Saturday Stew

July 11, 2009

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With the slotting of the weekly columns on Wednesday, Wednesday Wisps are probably going to be few and far between. Until the schedule is completely shaken out, Saturday Stew will take its place. Just like Wednesday Wisps, there will be a bunch of small ideas in the stew.



Twins prospect B.J. Hermsen grew up a hop, skip, and a jump from my hometown. Iowa is, I’m fairly certain, the only state that has summer baseball for high schoolers – other states have it in the spring. This makes is fairly unusual for Iowa kids to get drafted very high, because they peak later than the other players, simply because the schedule is later (in fact, the season is still ongoing when the MLB draft occurs).

Last year, Hermsen dropped to the 6th round. He likely would have been picked higher, but he was also a stud quarterback in football, and there was uncertainty that he would sign. Well, the Twins offered him $650,000 and Hermsen signed.

At long last, Hermsen made his minor league debut on June 24. How did he do? He tossed six perfect innings. The bullpen closed the deal and they finished with a combined no hitter. Not a bad debut. Hermsen probably hated to come out of the game, but as a young kid who almost certainly was on a pitch count, the Twins front office probably would have fired the manager if he had pushed him too far in his pro debut!

How did he do for an encore? Not bad – he allowed 2 runs (1 earned), 4 hits, and a walk in 5 1/3 innings – pushing his ERA up to 0.79 for the season.


And speaking of great pitching performances, Rockies farmhand Brandon Hynick was the Pacific Coast League pitcher of the week for the week ending July 5. He pitched in one game during the week, and threw a 7 inning perfect game. The teams were completing a suspended game that day, as well as playing another game, hence the shorter games (it is relatively common for minor league teams to play 7 inning games when there is a double header). It still counted as an official game, though – the 9th perfect game in the storied history of the PCL. The kicker? He did it at home, in the sky high altitude of Colorado Springs. If you think the air in Denver is thing, go to Colorado Springs some time!

Bluffer vs. Bargain

In January, I wrote an article entitled The Bluffer and the Bargain, highlighting Jason Varitek and Andruw Jones.  The gist is that I thought Varitek had overplayed his hand and that Jones  was a great pickup for the money, since the Dodgers were picking up nearly all his salary.

Nearly six months later, how are these guys doing?

Varitek is actually having a pretty good year, with  12 homers and a .825 OPS (through July 7).  This means I’m wrong, right?  Well, no.  In January, I said that he had put himself in a bad position by declining arbitration and would likely not sign for more than $5 million – half his 2008 salary.  What did he sign for – $5 million.  And most people felt that the Red Sox could have squeezed him a bit more.

Andruw Jones signed a $500K deal with the Rangers (don’t feel too bad for him, as the Dodgers are also paying him the remainder of a 2 year, $36 million deal he signed befor the 2008 season).  Jones has been a part time player and has been a bit up and down over the course of the season.  As I write this article on July 8, Jones just launched his 3rd homer o the game – bringing his season total to 14 homers in 160 at bats.  Bear in mind that a lot of players have around 300 at bats already.  This is great production from a $500K player.  Well played, Rangers.

Michael Jackson

Michael Jackson died with  a reported $400 million in debt, but also with substantial assets, including the rights to his own music and the music of other artists (including a share in the music of The Beatles).

I have a thought on a way for the estate to raise cash on pay off the debt.  Incorporate the major assets – form Michael Jackson Entertainment, Inc.  Then have an IPO.  Jackson fans – as well as other investors – could own a share of Jackson’s assets.  With the outpouring we have seen since Jackson’s death, what sort of money could an IPO raise?


I was discussing the auto industry with a friend of mine as we enjoyed lunch at the outside grill at Nelson’s Deli in Cedar Rapids (great burgers and brats!).  I began the conversation with this rather unconventional thought – “If we took all the money that was spent on research and development and infrastructure for cars and planes, we could build a nationwide teleporter network.  We’d only need one pod  per city block, since they would only be in use for a few seconds at a time.

After Dave nearly spit Coke all over the table, he countered with a rational idea.  “How much cheaper would cars be if they didn’t include a warranty?”  At first, this seems like a crazy idea.  Who would buy a car without a warranty?  Warranties are a big reason why people buy new cars.

