Enron’s back, back again
Back in the 90s, Enron was a company that appeared in Harvard Business School management textbooks, and its managers were considered up there with that other once-luminary Jack Welch. Those HBS textbooks have been conveniently forgotten, but they’re out there (I have been saving this photo for just the right time):
Anyway — Enron was a famous fraud, and if you are a famously bankrupt company that is famously bankrupt because of massive fraud, then usually that is the end of it. There’s a few jokes told by old timers who were actually there in the early 2000s, and maybe the odd Simpsons reference, but that’s it. You know — you don’t expect Enron to come back from the dead!
You’d be wrong. Go on Enron.com today and you will find a site that looks like any other corporate doublespeak website (generally I find the more doublespeak, the more bullshit the company). I particularly like the “repentant” one:
Dig deeper, through, and it appears this is all an elaborate ruse, purported by Connor Gaydos — probably most famous for the whole “birds aren’t real” bit. In other words, it’s a joke, folks! But a funny one. Give me Enron over SBF any day.
Heads Roll
Two big resignations — Pat Gelsinger, the doomed CEO of Intel, and Carlos Tavares, the CEO of Stellantis (think Jeep, Fiat, etc). Gelsinger going was a foregone conclusion — I was saw him dancing for his life on CNBC desperately trying to convince the market of Intel’s relevancy (short answer: Intel needs $$$ from the US govt if it hopes to compete…). Tavares is a classic example of Welchian management — obsessed with beating cashflow forecasts, but at the expense of not paying suppliers until the next quarter (stupid incentive, stupid outcome).
I’m exposed to Stellantis via Exor, the holding company of the Agenlli’s — Exor is also the biggest shareholder in Ferrari (a much higher quality business). Absolutely no interest in Intel, which has been a bonfire for years now.
Plebs
I wanted to share this fact with you, because I only recently learned it myself (I am a slow learner). You know when you are looking down from your ivory tower and shout “plebs!” At the plebs below? Have you ever wondered where “plebs” come from? Concilium Plebis, duh! Ancient Rome! Council of the common folk.
As the US starts to be run more and more by billionaires (Musk now has unprecedented power for a private citizen, and half of Trump’s picks are either billionaires or hedge fundies…) I wonder if we’re moving into a post-plebeian kind of world — of course the powerful have always exercised power; but has it ever been so obvious?
And I can’t help but draw parallels to the following chart — eventually the denarius (Rome’s currency) was so debased it was worth nothing. The erasure of the denarius, whether by coincidence or not, came after the plebeian council lost the majority of its power. Rome debased its currency again and again, until there was nothing left.
It goes to figure the US dollar is on the same trajectory. It could be over a hundred years, or two hundred years, though, before it is worth zero. Even Charlie Munger agrees:
…. I think the safe assumption for an investor is that over the next hundred years, the currency is going to zero,
This is the fate of all empires. The US is no different.
…Another dying empire
Recent yen strength pulled back USDJPY to under that 150 level. I think USDJPY could quite easily hit 160. Why?
Japan is a dying empire!
Some facts:
Govt debt to GDP — ~263%
Or, 9.3 trillion USD.
Also, the birth rate has declined and is flatlining:
The BOJ is in a tricky spot, because raising interest rates will raise debt payments. Also, many Japanese companies prefer the weak yen, especially companies like Toyota that take a lot of payment in USD. A too-weak yen is an issue as well though — as we know, the fate of all currency is a slow road to zero.
They have one weapon, which they are not shy about using:
Intervention, baby. Bring out the BIG GUNS:
Good primer here. BOJ comes in with big guns, buys the yen against the dollar (with its foreign reserves) and shores up the yen — for a time. It’s done this multiple times this year, generally when the yen nears 160. Problem is — Japan does not have infinite foreign reserves. They’re a sticking plaster for what is an endemic problem — high debt, low birth rate, a flat GDP since 1995. Also, remember that Japan is still recovering from the asset bubble of the 80s — that one was caused (partially) by a delayed tightening cycle by the BOJ. The BOJ is in no position to tighten right now. In effect, they are sitting between a rock and a hard place. “Modern monetary policy” doesn’t work for them anymore.
Yen gets weaker from here on out (I’ve been known to be wrong before, though…).
Company bits and pieces
Some weakness in Aussie darling Duratec right now, down ~10.00% on the month. DGL sitting at 58c. Little bit of buoyancy from those battered down booze stocks I keep going on about (Diageo, Pernod, Remy, Brown-Forman etc).
Disney has rallied about 30% in the past month and a bit. Feels like a lot of the news is baked in — some hit movies, a revival of the animation business… the real content heads ought to be looking at WarnerBrothersDiscovery and perhaps Paramount. The arb on Paramount is $15 for 48% of your class B shares (you don’t get class A shares, because you’re not a special little power puff like Shari), and you get to keep the remaining shares — not a stupid idea when Larry Ellison is involved… (his son is the purchaser of Paramount, for those new here).
WarnerBrothersDiscovery, of course, is a disgusting fetid beast of a stock because it’s had so much debt slapped on it. It is a debt product with an equity stub. If, however, debt goes down (and the cost of debt…) the cash flow increases tremendously.
My personal conspiracy theory of WBD is that it doesn’t have long for this world, and major owners John Malone and the Conde Nast family will be thinking of ways to either spin it off or do another merger. Remember…Comcast’s cable assets are due to be untethered from the mother ship.
Source post: Blackbull Research - Substack