Carl from Chicago – Page 136

Bear Economics

June 9, 2008 by Carl from Chicago

Dan is usually up on these things and he emails me as soon as it comes across the wires… another arrest of Cedric Benson, the Chicago Bears running back. He was arrested for drinking while boating and later, for drinking and driving. He just got released, so at least this soap opera is over.

On this blog, at least, Cedric is also known for other things – such as being a lousy running back on the Bears, a player who did nothing in the Super Bowl, and usually drops as soon as being hit, and can’t seem to find the hole or outrun the secondary. These attributes, bad as they are, are even worse since the Bears are traditionally a running team and have little else to fall back upon on offense (remember, Hester is on special teams and not proven as a receiver).

All of these items, however, are done to death everywhere else, and one thing about this blog is that we at least try to have a fresh angle on something or just leave it alone entirely. What really interests me, however, is the economics of the deal.

Recently I wrote about REM – the band (not sleeping), and how they stopped noodling around and actually decided to put out an album people would want to listen to – which just happened to be coincidentally linked to the fact that their guaranteed contract expired and going forward they would have to earn their lavish rock star lifestyles.

The question is – did the nature of Cedric’s contract encourage his lackadaisical attitude towards playing and his stupid off field behavior? I can’t seem to find the details of his contract but it was for $35 million, with a significant portion guaranteed. It was a five year contract, and he “played” for three years.

Rolling Stone Magazine Botches “100 Greatest Guitar Songs of All Time”

June 5, 2008June 4, 2008 by Carl from Chicago

In Rolling Stone’s June 12, 2008 issue they have an article titled “100 Greatest Guitar Songs of All Time.” I have a fondness for lists like this – here is a link to a post about Blender’s top 100 indie rock albums and a link to a post about Blender’s list of the top 500 songs in your lifetime.

In any list like this, there is subjectivity. However, this Rolling Stone list is so full of ridiculous biases and blatant misses that I threw the magazine down in anger. For I am quite qualified to comment on this topic, basically having spent my entire life listening to and / or playing these types of guitar songs.

I will briefly digress on Rolling Stone’s sins:

– Pretending that random, ’60s blues guitarists and obscure people like Paul Butterfield belong on the list
– Selecting songs based mostly on politics… for example they take the Jimi Hendrix song “Machine Gun” (over “Crosstown Traffic”) solely because Jimi referenced some anti-war protesters in his introduction
– Picking useless Rolling Stones favorites like Bruce Springsteen and pretending that they should get here just because they are politically correct (these are guitar songs, remember)
– Just missing out on trends that need to be hit hard… classic rock in the ’70s, heavy metal in the ’80s and grunge in the ’90s. Sure there were a few hits, but way too many misses

The Music Industry

May 20, 2008May 20, 2008 by Carl from Chicago

$\"TV Ad For Mars Volta\"$

A while back I was watching a television show that I enjoy called “No Reservations” with Anthony Bourdain when he traveled to Crete and Greece when I saw something completely astounding on television – an advertisement for the band “The Mars Volta” and their new disc, a CD that I actually went out and purchased (still don’t understand it yet).

Why was this astounding… because despite being a semi-avid disc buyer for decades the advertisements that I have seen were usually useless and not directed at me; but for once the record business actually targeted a show I’d watch with an ad that I would have responded to. So for a brief glimmer, an instant, I could see what some of these thousands of non-musicians that make up the music industry do and how it could add value.

ABOUT THE MUSIC INDUSTRY

Over the last several years the major record labels have been undergoing constant layoffs, restructuring, and mergers in an attempt to re-invent themselves in the digital age. There are four “major labels” today which control about 80% of the industry, with independent labels covering the rest.

Nuclear Power Cost Over-runs

May 17, 2008 by Carl from Chicago

The United States (and many other countries, such as Britain) faces an energy crisis of its own making. Due to a variety of bone-headed “deregulation” schemes, there is now no financial incentive for companies to build new large, baseload generating plants (nuclear, coal, hydro) and there are massive dis-incentives in the form of zealous greens and myopic regulators that will fight them every step of the way should they attempt to solve this problem.

While these facts are on the ground and manifestly self-evident (no new nuclear plants have been built in decades, not counting the TVA re-powering one site) and new baseload coal plants are extremely few and far between, journalists have been touting the “re-emergence” of nuclear power based on almost no hard evidence. As soon as these articles came out, I immediately pointed out the immense difficulties in building one of these plants, which range from the fact that there are 1) no financial incentives large enough to offset the massive risks 2) these estimates are “pie in the sky” and not backed up by cases of building in the USA 3) the history of these sorts of projects, on the other hand, is well documented and grim. This type of “reporting” is typical when reporters have only the barest knowledge of the facts at hand; as such they “humanize” the story and take uninformed or biased opinions verbatim without challenging the facts.

The Wall Street Journal had an article in their May 12, 2008 issue titled “New Wave of Nuclear Power Plants Faces High Costs”. Per the article:

“A new generation of nuclear power plants is on the drawing boards in the U.S., but the projected cost is causing some sticker shock: $5 billion to $12 billion a plant, double to quadruple earlier estimates.”

CPA Debate

May 15, 2008May 14, 2008 by Carl from Chicago

The American Institute of Certified Public Accountants (AICPA) publishes a monthly magazine titled The Journal of Accountancy. In their May 2008 issue, they have a point-counterpoint (not as wild as the old Saturday Night Live skits with “Jane, you ignorant sl*t”) on the topic of “fair value” for accounting.

I posted indirectly on the topic of fair value in this post when I noted that quarterly reporting, which is frequently charged with contributing to short-term thinking in the markets, had salutary effects in that CEOs were forced to publish results frequently which led to the ousters of many CEOs in the financial industry who were responsible for disastrous write-offs.

WHAT IS FAIR VALUE?

In a simplified version, the topic of “fair value” relates to whether or not write-downs should be taken on assets on the balance sheet (which reduces profits on the income statement) based upon reductions in market values, even if the assets haven’t been sold. For example, if a company has a bunch of loans on their books for $10B, and based on recent downturns in the market and sales of similar assets to third parties, the CURRENT value is $8B, then that company would reduce the value of the asset by $2B on the balance sheet and show a $2B loss on their income statement.