CW in FT: Old advice will help, not hinder, Darfur

Old advice will help, not hinder, Darfur
By Cody Willard

Published: April 27 2007 16:06 | Last updated: April 27 2007 16:06

One of the most important principles on Wall Street is Baron Nathan Rothschild’s famous piece of advice: buy when the blood is in the streets. There is one place more than any other that meets that criterion; Darfur. My advice is to rail against all those well-intentioned but foolish folks at places such as the Sudan Divestment Task Force and Genocide Intervention Network, begging us to sell just about any assets or any stocks of any companies that do business in Darfur.

Last April, I wrote a column for the FT called “Technology sheds light on the heart of darkness”. In it I outlined how the greatest way to combat violence and corruption is to open up communication channels to the victims and how the best way to open up communications channels is through capitalistic investment. Assuming profit-driven investment is the only way to create self-sustaining economic virtues, why on earth would we believe the best way to help the people and to stop genocide in Darfur is to completely isolate them? That is what will happen if the developed world’s investment community succumbs to the pressure from groups such as Fidelity Out of Darfur and sells its assets in any company doing business in Darfur. Its people will be further isolated.

Last week, the FT reported that Rolls-Royce, the British engine maker, was joining Siemens, the German technology group, and other big conglomerates and investment companies in pulling out of Darfur. Rolls-Royce said it would “immediately cease” to pursue new business in Sudan and “progressively withdraw” from supporting existing contracts. That is one more company that will never care what happens to the people in Darfur.

Virtuous cycles are created when we invest, when we build interests when we and create connections in an economy. Vicious cycles replace virtuous ones when we disinvest, remove interests and close connections.

These wrong-headed activist groups are now attempting to put pressure on the great Warren Buffett to divest any investments his companies have related to Darfur, specifically citing his (and Fidelity’s growing) investment in PetroChina. You see, PetroChina is a subsidiary of CNPC, which itself is a “subsidiary” of the Chinese government. And since CPNC does business in Sudan, which means CNPC does business with the government in Sudan, these people want Buffett to sell his PetroChina stake.

I guess these activists think that if PetroChina would just leave Darfur, all the violence and bloodshed would cease. What do these well-intentioned activists expect to happen when the government and people and few businesses in Sudan are completely isolated and without access to any capital? Do they expect the government gently to capitulate? Are the 2m uprooted citizens of Sudan suddenly going to be better off? What is the endgame of total isolation in the midst of genocide?

Go and watch Hotel Rwanda and tell me what Don Cheadle’s character, Paul Rusesabagina, would want. He would want more help and interaction and investment and connections to the developed world.

And from an investment perspective, there is even more reason to start putting money to work in the companies willing to do business in Darfur. All these forced liquidations in Sudan get done at far below even their minuscule market values. You always want to be on the buying side of a forced liquidation. And if there is no profit-driven corporation on the buying side of these forced sells, it is going to be politically driven governments, such as the Sudanese government itself, that will be the buyers. That is not going to help.

Although it seems counterintuitive at first, the advice is rather straightforward really, as the best time to buy is always when things cannot get any worse. The best time to sell? When the bulls are celebrating victory. I stepped into the figurative blood on Wall Street and in Silicon Valley when I launched my tech-centric fund in October of 2002, just 10 days before the Nasdaq hit its lowest point since the peak in March 2000. After being aggressively long tech for four years, I am approaching the US tech market with caution now that the Nasdaq has more than doubled from those October 2002 lows.

I would rather be a buyer in Sudan than in the US.

CW on RM: Weekend Vittles

Weekend Vittles
04/26/2007 3:25 PM

Thou shalt give equal worth to tragedies that occur in non-English-speaking countries as to those that occur in English-speaking countries-- Dan Le Sac vs. Scroobius Pip

• We're all going to consume a lot, a lot, more video per day, per week, per year 10 years from now than we do today. It's not a zero-sum game between totally free/freedom TV over the Internet vs. broadcast's slow death. Your watching habits will be come ever more efficient, more effective and quicker.
  
  I mentioned a couple weeks ago that I've been trying to watch American Idol this season. I "consumed" both of this week's episodes, totaling about three hours of broadcast programming, in a total of 42 minutes on my only night home this week using the slightly empowering DVR technology.

• I got a lot of requests for pre-earnings call trading ideas this week. It's not that I didn't want to offer several up each day, but as I told you last week, I feel like I got cold when earnings season arrived. I don't want to just throw trading ideas out there for the sake of throwing them out there.
  
  I'm going to take Friday and Monday off to clear the head and I'll come back, pedal to the metal. I always tell you not to force anytrades. I took my own advice this week and didn't force any trades or trading ideas.

