Case Blog

The historic inauguration of President Barack H. Obama last week has added some excitement to what is shaping up to be a very cold January for our financial markets.  Although our problems will not be easy to solve, there is a sense of optimism that we can tackle our problems and that with resolve and leadership we can move forward.  Chief Justice Roberts’ mulligan on the oath even provided an interesting sidebar.

The debate currently underway on the best way forward for our banking system is healthy.  Prior to the release of the remaining TARP funds, we need to make certain that we have a plan in place to remove the most toxic assets from the balance sheets of our money center banks. My own opinion is that we should try to accomplish this without the nationalization of these banks.

As the week progressed, Bank of America (BAC) CEO Ken Lewis  decided he had seen enough of John Thain’s tenure, and after a  brief 15-minute meeting in Thain’s remodeled Merrill Lynch office, he was shown the door. I have not seen a single person rise in Thain’s defense.

The New York Times Co. also took dramatic action last week to bring stability to its business.  Back in October, I wrote in A Family’s & an Industry’s Conundrum: “Several years ago before this decline became an avalanche and the credit markets dried up, private equity firms and hedge funds would have been lining up to compete for the right to take the New York Times Company private, together with the Ochs-Sulzberger family. Today that option seems like a distant dream. What options do the families have? Unfortunately, they are going to have to take some painful measures, including a dividend cut, during this protracted downturn to protect their core franchises.”

We learned last week just how painful their options would be when Mexican billionaire Carlos Slim made a $250M loan to the company. Slim already held a substantial stake in the The New York Times and has now added this sizable investment that provides  warrant coverage and a 14% interest rate!  With advertising lineage continuing to be under severe pressure, this was obviously the best option available to the family dynasty.  Towards the end of the week Moody’s downgraded their bonds to junk status.  Standard & Poor’s had already made this move in October. Both rating agencies cited the continued downward pressure on advertising and the impact it will have on earnings.

I mentioned in my column Playbook that Asset International will be launching a new digital product line, The 5000,  in the spring.  As a way of introduction: How do you have a dialogue with the fund managers of The 5000 largest pools of capital in the world? Watch for the answer in early April!

Finally, a number of subscribers asked for another value wine tip, a great suggestion given the current economic climate.  Paul Hobbs is one of northern California’s most distinguished wine makers and his eponymous wines are held in high regard by the critics. Most Hobbs fans do not realize that he has a very robust project in Mendoza, Argentina. You should look for these wines at retail.  Both the ‘07 Vina Cobos Malbec El Felino and the ‘07 Vina Cobos Cabernet Sauvignon El Felino have received 90+ scores (RP). They should cost between $17-$20.

The holiday season provided a nice interlude from the train wreck of a global economy that the fourth quarter of ‘08 unveiled. We spent the Christmas week in New York and then traveled to the Bay Area for the New Year. Unfortunately, we enter the New Year with all our problems still in place. As I write this Bernie Madoff is still out on bail, but each day as the magnitude of his scam and hubris comes into focus, he appears closer to having his bail revoked. For many who have lost their fortunes, he has become the new Ponzi or Scrooge.

It seems appropriate in the current economic climate to write about a value wine: Clos De Los Siete is an Argentinian-based project of the famed French oenologist Michel Rolland. The vineyard where this wine is made sits at the foothills of the Andes. To quote Robert Parker, “There may be no finer red wine value in Argentina than this superb blend  of 48% Malbec, 28% Merlot, 12% Syrah, and 12% Cabernet Sauvignon.”  Parker’s scores ‘06/92 & ‘07/91. You can find these wines at retail for $17-$20, which represents real value.

Mary Claire and I are always interested in finding the perfect pizza to go with an outstanding wine, like the Malbec blend mentioned above. We may have found that perfect pizza for those of you who live in New York City. In the East Village at 349 East 12th Street, just off 1st Avenue, you will find Una Pizza Napoletana, www.unapizza.com. The proprietor, Anthony Mangieri, set out several years ago to make authentic Neapolitan pizza. His oven is wood-fired and all of his ingredients, with the exception of his naturally leavened dough, are imported from Italy. He personally makes each pizza (there are only 4 options, my personal favorite is the Bianca) and is open from Thursday through Sunday from 5:00 p.m. until he sells out of his fresh dough. You can take out your pizza or eat in the small restaurant, but you need to show up and place your order in person, not by phone.  The restaurant offers a pleasant environment, a throwback to another era, and you can have an Italian beer or a glass of wine while you wait for your order.

This is also the time to turn our attention to sports, as the college football bowl season wraps up and the NFL playoffs are gaining momentum. The Florida Gators used their playbook to first expose Alabama’s weak hold on #1 in the SEC Championship Game. Nick Saban’s undefeated team could not compete with the Gators, which had suffered one loss to Ole Miss during the regular season. Coach Urban Meyer and quarterback Tim Tebow then used their playbook to play the high scoring #1 Oklahoma Sooners and defeat them 24-14 to win the mythical National Championship.  An undefeated Utah team turned to their playbook and Alabama suffered their 2nd defeat.  USC and Texas won their bowl games in fine form, but their claims on #1 were not heard.  My guess is that Tebow, after winning the Heisman last year and two national championships, will make himself available for the NFL draft and will be a first-round pick.

The 2nd round of the NFL playoffs begin today and each team will have a playbook that reflects some minor adjustments, but they will play the basic game that carried them this far.

My alma mater, Boston College, concluded a startling week on the basketball court. Last weekend they traveled to Chapel Hill to play the #1 undefeated North Carolina Tar Heals and beat a team that many pundits thought could go undefeated. They then traveled home to play Harvard and less than 72 hours after their surprising victory suffered an 82-70 upset by Harvard.  Coach Skinner of BC was quoted: “I told them it’s a short trip from the main house to the big house to the out house.”

President-elect Obama and his team are trying to put together their playbook to deal with a global economy that appears to be in a nosedive. I am encouraged that they are looking at many tools and a broad approach to try to jump-start an economy in free fall. The unemployment rate of 7.2% announced last week could easily climb above 10% by the end of the first quarter if the various stimulus plans fall short. I do believe that the current effective interest rate of 0% is starting to have some positive impact, but it will take an aggressive fiscal policy combined with a responsive monetary policy to pull us out of this deflationary spiral.

We are putting our own playbook together for Asset International, the global financial information provider that we acquired with Austin Ventures at the end of the year. We sense that global markets will demand more transparency as a response to the current financial crisis and look to position ourselves in New York and London as a trusted partner. We will be announcing a new digital and event product line launch, The 5000, later in the first quarter and are working with the AV team on several other acquisition opportunities. As we move forward, my blog will be posted here on  www.caseinteractivemedia.com and on a new AI site that is being developed.

Let’s hope that President-elect Obama’s playbook leads us back to the playoffs and if we are fortunate to a #1 ranking!