< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: March 2005

Wednesday, March 30, 2005

Torching Torch

Daily Deal (subscription only) gets the word out on the Creditor's Committee for Torch Offshore and their annoying behavior. After challenging the DIP, now the committee is asking for a trustee, and using the same arguments that they used for their defeated challenge to the DIP. DIP lender Regions Bank, along with GE I presume, call the creditor's committee out and a nice showdown is set for Wednesday.

But here's the thing, creditor's committees do this sort of crap all the time, and rarely is it ever in anyone's economic interest to keep having these hearings and having the DIP held up. But they do it anyway... and the lawyers for the committee, who pretty much have carte blanche, are the only ones making out by way of legal fees. Waste, waste, waste. Here's a place for some real reform, lets give b-judges a little more direction on how to stop lawyers from milking the company before it even gets reorganized.

Tuesday, March 29, 2005

I like my Congressmen

Why yes, I have six or seven of them. So do you by the way. Each with the same name: "staffer". And no, they weren't elected, but they are quite polite on the phone. [apropos the below]

The Two Party System

Just a note regarding some of the research I'm presently working on... (and which you'll hear more about soon)

I like the two party system just fine, but it doesn't exist today. Today we have a one party state, much like China. Except, whereas their party is called "Communist," ours is called "Incumbency".

The GOP is German

First the Moose uses a veiled "n" word, then Sullivan analogizes Rove to Bismarck. What's up with the German? Actually, the Bismarck analogy isn't far off. Bismarck passed a great deal of "progressive" legislation, but went to war on the working class and Catholics in politics (sound familiar?). Yet, aren't both bloggers mistaking greed for hatred when they make these comparisons? And isn't that exactly what greed would like us to do? I smell a trap.

Monday, March 28, 2005

I Heart Equity Traders

A long-time friend, and hopelessly optimistic equity trader (aren't they all) gave me another wonderful little rhyme to describe the short-term equity plays (a discussion about this generated his comment) "If you aren't shorting, then you must be ex-porting" HA!

Good Article

by Dizard in the FT today. Check it out. It reminds me that the swap market is almost completely unregulated. A lot of "newbies" I talk to forget this. Us ol' timers, or as Dizard charitably puts "veterans", well, we're a bunch of elephants.

Sunday, March 27, 2005

"An Act of Barbarism"

Hiding behind tough words like these, is a moral coward.

Friday, March 25, 2005

Colorful Holidays

Happy Holi to everyone. And, it being Good Friday as well, let me say Happy Easter to everyone too.

Thursday, March 24, 2005

Democracy Guy

Tim Russo has a good rundown on the latest, with updates, on Kyrgystan.

DLC Appeasement

As the hard left giddily points out DLC compromise, the Bull Moose calls Tom Delay and the modern Republican Party fascist. "Corporatism" might be a new label for the conservative majority. Kinda like the "librulism" of yesterday's majority. And how long before the dKos community argues it was their idea first?

Bankruptcy Fraud Insurance

Over my Bloomberg I read a brief snip on Merrill buying $140M of insurance for directors, executives, etc. should Merrill go 11. This morning''s LA Times runs the same snip, but provides a nice quote I hadn't seen: "When it comes to bankruptcy, independent directors are very concerned..."

That was Evan Rosenberg, vp at Chubb, the InsCo selling the coverage to Merrill. Sounds to me like deepening insolvency has officially become a big deal. Can't wait to see what this year's retail cycle brings.

Wednesday, March 23, 2005

Gotta Love This

Riebling takes a page out of Tim Russo's book and becomes self-critical (a trend developing?). A9 loudly applauds, especially the daily pics. To annoy the left's "reality based community" how about thinking, self-critical bloggers go by the slogan: "proud member of the meat eating community... more bull, less shit."

Tuesday, March 22, 2005

Views From the Door to 11

Federalist X introduced this site to me (Global Guerillas) and I've been admiring the writing for long while now. The site is filled with serious thought and valuable insight. I recommend it to all readers here.

The latest post, however, by author John Robb contains some deficiencies, and I hope what follows is instructive.

Robb describes Chris Anderson's work on the "Long Tail". At its core, Anderson's work is a critique, and a rather good one I might add, on Pareto's 80/20 rule (a discussion of which is found here). Many a b-school student has learned this rule, and then like all of us, butchered its meaning later in life. As a reminder then, the 80/20 rule is return over sales. Or, consequences over causes if you want to be as general as possible. Most everyone thinks of it in retail terms, 80% of the revenue comes from 20% of the products. "Category Killers" as retailers know them, are this 20%.

