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COMING in '08:
Mitsubishi;
Farmers and Merchants Bank (LA); Warner Brothers;
Bacardi, National Enquirer;
Goldman Sachs, Google. G. G. C. Murphy Co.
In the News
Quotes of the Week
- “I learned a respect for work that is actually
done” - Henry Z. Steinway, great-grandson of Heinrich
Engelhard Steinway, the illiterate German immigrant before the
ampersand in Steinway & Sons (died at 93). Joined the company
after graduating from Harvard in 1937 and began his career by
building pianos, just as his father and uncles had.
"All strategy concentrates on one single issue: How we can differ
from our competitors" - Klaus Jacobs, German-born billionaire who
built Barry Callebaut into the top chocolate seller, and Adecco
into the world’s leading temporary help agency (died at 71).
Wall Street - September 2008 -
"The Week That Changed American Capitalism" (Wall
Street Journal headline)
(http://graphics8.nytimes.com/images/2008/09/17/business/17aig01-190.jpg)
Death of Lehman Brothers
-
Henry Emanuel and Mayer Lehman
(http://content.answers.com/main/
content/ wp/en/8/8b/Lehman_Brothers.jpg)
3 persons
who made a difference:
1)
David Einhorn - saw the future &
prognosticated; runs
Greenlight Capital ($6
billion
long-and-short hedge fund);
questioned how the company valued the assets on its books, and
whether it was disclosing all the risks it faces; Lehman has
been singled out because of the large role it played in the
mortgage market and its reluctance to disclose information
about its assets compared with other Wall Street banks;
April 27, 2008 - NYT - "Wall Street, Run
Amok"
By BEN STEIN ( http://www.nytimes.com/2008/04/27/business/27every.html?scp=12&sq=David%20Einhorn&st=cse)
- 1) interesting set of rules promulgated by the
Securities and Exchange Commission in 2004, called
“Alternative Net Capital Requirements for Broker-Dealers That
Are Part of Consolidated Supervised Entities,” the amount of
capital that had to underlie assets was reduced substantially;
2) allowed such things as “hybrid capital instruments” (much
riskier than cash or Treasuries), subordinated debt (ditto)
and even deferred return of taxes, to be counted as capital.
The S.E.C. even allowed the banks to hold securities “for
which there is no ready market” as capital (reduced the amount
of required capital to engage in increasingly risky
activities,”); 3) allowed broker-dealers to set their own
valuations on assets and liabilities that were hard to value.
And broker-dealers could assign their own creditworthiness
ratings to counterparties in complex derivatives transactions
when those counterparties were otherwise unrated (S.E.C. told
Wall Street to police itself to save on regulatory costs,
while not bothering to “discuss the cost to society of
increasing the probability that a large broker-dealer could go
bust.”); 4) S.E.C. told me that all of its actions were
helpful to investors and that no one could have prevented the
Bear Stearns collapse because it was caused by liquidity
issues, not capital issues; 5) dramatically understaffed the
ratings agencies are in assessing risk on Wall Street and how
even the biggest ratings agencies largely allowed the Street
to rate itself;
July 2006 - Einhorn began betting against
Lehman’s stock ($60.41 on 7/21/06; high of $82.22 on 2/12/07)
Lehman, like its counterparts, raced to de-lever (reduce
leverage) - had a gross leverage ratio of 31.7:1 at the end of
the first quarter 2008 (borrowed $31.70 for each dollar of
equity), cut ratio down to 25:1 through its more than $100
billion in asset sales (according to person close to the
company who was given anonymity because he was discussing a
pending financial filing);
Einhorn only helped Lehman confront the facts. “The
losses are the losses, Einhorn certainly isn’t causing them.”
June 15, 2008 - New York Magazine - "The
Confidence Man: Hedge-fund manager David Einhorn believes his
public attack on Lehman Brothers wasn’t just about making
money. So what was it about?" ( http://nymag.com/news/businessfinance/47844/)
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2)
David Viniar - saw reality
& deliberated) -
CFO, Goldman, Sachs
- also in charge of Goldman's massive back office operations
which is not the case at other firms; dedicated to
consistently monitoring positions and testing for the worst
possible scenarios)
December 21, 2007 - Financial Times - "Man
in the News: David Viniar" By Ben White ( http://us.ft.com/ftgateway/superpage.ft?news_id=fto122120071455069557)
famous meeting on December 14 2006, in which senior members of
the mortgage trading desk, the risk department, the
controller's office and others gathered to discuss the US
housing market. They decided that it was time to put hedging
strategies in place to prepare for a housing downturn given
information from the controller's office and early losses
showing up in Goldman's mortgage book. The call to hedge was a
collective one, but as one senior executive put it: "If it
hadn't been for [Mr Viniar], it probably wouldn't have
happened."; hedging produced a profit in the third
quarter, left Goldman with a net short position against the
mortgage market).
