Nugget: Connecting the World Cup

From a GSMA/Deloitte report on the Brazilian telecom market:

  • “The 2014 World Cup and the 2016 Olympic Games in Rio will further increase demand for mobile services, however this is likely to add significant congestion to mobile networks, as these events are widely expected to consume significant bandwidth. The World Cup is expected to bring over 1 million roaming connections, generating 300% of the normal data traffic for a period of 8 weeks. Analysts estimate that during the London 2012 games, 60GB of data crossed the network in the Olympic Park every second, and this figure is likely to grow significantly in four years’ time. Providing extra capacity in such a limited time window will be a key challenge for operators.”

    – Brazil Mobile Observatory 2012

Nugget: J. M. Keynes the Stock Market Investor (research)

A paper found at the Social Science Research Network by D. Chambers and E. Dimson:

Abstract: Keynes made a major contribution to the development of professional asset management. Combining archival research with modern investment analysis, we evaluate John Maynard Keynes’ investment philosophy, strategies, and trading record, principally in the context of the King’s College, Cambridge, endowment. His portfolios were idiosyncratic and his approach unconventional. He was a leader among institutional investors in making a substantial allocation to the new asset class, equities. Furthermore, we document a radical change in Keynes’ approach to investment which was to the considerable benefit of subsequent performance. Keynes’ experiences in managing the endowment remain of great relevance to investors today.

Nugget: A Billabong write-up on Seeking Alpha

From the article: Billabong: A Cigar Butt With Upside? by Mike Arnold


Things look terrible at Billabong. However, as management sells off assets (West 49, etc), closes retail locations and refocuses on its distribution channels and brands, in my opinion, the company will survive, in one way or another.

The question is, will equity shareholders retain ownership in the future operations?

With a net debt position of only $152 million (not including some $350 million in off balance sheet lease commitments), it does not appear like an insurmountable hurdle to sell assets and/or issue a bond to protect shareholders and bank lenders.

In addition, I wouldn’t be surprised if a white knight came in to pick up the assets on the cheap and/or for strategic purposes. Nike (NKE), Adidas (ADDYY.PK), Columbia Sportswear (COLM), and Under Armour (UA) come to mind. VF Corp has already expressed interest in the assets.


In the comments section there is also a referance to an old NY Times article from 2003 on the purchase of Converse by Nike.

Nugget: PPR changes name to Keurig and starts Puma restructuring

From a Reuters article on June 18, 2013:

But beyond the name change and new logo featuring an owl, Pinault gave few answers to shareholders about the future of Puma or Fnac, the group’s CD and book business, which will list on the stock market on Thursday.

Pinault called on shareholders to hold on to Fnac shares they will receive when the business floats, valuing Fnac at 400 million euros ($533.90 million), significantly below the 1 billion euro mark some analysts had forecast two years ago.


Puma has lost its competitive edge and credibility in key areas such as the running shoe segment, allowing rivals such as Asics and New Balance to gain market share and bigger competitors such as Adidas and Nike to consolidate their lead.

Puma has made a number of mis-steps, including opening shops in the wrong places, poorly integrating licence businesses and back-office operations and spending money on sponsorships in sailing and rugby not closely linked to the brand. It suffered a 70 percent drop in net profit last year.

“I have the feeling that PPR took a long time to get into the business of Puma and really understand what was going on,” said Thomas Chauvet, luxury goods analyst at Citi.

Nugget: Goodwill and its Amortization: The Rules and The Realities

Masterpiece from Warren Buffett in 1983.

Outlier Allocators

The following entry is borrowed from Warren Buffett’s Berkshire Hathaway 1983 Chairman’s Letter as it was very informative and opened my eyes more clearly to the economic realities of goodwill. Amortization and goodwill are keys to understanding the intangible side of the financial statements.

“During inflation, Goodwill is the gift that keeps giving.”

(This appendix deals only with economic and accounting Goodwill – not the goodwill of everyday usage. For example, a business may be well liked, even loved, by most of its customers but possess no economic goodwill. (AT&T, before the breakup, was generally well thought of, but possessed not a dime of economic Goodwill.) And, regrettably, a business may be disliked by its customers but possess substantial, and growing, economic Goodwill. So, just for the moment, forget emotions and focus only on economics and accounting.)

When a business is purchased, accounting principles require that the purchase price first…

View original post 2,490 more words

Nugget: The Sneaker Wars and the Pele Pact

From the article Was Pele paid to tie his shoes during the 1970 World Cup final? – Los Angeles Times (October, 2012)

“This was especially evident during the 1968 Summer Olympics in Mexico City where Adidas actually had Puma sneakers confiscated by custom officials! Things had gotten so crazy that in the lead up to the 1970 World Cup in Mexico, the two companies actually decided to come to a sort of “peace treaty” and to avoid the dealings that had marked their relationship for most of the 1960s.

The most notable result of their interactions was the so-called “Pele Pact,” where both companies agreed NOT to sign a deal with Pele, the greatest football player in the world at the time. Their feeling was that they would both end up spending so much money on a bidding war that it would not be worth it in the end.

