In amongst the tech press the Unilever offer is regarded as a troubling sign, considering it's slightly less than half Honest's current valuation.
For people who invest in Unilever, this might be seen as a good tactic because they're trying to capture a future market while being relatively frugal about it. I think for people who are concerned about massive companies, this would be something to worry about. I would say I'm more open to this purchase than Bayer buying out Monsanto. That one involves so much money it just seems a bit disconcerting.
The appeal of Honest and Dollar Shave Club is that they have a market that is grocery store agnostic. They're both effectively mail-order brands. I mean, you can buy Honest at BBB I think but it's cheaper and easier through Amazon. Grocery store sales are shifting away from iconic brands and towards artisanal bullshit and "Honest" is artisanal bullshit to the core - I say this having gone through a couple-three boxes of their diapers. The issue with Bayer and Monsanto is it takes the agricultural supply duopoly to a monopoly, effectively. Monsanto should be broken up, not merged.
Ugh. It's a shame I'm on mobile cause in really want to get into the gnitty gritty of this Monsanto thing. I hope you don't mind if I just throw out some random talking points. My concern with Bayer and Monsanto is that if someone is willing to pay tens of billions of dollars in cash for another company, it must mean they know it'll give them a killer edge. That's worrying. Similarly, Bayer is a European company buying up an American company, which I'm sure would work out to be a hit to the US economy somehow in the long run. That's worrying too. If the deal does go through, that means two of the world's largest agricultural chemical companies, Bayer and Syngenta, will be European. Who's gonna be able to compete with them? DuPont? I don't think agricultural chemicals are a major priority for them. Also, for the record, I'm not pro or anti GMO or Pesticide, nor am I pro or anti corporate agriculture. I'm on the fence on all of the subjects, teetering with the wind.
Maybe it'll be a Dow-DuPont situation where way down the road the deal falls through...one can hope, at least. Has there been a market acceleration in companies being purchased by larger conglomerates or holding firms lately, or is it the signal being amplified by news coverage?
Cash is stupid cheap right now, which encourages large firms to take low-cost loans to buy back stock or purchase competitors. If you have a choice between losing 1% from having your money in the bank or, you know, buying up the guys that are constantly trying to undercut your prices, monopoly all the way.
A lot of what I've been reading makes it soundike stock buybacks are financial hand waving to make a companies earnings per share increase? hey investors, look how great we're doing. Is that accurate?
Well there's Bayer and Monsanto. Unilever has been on a buying spree. The DOJ is apparently trying to stop a bunch of health insurance companies from merging lately. Fits bought Chrysler a few years back. That's what I can't think of off the top of my head.
There have been shit tons. Fiat bought Chrysler as a troubled asset. That was after Daimler bought it then sold it back because it lost them a shit ton of money. My favorite was when Harley Davidson bought MV Agusta (because why the fuck not?) for 109 million euros in 2008, spent 20 million euros on it, then sold it back to the Italians for 3 euros. Not 3 million. Three. After Proton did the same thing did the same thing in 2004 and 2005, except the numbers were 70 million euros and 1 euro respectively.
Damn. Two of those mergers were electrical utilities and a third was gas energy. I thought mergers in those areas tended to be discouraged by governments to prevent monopolies. Interesting. Also, how the heck does buying an asset for millions of dollars and then turning around and selling it for pennies make sense? Is that some kind of Wall Street money laundering scheme or something?
Well, if you're losing $70m a year, and you've owned it for 2 years, and lost $140m, the time to sell it is right fucking now and if $1 gets it off your balance sheet, you're $70m ahead of where you'd be if you waited another year. Hyperexotic Italian marques are generally not sound financial investments to begin with and attempting to turn them into such is often quite expensive. Daimler made a small fortune out of a large one by buying Chrysler. Fiat appears to be on a similar trajectory.
It's not so much the killer edge as there's no advantage to holding cash, there's super-cheap leverage available all over the place, and you run into dire problems issuing dividends with borrowed money. So you can invest in infrastructure, you can buy back your stock, or you can eat your competitors. There's little incentive not to do it and there are powerful disincentives to doing anything else. Additionally, mergers and acquisitions look good on a profit'n'loss table right the fuck now whereas infrastructure and research investments won't pay off for years, and that makes shareholders and ratings agencies angry.