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3)
Richard Fuld - saw enemies &
obfuscated -
CEO, Chairman Lehman Brothers Holdings
July 8, 2008 - NYT - "Psst! Hear the Rumor of
the Day?" By ANDREW ROSS SORKIN ( http://www.nytimes.com/2008/07/08/business/08sorkin.html?scp=1&sq=Psst!%20Hear%20the%20Rumor%20of%20the%20Day?%20&st=cse)
- “I will hurt the shorts, and that is my goal,” Richard S.
Fuld Jr. fumed. Richard S. Fuld Jr., the chairman of Lehman
Brothers, has vented about short sellers. It was April, and
Mr. Fuld was blaming short sellers, one of the most maligned
tribes on Wall Street, for spreading rumors about Lehman
Brothers, the troubled investment bank he runs. Shorts bet
against stocks, and Lehman, they were whispering, looked like
the next Bear Stearns. Mr. Fuld must have been irate again
last week, when Lehman’s stock price plunged 11 percent in the
space of three hours for no apparent reason. The shares opened
that June 30 morning at $22.25, drifted higher — and then took
an abrupt turn around 1:30 p.m. Lehman closed that day at
$19.81, its lowest level since 2000;
September 9 , 2008 - Lehman ended talks with
Korea Development Bank for cash infusion of as much as $6
billion for a 25% stake in the fourth-largest U.S. investment
bank; couldn't agree in price (problems over prices);
Conclusion - All business is about cash and risk.
Fuld ignored the risks of leverage and illiquidity and tried to
stifle the information gathering abilities of professional money
managers like Einhorn - it doesn't work, IT NEVER WORKS. As with
Bear Stearns's demise - there was no conspiracy of short-sellers.
The proof is in the outcome - when rumor became fact - Lehman died
under the weight of its efforts to overvalue its assets when those
who compete for information about such issues knew better - Fuld
couldn't fool them. There is only one antidote to short
selling, only one piece of information which shorts fear most -
profitability, especially announcements of profits 'better
than expected'.
Richard Fuld violated a cardinal rule of management -
"Profitability is the
Key to Value. If You've Got it, Flaunt It. If You Don't Have It,
Get It
(business strategy). If You Can't Get It, Get Out
(capital
strategy)."
(---
Bill Fruhan, Professor Finance, Harvard
Business School, author of:
Financial Strategy: Studies in
the Creation, Transfer, and Destruction of Shareholder Value)
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INDUSTRIES
Automotive. Jeffrey W. Alexander (2008).
Japan’s Motorcycle Wars: An Industry History.
(Vancouver, BC: University of British Columbia
Press, 276 p.). Assistant Professor, History
(University of Wisconsin-Parkside). Motorcycle
industry --Japan --History.
Historical development,
societal impact of motorcycle industry, from
influence of motor sports on vehicle sales in early
1900s to postwar developments that led to massive
wave of motorization sweeping Asia-Pacific region
today.
Beverages.
(Bacardi Corporation), Tom Gjelten (2008).
Bacardi and the Long Fight for Cuba: The Biography of a Cause.
(New York, NY: Viking, 480 p.). National Public Radio Correspondent.
Bacardi Corporation (Puerto Rico) --History; Rum industry --Cuba
--History; Cuba --History. Intersection of business, power, family, politics, community, exile;
Cuban origins of Bacardi clan (patriots, bon vivants,
entrepreneurs, intellectuals); provided
example of business, civic leadership in Cuba for
nearly century (now headquartered in Puerto Rico);
founded 1862 - no chapter in Cuban history in which Bacardis have not played role.
(Starbucks), Kim Fellner (2008).
