Byline: By richard siklos section: Section C; Column 5; Business/Financial Desk; Pg. 1 Length
February 11, 2007 Sunday Late Edition - Final It's a Great Country, Especially if You're Rich BYLINE
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February 11, 2007 Sunday Late Edition - Final It's a Great Country, Especially if You're Rich BYLINE: By BEN STEIN. Ben Stein is a lawyer, writer, actor and economist. E-mail: ebiz@nytimes.com. SECTION: Section 3; Column 1; Money and Business/Financial Desk; EVERYBODY'S BUSINESS; Pg. 8 LENGTH: 1157 words THIS is a column about two vital investment notions. First, much has been made lately of stock buybacks by public companies. A stock buyback, as the name implies, occurs when a company uses its cash to buy back its stock. There has been a staggering amount of this stuff going on lately. In 2006, according to Phil DeMuth, my friend, book-writing partner and investment wizard, stock buybacks by the largest American corporations were roughly $325 billion, an immense sum even when compared with, say, 2004, when they were closer to $200 billion, itself a vast sum. The criticism of these buybacks is that they reduce the number of shares outstanding at Company X, and earnings are therefore spread over fewer shares. This raises earnings per share, and -- in a good market -- presumably raises the price of the shares, all other things held equal. This, in turn, makes the value of the options held by executives rise. So, supposedly, this makes share buybacks suspect. But I would like to offer a few more thoughts on share buybacks and then hit that one. When Company X buys back its shares, it is essentially saying that it thinks the investment is a good use of the company's money. Thus, if the company is selling at a price-to-earnings ratio of 20 -- a normal state today, implying a 5 percent annual profit -- management is saying that it has enough cash so that it is happy to invest in something paying a 5 percent return. The market as a whole is trading at about 20 times earnings, so the business community as a whole is saying it likes investments yielding 5 percent. This is discouraging. Historically, 5 percent is not an especially good rate of return on invested capital. The leaders of very few of America's companies would jump for joy if you were an employee and brought them a new project whose yield would be 5 percent per annum. Years ago, the investor and entrepreneur Roy L. Ash, a co-founder of Litton Industries, said that his company liked investments yielding more like 12 percent. Henry Wallich, my finance professor at Yale, said a long-term yield of 10 percent should be considered the threshold for a project. That our companies are happy with 5 percent is not a good sign for investment opportunities. The decline in returns may have to do with the vast accumulations of capital in this society. As the classical 18th-century economist Adam Smith and his 19th-century disciple David Ricardo intuitively recognized, as societies acquire more capital, the return on that capital falls. That may well be what's happening in the United States. If so, it's a not a great portent for stock market returns over the long haul. Next, it's true that buybacks can raise the value of stock options held by management. But there are two big mitigating factors: First, buybacks do not benefit only managers; the earnings per share of the stocks owned by us pound animals known as public stockholders also rises. Unfortunately for us stray animals, we don't get options triggered by reaching certain earnings-per-share goals as our betters up at the manor do. (And, of course, the fundamentals of most businesses are not really improved by buybacks, which is what the options are supposed to be all about. But by now, that's an old story in these columns.) Second, while markets sometimes like buybacks, sometimes they dislike buybacks as a totem that a company has matured and has no better use of its money. In other words, buybacks are not a sure thing to move a stock. Finally, there used to be a truism that stock buybacks are a tax-favored form of paying investors. If the buybacks raise the stock price, they make money for the investors that was once taxed at favored capital gains rates, as compared with dividends. But now, under the Bush tax regime, most dividends and long-term capital gains are taxed at the same gloriously low rate. Thus the rationale of a tax advantage for the buyback vanishes. It all seems complicated. (None of this would ever happen inside the gates of Eden.) But maybe corporations are simply flooded with money. My seer, Phil DeMuth, found out for me that the members of the Standard & Poor's 500-stock index alone had more than $2.6 trillion in cash and equivalents at the end of 2006. That is a stunning amount. The corporations simply do not know what to do with it. No one is going to call them insane if they buy back stock, and thus they cover their backsides while possibly feathering their nests. (There is another interesting aspect to this: the immense mass of stock that is owned by the wealthiest 10 percent of families in this country -- by some measures as much as 80 percent of all stock. And a very, very large portion of it is owned by the wealthiest 1 percent of families. In fact, the upper 1 percent owned about 44 percent of financial assets in 2001, the most recent year for which I could get data. (If you said that the $2.6 trillion of cash owned by American corporations was yet another asset of the very rich, you would not be terribly far off. This makes it a bit sad -- no, heartbreaking -- for the roughly 80 percent of Americans who have no or virtually no savings.) Or, to put it yet another way, this is a great, magnificent country, beyond all reason, with the doors of opportunity open to all. But it's really, really great for the rich. NOW, I said that this was about two investment thoughts. Here's the more important one. My wife is a saint. She is a living, breathing saint. She is good-natured, patient, helpful (she cleans out the icky cat litter boxes and bathes our pitiful three-legged adopted toy poodle), and she has put up with misconduct by me on a scale that is beyond imagining. We have been together for decades, and for decades she has wanted a big diamond ring. I thought of every excuse I could for not getting it for her: let's give the money to charity, what about our old age, what about our dogs' old age, the cats' old age and so forth. Finally, two years ago, I gave in and bought her a big diamond that I could ill afford. It makes her so happy that I feel like an idiot for not having done it sooner. She looks at it endlessly, twirls it around and around her finger, loves it, worships it. Now, bear in mind, most of her waking hours are spent helping animals through the International Fund for Animal Welfare. She is a charitable, saintly woman. But human beings like tokens of affection. She's a saint, but she's a human being. In a few days it will be Valentine's Day. Don't mortgage your future, but if the last few years have been good to you and if you have given what you should to charity, make the investment in your spouse or significant other. The return in her happiness, as far as I can tell, is beyond counting -- and tax free. When you're out of town, when you're under the ground, that stone will still be there on her finger -- and in a way, you will be, too.