I'm sorry if you explained this before and it just hasn't set in, but why is everyone thinking short term with investing and handling money when sometimes a company could do so much better if they hedged their bets and think long term?Additionally, mergers and acquisitions look good on a profit'n'loss table right the fuck now whereas infrastructure and research investments won't pay off for years, and that makes shareholders and ratings agencies angry.
(cracks knuckles) You keep asking these "simple" questions that kind of underpin the basic function of finance. I'ma try and make this simple without making it overly simplistic. Wish me luck. Everyone is thinking short term with investing and handling money because "shareholders" aren't just long-term, personally interested people who wish to profit from being a part of something greater than themselves. When I say "Ford," you think this: But when I say "Ford", mk (for example) also thinks this. Now - the mutual fund or hedge fund or accredited investor or university endowment manager or dude with an eTrade account doesn't not think Steve McQueen. But he also sees EBITDA, GATT earnings, P&L, amortization, revenue, and a whole bunch of other shit. I mean, none of this makes sense to 99.9% of people but to lots of people, it makes dollars. Those numbers are related to money. Money moves those numbers. And the dumb thing is that those numbers impact the value of the company, and the value of the company impacts the company's financing, and the financing of the company impacts its ability to operate, and it isn't that much of a leap of faith to discover that the perception of a company affects the reality of the company and when the perception that matters is the perception of traders, you do stuff that moves those numbers, not stuff that moves the company. There are others that can explain this better than me, but if Ford invests 10% of its spare cash in a new factory, it takes a loss. It doesn't have an asset yet, it has a hole in the ground. It can amortize that loss over several years (based on a number of complex calculations that are governed by the SEC and the IRS) but it's still a loss. If Ford instead invests 10% of its spare cash into its own shares, all of a sudden its earnings per share go up by (purchased share number)/(old share number) percent. Nothing is created, nothing is destroyed but the numbers move and that increases the attractiveness to investors. Or, the lazy ones. But not the ones that are knee-deep in Ford who think that investing in a new factory is a much better idea. Here's how those pitches usually go. So it's not like it's a settled thing. But for large, lazy, algorithm-driven ETFs and mutual funds and the like, looking over a dozen and one statistics an hour, that aren't neck-deep in the lore of Ford, the stock buyback looks like a better bet.
Really dumb questions to follow. Sorry in advance. Are older, more stable, blue-chip companies more insulated from the investor mentality that drives this type of behavior? I can't imagine a company as large and stable as GM or GE making rash, short term decisions to court investors because A) their size insulates them from market risks (auto bailout situations aside that is) and B) it's a lot more difficult to turn a massive company's direction than it is a smaller, more streamlined company. Do shareholders argue about these things and does it affect the decisions a company makes? For example, if I were a shareholder for Ford I'd want them to think longterm instead of short term and I'd find fly by night investors pretty frustrating. It seems like everyone keeps thinking short term and quick cash, from the conversations we've had and the things I've read on Hubski and the internet at large. You've alluded to gambling before and the other day francopoli said something similar in a short discussion about quantitive easing. If this behavior is so risky and everyone keeps saying so, what are companies and governments doing to try and discourage it?
Once again, they aren't dumb questions - they're insightful questions. The problem is the answers aren't simple, nor are they uncontroversial. You are talking about "shareholder value", which is probably the big argument in business management. How controversial? Well, It's generally blamed on Jack Welch, the former CEO of GE, who has said it is "the world's dumbest idea". Really, it comes from Milton Friedman, who is either worshipped or reviled depending on whether you buy your suit at Brooks Brothers or Canali.
