Three Haiku

I.

Equity Private
Makes fun of Michael Porter.
Go ahead: read it.

II.

EP loves Apple
Computer, a fact I find
Strangely amusing.

III.

I love her writing,
But it is too long to read
On an iPhone screen.

© 2008 The Epicurean Dealmaker. All rights reserved.

Not Safe for Work

Stranger: "There's just one thing, Dude."
Dude: "And what's that?"
Stranger: "Do you have to use so many cuss words?"
Dude: "What the fuck you talkin' about?"
Stranger: "Okay, Dude. Have it your way."

— The Big Lebowski

In between dusting off my snowglobe collection and watching my backlog of "Highly Probable" M&A deals drift into the "Maybe, But Don't Count on It" and the "Who the Fuck Do You Think You're Kidding?" columns of my revenue report, I have had plenty of time to contemplate the mysteries of modern life.

Like: did Al Gore really invent the internet? Does the "Prince of Wall Street" still have a job offer in Financial Sponsors at a "bulge bracket" bank? And, is it true that Equity Private and Dan Loeb plan to use a mixture of shredded 10-Qs and portfolio company business plans as confetti at their upcoming wedding scheduled for a secret location off the Dalmatian Coast?

We may never know the answers, Dear Readers, but certain questions are worth asking anyway, no?

Along similar lines, I have had little success puzzling out the method behind the madness of certain other sites in the blogosphere in linking to these pages. Given the uniform brilliance, concision, and topicality of the posts which I so modestly share with you here—with which assessment I am sure the cleverest of you will heartily agree—I am constantly surprised that every site in the econoblogosphere and beyond does not automatically link to each and every one immediately upon publication.

(This confusion of mine does not extend to those few websites—which shall remain nameless here in their all-too culpable shame—whose failure to link to even the most incandescent and stupefying of my literary emanations is patently due to mean-spirited, uncomprehending envy. Face it, you sad pretenders, only the Great are called to Glory in the Pantheon of Genius, and your ticket stub expired years ago.)

Because lack of quality or intelligibility are so clearly not even worth considering as possible reasons for respectable, upstanding sites not to link to my posts, I can only conclude that the fault, Dear Readers, lies not in my stars but in my language.

And by "language" I do not mean to refer to that old canard that my diction and writing style is somehow excessively stilted, ornate, or pitched above the heads of all but the most erudite, perceptive, or anal-retentive of readers. After all, even the poster boy for plainspoken English prose, Ernest Hemingway, was not averse to using the occasional "ten cent" word and run-on paragraph when it suited him. (Usually in the context of sex, natch.)

No, by "language" I mean those naughty bits which get caught in the teeth of censors, FCC bureaucrats, and Episcopalian ministers everywhere; namely, cuss words.

Now, I have alluded before to the "functional Tourette's syndrome" which can afflict the ranks of junior investment bankers.¹ It occurs to me that I may not have made clear to those non-investment bankers in my audience (thank God for all three of you) that this coping mechanism is not limited to the clueless and jejune underclass of Analysts and Associates. Rather, it extends all the way to the top of the company pyramid as a permanent feature of social discourse within the four walls of an investment bank. No matter how high you rise on the org chart, you simply cannot maintain your authority, gravitas, or blood pressure without unleashing the occasional torrent of toe-curling language so foul and despicable that Lenny Bruce himself would cut his hair and join a convent if he heard it.

Having burned a few blue streaks into the wall-to-wall carpet of a few investment banks myself, I can testify to the fact that one usually feels appreciably better after having unloaded on some unsuspecting Analyst, computer screen, or (absent) client with such a tirade. Furthermore, as long as one is not on the receiving end of such a bombardment, one usually finds the performance quite amusing. There really is nothing quite so rib-tickling as overhearing a colleague deliver a ten-minute monologue on the inadequate parentage, physical endowment, and sexual morals of another person or object without having to use more than 15% of his words from the stock of those acceptable to the evening news.² There is a certain grandeur to filthy language, especially when it is delivered with conviction, and abandon.

