Farewell then Bennigans...

Farewell then
Bennigans -
Bringer of
faux-Irish
to American
Suburbia,

Amazingly,
you wrung
huge margins
from the cheese-slathered skin
of
the humble
potato.

You were
the first
of your kind
to arrive,
and now,
the first
to depart.

Your green-roofed
carcasses
will litter
dead retail
centers for
years to
come.

Oh yeah, and
my first flame
was once
a server
for you...
and even way back then,
thought (rather articulately)
that "you
sucked!".

(With usual apologies to EJ Thribb and Private Eye)

It's the Silly Season (in DC)

Last night, I had the misfortune of hearing an interview with Senators' Dodd & Shelby discussing their bipartisan housing bill (which passed committee 17-2, or so). This was just after listening to Speaker Pelosi rant about the dire need to release oil from the SPR in order to send prices lower. Little makes me more despondent than watching the knaves pandering.

First let me address Dodd's inanities, which were delivered in a tone of voice that was positively pleading, usually reserved for a mother with a malnourished child. "THE SKY IS FALLING ALL AROUND US AND NOT JUST IN THE US BUT WORLDWIDE!!! THE CASE-SCHILLER INDEX IS LIKELY TO FALL ANOTHER 30%", he told PBS's reporter, " AND WE SIMPLY CANNOT ALLOW THIS TO HAPPEN..." Ahem, pardon me, Mr Dodd, but ummm where the hell were you when when housing prices were vaulting upwards and the Fed was doing its best mimic of Japan's ZIRP? You were dissing Issing, and all others who suggested that skyrocketing asset prices demanded attention. Where were you when financial institution balance sheets and credit growth were ballooning?? Which fellow Senators were you whipping into shape when tax cuts were the rage, unrequited as they were by fiscal restraint??!? Perhaps if you'd not let housing prices appreciate so, and encourage your banking friends to willy-nilly finance the HELOCs and equity-withdrawal refi's in order to mindlessly consumer beyond their means, we wouldn't be here now. Hypocrite!

Gollywag #2 was listening to Madame Pelosi waffle on about the benefits of slamming the market with oil from the SPR. Mrs Pelosi may be a fine leader, and consensus-builder, and she may have a good heart, in sort of the same way that Gore Vidal is a wonderful writer and perhaps the top literary critic. But neither he, nor she should trespass into the realm of economics. For while such a notion of spending our savings would be consistent with American public and private economic policy over the past two decades - particularly the last one, it is, I must say daft in the extreme, particularly when the primary reason cited was: "Because the American people have already paid for it...". Ma'am, if I might point out, that logic is the same logic that would have us spend all our savings, because we've already saved. It is utter nonsense. The SPR, like one's savings, have been built for a rainy day. Not a drizzle. Not a light shower. But a full-on honking severe turbo-tempest. Next time, we who would dearly like to see the republicans dethroned would kindly ask that you please think before speak.

The SPR issue really gets my goat. For LOWER oil prices (without an attendant energy policy) only encourages MORE of the wastefulness that has gotten into this dilemma in the first instance. I would be amenable to a temporary draw on the SPR in exchange for say large energy taxes, renewable incentives, mandatory conservation initiatives (beginning with government itself), etc. But it is terribly painful to listen to all manner of demagogue (whether its about the SPR, drilling the ANR or offshore, or imploring the Saudi's to pump more) prattle on about supply, when - as Amory Lovins of the Rocky Moutnain Institute rights points out, by far the highest returns on energy investment are NOT on the supply side, but on the demand side in the form of conservation and extracting higher efficiencies.

Mechel: Steal or Steel?

Poor Igor Zyuzin. What could he possibly have done to earn the wrath of Prime Minister Putin? Stealing? Price Fixing? Insufficient baksheesh? Slept with his girlfriend? Doesn't really matter. The stock has been shattered, and along with it, the confidence that Mechel is "safe" and squarely within Putin's circle of friends (Oh how the god of mixed metaphors will crucify me for that!).

Hope you weren't long...

Shock - Horror!! - Trading Firm Manipulated Prices!

An SEC press release detailed with shock, horror (and awe) the luciferian machinations and manipulations of Optiver BV in the US energy markets. OK, admittedly my language is overblown, and no one is, or should be surprised by such revelations. At least anyone whose seen the smartest guys in the room, or witness the torpedoing of Amaranth.

