Saturday, July 30, 2011

Akamai collapse continues

My apologies to anyone who listened to me.

On May 17th there was a post here, "Akamai, a jewel on sale", that suggested Akamai as an undervalued stock that was ripe for acquisition. The stock was at around $30 then. After yesterday it is at $24, about half of what it was 9 months ago. What a disaster for any short term investor.

For long term investors that have already been rewarded well over the years the dilemma now is whether to just give up and take leftover gains or hang in there. Akamai remains a cash rich mid-cap tech company with no debt. It now trades at just a 14x forward p/e. 20% of all internet traffic flows through its servers. What has happened, however, is that it is no longer seen as a high growth company.

The competitive landscape has changed, the cloud competitors have taken a slice of the high valued added and high margin business, and Akamai's core business is becoming a commodity subject to pricing competition and compressed margins.

Accepting that, Akamai is still growing earnings and revenues in the double digits. It has a global franchise. It's services are still essential. What one can't really know as an investor outside of the narrow world of this tech space is whether their MIT related algorithym prowess has in some way diminished. Are they cutting edge or are they institutionalized now.

Whatever the answer, they are more than ever an acquisition target for some cash rich large firm, but now the question is at what price?

I am mulling over my next move, which is muddied by the debt ceiling political dysfunction. Who really knows the price of anything until this political impasse, this suicide attempt, is resolved.

Balanced Budget amendment would be un-American

The balanced budget amendment that is gaining currency among certain groups of Republicans is just plain stupid.

The United States obviously has a debt issue that needs to be addressed over a time frame that allows for thoughtful solutions. Notably, we need to end our massive and hopeless police actions in Iraq and Afghanistan and, while staying involved, be an advisor and supplemental enforcement resource rather than a significant armed force that deepens anti-Western resentment. Beyond that, there are solutions that will be related to the tax code, entitlement programs, and the long term purpose of our military, among others issues. Ultimately, however, the way out of this dilemma is GROWTH.

A growing economy will result in more tax revenues and a more self-reliant population. To get there, there is a need to invest in education and infrastructure and a need to embrace all people who can contribute to our prosperity, regardless of gender, race, or national origin.

A balanced budget would preclude the investment needed to nurture growth. Growth is fundamental to the American spirit of optimism. This optimism had been part of our DNA since 1776 and now the misnamed tea party wants to reject that part of our country's genetic code. Any business with opportunities knows that an option to support potential growth is to borrow. Any family knows that, to grow opportunity for family members, borrowing for needs that extend into the long term, prudently done, is essential. That's because the businesses and the families are optimistic. They believe that through work and consistency there is opportunity ahead.

The budget needs to be brought into a better balance. An actual balanced budget would forego opportunities for the future at a time when investors are willing to throw money at us for amazingly low interest costs. How stupid is this idea? We need to invest for growth and this can only be partially self-funded through immediate cuts.

The tea party ideas are simply our of sync with the best of the American tradition. Perhaps education spending is already doomed to be coming too late. What time is Dancing With The Stars on?

Friday, July 29, 2011

Picard hoisted on own petard

Who is Irving Picard and why is he out of control? The Madoff trustee, who has filed over 1000 lawsuits seeking to obtain over $100 billion in judgements(total Madoff losses for investors were reported to be $65 billion but most of that was not principle, just fake profits), is finally being held accountable by the legal system that he has been abusing.

No matter how obvious this abuse was, the media never questioned anything and any "villain" that Picard attacked and sued was viewed as likely to be culpable, especially since they were finanicial companies(see Gretchen Morgensen). Yesterday the U.S. District Court in Manhattan threw out Picard's suit against HSBC and confirmed that this precedent would apply to all other similar suits as well.

Picard's suits were against firms that served a back office operating function for Madoff and his investors. There was no legal precedent for his suits and plenty of precedent for the bank's innocence(as a simple example, if someone has a bank account at Wells Fargo and then writes some checks to do something illegal, say buy some cocaine for resell, is Wells Fargo now guilty of illegal drug dealing? No.) In the case that I am familiar with, Picard, on behalf of Madoff victims, sued JPMorgan Chase for $6 billion, over $5 billion of which was punitive damages. In a legal sense this was a "hail Mary", but in a PR sense the media gobbled it up with no questions asked.

