5 Lessons from Mike Wallace's Life for All of Us

The world has lost a giant in Mike Wallace.  He was fearless.  Let's hope we can all learn from how he lived his life to improve our own.

Read the full post on Forbes

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Big Media: Big Yawn

The advertising market continues to be severely weak. Yet, the fact that we're not in freefall has caused some of the most beaten down and debt-laden companies to be bid up in the last 6 weeks.

Names such as Harley Davidson (HOG), Royal Carribbean (RCL), Cemex (CX) and Lamar Advertising (LAMR) are all up big since March 6th (65 - 167% vs. 25% for the S&P).

Comparatively speaking, Big Media's returns over that time period look more modest. Yes, CBS is up 70% since early March, but it's still trading at less than $6, giving it -- to put it in perspective -- only a little more than double the market cap of what it agreed to buy CNET for last year.

News Corp (NWS) and Viacom (VIA) are up 35% since early March but lag the S&P over the last 6 months. Disney's (DIS) return since March 6th is 2 points less than the S&P's. And Time Warner (TWX) stock price (not including the dividend from the spin-off of Time Warner Cable (TWC)) is only up +2% since the great Bull Run began 6 weeks ago. Memo to Jeff Bewkes: where did my rally go?

The truth is that, although Big Media has been pummeled since this bear market began, it was never really priced for extinction (except maybe CBS, which is why it has bounced back as much as it has) like some of the other consumer discretionary plays. This "rise from the dead" rally hasn't let them participate.

Big Media is left priced for a severe long-term painful future, which is probably accurate.
Therefore, it's a space I'm avoiding.

Position: None.

Originally published in RealMoney.com on 4/28/2009 11:30 AM EDT

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A Look Into the Micro Crystal Ball

Published in RealMoney.com

By Eric Jackson

12/31/2008 12:00 PM EST

In these final days of 2008, we turn our eyes to next year and how the stock market will fare. Rather than adding to the chorus of predictions about the price of oil, gold and the dollar -- as well as the S&P 500 in general -- I wanted to offer some predictions that are micro in nature.

1. New York Times (NYT - commentary - Cramer's Take) will be sold to avoid shutting down. The sales of its Boston properties, cutting of its dividend and mortgaging of its headquarters will not be enough to refinance its debt in 2009. The Times will be forced to seek out a friendly purchaser, more likely to be Mort Zuckerman, Eli Broad, Terry Semel or Ron Burkle than Rupert Murdoch because of News Corp's (NWS - commentary - Cramer's Take) own financial challenges.

2. Yahoo! (YHOO - commentary - Cramer's Take) will appoint an inside board member as CEO by the end of February (either Gary Chapple, Maggie Wilderotter or V.J. Joshi), which will be panned by the business media and employees as uninspiring. Current President Sue Decker will immediately leave the company and take a job later in the year working for Warren Buffett at Berkshire Hathaway (BRK.A - commentary - Cramer's Take). Microsoft (MSFT - commentary - Cramer's Take) and Yahoo! will announce a friendly "merger" by the end of the summer.

3. Terry Semel will buy a media property through his investment firm and effectively run it (a la Sam Zell). After all the bad press from his days at Yahoo!, Semel won't be content to stay on the sidelines.

4. CBS (CBS - commentary - Cramer's Take) will be spun off from Sumner Redstone's control and Les Moonves will be removed as CEO. Redstone's debt restructuring talks with the banks will force him to jettison his stake in CBS and hang on instead to Viacom (VIA.B - commentary - Cramer's Take). The network will be sold to another media company and Les Moonves will immediately move on. Home Depot (HD - commentary - Cramer's Take) cofounder Ken Langone will be among the new owners of the company.

5. Howard Stern will announce he's not re-signing with Sirius (SIRI - commentary - Cramer's Take) and instead retire; Sirius will restructure through Chapter 11 with Mel Karmazin staying on. Disappointed in his lack of influence as part of Sirius, Stern will throw in the towel and announce he's retiring after his five-year contract ends in 2010. He will stay retired for nine months before announcing he's returning to terrestrial radio.

6. Google (GOOG - commentary - Cramer's Take) will buy geospatial satellite operator GeoEye (GEOY - commentary - Cramer's Take). Google will see providing the map images (and searching any location on Earth) that appear on Google Maps, Google Earth and its G1 mobile phone as strategic, as well as in line with its interest in space in general. Google's stock will end 2009 at $350.

7. Women's retailers will face bankruptcy. Ann Taylor (ANN - commentary - Cramer's Take), Talbots (TLB - commentary - Cramer's Take) and Charming Shoppes (CHRS - commentary - Cramer's Take) will all announce bankruptcy before the summer, as cautious women shoppers stay away from these retailers and tighten their purse strings. Chico's (CHS - commentary - Cramer's Take) will teeter on the edge of bankruptcy but survive the year.

8. Bill Gates' investment firm will orchestrate a takeover of Crocs (CROX - commentary - Cramer's Take) in his first active investment. Faith in the Crocs products, which are used by the Bill & Melinda Gates Foundation with children in Africa, as well as frustration with the current management, will spur Gates into taking over the footwear company.

