Details of Cerberus offer for Air Canada

It is verging on scandalous that the details of the latest (and supposedly final) Cerberus Capital offer for Air Canada have not been made public. Yes, tiny details have leaked out, and yes, ordinarily such auctions are better handled in private, with only the final details made public once something has been agreed to.

But this case is different: there is the perception that Victor Li’s Trinity Time Investments, as sole effective bidder, is getting a sweetheart deal for non-economic reasons. After all, earlier reports made clear that Cerberus’s prior offer was more than $100-million more than Li’s last offer, yet Li was picked to win by the Air Canada board, largely because of Li’s Canadian passport. (Under Canadian law, foreigners are constrained to no more than a 25% ownership position in airlines.) Investors deserve to know what is really going on.

“Sigh”: Political economics of Brad DeLong

I like Brad DeLong a great deal. He is a smart fellow, and he has many wonderful insights, especially when he talks about the history and evolution of markets and industries. But when he mixes politics with his economics, as he is prone to do as a Democrat and card-carrying non-supporter of current President Bush, something comes over him.

I won’t get too deeply into it other than to say much of it is largely captured by this: “*Sigh*”. It is what Brad says when something goes less well than expected (according to him) with unemployment, interest rates, growth, and/or the U.S. economy. But too often the “sigh” is a front for statistical cherry-picking. We had another example today, with Brad pointing out that unemployment insurance claims are rising. He knows as well as I do the amount of noise in these figures, and he has pointed it out before — when it suited him, as opposed to suiting the Bush administration.

Worthwhile Canadian initiative

Years ago the New Republic ran a contest to find a more boring headline than “Worthwhile Canadian Initiative”, a clunker from the NY Times. While it’s not quite as bad, Canada’s Journey to an Information Society is darn close. Nevertheless, the report from Stats Canada is interesting, at least to we policy wonks, as it brings together data and analyses to trace Canada’s economic and societal transformation to a more technically enlightened country. You can read the full PDF report here.

Blaming mutual fund buyers rather than sellers

The current Forbes is cited by economist Tyler Cowan at Marginal Evolution as he makes an entertaining argument blaming mutual fund investors for their performance problems, as opposed to blaming fund trading scandals. In particular, he pulls the following factoids:

How much investors lost, over the last ten years:

  • By attempting market timing, rather than “buy and hold”: $1 trillion
  • From high mutual fund fees: $20 billion
  • From crooked trades: $10 million

    Does this mean, as Alex argues, that mutual fund investors are their own worst enemy? Well, sort of. Certainly it is well understood in financial circles that investors trade too often, stick with misperforming funds longer than they should, and generally chase last year’s winners and ignore reversion to the mean. But it is slippery logic to create an equivalency between that behavior, over which investors have control, with other costs over which they have no control and incur without informed consent (e.g., crooked trades, etc.). Granted, the former costs are much larger than the latter, but that hardly absolves “crooked traders” of criminality.

  • Professor profits from market timing

    The story this morning that one of the chief critics of market timing also profited from it puts a neat point on how tricky this issue is. During the middle of 2003, according to the WSJ, Stanford professor Eric Zitzewitz was advising Eliot Spitzer’s office while starting up a timing-trade operation. According to the story, he allegedly made $500,000 on $19.5 million in capital (10% annualized) during a three-month period this summer.

    Most are focusing on the essential contradiction of having someone criticize the industry while (legally) profiting from it. I’m more mischievously sanguine, and am tickled that Zitzewitz did more than most finance professors and got his hands dirty in the market. More interesting, however, is how (relatively) poorly he did. Zitzewitz turned in only 10% annualized returns, as opposed to the 35%-70% annually he forecast from the strategy. Perhaps some critics are right: market timing is a money-losing strategy that just happens to be over-loved by the high-IQ set.

    Selling prices by the pound

    There is a fascinating meta-price market emerging at Ebay, according to this WSJ article. The online auctioneer is taking the natural step of selling, in volume, its sale prices. For example, it is tracking and selling price trends in everything from Sony DVD players to Ford Explorers. All sorts of people are using the data, from Intuit (tracking electronics price declines to estimate the value of charitable gifts) to the PGA (who are tracking the used-golf-club market). As has become standard wrongheaded practice, of course, the people most directly affected by this sort of thing — like Kelley’s Blue Book, the main arbiter of user-car prices — are myopically saying this will have no effect on them. They’re wrong.

    Myth of media concentration

    In the mid 1980s, the top ten media companies accounted for almost half of total industry revenues. The figure was only slightly higher by the late 1990s. The January issue of Reason magazine tears into the myth of media monopolies, pointing out they are neither as common nor as powerful as some seemingly think.

    Biographies Better than Canada, says Bill Bryson

    Here is author and travel-writer Bill Bryson in a Financial Times interview this weekend. Apparently he’d like to write a travel book on Canada, but he has been told that is not such a good idea — and so he is thinking of writing a biography instead. Ouch.

    At the moment [Bryson] isn’t working on a particular book but has 10 ideas he is researching. “I would absolutely love to do a book on Canada,” he declares boldly. There’s a pause as I struggle but fail to say something enthusiastic. “I find Canada fascinating, particularly its relationship to the US.
    “But publishers beg you not to do a book on Canada. Nobody wants to read a book on Canada. Even Canadians don’t want to read a book on Canada! My wife would very much prefer it if I did a book where I stayed at home, which makes a book on Canada doubly difficult. So I also have ideas for other things like biographies.”

    What will they thnk of next: Beer as new CFO

    American Airlines Names Beer as New CFO (Reuters)


    Reuters – American Airlines said on Friday James
    Beer, a vice president for Europe and Asia at the world’s
    largest airline, will be its new chief financial officer.

    Skype’s VoIP ambitions Skype co-founder

    Skype’s VoIP ambitions


    Skype co-founder Niklas Zennstrom explains why telephony is bound to wind up as just another application on the Internet. Further evidence (if needed) that I was spot-on with my WSJ OpEd today saying that both Vonage-style VOIP vendors and and incumbent voice-oriented telecoms are doomed.