Shane's Feed
Sep 15, 2014
via Counterparties

Beyond unlimited breadsticks

“Is there something going on with Olive Garden?” a friend asked me on gchat earlier today. There is, indeed, something going on with Olive Garden. Last week, hedge fund Starboard Value — which owns almost 9 percent of Olive Garden — released a 294-page slide deck on what’s wrong with the chain restaurant’s operations (it’s “the mother of all food reviews,” says Jordan Weissman). Matt Levine helpfully indexed the good slides: “The breadsticks are slides 104 and 105, the pasta water is slide 164, and don’t miss slides 142 to 149, on alcohol, or slides 167 to 169, comparing dishes on Olive Garden’s website to pictures in the actual restaurants.”

One of the sticking points that got the most attention was Olive Garden’s signature unlimited breadstick deal. It isn’t that Starboard wants Olive Garden to ditch its deal, as many (including us, originally) reported, but just that the company would save money by waiting for customers to ask for more breadsticks, rather than bringing extra out that will just go to waste. “Starboard likes the unlimited breadsticks marketing, it just doesn’t like the way they’re delivered,” says Joe Weisenthal.

Sep 15, 2014
via Data Dive

Bankruptcy isn’t what it used to be

Radio Shack is considering bankruptcy. The electronics retailer has struggled in the digital age, and announced today that its CFO, John Feray, resigned last week. He will be replaced by Holly Etlin, a managing director at AlixPartners, which has been advising Radio Shack financially since 2013. Even with outside help, the company’s share price has tumbled since 2010:

Bankruptcy isn’t quite as helpful for a company as it used to be. While retailers used to be able to use Chapter 11 as a shelter to devise new business plans, with around half emerging from bankruptcy, a 2005 law has changed all of that.  Reuters reports that if Radio Shack files for Chapter 11, it isn’t likely to recover, thanks to the nine-year-old law that only gives companies 210 days to turn things around. Now, only 12 percent of companies emerge from bankruptcy without going out of business. ”Circuit City Stores, Borders Group, Filene’s Basement, Linens ‘n’ Things, Coldwater Creek and plenty of smaller chains have gone out of business after filing for Chapter 11,” write Tom Hals and Nick Brown.

Sep 8, 2014
via Counterparties

(Dis)United Kingdom

After months of treating the Scottish independence movement as a sideshow, Britain got something of a shock last week when the Yes campaign surprisingly came out ahead in the polls. The vote is set for September 18. The pound took a hit today, closing at $1.61 — 1 percent lower than at the open.

What happens if Scotland votes for independence? Well, nothing immediately. “None of the details are settled today and everything you hear from either side is a campaigning and negotiating stance,” writes Guan Yang. Of course, he also adds that “the alternative, to pre-negotiate all the terms, is unworkable, because the British government has already demonstrated a willingness to be excessively inflexible in the hopes that Scots will vote no.” Basically, only if Scotland votes yes will the two sides actually come to the negotiating table.

Sep 5, 2014
via Counterparties

Recovering, with a stutter

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The economy added 142,000 jobs in August. It was a pretty big disappointment, considering the consensus estimate was around 225,000. The unemployment rate ticked down to 6.1% from 6.2% — bad news, since the decline comes from people dropping out of the labor force, rather than people getting jobs. Nick Bunker and Heather Boushey sum it up: “The U.S. economy is steadily if slowly expanding but not enough to spark sustained growth in jobs and wages and a commensurate decline in unemployment.”

Cardiff Garcia writes that “the report is hard to reconcile not only [with] other recent indicators [ISM data was great, auto sales are up, initial jobless claims were unchanged in August] but also with the obviously stronger momentum in prior jobs reports this year.” However, he continues, “if the acceleration in the recovery since the end of the first quarter has slowed, it wouldn’t be the first time that the US economy has head-faked observers.”