But take a deeper look at this.  Warranties, of course, are not free.  Car companies build the cost of warranty repairs into the cost of the car.  Basically, you are paying for the expected average cost of warranty repairs.  That doesn’t sound too bad, right?  Except that since warranty work can only be performed at authorized dealers, they’re building in the cost of dealership labor and OEM parts!  If you’re like me, you know a guy who can fix things with cheaper, non-OEM parts, as well as cheaper labor.  And my guy is just as good as the dealer (in some cases, clearly better than the dealer).

I don’t see this idea actually gaining any traction at all, simply due to the huge financial risk when it comes to cars.  Perhaps, though, there’s room for a warranty that only covers major repairs – perhaps with a $500 deductible.  How much money would this shave off the sticker price?

All the news that fits, we print

June 6, 2009

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David Carradine

David Carradine, most famous for his roles in Kung Fu and Kill Bill during a long and successful acting career, was found dead in his hotel room in Bangkok.  He was 72.  He was found hanged, and the police are saying that it was a suicide.  Carradine’s manager and wife are very skeptical and believe that foul play was involved.  I would tend to agree with the foul play angle, although we’ll certainly find out more about this in the coming days.


Nadya Suleman, a/k/a Octomom, is calling Jon and Kate Gosselin “attention seekers”.  We see a lot of case of hypocrisy in the world today, but this one has to take the cake.  In case you’re one of the two people who doesn’t know, Jon and Kate (plus eight) are having marital problems.

On the topic of Nadya, the Octo family will be featured in a reality show.  Nadya’s autobiography will also be on the shelves soon.  My suggestion would be to boycott everyone involved.  I plan to boycott all companies that advertise on the show, and well as the publisher of the book.  I buy a lot of books, so my boycott could hurt the publisher a bit.  Vote with your wallet.

Missing plane

An Airbus plane traveling from Rio De Janeiro to  Paris dropped off radar and is presumed to have crashed in the Atlantic Ocean.  Searchers thought that they may have found the wreckage earlier this week, but authorities now say that the wreckage is not from the aircraft.  I am a bit curious about what the wreckage IS from.  I’m hoping that the plane simply landed on a remote island and has not been able to open a line of communication, but that seems rather unlikely.  The locator device within the plane’s “black box” will only emit a signal for 30 days – after that point, it may be impossible to find the plane.


GM filed for chapter 11 bankruptcy this week and has been selling off some of its brands.  Hummer was sold to Chinese company Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd.  and Saturn will be sold to Penske.  Pontiac and Saab are still on the block.  The core GM will see its ownership change – 60% of the company will be owned by the US government, 12.5% by the Canadian government, 10% will be owned by creditors, and 17.5% will be owned by the UAW.  It is expected that the governments will only be short term investors  until a more permanent buyer (Fiat?) can be found.

Obama in the middle east

President Obama is in the middle east this week.  He gave a speech in work he advocated both sides working together, rather than letting our difference define us.  Peace in the middle east is a tall order – if Obama can establish lasting peace, clear room on Mt. Rushmore!  I think it would be great if people COULD get beyond their differences.  We’re on the earth for a short time – why waste so much of it squabbling?

News Recap

May 18, 2009

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Auto dealers

Nearly 2000 auto dealers were informed by GM or Chrylser of the manufacturer’s plans to terminate franchise agreements.  The impact to GM and Chrysler is not likely to be very large.  For example, 90% of Chrysler’s sales volume come from about 50% of their dealers.  Stand this stat on its head, and it tells you that Chrysler could terminate agreements with half their dealers and lose only 10% of their revenue.  For the dealers affected – many of them longtime family businesses – the impact will be much larger.  Some dealerships were diversified with agreements with multiple manufacturers and should be able to make up some of the shortfall by focusing on selling the other brands.  Others, however, had all their eggs in one manufacturer’s basket and will simply be unable to sell new cars unless they are able to procure a franchise agreement with another manufacturer.