The Forbes link is really interesting. On the eagerness of some to receive a sanction to be greedy: In such a world, it is therefore hardly surprising, says Roger Martin in his book, Fixing the Game, that the corporate world is plagued by continuing scandals, such as the accounting scandals in 2001-2002 with Enron, WorldCom, Tyco International, Global Crossing, and Adelphia, the options backdating scandals of 2005-2006, and the subprime meltdown of 2007-2008. Banks and others have been gaming the system, both with practices that were shady but not strictly illegal and then with practices that were criminal. They include widespread insider trading, price fixing of LIBOR, abuses in foreclosure, money laundering for drug dealers and terrorists, assisting tax evasion and misleading clients with worthless securities. Martin writes: “It isn’t just about the money for shareholders, or even the dubious CEO behavior that our theories encourage. It’s much bigger than that. Our theories of shareholder value maximization and stock-based compensation have the ability to destroy our economy and rot out the core of American capitalism. These theories underpin regulatory fixes instituted after each market bubble and crash. Because the fixes begin from the wrong premise, they will be ineffectual; until we change the theories, future crashes are inevitable.” CEOs and management have been looking to be told that greed is good. So a book like Hardball or Milton Friedman's 1970 article are manna from heaven. That article by the way, by Friedman, is gross. First paragraph: How do we make greed less sexy? Or "not wanting to pollute" more sexy?The supposed management dynamic of maximizing shareholder value was to make money, by whatever means are available. Self-interest reigned supreme. The logic was continued in the perversely enlightening book, Hardball (2004), by George Stalk, Jr. and Rob Lachenauer. Firms should pursue shareholder value to “win” in the marketplace. These firms should be “willing to hurt their rivals”. They should be “ruthless” and “mean”. Exponents of the approach “enjoy watching their competitors squirm”. In an effort to win, they go up to the very edge of illegality or if they go over the line, get off with civil penalties that appear large in absolute terms but meager in relation to the illicit gains that are made.
When I hear businessmen speak eloquently about the "social responsibilities of business in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are–or would be if they or anyone else took them seriously–preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
That's not what Milton Friedman is saying. So here's the hairy battle of externality: Friedman is saying that business managers have a responsibility to the metrics that are directly quantifiable and directly measurable to the charters of that business. If it's a bank, it needs to make money. If it's a hospital chartered to help as many people as possible, it needs to help as many people as possible. Those are the metrics that are available, those are the goals that should be pursued. By the way, ever seen the word "eleemosynary" before? I haven't. Apparently it means "charitable." So here's the basic problem: Friedman is saying externalities don't fucking count because they aren't part of the equation. He argued that what does matter is what is in the equation, and if it mattered it would be legislated: In other words, "render unto caesar." Corporations need to make money and the government needs to take care of social needs such that all externalities are appropriately taxed and penalized to force the corporation to make money only in such a way that is socially responsible. But it doesn't take a genius to argue that the government moves hella slower than a predatory corporation. To which Friedman says: Aside from the question of fact–I share Adam Smith's skepticism about the benefits that can be expected from "those who affected to trade for the public good"–this argument must be rejected on grounds of principle. What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures. In a free society, it is hard for "evil" people to do "evil," especially since one man's good is another's evil. TL;DR: TOO FUCKING BAD. So Friedman's answer to your question is "tax the shit out of greed and pollution so it's no longer so attractive." The fact that you will never get a legislature to move as quickly as a corporate board is, to Milton Friedman, proof that your society doesn't actually want clean air or charity all that much. Because Milton Friedman was an asshole. Peculiarly enough, the article practically begs for fascism. But I'll bet the average business pundit never reads that far.The discussions of the "social responsibilities of business" are notable for their analytical looseness and lack of rigor. What does it mean to say that "business" has responsibilities?
This process raises political questions on two levels: principle and consequences. On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions. We have established elaborate constitutional, parliamentary and judicial provisions to control these functions, to assure that taxes are imposed so far as possible in accordance with the preferences and desires of the public–after all, "taxation without representation" was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law.
Many a reader who has followed the argument this far may be tempted to remonstrate that it is all well and good to speak of Government's having the responsibility to impose taxes and determine expenditures for such "social" purposes as controlling pollution or training the hard-core unemployed, but that the problems are too urgent to wait on the slow course of political processes, that the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing current problems.
Some environmental activists, impatient with legislative processes, sought relief from the Supreme Court. In 1992, the SCOTUS was like naw. There are other negative externalities that could be challenged in the courts, but my sense is that the SCOTUS repeatedly tells these people, "Do work in the legislature or gtfo." And they're not wrong per se. But then the conversation winds all the way back to our favorite topic on hubski: monied influence trumps a disorganized and apathetic population, and we need campaign finance reform.The fact that you will never get a legislature to move as quickly as a corporate board is, to Milton Friedman, proof that your society doesn't actually want clean air or charity all that much.