All of those abusive and irresponsible suits are now tossed. Thank goodness for a dose of sanity in this world for once.

On top of that it was reported separately today that the General Accounting Office, at the direction of Congress, has opened an investigation into Picard and his huge "claims" against investors with clawback provisions. They will also investigate Picard's selection for this role, his compensation, and his expenses in being trustee. This is long overdue.

Madoff investors have already been provided unprecedented tax relief by the IRS. Picard was on a path to compensate investors for every penny of false profits that they blindly accepted(and many of these investors were not stupid people) plus some.

Finally Picard's actions are being examined.

Wednesday, July 27, 2011

Economic anarchism at work

McConnell and Boehner's two and a half year non-cooperation approach against anything Obama has now backfired on them as they try to bring the Tea Pary contingent under their umbrella. Despite their consistent intransigence, those two leaders were essentially classic Republican supporters of business, the wealthy, and a view that an unfettered market economy eventually cures all. Their Tea Party brethren have no such allegiances and no certain belief, or at least it seems that way.

The funny thing is, is funny the right word today, that the constituency, as in voters, that elected these Tea Party demons has no clear point of view. Who are Tea Party voters?

There are for sure some scorched earth libertarians like Ron Paul, types of intellectuals that are certainly not commonplace. There are wealthy right wingers who simply want no part of government, and see no function of government in contributing to a fair or humane society, but they are not so many as to be able to elect someone. They can contribute plenty of money of course.

There needs of course to be a significant critical mass of tea party voters that will scare the Republican status quo and that will elect politicians that will cater to their resentments and fears. Have you ever met a real Tea Party voter. I've only known one and randomly had contact with a few others.

The one that I have known(and I will blur this to conceal identity) detests Obama as a starting point. He adores anything related to the military. He receives disability payments for some supposed back injury although the off the books job that he does certainly couldn't be done by someone who was disabled. He only gets his health check-ups and health care at a veteran's hospital(he served in the military but never came within 3000 miles of combat). In other words, we have a person who wants to balance the budget, cut government spending, and thinks he deserves every possible benefit because the government owes it to him.

Does this make any sense?

From my sort of cloistered New York life that's my exposure, except for some brief conversations with crazy people in the library or at the local diner and having to listen to a rant by a young cab driver who must have been tweaking. I've talked to some friends, however, whose families or friends still run deep in southwest Virginia in one case and in the Long Island area in the other. They describe the same phenomenon of Tea Party obsessives who think they personally deserve every possible government entitlement and then some, then some since they manipulate the system to get as much as possible. Balance the budget, shut it down, give me mine, are these the citizens that have become the marginal voter and have scared the almost the entire Republican caucus into a belief in economic anarchy.

As painful as today's market performance was, at least maybe it will shake Boehner, McConnell, Cantor, and others down to their shorts, and if not the market then maybe their corporate donors will give them a ring.

Tuesday, July 26, 2011

Ikea's Swedwood faces union vote in Danville tomorrow

From the Washington Post to the Daily Show, other major newspapers and international wire services, this vote to unionize has received an immense amount of attention. That's especially considering that it concerns just 325 workers in a small southside Virginia city.

Why is that. Ikea is a global company and that's a start. It's an unusual example of a foreign company being accused of abusive labor practices at a U.S. subsidiary, using the company to produce goods at a cost well below what they would do in their home country, as opposed to Nike in Indonesia or some such example. The Daily Show called Danville "Sweden's Mexico". It is also a rare instance of an attempt at unionizing in the generally union free South of this country.

From this perspective, the coverage has been easy to view as one-sided. If the abuses chronicled are institutionalized and not one-offs, there is a big problem and a union may be the answer. Only one person is ever quoted, it seems, in the articles and that is a Bill Street, who speaks for the workers who want to unionize and who one would think is from Danville if they didn't know more. He is professional union organizer from the big union, headquartered elsewhere. Ikea, however, is generally viewed as being a good employer and company elsewhere, so what went wrong and how pervasive is it?

I do know that while an average wage of $14 - $15 an hour for a manufacturing job, plus health benefits, sounds anemic in most places, in Danville that would be a coveted job in many families with few options in a city with a low cost of living and two decades of decreasing job opportunities. Ikea corporate of course defends its practices in general but is cooperating with the union election and apparently not interfering in any way.

