Financial Myths: “Don’t Laugh, This Isn’t Reality TV” Part II

Michael McTague |

This Jack Nicholson line from The Departed shows he was onto something. Reality TV may resemble the way things work more than we would like to think. The Myth Buster realizes that the topic does not sound erudite. But, consider the facts. Last month, we looked at several bizarre situations: Mark Cuban accused of wrongdoing over an apparently worthless stock; a SAC trader faints and gets a very long sentence while efforts to trap his boss flop; Sears (SHLD) stumbles amid clever planning hyperbole that has not turned a profit. This month we find equal – maybe greater -- examples of the strange reality of business.

Budweiser Takes the High Ground

Amid the furor over football players and domestic abuse Budweiser (BUD) criticized the National Football League (NFL) for not being tough on domestic violence. Don’t laugh! After all, the beer companies believe in “drinking responsibly,” a catch phrase of this part of the sin industry. An organization called the Distilled Spirits Council of the US promotes “responsibility and moderation.” Wait a minute. Isn’t liquor related to violence? According to the Huffington Post, a study by Northwestern University found that proximity to a liquor store or bar made a person 500 times more likely to be shot than anyone else in the same neighborhood.

A tougher question is which area of human endeavor – football or drinking liquor – really is more dangerous. The correct answer may win the contestant a new washing machine or a cruise to Bermuda. Recent evidence reveals that nearly three out of ten football players will suffer at least moderate neurodegenerative disease. A main cause appears to be brutal tackles. Legendary quarterback Joe Montana suffered at least four concussions; quarterback Steve Young endured seven. No organization would ignore such statistics, but professional football appears slow to investigate tougher rules, better helmets, preventive care and other means of stemming the damage.

While three out of ten football players sustain brain injuries, the extent of domestic violence among football players is not known. However, the league’s third-and-twenty response to the recent flurry of ugly incidents shows that they were not on top of the issue. By contrast, the liquor companies have made an effort to reduce irresponsible drinking. According to Gallup, the percentage of American adults who drink liquor has remained consistent for many decades. About one third of Americans do not drink at all. The other two thirds drink liquor, ranging from once a month to several a day. Most do so without serious incident.

Since we know prohibition of liquor did not work, liquor companies that strive for responsible drinking provides a reasonable alternative. Now, what will the NFL do about violence on and off the field?

Oracle’s Heave Ho: Who Is The Biggest Loser?

In another bizarre twist of fate, Larry Ellison steps aside as Oracle (ORCL) CEO. The founder and multi-billionaire who would love to outpace Warren Buffett of Berkshire Hathaway ($BRK) and Bill Gates of Microsoft (MSFT) in personal wealth “stepped aside.” Is this credible? Does it sound more like “The Biggest Loser?” This tenacious entrepreneur referred to Hewlett-Packard’s (HPQ) acquisition of Compaq as ‘watching two garbage trucks collide in slow motion’. This is not the remark of someone who merely steps aside. So when the wheel spun, who was selected as Ellison’s replacement? Oracle’s new co-CEO is Mark Hurd, a former top executive at Hewlett-Packard. Oracle has done well with Java, Solaris, servers, storage and cloud computing. Could this foretell their entry into a new line -- the garbage truck business? Don’t laugh, they are big in storage.

Maybe we shouldn’t take the new CEO too seriously. Ellison remains Chairman of the Board and will be the top technology officer. After all, he is a true American Idol.

Keeping Up With Mbits Per Second or the Kardashians

In another reality TV knock off, it appears that some mobile networks are going to up their fees by threatening to allow certain websites to operate slowly – unless they pay a fee to run quickly. The effect of this would be to bloat the revenues of the huge networks and make it even more difficult for the small networks to compete. Verizon (VZ) and AT&T (T) are the market share leaders. Sprint (S) and T-Mobile (TMUS) trail by a good distance. So, Sprint and T-Mobile users may suffer the fate of the smaller providers as their searches slow to the speed of molasses. Just imagine, you are trying to take advantage of a special online sale of 25% off and you get a drawn out three-minute message: “ Sign up imm---ed----i---ate----ly. Get your sav----ings------now.” At that speed, they will never keep up with the Kardashians.

“Don’t Laugh, This Isn’t Reality TV,” a remark by the iconic Jack Nicholson – the actor who said, “Nick, Nick, Nick, Indians!” “Here’s Johnny!” and “You can’t handle the truth” -- has proven itself an insightful and prescient myth indeed. Big business resembles reality TV more than one might like to think. Incidentally, since the last Myth Buster installment, Mathew Martoma, the SAC employee convicted of insider trading, is out on a bail appeal after hiring a new lawyer. The wheel of fortune just keeps spinning!

Next month, the Myth Buster will take a look at his track record over the last year. Don’t miss a spirited review.

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Michael McTague, Ph.D. is Executive Vice President at Able Global Partners in New York, a private equity firm.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ORCL Oracle Corporation 38.50 -0.20 -0.52 19,120,264
S Sprint Corporation 7.98 0.04 0.50 8,775,180
TMUS T-Mobile US Inc. 54.44 0.18 0.33 3,087,884
VZ Verizon Communications Inc. 49.81 -0.06 -0.12 10,650,716
SHLD Sears Holdings Corporation 12.51 -0.69 -5.23 774,478
BUD Anheuser-Busch Inbev SA Sponsored ADR (Belgium) 101.39 1.48 1.48 2,559,242
HPQ HP Inc. 15.12 0.06 0.40 8,377,096
T AT&T Inc. 38.61 -0.27 -0.69 16,102,161
MSFT Microsoft Corporation 59.25 0.05 0.08 25,515,665

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