Gay marriage

Gay marriage continues to be a hot topic.  California’s supreme court is set to rule on whether or not to overturn the state’s ban on gay marriage that was enacted by proposition 8.  The court overturned the previous ban on gay marriage last May.  New Hampshire’s governor has said that he would approve a gay marriage bill if the legislature changes the bill to allow certain protections for churches.  The legislature will vote on the altered bill this week.  Gay marriage is being debated in several other states.  Currently, gay marriage is legal is 6 states – California, Connececticut, Iowa, Maine, Massachussetts,and Vermont.  Once this numbers gets to about 15, I think there will be a tidal wave of states that pass bill allowing it.  With Democrats (who are bigger proponents of gay rights) in control in many states, this would be the ideal time for them to move forward with gay marriage bills, expecially with a currently high level of public support.

Governors and Senators

Republican senator Kay Bailey Hutchinson has decided resign in order to run for governor in 2010.  On the flip side, Florida governor Charlie Crist has decided to run for senate in 2010.  As critical as Florida has been in recent elections, a Democratic pickup in the Florida governorship could be just what the Dems need to tilt the balance a bit more to the left.

On the Bunning front, Kentucky Republican senator Jim Bunning has decided that he will indeed run for re-election, in spite of previous reports to the contrary.  Ron Paul’s son, Rand, may join in the fray in the Republican primary.  Circle this one as a race to watch.  Hall of Fame pitcher Bunning has become an embarrasment for his party, and his won party make seek to undermine his efforts at re-election.  Bunning narrowly won in 2004 and would likely lose to a strong Democratic challenger.

Farrah Fawcett

There’s another reason to like Farrah Fawcett.  She became convinced that someone at UCLA medical center was leaking her medical records to the press.  In order to confirm her suspicions, she intentionally withheld news from her family and friends when her cancer returned in 2007.  When the information found its way to the National Enquirer, Fawcett knew that someone at UCLA was the source.  An investigation found that employee Lawanda Jackson was responsible for the leaks.  Jackson was convicted, but died of cancer before she could be sentenced.

Fawcett’s actions have raised awareness of the seriousness of patient privacy and the need for harsh penalties for those who breach that privacy.


Note: inaccurate information regarding the California Supreme Court has been corrected.

Auto industry saga

May 11, 2009

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This week, Chrysler announced plans to file for chapter 11 bankruptcy protection.  This is not liquidation (chapter 7).  The intent of chapter 11 is to give a company time to restructure its debt.  In the case of Chrysler, it appears that it will emerge from bankruptcy under joint ownership of Fiat, the United Auto Workers union, and the United States Government.  Current majority owner Cerberus Capital Management will cede its share of the company

In another corner of Detroit, General Motors may be preparing for a bankruptcy filing of its own.  While GM’s 1st quarter loss of $6 billion was better than what industry experts had expected, $6 billion is still a huge quarterly loss.  GM’s book value (assets – liabilities) is now about -$90 billion.  Once again, Fiat is being mentioned, this time as a possible buyer for GM’s European subsidiary.

Earlier in the year, I was talking with friends and mentioned that I would not be surprised if a foreign company jumped in and bought GM and Chrysler.  My thought, however, was that it would be a Japanese company.  Mitsubishi – a huge corporation with operations in several industries – was the company that I thought was most likely.  Toyota also seemed like a possibility.  I must admit that Fiat never entered my mind.

What is Fiat, exactly?  Fiat is an Italian company that was founded in 1899.  The most stunning revelation I discovered was that I was that Fiat owns a substantial stake in Ferrari – and has since the 1960s!    Fiat has won the European car of the year award 12 times in the last 40 years, more often than any other manufacturer.  Fiat is also the second largest agricultural equipment manufacturer in the world behind Deere (Fiat owns companies such as Case IH) and third largest construction equipment manufacturer, behind Caterpillar and Komatsu.  Fiat has additional interests in several other industries.  In short, it is a huge multinational corporation that manages operations in many industries and actually turned a profit last year – a net income of 1.7 billion Euros last year on just under 60 billion Euros in revenue.