Tomorrow's vote will tell us more than most of the news coverage. Regardless of the outcome, it is unclear whether this whole episode has any real benefit for Danville, a city that desperately needs to attract more companies and more entrepreneurs to the area if it is to enter a needed period of renewal.

Friday, July 22, 2011

Opposing views, depending on their responsibility

While Virginia representive and House majority leader Eric Cantor is one of the most obstructionist of the Republican leaders on getting any deal done, a fellow Virginia Republican is taking a different stance.

No one would call Virginia Governor Bob McDonnell moderate in his views as a conservative. Yet he has written a letter to all members of Congress and President Obama stressing how damaging not raising the debt ceiling would be to state finances, and Virginia is one of the soundest states in terms of ratings and market access.

States build budgets around what they expect to receive from the Federal government. Rating agencies have models for states finances with those expectations.

So the difference in responsibility is clear. Cantor manages nothing. He is in Congress. He is an ambitious politician. McDonnell manages a state government with thousands of workers and with obligations to meet.

Maybe they should have a showdown in front of the Virginia State Capital, old style like Virginia gentlemen.

Friday, July 08, 2011

the aforementioned corn on the cob blog

June 13, 2010, a little disturbing that I didn't realize that it was just a year ago that I was making this salad - oh well.

Eyes Not Sold search keywords

On May 28th, this year, I posted a comment about my late realization that Google kept accessible data on their free blogspot service, and have done so since May 2009. There is country of origin data which I previously highlighted, but there is also URL data, usual suspects and not especially analyzable by me, Referring Sites led again by the usual - Google,, Yahoo, Facebook... and then there is Search Keywords top ten list.

For this blog eight of the top ten are more or less expected, John Borden at the top, five variations of eyesnotsold, two related to JPM, and then two more. One is not really a surprise and that is John McGillicuddy. A note here on his passing apparently is still read. He influenced so many people. The other top ten seach keyword is "what to do with leftover corn on the cob". I certainly wrote something about this, no idea when, but that seems to be my contribution to the food world. Nothing like my daughter Lynna and her thoughtful blog, but somehow noticeable?

Wednesday, July 06, 2011


Today I learned that the equivalent to the S&P 500 Index in Vietnam is named the Ho Chi Minh Stock Index. First a trail, then a city, and now the heart of a market economy.

It takes time, but maybe positive things can evolve without us.

Monday, July 04, 2011

Positive words from Liaquat Ahamad

This weekend's Barron's has an interview with financial historian Liaquat Ahamad. The 58 year old Cambridge graduate's book, "Lords of Finance: The Bankers Who Broke the World", was a history of central banker's actions in the late 1920's and the 1930's that led to, and exacerbated, the Great Depression. It focused on the central bank heads of the U.S., Germany, France, and England.

The book is a compelling read, and won the Pulitizer Prize for History in 2010 and the Financial Times Best Business Book of the year in 2009. Ahamad, formerly of the World Bank and more recently an investment manager, had as his motivation for writing the book a realization that in current times as well, the late 1990's and the most recent years, who is in charge, the individual people, is crucially important.

The interview mostly reviews some of the key tenets of "Lords of Finance", but in the final parts moves to today. Of these times Ahamad says,

"If you take the whole group of people running the finanical system in 2007, 2008, and 2009 - particularly the trio of Fed Chairman Ben Bernanke, Treasury Secretary Timothy Geithner and his predecessor Hank Paulson - they were slow to appreciate the magnitude of the problem. But once they recognized it, they basically saved the world from a Great Depression. We should build statues to those guys."

The U.S. financial leadership team, in Ahamad's view, led the world away from the abyss. Second guessed frequently, often ridiculed by members of Congress, and always in a tough spotlight, they perservered and are not yet fully recognized, especially in this country, for what they accomplished.

Come on, it's July 4th, and we could stop and consider the necessary decisions that were made and what has been avoided, no matter how challenging the future seems to be. We could even go so far as to acknowledge the support of President's Bush and Obama. Their decisions created or complicated issues at times, but they certainly took some heat for ultimately supporting their Treasury secretaries and financial teams.

I can hear fireworks in the distance, I'm eating a bowl of watermelon, and I face no huge crowds or traffic jams. Maybe next year I'll head back to the East River for the fireworks, they are spectacular, but would the ordeal of getting back be worth it?