But apparently many, many websites in this country cling to the patently false delusion that they are somehow "PG-13" sites oriented toward the putatively sensitive and tender-hearted "Man on the Street." Really, guys, what are you smoking? Sure, it is demonstrably true that 28.6% of the combined readership of the Wall Street Journal's Deal Journal and the New York Times' DealBook has an emotional age of 14, but I guarantee you that 98.6% of those individuals are of legal drinking age and possess at least 13 back issues of Juggs magazine. It is heroic to assume that anyone outside the investment banking, private equity, and hedge fund industries even gives a shit about what happens on Wall Street or in the world of finance. Certainly, the emanations and soundbites we hear daily out of Washington, D.C. and the non-financial media give us no reason to believe that anyone is paying attention to the facts.

However, I can take comfort that not all of my off-color diatribes fall upon entirely stony ground. There does seem to be some appreciation of my finely honed and fiercely delivered excoriations among my cultural and linguistic forbears across the pond. Personally, I have always held a soft spot in my heart for a race which can coin (and unselfconsciously deliver) a phonetic and descriptive gem like "wanker." I mean, crikey, even their bloody parrots say it.

However, I would not be honest if I did not share a certain queasiness I felt when I discovered recently that my rant about JPMorgan's takeover of Bear Stearns was the most popular post this site has ever published, by an factor of two or more, and that virtually all the offending traffic came from Old Blighty, erstwhile Queen of the Waves. Given that the piece was riddled throughout with references to defecation, buggery, and forced penetration of all kinds, I begin to worry that my English friends have not quite—to paraphrase an old joke—left their old public school chums behind.

Bah-dum-bum.

¹ Careful readers will note that I was much more liberal in my use of obfuscating asterisks when I referred to unapproved vocabulary in such early posts. I have become bolder—and, I must admit, lazier—in my old age. Those of you who do not approve of this development can go f**k fuck yourselves.
² I am no cunning linguist, but I tend to believe that it is often the proportion of naughty to clean bits in a particular utterance, rather than its absolute length, which determines its snicker-worthiness. I can think of no better example in this regard than my favorite utterance from that underrated cuss-fest, The Commitments:

"Fook you, ya faht fooker!"

Of course, alliteration helps.

© 2008 The Epicurean Dealmaker. All rights reserved.

The Scorpion and the Frog

Once upon a time, there was a frog which lived happily on the bank of a broad river. It was a good riverbank, with plenty of flies to eat and lots of nice, cool water in which to swim and dive. Life was good for the frog.

Then, one day, another frog which had heard of the nice river came and made his home just down the riverbank from the first frog. At first, the two frogs were cordial and polite. While they were not really friends, and they were natural competitors for the bugs and other food on the bank, there seemed to be plenty to go around, so they lived in peace with one another.

After a while, though, the riverbank began to change. The river itself became wilder, colder, and more dangerous. At the same time, the flies, which had been so plentiful, began to disappear. Soon, the two frogs began to fight over the few bugs and pockets of calm water that remained on the riverbank, and they became implacable enemies. They would fight and squabble every day, until they were gaunt and exhausted from stress and lack of food. There came a day when they could not even rouse themselves to fight over a stray dragonfly that was blown onto the riverbank by a passing storm.

That morning, as the first frog lay panting and starving in his little hole, a scorpion wandered down to the riverbank and struck up a conversation.

"Hello there, Mr. Frog. How are you this fine morning?"

The frog just grunted, so the scorpion continued: "I have heard that the other bank of this river," which was too far away for the frog to see, "is a veritable paradise of gentle pools, soft breezes, and fat, juicy bugs." The frog perked up a little at this.

"Unfortunately," the scorpion continued, "I cannot swim. Therefore, I am looking for a trusty frog to take me across the river on his back so I can enjoy this riverine nirvana. Would you by any chance be interested in taking me?"

The frog was sorely tempted by this offer, thinking that he would no longer have to share the slim pickings of his current home with the second frog. However, he noted the morning sun glinting on the sharp tip of the scorpion's stinger and gulped.

"But how am I to know that you would not stab me with your stinger once you are on my back and kill me, Mr. Scorpion?"

