Andy Kessler

WSJ: How Cable Lost the Remote

 http://www.wsj.com/articles/how-cable-lost-the-remote-1430348772

"Everybody loves watching sharks,” Discovery Communications founder John Hendricks quipped at a media conference years ago, “and people will watch anything about Nazis. If we could just get sharks to fight Nazis, we would mint money.” He needn’t bother.

Discovery CEO David Zaslav, who oversees the cable empire that includes the Discovery Channel, TLC and Animal Planet, pulled in $156 million in compensation last year, up from $33 million in 2013. Expect that to change.

This isn’t a rant against CEO pay, but it is irritating that you and I helped pay Mr. Zaslav’s salary when most of us don’t use his product. One of Discovery Channel’s highest-rated shows, “Naked and Afraid,” which documents partially blurred naked people living in the wild for 21 days, boasted 2.9 million viewers last year out of 100 million households that pay for the channel through basic cable. Discovery Communications’ $3 billion in U.S. sales for 2014 means that each household paid about a buck to Mr. Zaslav. A nice gig if you can get it.

But this is how the cable cabal works—or worked. ESPN’s recent decision to sue Verizon over cable-package placement is one indication that change is afoot.

With a local monopoly, cable operators dictate packages and pricing, markets be damned. Satellite rarely competes on price. Cable bills have grown at almost triple the rate of inflation over the past two decades, according to the Federal Communications Commission. But in April, Verizon announced Custom TV, which offers a few basic channels and additional channel packs: Kids, Pop Culture, Lifestyle, Entertainment, News & Info, Sports Plus and Sports. The Discovery Channel is no longer basic cable. Neither is ESPN. Uh oh.

WSJ: Instead of Attacking Insider Trading, Make Everyone an Insider

http://www.wsj.com/articles/andy-kessler-instead-of-attacking-insider-trading-make-everyone-an-insider-1428361776

Here’s how you know a company is about to miss earnings: The stock falls slowly after the quarter ends and continues trickling until the announcement that, lo, the company didn’t live up to analysts’ estimates. Someone knew it was coming and traded on the tip. Someone always knows.

It’s called insider trading, and Preet Bharara, the U.S. attorney for the Southern District of New York, has convicted 80 people of it. On Friday the Second Circuit Court of Appeals denied Mr. Bharara’s petition to rehear U.S. v. Newman, which overturned the convictions of two hedge-fund managers by suggesting that the pair didn’t have direct insider knowledge, but instead received information passed along by others.

If you think that is a fuzzy legal distinction, you’re right. There is no actual law against insider trading, only securities fraud. Last month Rep. Jim Himes (D., Conn.)—whose constituents happen to include a flock of hedge-fund managers—introduced bipartisan legislation to ban “material, nonpublic” insider trading, the latest of many such attempts. Here’s a better idea: Open up the information vault and make everyone an insider.

First, a little history. On your first day on Wall Street, you learn that it is illegal to trade on “material, nonpublic information.” Until 2000 analysts and investors could use “mosaic” analysis. You couldn’t ask a company what it was going to earn in the first quarter, but you could ask about product trends or pricing, and companies would provide “guidance.” As, say, widget sales slipped, companies would call analysts and change the guidance. If you were any good, you could cobble together a picture of what the quarter might look like. There was an art to it, and there weren’t many surprises.

In 2000 the Securities and Exchange Commission enacted Regulation Fair Disclosure, known as Reg FD, on the tenuous premise that small investors were being hurt by big boys getting information first. Reg FD required companies to disclose information to all investors at the same time. Then came the unintended consequences, and “fair disclosure” morphed into Regulation No Disclosure. Companies clammed up even further after the 2002 Sarbanes-Oxley law, which required CEOs to sign off on all released information.

Now public companies only release information once a quarter, but someone always knows. A crooked insider, an accountant or the brother-in-law of a salesman who missed a quota. Reg FD has been a boon for insider trading.