• A reader asked me, "Why was Bernanke jawboning us lower a year ago, but he's specifically trying to engineer a bubble today? What has changed?" I don't know why he doesn't get back to jawboning. I'll think about that a lot this weekend, because it seems like he should be. Why not jawbone and then surprise the Street with a cut if need be?

• The currency issue I highlighted earlier today -- that one has really got me worried. It's providing a false sense of boom among U.S. companies and investors. Maybe that's a virtuous thing in a reflexive kind of way. Then again, maybe it's inflating valuations as we spike on these FX-inflated earnings.

• The only trading advice you'll ever really need comes near the end of this totally "flipped" song from Dan Le Sac vs. Scroobius Pip, "Thou Shalt Always Kill." Seriously, the only way to outperform is to think for yourself.

And with that, I am heading out to the country by myself for the next three nights to not do so much thinking. Please check out my column in this weekend's Financial Times as I "flip" the idea that selling all Sudan-related outfits would do anything to help anyone in Darfur. It matters, per those lyrics at the top.

Net short on rest, but hoping to back up the truck this weekend.

Emily Post for the Digital Age

I see a publishing goldmine!

As technology has accelerated, social conventions have not kept up.  We are simply not considerate when technology is in the mix.  How many times have you had to put up with a guy screaming in to his cellphone as you suffer through only half the relevant info?  Or the haze that comes over people when they fit their iPod headphones in their ear?  Or worst of all, the walking texter, oblivious to the safety of themselves and others?

Even sparing the common (and sometimes dangerous) annoyances, the little unforseen consequences of tech continue to crop up.

For example, how do you stop a text message conversation?????  The running dialogue makes it so that neither party wants to be the one that breaks it off.  All conversations seems to have the following pattern:

Texter1: "Hey what's up"
Texter2: "Nothing much, how are you?"
Texter1: "Good, hope you are well."
Texter2: "I am." 
Texter1:  "Cool"
Texter2:  "OK"
Texter1:  "Alright."
Texter2:  "Bye then."
Texter1:  "Cool."
Texter 2:   "Awesome"
Texter1:  "Alright"
Texter2:  "See you later."

Do you see the conundrum?  There is no standardized behavior here, no right way to do something.  Some kind of visual symbol of an understanding that a conversation is over needs to exist.

And the opportunity lies with Emily Post inventing the de facto standard of digital manners. 

That reminds me, didn't someone else create a de facto standard, and is also in need of a manners lesson...

 

Setting Up Shop

Good Afternoon,

This is Ashwin Deshmukh with my first post under the Cody Blog banner.  If you didn't read Cody's thoughtful words on me, do so before you continue.

Onwards then.

So as Cody mentioned I essentially stalked him on Bond Street in New York in order to discuss his post on Darfur from 2006.  The  part that really resonated with me is frustration that he vented on not being able to ease the suffering of those in Darfur without giving up his more than full-time schedule. 

What Cody was expressing  and what I think is more true than ever, is the frustration to help in a crisis far away, even though it feels like the world is shrinking.  We seem removed a the situation artificially by distance, which is a complete reversal of how we think about closeness.  It seems so close and real and current, but contextualizing horror is messy work and creates a barrier compounded by the remoteness of it all.

Of course this is an illusion.  As the largest nation in Africa by size, Sudan has crucial natural resources and undeniable geopolitical importance, and the separation between America's needs and Darfur's reality is slim.

The last thing I want to come off as is trite when discussing Darfur, but every life lost to this genocide can be felt in some way outside of the locale of the tragedy.  Which is bascially how I hit upon my idea, a response to the current model of trade of Sudan with the rest of the world.  You don't get the whole thing all at once and certainly not right now, but Cody and I are both excited at the prospects, so be sure to check in by using the RSS feed on the page.

Introducing a New Voice of the Revolution

At the end of March, I attended a party celebrating the 100th episode of Wall$trip.   Hosted by the lovely Lindsay Campbell, the site is the meeting of stock culture and pop culture. The Gray Lady has a nice write-up on WallStrip.

The event was held in a cast-iron loft building that has a performance space on the ground floor.  When a video blog is throwing open bar parties to commemorate a number of programs made, you just know that the 'bubbliciouness' that Lindsay and I laughed about during my interview is very real. 

I settled in to my conversation mood, which is ripe time for someone to hit me with an insight.  It was my luck night for such an interaction.  An Indian guy in his very early 20s, dressed nonchalantly enough to blend in and stand out at the same time gave me the standard male head nod.