"Why, Mr. Frog, I am surprised at you. If I stung you while we were in the river, you would drown, and so would I. Remember, I cannot swim. I only thought you might find my proposal interesting," the scorpion sniffed, looking around at the frog's dismal hole, "since it looks like you could use a change of scenery yourself."

"But," he continued, "if you are not interested, I hear there is another frog just down the bank from here. Perhaps he would be agreeable to my proposition."

"Oh, no, no, no!," exclaimed the frog, brushing aside his qualms, "I would be delighted to carry you across the river."

"Excellent," replied the scorpion. "Since I will be on your back and able to see over the river's waves to the other bank, I will act as your pilot and navigator. And once we reach the other side, I will catch and kill twenty juicy flies for you in recompense for your generous assistance."

The frog was well pleased with this, so he and the scorpion set out immediately for the water's edge to make their crossing.

As soon as they arrived, however, the frog had a nasty shock. There, at the water's edge, was his frog neighbor and a second scorpion, apparently preparing to cross the river just as he and his companion were planning to do. Each frog became enraged at the thought that his deadly enemy would cross the river to froggy paradise, so they began bellowing at each other and girding for battle.

The two scorpions, however, who just wanted to get to the other side and who needed these silly frogs to carry them, intervened with their companions and attempted to calm them down.

"Gentlefrogs, gentlefrogs," the first scorpion exclaimed, "surely there is no need to fight about this. I have heard that there are bugs enough for all of us on the other side of the river. Besides, the opposite riverbank is much larger than this one, so you will each be able to live in peace and plenty without ever even having to catch sight of one another."

"This is true," asserted the second scorpion. "I have heard it as fact from a raven which told me the tale last week. Please do not fight, and let us all cooperate, to our mutual benefit."

The frogs, who were frankly too exhausted to make a good fight of it anyway, saw the wisdom in the scorpions' words and allowed themselves to be talked out of a battle. After a while, they even suggested that the scorpions tie one of each frog's hind legs to the other with some grass, in order to make a more stable platform for the scorpions to ride on and to make the burden of swimming the turbulent river more manageable for the tired frogs.

The four companions now prepared for their crossing. There next erupted a bit of a scuffle between the scorpions, when it became clear that they each expected to have the prestigious role of pilot to the expedition, rather than the less important one of navigator, but the tolerant frogs were able to restore peace with a promise that the scorpions could share both duties equally in the crossing. All was well once more, the little expedition pushed off the bank, and the frogs began swimming to the promised land with the scorpions on their backs.

Unfortunately, however, the sun soon sank below the opposite bank, as the four companions had already wasted much of the day in argument. In the dark, the frogs became lost, and the scorpions began to argue heatedly, each blaming the other for getting the flotilla lost and complaining vociferously that his rights and privileges had been trampled on by the other.

The scorpions soon came to blows. In striking at the other with his tail, one of the scorpions missed and accidentally stabbed one of the frogs in the back. In the dark and confusion, it was not clear who had struck the fatal blow or indeed which frog had been stung. Nevertheless, since both frogs were tied together at the leg, the paralyzed frog dragged the other—and both of the still-squabbling scorpions—down to the bottom of the cold, dark river, where they all perished.

Fortunately, however, there is a happy ending to this sad story. A big catfish later found the four companions floating on the riverbed and enjoyed a wholesome and delicious evening meal.

Which leads us to the moral of our story:

Only bottom-feeders will benefit from an airline merger.

© 2008 The Epicurean Dealmaker. All rights reserved.

Melancholia

To pleasant songs my work was erstwhile given, and bright were all my labours then; but now in tears to sad refrains am I compelled to turn. Thus my maimed Muses guide my pen, and gloomy songs make no feigned tears bedew my face.

— Boethius, The Consolation of Philosophy

Things are a mite quiet here at the Volcano Lair, Dear Readers.

I assume the clever among you will have already inferred this fact from the relentless drumroll in the financial press about declining M&A volumes, struggling investment banks, and the like. Blah, blah, blah.

Like all dutiful merger advisors, I continue to do my best to persuade my corporate clients that now is the time to strike, while Steve Schwarzman and Henry Kravis are busy renovating their secret Italian love nest away from the harsh glare of media scrutiny. But the intelligent and well-funded among these—a distressingly high proportion thereof, to my continual disappointment—just look at me skeptically and say, "Why bother?"¹

Indeed, "why bother" is an attitude I perceive generally in the financial zeitgeist at present. The media, sad to say, are not helping.

