Monthly Archives: May 2004

Reds outlast Stros

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Sean Casey and Ken Griffey hit run scoring doubles off of normally reliable Brad Lidge in the bottom of the eighth on Saturday night in Cincy as the hard-hitting Reds sent the Stros to their third straight defeat, 8-7. The win moves the Reds into a first place tie with the Stros and the Cubs in the NL Central. All three clubs have a 24-18 record.
The Rocket struggled in this start, giving up six runs and nine hits in six innings, including four walks. Despite Clemens’ strong start this season, his elevated walks total is a clear sign that his performance level is trending downward.
The Stros’ stroked 15 hits and were led by red-hot Lance Berkman, who hit his fourth dinger in the last five games and had two doubles. Of course, manager Jimy Williams continues to bat Berkman fifth in the order when he is a far superior hitter to any other Astro and thus, should be batting in the postion in the order that would maximize his plate appearances.
In fact, Williams’ dubious decision-making is becoming a big problem for the Stros. Despite near deification among local reporters as being a real “baseball guy” (whatever that means), Williams in reality is a mediocre manager, as has been explained earlier here and here. Late in this game, Williams again allowed his irrational prejudice in favor of veteran players to hurt the Stros’ chances of winning.
In the top of the ninth, consecutive hits by Kent, Berkman and Ensberg scored a run to make it 8-7 with no outs. After Berkman was cut down on a fielder’s choice, the Stros still had runners on first and second with one out. Inexplicably, with the game on the line, Williams trotted two of the worst hitters in Major League Baseball — Brad Ausmus and Jose Vizcaino — to the plate. The Stros’ bench is not strong this season, but Williams’ refusal to use the far superior hitter second year man Jason Lane in that situation is yet another example of Williams’ questionable use of veteran players over better, but younger, alternatives.
As noted earlier, Williams non-sensical platooning of the emerging star Ensberg last season with the far inferior Geoff Blum may have been the difference in the close NL Central race that the Stros ended up losing to the Cubs by a game. This season’s NL Central race will likely by just as close, and the Stros’ small margin of error cannot afford Williams’ continued poor decision-making.
Wade Miller tries to right the Stros’ ship the Sunday afternoon game against the Reds’ Corey Lidle. After closing out the Reds series tomorrow behind Tim Redding, the Stros come home for key home and home series with the Cubs and Cards.

The law of good, but not well thought out, governmental intentions

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This Washington Post article reports that “the law of good, but not well thought out, governmental intentions” is again vetoed by the practicality of horse trough politics:

NEW YORK — Six months after the Sept. 11, 2001, terrorist attacks, Congress approved an $8 billion program to repair this city’s damaged office towers, build apartment buildings and finance the rebirth of the financial district.
But two years later, city records show that much of the money, dubbed Liberty Bonds, has gone to developers of prime real estate in midtown Manhattan and Brooklyn and to builders of luxury housing.

And who received this governmental perk? Yes, the businesspeople who needed it the least:

Local and state officials — over the objections of their own downtown development chief — gave one developer $650 million from the Liberty Bonds to erect an office tower for the Bank of America near Times Square, miles from the shattered precincts of Ground Zero. According to city records, another developer got $113 million to build a tower for Bank of New York in Brooklyn. One of the few projects downtown has gone to actor and sometime developer Robert De Niro, who picked up nearly $39 million from the bonds in November to build a boutique hotel in Tribeca, directly north of Ground Zero.

Congress designated $1.6 billion of the Liberty Bonds for rental housing for the tens of thousands of moderate-income residents who live in Lower Manhattan. Who got that money?:

Nearly all the money from those bonds has gone to prominent developers to build luxury apartment towers in the neighborhoods around Ground Zero, accelerating its transformation into one of New York’s richest neighborhoods, the city records show.

And what is the bureaucratic response to allegations of political favortism over the doling out of this financial largesse?:

State housing officials said that political favoritism played no part in their decisions and that loans were handed out “on a first-come, first-served basis.” Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.

To which Professor Sauer responds insightfully: “That’s it folks — projects already “in the works” get millions of subsidies. What good are the subsidies then?”

Why don’t airlines hedge fuel costs?

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The always perceptive Professor Ribstein over at Ideablog asks this question: Given the volatility or oil prices and the adverse impact of high prices on the business of running an airline, why don’t airlines hedge their fuel costs?
The answer: Airlines generally are not, and never have been, particularly well-managed.
After a particularly unfulfilling experience in investing in airline stocks several years ago, Warren Buffett studied the industry and concluded, if one tabulates all of the airline industry’s finances since the day the Wright Brothers in 1903, one will discover that, cumulatively, there has not been a single penny of profit. Mr. Buffett has also suggested that, in hindsight, shooting down the Wright Brothers on that beach would have been a reasonable financial, if not moral, move.
However, one airline — Dallas-based Southwest Airlines — is and always has been well-managed. And guess who has been hedging its fuel purchases? Read about it here.
Update to this post here.

