Monthly Archives: September 2006

The art of predicting energy prices

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crude_prices.gifOil prices continued a steady slide last week, ending the week at a five-month low as concerns about possible shortages that fueled this summer’s rally ebbed. The October crude contract on the New York Mercantile Exchange settled at $66.25, the lowest level for a front-month contract since April 5. The contract has lost more than $11 in the past month. Previous posts on the energy markets are here.
Meanwhile, James Hamilton posted this typically astute analysis of the big discovery in the Gulf of Mexico last week and explains why it may not have as big an effect on energy markets as big discoveries of the past. Also, the Chronicle’s David Kaplan provides this interesting article on Houston-based chemical engineer Henry Groppe, who has long been one of the most respected behind-the-scenes experts in the Houston business community for predicting energy prices. As noted in this Resource Investor piece from last year, the 80-year old Groppe is the forerunner of such younger experts as Matt Simmons, who have carved-out careers in advising businesses on risks relating to energy prices.
Finally, this recent Economist article reminds us the silliness of bashing big U.S. oil companies for supposedly controlling energy prices. Turns out that the thirteen largest oil companies in the world are all state-owned and control about 90 percent of the world’s oil reserves. The biggest U.S. major — Exxon Mobil — is a measly 14th and controls only a fraction of the world’s reserves.
Pass that information along to Bill O’Reilly if you have a chance.

The best and worst of the Stros

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Berkman6B.jpgAs the Stros play out the string of the 2006 season amidst the beginning of the football season, the Stros’ lone slugger — Lance Berkman — quietly reached another milestone in his quest to become the best hitter in Stros history.
Over the weekend against the Brewers, Berkman overtook future Hall of Famer Craig Biggio for second place in career runs scored against average (“RCAA”) among Stros players. As regular readers of this blog know, RCAA is a Lee Sinins-developed statistic that is among the best in reflecting the effectiveness of a hitter. The reason for this is that it focuses on the most important statistic in baseball for a hitter — creating runs. Whereas more commonly cited statistics such as batting average can be very misleading (for example, some local media commentators misconstrue Willy Taveras‘ .284 batting average as meaning that he is having a good hitting season), RCAA is particularly valuable in evaluating hitters because it focuses on the two most important things in winning baseball games — that is, creating runs and avoiding making outs.

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2006 Weekly local football review

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matthew-mcconaughey-hook-em-horns.jpgOhio State 24 Texas Longhorns 7

Ohio State came into Austin on Saturday night and won the season’s first big game by playing as exceptionally as Texas did last year in Columbus. The Horns did not play badly and would have been threatening to take the lead deep in Ohio State territory midway through the 4th quarter had Michael Pittman not fumbled away a Longhorn TD in the first half. Although the Horns ran the ball reasonably well against an always rugged Buckeye defense, none of the Horns’ receivers were able to break a big play, which is going to be an important element for the Longhorns to win big games in the post-Vince era. And what on earth is UT doing allowing Matthew McConaughey to act like an idiot on national TV while on the Longhorns sideline? The Horns have a nice scrimmage against Rice this weekend in Houston at Reliant Stadium before beginning the Big 12 schedule the following weekend in Austin against Iowa State.

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The silicosis-asbestos web

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silicosis.jpgDon’t miss this Matt Tolson/Houston Chronicle investigative piece on the cooperation between several Houston plaintiff’s attorneys — including prominently John O’Quinn — regarding the prosecution of dubious silicosis and asbestos claims, sometimes based on the same plaintiff (see related earlier post here). This part of the article is particularly interesting:

From the moment in late 2004 that silicosis litigation began to unravel under [U.S. District Judge Janis] Jack’s scrutiny, [former O’Quinn partner Richard] Laminack has denied any wrongdoing. The O’Quinn firm did not do asbestos work, he said, so it should not be lumped in with other firms who recycled their old clients, a practice that Jack saw as presumptive evidence of fraud.
“We never, never represented an asbestos claimant and then turned around and retreaded it as a silicosis claimant,” Laminack told the judge, an assertion he repeated to the congressional committee. “We never, ever did that.”

