Wednesday, February 01, 2006


I've had a dry spell for the last few days. Nothing, or almost nothing, in the business press incited a passionate response in me. I have been dispassionate.

On reflection, though, I have decided there are two things which elicit sufficient passion to merit a post.

First, my equity portfolio strategy registered a 7.7% gain for the month of January. The S&P500, by comparison, returned 2.6%. I'm quite pleased by this performance. In fact, I had to take a look at my 2005 performance to recall that the strategy's performance in this month just ended is nearly as good as my best month last year. As this blog is notionally about my musings with respect to the equity markets in which I invest, I suppose this is a relevant topic on which to write.

Second, a friend (the same NYTimes-reading friend who passed me the recent piece about Les Moonves and the recent TV network consolidation) passed me a NYT piece by Ben Stein. Ben was writing indignantly about Glenn Tilton and friends, who manage UAL and have just led it out of Chapter 11. He is indignant that, through various financial steps, the management which led the firm into bankruptcy, i.e., a less than competent team, has rewarded itself handsomely on the way out, with a multi-million dollar compensation pool. This is presumably at the expense of the owners/workers of the airline, who are its union employees.

I happen to like Ben Stein a lot- as a conservative thinker, an actor, and a writer. On one level, I share his indignation.

However, on another, I do not. As I wrote earlier in this blog, regarding our nearly-hopelessly-fouled-up pension system, the dog that has not barked, to paraphrase Conan Doyle, is the media outrage over the inept union leaders who consented to owning a piece of UAL in the first place.

How many times do these geniuses have to mess up to learn that, when a corporate management errs so badly as to go bankrupt, it is not a good idea to take your receivable in the form of equity in a reorganized company that these same managers are going to continue to run? Duh....

For goodness sake, just get in line in court and take the cash when you can. Or bargain for the right to hire your own management. But to supinely hang around and watch Act II, complete with a questionable payout to the team that got you into the mess in the first place, just seems too incredulous for words.

My own take on this sorry situation is that the union rank and file have, once again, gotten the "benefit" of the union leadership they elected and, so, deserve. Welcome to democracy, guys and gals. You voted for it, you own it!

Don't come crying to the rest of us about what a bad deal you made in the quest to keep UAL alive, in the face of obvious excess global airline capacity. Elect better leaders in your union next time, and maybe you won't make this mistake twice.

Oh, and because this blog is, notionally, about the large-cap equity markets, let me add this. I seriously doubt that my portfolio selection approach will ever own an airline like UAL, or, specifically, UAL. It has, in the past, briefly selected Southwest Air. But a major carrier remnant? Not a chance. We go for consistently superior performance by quality management. UAL would never make that cut.