Coyote Blog

Companies and assets don't go *poof* in a bankruptcy.   In fact, if any of you are even somewhat of a frequent airline flyer, over the last 10 years you likely flew an airline in bankruptcy.  Companies operate all the time, sometimes for years, out of Chapter 11.  In fact, that is what chapter 11 is all about -- helping creditors get more value from a company by keeping it in operation  (only in truly hopeless cases, like Solyndra, is liquidation a higher value outcome for creditors than continued operation).

As such, then, the Obama Administration did not "save" GM and Chrysler, it simply managed their bankruptcy to political ends, shifting the proceeds from those guaranteed them by the rule of law to cronies and political allies.  In the process, they kept these companies on essentially the same path that led them to bankruptcy in the first place, only with a pile of taxpayer money to blow so they could hang around for a while.

To this end, the WSJ has a great editorial on the whole mess

In a true bankruptcy guided by the law rather than by a sympathetic, rule-bending political task force, GM and Chrysler would have more fully faced their competitive challenges, enjoyed more leverage to secure union concessions, and had the chance to divest money-losing operations like GM's moribund Opel unit. True bankruptcy would have lessened the chance that GM and Chrysler will stumble again, a very real possibility in the brutally competitive auto industry.

Certainly President Obama threw enough money at GM and Chrysler to create a short-term turnaround, but if the auto makers find themselves on hard times and return to Washington with hats in hand, his policy will have been no rescue at all.

I will refer the reader back to my editorial way back in 2005 why it was OK to let GM die

Today's entry:  "shareholder rights plan."  Example usage:

Less than a week after activist investor Carl Icahn announced a 10 percent stake in Netflix, the online video company is moving to protect itself against hostile takeovers.

The Los Gatos, Calif., company said Monday that it has adopted a shareholder rights plan.

Icahn disclosed his stake in Netflix Wednesday.

Under the plan, rights are exercisable if a person or group acquires 10 percent of Netflix, or 20 percent in the case of institutional investors, in a deal not approved by the board.

This is basically a poison pill that can be triggered by the Board that can dilute the value of a hostile investor's share of the company.  What it does is force investors to negotiate with management for takeover of the company, rather than directly with shareholders.  As such, it is actually a "management rights plan" as it empowers management at the expense of shareholders  (as evidence of this, in a rising market today Netflix stock fell on this news -- shareholders know that such moves have nothing to do with their well-being).  Managements use it either to protect their jobs (by disallowing hostile takeovers their shareholders would otherwise support) or at least to get a nice payoff on the way out the door as the price for agreeing to the deal.

I go nuts when I see a bad process.  It bothers me so much I had to stop going to the local bagel outlet because their process behind the counter was so frustratingly awful it made my teeth hurt  (take order here, walk all the way to other end to get bagel, walk all the way back to toaster, then cross back over to get spread, all while nobody is able to pay because the only cashier also seems to be the only one assigned to fulfilling complicated coffee orders).

Because of this, going through TSA screening makes me completely nuts.  Screening is a classic assembly line process with steps that include putting shoes in bin, putting toiletries in bin, putting laptop in bin, shoving bin through x-ray, walking through scanner, retrieving items from x-ray, putting on shoes, putting items back in luggage, stacking bins and returning them to the front.  In many airports, I have observed that the long lines for screening are due to a simple bottleneck that could easily be removed if anyone in the TSA actually cared about service performance.

For example, I was in the San Jose airport the other day.  They had a really large area in front of the scanners with really long tables leading to the x-ray.  I thought to myself that this was smart - give people plenty of time in the line to be organizing their stuff into bins so one of the key potential bottlenecks, the x-ray machine, is always fed with items and is never waiting.

But then I got to the end of the process.  The landing area for stuff out of the x-ray was incredibly short.  When just one person tries to put their shoes on while their bag was still on the line, the whole x-ray conveyor gets jammed.  In fact, when I was there, the x-ray guy had to sit and wait for long periods of time for the discharge end to clear, so he could x-ray more bags.  One might have blamed this on clueless passengers who held up the line trying to put on shoes when they should step out of line and find a bench, but there were just two tiny benches for five screening lines.  The only place to get your stuff organized and get dressed was at the discharge of the x-ray, guaranteeing the x-ray gets held up constantly.

I can almost picture what happened here, but since I don't fly to San Jose much I haven't observed it over time.  But I bet some well-meaning but clueless person thought he saw a bottleneck in the entry to the x-ray, shifted everything to dedicate a ton of space to the entry, and thus created an enormous new bottleneck at the back end.  This kind of thing is stupid.  We are, what, 11 years into this screening?  Can you imagine Texas Instruments tolerating such a mess on their calculator assembly line for 11 years?

I have a new article up at Forbes on how crazy it is to extrapolate conclusions about the speed and direction of climate change from a single data point.

Positing a trend from a single database without any supporting historical information has become a common media practice in discussing climate.  As I wrote several months ago, the media did the same thing with the hot summer, arguing frequently that this recent hot dry summer proved a trend for extreme temperatures, drought, and forest fires.  In fact, none of these are the case — this summer was not unprecedented on any of these dimensions and no upward trend is detectable in long-term drought or fire data.   Despite a pretty clear history of warming over the last century, it is even hard to establish any trend in high temperature extremes  (in large part because much of the warming has been in warmer night-time lows rather than in daytime highs).  See here for the data.

As I said in that earlier article, when the media posits a trend, demand a trendline, not just a single data point.

To this end, I try to bring so actual trend data to the trend discussion.