Sep 4, 2014
via Counterparties

The easing that must not be named

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The European Central Bank has started the march toward quantitative easing. At today’s ECB press conference, president Mario Draghi announced that “the Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities (ABSs).” In the words of the WSJ’s Alen Mattich, Draghi “pulled out the long bow, notched the biggest monetary arrow he was allowed, gave a mighty pull and let fly…”

Technically, the news this morning was the surprise cut in interest rates, to 0.05 percent from 0.15 percent, but the fact that ABS purchases will begin in October was really what people got excited about. About those purchases: should they be considered QE, a policy that Draghi hinted that the ECB might finally be getting around to at a speech last month at Jackson Hole? It’s unclear. It really depends on how you define QE.

Sep 3, 2014
via Counterparties

Mr. Cantor Goes to Wall Street

No longer bringing in a government salary, Eric Cantor has decided to try his hand at investment banking. The former House majority leader will become a vice chairman and managing director at the investment banking boutique Moelis. His compensation will be around  $3.4 million through the end of next year (plus “the reasonable cost of a New York City apartment”).

What will Cantor do at an investment bank? Probably not a lot of Excel. Dennis Kelleher, the head of the public-interest group Better Markets (which opposes the banking lobby in Washington), says he’ll likely be lobbying for Wall Street among his former colleagues after his mandatory one-year ban expires next August. Kelleher tells Annie Lowrey, “Wall Street is after what it’s always buying in Washington: access, influence, and unfair advantage.” He also gets into specifics:

Sep 2, 2014
via Counterparties

What’s in a word?

It’s time to talk about financial jargon. The pseudonymous blogger Lady FOHF was not happy about the BBC Newsnight piece on the subject last week (content is here, but geo-restricted to the UK, and I can’t find it anywhere else, so I’ll take Lady’s word for it). She writes that like other specialized professions (law, medicine, etc.), “financial services has evolved an internal language. The Newsnight item saw fit to present this as a deliberate effort by the industry to obfuscate its activity and make it ‘impenetrable’ to the lay person.”

The Newsnight piece was related to the upcoming release of John Lanchester’s new book, How to Speak Money, on the same subject (excerpted recently in the New Yorker). The book is, by at least one account, quite good. John Gapper, writes that “its brief explanation of the bond repo market is the only intelligible account I have read.” The book is, however, intentionally pretty basic. Lanchester tells Gapper, “I think FT readers should explicitly be forbidden to read this book because they know it already. One of my ambitions is that, after you’ve read it, you can read the FT. I’m the training wheels.”

Aug 29, 2014
via Counterparties

The cost of not laboring for a day

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It’s Labor Day weekend in the US. We assume you have already left the office and are on your way to wherever it is that you have chosen to soak up the last rays of the summer sun. As such, we decided to look into what the holiday weekend will cost you. This is what FRED tells us (for comparison, the latest Consumer Price Index shows a 2% increase compared to last year):

Gas prices have been falling — although they haven’t fallen by as much as they did at this time of year last year.

Aug 29, 2014
via Equals

How letting women fail can help them succeed

In life, and especially at work, women often are afraid to break the rules. They are also afraid to fail in ways that can differ from men. Often, this holds them back in their careers. It isn’t an irrational position. Instead, it’s more likely a reaction to social pressures that tell them they will be more harshly judged than their male peers on their perceived missteps.

Over at the Harvard Business Review blog this week, Tara Sophia Mohr writes that she is skeptical of the “confidence gap” as a reason that women aren’t getting as far up on the career ladder as their male peers. She did a survey of professionals and asked them: if they looked at a job, but decided not to apply, why not? It usually wasn’t because they didn’t think they could do the job well, she says.

Aug 27, 2014
via Counterparties

Tax King

Burger King is moving to Canada. The American fast food chain is buying Tim Horton’s in an $11 billion cash-and-stock deal and will incorporate over the border. It’s an obvious tax inversion move. Or is it? According to Burger King’s CEO Daniel Schwartz, “We don’t expect there to be meaningful tax savings or a meaningful change in our tax rate.”

Or not. Matt Zeitlin reports that while that’s technically true today, “the company could reap significant tax savings if it continues to grow overseas.” The consensus is that this is definitely a tax inversion deal. Matt Levine says it’s an “immaculate inversion,” and writes, “the result is that Burger King will do an inversion where a majority of its U.S. shareholders won’t owe taxes.”