The deal Fiat made with Chrysler was that Chrysler would give Fiat a 35% stake in exchange for access to some Fiat technologies (in particular, technology related to hybrids).  Certainly Fiat gave up some competitive advantages by allowing Chrysler access to the technologies, but on the flip side, they were able to acquire 35% of Chrysler for no money out of pocket.  Don’t be surprised if they do indeed pick up GM Europe for a song – and don’t be surprised if Fiat turns the GM and Chrysler units into profitable businesses in the course of the next decade.  Interestingly, GM once owned a stake in Fiat.  Fita had a “put” option, meaning that Fiat had the option of selling itself to GM at a particular price (market value, in this case).  GM declined to honor the option and paid $2 billion to Fiat (this was a penalty that was specified in the put option).  In essence, Fiat can use some of GM’s own money to buy GM Europe..

Another company that could come out of this mess as a winner is Ford.  A portion of the country has a strong desire to buy an “American” car.  It is quite possible that there will soon be just one choice – and this could allow Ford to significantly strengthen its market share.  I’m not suggesting that they would immediately pick up the entire market share of GM and Chrysler, just that they could carve out a large chunk of it.

From the perspective of the consumer, the one good bit of news is that the US government is providing a guarantee for the warranties of any US automakers that go bankrupt.  Surely there were some people who were delaying a purchase over fears that the warranty would be worthless if the manufacturer went bankrupt – they can now buy without that fear.

From an entertainment perspective, it will be interesting to see what sort of impact this will have on NASCAR.  The auto manufacturers provide financial support for team that race under their emblem.  Will the Chevys and Dodges continue to race in NASCAR in 2010?

GM bankruptcy / Southland killer

April 30, 2009

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A couple of news stories grabbed my attention today.

GM was unable to negotiate concessions with some of its bondholders and will have to file for chapter 11 bankruptcy.  This is reorganization bankruptcy, not liquidation bankruptcy.  The prevailing thought is that GM will emerge from bankruptcy in the hands of Fiat and the UAW.  Chryler will halt vehicle production for (at least) 60 days.  Their leasing arm will be folded into GMAC finance.  They will receive and additional $8 billion in bailout funds, which hopefully the taxpapayers will see returned to them at some point.  I have not seen any word on how this may affect the money that Chryslers spends on manufacturer support of Dodge teams in NASCAR (Dodge is a Chrysler brand).

On the bright side for buyers, this might be a good time to buy a Chrysler vehicle.  Demand will likely sag on the news, but the warranties will now be guaranteed by the government.  With the recent news of GM “temporarily” closing 16 of its 21 plants and planning to buy ou 40% of its dealers, Ford looks to be in prime position to pick up some market share from the segment of the population that will only buy American vehicles.

The other story came out of Los Angeles.  A 72 year old sex offender gave his DNA sample, as required by state law.  The DNA got a match with a rape kit from murder victim Ethel Sokoloff, a 68 year old woman who was killed in 1972.  As a result,  John Thomas Jr. has been charged in two murders (Sokoloff’s and another crime in 1976).  Police believe that Thomas may be the “Southland Strangler” who may have killed more than 30 women (and raped many more) since 1955.

This has to be the mother of all cold cases.  Even if you were able to crack the case of a serial killer who began his reign of terror 54 years ago, the odds of the perpetrator still being alive are not very good.  I have an interest in crime, and I intend to write a bigger article on the story next week, after getting a chance to sesearch it a bit more.

Is GM dead?

April 22, 2009

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USA Today is reporting that GM will shut down 15 of its plants for 9 weeks between May and July.  GM has a total of 21 plants.

Clearly, by any measure, GM is in a world of hurt.  At the end of 2008, they had a book value (assets – liabilities) of  -$85 billion.  This number has been sinking even lower during 2009 as they chew through bailouts funds given to them by the government.

Here are a few things that will help put this into perspective a bit.

  1. If GM were to begin making $10B in profits annually – something they have never done in their history) -starting in 2009, it would take 9 years until the balance sheet was positive.  A more realistic (but still overly optimistic) expectation of $5 billion in profits would result in a positive balance sheet in 17 years.
  2. If you, and each of the 300 million residents of the USA, were to give GM a check for $283, this would just barely wipe out the $85 billion in negative equity.

I’d love to see GM turn things around, but they are quickly running out of time (and money).  If GM still exists at the end of 2010, I think it will either being a division of a Japanese manufacturer or it will be a much smaller GM.