Admit it, now, how many of you are enthralled to pick up your morning newspaper to read the 337th story this month on the subprime/mortgage/CDO/CDS/auction rate security crisis du jour and whether it is a) over, b) just getting started, or c) all Ben Bernanke's fault? Even the perma-bearish Bloggers of the Apocalypse, like Nouriel Roubini and pals, have become tired and tiresome to read; now, in what should be their hour of glory. They were a lot more fun to listen to when the party was in full swing, and their jeremiads carried the desperate tang of Cassandras who know they are right but can get no-one to listen.

Meanwhile, the rest of us soldier on, heads down, with appropriately downcast and guilty expressions painted on our faces to show that we, too, realize we were at fault in this and therefore should not be sacrificed on the General Altar of Economic Contrition. Even the profiles of potential villains of the month we read nowadays, like those of mortgage meltdown lottery winner John Paulson and evil-genius-turned-bumbling-oaf Stephen Feinberg, carry all the gustatory excitement of cold mashed potatoes on a dirty plate. Who cares?

It is against this cheerless background that your Dedicated Correspondent finds it difficult to lift the proverbial pen and dash off yet another scintillating missive from the frontiers of Vanity, Hubris, and Financial Shenanigans. If they are not in fact being good, the Naughty are busy pretending to be so—or at least hiding in St. Tropez—and the Vain and Hubristic are mostly lying in such an impressive pile of smoking ruins that even the most vengeful scold is getting tired of pissing on their ashes.

In short, Dear Readers, I lack material.

But I have high hopes that this condition is merely temporary. Neither economic recession—whether in progress, merely looming, or just a figment of anti-capitalist scaremongers—nor a newly discovered probity and sobriety among the Captains of Finance and Industry can persuade me that Human Folly has been repealed in perpetuum. I am unshakeable in my belief that there are individuals out there, right now, who are planning their own apotheosis and subsequent self-immolation on the field of Mammon with such a grandeur and flair that my very fingertips tingle with excitement. I promise you, Faithful Readers, that as soon as they lumber out I will set forth, quill and keyboard in hand, to puncture their pomposity and skewer their self-regard as of old.

In the meantime, I can do little more than paraphrase the Immortal Bard:

"An ass, an ass! My kingdom for an ass!"

¹ The unintelligent and underfunded generally ask another question: "Can you introduce us to your restructuring partner?"
© 2008 The Epicurean Dealmaker. All rights reserved.

Jack-Jack Attack

To: jack@jack.com
From: The Epicurean Dealmaker
Subject: Jeff Immelt

Dear Jack —

I saw that you apologized on CNBC today for the televised ass-whuppin' you gave Jeff Immelt yesterday after GE's earnings release. I'm sure Jeff appreciated the retraction, and I know for a fact that he hopes you don't "get out a gun and shoot" him if GE misses again. He asked me to tell you that he is working like gangbusters on the Gordian Knot puzzle you left him, but he still hasn't found the bottle of Jack's Secret Sauce you hid in the company boardroom. (Gosh, you guys are clever. I never knew the GE Way included scavenger hunts for the incoming chief executive.)

Heaven knows, there seems to be a surfeit of underemployed, overexposed old farts running around burnishing their reputations at the expense of their successors, but I am glad you had the cojones to call "foul" on yourself for your little indiscretion. While there do seem to be a few skeptics out there, the brown-nosing sycophants anchors on Squawk Box certainly seemed to think you're a stand-up guy, so you must be okay.

Of course, if you really were trying to be supportive of Immelt, rather than boosting your waning speaking fees by putting in another gratuitous appearance on CNBC, maybe you should have said something more on point, like the following:

"Ya know, I've got a helluva lot of respect for Jeff, 'cause he's been trying to dig himself and GE out of the stinking sump I left 'em in when I sashayed off into the Cialis Sunset with Suzy. Who knew that a sprawling conglomerate with revenues greater that the GDP of many countries couldn't grow faster than the global economy forever? Lemme tell ya: I sure didn't.

