Bashing the capitalist roaders

Hillary%20Clinton%20pointing2.jpgDoes it appear to anyone else that Hillary Clinton is getting a bit desperate in attempting to salvage her campaign for the Democratic nomination? Get a load of this:

Sen. Hillary Clinton took a swipe at [investment bankers], suggesting wealthy investment bankers and hedge fund managers on Wall Street aren’t doing real ‘work.’ [. . .]
“We also have to reward work more,” Clinton told a small group of Ohio residents today. “and by that, I mean, I have people in New York working on Wall Street as investment managers, as hedge fund executives. Under the tax code, they can pay a lower percentage of their income in taxes on $50 million dollars, than a teacher, or a nurse, or a truck driver in Parma pays on $50,000. That’s very discouraging to people.” [. . .]
The line about investment fund and hedge fund managers has been introduced into Clinton’s talking points as she campaigns across the economically struggling state of Ohio.

Investment bankers are certainly an easy target, but Clinton’s statement that they don’t do “real work” is either disingenuous or appallingly ignorant. Would Clinton say such a thing about other financial intermediaries such as real estate brokers? Investment bankers working on multi-billion dollar mergers are not all that different from real estate brokers — they are financial intermediaries who get paid a commission for helping to originate and close deals. In short, they are being paid a fee for arranging a transaction between a willing buyer and a willing seller.
And believe me, for anyone who has ever seen investment bankers work a deal, it’s definitely hard work. Finding potential buyers and sellers, persuading them to become involved in a transaction, and making the deal happen amidst the myriad of risks that could undermine it is not a cakewalk. Long hours, the ability to deal with rejection, the uncertainty of the fee until the deal closes, grinding travel and pressurized work conditions are just a few of the hardships that investment bankers endure.
Inasmuch as such work is hard, it’s not for everybody. Thus, with really good investment bankers in short supply, they can command high compensation. And the good ones are well worth it. Where else will a seller or buyer find someone with a comprehensive list of direct contacts among potential parties to a transaction and extensive experience getting difficult deals closed? A principal to a transaction is simply renting those contacts and experience and, although often expensive, the investment banker is worth every penny if he or she can pull a deal together for the principal.
The foregoing is pretty basic stuff, so it’s alarming that a Senator from a state with more investment bankers than any other would engage in demagoguery over them. John Carney over at Dealbreaker sums up the irony quite well:

“Now being the First Lady for eight years and a Senator from a state in which you’ve never lived, that’s real work.”

And lest the Obama crowd get too over-confident with Clinton’s increasingly bizarre statements, get a load of this performance by Austin lawyer, former Austin mayor and current Texas state senator Kirk Watson, who has endorsed Obama:

Hope for a hog solution?

feral%20hog%20022108.JPGTexas’ feral hog problem has stymied many a smart scientist over the years, but it appears that the Aggies may have discovered a possible solution(H/T: Craig Malisow)

If you’re a land owner and animals such as coyotes or wild pigs are driving you hog wild, help may soon be on the way to control their numbers in a humane way – in the form of a birth control pill for animals being developed at Texas A and M University’s College of Veterinary Medicine and Biomedical Sciences. The concept would be to get it to wild animals through baited food, researchers say. [. . .]
n Texas, feral hogs have become a severe nuisance to farmers and ranchers, and the state has an estimated 3-4 million feral hogs, by far the most in the country.

Gig’em Ags!

Looking for other lines of work

buser.gifSo Professor Buser, what did you plan on doing as a side occupation after your expert witness career? Judge Posner wants to know:

Buserís initial report proposed that if permitted by Allmerica to continue its market-timing trading, Emerald would have earned an annual rate of return on its investment
of 34 percent for 20 years, for a discounted present value of $150 million. That was a preposterous estimate, properly excluded by the district judge under Fed. R. Evid. 702. . . .
Buserís first report was so irresponsible as to justify the judgeís decision to exclude the second report summarily. Buser had demonstrated a willingness to abandon the norms of his profession in the interest of his client. Such a person cannot be trusted to continue as an expert witness in the case in which he has demonstrated that willingness, and perhaps not in other cases either.

Maintaining Enron myths

natwest%20three%20022008.jpgEver wonder how the mainstream media maintains Enron-related myths?
In reporting on the sentencing hearing later this week in the Enron-related case of the three former UK bankers dubbed “the NatWest Three” (prior posts here), the Chronicle’s Kristen Hays observes the following:

In their plea deals, the trio admitted they committed wire fraud in a scheme with Fastow and his top lieutenant, Michael Kopper, to cheat their former London employer, Greenwich NatWest. The bank, which is now part of the Royal Bank of Scotland, had a stake in a Fastow-created partnership and the three men advised their employer to sell that interest for $1 million when they knew its value had grown.
Fastow arranged for Enron to pay more than $19 million for Greenwich NatWest’s stake and divided most of the cash among himself, Kopper, the British bankers and others.

