Andy Kessler

WSJ: Don’t Be Too Eager to Make a Deal

 https://www.wsj.com/articles/dont-be-too-eager-to-make-a-deal-1522005036

If talk is cheap, advice is cheaper. I sprinkle advice out like salt on french fries, not knowing if it works or not. You’re probably thinking: typical newspaper columnist. But hear me out.

About a decade ago, I met my friend Andrew for lunch at Henry’s Hunan Restaurant in San Francisco—hot and spicy. He was from Washington, knew everybody and had worked at a policy-strategy shop. He had even done business with T. Boone Pickens, the legendary wildcatter.

“I owe you,” Andrew insisted, “for the advice you gave me.” I had no idea what he was talking about, and my face must have shown it. “The ‘put it in the corner of your desk’ trick,” he reminded me. It all flooded back.

I once had a boss who would never sign anything, at least not right away. Instead, he told me, he would put the document in the corner of his desk. He would see it every day—and not forget about it—but not sign it. Eventually, a series of people would call until the person in charge got on the phone in a huff. Then my boss would say, “Hey, I’m happy to sign this, but what do I get?” At that point, he could ask for almost anything.

It works because it makes the impersonal personal. In 1999 one of our fund’s private investments was going public. The bankers at Goldman Sachs sent over a standard 180-day lockup agreement. I hated lockups. I’d rather sell into the frenzy, like Dropbox last week. What the heck, I thought, I’ll just put it in the upper right corner of my desk. Over the next few weeks, I got a series of calls and voice-mail messages asking me to sign the lockup. I ignored them, and eventually the head of tech banking called.

“You’re holding up the deal. We can’t proceed with the IPO without your signed agreement,” he told me. “Well, I doubt that,” I replied matter-of-factly, “but what’s in it for me?” After a pregnant pause, he asked what I wanted. Bingo. I was ready: “How about an allocation of 30,000 shares for my investors. It would beat the 1,000 shares we normally get.” Another pause. “OK. Agreed. Fax the signed pages within the hour.”

WSJ: AT&T’s ‘South Park’ Argument

 https://www.wsj.com/articles/at-ts-south-park-argument-1521397501

The biggest antitrust trial since U.S. v. Microsoft begins Monday in a federal court in Washington. The Justice Department seeks to block the $108 billion merger between AT&T and Time Warner. But the government doesn’t stand a chance—like Wile E. Coyote chasing Road Runner off a cliff and ending up suspended in midair.

What may have started as a Trumpian jab at #FakeNewsCNN has tragically turned into a serious antitrust action. The Justice Department’s case stands on such modern foundations as Section 7 of the Clayton Antitrust Act of 1914, which can block mergers whose effect “may be substantially to lessen competition.”

The crux of the case is that AT&T’s subsidiary DirecTV, with its 21 million U.S. subscribers (about a fifth of the cable and satellite market), should not be combined with Time Warner’s HBO, with its 54 million U.S. subscribers. The result would be a “vertically integrated programmer” with the alleged ability to raise prices at will on other cable operators. It could even (horrors) withhold HBO’s “Game of Thrones” from DirecTV’s competitors.

I’ve got to admit, even four or five years ago, I might have agreed. The cable industry has abused geographic monopolies to raise prices almost since the first coaxial cables were strung on telephone poles. Comcast ’s 2011 merger with NBCUniversal was potentially anticompetitive, which is why the government imposed 150 different conditions on it. But the landscape has changed since then. A lot.

If I were AT&T’s attorney, I’d introduce as evidence a clip from the “Franchise Prequel” episode of “South Park,” which makes fun of Netflix for funding so many new TV series. A Netflix employee answers the phone saying: “Netflix, you’re greenlit. Who am I speaking with? . . . Would you like a pilot or just go straight to an order of six episodes?”

WSJ: George Costanza’s Investment Tips

 https://www.wsj.com/articles/george-costanzas-investment-tips-1520800111

I’m frequently asked what it takes to run a hedge fund. Translation: “If a dope like you can run one, I certainly can too.” Fair enough. A lot of hedge funds are getting killed in a huge upmarket: Brevan Howard’s Master Fund shrank 5.4% in 2017, while David Einhorn’s Greenlight was down 12% in the first two months of 2018. It’s time for a new batch of fund managers. Think you can do better?

First, let’s see if you’re up to it. Right now, go out and buy a 60-inch flat-screen TV. Easy, right? As soon as it arrives, return it for a 75-inch model. Then, when that shows up, return it and get the 42-inch version. Still having fun? It’s a royal pain. As soon as you’re comfortable with something, it’s probably time to sell it. This self-qualifying exercise will show if you can turn on a dime when, say, tariffs tank the economy.

Next, visit all the people you know and ask them to take out their wallets and give you a slug of their money. Do the same for a bunch of strangers, too. Then promise that you’ll return triple the money in a decade, minus your modest 20% of the upside fees.

Ready to invest? What’s your style, your edge? Macro, distressed debt, long-short, dollar-event-driven, cryptocurrency arbitrage? Actually, there’s only one way to invest, especially in today’s environment. It works for everyone, from $20 billion hedge funds to individual retirement accounts worth a few thousand bucks: Take the pulse of the market and figure out how everyone is wrong.

Easier said than done. It isn’t hard to get caught up in the emotion of the market. It’s euphoria when stocks are booming and you’re getting crypto tips from Uber drivers—and despair when everyone is dumping stocks and swearing never to own them ever again. You’ve got to zig when everyone else zags. “Serpentine, Shel, serpentine!”

How do you know what’s right? It almost always feels wrong. There’s an old saying on Wall Street: “Your hand should be shaking when you place your order.” You can learn from George Costanza of “Seinfeld.”

 He once lamented, “Every decision I’ve ever made, in my entire life, has been wrong. My life is the opposite of everything I want it to be.” When Jerry Seinfeld opines, “If every instinct you have is wrong, then the opposite would have to be right,” George gets it. “Yes, I will do the opposite. I used to sit here and do nothing, and regret it for the rest of the day, so now I will do the opposite, and I will do something!”