1. What the Hockey Were They Thinking?
We used to think that companies' quarterly Wall Street conference calls were a learning experience. You know, an opportunity for enlightening dialogue between executives and analysts.
If you really want to know what they're like, think back to some of those phone calls you got from Mom and Dad when you were off at college. They reported dull hometown news, you pretended to listen, and a few weeks later you went through the whole meaningless ritual again.
That's what we got to thinking this week when, to take a break from the never-ending Stanley Cup playoff series, we listened to the replay of
May 2 call covering the financial results for the first quarter of 2002.
On the call, Cablevision -- owner of the New York Rangers, the New York Knicks and the Madison Square Garden arena in which they play -- had a measure of bad news for investors. "The Rangers missing the playoffs," said Cablevision President Jim Dolan, "does result in a change to MSG's cash-flow guidance, to $90 million to $95 million from $100 million."
Which is what most analysts echoed, without comment, in their postcall research reports.
Fine and dandy, except for a few small problems we have with this. First, there's the issue of basing financial projections on the assumption your team will make the playoffs.
They Shoot ... They Don't Score
With any team, that might be a little odd. But where the Rangers are concerned, it's a lot odd. When Cablevision published its original $100 million MSG cash-flow guidance at the end of January, the Rangers had only a tenuous toehold among the Eastern Conference teams that could have qualified for the playoffs. And the Blue Shirts still had nearly 30 games, or more than a third of the season, left to play.
And unlike the Knicks -- who made the NBA playoffs 14 years running before they flamed out this season -- the Rangers had serious short-term and long-term mo-mo difficulties; they hadn't made the playoffs since 1997, and they'd just come off a nine-game January losing streak.
At Cablevision, we suppose, you gotta believe.
2. Abercrombie & Fitch's Bum Steer
We've got mixed feelings about writing about the Dumbness of
Abercrombie & Fitch
. It only encourages them.
See, here is a company that thrives on annoying people. It's like a spitball-shooting kid in elementary school; acting irritated and screaming "Stop it!" only eggs him on to further damage. The cruelest thing you can do to him is ignore him.
Public's Got It All Thong
As you may have read over the past week, the spitball-shooting A&F's latest crime against humanity was marketing thong underwear to preteen girls. After a few newspaper articles and a few hundred thousand angry parents complaining about sexualization of fourth-graders, A&F dropped the drawers from its product line.
Funny how offensive products are getting to be a habit for the company. Why, only last month, the company was selling racist-caricature T-shirts featuring a mock advertisement for the mythical "Wong Brothers Laundry Service."
So does this boneheaded merchandising mean that A&F is Dumb? Of course not. These moves are calculated to generate publicity and attract kids by repelling their parents. Heck, they've probably got a Vice President for Creating Public Outrage. (We were going to ask them about this, but they didn't return our phone call.)
What's most irritating -- see? they got us -- are A&F's protestations that the stuff it sells is lighthearted, whimsical fun. It's critics of the company who have dirty-minded thoughts related to thong underwear. Yes, A&F sees no evil, hears no evil and speaks no evil. Too bad it's just evil.
3. Stock in the Middle
Ready for another of our occasional insights into business reporting?
Well, strap yourself down. This one's a doozy.
Sometimes, we fear, people don't tell reporters the truth.
Yes, afraid so. And we'll go even further out on a limb here: Sometimes, it appears to us, felons don't tell reporters the truth.
Yes, yes, all too hard to believe. But true, we fear.
How did we get so cynical? Well, we read with horror this week how the U.S. attorney's office in Brooklyn charged one Amr I. Elgindy with
all sorts of bad stuff: racketeering, insider trading, market manipulation, extortion and obstruction of justice. Stuff like that.
readers with long memories will recall that back in the heady days of message boards and daytrading, this gentleman, known by his nom de net Anthony@Pacific, was a regular folk hero for the way he ripped into shares of small-cap companies.
Until he went to jail, that is. As we reported back in 2000, Elgindy
went up the river in 2000 after pleading guilty to felony mail fraud. But that had nothing to do with the stock market, and it happened years before this Internet thing, he told
. He was a changed man.
We supposed that means he's not the kind of guy who, as the indictment accuses, would conspire with two rogue FBI agents over the past two years to dig up confidential information about companies he was selling short, and to spy on a federal grand jury investigation into Elgindy himself. Defendants, after all, are innocent until they're proven or plead guilty.
was unable to reach Elgindy for comment earlier this week.
So maybe what we ought to do is forward to prosecutors what he told us on his way to the pokey in 2000. He could keep an eye on "scumbags" in the market, he told us, "because I used to be a scumbag."
He added, "I'm just a young guy trying to earn an honest living."
Try, try again.
4. Grubman's Qwest for Truth
This week, Salomon Smith Barney
announced it would no longer tie research salaries to investment banking business. In other words, telecom analyst Jack Grubman will be paid on the quality of his buy and sell calls.
Whoops. When it's your own dime, Jack, we suggest you start flying coach.
Yeah, that's our reaction after taking a look at Grubman's most recent piece of research -- this week's rerating of
from neutral, speculative to neutral, high risk.
Whatever that means.
Grubman also helpfully cut his price target on the stock from $8 to $5 a share. Of course, because Qwest was trading at $5.03 at a time, that's sort of like making a slam-dunk while you're standing atop a 12-foot ladder leaned up against the backboard.
5. Can't Say We Didn't Warren You
Somebody's Dumb here. We just can't figure out who.
What's puzzling us -- what's making us think so hard our head hurts -- is the news this week about Warren Buffett and
The Rich Get ...
As you may have read this week, Berkshire Hathaway issued what it called "the first ever negative coupon security." What that means, as far as we can figure out, is that if you lend Warren Buffett money, he doesn't pay interest to you; you pay interest to him.
OK, OK. It's not quite that simple. Somewhere in the deal, lenders get the right to buy Berkshire Hathaway stock sometime in the next five years for about $13,500 more than its current price of $76,100 a share. That may or may not be a good deal, depending on what Buffett and his pal Charlie Munger come up with in the next half-decade.
So being that this deal was open only to qualified institutional investors -- a fancy name for someone who uses $10,000 chips at the blackjack table in Las Vegas -- we assume everyone involved is smart enough to figure out why they're paying Warren Buffett money and rich enough not to care if the deal sours.
But we're fascinated by this rich-get-richer deal. Mainly because it gives us a chance to tell one of our favorite rich-man-poor-man stories.
Here's how it goes: Many years ago, back before you kids were born, we had a peonlike $250-a-week media job in New York City. The big excitement one week was going to a book party at the Palladium, a hot disco back in the days when there were discos for people to go to. All very cool, until we learned that the beer we ordered at the bar would cost us $6.
Six dollars! Why, we could go to a movie for six dollars! We could buy three days' worth of lunch for six dollars! But rather than say we didn't have enough money for a beer, we paid up.
Then who should we see next to us at the Palladium bar, but multi-jillionaire financial news publisher Malcolm Forbes. How much did his drink cost him?
Nothing, of course. He had a free drink ticket.
Ain't no justice, kids.