Actually, as noted in this earlier analysis of the NatWest Three plea deal, the following is what the former bankers actually pled to:

So, after years of litigation, the NatWest Three pled guilty to a single count of wire fraud. The basis of the guilty plea is that the three bankers failed to disclose to NatWest the [$250,000] option that they had taken from Fastow to purchase a portion of NatWest’s interest in Swap Sub at the time that NatWest sold that interest to Southampton [for $1 million]. Importantly, the basis of the plea deal is not that the NatWest Three knew and didn’t tell NatWest that the value of the bank’s Swap Sub interest was going to skyrocket soon after Southampton bought it as a result of Fastow completing the unwind transaction with Enron.

Read about the real NatWest Three deal.

Born Standing Up

born_standing_up.jpgDon’t miss this Smithsonian.com excerpt from comedian Steve Martin’s new autobiographical book, Born Standing Up: A Comic’s Life (Scribner 2007). Take, for example, Martin’s hilarious description of the implementation of his novel theory of comedy in one of his initial shows:

A skillful comedian could coax a laugh with tiny indicators such as a vocal tic (Bob Hope’s “But I wanna tell ya”) or even a slight body shift. Jack E. Leonard used to punctuate jokes by slapping his stomach with his hand. One night, watching him on “The Tonight Show,” I noticed that several of his punch lines had been unintelligible, and the audience had actually laughed at nothing but the cue of his hand slap.
These notions stayed with me until they formed an idea that revolutionized my comic direction: What if there were no punch lines? What if there were no indicators? What if I created tension and never released it? What if I headed for a climax, but all I delivered was an anticlimax? What would the audience do with all that tension? Theoretically, it would have to come out sometime. But if I kept denying them the formality of a punch line, the audience would eventually pick their own place to laugh, essentially out of desperation. This type of laugh seemed stronger to me, as they would be laughing at something they chose, rather than being told exactly when to laugh.

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The faux-analyst

earnings%20call.jpgOne of the funniest things I read from this past weekend was this W$J article about the earnings conferences calls being crashed by a faux-analyst named Joe Herrick:

At least seven times just the past three weeks, a mystery caller has cleverly insinuated himself into the normally well-manicured ritual of the quarterly calls. As top executives of publicly traded companies respond to securities analysts’ questions about their balance sheets, he impersonates a well-known analyst to get called upon. Then, usually declaring himself to be “Joe Herrick of Gutterman Research,” he launches into his own version of analyst-speak.
“Congratulations on the solid numbers — you always seem to come through in challenging times,” he said to Leo Kiely, president and chief executive officer of Molson Coors Brewing Co., on Feb. 12, convincingly parroting the obsequious banter common to the calls. “Can you provide some more color as to what you are doing for your supply chain initiatives to reduce manufacturing costs per hectoliter, as you originally promised $150 million in synergy or savings to decrease working capital?”

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Importantitis

Orson%20Welles.jpgTheater critic Terry Teachout made an interesting point the other day in this W$J op-ed about one of the hazards of great achievement relatively early in one’s career:

Leonard Bernstein set Broadway on fire in 1957 with “West Side Story,” a jazzed-up version of “Romeo and Juliet” in which the Capulets and Montagues were turned into Puerto Rican Sharks and American Jets. It was the most significant musical of the postwar era — and the last successful work that Bernstein wrote for the stage. His next show, 1976’s “1600 Pennsylvania Avenue,” closed after seven performances. For the rest of his life he floundered, unable to compose anything worth hearing.
What happened? Stephen Sondheim, Bernstein’s collaborator on “West Side Story,” told Meryle Secrest, who wrote biographies of both men, that he developed “a bad case of importantitis.” That sums up Bernstein’s later years with devastating finality. Time and again he dove head first into grandiose-sounding projects, then emerged from the depths clutching such pretentious pieces of musical costume jewelry as the “Kaddish” Symphony and “A Quiet Place.” In the end he dried up almost completely, longing to make Great Big Musical Statements — he actually wanted to write a Holocaust opera — but incapable of producing so much as a single memorable song.

