Herbalife and Bill Ackman in furious agreement

Today Bill Ackman announced that Pershing Square was settling an insider trading securities class action. To quote:

Pershing Square and Valeant have agreed to split the $290 million total settlement such that Pershing Square will pay $193.75 million and Valeant will pay $96.25 million. 

But Mr Ackman seems to think that a settlement of approximately $200 million does not say anything at all about the legitimacy of the case. Again to quote:

“We continue to believe the case had absolutely no merit,” said Pershing Square CEO Bill Ackman. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation.”

Herbalife - who previously settled a case for a roughly $200 million payment - is of course in full agreement.

I think it is the first time Mr Ackman and Herbalife have agreed on anything.

So let us savour it.




John

The Urban Dictionary is surprisingly up-to-date: nocoiner edition

nocoiner

A Nocoiner is a person who has no Bitcoin. Nocoiners (usually Socialists, Lawyers or MBA Economists ) are people who missed their opportunity to buy Bitcoin at a low price because they thought it was a scam, and who is now bitter at having missed out. The nocoiner takes out his or her bitterness on Bitcoin Hodlers, by constantly claiming that Bitcoin will crash, is a scam, is a bubble, or other types of easily refuted FUD. Nocoiners have little to no computer skills or imagination; even when they see the price of Bitcoin go up and its adoption spread they consider all Bitcoin users to be in a collective delusion, with only themselves as the ones who can see what is happening. This attitude comes from being steeped in the elitist priest cultures found at Harvard, Yale and Columbia, where anyone who is not part of their clique is treated with suspicion by default. The worst nocoiners are tenured academics and goldbugs. Nocoiners believe that the world owes them everything they want because they are part of an elite; they are hysterical liars, brats, prostitutes and losers.

I'm pretty sure Emin is a Nocoiner. Yesterday he made a Tweet about how Bitcoin going up was just a fad, and that a crash was inevitable. He's always talking Bitcoin down; if he had Bitcoin, he would never trash his own stash.

#bitcoin#nocoiner harvard socialist

Why settle for just one bubble?

Step 1. Be a marijuana thing.

Step 2. Be a bitcoin thing.

Step 3. ...

Step 4. Profit!

An initial coin offering for augmented reality smart glasses: you only live once...

This advert - offering another cyrptocoin - specifically for *really smart* augmented reality smart glasses marks the new crypto-high.

Apple pulls a Dell

The keyboard on my new (current model) MacBook Pro is sticking. So I take it to the Genius Bar.

It was two hours for an appointment - and that was fine - so they texted me and I came back in two hours. So I came back in five minutes.

The staff member cleaned most the keys but broke one off. Ugh.

So they want me to check the machine in so they can replace the top-plate to which the keyboard is irrevocably stuck. Fair, unpleasant.

But now they want it for three to five days AFTER the top plate has come into the shop. They won't accept me dropping it in the morning they are fixing it. Instead it needs to wait in queue whilst they let the time elapse. (I can and do use the machine with a remote keyboard.)

I never thought I would say this - but this was the sort of behaviour exhibited by Dell before Dell blew up. Intransigent, arrogant, and actually not caring about the needs of customers.

I am genuinely surprised. I thought this company charged premium prices and gave premium products and premium service.

At least on the service I was wrong.





John

PS. Apple Bondi Junction. Customer service officer Morin.

PPS. Many have pointed out consistent problems with this keyboard. Try this... https://theoutline.com/post/2402/the-new-macbook-keyboard-is-ruining-my-life

I am getting close to just asking for a refund of the machine (faulty design) and going back to a Dell.

Some thoughts on the firing of James Damore from Google

As the world knows by now James Damore was fired from Google for writing a memo that questioned Google's diversity policies.

As a holder of Google stock I have a few thoughts on this.

Software engineering is a job where you cannot replace one brilliant software engineer with six adequate ones. It really is a job where the best people can lever their work over millions of computers and the whole world.