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Institutionalized scapegoating

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scapegoat.jpgTwo news items at the end of this week reflect the festering cauldron of resentment toward business in American society that government is manipulating to advance its troubling regulation-through-criminalization policy.
First, there was the news that New York’s Attorney General Eliot Spitzer — after defaming former AIG chairman and CEO Hank Greenberg in the media (see also here) and strong-arming the company to show Greenberg the door — dropped virtually all the substantive charges of wrongdoing in his lawsuit against Greenberg. All that is left in the lawsuit is what amounts to an arcane accounting dispute over about $25 million in the context of a $150-200 billion company.
So, over this relative pittance, Spitzer blemished the reputation and career of a man who generated enormous wealth for millions of AIG shareholders, while extracting a $1.64 billion fine from AIG by threatening to cause the company to endure an Enronesque meltdown (see also here). For this and other anti-business crusades, Spitzer will soon be rewarded with the governorship of New York. Larry Ribstein adds additional perspective.
And lest you think that Spitzer’s manipulation of AIG and Greenberg is an isolated incident, just review what happened to the Merrill Lynch executives in the Enron-related Nigerian Barge case and the prosecutor who caused that outrage.
Meanwhile, a day after Spitzer dropped his lawsuit, New York authorities arrested Peter Dicks, the chairman of the English publicly-owned gambling company, Sportingbet. Dicks was detained under an outstanding warrant issued by Louisiana gaming authorities and the arrest comes just a couple of months after federal authorities arrested David Carruthers, the former CEO of BetOnSports, another British publicly-owned gaming company.
By the way, while Dicks sits in jail today, gamblers will place billions of dollars worth of bets in Louisiana casinos.
As Geoffrey Manne aptly asks, “Where’s the outrage?”

Academic wrangling

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TSU prez Slade2.jpgTurns out that former Texas Southern University president Priscilla Slade’s decision to teach accounting at the school — while under indictment for accounting irregularities — was not a good idea. The school announced yesterday that Ms. Slade has been put on leave from her teaching duties and that a proceeding is being commenced to attempt to revoke her tenure at the school. The proceeding to revoke tenure will almost certainly be postponed pending disposition of the criminal charges against Ms. Slade.
Meanwhile, up in always-interesting Austin, University of Texas law professor Loftus Carson‘s lawsuit against the University of Texas and related parties hasn’t received much publicity. However, that all changed when Professor Loftus filed a motion to recuse U.S. District Judge Sam Sparks from his case after the Austin American-Statesman listed Judge Sparks as one of 30 judges who have received complementary Longhorn football tickets and attended exclusive receptions while at UT football games. Judge Sparks recused himself from Professor Loftus’ case yesterday and appointed a judge who is not a Longhorns fan (a rare jurist in Austin) to handle the case. I mean, what else could Judge Sparks have done given that the no. 2 Longhorns are playing no. 1 Ohio State on Saturday night in Austin?
By the way, the Statesman article on the Loftus case reports that Judge Sparks observed during the recusal hearing that he considered the tickets and receptions “a small favor” from UT for the time that he serves on panels at the UT Law School. Longhorn football tickets “a small favor?” Judge Sparks has obviously not purchased any UT football tickets lately. ;^)

James deAnda, R.I.P.

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deanda.jpgFormer U.S. District Judge James deAnda, former chief judge of the U.S. District Court for the Southern District of Texas, died yesterday at the age of 81 at his summer home in Traverse City, Mich. after a short bout with prostrate cancer.
Judge deAnda was the last surviving member of a four-man legal team that handled the appeal in Hernandez v. Texas, the landmark 1954 Supreme Court case that overturned an all-white jury’s murder conviction of a Texas man because Hispanics had been systematically excluded from the jury pool in the case. The Supreme Court ruled for the first time in Hernandez that Hispanics were a separate group deserving of the same Constitutional protections as other minorities.
Judge deAnda was a native Houstonian who graduated from Davis High School before obtaining an undergraduate degree from Texas A&M and a law degree from the University of Texas. He practiced law in Houston for almost 30 years before President Carter appointed him to the U.S. District Court bench in 1979, where he served with grace and wit until he resigned in 1992 to return to private practice. Judge deAnda continued to practice law ably until shortly before his death.
A funeral Mass will be celebrated for Judge deAnda at 11 a.m. Wednesday, September 13th at St. Michael’s Catholic Church on Sage Rd. near the Galleria.