Wrestling with Starbucks: Conscience, Capital,
Cappuccino. (New Brunswick, NJ: Rutgers
University Press, 283 p.). Starbucks Coffee Company;
Coffee industry --United States; Coffee --United
States --Marketing; Corporate culture --United
States. Corporation filled with
contradictions: employee-friendly processes,
anti-union practices; internationalist vision,
longing for global dominance; community
individuality, cultural hegemony; profitable enough
to please Wall Street, principled enough to please
social justice advocates; forces that affect
Starbucks's worth and worthiness;
unexpected look at Starbucks,
global economy, economic convictions, values.
Chemicals. (IG Farben), Thomas Hager (2008).
The Alchemy of Air: A Jewish Genius, a Doomed Tycoon, and the Discovery
that Changed the Course of History. (New York, NY: Harmony
Books, 384 p.). Haber, Fritz, 1868-1934; Bosch, Carl, 1874-1940;
Chemists --Germany --Biography; Nitrogen fertilizers --History --20th
century; Technological innovations --History --20th century. German
chemists, Nobel laureates Fritz Haber, Carl Bosch overcame chemical,
engineering problems posed by use of large-scale high-pressure
technology to allow economical mass synthesis of ammonia from nitrogen,
hydrogen - Haber-Bosch process; often called most
important invention of 20th century; saved world, lost everything
via unforeseen results of discovery (make bread out of air, built
city-sized factories, controlled world markets, saved millions of lives;
also used to make gunpowder, high explosives that killed millions during
two world wars, massive nitrogen pollution, growing pandemic of
obesity); vilified during their lives; both, disillusioned and
disgraced, died tragically; Bosch, former managing director of Badische
Anilin und Soda Fabrik [BASF] Company, 1919-1923, co-founder of
IG-Farben; proposed that all I.G companies merge into single corporation
bring all industrial activities, financial strength together;
December 9, 1925 - companies of I.G. cartel
merged into BASF, created new corporate colossus:
I.G. Farbenindustrie Aktiengesellschaft — I.G. Farben; today -
hundreds of factories convert atmospheric nitrogen to ammonia to
manufacture artificial fertilizers to improve modern-day agricultural
yields; drove world's population from 1.6 billion in 1900 to 6 billion
in 2000.
Electronics.
(Sony), Sea-Jin Chang (2008).
Sony vs Samsung: The Inside Story of the Electronics Giants' Battle For
Global Supremacy. (Hoboken, NJ: Wiley, 250 p.). Kumho Asiana
Group Endowed Chair Professor of Business Administration (Korea
University). Soni¯ Kabushiki Kaisha; Samsung Group; Electronics
--History. 2002 - market capitalization of Sony fell below that of
Samsung for the first time; key strategic decisions by Sony and Samsung
with respect to technology, marketing, organizational infrastructure,
globalization strategies from mid-1990s to 2006; performance differences
attributed to strategies, organizational processes, executive leadership;
each company’s approach to global expansion, key factors for success,
failure.
Entertainment. (Disney), J.P. Telotte (2008).
The Mouse Machine: Disney and Technology. (Urbana, IL:
University of Illinois Press, 221 p.). Professor of Film and Media
Studies (Georgia Institute of Technology). Walt Disney Company; Motion
picture industry --Technological innovations; Television --Technological
innovations; Amusement parks --Technological innovations.
Technological
context for Disney creations: stereophonic
surround sound for Fantasia, experimentation with wide-screen
technology, inaugural adoption of three-strip Technicolor film, fostering depth in animated image; partnership with
television, development of theme park, depiction of technology in
science fiction; digital filmmaking with Pixar, digital special effects in live-action films; extraordinary growth into one of
largest, most influential media, entertainment companies in world.
Food.
(Cadbury Ltd.), John Bradley (2008).
Cadbury’s Purple Reign: The Story Behind Chocolate’s Best-Loved Brand.
(Hoboken, NJ: Wiley, 342 p.). 24-Year Veteran of Cadbury (Brand
Management, Market Research, Sales, Cadbury World). Cadbury Ltd
--History; Confectioners --Great Britain --History; Chocolate industry
--Great Britain --History; Brand name products --Great Britain
--History. Story of bold initiatives, endurance, adaptation - focus on
quality, innovative marketing,
selling approaches; navigating through competitive initiatives, retail
changes, media revolutions.
Food Service.
(Ben’s Chili Bowl), Tracey Gold Bennett, Nizam Ben Ali (2008).