"'Course, in my day, it was a helluva lot easier to deliver on 15%-plus earnings growth every quarter when we had an entire accounting department dedicated to smoothing earnings through sleight of hand and reserves management. We also didn't have any namby-pamby audit partners waltzing into the boardroom pretending they had spines, either. (I really hate those Enron smartasses. They just had to go and ruin a sweet little game for the rest of us.)

"Anyway, I'm sure Jeff'll do a helluva job, 'cause he's a helluva guy. Why, Suzy likes him so much she told me she's gonna give him a great big interview the next time I go out of town on a speaking jaunt. And Suzy, well, I trust her judgment, 'cause she's a helluva gal."

On second thought, Jack, maybe the whole public appearance and speech thing wasn't the best idea in the first place. I know you pride yourself on your outspokenness, but where I come from there's only one thing that comes "straight from the gut," and it don't smell pretty.

Maybe in the future you should perform your evacuations in private, rather than depositing your straight talk in a steaming little pile on national television. That way, you won't have to apologize later for stepping in it.

Stupid old man.

© 2008 The Epicurean Dealmaker. All rights reserved.

Born and Bred in a Briar Patch

"Who asked you to come and strike up a conversation with this Tar-Baby? And who stuck you up the way you are? Nobody in the round world. You just jammed yourself into that Tar-Baby without waiting for an invitation," says Brer Fox, says he. "There you are and there you'll stay until I fix up a brushpile and fire it up, 'cause I'm going to barbecue you today, for sure," says Brer Fox, says he.

— Brer Rabbit and the Tar Baby, retold by Catherine Farrell

Katy bar the door!

Having failed to unwind their ill-thought-out investments in Delta Air Lines and UAL and slink off quietly into a dark corner, as I recommended last November, Pardus Capital has suspended redemptions by its investors.

Pardus Capital Management, the hedge fund manager that has pushed for the merger of United Airlines’ parent UAL and Delta Air Lines, has suspended investor redemptions because the $2 billion firm has been hit by market volatility this year.

“The actions we have taken will allow us to protect the funds and their investors from the external short-term pressure of the broader financial markets,” New York-based Pardus said Monday. “The funds have been disproportionately affected by recent market volatility.”

Pardus, an activist investment firm that takes big positions in a small number of companies, owns stakes in both Delta and UAL and has proposed consolidation in the business. It’s also been active in the automotive industry, with positions in General Motors Corp., Delphi Corp.

While it is true that the volatility¹ of Pardus' positions has increased dramatically—along with that of every other stock in the market—I seriously doubt that is why they are barring the door to withdrawals from their long-suffering investors. After all, Pardus is an activist investment fund, one which takes a few concentrated stakes in purportedly undervalued securities, finances them entirely with equity, and pushes for change to unlock hidden or trapped value. Day-to-day or week-to-week fluctuations in the market price of their positions should cause them no worry whatsoever, since they don't get hit with margin calls. Furthermore, the activist investor model requires a certain amount of patience, since even its most impatient practitioners recognize that it takes time to turn around a target company's strategy and performance according to their design.

Rather, I think the value of the Pardus funds has been "disproportionately affected" by something quite different: its managers' spectacularly crappy investment decisions. Airline mergers? The automotive industry? What's next? Changing corporate governance at a French software company?

Pardus has been among the worst performing big activists, losing about $800m, almost a quarter of its value, in November and December and almost another 10 per cent by the end of February, according to investors.

This isn't a case of a little excessive leverage coming back to bite an inattentive manager, but one of a manager purposely choosing to invest his LPs' funds in a couple—or three—of the biggest tar babies in the investment universe.

Now, the investors are stuck, with Pardus telling them not to expect return of their funds for up to two years. What befuddles me is what the Pardus managers think is going to happen in the next two years to pull their chestnuts out of the fire.

Deus ex machina is not a valid investment strategy, Mr. Samii.

¹ Volatility is a directionless measure of (stock) price variation, Children. Pardus's investors are banging on its doors because its positions are going down.

© 2008 The Epicurean Dealmaker. All rights reserved.