Intellectual Capital

This past week Regal Entertainment Group hired Morgan Stanley to explore strategic alternatives for the company. This is not-so-secret code language for “shop it around and try to sell it.” What might this mean for Knoxville? “Selling the company” is a fairly broad term that can capture a lot of issues, not just a shift in ownership. Regal’s own history is a perfect case study. In 1998, nine years after launching Regal Cinemas, founder Mike Campbell sold the company for $1.5 billion to a couple of private equity firms. Few people even realized it. The company remained in Knoxville. The … Read More

In the 1987 film, Wall Street, Michael Douglas’ character gives a speech at a shareholder’s meeting in which he proclaims that greed is good. The scene, based on an actual 1986 University of California at Berkley commencement address by Wall Street thug Ivan Boesky, quickly became a symbol of anything wrong within American capitalism. While both Boesky and Douglas’ Gordon Gekko deservedly ended up in prison, greed generally gets a bad rap. Greed, however, is entirely different from its destructive cousin, envy. Greed is repugnantly destructive when it is unprincipled; envy is always destructive. Always. Even the origin of the … Read More

In 1987 I had been in the investment business less than two years. My wife and I, fresh out of college, purchased our first home. Her job paid more than mine, even with my fancy UT MBA. Three degrees, two jobs, one little dog and one little mortgage. Life was easy. Then on October 19 of that idyllic year, the Dow Jones Industrial Average dropped 508 points, which is the percentage equivalent of a 3,100 point drop today. But in 1987, that 500 point drop was only half of the story. In the two months prior to that record decline, … Read More

Upon his election in 2008, President Obama was roundly expected to be the financial saviour of the common man. He railed against “fat cat Wall Street bankers,” criticizing both their behavior and the compensation. He promised to help middle class families by reducing their taxes, increasing the minimum wage and reducing income inequality. By these measures, he has been an abject failure. Median family income has continued to decline. Adjusted for inflation, median family income is the lowest it’s been since 1989. By contrast, the top five and one percent of income earners have enjoyed increases in both wealth and … Read More

In 1987 my wife and I bought our first house, a vinyl-sided starter home off Cedar Bluff Road. We felt almost like mortgage thieves, borrowing 30-year money for a mere 10.15 percent. Clearly, the credit gods had favored us. In 1987, I was focused on the previous few years, especially when mortgage rates had reached 16.3 percent in 1982. But the world didn’t begin in 1982, nor was it about to end in 1987. Or even in 2014. High quality US mortgage rates averaged 5.1 percent in 1900, or only slightly more than today’s average 30-year rate of 4.30 percent … Read More

An initial public offering (IPO) is the process by which a company raises equity capital from outside investors. It unofficially signals that a business is in the Big League. An IPO is a symbolic recognition of capital as necessary of factor of production and its role in powering the world’s economic engine. The largest IPO in the history of capitalism now belongs to Chinese e-commerce giant, Alibaba Group. The company raised $25 billion on a single day a little more than a week ago. The previous record holder was the Agricultural Bank of China, which raised $22.1 billion in its … Read More

Almost thirty years ago I stepped onto an empty elevator on the top floor of Knoxville’s 27-story Plaza Tower. Inspired by Alan Funt’s Candid Camera television show, I turned and faced the rear of the car. The elevator stopped at the 25th floor and picked up a second passenger. After about five seconds, she turned around with me, never saying a word. The elevator stopped several times. By the time we reached the lobby, about half of the people on the crowded elevator were facing the wrong way. That seemingly sophomoric prank was an invaluable investment lesson that continues to … Read More

If Tennessee’s football team wins eight games this season any reasonable observer would describe it as massive improvement. When the Volunteers won eight games in 2000, fans were generally disappointed. When measuring change, the beginning point matters. The Butch Jones era began in the athletic equivalent of a horrible bear market. Last week I saw an old friend who complimented me on my weight loss. I’ve actually gained a few pounds in the past month, so he caught me off guard. That is, until we realized that our last face-to-face visit was more than 20 years ago—when I was about … Read More

I love college football. I love the pageantry, tradition and passion surrounding the game. But I do not love the game’s governing body. The National Collegiate Athletic Association (NCAA) is among the most morally corrupt organizations in the free world. Society willingly accepts the situation because of tradition, ignorance or outright self-interest. The NCAA’s practically religious mantra is “amateur athletics.” The supporters of the quaint, idyllic notion of “amateur athletics” are quick to defend the cost of a scholarship as fair compensation to college athletes. Once a person accepts that it is morally permissible to exchange tuition, food and a … Read More

Shares of Apple Computer topped $100 a share this past week, eclipsing their previous high of $100.72 in September 2012. Demonstrating an uncanny ability to forecast short-term price movements, I sold my Apple shares in May this year for $85 per share. In the interest of both full disclosure and self-defense, I should also note that I had purchased the Apple shares only 12 months earlier, for $64 share, producing a tidy 33 percent profit in only a year. Some people would argue, however, that by selling in May rather than August, I lost $15 a share. They are badly … Read More