But perhaps the most amusing thing about such a firm (compared in the same breath with Susquenhanna, and DE Shaw) who ironically vocally boasts about recruiting A-1 mathematicians from the best schools who also are "the smartest guys in the room", is that (according to the SEC) these geniuses left a slime trail of e-mails detailing their bold exploits in vivid colourful splendidiferous language, thus violating a cardinal rule of market-based "crime": vaporizing your own plausible deniability. For there are lots of reasons why participants do seemingly sub-optimal and uneconomic types of trades, including ignorance and stupidity. But when you hang yourself by bragging about it in emails, one's length of rope with the authorities demonstrably shortens.

Clearly business and engineering schools in America (and apparently elsewhere) are failing their students by NOT properly educating them in the subtleties of contrapreneurship. It seemingly happens over and over again - across the spectrum of firms, spanning industries. The groundrules are simple: Cover your tracks. Always have a Plan B. Retain multiple outlets to describe the appropriate plausible deniability. Certainly do not brag about it to friends or associates. Know when to fold, when to walk away, and when to run. Don't count your money, when your sitting at the table. And Never, NEVER refer to any such activities in any written electronic communication except in the most obscure of coded language indecipherable to prosecuting authorities.

Bad Chapter 11 Poetry

So Farewell
Then
SemGroup,
LP.

Latest
(and largest)
non-consumer
casualty
of energy
price
vol.

You were
stealthily
in the Midstream
before being
ummm
errr
"victimized"?!?!

Dr Hyperbole
tells us:
"Hedging should
reduce
risk"
No?

Shucks! (*)
you must've
missed the
fine print detailing
the perils of
"variation margin".

(*) - red state vernacular for "FUBAR"
With apologies to Private Eye & EJ Thribb (aged 8-1/2)

Effingly Absurd Efforts

If I'd told you that Jeff Skilling or John Rigas were raising capital for a new investment fund or business venture, laughter would be the more polite of your reactions, though effing derision might be appropos. Of course, one is free to give it the old college try as the now overly-effervesced Sowood, Peloton and Amaranth PMs have. But legal imbroglios are different, and so it is with raised eyebrows that I bring your attention to former MAC associate Takashi Kosaka's effingly bold Singapore-domiciled activist-value fund managed by eponymous Effissimio Capital Management.

He's bought some effingly big stakes (see above) in the "time-honoured" (JCH code for shitty and shrinking) Gakken CO Ltd.#9470, also-ran Nissan-assembler Nissan Shatai #7222, "hidden-asset" landlord Tachihi Enterprise #8821 (and their intermediate parent, New Tachikawa #5996, Mitsui M&S Plant Engineer, MESCO, #1737, and PC distributer Daiwabo #9912. It is my contention that in time, they will become portfolio effigies - tributes to an investment strategy with lottery-like odds.

Why? CAll me conventional, but in contrast to other activists who often at least make an attempt to target reasonably "good" assets and companies whose share-prices have been under-performing, Mr Kosaka's effingly bold accumulations have the following in common: the enterprises are uniformly shitty and largely shrinking; they are all, excepting Gakken, wholly-owned or controlled subsidiaries of other listed companies, and all the positions are wholly and completely unmarketable in the context of the market. Transgressing any one of the foregoing might be forgiven for a three-cent nickel, but violating all three together should be a cause of grave concern to investors in the effingly absurd hedge fund. And all this is before pointing out the frightening lack of diversification to which investors are exposed for the luxury of one-and-twenty.

A very astute friend and former manager of a large global hedge fund looked at me puzzle-ingly when once, long ago, I pointed to the "cheap" assets in Japan such as those precisely owned by Effissimo. For he had cut his teeth as a well-connected opportunist in the French market and learned that such things are mostly cheap for a reason (tax, control, financial flexibility afforded the parent) and that there is little gain to be had from being a minority holder no matter how cheap. "IF it is cheap, AND otherwise 'controlled', you must own 50.1% or nothing at all..." And this is in France where at least minority investors are afforded some protection against the common Japan practice of "The Take-Under", where consolidated subsidiaries are subsumed at often-unfavourable prices back into the parent.

This was of course in the days before the agent-principal hedge fund conflicts made their pursuit an efficacious and attractive undertaking - at least for the IM. While I have been less-than effusive of Steel Partners investment manager enrichment schemes masquerading as a hedge fund (which interestingly has NOT been seen recently adding a to a single position in any MoF filings leading one to believe that my prognostications about an eventual death-spiral may be in the process of being requited), Steel's approach appears positively scientific by comparison to Effissimo's efforts (though I'll hold my tongue on their relative honourability).