9. Hugh Hefner will make a lowball offer to take Playboy (PLA - commentary - Cramer's Take) private with several other friendly individual investors after disillusionment in the low stock price. This action will spur interest from a larger foreign investor to buy the company with the promise of letting Hefner continue to run it independently.

10. Dry bulk shippers like DryShips (DRYS - commentary - Cramer's Take) and TBS International (TBSI - commentary - Cramer's Take) will triple in value before June 1 as the general market rallies, before declining 50% in the second half of the year.

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TheStreet.com: Activist Investor: Liberty Global's Spinning Wrong Way

From TheStreet.com
By Eric Jackson
10/28/08 - 11:17 AM EDT

About 10 days ago, Liberty Media (LINTA Quote - Cramer on LINTA - Stock Picks) Chairman John Malone sold $18 million worth of stock in Liberty Global (LBTYA Quote - Cramer on LBTYA - Stock Picks), a video and broadband service provider catering to Japan, Europe and Chile. Although Liberty Global's stock price is down 55% in the last month, you should follow his lead and get out now ahead of earnings, which will be announced in early November.

Malone's multiple Liberty-related entities (e.g., Liberty Communications, Liberty Global, Discovery Communications (DISCA Quote - Cramer on DISCA - Stock Picks)) have one thing in common: a love for opaque corporate structures with multiple classes of voting shares. In early 2007, before the words "CDS" and "subprime" had entered our collective lexicon, such complexity mattered little compared with high-growth businesses fueled by acquisitions. Liberty Global complied with this preference and its shares peaked at $44 in July 2007. However, there's been a slow descent since then until this month when the stock has fallen off a cliff. They traded yesterday under $13.

Malone's large stock sales this month are not unique for corporate chiefs these days. Sumner Redstone of Viacom (VIA Quote - Cramer on VIA - Stock Picks) and CBS (CBS Quote - Cramer on CBS - Stock Picks) and Aubrey McClendon of Chesapeake (CHK Quote - Cramer on CHK - Stock Picks) both had to unload large amounts of shares in the face of margin calls a few weeks ago. Malone gave no explanation for his sale, although he presumably faced similar pressures, considering that Liberty Global had spent $1.621 billion repurchasing its shares in the first six months of this year at weighted prices between $34.37 and $35.55.

That cash spent on share repurchases at triple the current market price could come back to harm Liberty Global in the coming quarters, as it only had $1.2 billion in cash at the end of June and just under $20 billion in debt.

Liberty Global is essentially a Comcast (CMCSA Quote - Cramer on CMCSA - Stock Picks)for non-U.S. markets. It delivers video and Internet via broadband instead of traditional cable. It derives no revenue from subscribers in the U.S.; its customers are principally in Japan, Western and Eastern Europe, Chile and Australia. In the first half of 2008, when the notion of emerging markets being decoupled from a flagging U.S. economy was in vogue, such a portfolio would be envious. Now, it appears all these countries are in for a longer recession than the U.S.

Aside from country recession risk, Liberty Global is exposed to currency risk. Virtually all the currencies tied to Liberty Global's customers have weakened significantly between June 30 and Sept. 30. In October, the pace has dramatically increased. Hungary's forint is down 30% this month vs. the dollar, the Chilean peso is down 22.5%, and the Aussie dollar is down 31%. These three countries counted for 16.4% of Liberty Global's total revenue last quarter.

Liberty Global does have extensive derivatives to mitigate this currency fluctuation risk. And some of its debt held in these currencies will surely benefit from the strengthening of the dollar in the past few months. However, the explanations given in the most recent 10-Q make don't make clear the extent to which the company is protected. We will probably have to wait for a more complete explanation during the company's next analysts' call. What is clear is that many companies that believed they were protected from currency risk have experienced deep pain in the last few weeks (such as Citic Pacific's $2 billion loss on a wrong bet against the Aussie dollar).

Liberty Global's assets also include stakes it owns in Sumitomo and News Corp. (NWS Quote - Cramer on NWS - Stock Picks). These investments were worth $682 million at the end of June using fair value accounting. Both companies dropped 25% in the third quarter, and more in October.

When you stack up Liberty Global vs. Comcast, Liberty Global's valuation still appears too rich. Liberty Global's trailing price-to-earnings ratio is 98, with a forward P/E of 26. That is starkly higher than Comcast's trailing P/E of 16.8 and forward P/E of 13. Liberty Global also has a much lower operating margin, return on assets, and return on equity compared to Comcast. Additionally, Liberty Global's debt-to-equity ratio stands at 3.84 vs. 0.81 for Comcast.

We have seen highly levered companies with high P/E ratios -- such as Las Vegas Sands (LVS Quote - Cramer on LVS - Stock Picks) and MGM (MGM Quote - Cramer on MGM - Stock Picks) -- punished in the last few weeks, even though they had both experienced significant sell-offs over the last eight months. (Las Vegas Sands' debt-to-equity ratio is only slightly larger than Liberty Global's.) Liberty Global needs to win back the trust of shareholders by simplifying its corporate structure and fully explaining the extent of its currency exposure in next month's analyst call. Until then, investors should follow John Malone's lead and stay away from Liberty Global.

At the time of publication, Jackson's portfolio was short Liberty Global, CBS and News Corp.
Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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