After pleasantries Ashwin introduced himself as Ashwin Deshmukh, a New York University student majoring in Economics.  He explained that he had seen me on WallStrip and that the allure of Lindsay Campbell and the probability of my presence had brought him here.

It was a specific post I made on this blog about Darfur that caught his eye.  Ashwin had been a delegate to a U.N. conference in New York when he hit on a pretty unique idea to help with the situation (more on that later).

I was hooked on the personality and the possibility and invited Ashwin to my offices Monday.  We immediately hit it off and I feel comfortable saying that he 'gets it'.  And 'it' is a lot--the RevolutioNetwork, the money management and our future trajectory--his background and vision are a good fit and I'm happy to say that he is part of our office now.

Ashwin is going to be the Director of Activism and Politics for the RevolutioNetwork and he will be expressing his values and ideas on here, as a complement to my posts.

The timing could not be more fortuitous; the zeitgeist has turned to responsibility and knowledge of the world around us, particularly the things that are wrong AND in our control.

We look forward to your comments on Ashwin's writings.  Feel free to email him at [email protected]; griping, disagreeing and complementing are fine by both of us.

New York Magazine Gives it Up

What is with the cover of New York Magazine this week??



http://nymag.com/nymag/toc/20070430


Here are the front page stories:

"What Married Men Think-But Don't Say"
"My Big Far Gay Wedding"
"The Hot-Mommy Cult"
"The Sex Diaries: Erotic Lives of Six New Yorkers"
"Virgins in Sin City"

Open to the contents and you see androgynous posterior shots flanking a list of titillating stories.  Is it sweeps week or something for the periodicals issue? Is there a commodities market for selling flesh I am missing out on?

Maybe we should pursue the same strategy for a sweeps week at RevolutioNetwork.....

Back from a Non-Hiatus

It will strike none of the faithful followers of my RealMoney postings and televisions appearances, that I have been immersed in venues other than the blog you are currently reading.  If you still have this in your RSS reader, congratulations-you will be among the first to know that the practice of simply reposting ends today.

As I have been telling everyone I come in contact with (in the physical realm) there are many irons in the fire and maintaining a daily page has simply gone by the wayside.

No more.

You can expect a return to the posting style and content of last fall, set against a as-yet-unveiled new format.  Exciting stuff if you ask me, which you kind of are if you're still reading.

The main impetus for the absence has been my attention to the RevolutioNetwork and its growing audience.  We have integrated new technologies and introduced nuanced features that in our opinion augment the end-user experience.  Of course we welcome feedback in this area --- after all it's a Revolution based on you.  Visit BoomRevolution.com to peruse, play and proffer.

CW on RM: The Impact of Overseas Demand

The Impact of Overseas Demand
04/23/2007 9:24 AM

M&A, buybacks, strong earnings on low expectations of such -- what's not to like out there, right? At the current juncture, there's strong demand for stocks, little supply and strong/stronger-than-expected earnings growth. That, simply put, is why we're at all-time highs in most of the major indices.

I've been thinking a lot about the dynamic of how much of these strong earnings are being driven by what most companies are describing as very strong overseas demand, but slowing domestic demand. While a lot of analysts have correctly cited the companies who have big overseas exposure as benefiting from the collapsing dollar, let's take that out just one step further. I wonder how much of that overseas demand these companies are talking about is inflated by overseas enterprises simply shifting their spending dollars to U.S.-manufactured products and away from other places.

The permabears can and will have a field day with this line of thinking as they parse it out themselves and get it out in their blogs and to reporters in the mainstream media. I certainly don't want to ignore the reality of how strong these earnings are again this season overall, as that is what it is.

It's important to be skeptical, whether bull or bear. And I will remind people that in the grand scheme of the broader business cycle, that we're seeing a lot of signs that we're closer to the top than the bottom. Treat your exposure to the market that way.

At the time of publication, the firm in which Willard is a partner had no positions in the stocks mentioned, although positions can change at any time and without notice.

CW on RM: Weekend Munchies

Weekend Munchies
04/20/2007 3:54 PM

"Everything is exactly what it seems.
She's not hiding wings beneath her leather jacket.
Making my way downtown through the haze,
Making my way downtown through the maze,
I thought I'd figure out how to change.
But you never change.
You're not straying far from who you were in high school.
Everyone is exactly who they are." -- Slow Runner

Bull-market rally, good earnings: That about sums up the action of the week, eh? Here's what I'll be pondering this weekend.

• Citi has been hamstrung by the government and regulators, much like Microsoft was from the late 1990s until Google shocked the world with its rise to dominance "despite" Microsoft's monopoly.
  