If you are Sundar Pichai (the CEO of Google) your job is to attract, hold, motivate and direct the very best software engineers - and to make sure their work does scale over the whole world.

In doing this he literally should not care whether men are better software engineers or mathematicians on average than women. Google should not interested in average. Google should be interested in the best.

I will hold Emmy Noether up as better than pretty well all men in all current mathematics and physics faculties. There may be a dozen in the world who can match her.  Probably less. If she pops along you should hire her. Even if women are less good on average at maths than men that should not matter. Emmy Noether is clearly better than anyone else you are going to hire this year.

The truth or falsity of James Damore's assertions in the memo literally do not interest me and should not interest Sundar Pichai. His memo made his job of hiring the the best harder. If the best happened to be a woman or another minority they might prefer work somewhere more welcoming.

If I were the Google CEO I would not have just fired James Damore. I would have been proud to fire him.

There is a lot of talk about Mr Damore receiving compensation from Google for his firing. For what? He broke the Google code of conduct and was fired for cause.

Yes, his feelings and the feelings of many delicate petals on the right are hurt.

But they are no more entitled to compensation for hurt feelings than anyone else.

If Sundar Pichai wastes shareholder funds compensating him I will be disappointed.

And don't think for a moment that this is a liberal line. Google is and should be a proudly elitist place for a software engineer to work. And Mr Damore was fired because he offered a phoney elitism (based on gender rather than competence).

Phoney elitists like him don't deserve to work in such a place.

Mr Damore was right on one thing. Diversity shouldn't be valued for its own sake in such a place either. But I haven't noticed a lack of elitism in Google staff I have met. They positively drip elitism.

Diversity is valued though and it seems is valued for the right reason. It gets you a better chance of recruiting the best.




John

E&P decoding - Pioneer Natural Resources edition

I think I know what this means but as per usual the internet is full of people who know far more than me. You dear readers are my 20 thousand person expert network. 

This is from the Pioneer Natural Resources conference call. I would really love people to explain it - preferably word-by-word in the comments. In particular I want to understand the drivers of the pressure changes (which matters for proppants for instance) and how the four-string casing deals with the problem.

Thanks in advance:

We've mentioned this in all the slides and such, but we did fall behind operationally on our completions in the Spraberry/Wolfcamp, in large part due to unforeseen drilling delays. What happened is the delays were really the result of unexpected changes in pressure regimes in the field.  

So what we've seen is increasing pressures in some of the shallow formations that means we have to mud up substantially to deal with that problem and then we immediately then are drilling into lower pressure depleted zones. And we were at the knife's edge of this really through all 2016. But these pressures have changed in a subtle manner such that we now find we had a higher percentage of what we refer to as train-wreck wells, where we have all kinds of problems with lost circulation and other issues because of this pressure change. 

The easiest way to remediate this is with a drilling plan takes us from a three-string casing design to a four-string casing design. So that's exactly what we've done. We solved this issue. We have addressed it and we've done so by changing the casing design, which has proven to be very successful. 

One thing it does is it does increase the well cost substantially, about $300,000 to $400,000 per well, and it does increase our time of drilling five days or so. But we're also nickel-and-diming away other costs in these wells to try to get that money back, including changing out surfactants and other things to try to reduce costs and reduce days. So we're not going to stand pat with this increase. We're going to chip away at it and reduce it. 

Cumulatively, though, what happens is because we've impacted the schedule, we've also then reduced the number of POPs we're going to be completing this year by about 30. Those essentially will move into 2018. That's 100% due to these drilling delays I mentioned, which I believe we now have mitigated. But you have to also factor in the delays not only result in the deferral of wells you put on production, but also loses production days for all the wells that get delayed that are going to be POP'd in the future, particularly later in the next year. But the point is we're now dealing with that. I think we have that squared away. I have a later slide we'll talk about more detail on that.

The cyclicality of share buy-backs: Costco edition

Currently looking through Costco - one of the finest companies I know. (We do not own a stake...)

Anyway this is hardly a Costco specific comment - but here is a run of their buy-backs (after issuance/option exercise etc). Negative numbers are net repurchases.

