01 October 2014

Birds of a Feather, And All That

Steven Davidoff Solomon makes a run at corporate boards in his piece on Darden Restaurants, today. He closes the piece with:
Absent a last-minute, face-saving compromise, the likelihood of a full-scale ouster raises the glaring question: Why would the board pointlessly and perhaps foolishly invite its own demise?

To recap, for those not wanting to read the piece: a couple of tutes decided to buy up stock as activist shareholders. These are Starboard Value and Barington Capital Group. Both are hedge funds. They determined that Darden Restaurants, and the management thereof, was being mismanaged. The CEO and board disagreed. Much mayhem has ensued.

As Adam Smith (the real one, and I suspect the fake one, too) is so famous for: each economic actor behaves with enlightened self interest, which gave rise to the term homo economicus. Of course, Smith was opposed, on the whole, to capitalists generally and concentration specifically. What is this self interest for a corporate board member? Well, evidently it is to be best buds with other CxOs. In the case of Darden, as of today, eleven of twelve directors are current or former CxO/director of some corporation. If you want to expand your scope of earnings as a director, it helps if you don't look behind the curtain of whatever boards you currently have. Be nice to your CEOs and fellow board members, and you'll find far more opportunities to be a board member. I think that's what's called a sinecure. One hand washes the other. Birds of a feather flock together.

This is not to say that hedgies have the best interest of Main Street or Ma and Pa Kettle foremost in mind, of course.

For the quant types, this all raises the core question: if macro effects are just the sum of all those micro effects, isn't the whole shebang the result of such (low grade) corruption, rather than some human-centric version of thermodynamics? It ain't what ya know, it's who ya know; ya know? Or, as one who's been there puts it:
Directors were not appointed to compensation committees on the basis of distinctive skills or interests. Rather, they tended to be directors who could be relied on by management to be both sympathetic to management's compensation requests, and non-confrontational.

To get on the compensation committee, of course, one need be on the board. Be nice to your CEOs, and they'll be nice to you when it's your moolah to be decided. Stingy comp committee members won't be around long, ya think? Ring around the Rosie.

So, to answer Solomon's question (that does have a nice ring to it, doesn't it?): what's one board when you've got a whole life of other boards to run, ahead of you? Hedgies, after all, are not viewed as white knights anywhere.

30 September 2014

Apple is a Great Source of Iron

Does anyone else find it just the slightest ironic that Apple would abandon its "patented" solid rectangle with straight sides and flat front/back for something much more "round" in all three dimensions? And tout its thinness? And then, to top it off, provide a Stay Puft marshmallow man silicone case? Kind of like putting a Santa Claus suit on Twiggy.

I Want It All Done Now!! Do You Hear Me?!

Codd is reputed to have said, in some manner of words, that the RM means a query (whether read or write) is "done all at once". This makes sense, given that the RM is built on set theory and expressible as a linear algebra problem. Just as the regression equation can be written in matrix notation (atomic operations on multiple values), so one can view RM operations. We all know, of course, that real computers are sequential processors most of the time most places. Until now, again. HP has gone and done it.

Here, and here. One says Informix is an option, while the other says it's part of the ship. Informix has been into parallel for some time. Lots o gerbils spinning in those cages can do a lot of work in toto. No, not in Kansas. See Chapter 12, here.

Dr. Codd was right, after all. He he.

24 September 2014

Where Did I Leave My Keys??

Quants aren't just used by the Masters of the Universe to crash everybody else's immediate vicinity (Hank Greenberg's attempt to get his AIG punishment overturned is about to go to trial; chutzpah of the highest water). They're also the backbone, so to speak, of clinical trials of the Next Magic Bullet drug/device/therapy. FDA swears by p-value.

Adam Feuerstein is something of an enfant terrible to retail plungers in penny stocks; forever calling "bullshit" on their next 10 bagger. But, to his credit, he sometimes gazes at larger companies when they're working on interesting compounds. Today he's got an ADHD company (that's the stock symbol, too) to talk about. What I find interesting is the large impact that placebo makes in the study. One has to wonder what's being measured?

Welcome Back Gumby [update]

Some time back, I predicted that the flip phone would rise, Phoenix like, from the mire of smartphone muck. These 5+ inch behemoths just won't work very well. Some curved screens have appeared, but now we get word that the 6/6+ are spontaneously bending. I told you so. There are certain female tennis players who'd turn a 6+ into a crescent moon if stuffed long enough in a pair of Spanx. So to speak.

Now you know why they didn't use sapphire for that screen!!

I can't find that any of the usual suspects which tear apart these devices have specified what type of aluminum is used. As the Wiki shows, there are a raft of hardened and alloyed aluminums. It seems that "case hardening" isn't used with aluminum alloy although the effect is much the same, but "through hardening" is. Me thinks Jony and Tim got it a bit wrong.

[another update]

18 September 2014

15 September 2014

Up The Down Staircase

I'm not a fan of David Stockman, to say the least. But recent punditry on the subject of interest rates, asset prices, and bubbles led me to the obvious question: is it true, as it appears, and in the data; that corporations (that is to say, their capital allocators) are executing share repurchases in excess? Which is to say, as I have said more than a few times, that the growth in share prices is the result of intrinsically lowered returns on real investment? Which is to say, further, that the Masters of the Universe CxO types simply aren't generating any return?

So, of course, I went wandering on the innterTubes asking for the value of corporate repurchases. Alas, a Stockman piece came up first. Ever more alas, since he uses the data to make his usual wrongheaded conclusion. He hasn't actually learned much since his defense of Voodoo Economics.
Self-evidently, the corporate form of business organization is designed such that some considerable portion of net earnings should be returned to their owners each year. But a 95% rate of distribution is a giant aberration. Were this outcome to occur on the undisturbed free market, for example, it would signal an economy that is dead in the water and that participating companies face a dearth of opportunities to reinvest profits in future growth.

And, of course, that's exactly what's been going on. As the science and engineering geeks figured out some time ago, we're in the post-discovery age, of marginal incrementalism (kind of like, very unique). With real interest earnable near zero, then share prices (and bond prices, to be clear) go up to meet this rate. Or, as Vinny in those mob movies used to say, "who's gonna give ya a better deal, huh?" Lots of Chinese and Germans and such thought that Florida and Costa del Sol real estate was a sure thing. Not.

Or, as another pundit put it:
Corporate CEOs, with their massive share-buyback programs are in effect investing in the stock market rather than in expanding business opportunities at their companies. Either they expect higher returns from the market, or lower returns in their business, or some combination of both. Given their questionable track record in timing the market, this may be a cause for concern.

It's one thing, although wholly foolhardy, to pay Goodell $44 million to "oversee" the behavior of his employers, since it's just football. Quite another for the Masters of the Universe to get paid such sums and not actually do anything.