Power Ambition Glory --- Book Review

Steve Forbes and John Prevas reached deep and identified that 'Plus ca chance plus c'est le meme chose" The book is a wonderful read if you are into classical history and trying to understand the modern day CEO. Excellent and concise history followed up with comparisons to modern day executives and how they fared in the various battles they fought.

Historical figures are understood as we analyze their circumstances. The book is not as understanding of the modern day executive who wins some and then does not win some. Then again it's hard to criticise Julius Ceasar but Carly Fiorina we have lots of opinions on. Hmm The book does not help you understand the CEO as he/she develops on the public stage.

It is interesting to note that only North American executives were compared to the Greco-Roman world with a significant nod to Persia and Asia Minor. No modern day executive from Asia and no historical figures from the Middle Kingdom or anyone else from Asian history after the classical greats.

Warren Buffets Eulogy for Moody's

Berkshire Hathaway (BRK.A) a.k.a. Warren Buffett continues to sell Moody’s (MCO). Clearly the model is broken and has significant litigation to look forward to. The courts recently ruled that the freedom of speech defence is not acceptable. Bring on the lawsuits. Moody’s does not have the capital to pay the losses. Standard and Poor’s a.k.a. McGraw-Hill (MHP) and Fitch also cannot pay the bill. Charles Gasparino of CNBC in his new book “The Sellout” identifies that analysts working on structured products made more money than analysts working on regular ratings. Good to know we found the thirty pieces of silver.

The market needs to stop identifying pall bearers for the credit rating funeral. Investors particularly institutional investors need to learn how to do due diligence. This is costly, time consuming and unfamiliar. If General Motors can be knocked off its pedestal imagine what can happen to Moody’s and Standard & Poor’s.

Corporate Library Locates Ten Highest Paid 2008 Executives

Corporate Library put out a list of the Top 10 Highest Paid Executives for 2008. Go to corporate library for the full report.

They are

Stephen Schwarzman Blackstone Group (BX)
Lawrence Ellison Oracle (ORCL)
Ray Irani Occidental Petroleum (OXY)
John Hess Hess Corporation (HESS)
Michael Watford Ultra Petroleum (UPL)
Aubrey McClendon Chesapeake Energy (CHK)
Bob Simpson XTO Energy (XTO)
Mark Papa EOG Resources (EOG)
Eugene Isenberg Nabors Industries (NBR)
Michael Jeffries Abercrombie & Fitch (ANF)

Hovanian Strange Tax Obligations

Hovnanian Enterprises, Inc. (HOV) reported results typical for a house builder. They have the market focused on sales, liquidity and debt reduction. Scanning their results you realize they are paying taxes. How so they are losing money? For the three quarters year to date they have a tax tab of $42.7 million, with $20.8 million in Q3 alone. No explanation of how they do that.

There is an obscure point about The FAS 109 current and deferred tax valuation allowance charge to earnings was $76.7 million during the third quarter of 2009 and $198.3 million year to date and as of July 31, 2009, the total valuation allowance is $873.8 million. This FAS 109 charge is a non-cash valuation allowance against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years.

But the numbers do not seem to line up.

Taxes are settled in cash. They need to explain the tax liability and why it is occurring

Brown Forman ------ Fundamentals Scream in Agony

Brown-Forman (BF.A) the purveyors of Jack Daniels reported something called exceptional earnings. This was done with declining sales and even more severe declines in costs. So management can take the credit for lowering costs. There has been a small decline in outstanding shares so the EPS is easier to manage. But take a look at what they did to achieve the results.

Lower marketing costs for a purveyor of booze has never been a good idea. For some dark psychological reason the consumer needs to be reminded that he/she should have a drink. If you drink enough Jack you black out and have memory loss. This will not get them the marketing awards now and definitely will not get them the financial awards that we all want.

In the meantime, in the context of improved earnings the balance sheet is starting to wilt. Cash is down and receivables and inventories are up on declining sales. The fundamentals are screaming out in pain and agony. But they increase the dividend and increase short term borrowings. Time to close the bar.

Rosetta Stone Progress??

Rosetta Stone Inc (RST) continues to make the same mistake? They reported several weeks ago, over exuberant marketing and advertising costs which were not having the required impact. i.e. poor sales. Is it just me or are they still all over TV with the same type of ad? The stock still trades at the bottom of its 52 week range. Are they cleaning up their act? Or is the act cleaning them out?

BYD Puts Words in Warren Buffett's Mouth

Warren Buffett who of course runs Berkshire Hathaway (BRK:B) wakes up this morning and finds that the boss of one of his investments may be putting words in his mouth. BYD Co (HK:1211) claims MidAmerican a unit of Berkshire has always intended to raise its stake in BYD because it believes BYD has good prospects in the development of renewable energy, but we are still considering (whether to sell more),” BYD Chairman Wang Chuanfu told reporters on Monday.

This is very un-Buffett like. The company’s shares have been rising, particularly after BYD touted Buffett’s involvement.

The NY Times DealBook reports “BYD shares are not cheap at the current price level, but since the company’s strategy is in line with Beijing’s policy, and with the support of Buffett, the market is willing to pay a premium for that,” said Ben Kwong, the chief operating officer of KGI Asia.”

The publicity drum sounds really loud right now. Is the big promote on? Public discussion of private deals. Hmmm