But what is it in the pursuit of large illiquid holdings that seemingly prevents the ability to resist the temptation to manipulate stock prices into meaningful valuation periods? Do they think no one will notice? Perhaps like MAC (and the late Leona Helmsley), rules are for "little people"? As an observer, I admit that I must be careful not to fall prey to the behavioural flaw of seeing non-existent patterns in the erstwhile random meanderings of stock-prices. But the coincidence of quarterly ramps (as depicted in New Tachikawa Aircraft - seen adjacently) would stretch the imagination of even the strongest apologists for the primacy of an unfettered market determining price. For the former cohort of a felon, Singapore may be (from Mr Kosaka's perspective) the domicile of choice for all the right reasons...

CNN vs. Chris Wood

What gives? CLSA's Chris Wood is banging the table on the attractiveness of Japan's equity market, yet, in a little-noticed innovation, CNN's scrolling financial banners (at least the ones piped through the cable news channel's Italian offering) has scrubbed the Nikkei index from its news scroll in favor of Singapore's Straits Times, and the HK's Hang Seng, as the Asian bellwether(s). Perhaps it is an oversight, or maybe the Nikkei is now well-and-truly irrelevant. Or perhaps CNN, like the covers of the Economist and Time magazine, are meaningful contra-indicators. I just thought it was interesting, and potentially telling, as a news-and-data junkie, that I was unable to keep abreast of the daily (mostly downward) fluctuations from a purported leading news provider.

(Note to self: Must get a USB global 3-G device...)

Earth to Gramm: W.T.F.Were You Thinking??!??!

In the solitude of the high Alta Badia amidst the Malga's (working summer farms), the world's happiest cows gorge themselves upon verdant clover, wildflowers and grasses, clinking bells carried by the wind from seemingly all directions. From here, where the fossils in the Dolomite rock are Pleistocene, it is hard to imagine that the international monetary system is in severe and irreparable decline. The farmers cut and dry the grass for winter while the rest of the family including a now-short-and-stooped grandmother rake it on the steep slopes unreachable by conventional tractor. Marmots still squeal in the fog of morning, hawks hover high and time - excepting the encroachment of modern tourist construction built by the more enterprising of the Ladinisch - seemingly stands still.

Modernity intrudes nonetheless. Some of the enterprising have assumed large debts to construct - at a most dubious point in the cycle of both economic growth and changes wreaked by global warming - resorts that will inevitably be owned by the banks before the cycle is done. Restricted as comms were, a CNN-branchlet seemingly intended for Africa evidenced by ads for Nigerian banks and Ghanian port-services accompanied Berlusconi #1, 2 & 3 on the limited cable. It was the odious CNN that delivered to me the somewhat hilarious figure cut by Phil Gramm calling Americans a bunch of economic whiners, further suggesting that America's economic ills are both imagined by the Polity in general and a figment of the democrats' political strategists in particular. Now while it may be true that Americans are whiners - whether about taxes, gas prices, or one's liberalness, that is as far as Mr Gramm's worldview intersects with objective reality. Lore has it that everything is bigger in Texas - the cars, hats, steaks, the ego's, and if Mr Gramm and America's President are anything to go by, so to is the sheer ludicrousness of her politicians. $150bbl-oil has it would seem, has untethered any prior connection that such figures had with reality in the rest of the non-oil producing, home-owning, food-eating nation, a nation itself divorced from reality by the bubble of its own existence, as aptly summarized by Dr Roubini in his latest missive.

The problem with monumental political falsehood is that, like slander, it nonetheless tends to stick, remaining in the conscious mind long after it's been garroted by the facts. So let us contemplate for a moment the objectively sorry state of America's economy, and the likelihood of a yet-sorrier state in the imminent future. She [the USA] has seen steeply falling real wages for most workers for the last decade, impossibly large and persistent current-account and trade deficits on top of fiscal gaps that (all-in including SS) stretch the probable and exist only as a result of cynical piss-taking by foreign CBs mercantilist policies; persistently negative household savings rates that would make Edith Cresson's Grasshoppers blush; an energy-appetite woefully incongruous with the soaring energy prices, and future supply considerations, and energy-inefficient housing and transport infrastructure; an absurd healthcare infrastructure that consumes more per unit of GDP that any other nation YET leaves more than 20% of the population uninsured and uncovered, and fails to measure-up to peers spending half-as-much when it comes to basic measures of achievement such as infant mortality, and longevity; a financial system (including brokers, mono-line insurers, GSEs, and regional banks) that is in tatters due to excessive short-termism, greed, and flawed monetary policy; unprecedented income inequality that continues to widen through all-manner of rent-seeking and flawed political process, a currency that is in near free-fall through not-so-benign neglect, and an unwillingness to impose austerity upon a people whose lifestyles are at odds with their ability to afford what they've been told and sold is their god-given right; homes prices that are also in free-fall, municipal and state-finances that are in shambles, infrastructure (particularly transport, education and electricity) that is decaying rapidly, on top of unprecedented real and nominal levels of household indebtedness - especially credit-card debt, and international diplomatic initiatives strait-jacketed by the nation's debt held by our potential military foes and both real and imagined economic rivals. This is in addition to the Rappaport short-termism and economic cronyism encouraged by asymmetrical risk/reward of executive compensation that rivals the very best the Russian kleptocrats can muster, leaving the nation's enterprises as perilously fertile as the midwestern soils ravaged by intensive monoculture.