Year Ended	Cash from stock issuance ($million)
2,016	-412
2,015	-395
2,014	-212
2,013	77
2,012	-459
2,011	-355
2,010	-348
2,009	2
2,008	-548
2,007	-1644
2,006	-1039
2,005	-135

The company - as you can see - has bought back a lot of stock. The lack of a buyback in 2013 followed a purchase of a non-controlling stake in Costco Mexico.

But whatever - the company stopped repurchasing stock at the bottom of the market in 2009 - only to start again in earnest as the market and their stock price went up.

This happens in almost only cases - and in this case I do not think the board is mendacious in manipulating their stock. It just happens.

And it even happened with Charlie Munger (who is more than passingly rational) on the board.

Just saying.





J

E*Trade advert...

In the old days an advert like this would have marked the top.

Completely floored to see adverts this extreme again.

Source: Twitter...

Hat tips: Charlie Grant, Inner_Scorecard.

Canadian non-standard mortgages: a state of play

Regular readers of this blog will be aware that Home Capital Group - a Canadian non-standard mortgage lender - is in financial trouble.

The gossip is that the regulators in Canada are also putting some pressure on lenders to improve underwriting standards. There is similar gossip in Australia, however Australia has not had the collapse or near collapse of any lenders.

Canada Mortgage & Finance Group (CFMG) is a broker in the Greater Toronto Area (GTA). The CEO of CFMG (Ameera Ameerullah) writes a blog on LinkedIn which I have been reading for some time.

She has recently posted about the state of play for even slightly non-standard mortgages in the Greater Toronto Area.

Below (and without further comment but with her permission) I reprint her latest post.


-----------


CLIENTS ARE STUCK AND BROKERS SCRAMBLING - WHAT IS THE GOVERNMENT DOING?

Private lending rates increased and lending fees increased with LTV being decreased! Clients are stuck and brokers are scrambling to find options for their clients. Clients are placed in a very bad situation as they are in position of being sued since they cannot come up with the extra capital to close on alternative mortgages.

THE GOVERNMENT has caused tremendous issue for clients and the brokers community. We need Home trust back in the market. Presently no one is qualifying with the banks due to increased CMHC premium, lending restrictions and lenders requirement...it's killing clients not helping them!

Clients been saving for their down payment and closing cost but now they cannot close on their purchase due to down payment requirement and lending restrictions. Qualifying rate and amortization cut back on insured deals is causing greater concern. Most B lenders are affected with what's happening with Home Capital. Both the residential and commercial market is affected.

Private first residential mortgage in the GTA is now at 8.99 to 9.99% RATE - 65% LTV to 75% LTV. You'll obtain 80% if you're lucky and be prepared to pay higher rate and fees. Fees are 3 to 4% on a first now on private - This is INSANE. In fact many private lenders are out of capital. Options are minimum! These changes only affects clients and everyone having a tough time to close. Brokers are scrambling now to find alternative option for their clients since Home Trust is not funding and many other lenders who depended on Home trust money are stuck as well. How can a broker get by when they have to place their clients in an expensive private mortgage? There's no room for us to charge a fee so pretty much we are all affected. Only the big banks are benefiting from the Government change and yet they themselves are loosing business as no one can fit their qualifying requirements. Banks are pressuring their BDM to originate business - how can they when the Government ridiculous change affects the entire mortgage industry? Originating business is easy but closing deals have become horrid and clients pocket is feeling it.

The Government really need to make some immediate change as they have in the past year because with this trend home buyers are being placed in more debt as cost of borrowing on private capital is expensive. These changes are hurting clients and will hurt the economy. AWFUL STATE THE INDUSTRY IS IN. If one doesn't have about $1600 - they cannot live in a decent one bedroom apartment even by renting. Clients that purchased from builders and are set to close are having a difficult time to close in allocating extra funds.

Brokers should start to voice their opinion as this is our industry and if you don't speak up then we are all doomed with our clients!