Anderson's thesis is that information technology is rapidly moving markets to 50/50. Anyone watching the general trends caused by things like the iPod and satellite radio are forced to agree with Anderson. I too agree with him. But this is, in my opinion, only half the story.

The other half of the story is the demand itself. From where I sit, distressed companies are a predicate of this demand, and the decision to finance a rescue is more a gauge of demand than of supply. If Anderson's thesis described a lasting state of the market, money spent resurrecting failing entities would be money wasted. Should 50/50 markets exist for a period of time, VCs would deliver returns on average far higher than those investing in distressed, old, 80/20 markets.

Here then is the point precisely... Anderson's description of the retail business is behind the curve. What is happening in retail now is a result of fundamental market forces, the ends of which were bet on by VCs and debt financiers close to a decade or so ago. Now that capital has been used up, and folks like me are called in to clean up the waste. The 50/50 market occurred earlier (if ever), and would be evidenced by the private equity deals and their debt counterparts in the early and mid 90s. Now though retail, at least, is finding itself in a consolidation phase, the 50/50 markets (if they ever truly existed) are moving back towards 80/20.

Such is my contrarian view. You may be wondering though where Robb comes in? Well he applies the 50/50 analysis to global terror and warfare. He states that the near monopoly nation-states once had on warfare is being broken up by global terror networks. The technological forces causing this, in Robb's view, are democratization of warfare tools, amplification of damage, acceleration of word of mouth. Again, I think Robb is getting it backwards here. I'm no student of military history, but it seems to me what caused these three forces were one overriding force, demand. The demand by the third-world to compete with the first in terms of power projection. Third-world nation states were kept harmless by low economic worth and crushing debt. Only non-nation actors, or in other words, non-debtor actors, would provide a means to compete. Those means then are the three forces Robb speaks of (and possibly many more).

Of course, that is my admittedly unstudied opinion. In my business though, we look at the world from the bottom up quite a bit, and as such, we view things slightly differently than others. I hope its a view worth considering in connection with the excellent work of Robb and Anderson.

Monday, March 21, 2005

Train Dispatch #6 - AM Talk

Every morning we stop at East Norwalk on our way to Grand Central. Its one of those little stops where the platform is too short for the train, some days the end of the train is boarded, while others its the back. Today it was the back. I like it when the East Norwalk folks make it on to my end of the train. They're a different bunch altogether. A lot of East Norwalk commuters, at least the ones I've gotten to know, live right by the water. Sure their house isn't as grand as the estates in Greens Farms, but they're right up there against the sound, probably have a boat crammed in the front yard, and they love it... so do I.

This morning one of my favorite people on the train sat across from me in the two person seat backing up to the vestibule. A lot of times, these facing seats make great card game spaces, but this morning it was me, my old friend from East Norwalk, and three people snoozing away.

"How's the family?" he asked me. "Doing well, yours?" "Oh fine, just fine. My grandson graduates high school this year." "Congratulations." "Yes, he lives in CA so I doubt I'll be able to make it, wish I could."

Just so everyone is clear here, this sort of pleasant, civil, polite banter is highly unusual on Metro North, especially in the mornings. Most people are either sleeping, reading the paper, or are somewhere in between the two. Few people have conversations like this in the morning, and the evenings are more like locker room talk than coffee talk.

"Well I'm sure you must be proud." "Yes, I am..." He stared out the window for awhile.

"Say, what did you think about the latest attack in Iraq?" This question puzzled me. What on earth could he be referring too? I follow Iraq pretty closely, more closely than most I guess, but I was unaware of a new "attack" having happened, just more of the same.

"Which latest attack?" I asked. "Oh you know, the one oustide Baghdad, it was on MSNBC. They say they got 24 insurgents and only 6 of ours wounded. I suspect we'll be hearing about some dead on our side in a few days. That's how it always is, we know their dead right away, but it takes awhile for us to count ours."

I then peppered him with some questions, really worried I had missed a major development, but from what I could tell, it was just more of the same stuff I've been hearing.

At one point in the conversation, he looked at me squarely and said: "if we ran such a cheap war in WWII, the Germans would rule the world." My reply, after a second thought, "it begs the question of how badly we want to win?" "You're right" he nodded. We bothed stared out the window.

