As any baseball fan knows, the New York Yankees have an A Rod problem. Just in case you have no idea what I am talking about, A Rod is Alex Rodriguez, the third baseman for the New York Yankees, signed in December 2007 to a one of the richest sports contracts in history. The Yankees, dazzled by the the numbers that A Rod posted in 2007 and by the possibility that he could become baseball's home run king (with 500 home runs, he seemed to be on a path to beating Barry Bond's record of 762 home runs), signed the then 33-year old to a ten-year contract worth $275 million (with numerous bonus clauses...
Private Equity: Too disruptive or not disruptive enough?
From my past blog posts, you should know that I am not a political blogger, but Mitt Romney’s background as a key player at Bain Capital has made private equity a hot topic this political season. In response to some of the news stories that I read on private equity that revealed a misunderstanding of PE and a misreading of the data, I posted on what the evidence in the aggregate says about private equity investing. Reviewing that post, I noted that PE fit neither side’s stereotype. It has not been as virtuous in its role as an agent of creative destruction, as its supporters would like us to believe,...
The disclosure dilemma: Why more disclosure has led to less information
The last three decades have been the golden age of disclosure, as both accounting rule writers and regulators have pushed companies to reveal more and more about their prospects to investors, both in the US and internationally. Some of this push can be attributed to more activist investors, demanding more information from companies, but much of it can be traced to accounting fraud/malfeasance, where companies held back key information from investors, who paid a price as a consequence. In response, legislators, the watchdog agencies (SEC and its equivalents) and the accounting rule-writers (GAAP,...
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Winning (losing) by losing (winning): The power of expectations
If you are a baseball fan, I am sure that you know that both the New York Yankees and the Baltimore Orioles made the playoffs last week. While there was some celebration in New York on the news, it was nothing compared to the jubilation in Baltimore. The reason is not hard to fathom. In the last 16 years, the Yankees have made the playoffs in all but one, and with their payroll and heritage, Yankee fans view the playoffs as an entitlement, rather than a bonus. For Baltimore fans, whose team has not had a winning record (forget about making the playoffs) in a long time and was not expected to have...