Ben’s Chili Bowl: 50 years of a Washington, D.C. Landmark.
(Charleston, SC: Arcadia Pub.. 128 p.). Son of founder. Ben’s Chili
Bowl; Ali, Virginia and Ben; Restaurants -- Washington, DC. August 22,
1958 - West Indian immigrant Mahaboob Ben Ali, Virginia Rollins (fiancée)
opened hot dog, chili shop on U Street in Washington, DC;
50-year history of Ben’s Chili Bowl, U Street, Ali family,
patrons who defined Ben’s as vibrant cultural landmark.
Nonprofit.
(Natural History Museum), Richard Fortey (2008).
Dry Storeroom No. 1: The Secret Life of the Natural History Museum.
(New York, NY: Knopf, 320 p.). Senior Paleontologist at the Natural
History Museum in London. Natural History Museum--London--history.
Behind the scenes at London’s Natural History Museum, its
treasures (plants from voyage of Captain Cook, barnacles to which
Charles Darwin devoted years of study, hidden accursed jewels),
extraordinary people, meticulous research, driving passions that
helped to create timeless experiences of wonder that fill museum;
social history of scientific accomplishments of 19th,
20th, 21st centuries.
Oil. Mazen Labban (2008).
Space, Oil, and Capital. (New York, NY: Routledge, 179 p.).
Assistant Professor, Department of Geography and Regional Studies
(University of Miami). Petroleum industry and trade --Economic
aspects; International economic relations; Geopolitics; Petroleum
industry and trade --Russia --Case studies; Petroleum industry and
trade --Iran --Case studies. Relationship between
production of oil, inter-capitalist competition in global economy;
necessary to appreciate process of social production of space in
determining access to, control of global oil production and world
markets.
Railroads. (New York Westchester & Boston Railway), Herbert H.
Harwood, Jr. (2008).
The New York, Westchester & Boston Railway: J.P.
Morgan’s Magnificent Mistake. (Bloomington,
IN: Indiana University Press, 155 p.). Former
Executive, Chesapeake & Ohio and the Baltimore & Ohio.
Morgan, J. Pierpont (John Pierpont), 1837-1913; New
York, Westchester & Boston Railway --History;
Railroads --New York (State) --History.
Opened in 1912
as high-speed, high-capacity electric line designed to
develop, serve upper-income communities in one of New
York City's most rapidly growing suburban areas;
financed by J. Pierpont Morgan; cost top construct -
$2 million a mile (almost $40 million a mile in 2005
dollars); designed to carry more than 100,000 people a
day efficiently and comfortably, ran through virtually
undeveloped territory, duplicated line of parent
company that built it; 1927 - discontinued.
Retail -
Discount. (McArthurGlen Europe), J. Byrne Murphy (2008).
Le Deal: How a Young American in Business, in Love, and in Over His
Head, Kick-Started a Multibillion-Dollar Industry in Europe.
(New York, NY: St. Martin’s Press, 295 p.). Co-Founder, Deputy Chief
Executive of McArthurGlen Europe. Murphy, J. Byrne; Clothing trade
--Europe; Retail trade --Europe; Businessmen --Europe; Americans
--Europe. Eight years in ultimately successful
struggle to implant concept of designer outlet centers (discount
fashion malls) in Europe; from nothing to approximately $
billion in sales from 11 centers across Europe; created nearly 8,000
jobs, opened 1,500 stores featuring 500 brands, attracted nearly 40
million shopping visits per year, spawned array of competitors;
understanding nuances of foreign cultures key to prospering in
multicultural, polyglot, interconnected, globalized world.
MANAGEMENT
Education &
Learning. (Kellogg School), Matt Golosinski (2008).
Wide Awake in the Windy City: Celebrating a Century of Excellence
at Northwestern University’s Kellogg School of Management,
1908-2008. (Evanston, IL: Northwestern University Press,
378 p.). Assistant Dean and Chief Marketing Officer of the Kellogg
School. Kellogg School of Management --History; Business schools
--Illinois --History. Century-long ascent of
Kellogg School of Management; its influence on marketing,
evolution as globally renowned general management force; school's
strategic decisions, some of most important catalysts — deans,
professors, students, business practitioners.
Marketing.
(Harry Potter), Susan Gunelius (2008).