So, while it is all well-and-good for Mr Gramm to conjure political invective accusing the opposition of false manufacture, the fact is that none of these major-league problems are imagined, most were encouraged by, and accelerated their emergence since the turn of the millennium under republican watch without any acknowledgment to mission-control in Houston that we've even got a problem. Whiners? Maybe. But rest assured this has nothing to do with with the issues we face. Hopefully, this will be a year that the liars will be called-out, and perhaps that people recognize their own culpability in the travails that the nation now must confront.

Fiddling While Rome Burns

First, apologies and explanations for my absence: it was the Italians fault. Their hotels, you see, have a bizarre sense of what the internet represents, treating it like the way hotels-of-old treated telephone access: with unimaginably large mark-ups, byzantine security firewalls that restrict access, in distinct opposition to informations burning desire to be liberated. Not that my drivel represents a security threat, but apparently the Italians are more abusive than the NSA in this regard, with the most prevalent eavesdropping and surveillance of all NATO members. Of course, one might question whether Mr Berlusconi's intention is National Security or personal security, though I reckon its closer to the latter.

Second, though my market sensibilities feel guilty about vacationing while proverbial Rome burns, I have no regrets, having spent a decidedly magical couple of weeks at altitude in the Sudtirol with family, pursuing vigorous hikes and climbs with all the requisite libations. And it felt doubly-liberating since this was the first time in nearly nine years that I am truly free - unburdened with a so-called risk-position (more on this later). Up there, away from Bloomberg, newswires, cell-phones, email & dingleberries, the world appears just fine. Farmers make hay, with cows eating the excess grass; Dutch people still tow their camper vans anywhere and everywhere, and Belgians have yet to learn to drive in the mountains. Expresso's (always short - and never burned) are consumed frequently and with aplomb, while aperatifs and digestives flow freely. Change still comes slowly there. But if one looks with but mild astuteness, there are plenty of signs of the post-millennial, post-dollar-hegemony which I will share with you in a later post.

Third, sorry about not requiting replies to my observations on Bob Dylan’s latest tour. My brother (a far more informed critic than I) sympathized with my thoughts and pointed to “Live at Budokan” as 'the beginning of the end', with his brontosaurus-like mastication of “Maggie’s Farm”, to which I agreed. To the commenter who was looking for exemplary evidence of his manglings, I sadly cannot do justice as I fear I do not have the musical lexicon, but his destruction-through-bizarre parsings of nearly every line, in every tune, reminded me of the difference in meaning that a transposition of a single comma makes to the hypothetical phrase “…she was french, kissed by sun…” versus "...she was french-kissed by the sun....". The meaning is, of course, altered irreparably. That is a mere comma or pause. In musical vocalizations, there are multitudes of opportunities to inflect, emphasize, intone, change the pace of the cadence, whether overtly or subtly, that imbue (or not!) a song and lyric with meaning and hence poignancy. Not all changes of course impact the meaning or poignancy, but at it happened, most of Mr Dylan's THAT night, did, and did so for the worse. That is just my opinion. All the same, thanks to all to who've wrote and commented. Quiet alpine nights were perfect for conjuring and distilling musings - despite my technical inability to launch them into the world. They will hopefully re-emerge during the coming week.

Poignant No More

There are things in modernity that have outlived their useful purpose. Some (like the Gas Guzzlers, Mao Suits, the incandescent light bulb) by circumstance, some (the top-loading washer, the typewriter) by the emergence of better design and technology, whilst others (President Bush, the shadow banking system, stock-brokers, or mortgage brokers) become more-than-redundant due to senescence or worse yet, by willful neglect. A few (say the NYSE) of course will whither from superciliously clinging to the vestiges of past usefulness or glory beyond its sell-by date. And so it was with Bob Dylan, for almost the entirety of his two-hour gig at the Palais des Sportes in Grenoble, that I was unable to shake such thoughts from my head.

