Daily Archives: June 1, 2005

More on AIG’s Enronesque experience

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AIG11.jpgAmerican International Group Inc. released its long-delayed annual report yesterday and, as expected, reported a 2.7% hit to the company’s net worth along with cautionary notes about the longer-term cost that AIG is confronting as it deals with multiple governmental investigations. Here are the previous posts on the travails of AIG.
In a particularly important disclosure, AIG noted that credit downgrades over the past several weeks have forced it to post an additional $1.16 billion in collateral for certain financial contracts. Although that amount is manageable for the time being, AIG noted that “additional downgrades could result in requirements for substantial additional collateral, which could have a material effect” on how AIG manages its short-term liquidity needs.
As noted in this earlier post, a failure of trust is what caused Enron’s failure, and credit downgrades and customer trepidation over AIG’s financial difficulties can cause the same downward spiral for that company. In its latest annual report, accounting adjustments reduced AIG’s previously reported net income for 2004 by 12% ($1.32 billion) to $9.73 billion, and reduced AIG’s book value by $2.26 billion to $80.61 billion. Overall, the restatement reduced AIG’s net income from 2000 through 2004 by 10% ($3.9 billion).

The remarkable Rocket

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RogerClemens7.jpgThe Stros pulled out a rare win last night, but the real story this week is that Roger Clemens reached a milestone that reflects that he is the best pitcher that any of us will ever have the pleasure of watching.
As regular readers of this blog know, I am somewhat of a stathead in regard to baseball, and I particularly find that the Lee Sinins-developed statistic — runs saved against average (“RSAA”) — is the best statistic for evaluating a pitcher’s performance.
As with its counterpart for comparing hitters — runs created against average (“RCAA,” explained here) — RSAA is particularly valuable to evaluate pitching because it focuses on the two most important things for a pitcher in winning baseball games — that is, not giving up runs and getting hitters out. RSAA measures the number of runs that a pitcher saves for his team relative to the number of runs that an average pitcher in the league would give up while obtaining an equivalent number of outs for his team (as with RCAA, RSAA is park-adjusted). Inasmuch as the hypothetical average pitcher’s RSAA is always zero, a player can have either an RSAA that is a positive number — which indicates he is an above average pitcher (i.e., Clemens) — or an RSAA that is a negative number, which means he is performing below average (i.e., Brandon Duckworth or Tim Redding)
Moreover, just as RCAA is a valuable tool for comparing hitting ability of hitters from different eras, RSAA is a very good measure for comparing pitchers who played during different eras. Inasmuch as RSAA measures a pitcher’s ability against that of an average pitcher in the pitcher’s league for each particular season, a pitcher’s lifetime RSAA measures how that pitcher performed against an average pitcher in his era, which is really the best way to compare pitchers from different eras. On the other hand, comparing other pitching statistics — such as earned run average, wins and hitting statistics against — is often skewed between pitchers of hitter-friendly eras (i.e., the current era) versus pitchers of pitcher-friendly eras (i.e., such as the late 1960’s and early 70’s).
Well, even though the Stros lost on Monday, Clemens pitched well (8 IP, 4 H, 2 R/ER, 1 BB, 7 K’s) in his 650th career start and, in so doing, set the modern major league record for career RSAA:

1 Roger Clemens 671
2 Lefty Grove 668
3 Walter Johnson 643
4 Greg Maddux 556
5 Grover C Alexander 524
6 Randy Johnson 512
7 Pedro Martinez 488
8 Christy Mathewson 405
9 Tom Seaver 404
10 Carl Hubbell 355

Even including pitchers from the 19th century, Clemens ranks 3rd on the all-time RSAA list:

1 Cy Young 813
2 Kid Nichols 678
3 Roger Clemens 671
4 Lefty Grove 668
5 Walter Johnson 643
6 Greg Maddux 556
7 Grover C Alexander 524
8 Randy Johnson 512
9 John Clarkson 508
10 Pedro Martinez 488

Moreover, during his career, Clemens has led the league (or tied) in RSAA during a season 6 times and finished in the top 5 an incredible thirteen times:

1986 AL T1ST 46
1987 AL 2ND 46
1988 AL 2ND 42
1989 AL T3RD 28
1990 AL 1ST 55
1991 AL 1ST 50
1992 AL 1ST 49
1994 AL T2ND 40
1996 AL 3RD 46
1997 AL 1ST 69
1998 AL 1ST 51
2000 AL 2ND 32
2001 AL T6TH 24
2004 NL 4TH 32

