Smörgåsbord? No, Thank You!

A few years ago, I had the questionable pleasure of experiencing a Christmas-time ferry from Stockholm to Helsinki. The main dining-room on the ship was crowded with grown-up men and women that all looked like starving drunkards who were prepared to fist-fight for an extra piece of eel to pile high on their already overfilled plates. Within minutes, I was prepared to board the life boats! Lucky enough, a kind stewardess helped me to my cabin where I stayed until entering the port.

The question is if I’m the only Swede who gets filled from looking at a smörgåsbord rather than eating it? Reading ad's and mailers about the mushrooming establishments marketing the abnormal feasts at Christmas-time, this is probably the case. Classy and normally low-keyed home-cooking restaurants are suddenly transformed to factory entities. Volumes of all kinds of herring, smoked and cooked salmon, stockfish, liver pates, pork-ribs, ham, turkey, hotdogs and meatballs, and God knows what-not, are assembly-produced with a Scientific Management perfection that even would have good old Mr. Taylor stare in wonder. The leader of the pack, in the wining-dining capitol, claim to serve a smörgåsbord of 365 dishes, like if the ultimate culinary experience would be to eat what you normally do during a whole year in a single gigantic scoop.

Now, where do all these calories, sugar and fat go, when Christmas is all over and everyone have sobered up from New Year’s Champagne? The answer is of course to the waistline, enhancing one of the only growth sectors in the otherwise mature food industry. The food market segment that is focused on reducing the same waist line!

Not much paper and ink have been expended by the dietary pundits on the mystery of why the Mediterranean peoples, with their love of rich food, wind up with a lower casualty rate in the cardiac department than us gastronomically athwart up here in the Polar north.

I think, I have the simple answer. We eat too much! So, leave the smörgåsbord alone. Skip the glögg, beer and schnapps, and go for "hearty" red wines instead.

And, live well! It’s Christmas time, you know!

Cuba Libre

Did you know that Cuba Libre is one of the world’s most popular drinks? It all started during the Spanish-American war. A group of American soldiers had gathered in a bar in Old Havana for drinks. Suddenly, a Captain arrives and his voice calls for rum and coke (actually it is 6 cl light Bacardi rum and 18 cl Coca Cola), with ice and a twist of lime. More soldiers are entering the crowded bar. Suddenly, the Captain proposes a toast; “Por Cuba Libre” to celebrate the free Cuba. At that moment, the drink Cuba Libre is born.

Cuba has also been one of the most admired nations among communists and socialists, and other Anti-American groups. And still is, it seems, even though the Libre part is long gone and forgotten in Cuba, with now fifty years of communist dictatorship rule.

One of the sternest supporters of Castro’s dictatorship, and communist Cuba, was the former Swedish Prime Minister, Olof Palme. He and his fellow socialists in power during the 60’s, trained and organized herds of leftist journalists that would dominate Swedish media for a generation and beyond. Hence, it was no surprise to me that the Swedish public service television provided a full evening show about the great Castro for the ignorant populace last Saturday. The old man is 80’ish and has been in power 50’ish, you know, and that calls for a public celebration to show-off the very special Swedish form of third-world solidarity!

No embarrassing critics were allowed to contribute a second opinion, of course. To claim that Castro has a track record of human harassments and murder that makes even Chile’s former dictator, General Pinochet, seem tender-loving, is nothing but right-wing and American propaganda. That Castro has collected billions of dollars outside of Cuba is, of course, only for the good of the people.

As Honore de Balzac one time said: “Behind every great fortune there is a crime.”

Bob Geldof and I

Do you remember Bob Geldof’s song “I Don’t Like Mondays”? It is the only song I remember The Boomtown Rats succeeded with, back in 1979. Geldof turned out to be more of an administrator and marketer, than song-writer. Nothing wrong with that!

Now, like Geldof, why do I dislike Mondays and why is writing on Mondays so cumbersome? But, I hear you say, you often don’t submit a single line on Sundays, so what’s the problem? Well, the Good Book says that thou shall knock off the work-bit on that particular day. The fact is that I’ve never been able to comply with such sound advice. Personally, I find Sunday evenings to be marvelously productive, while Mondays, frankly, sucks.

Of course, modern web-diarists are under no obligation to fill in every day with their obscure thoughts. Even the diligent monks who wrote the Anglo-Saxon Chronicles would take their eye off the ball occasionally. For instance, in 509 AD, they only made a single entry for the entire year: “St. Benedict, the abbot, father of all monks, fared to heaven.” I suppose they must have spent a lot of time pondering that year, especially with the abbot out of the way.

As a result of my Monday day-dreaming, Tuesday mornings become nothing but frenetic, as I have to rush to get the sour backlog cleared. By the time I have finished, the muse of inspiration has packed up and gone to bed. Hence, I prefer travel and meetings from Tuesday afternoon until Friday. Saturday is family-time and, as a consequence, the big ideas come on Sundays!