Harry Potter: The Story of a Global Business Phenomenon. (New
York, NY: Palgrave Macmillan, 216 p.). Branding (Marketing); Brand name
products; Potter, Harry (Fictitious character). Bestselling books of all
time; most incredible brand success ever
(price wars, box office revenue, brand values).
Organizational Change. (2008).
A Sense of Urgency. (Boston, MA: Harvard Business Press,
128 p.). Konosuke Matsushita Professor of Leadership, Emeritus
(Harvard Business School). Organizational change.
First step in 8-step process for
implementing successful transformations: create sense of
urgency by getting people to see, feel need for change; insidious
nature of complacency; how to go beyond "the business case" for
change to overcome fear, anger that can suppress urgency; ways to
ensure that actions and behaviors (not just words) communicate
need for change; how to keep fanning flames of urgency even after
transformation effort has scored some early successes.
BUSINESS HISTORY
Business Growth and Influence. Anne Mayhew (2008).
Narrating the Rise of Big Business in the USA: How Economists Explain
Standard Oil and Wal-Mart. (New
York, NY: Routledge, 208 p.). Professor Emeritus of Economics
(University of Tennessee). Big business--Case studies; Big
business--history. Stories
surrounding creation of Standard Oil, Wal-Mart and their founders, John
D. Rockefeller, Sam Walton;
narratives associated with American big business; diverse views, its
effects of welfare can be reconciled, better policies derived from ideas
from business world, those who have dissented from most widely accepted
story told by economists; some of major social, economics problems of
21st-century.
Capitalists. (Vanderbilt), Stephen Dando-Collins (2008).
Tycoon’s War: How Cornelius Vanderbilt Invaded a Country to Overthrow
America’s Most Famous Military Adventurer. (Philadelphia, PA: Da
Capo Press, 400 p.). Australian-born historian. Vanderbilt, Cornelius,
1794-1877; Walker, William, 1824-1860; Compania Accesoria del Transito
--History; Businessmen --United States --Biography; Filibusters
--Nicaragua --Biography; Nicaragua --History --Filibuster War,
1855-1860; United States --Military relations --Nicaragua; Nicaragua
--Military relations --United States; Nicaragua Canal (Nicaragua)
--History; United States --Foreign relations --1815-1861.
1856 - William Walker, young man from Nashville, set out to conquer Central America, take away Vanderbilt’s most
profitable shipping business; Vanderbilt waged bloody war involving
seven countries, deaths of thousands of Americans.
Crises - Financial. (U.S. - 2008), Robert J. Shiller (2008).
The Subprime Solution: How Today’s Global Financial Crisis Happened and
What To Do About It. (Princeton, NJ: Princeton University Press,
208 p.). Arthur M. Okun Professor of Economics (Yale University).
Subprime mortgage loans; Secondary mortgage market; Real estate
investment; Financial crises. Origins of crisis,
measures to solve it - restructuring of institutional
foundations of financial system; blames subprime crisis on
irrational exuberance that drove economy's two most recent
bubbles--1) stocks in 1990s, 2) housing between 2000 and 2007; how
these bubbles led to dangerous overextension of credit (resulting
in foreclosures, bankruptcies, write-offs, global credit crunch);
bailouts of low-income victims of subprime deals needed in
short run; longer term solution - require leaders to revamp
financial framework, deploy ambitious package of initiatives to
inhibit formation of bubbles, limit risks ((better financial
information; simplified legal contracts and regulations; expanded
markets for managing risks; home equity insurance policies;
income-linked home loans; new measures to protect consumers
against hidden inflationary effects)..
Economic Events.
(Depression - 1819), Clyde A. Haulman (2008).
Virginia and the Panic of 1819: The First Great
Depression and the Commonwealth. (Brookfield,
VT: Pickering & Chatto Ltd., 198 p.). Chancellor
Professor of Economics and Chair, Department of
Economics (College of William and Mary). Panic of
1819; Virginia -- history; Economic history --
1800-1850; crises--economic; Depressions -- 1829.
America's first experience of boom-bust cycle;
booming agricultural exports, transatlantic trade,
intense land speculation westwards, easy credit from
state banks and newly created Second Bank of the
United States; boom ended as foreign markets dried up,
prices fell, credit withdrawn; one of most
dramatic economic crises experienced by US during 19th
century; characteristics of ensuing depression,
its impacts on Virginia, nation.
FICTION
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ANNIVERSARIES - 2008 |