  Rumors of a Citi takeover of Deutsche Bank sure would indicate that those chains are coming off. CEO Chuck Prince et al would finally be able to leverage the growth potential of this giant asset base.

• It's exactly because of the continued hamstringing that has been done to Microsoft that Softee cited Google's acquisition of DoubleClick as antitrust. Microsoft sure scored some serious political bricks for its own foundation with this one.
  
  Note that Google needed pretty much no subsidization or other help from the government in its rise to dominance over Softee, say, unlike the ethanol companies messing up our food and food-supply pricing, as I discussed on CNBC last summer.
  
  Sun, RealNetworks and the other losers who could never figure out how to compete against the formerly dominant Softee sure look like chumps and cost us a lot of innovation and progress with their endless litigation and calls for regulation. I went off on this topic on CNBC last summer here.
  
  The upshot? Stick with the Googster.

• You know that corporation formerly known as the Rolling Stones? (That's what I call that enterprise anyway.) You heard about that U2 group formerly known as a rock band?
  
  This endless corporatification of music is certainly part of the problem that's causing the recently reported 32% year-over-year drop in music sales.

• Remember when the telco hardware providers like Lucent and Nortel got desperate near the end of their bubble and started doing ridiculously risky vendor-financing deals with their customers to keep the growth balls up in the air? Remember when the car companies did that with zero-percent financing and were able to extend their previous boom cycle?
  
  You see the parallel between those and where we are in the real estate cycle, with the no-doc loans that had been keeping the real estate growth balls up in the air?
  
  You remember how the telco and car cycles ended for investors? Just askin'.

• With these strange Tribune-like deals in which employees are quasi-funding buyouts of entire companies, I wonder what kind of deals could be cut in Detroit if the private-equity people really got creative.

• On that note, as my colleague Ashwin points out, wouldn't it be smarter for union members to allocate their union dues for purchasing stock in their employers as opposed to contributing to a political bureaucracy? GM union membership dues were $191 million in just 2006 alone. That is 5.5 million shares at $35, or about 1.1% of the company. Not a small amount. Can you imagine if the workers had been buying their own employers' stock for the past three decades with their dues? Just sayin'.

I feel this city, these stocks, this job -- er, these jobs -- my nonwork life, these networked tech gadgets and just about everything weighing down on me. I need some fresh air, a little change, maybe a trip home to Ruidoso. Thanks for reading, and I'll see you next week.

At the time of publication, the firm in which Willard is a partner was net long Microsoft and Google, although positions can change at any time and without notice.

CW on RM: Taking Snapshots of Big Tech

Taking Snapshots of Big Tech
04/18/2007 8:38 AM

I just wish there were some earnings reports so I have something to do these days. Oh, wait, it looks like a few reports came in last night. Here's my snapshot take on some of the big ones:

• Intel: The report wasn't half-bad, as my Pops used to say around the animal clinic when I'd finish cleaning out the horse pen in the back. The main focus of the sell-siders this morning seems to be on the expansion of gross margins back into the 50% range. With AMD's scorched-earth pricing policies, there was a lot of concern that gross margins would come in somewhere in the mid-40% area. That has the stock up pre-market, but it's a long day ahead. We'll have to see if the upward bias to decent earnings reports continues.

• IBM: The company didn't exactly affirm a strong tech-spending cycle in the enterprise. While that's worrisome from a macro perspective, as we try to gauge the state of enterprise demand, it's especially bad for IBM. It means that some of its strategies, such as selling off its PC biz to Lenovo, might not be panning out as well as it hoped. There are lots of downgrades and disappointed analysts in this one today.

• Seagate: Given the recent top-line warning, the fact that Seagate remained profitable and kept profitable guidance out there for the next quarter and the year is a good thing. That said, as my recent video and written mea culpas already stated, I was already wrong on this name. My out-of-the-money calls still have some value because they're so far out in time, and I'm not looking to sell them. I've not added to them since the warning and probably won't now, either. Moving on.

• Yahoo!: What a shocker that this company couldn't deliver on its always ratcheted-down guidance yet again. How many, how many, how many quarters in a row has this management mismanaged the Street? More to the point, these guys are destroying their brand with their compromised and confusing policies of content delivery, as I outlined when I suggested the paired trade with Yahoo! and Google. As you can imagine, I'm upset that I was too "disciplined" to put that trade on before the earnings call, but discipline does trump conviction, as Jim Cramer will tell you.

More in a bit.

At the time of publication, the firm in which Willard is a partner was net long Seagate and Google, although positions can change at any time and without notice.