The sorry fact of life is that without some quiet thinking time, no researcher can ever accomplish anything really worthwhile, adding to what is already known. And, without some peaceful contemplation, where would there be any serenity in life? Outside of Church, for us agnostics?

From my rusty home town, Sandviken, I remember the old story of the crippled steel worker, sitting and smoking on a bench outside of the rolling mill, when the young and ambitious engineer comes running and, rather upset, he asks:
“Are you sitting here, all the time, doing nothing??”
The old man takes out his snug from the mouth.
“No, Sir! At six o’clock, I am relieved!”

A 2nd Note on Global Warming

It may not come as a surprise to some of you, but now it has been confirmed that in order to reduce the risk for global warming, we have to invest in more nuclear power. Whether we like it or not! This opinion may not be particularly interesting if it merely was my own, but when it for the first time in its history comes from the International Energy Agency, there are reasons to raise eyebrows even for the most green-blooded fanatics.

Although several countries, including India, China, the US and France, are already planning more nuclear plants, and others such as the UK are in the early stages of backing new reactors, many countries still oppose any addition to nuclear capacity, including Germany, Spain and Sweden, of course.

Now, IEA claim that: “We need a decision almost tomorrow if we are going to act before we reach a point of no return in climate and security of supply.” This means that politicians need to persuade reluctant voters that nuclear power is safe and necessary. In order to bolster energy security and combat global warming, i.e. to save the environment!

The agency find modern nuclear power to be cost competitive with coal and gas, its main rivals, and concludes that there is enough uranium deposits to meet renewed demand. The $17.000 billion energy investment needs until 2030 has risen significantly and the world is “on an energy path that is vulnerable, dirty and expensive.” The goal is therefore to “prepare an alternative path ... to a cleaner, safer, less costly system”, which requires nuclear power investments, but also greater energy efficiency, new technology developments in renewable energy, especially bio-fuels for transport and wind for power generation. But, a development without nuclear energy is no realistic alternative! Wind and solar power have their place, but because they are intermittent and unpredictable they simply can’t replace big base load plants such as coal, nuclear and hydroelectric. Natural gas, a fossil fuel, is too expensive already, and its price is too volatile to risk building big base-load plants.

Given that hydroelectric resources are built pretty much to capacity, nuclear is, by elimination, the only viable substitute for coal. It’s that simple.

Today, the United States have more than six hundred coal-fired plants that emit nearly 2 billion tons of CO2 annually, which is the equivalent of the exhaust from about 300 million automobiles. In addition, the Clean Air Council reports that these coal plants are responsible for 64 percent of sulfur dioxide emissions, 26 percent of nitrous oxides and 33 percent of mercury emissions. These pollutants are eroding the health of the environment, producing acid rain, smog, respiratory illness and mercury contamination.

Meanwhile, the 103 nuclear plants operating in the United States effectively avoid the release of 700 million tons of CO2-emissions annually, the equivalent of the exhaust from more than 100 million automobiles. Imagine if the ratio of coal to nuclear were reversed so that only 20 percent of the Americans electricity was generated from coal and 60 percent from nuclear. This would go a long way toward cleaning the air and reducing greenhouse gas emissions. Every responsible environmentalist should support a move in that direction, not the least for China, where the emission growth in the world is highest.

The core problem with nuclear energy is its associated myths that are extensively exploited by the green lobby activists. The first one has always been that nuclear energy is expensive, all cost taken into account, while the fact is exactly the reverse. In 2004, the average cost of producing nuclear energy in the United States was less than two cents per kilowatt-hour, comparable with coal and hydroelectric. Advances in technology will bring the cost down further in the future, while nobody can forecast the price of oil and gas anymore and the indirect environmental costs of CO2-emmissions are potentially mind-boggling.

The second issue concerns safety. Although Three Mile Island was a success story, the accident at Chernobyl was clearly not. This early model of Soviet reactor had no containment vessel, was an inherently bad design and its operators literally blew it up. The multi-agency U.N. Chernobyl Forum reported last year that 56 deaths could be directly attributed to the accident, most of those from radiation or burns suffered while fighting the fire. Tragic as those deaths were, they pale in comparison to the more than 5,000 coal-mining deaths that occur worldwide every year. The fact is that no one has died of a radiation-related accident in the history of civilian nuclear reactor programs in the Western world. Although hundreds of uranium mine workers did die from radiation exposure underground in the early years of that industry, this problem has now been corrected.

