Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

Obama Made Me Late

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I was in NYC recently and saw a big airplane over to the side of the tarmac, surrounded by police cars with flashing lights.   I had a long time to kill since we were in the never ending queue to get up to the runway at LaGuardia.   When I got up closer I could see that it was Obama’s plane – he was apparently in NYC meeting the faithful.   Here is an article about his plane (and McCain’s).

All I can say is that he wasn’t exactly saving greenhouse gases in his trips.   It was a big full-size jet – a Boeing 757.   A big bus pulled up in front of the jetway, although I didn’t see anyone getting up (view was blocked).   The plane didn’t go to the terminal, it was out far on the corner of the tarmac by the runway, with the big stairway moving up to the front (just like in those old movies where the Beatles are getting off the plane).   The next thing I know, we were waiting in queue and his plane just pulled to the front of the line, directly in front of my flight.   They just moved to the front of the whole line.

I didn’t have my blog camera with me or I’d have taken a photo.   But I can tell you that Obama left around 6pm Eastern time.

He travels in style, that’s for sure.   He can run a campaign and knows how to get out of LaGuardia faster than any ordinary civilian, by just going directly to the plane and avoiding check in and security and then just cutting his big jet to the front.

Let’s Suck Less

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In business literature risk-taking is often celebrated, and the battling against long odds in the hope of redemption. Many business case studies have dramatic story arcs where someone made a bet on an unproven technology that eventually saved their company (like Steve Jobs with Pixar and Apple). The implied story arc of companies in decline (like Montgomery Ward, which felt that the great depression was going to return after WW2 and missed out on the postwar boom) is that companies that miss chances to take risks are often punished in the end with failure or takeover.

Jamie Dimon is the CEO of JP Morgan Chase. The bank that he runs has mostly escaped the recent credit crisis and CDO issues without major damage. His story, which was well told in the Fortune September 15, 2008 issue, is that by avoiding risk, he saved his bank to become much stronger than its competitors. His bank pulled out of underwriting dodgy mortgages and issuing CDO’s when they felt that the returns weren’t worth the implied risks (which they measured in the credit default market, among other places). At the time, JP Morgan Chase had a market cap far below their peers and were being punished by stock analysts for not leading in these high growth (and ultimately disastrous) categories.

If you look at the graph above, JP Morgan Chase now has a market cap bigger than its competitors, which didn’t happen by raising their stock value but by avoiding a catastrophic hit that their peers faced. While “Losing Less Means Winning” is a polite way to say it, I’d prefer “Let’s Suck Less” which is a more accurate term (since JP Morgan Chase did take multi-billion write downs, after all).

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Michael Hammer

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Michael Hammer, consultant and author of “Re-engineering the Corporation”, died recently at the age of 60. Mr. Hammer’s methods often involved mass downsizing as companies re-focused on efficiency and removing layers of management. If this were “The Onion” we’d probably make a snarky remark that Michael Hammer determined that he was no longer a productive asset and decided to re-engineer himself out of existence rather than being a financial burden on the corporations that he served.

All joking aside, Michael Hammer was an important man. At the time that his star was rising in the early 90’s, the US was in recession, and corporations were looking for new ways to restore profitability. His book, “Re-engineering the Corporation”, provided a methodology and a set of buzzwords for corporations and consultants to use as they reviewed operations with an eye towards increasing efficiency.

If you ever saw “Office Space”, then you saw a tongue-in-cheek but not too far off the mark view of the type of work that actually was bred by Mr. Hammer’s thinking. The consultants (The “Two Bobs”) bring in staff and ask them what they actually do all day, focusing on processes that don’t add any value (such as the engineer who describes his day-to-day activities which are clearly of little use, who then gets all flustered and shouts that he is “good with people”) or that are unnecessary management overhead (such as the “hero” of the film who says he has a dozen (?) bosses who each call him out over his failure to complete his TPA report).

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Box of Trouble

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I am blessed in that I live very near (stumbling distance) to the mega-liquor store Binny’s in River North. Binny’s has every variety of wine and beer known to man (except they don’t stock Trumer Pils) and at reasonable prices, too.

For Christmas someone gave me a wine stopper that you can “pump” the air out of the bottle with and it seals the bottle back up so that it keeps indefinitely (well, I don’t know how long indefinitely is because we typically drink it over a few days, but long enough). This isn’t the one I have (mine is plastic, better if you drop it on the ground a lot) but you get the idea. We also have a little 6 bottle wine refrigerator that we received and keep in the kitchen – this way we can keep the wine at a reasonable temperature (around 60 degrees or so) which means that it is cool but not cold.

With all of these technological upgrades, I have been purchasing more upscale wines, to boot (especially now since the red wines keep longer). I have been buying Pinot Noir in the $30 / range, which buys you quite a nice bottle of wine at Binny’s (something that would cost you $70+ at a restaurant).

Just for grins I was going on a trip and I asked the clerk at Binny’s what the “best box wine” was in the house. He took me over and pointed to the “Black Box” series of wines as he grimaced at my question. I selected the Merlot (which I don’t usually drink) for $16 and off I went.

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Russia and Georgia – An Economic Mistake

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Economic Impact of Georgia Invasion

A recent Wall Street Journal article titled “Borrowing Costs Increase Sharply for Russian Firms” lays out the economic toll that Russia will begin to feel from their invasion of Georgia. Per the article:

“the Georgian conflict has sparked prohibitively funding costs… conditions have deteriorated significantly for Russian borrowers, as reflected by sovereign and corporate-credit spreads, which have widened sharply, substantially increasing the cost of borrowing… but even then, an attractive premium may not be enough to entice investors to participate in deals… the majority of investors won’t want to participate right now. They will prefer to wait for signs of improvement, and right now there are no clear signs.”

For Russian companies seeking debt financing, this war comes at a bad time. The world debt markets are already being roiled by a lack of liquidity and losses, making even solid companies with low credit risk scramble for funding. Now add to this the fact that Russia seems to be actively repelling the West, this makes Russian instruments an even bigger risk.

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