It was a combination of happenstance and serendipity that brought me there, to l’Isere in eastern France on that June day, so-aligning our paths, that I felt cornily compelled to pursue this ummm errr destiny to its conclusion. A ticket came easily, despite the apparent scarcity but hours before, as did on-street parking free from the hassles of K&C permits, zealous traffic wardens or other suspect and thoughtless municipal revenue scams. Beer and freshly-made sandwiches (on baguettes) were provided cheaply and with both quality and smiles unlike the Aramark-abuse heaped upon the customer at North American events where everyone is cynically entitled to their pound-o-flesh and where the words “public interest” are oxymoronic at best. As the lights dimmed, my hopes were uncharacteristically high, as touring bikers and hippies were joined by parents in their 50s and 60s accompanied their grown children (and grandchildren!), and for once, I didn’t feel old and out of place as one of my age inevitably does at such gatherings.

Yet as the concert began, I was bugged almost immediately. No, I was not put-off by his band, for he was indeed accompanied by fine and accomplished musicians. Nor was I disappointed that he wasn’t playing guitar, but keyboard of one variety or another. And anyone who’s seen him over the years wouldn’t expect him to croon sweetly, so I wasn’t disappointed by the evolution of his characteristic rasp into a definitive growl. Even expectations about repertoire were non-existent, so the mix of new and old sat perfectly well. What saddened me however, was the apparent contempt his displayed towards his “art”, and so - by extension - his audience with what to this seasoned listener’s ears were nihilistic and mocking interpretative phrasing of lyrics that mangled once-poignant creations. It is galling enough to witness the mercantilist piss-takers and their consumptive co-conspirators destroy (what’s left) of the Bretton Woods system, for flawed as it, it remains the only one we’ve got, and therefore highly poignant for any saver, at least until replaced by something better. But to do see an artist debase and grafitti his own works (that I myself love) is almost more than I could bear.

You see, I have no problems with change, and even admire it for its own sake. Change (in art, at least) is good - even when things are going well for there is virtue in taking one out of one’s comfort zone, or applying one’s talents to new medium. Miles (as I’ve written here before) explained why he stopped playing ballads as:

“…because I liked playing ballads too much….”

And I have no doubts that it would be bloody f*cking boring reproducing the same arrangement of the same song day-in-and-out year-after-year. But there is “good” change and bad change. Constructive change and destructive change. Change that works, and change that doesn’t. 1970s fashion was indeed a change from what preceded it, but its worth remains debatable. But Thursday night’s concert in Grenoble, the change was in my opinion decidedly for the worse. Take a classic such “Tangled Up in Blue” from Blood on the Tracks, or 60s classics “Hard Rain”, ”Blowing in The Wind”. These were poignant works, with meaning imbued by phrasings and their consequential emotion – particularly when read/spoke/sung by the songwriter-lyricist-poet. But to edgier backing rhythms of his band, he was parsing the phrases in the most bizarre fashion – growling them rapidly in ways that decimated the poignancy, emotion, an sensitivity of the original works, leaving me thinking….WTF???! It was, no pun intended, disconcerting, in much the same way as commodity allocations as an asset class are a classical demonstration of a composition fallacy. And like such fallacies of composition cynically mock the system of which they are a product, so too did it seem that Mr Dylan was mocking his fans, taking the piss at those tossing $100 bills his way for the dubious pleasure of two hours of entertainment approaching abuse.

Now Dylan has a long history of disappointing fans, admirers, and just about most people not immediately close. Some - even those personally dissed by Robert Dylan a.k.a. Zimmerman like Joan Baez - explain it away as something which is essential to the artist in him. Apparently, he is less of a creator of art, than a channeler of inspiration that allows him to tap into something almost-divine and verbalize archetypical feelings. This is in contrast to say, Leonard Cohen, who treats composition and songwriting like a 9-to-5 job, and says its bloody hard work. Fine, I can accept that. And they ARE his songs, so he is free to do whatever he wants to with them. Perhaps Ms Baez is correct, and since he hasn’t sweated for these works, he has no attachment to them. And if he has no attachment, perhaps they have no meaning to him, allowing him to shit and piss upon their carcasses. In this view, poignancy is conjured only in the eye of the beholder, and Mr Dylan has made his view clear. Just as the PBoC, BoJ, SNB, and Federal Reserve have made clear theirs.

It is a sign of the times. We are in new and uncharted territory in modernity – composed of one part selfishness, one part-nihilism. So have a drink. Borrow some money. Don’t pay it back. Steal from your neighbor. Pick the public flowers in the park. Fuck everyone. Nothing really matters anyway…right?!?!

The Times They Are A-Changing c1963

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers
Throughout the land
And don't criticize
What you can't understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin'.
Please get out of the new one
If you can't lend your hand
For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.
Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers
Throughout the land
And don't criticize
What you can't understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin'.
Please get out of the new one
If you can't lend your hand
For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.