Nuclear waste is another big issue and the claim that it will be a societal danger for thousands of years. The fact is that within forty years, used fuel has less than one-thousandth of the radioactivity it had when it was removed from the reactor. And it is also incorrect to call it waste, because up to 95 percent of the potential energy is still contained in the used fuel after the first cycle. Now that the United States has removed the ban on recycling used fuel, it will be possible to use that energy and to greatly reduce the amount of waste that needs treatment and disposal. Several countries are now entering the nuclear-fuel-recycling business.

The recent major concern has perhaps been that nuclear reactors are vulnerable to terrorist attack. The fact is that the six-feet-thick reinforced concrete containment vessel protects the contents from the outside as well as the inside. Even if a jumbo-jet did crash into a reactor and in the unlikely event of breaching the containment, the reactor would not explode. In fact, the normal extraordinary safety measures of nuclear plants also increase safety from a terrorist attack. Instead, there are many other types of facilities that are far more vulnerable to terrorist attacks, including liquid natural gas plants, chemical plants and numerous other political targets.

Nuclear fuel can be diverted to make nuclear weapons. This is the most serious issue associated with nuclear energy and the most difficult to address, as the examples of North-Korea and Iran shows. But just because nuclear technology can be put to evil purposes is not an argument to ban its use. The only practical approach to the issue of nuclear weapons proliferation is to put it higher on the international agenda and to use diplomacy and, where necessary, force to prevent countries or terrorists from using nuclear materials for destructive ends. Rather, increased safety shall be a motivator for new inventions and solutions. And new technologies such as the reprocessing system recently introduced in Japan, in which the plutonium is never separated from the uranium, can make it much more difficult for terrorists or rogue states to use civilian materials to manufacture weapons.

In 1979, Jane Fonda and Jack Lemmon produced a frisson of fear with the blockbuster movie; “The China Syndrome,” a fictional evocation of nuclear disaster in which a reactor meltdown threatens a city’s survival. Less than two weeks after the opening, a reactor core meltdown at Pennsylvania's Three Mile Island nuclear power plant sent shivers of very real anguish throughout the world, not the least in my home country. Because of this double entendre nobody noticed that the Three Mile Island was in fact a success story. The concrete containment structure did just what it was designed to do; to prevent radiation from escaping into the environment. Although the reactor itself was crippled, there was no injury or death among nuclear workers or nearby residents. Three Mile Island was the first and only serious accident in the history of nuclear energy generation in the United States, but under heavy fire from Hollywood, it was enough to scare away any further development of the technology and new plant investments. In Sweden, we even made it unlawful to improve nuclear technology.

Is it not outlandish and somewhat bizarre that, in retrospect, when the facts are known, it turns out that the pro-nuclear or rather least negative nuclear “Linje 1 – voters” in the public Swedish referendum, 1980, turns out to be the ones who were most environmentally friendly?

Perhaps, the green lobbyists and “Linje 3 – voters” were too much under influence of Fonda and Lemmon than doing the homework on technology and environmental facts?

A 6th Note on Cevian and Gardell

After being asked by many readers to comment upon Cevian, sometimes being called a hedge fund and, now and then, a private equity firm and their differences to the old day’s typical conglomerate, I will in this note make some comments as regards the financial business concept of hedge funds.

According to their own presentation, Cevian is a private investment firm that acquires significant minority ownership positions in undervalued Nordic public companies where there are opportunities to enhance value through active ownership. Like a typical hedge fund and private equity firm, Cevian invests capital for a number of institutional and accredited investors organized as an offshore formed limited partnership. The difference to the standard hedge fund is that Cevian does not, merely, act on negative control, i.e. the active buying and selling of securities. They believe in governance participation, which is something that divides hedge funds. Some does it, many don’t.

According to my knowledge, Cevian does not involve themselves in the practice of using complex and short-selling financial instruments like the typical hedge fund. But, like with all of them, this we don’t know as observers from the outside. Hedge funds are relentlessly secretive with their trades. Therefore, Mr. Gardell’s active pursuit of becoming a media darling in Sweden is a somewhat atypical behavior for a hedge fund front figure. At the same time, there are examples where hedge fund manages in search for a quick exit, would speak-up the share and be the seller, at the same time. Didn’t Mr. Gardell do that with Lindex? And, why is he keeping up so many journalistic relationships? Do you really think he does that for no reason?

The questioning of hedge funds as important players on the equity markets and in the power struggle of corporate governance is increasing and, recently, includes such different institutions as the US Senate Juridiciary Committee and the European Central Bank. Coming under heightened scrutiny primarily as a result of the failure of the Nobel Prize winner led Long-Term Capital Management in 1998, which necessitated a bailout coordinated by the US Federal Reserve, hedge funds have still grown substantially since then and primarily because of the lack of control financial authorities can assign upon them due to their offshore locations.