Sunday, March 13, 2005

Bankruptcy Amendment Rundown

Sorry for the late post, vulture business is heating up again. Here's the word on the amendments to the this past week's bankruptcy bill.

The conflict of interest problem referenced below was defeated and investment bankers who lent and now want to sell the restructure are still barred. This just makes good common sense in my view, and I applaud the SEC for sticking to its guns.

Transfers to Asset Protection Trust - The Talent amendment (D-MO) limits transfers made to asset protection trusts which are (allegedly Fed. X tells me) bankruptcy remote. Trustees can avoid transfers within 10 years of the petition date where the transfer was made to a trust created with "actual intent" to hide from the bankrupt estate. A broader amendment seeking to close the "millionare's loophole" in these asset protection trusts was defeated. Again, Federalist X and some others I've spoken to say this whole thing could be made moot as a matter of law given certain scenarios. We'll just wait and see about that.

Means test - all amendments here were defeated except one, an exemption from the means test for disabled vets who incur debt while on active duty. If your a debtor-attorney with clients in Iraq, tell them to get shot.

Wednesday, March 09, 2005

11th hour?

This just in, from the ABI:

[...] [T]he bill’s 8-year history of eleventh hour snags may be at hand again. The issue now surrounds a proposed change (in §414) to the definition of “disinterestedness” under §101(14) of the Code, to eliminate the automatic disqualification of investment banking firms from representing a company if the investment bank was previously the underwriter for an outstanding security of the now-bankrupt company. The provision is important to several large investment banking firms that seek exclusion from the per se disqualification rules. A bipartisan pending amendment by Sens. Patrick Leahy (D–Vt.) and Paul Sarbanes (D—Md.), supported by the Securities and Exchange Commission, would strike the provision and restore the automatic disqualification of firms who served as investment banker for any outstanding security of the debtor. Because it is unclear how this vote might break, the leadership has not permitted a vote on this or other pending amendments. As of 8 p.m., it is unclear how or when the stalemate will be resolved. [...]

Strike Two!

UPDATE: Russo has more from the WP at DemocracyGuy

More on Bankruptcy

Earlier I said, after passage of the bankruptcy bill I'd rather lend to trailer trash than to distressed corporate America. Of course, this was somewhat hyperbole, somewhat true. A colleague of mine emailed me today and told me I've missed the whole point. His view is quite simple: the removal of risk in the higher yielding consumer credit business will result in a massive, but slow, restructuring of the nation's most risky (in default terms) debt. I must admit, this is a good analysis. And I suppose the credit card companies have put together some good studies showing the same. For my part, the studies I've seen make it clear this so-called reform is not dispositive of the great consumer bankruptcy risk. However, it is fairly easy to see how this could work, and it isn't out of the realm of possibility. As such, I concur that this could be a good economic reason to support this bill. However, for now, I remain skeptical of this argument and continue to view the bill as a last ditch effort to squeeze out more credit markets where credits markets are just not due. The other view though, is now clear (for once), consumer credit yields should decrease as a result of the bill.

Let me also mention here, I really enjoyed the quotes Federalist X asked to be posted. They are below and they are quite good. It is simply ashame that both political parties today are reduced to the likes of the Rush Limbaugh Show and the Daily Kos website to find their inspiration. As Federalist and his ilk remind us, inspiration is rarely found in the future.

Wednesday, March 02, 2005

Dearly Departed

Federalist X asked me to pass this along to readers and other posters here at A9. "A good person has passed away. Out of respect, no more posting here until this time next week. Thank you."

He also asked me to post the quotes below, "in memory of all Americans fallen this year", from Pericles' Funeral Oration (the highly praised translation used is available here.) For me and the other contributors, we wish you the best Federalist.

...For men can endure to hear others praised only so long as they can severally persuade themselves of their own ability to equal the actions recounted: when this point is passed, envy comes in and with it incredulity. However, since our ancestors have stamped this custom with their approval, it becomes my duty to obey the law and to try to satisfy your several wishes and opinions as best I may.

I shall begin with our ancestors: it is both just and proper that
they should have the honour of the first mention on an occasion like the present. They dwelt in the country without break in the succession from generation to generation, and handed it down free to the present time by their valour. And if our more remote ancestors deserve praise, much more do our own fathers, who added to their inheritance the empire which we now possess, and spared no pains to be able to leave their acquisitions to us of the present generation. [...] But what was the road by which we reached our position, what the form of government under which our greatness grew, what the national habits out of which it sprang; these are questions which I may try to solve before I proceed to my panegyric upon these men; [...]