Even more remarkably, Clemens’ 26 RSAA that he has generated to date during the 2005 season is already a major league record for a 42 year olds pitcher:

RSAA YEAR RSAA
1 Roger Clemens 2005 26
2 Jack Quinn 1926 23
T3 Hoyt Wilhelm 1965 21
T3 Nolan Ryan 1989 21
T3 Warren Spahn 1963 21
6 Babe Adams 1924 15
7 Sad Sam Jones 1935 14
8 Doug Jones 1999 13
T9 Connie Marrero 1953 11
T9 Red Ruffing 1946 11
T9 Grover C Alexander 1929 11
T9 Dutch Leonard 1951 11

Finally, after only one and a third seasons with the Stros, Clemens already ranks 7th in career RSAA for Stros pitchers:

1 Roy Oswalt 115
2 Billy Wagner 99
3 Mike Hampton 76
4 Dave Smith 75
5 Octavio Dotel 67
6 Nolan Ryan 60
7 Roger Clemens 58
8 Wade Miller 56
9 Don Wilson 55
10 Joe Sambito 53

Roger Clemens is truly a pitcher for the ages.

Russian and U.S. Prosecutions of Businesspeople

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Former billionaire Russian oil magnate Mikhail Khodorkovsky was sentenced to nine years in prison yesterday by a Russian court in a case that businesspersons from around the world have followed carefully as a sign of the Russian government’s willingness to treat business interests fairly.

Russian governmental officials have presented the case against Mr. Khodorkovsky as a repudiation of the corrupt capitalism in the early days of Russia’s market economy of the 1990s that allowed Mr. Khodorkovsky to win control over Yukos, which was then Russia’s largest oil company.

Thus, the Russian government’s actions against allegedly corrupt business leaders is quite popular among most Russians, who resent Mr. Khodorkovsky and the other Russian tycoons who made fortunes during the 1990’s while most Russians struggled under the new market economy.

Nevetheless, the price that the Russian government will pay for prosecuting Mr. Khodorkovsky may be costly.

Western governments and investors have begun to question the Russian government’s commitment to the rule of law in regard to its treatment of business interests that compete with the government’s business interests.

Moreover, the government’s dismantling of Yukos has made given foreign investors yet another reason to avoid investment in Russian capital markets precisely at a time when Russia’s undercapitalized economy desperately needs that investment.

But lest we in the U.S. get too self-righteous about the Russian government’s handling of Mr. Khodorkovsky’s case, remember that the sentence pursued by U.S. prosecutors and handed down by a U.S. federal court in the sad case of Jamie Olis makes the Russian government’s handling of Mr. Khodorkovsky’s case look downright reasonable.

And if you do not believe that a prosecution of a U.S. business figure could be based on similar political aspirations as those involved in Mr. Khodorkovsky’s case, just watch the upcoming case against Maurice “Hank” Greenberg develop.

What parallel universe are we living in when the U.S. government’s criminalization of business interests appears as bad, if not worse, than that of the Russian government’s?

Declaration of innocence?

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nytimes2.gifThis headline — “Reversal of Andersen Conviction Not a Declaration of Innocence” — to this NY Times/Kurt Eichenwald story about the Supreme Court’s decision in Andersen is revealing of the mainstream media’s mindset in regard to the government’s dubious policy of criminalizing merely questionable business practices.
In reality, the Andersen decision is not a “declaration of innocence” for an entirely different reason than the ones set forth in the article. Indeed, Andersen does not need such a declaration because of a fundamental principle of American jurisprudence that the mainstream media and the government prosecutors routinely overlook while pursuing “justice” in regard to unpopular businesspersons.
Andersen is innocent until proven guilty.

Deep Throat revealed

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Deep Throat.jpgMark Felt, a retired high-ranking FBI official during the Nixon Administration, confirmed yesterday the Vanity Fair magazine story in its July issue that he was “Deep Throat,” the confidential shadowy source for Bob Woodward and Carl Bernstein, the Washington Post reporters who helped unravel the Watergate scandal that resulted in the resignation of President Richard Nixon over 30 years ago. Here is the exhaustive Washington Post coverage on the story.
The movie based on Woodward and Bernstein’s decent book about the affair — All the President’s Men — does a reasonably entertaining job of telling the story about the Watergate scandal. However, for a more complete and compelling source of information about the Watergate scandal, read the late J. Anthony Lukas’ Nightmare: The Underside of the Nixon Years (Viking 1976).