Saturday, July 02, 2011

Watermelons are heavy

Today I went into the city with a specific errand. That was to buy and take a watermelon to my invalid in-laws in their Chinatown apartment. Their caretakers are generally good, but bringing in a watermelon..?

The genesis of this idea was that for the last two years of my father's life he ate and loved his watermelon every morning. The local Food Lion store seemed to have it year round chopped up and in plastic containers. At first I just viewed it as a tasteful way for him to hydrate himself, but a few months ago in my Nutrition Action newsletter I learned that watermelon is an incredibly healthy melon, full of things that our body needs. Who would have thought? Maybe that was my father's successful every morning recovery mechanism, tasteful, and forget about Revive Vitamin Water.

My father in law can still eat foods that are not too dense, he always loved watermelon, and even though he no longer talks he does understand things and appreciates visits. So off I went this morning.

85 degrees and humid in New York is not like the same measure in other places. With all of the concrete, all of the 98.6 degree bodies, and all of the cars, taxis, and trucks, it is really serious sweaty hot weather. I took the subway down from Penn Station and walked over to East Broadway where the major vegetable and fruit stores are located. That's maybe three quarters of a mile from my in-laws apartment building. The seedless watermelons, best for him, were really big. The store triple bagged one and off I went.

Manhattan Chinatown is one crowded place, sidewalks packed more with locals than tourists, but certainly with both. I kept switching hands with this heavy item, trying to get around strolling locals, gawking tourists, and balky children, while still being polite. I had never appreciated either how heavy a big watermelon is or how age can diminish one's strength. By the time I arrived at their apartment the caretakers took one look at me and brought a role of paper towels for me to dry off with and turned up the air conditioning.

Hey, it was a success. I visited. I hope that the watermelon was good for all.

My day, as always in Manhattan, continued. I went to Big Wong on Mott Street and bought some ribs in black bean sauce over rice and some Singapore Chow Fun to take home. Then I walked up Mulberry and saw that despite it not being a Feast week in Little Italy the street was blocked off and festive. My wife's financial interest in 142 Mulberry seemed to be thriving, her almost no control of the situation notwithstanding(I could say so much more but even my disclaimer heading for this blog might not be good enough for the controlling "partner").

Next was buying some "Chinese broccoli" on the street at upper Mott still in the expanded Chinatown. This stuff is terrific, can't be bought at any regular supermarkets, and at $2.50 for two pounds is a bargain. Steamed with garlic, salt, olive oil, a little fennel, and a little fresh lemon juice at the finish, I can make this healthy food delicious. That said, my wife Kathy does it better.

Then it was up to McNally Jackson bookstore, as mentioned before the best independent bookstore in the city, and a few books picked up because they highlight literature that almost no else does, good stuff. On to Dhaba for a quick Indian buffet at Lex and 27th, not too much as the heat had muted my appetite for what can be heavy Indian food. I did simply take a long rest there over my rice pudding, reading and being cooled down by the a/c, enjoying the always cooled down music as well and the eclectic crowd.

Finally off to Penn Station, while walking Kathy called and reminded my that the trains were on the :19 on weekends, as in 3:19 and 4:19. It was 3:10 and I was not going to make it. I went into Szechwan Gourmet on 39th and had a second small lunch, hot and sour seafood soup and sauteed spinach with lots of garlic - enough left to bring some home(I'm almost 6'3 and rarely exceed 165 pounds, so if the least bit hungry my metabolism allows me to eat) --- that was not always the case when I was working all of my waking hours but that's another story.

So that was a good exhausting day that finished in a sort of amazing way. Going to my train in Penn Station I quickly grabbed a Barrons and handed over the 5 buck price and the Asian Indian proprietor wouldn't take it. I was confused. He explained that I had given him a 1953 silver certificate $5 bill that was worth at least $70 to collectors. How honest is that, beyond all reason really. I gave him a regular five, thanked him profusely, and made the 4:19.

I was in Manhattan yesterday as well doing errands and dealing with my broker on some transfer of mortgage backeds from MSSB to Fidelity that are being blocked. Morgan Stanley Smith Barney is such a poorly managed if not corrupt firm. What a pain, inherited from my father's completely hoodwinking preppie self serving broker who he adored.

Tomorrow I'm staying home, reading, writing, no rithmetic unless a bill or two gets paid, but Manhattan has gotten all of me in the last two days. I will rest.