Houston Texans, Year Five

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HoustonTexasLogo.jpgHas it really been only a year since the pre-season review of the Texans’ 2005 season? Look at all that has transpired over the past year:

The Texans had a disastrous start to what was considered a promising 2005 season, which included a first home game roasting of some understandably upset season-ticket holders;
A previously-fawning media bailed out quickly as the Texans ship was sinking, even though some reporters remained quite confused over the Texans seemingly inexplicable decline;
Former Texans general manager Charlie Casserly was initially in disbelief over the season, but then became increasingly defensive over criticism of his personnel management, which — at least in regard to drafting players — turned out not to be as bad as most folks assumed, although it became apparent that selecting QB David Carr with the first pick of the 2002 NFL draft was a mistake;
As the Texans’ fortunes faded, hope sprang anew that the team would be revived by a once-in-a-decade-type running back, only to have those hopes dashed by intrigue and then the selection of what may end up being a more prudent choice in the long run, even though John McClain contended that it is impossible (except for him) to evaluate NFL drafts accurately in the short term;
Coach Dom Capers graciously accepted being cut loose at the end of the horrifying season, but then worked his new job to scam Texans owner Bob McNair for more salary. Meanwhile, despite strong denials from Casserly and McClain that Casserly was being shown the door, Casserly was fired after the NFL draft even while denying that he was being fired, and then confirmed that he was indeed fired a couple of months later;
After three seemingly successful seasons and a fourth disastrous season in the team’s first four years, Texans owner Bob McNair changed the management model for the Texans going into the team’s fifth season;
Increasingly sophisticated statistical analysis of professional football generated some underappreciated factors for determining the outcome of NFL games; and
Although more circumspect about the Texans’ prospects in comparison with the pre-season last year, the local media’s pre-season coverage of the team and its players frequently continues to lack any objective analysis.

Whew! So where does that leave the Texans coming into the 2006 season? Well, certainly not in great shape but, somewhat surprisingly, in better shape than would normally be the case of team coming off a 2-14 season. Indeed, a reasonable case can be made that the Texas are finally moving in the right direction.

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Appreciating Agassi

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Agassi3101.jpgDon’t miss this superb Jay Winick/Opinion Journal op-ed on tennis icon, Andre Agassi, who retired gracefully this past weekend after after putting on a stirring performance during the first three rounds of the U.S. Open tournament in New York.
I’ve never met Agassi, but I have followed his career with interest because of our mutual friendship with prominent Las Vegas attorney, David Chesnoff. Several years ago, I had the pleasure of spending a morning with Agassi’s parents while Andre’s father gave David’s son a tennis lesson at the Agassi’s Las Vegas home where they have lived for several decades. Andre’s parents are wonderfully down-to-earth folks who are a joy to be around, so it’s no surprise to me that their son has matured into a fine man.
By the way, although probably not the greatest tennis player of his generation, Agassi nevertheless is one of the most remarkable athletes of this era. A case in point is a golf game that he played several years ago with David in which Agassi faced a daunting recovery shot around trees to a small green protected by a lake. Agassi grabbed a 3-iron, sized up the situation and then hammered a 200 yard shot that sliced around the trees on to the green, stopping 15 feet from the cup. Agassi calmly put the club back in his bag, jumped into the golf cart, looked at David and asked with a wink:

“So, David. What’s so tough about this game again?”

Is the backdating options scandal “the Enron of 2006?”

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backdating options.jpgYes, in an observation made yesterday during a Senate committee hearing that should send shivers up the spine of anyone concerned about the increasing criminalization of business in the United States, that’s how Senator Robert Menendez (N.J. Dem) characterized the widespread practice of backdating options as a means of compensating corporate executives (previous posts here).
That Senate hearing follows on a recent and far more reasoned discussion of the issues involved in backdating options that Matthew Bodie began here. Larry Ribstein returned Bodie’s serve here and Bodie volleyed back here. Geoffrey Manne and Josh Wright got into the game with this post, which Bodie responded to here. Finally, Professor Ribstein ripped this winner to close the discussion, at least for now.
Compare the depth of the foregoing discussion with the superficial platitudes described in the article about the Senate hearing yesterday. Then consider the damages to lives, communities and careers that occurred as a result of the criminalization of business that occurred as a result of the Enron meltdown. Is the allegedly wrongful conduct in regard to the practice of backdating options so clear that it should be handled with the blunt instrument of the criminal justice system? If you really think so, then consider this.