Critics have charged that hedge funds pose systemic risks for financial stability, which warrants close monitoring despite the essential lack of any possible remedies. This risk is further magnified by evidence that broad hedge fund investment strategies have also become increasingly correlated, thereby increasing the potential adverse effects of disorderly exits. It is to be noted how Mr. Gardell, frequently, speaks about his “network”. The European Central Bank, therefore, sounded a note of alarm over the possible repercussions from any collapse of a hedge fund, or group of funds. The unthinkable, for example, could be a collapse of GM and/or Ford in the US, with severe effects upon the Volvo share and, subsequent, requirements for Cevian et al to liquidate their major positions.

In 2005, Princeton University professor Burton G Malkiel published a "heated" paper that presented how hedge funds systematically under-perform the market averages. He also argued that hedge fund indexes were often statistically faulty and overstated their real performance. Clearly, recent evidence suggests the myth of good performance in all markets is somewhat shaky even for fund of hedge funds. Adding the track-record of these funds, from their own prospectuses, together; they would already have taken over the world!

The fact is that also hedge funds may simply bet wrong, and the problem is that they do this with a high degree of leverage. For example, in September 2006, the US hedge fund Amaranth Advisors lost roughly $6 billion of its $9 billion assets on a series of ill-timed trades. So, you must realize as an investor, continuous track-record of beating the market, through leverage, takes you closer to bankruptcy at the same time. A simple lesson that, obviously, even Nobel Prize winners can forget!

The Act of Contemplation

Yesterday, I got the question; how do you decide what to write about? And, embarrassingly enough, I could not enlighten the interrogator on that fundamental question. It is a question of pure chance and other things not under my control, I guess. Or, maybe, I’m just an insignificant part of the normal media buzz. Business, politics and society trends come and go, and there are a few notes from my pc-pen.

Spending my prime time thinking about wireless Knowledge Automation applications, creating new management technology and conducting organization theory research, requires a lot of contemplative time, so I use a good deal of darkened hours this time of year searching for the muse of inspiration to help in the development of new ideas. This means that while I’m not reading or writing, I spend a good deal of horizontal time in my favorite Scotch-checkered sofa and sitting in my old Chesterfield armchair, staring into the voids of my harbor view with some soft and inspirational music in the background.

“What is this life, if full of care,
We have no time, to stand and stare?”
……wrote someone whose name I can’t recall. It is, actually, a very important activity that many professionals skip from their overflowing agendas, from dusk to dawn and dawn to dusk. God bless them and thank you, whoever you are, for freeing my soul from these unrelenting reins.

A 5th Note on Cevian and Gardell

Mr. Gardell’s recent comments in Affärsvärlden on the weak corporate governance in Europe must take a firm top position on the short list of most pathetic statements by a Swedish financial investor. Without any form of substantiation, he bluntly claims that Sweden is ahead of the pack and everyone else is lagging behind. So, Europe, here I come, he clarifies to the bewildered reader. Renounced of experience from foreign corporate governance, himself, Mr Gardell shall now teach the financial communities in Frankfurt, Paris, Amsterdam, Milan and the City of London, how he turned around Lindex by changing CEO and appointed Emma Wiklund as front figure for a successful ad campaign, before Cevian sold out.

I’m sure they will be impressed and scared to the bones.

For my readers of younger age or constrained by a short memory, I come to think about the last time I heard of a similar idea, equally delightful and lunatic. It was little more than ten years ago and another Swede; Mr. Anders Lettström. The company was Reinhold City. Like in the Gardell case, Mr. Lettström thought that capitalizing upon the appreciation of real-estate values in Stockholm at the time, would make him an equally superior investor in all major cities in Europe. Hence, he invested in prime property in the best metro-locations all over Europe, arguing how valuable his properties were given the extreme premiums he was forced to pay. While the European real-estate broker community was shaking their heads, in wonder, about the strange behavior of the unheard of Swede, Reinholds City’s finances went from billions in cash to financial meltdown in less than two years.

One Dutch banker involved in the liquidation of Reinhold City’s assets commented to me; “Swede’s believe they are superior investors, when they actually only take greater risk than what’s good for them. They leverage their houses not only up to the chimney; they also finance the smoke!”.

I think the Gardell-Lettström parallel is quite significant. So, if you are impressed by Cevian, find out how leveraged they are with “Other’s Peoples Money” in their minority investments in Sweden and elsewhere. Thereafter, you take the same leverage on your own hard-earned cash, buying for example Volvo or Telia shares, and hope for Gardell’s salvation when he becomes appointed as a non-executive director. If you make it, your return on investment will be higher than his. You don’t have to pay him, you know! So, you must be smarter than he is!

If, on the other hand, “the random walk on Wall Street” goes against you, and you have problems sleeping at night, when the bank makes those ill-willed margin calls, don’t forget that you have been warned, reading this.