Holding: Plaintiffs did not have standing to bring suit under the Endangered Species Act, because the threat of a species' extinction alone did not establish an individual and nonspeculative private injury.
That Wikipedia Article is a bit hard to take in. I think cause I'm lacking some core background information. I don't mean to focus on just the criticisms and disadvantages listed in the article but A) I can more easily understand the points being listed and B) judging from what I've seen from how companies like Wal-Mart treat their employees, VW skirt EPA regulations, and Nestle operates in 3rd world countries, many of those criticisms seem very real and very serious. This statement stands out to me . . . If there is a huge interest in short term profits these days and buying and selling company stocks as a way to make quick cash, I don't think many shareholders are too concerned about what happens to a company a year or so down the road as long as they can get their cash and get out before it's too late. Also, this stands out to me too . . . I keep hearing "soft recession" and "quantitive easing" thrown around (I have a pretty good idea of what the first term means and half an idea of what the second term means). Could it be we're in an era kind of like the '70s? Only this time the stagflation is caused by something else, we're at the ropes of trying to control inflation, and now China is the new Japan? If we're still using '80s finance tactics and we're facing all this trouble, whatever new solution we come up with might be more drastic and even more dangerous. I'm gonna read more up on Benefit Corporations cause they sound like a real good idea worth looking into.Most notably, the competitive advantage period takes care of this: if a business sells sub-standard products to reduce cost and make a quick profit, it damages its reputation and therefore destroys competitive advantage in the future. The same holds true for businesses that neglect research or investment in motivated and well-trained employees.
During the 1970s, there was an economic crisis caused by stagflation. The stock market had been flat for nearly 12 years and inflation levels had reached double-digits. Also, the Japanese had recently taken the spot as the dominant force in auto and high technology manufacturing, a title historically held by American companies.
Hey, I didn't read the Wiki article either. I just know that you tend to like them. mk might be able to find the data - I'm about to get on a plane - but something like 70% of "traders" on the market right now are algorithms, in the form of ETFs. There is no algorithm written that gives a fuck about where GM will be seven years from now. That's another beef against the market as it exists: we're highly refining the behavior of a model that is increasingly divorced from real-world inputs and outputs. You have again found the horns of the dilemma. Keep in mind there are several schools of economic thought and they all hate each other to varying degrees. Ben Bernanke basically made his bones studying the Great Depression and the one thing he knew the US didn't need in 2008 was a "liquidity trap" whereby people who needed money couldn't borrow it. Thus all the money injected into the market (HBO has a great dramatization of this if you're interested). However, lots of people thought Bernanke was wrong. Lots of people think Bernanke was right . Lots of people don't even know what they're thinking. It's inherited knowledge that Friedman thought FDR's New Deal prolonged the Depression, despite what you learned in US History in high school, but even that opinion is controversial. So I don't have any answers for you. But I will tell you that financial pundits that charge $600 a year for their newsletters ask and answer your above question, ad nauseum, rarely coming up with the same results. Somewhere or other I mention that Hubski should look into being a B-corp, but I'm about to board.If there is a huge interest in short term profits these days and buying and selling company stocks as a way to make quick cash, I don't think many shareholders are too concerned about what happens to a company a year or so down the road as long as they can get their cash and get out before it's too late.
I keep hearing "soft recession" and "quantitive easing" thrown around (I have a pretty good idea of what the first term means and half an idea of what the second term means). Could it be we're in an era kind of like the '70s? Only this time the stagflation is caused by something else, we're at the ropes of trying to control inflation, and now China is the new Japan? If we're still using '80s finance tactics and we're facing all this trouble, whatever new solution we come up with might be more drastic and even more dangerous.
I'm gonna read more up on Benefit Corporations cause they sound like a real good idea worth looking into.
I think this is the comment where you mention Hubski being a de facto cooperative and propose restructuring Hubski under a cooperative charter or as a B-corp. rd95