Reds down Stros

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The Reds jumped on Stros relievers Backe and Miceli for five runs in the sixth to take control and then cruised to a 7-4 win on Friday night at Great American Ballpark.
Andy Pettitte muddled through five innings for the Stros, giving up two runs on four hits, but walking four, which jumped his pitch count. Backe and Miceli stunk up the joint in the sixth, and Jeff Kent did not look slick, either, making a poor play on the first hit of the inning and failing to make the turn on a double play ball that would have short circuited the big inning. Meanwhile, the Reds’ relievers shut the Stros down after the Stros took a 4-2 lead in the top of the sixth on a Bags dinger and an Ensberg pinch hit (yes, manager Jimy did not start the hottest hitter on the team — simply incredible).
The Rocket takes the hill on Saturday as the Stros try to get back on track after two straight losses. The Stros are 24-17 on the season and still a game in front of the Cubs for first in the NL Central, but now also just a game in front of the surging Reds.

Southwest – Klein Bank merger

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This Chronicle article reports on the announcement of the merger of two Houston area independent banks — Southwest Bank of Texas and Klein Bank. Southwest will be the acquiring entity under the $165 million deal. The merged company will become the second-largest independent bank in Texas and the fourth-largest bank in the Houston area, behind J.P. Morgan Chase, Bank of America and Wells Fargo. The combined companies will have $6.6 billion in total assets, $4.2 billion in loans, $5.3 billion in deposits and a loan limit of $77 million.

Oscar Wyatt makes big Enron asset play

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This NY Times article reports on Enron Corp.’s announcement today that, subject to Bankruptcy Court approval, it has agreed to sell for $1.8 billion its most valuable remaining pipeline assets to a company run by colorful Houston billionaire Oscar Wyatt, Jr.
Enron’s pipeline and power assets have never been part of the company’s troubled businesses that led it into bankruptcy in late 2001. Enron will sell CrossCountry Energy Corp. — which owns outright or has stakes in three North American natural-gas pipelines — to Wyatt’s company, NuCoastal LLC. As a part of the deal, NuCoastal would also assume $430 million in debt from the 2,600-mile Transwestern Pipeline in the deal.
Mr. Wyatt, who is 79 years old, has long been one of Houston’s most outspoken businessmen. He founded Coastal Corp. and turned it into a natural gas giant before retiring as its chairman in 1997. El Paso Corp. bought Coastal in 2001 for $22.6 billion, and Mr. Wyatt’s public (and caustic) displeasure with El Paso’s management generated an unsuccessful proxy battle to oust El Paso’s board last year. Another example of Mr. Wyatt’s outspoken nature was his public opposition to Operation Desert Storm in the first Iraq War in 1991, which was led by fellow Houstonian President George H.W. Bush.
Mr. Wyatt’s company may still be outbid for CrossCountry Energy because bankruptcy courts generally award the assets to the highest bidder until the deal is approved. If that occurs, Mr. Wyatt’s company will likely receive a generous “stalking horse” fee, which is usually a percentage of the ultimate purchase price.

Russian oil and gas majors

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This NY Times article provides a good analysis of the the difficulty that Russia’s largest oil and gas companies are having in translating their huge reserves into stature among the world’s major oil and gas companies in the marketplace for investors. The article starts by noting the huge potential in the Russian oil and gas business:

By rights, Russia should have a world-class energy company. It has 6 percent of the world’s oil reserves and pumps 10 percent of daily global production, rivaling Saudi Arabia. And its economy has rebounded as oil-consuming nations east and west turn increasingly to Russia for energy supplies.

However, that potential has not yet translated into success. The article uses the example of Lukoil, one of the two Russian majors:

But the very things that make Lukoil work in Russia are holding it back in the rest of the world, analysts and industry experts say: Lukoil remains a very Russian company, with all that has come to imply, from its complex structure and opaque finances to its inefficiency and dependence on the good will of the Kremlin.

In short, the lack of business management development under the old Soviet Union’s economy continues to bedevil Lukoil in comparison to other major oil and gas companies:

Though publicly traded as a single entity, Lukoil is structured more like a decentralized web of fiefs, and some investors say it is often unclear how profits flow to the center of the group or whether its published accounts fully capture what is going on.
“Some of the units within Lukoil, like Permneft, are, in management terms, very autonomous,” said Ian Hague, co-manager of Firebird, a hedge fund specializing in Russian investments. “The amount of oil they’re producing, as compared to net income, seems to show that large sums – hundreds of millions of dollars – are going places not clear to investors.”
“Investors don’t like things that are difficult to explain,” Mr. Hague said. “If Lukoil is running an expensive ship, meaning more of their money goes to administrative costs than others, investors view that as a problem.”

