Got A Complaint?

I really don't want to hear it. Send it to these people.

Holiday Report

The animal? Delicious.

My contribution? Improving.

Tree missing the house? Thanksgiving indeed.

A Fate Worse Than Being A Turkey in November

I've recently been thinking a little about slavery. It started from an anthropological and historical perspective as a result of a book I'm reading. I'm reminded of it regularly as I pass the hidden stairway to our home's third floor; a stairway that we were told by the previous owner had been used to hide people traveling on the Underground Railroad. The topic was raised again two nights ago as a result of a comment my mother-in-law made.

I was deleting email at my desk for a few minutes between splits with the missionaries and a late evening business appointment. From the other room I overheard bits and pieces of a conversation Diane was having on the phone, I assume with one of her daughters. I don't know the context, but she said something like, "This house was built during the time of slavery and over the last couple of days slavery has been in effect again." Her actual statement was undoubtedly more eloquent. Given the amount of unpaid labor Denise's parents have been pressed into during their visit to our home this week, her words are probably accurate.

All these thoughts about involuntary subjugation have recalled one of my favorite bits of Book of Mormon imagery. In 2 Nephi 26 the prophet describes Satan leading people through temption with flaxen cords, "until he bindeth them with his strong cords forever." Once I understood the message behind that simple image it became a powerful motivator for trying to avoid willingly taking on seemingly minor forms of bondage. As horrible as the chains of physical slavery are, spiritual slavery is worse. I'm grateful this year for a Redeemer who invites, gathers, calls, leads, and provides an easy yoke that frees all those willing to trade in the shackles of sin and death.

Happy Thanksgiving.

Ya'll Come Back Now

Today's learning for make benefit glorious humor of my lunch time (if anyone finds a PG-13 version of that film I will provide the popcorn) is accents. Not effete letter modifications, but the determination of regional speech patterns.

This is quite interesting and seems accurate. At least it was in my case.

Brains, Igor! I Need More Brains!

I am fascinated by many aspects of physical science. Though I lack the requisite knowledge of mathematics, physics, chemistry, biology, astronomy, or any other qualification to be involved with real science, I enjoy learning what I can from the layman's perspective. My interest leads to some occasionally odd lunchtime reading.

While reading about advances in organ transplant and development, I learned from a leading evolutionary geneticist that most people would not want to have their brain replaced by someone else's. I want to host a dinner party for those people who do want to have their brain replaced. Any volunteers?

You talkin' to me?

Today I got an email from Ms Penzer with an oblique reference to the title of this blog. Knowing that she was working on her own blog last night I figured she was hinting at her discovery of Delicious Animals. Not only has she somehow found it, but apparently other friends have too.

I'm not sure how I feel about this. I knew the day would come eventually, I just didn't expect it so soon. What if I get blog performance anxiety? Since I'm not as humorous as many of the friends, not as creative as any of them, and far less cute than my children I need to find a niche. Looks like digitalization of my mental ramblings is no longer going to cut it.

All The Small Things

I am often frustrated in Grand Central Station. It's very rarely anything significant. I dislike most of the advertising campaigns whose posters demand attention as I walk through the corridors. I don't like the people who come to a full stop in front of the monitors displaying track locations. I can't figure out why any train I need to take ever has to be all the way down on the lower level. What put me over the edge was the most recent recorded public address announcement.

The woman who makes it was a conductor on one of the trains I took with some regularity a year or so ago. She used to recite the full set of announcements about every two minutes until the train departed. This was frustrating to me as I try to arrive a least ten minutes before the scheduled departure to ensure I can get a seat. (I'm not a fan of standing.) Repeatedly hearing about all the stops we were going to visit, the courtesy warning to keep feet and baggage off seats, and the fact that tickets purchased on board the train are more expensive made me dislike the intrusion of her voice into my head. And now I hear that voice every time I walk to or from a train. The pacing, emphasis and even diction are all off. Here's her announcement:

"Attention Harlem, .... Hudson, ..... and New Haven CUSTomers. Please watch .... your step .... and beware. ..... OF the gap .... when entering ... and exiting th' train. Thangoovery mUCH."