Teachout goes on to discuss the career of Orson Welles, another performer who peaked early with “Citizen Kane” and then spent the remainder of his career attempting to scale that peak again. Teachout compares Welles and novelist Ralph Ellison to choreographer, George Balanchine:

Contrast Ellison’s creative paralysis with the lifelong fecundity of the great choreographer George Balanchine, who went about his business efficiently and unpretentiously, turning out a ballet or two every season. Most were brilliant, a few were duds, but no matter what the one he’d just finished was like, and no matter what the critics thought of it, he moved on to the next one with the utmost dispatch, never looking back. “In making ballets, you cannot sit and wait for the Muse,” he said. “Union time hardly allows it, anyhow. You must be able to be inventive at any time.” That was the way Balanchine saw himself: as an artistic craftsman whose job was to make ballets. Yet the 20th century never saw a more important artist, or one less prone to importantitis.

I’ve admired the trait that Teachout notes in Balachine in Texas novelist, Larry McMurtry, who churned out interesting novels and short stories for 25 years or so until he reached the pinnacle of his profession at the age of 50 with his 1985 Pulitizer Prize-winning novel, Lonesome Dove. Even after hitting a grand slam with Lonesome Dove, McMurtry didn’t rest on his laurels; he went back to work producing a novel every several years or so. Although many of those novels and other works (the screenplay to Brokeback Mountain, for example) have been highly entertaining, he has not been able to produce a work on the level of Lonesome Dove. The odds are that McMurtry won’t (he is 72 now), but my sense is that he is much more likely to do so pursuing his craft the way in which he is doing it rather than sitting around contemplating what the next great American novel should be.

An emerging risk of youth sports

ACL%20injury.jpgAs youth sports become increasingly specialized, a family from The Woodlands is the subject of this Gina Kolata/NY Times article on one of the big risks to children of that trend — increased torn anterior cruciate ligaments (“ACL”), the main ligament that stabilizes the knee joint:

The standard and effective treatment for such an injury in adults is surgery. But the operation poses a greater risk for children and adolescents who have not finished growing because it involves drilling into a growth plate, an area of still-developing tissue at the end of the leg bone.
Although there are no complete or official numbers, orthopedists at leading medical centers estimate that several thousand children and young adolescents are getting A.C.L. tears each year, with the number being diagnosed soaring recently. Some centers that used to see only a few such cases a year are now seeing several each week.

A friend of mine and I were discussing last week how unfortunate it is that most children these days depend on their parents to organize athletic activities for them rather than simply playing sports informally with neighborhood friends. Increased specialization is the natural evolution of organized sports, which means more games, more practice and more pressure on growing muscles, joints and bones. Not a particularly healthy risk in my book.

Alltop, all the time

guy2.0.jpgHave you checked out Guy Kawasaki‘s new venture, Alltop? If not, you should. Guy is adding categories and new links frequently, so Alltop is turning into a great launching pad for finding informative blogs on a wide range of topics. Check it out.

An interesting headline choice

reliant-astrodome%20Google%20Earth.jpgKevin Whited and Cory Crow continue to express amazement at the delusional nature of county officials and the Houston Chronicle over the proposed Astrodome hotel project that is now in its fourth year of being bandied about. The latest Chronicle effort to breath life into this boondoggle is this weekend article that carries the following headline:

“Dome plan could bring in millions”
“Report also says hotel would have 72 percent occupancy rate”

More realistically, the headline could have read as follows:

“Dome plan could cost County millions”
“Report says that hotel would have only 72 percent occupancy rate”

All depends on one’s point of view, eh?
Given my extensive blogging on this boondoggle, I won’t go into all the reasons why converting the Astrodome to a destination hotel is unlikely to happen without a large public subsidy. Suffice it to say that if private financing for Astrodome hotel could not be arranged over the past several years when the market for such financing was quite good, then it’s not going to happen in the foreseeable future now that credit and equity markets have pulled back from such speculative investments. So, if this deal is going to proceed, then get ready to provide a bountiful public subsidy for it.
However, one name mentioned in the Chron story reminded me of an instructive legal matter I handled back in the mid-1980’s. The matter involved an Astrodome-area hotel that had been promoted to investors and built immediately before the bottom fell out of the local commercial real estate market when the price of oil and gas tumbled to record lows at the end of 1985. I ended up representing the promoters, who had guaranteed a large portion of the construction financing on the hotel.
During the year or so that my clients owned the hotel, it never came close in any month to generating enough revenue to cover the operating expenses of the hotel, much less generating anything for my clients to use to pay debt service on the construction financing. Not surprisingly, the bank eventually foreclosed on the hotel. The promoters and investors lost their entire investment in the hotel.
Guess who the consultant was who prepared the glowing feasibility study that helped persuade my clients to promote and finance that boondoggle?
Yup. John Keeling.