Stocks of American majors like Exxon Mobil and ChevronTexaco are now trading at price-to-earnings multiples in the mid-teens, based on estimated earnings over the next year. But Lukoil’s multiple is just 7.9, in the middle of the Russian oil pack.

Now a decade and a half after the fall of the Soviet Union, is it fair to ask whether Lukoil and Yukos (the other Russian oil and gas major) will be able to achieve stature equal to the world’s oil and gas majors in the marketplace for investors without the importation of Western oil and gas management expertise?

Katy Freeway chaos

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If you have any intention whatsoever to drive this weekend anywhere close to the Katy Freeway – West Loop interchange, you need to reconsider.
As a part of the ongoing Katy Freeway expansion project, the Highway Department will close the Katy freeway near the West Loop interchange from 9 p.m. tonight through 9 p.m. Saturday for eastbound lanes and from 9 p.m. tonight to 5 a.m. Monday for the westbound lanes so that workers can demolish a portion of the North Post Oak Road bridge. As a result, drivers will face detours via side streets and frontage roads with traffic jams likely to snarl near west Houston and the Galleria area all weekend.
If you absolutely must drive in this part of town over the weekend, I recommend highly that you bring a good book to read while you sit in traffic.

Stros go Fish

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Josh Beckett pitched seven and two thirds strong innings and the Marlins roughed up Roy O for eleven hits over six innings as the Fish downed the Stros in the final game of their series at Pro Player Stadium, 6-2.
Beckett clearly had his game face on for his hometown team as he gave up only five hits and two runs, one of which was Lance Berkman‘s third yak of the series. The Stros made it interesting by loading the bases with two out in the eighth, but the marginally competent home plate umpire Lazaro Diaz rang Berkman up on an absurdly outside pitch from Benitez and the Stros were toast.
The Stros to to Cincinnati for a weekend series with the Reds before returning to the Juice Box next Tuesday for a two week stretch of games against the Cubs and the Cards. The NL Central race is about to heat up.

R.I.P., Lord Hill-Norton

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As the members of my old Clear Thinkers email list know, I enjoy reading British obituaries. The British have a long and special talent for writing witty obituaries, and the good folks over at Southern Appeal point us to the latest example, this London Telegraph obituary of Admiral of the Fleet Lord Hill-Norton, who died this past Sunday at the age of 89. The entire obituary is a hoot, and you get a flavor for it in the first two paragraphs:

Admiral of the Fleet Lord Hill-Norton, who died on Sunday aged 89, was a formidable Chief of the Defence Staff before becoming the senior military officer in the Nato alliance; he also had a reputation for being one of the rudest men in the Royal Navy.
Almost from the beginning of his career some considered him destined either to be court martialled or to end up as First Sea Lord. His reputation for ruthless efficiency and meticulousness, combined with good luck and an irritating habit of being right, took him to the top. This made it seem all the more strange when, as a retired officer in the House of Lords, he placed rather more credence on the possible existence of unidentified flying objects than did less talented individuals.

Sounding like a character out of the brilliant British comedy “Fawlty Towers,” Lord Hill-Norton’s immediate post-WWII duties are described as follows:

By now his reputation as an abrasive and short-tempered officer was well established. He was in the habit of answering the telephone with the words: “Gunnery Division. Hill-Norton. Kindly state your business briefly; we’re busy men here.” An inadequate response would result in the telephone receiver being slammed down.

Even in retirement, the Lord’s demeanor did not improve, as is reflected by his reaction to some proposed cuts in military appropriations:

The defence cuts ordered by Options for Change did not improve his view of politicians, whom he regarded as sufferers from sea blindness. He was scathing about proposals to economise on Armed Forces pensions, and most notoriously called the then defence secretary Michael Portillo “a little creep” for suggesting the sale of Admiralty Arch.

But in classic British obituary style, Lord Hill-Norton’s obit closes with an acknowledgement of his good side:

Although Hill-Norton was feared, hated and respected in equal measure he led from the front. His harsh manner and foul language belied a man who could, on rare occasions, demonstrate an otherwise well-concealed humanity. He was always receptive to sound arguments but would not suffer fools or those who weakened before his onslaughts.
He married, in 1936, Margaret Linstow, whom he selflessly brought out of hospital to nurse at home himself in recent years. She survives him, with their daughter and son, Vice-Admiral Sir Nicholas Hill-Norton.