This really irritates me, even thinking about it now.

Many aspects of Manhattan frustrate me, so why I am particularly bothered by these little things in the train station has been perplexing. I'm not particularly self-aware (and certainly not aware of others often enough) so I decided to think a little about why these minor things irritate me. I think it's a case of frustration by association. In the morning I am tired, my thoughts are already on the projects that lie ahead, and I am not thrilled to be starting ten to thirteen hours of work. In the evening I just want to get home and don't want to deal with the commute. So maybe my frustration is an indication of what a dedicated husband, father, and employee I am....

Nah, that can't be it. I'll have to keep thinking about this one.

It's Beginning to Look A Lot Like...

Manhattan Non-Denominational Year-End Tourist Season.

I can tell it's time when on my 6:40am stroll from Grand Central to the office I pass a seventy foot Norway spruce lying on a flatbed truck at 49th street, two dromedary camels along 50th, and three overly perky and underdressed women on 6th avenue.

Hand Holding

I'm often asked what I do for a living and I never know how to respond properly. The answer is different depending on who is asking. I can't give the same answer to a school teacher as I do to another banker. Usually I just shrug and say I make rich people richer. I try a little harder to explain my job to students or job seekers who are genuinely trying to understand. Even then it's tricky.

The same situation occurs when trying to explain how to properly pitch an investment idea. I rarely see ideas presented correctly but have tired of trying to correct people. Currently two undergraduates at the University of Utah are interning for me. They are about to make their first stock pitches and asked for some direction in that process. Copied below is what I sent them. Now going forward I can tell people who ask how to present an investment idea that the key aspects are online and that if they are smart enough to work on Wall Street they will find it.
_______________________

Here's a summary of the most important parts of an investment idea. They are roughly in the order I think they should be presented, but I'm not picky about that. This template will not produce a full write-up on the idea. It's just a one- to two-page summary of why you think it's worth doing the real work.

Thesis - What should we do and why?
The thesis should be a single sentence containing the action (buy or sell) on the equity and the most important reasons justifying the action. For example: Buy Grupo Mexico due to its deep discount to the sum of its parts, market mispricing of Asarco bankruptcy liability, and upside potential from approval of Ferrosur merger.

Target Price & Trading - What is the upside?
Ideally, you should have a quantitatively derived price you believe the equity will trade to. This should also include the time in which you expect the target to be reached. If there is a particular entry point you recommend (eg after an event has occurred or a certain stock price level reached) include that as well. For example: Conservative sum of the parts analysis produces a €125 target for Umicore in the next six to nine months. Assuming disposal of zinc operations and a re-rating in line with Johnson Matthey, there is another €25/share in value. Stock has chart and valuation support at €95, attributing no value to the zinc business and 20% discount to JMAT on the core operations.

Key Points - Detail the facts that justify your thesis
It's crucial that this section includes FACTS. Think like a scientist -- if someone else is verifying your analysis, could they dispute your facts? If so, you have opinion, conjecture, or analysis rather than fact. Also, if it can't be quantified, it isn't a fact. From your facts you make the points that support your thesis. For example: Hewitt Associates has $400m in cash and has guided for $250-$270m FCF in '06. Through nine months, the run rate was $281m, making guidance look attainable. At $22/share, the ex-cash FCF yield is over 12.5%.

You should have one section (at least a sentence, no more than a paragraph) for each key point in support of your thesis. You can also include a couple of additional sections for non-essential points, but generally four or five points are sufficient.