Our constitution does not copy the laws of neighbouring states;
we are rather a pattern to others than imitators ourselves. Its administration favours the many instead of the few; this is why it is called a democracy. If we look to the laws, they afford equal justice to all in their private differences; if no social standing, advancement in public life falls to reputation for capacity, class considerations not being allowed to interfere with merit; nor again does poverty bar the way, if a man is able to serve the state, he is not hindered by the obscurity of his condition. The freedom which we enjoy in our government extends also to our ordinary life. There, far from exercising a jealous surveillance over each other, we do not feel called upon to be angry with our neighbour for doing what he likes, or even to indulge in those injurious looks which cannot fail to be offensive, although they inflict no positive penalty. But all this ease in our private relations does not make us lawless as citizens. Against this fear is our chief safeguard, teaching us to obey the magistrates and the laws, particularly such as regard the protection of the injured, whether they are actually on the statute book, or belong to that code which, although unwritten, yet cannot be broken without acknowledged disgrace. [...]

We cultivate refinement without extravagance and knowledge without effeminacy; wealth we employ more for use than for show, and place the real disgrace of poverty not in owning to the fact but in declining the struggle against it. Our public men have, besides politics, their private affairs to attend to, and our ordinary citizens, though occupied with the pursuits of industry, are still fair judges of public matters; for, unlike any other nation, regarding him who takes no part in these duties not as unambitious but as useless, we Athenians are able to judge at all events if we cannot originate, and, instead of looking on discussion as a stumbling-block in the way of action, we think it an indispensable preliminary to any wise action at all. Again, in our enterprises we present the singular spectacle of daring and deliberation, each carried to its highest point, and both united in the same persons; [..] But the palm of courage will surely be adjudged most justly to those, who best know the difference between hardship and pleasure and yet are never tempted to shrink from danger. In generosity we are equally singular, acquiring our friends by conferring, not by receiving, favours. Yet, of course, the doer of the favour is the firmer friend of the two, in order by continued kindness to keep the recipient in his debt; while the debtor feels less keenly from the very consciousness that the return he makes will be a payment, not a free gift. And it is only the Athenians, who, fearless of consequences, confer their benefits not from calculations of expediency, but in the confidence of liberality.
[...]

Indeed if I have dwelt at some length upon the character of our
country, it has been to show that our stake in the struggle is not the same as theirs who have no such blessings to lose, and also that the panegyric of the men over whom I am now speaking might be by definite proofs established. That panegyric is now in a great measure complete; for the Athens that I have celebrated is only what the heroism of these and their like have made her, men whose fame, unlike that of most Hellenes, will be found to be only commensurate with their deserts. And if a test of worth be wanted, it is to be found in their closing scene, and this not only in cases in which it set the final seal upon their merit, but also in those in which it gave the first intimation of their having any. For there is justice in the claim that steadfastness in his country's battles should be as a cloak to cover a man's other imperfections; since the good action has blotted out the bad, and his merit as a citizen more than outweighed his demerits as an individual. But none of these allowed either wealth with its prospect of future enjoyment to unnerve his spirit, or poverty with its hope of a day of freedom and riches to tempt him to shrink from danger. No, holding that vengeance upon their enemies was more to be desired than any personal blessings, and reckoning this to be the most glorious of hazards, they joyfully determined to accept the risk, to make sure of their vengeance, and to let their wishes wait; and while committing to hope the uncertainty of final success, in the business before them they thought fit to act boldly and trust in themselves. Thus choosing to die resisting, rather than to live submitting, they fled only from dishonour, but met danger face to face, and after one brief moment, while at the summit of their fortune, escaped, not from their fear, but from their glory.

So died these men as became Athenians. You, their survivors, must determine to have as unfaltering a resolution in the field, though you may pray that it may have a happier issue.
[...]

Tuesday, March 01, 2005

WalMart Killed In Cleveland

Can I take credit for this?

Great Headline

From the FT: "Lebanon's Pro-Syrian Government Quits". Congrats. What about that pro-Saudi Arabian government? Readers and Federalist, sorry for slipping out last week. I was supposed to main the helm and I ended up in California with my now fiancee. Priorities.