost-finished biography of Norman Rockwell,” thanks, apparently, to one too many strident columns, including a recent interview with Goldman Sachs strategist Abby Joseph Cohen.

Now, we here at NotMakingThisUp harbor no particularly positive, or negative, view of Abby Joseph Cohen.

When reading the Barron’s Roundtable each year, we do skip Cohen’s blandishments on the economy or whatever big-cap stock she currently favors—it always seems to be either J&J or IBM, or both—and go straight for Marc Faber.

But such is the by-product of the job: being a “Strategist” for a high-profile firm on Wall Street means never having to say anything that may come back to haunt you. In other words, the blander the better—and if you don’t think that’s the way it works, you haven’t worked on Wall Street.

Still, Cohen missed a great chance to go toe-to-toe with Solomon in last weekend’s column, and that is a shame, because Solomon’s interview technique is like the playground bully—aggressive questions and lots of them—without much in the way of actual knowledge on the subject beyond her own narrow instincts.

Indeed, here’s how we here at NotMakingThisUp would have liked to see it go down.


QUESTIONS FOR ABBY JOSEPH COHEN
A Steady Hand
INTERVIEW BY DEBORAH SOLOMON


Deborah Solomon: As a partner at Goldman Sachs and one of the best-known market analysts in this country, you’re surely aware that women continue to be thinly represented among the senior ranks on Wall Street. Why is that?

Not Making This Up: For the same reason that of the 11 senior executives at the New York Times, only 1 is a woman.

DS: I assume there’s no shortage of candidates.

NMTU: I assume there’s no shortage of female English majors for the New York Times, either.

DS: But if women make up 30 percent of M.B.A. programs, as has been reported, why do they represent only 12 percent of the current partners at Goldman Sachs?

NMTU: You do realize that women bear children, don’t you? I mean, you are aware of that? And you do realize that, as a result, in the real world—whatever you and the editors of the New York Times might wish for—many highly educated women at a certain age face a choice that men don’t face? And many do in fact reject the notion of sacrificing everything else in their lives for the brass ring of becoming a Goldman partner?

DS: Let’s change the subject... Do you have a Facebook page?

NMTU: Deborah, if you knew how to use Facebook you’d know whether I do or don’t—you can search for them, you know.

DS: Ah, well let’s change the subject to something I can score points on… Goldman Sachs just withdrew its offer to American clients to sell shares of Facebook, which could violate all kinds of rules.

NMTU: What, exactly, are these “all kinds of rules” you say the deal could have violated, specifically?

DS: Uhhhhhh….

NMTU: Name one.

DS: (Feverishly thumbing through her notes, which happens to be a single New York Times “DealBook” article)…uhhhh….Let’s change the subject to class warfare. Do you think it’s ethically justifiable that certain bankers earn $50 million or $60 million a year at a time when unemployment is nearly 10 percent and income inequality is widening in this country?

NMTU: No, so why does Obama keep hiring them for his Chief of Staff?

DS: I hate you. Let me try this another way… You could say that entertainers at least provide entertainment, as opposed to a C.E.O. What is a C.E.O. contributing to society?

NMTU: What about the C.E.O. of the New York Times Company, Janet Robinson? [Editor’s Note: This is the one response Abbey Joseph Cohen got right.]

DS: What about her? She’s contributing a newspaper to society, which presumably keeps the American public better informed. It has been widely observed that the financial-services industry is not creating a product in the tangible sense.

NMTU: Aside from the howler about “no tangible product”—Wall Street funds lots of companies that create tangible products, like, oh, the iPad—your well-paid CEO blew the digital revolution, for starters.

DS: Well, we have a successful web site.

NMTU: Why on earth is Huffington Post the go-to name in online news? How did you let Politico become the go-to name in online politics? What was going on over at the New York Times while the Wall Street Journal was making the online transition so successfully and you did not? Why do more people watch Yahoo! TV than New York Times TV on the web?

DS: Uh, well, we don’t have a “New York Times TV” on the web.

NMTU: Precisely. You guys blew it. And for that, your CEO received $6.2 million in compensation in 2009, according to my Bloomberg—which happens to be the go-to name in financial data, not the New York Times.

DS: (Fumbling for a cigarette, trying to get the wrapper off.) Son-of-a—

NMTU: You smoke?

DS: (Lighting up.) I quit thirteen years ago. Let’s move on… Do you feel any responsibility for the economic meltdown of 2008, which you failed to foresee?

NMTU: How, exactly, am I responsible for pushing Fannie Mae to make bad loans to people who couldn’t afford them?

DS: We’re talking about your life; there was a big meltdown in 2008. I’m wondering, how do you deal with that emotionally?

NMTU: Do you feel any responsibility for the collapse of the New York Times as a leading source of news?

DS: Please leave.


We’ll miss Solomon’s columns but look forward to her almost-finished biography of Norman Rockwell, the artist who painted lovingly iconic scenes of an Americana that must set Solomon’s hair on fire: family gatherings at Thanksgiving; rosy-cheeked Boy Scouts; flag-waving parades.

Indeed, given her left-wing muscle-memory, it should be about as suffused with her own blinkered mindset—and therefore just as uninformed—as a biography of Pablo Picasso by Sarah Palin.

The working title, we understand, is “Norman Rockwell, American Monster.”



Jeff Matthews
I Am Actually Making This One Up

© 2011 NotMakingThisUp, LLC

The content contained in this blog represents only 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 investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


Wednesday, February 02, 2011

Does Bernanke Read This?


Challenger, Gray & Christmas, Inc. is a unique, veteran outplacement firm whose seasoned principals Your Editor has had the pleasure to encounter over the years.

Now, the good folks at Challenger, Gray also happen to tally and report monthly job cuts based on their own experience in the real world, similar to the way payroll processing giant ADP reports monthly job creation based on its own experience in the real world (see “The Fed in La-La Land” just below).

And today’s job cut report from Challenger, Gray is a head-turner.

Anyone bothering to read the press release will find it includes the phrase: “Lowest January on Record”—and no, they are not talking about job creation, they are talking about job cuts.

But don’t take it from us. Take it from the actual press release yourself:

January Layoffs Down 46% From Year Ago
38,519 CUTS ANNOUNCED; LOWEST JANUARY ON RECORD

CHICAGO, February 2, 2010 – The slow pace of downsizing that marked the second half of 2010 appears to be continuing into 2011, as employers announced plans to cut 38,519 jobs in January. While that is an increase from the previous month, it marks the lowest January total on record, according to the report released Wednesday by global outplacement consultancy Challenger, Gray
& Christmas, Inc.

January job cuts were up 20 percent from December, when planned layoffs totaled 32,004; the lowest monthly figure since June 2000 (17,241). Compared to a year ago, however, last month’s job cuts were down sharply, falling 46 percent from the 71,482 job cuts recorded in January 2010.

The 38,519 job cuts last month represents the lowest January total since Challenger began tracking monthly layoff announcements in 1993…

And that’s just the first three paragraphs. For more color, read the full release at http://www.challengergray.com/press/PressRelease.aspx?PressUid=160

So the Question for Today is, does Ben Bernanke read this stuff?



Jeff Matthews
I Am Not Making This Up

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