Catalysts - What will make your thesis work?
You need to identify the factors outside your thesis that will make it work. If the stock is too cheap, what will make the price move higher? If it's a restructuring play, who will do the restructuring and when? Ideas that require a takeover (LBO, merger, controlling stake purchase) to work are rarely worth considering. Quarterly or annual reporting is only a catalyst if you can predict with high certainty what will happen and outline it in advance. (eg No one wants to hear about a cheap stock that will move higher when good results are announced on the quarter. You're either guessing or have inside information. Neither is of any use.) For example: Reduction of production targets by other coal miners will increase market conviction that commodity prices have found a floor. Stabilizing coal prices will support the equity while the other factors are resolved.

Risks - If your thesis is proved incorrect, why will it be so?
Of course there is no way to identify everything that can go wrong with an investment idea. However you must know the weaknesses in your argument. By definition, none of your key points will be incorrect -- those are facts and so aren't open to dispute. The conclusions you drew from the facts may be wrong. Management can do something unanticipated and stupid. Bad men can fly planes into buildings. Those are risks you need to consider and quantify where possible. For example: If following the divestiture of Umicore's zinc operation the shares do not re-rate to the extent forecast, the results would be less positive than predicted. Every 50bps in EV/EBTIDA multiple is worth approximately €6.

Valuation - Provide the numbers that support your idea
Be sure your thesis is supported by valuation. If you're pitching a value idea, it better be cheap. Growth stocks should actually be growing. Be sure you distinguish between absolute and relative valuation. The specific information you include will vary from company to company. Generally you'll want to provide current detail for your idea, key peers, and a sector or group average. Historical valuation information for your idea and the sector is also useful. If you need an example of a valuation table please let me know.

So It's Come to This

I just received an email from my wife. Before detailing its contents, let me explain our communications pecking order:
- Phone Calls are for urgent or deeply emotional issues
- Emails are for family or SmartNoise business
- Instant Messages are for updates, questions, and communication through the day

In terms of volume, most of our Monday-Friday 6am to 7pm communication is via IM. It allows Denise to reach me without going through my assistant, which she prefers. It also allows each of us to try initiating non-time sensitive conversations without interrupting the other. If one of us is busy or away for a few minutes the message waits until we can deal with it. It's a good system.

One more bit of background. Last night at 11pm I finished upgrading the wiring and electrical outlet for Denise's computer equipment. Since it was well past my bedtime, I selfishly chose to sleep instead of setting up her computer.

Here's Denise's email in its entirety, "Sorry no IM on your comp."

Apparently she sat down at my computer and discovered that I don't have an instant messaging program installed. So now we are incommunicado despite the landlines, mobile phones, fiber optic internet connections, email programs and Blackberries that clutter our lives.

Does This Mean She Has to Marry GI Joe?

Denise's family loves nicknames and plays on words. Her father is a master of them. Through time, many nicknames undergo further modification such that they are unrecognizable next to their original forms. Kind of like modern corn compared to its predecessors. As a result, my sisters-in-law and wife are known as Sputter, Sputter, Bena, and Geener. Yes there are four of them and yes two of them have the same name. Please don't ask me to explain it.

Much like the result of selective genetic manipulation in corn, this renaming phenomenon seems to be amplified in one of our children. Caroline, who turned three this summer, has been making up her own lyrics to songs for some time. She renamed Rachel "Shira" (this apparently relates to a children's show). She insists on calling Denise and I "Mother" and "Father" in spite of the fact that no one else in the family does this. Within a day of moving into our new house she decided the back stairs, which wind in a tight spiral, were castle stairs. This led to each member of the family receiving a royal title. She condescended to name me King, for which I have granted her a particularly fine Duchy in the north country.

My current favorite renaming is for Emma. Caroline doesn't get all the credit for it, though she did deliver the coup de grace. One of the nicknames Denise uses for Emma is "Ermy Germy". Again, please don't ask me to explain. Because Caroline has lived all her life in New York, she has a recognizable accent. Somehow she's twisted the soft 'e' to a soft 'a' and modified the second word. Thus my oldest daughter, the pacifist who cowers at the mere sight of my paintball gun, is now known as Army Guy.