Led by Pele, Brazil’s 1970 national team was one of the greatest World Cup teams in the history of the tournament. They played Italy in the final match of the tournament. It was one of the most highly anticipated football matches in years. Right before the opening whistle, Pele asked the referee for a moment to tie his sneakers. All eyes were on Pele as he bent over to tie his sneakers….Puma sneakers. What happened to the “Pele Pact”?”

Nugget: Very good article on ESPN in the Economist

The Real Disney – The Schumpeter column @ Economist (april 2013):

“Disney smartly gives its subsidiaries autonomy. The boss of ESPN, John Skipper (a former Disney executive), and Mr Iger (a former ABC sports producer) both love sports and speak often, but are 2,900 miles apart. Disney’s biggest contribution to ESPN has probably been its fat wallet, which paid for new sports rights and technology. ESPN was one of the first firms to offer live video on its website, and it has launched an application so cable subscribers can stream ESPN on mobile devices.

At Disney’s coaxing, ESPN experimented with brand extensions such as restaurants and mobile phones that pinged match results to subscribers, but both flopped. Not all brands, it transpires, can be trotted out to theme parks and toy shops. Disney learned this, and focused instead on new content and platforms. ESPN has a fleet of channels and websites aimed at specific audiences, such as Hispanics and women, as well as a magazine, and is savvy when it comes to mobile and online viewing.

ESPN’s muscular profits depend on three things. First, fans watch sports live: no one wants to see Monday Night Football on Wednesday. Because viewers cannot fast-forward through the adverts, advertisers pay more for slots on ESPN.

Second, ESPN offers spectacles you cannot see elsewhere. Rights to broadcast games are often exclusive. ESPN shows more sports, including baseball, car-racing and poker, than any other network. SportsCenter features some of America’s sparkiest sports commentators, whose banter is as irreverent as an English football chant, minus the swearing. (Keith Olbermann, an over-the-top political pundit, used to be one of them.)

Third, ESPN pioneered “affiliate fees”, which cable operators pay for the right to carry each network. In 2013 ESPN will probably earn $6.6 billion from them, more than three times what it makes from ads, according to SNL Kagan, a research firm. Because it has so many exclusive sports rights, ESPN has been able to haggle its fee up to $5 per subscriber, per month: far higher than any other network’s. These fees are more predictable than ad sales, which is why investors are such fans of cable networks.”

The complete article

Nugget: Great interview with Wilbur Ross

I am American business is a series of interviews with American business people by CNBC. They did Wilbur Ross and you can find the whole interview here:

CNBC interview with Wilbur Ross


“Right. The way we’re looking at things is to really own them. If we buy a bond at 30 cents on the dollar, it’s not that we hope it goes to 35 so we can sell it. If we buy a bond at 30 cents on the dollar, it’s because we want it to default and we want to own the business. When you own the business, it means you have to be in there for a number of years, because it takes a while to fix it, then it takes a while to get it public or get it sold. So it’s a completely different mentality. In our shop, it’s a big event if there’s a trade in the whole day. Most places are trading, trading, and trading like mad, so it has a very different rhythm to it.”


“When we’re looking at an opportunity, first of all we look at it on an industry basis, because we’ve learned over the years that when companies go bad, they generally go bad as a whole industry. At one point it’ll be all the airlines that are bad, another point all the steel companies, and another point the textiles. That’s because what happens is you have industries that have been high users of leverage and then some catalytic event occurs, so the industry tends to have problems simultaneously. This creates two sets of opportunities, one is to fix the individual company, and second is the potential for changing the dynamics of the whole industry. If you can do both, then you get two big increments to value. So that’s what we really try to shoot for.”

Braves´New World –

Braves’ New World – by Monte Burke at (2008)

But the biggest changes are within the stadium. In 2005 the team spent $10 million on a 70-foot-high high-definition screen that looms over center field. The city owns Turner Field and won’t let the Braves sell naming rights to it for another six years, but in 2005 the team opened $3 million Tooner Field next door as a place for kids to play during games, with the Cartoon Network as sponsor. Last year the Braves launched all-you-can-eat seats, sponsored by ampm convenience stores, where patrons pay $35 to $70 to eat and drink to their heart’s content. They’ve also started the Suntrust Club, 143 premium seats only 43 feet behind home plate (closer to it than the pitcher’s mound). That cost $6 million, with its underground high-end lounge and bar, but the seats go for $25,000 a season apiece.

In all, the Braves have spent $30 million over the last five years making the fans want to come back, and it seems to be working. Not only is attendance up, but 20% of the 10,000 season ticket holders lost in the early 2000s are back. All of which helped make 2007 the team’s most profitable year in at least a decade. The Braves did a superb job replacing TBS, divvying up the games to three stations. This season the baseball players will bring in $57 million from broadcasts on FSN South, SportSouth and Peachtree TV, a local Atlanta station.

Still, Malone knows that maximizing his return ultimately depends on how the Braves do on the diamond. Shortly after he bought the team it acquired a big-hitting first baseman, Mark Teixeira, who makes $12 million a year, and this off-season it won back Glavine, who earns $8 million. “Off-season moves like that mean a lot to people who have been here,” says third baseman Chipper Jones, who has been with the Braves since 1990. Malone says he has set no limit on the payroll: “We won’t be cheap. We’d like to win. If Terry calls up and says they need something, they’ll get it.”