Copyright 2007 The New York Times Company 1152 of 1258 DOCUMENTS The New York Times
Correction Appended Late Edition - Final
Mr. Snyder's private equity firm, RedZone Capital, is planning to announce the transaction today, he said in an interview. Terms of the deal were not disclosed, but revenues were $250 million, and analysts estimate the chain's value could be more than $500 million. The acquisition is Mr. Snyder's latest high-profile transaction in a recent series of deals. Last year, he took over the Six Flags amusement parks after a bitter proxy battle and, over the summer, struck a deal to back Tom Cruise's production company when Paramount Pictures unceremoniously shed Mr. Cruise. Mr. Snyder's deal for Johnny Rockets, which started in 1986 as a corner restaurant serving burgers and malts on Melrose Avenue in Los Angeles, is his first major entrance into the food business. Johnny Rockets has been on a tear, growing at least 20 percent a year since it was started by Ronn Teitelbaum, a clothing retailer, who expanded it to 203 locations, with some restaurants abroad. Mr. Teitelbaum died in 2000, but his chain continued to grow. It now has three outposts in Dubai and a presence on Royal Caribbean International cruise lines. For Mr. Snyder, who was a self-made millionaire at 19 and then created an advertising company that made him even wealthier, Johnny Rockets is an opportunity to leverage his marketing prowess and expand the chain across the nation, if not beyond. ''We think it's a big-time brand,'' he said, his voice filled with excitement. ''You can see the business rocketing, no pun intended, in the future.'' He has ambitious expansion plans, anticipating opening 1,000 new restaurants in the next five years. ''There's no reason we shouldn't have 15 or 20 Johnny Rockets in Dubai,'' he said. One of the first steps will be establishing a series of smaller restaurants, called Johnny Rockets Express, in airports, malls and urban areas. While the company owns about a third of its stores, its plans are to expand its franchise program. He also envisions opening Johnny Rockets restaurants inside FedEx Field in Washington, where the Redskins play, and inside Six Flags theme parks. ''The thing about Dan is he always keeps you guessing,'' said Mark Shapiro, the chief executive of Six Flags, who left his job as ESPN's programming director to work for Mr. Snyder. ''If you had polled 100 C.E.O.'s about what Dan would buy next, this would not be on the list.'' Mr. Shapiro, who says the Oreo cookie shake is his favorite Johnny Rockets menu item, added: ''Anything he touches, as long as you got the patience, turns to gold.'' Patience may be a virtue needed in his investment in Six Flags. Last year, its amusement parks recorded a 14 percent decline in attendance. Mr. Shapiro said he expected a turnaround this year after 7 of the 30 parks were sold for $312 million. But Mr. Snyder's life has always been a roller coaster ride. A dropout from the University of Maryland who was enrolled for only a few semesters, Mr. Snyder quickly leaped into several entrepreneurial ventures. By the age of 20, he was leasing jets to ferry college students to the Caribbean. By 25, he had started a publishing business, but it ran aground, and a bank confiscated his sports car, a Lotus Elise. But he bounced back. Fred Drasner, chief executive of U.S. News & World Report and a mentor to Mr. Snyder, nicknamed him ''Timex,'' because he ''takes a licking and keeps on ticking.'' He created a marketing juggernaut, Snyder Communications, that in 2000 he sold to a French rival, Havas Advertising, for $2 billion in stock, a record for an advertising deal. Mr. Snyder pocketed nearly $300 million in the transaction. Johnny Rockets was sold to Mr. Snyder by the Teitelbaum family, Apax Partners and Centre Partners. Apax and Centre Partners became involved in 1995 after the company suffered a debilitating battle between Mr. Teitelbaum and Alfred M. Bloch, a psychiatrist who was then its controlling shareholder. Mr. Teitelbaum had sued Dr. Bloch and a partner, charging mismanagement and self-dealing. URL: http://www.nytimes.com SUBJECT: RESTAURANTS (92%); MERGERS & ACQUISITIONS (90%); RESTAURANT FOOD & BEVERAGE SALES (90%); ENTREPRENEURSHIP (90%); THEME RESTAURANTS (89%); THEME PARKS (89%); TRAVEL HOSPITALITY & TOURISM (78%); AMERICAN FOOTBALL (78%); SPORTS (78%); PRIVATE EQUITY (78%); RETAILERS (78%); INTERVIEWS (76%); WEALTHY PEOPLE (76%); CRUISES (74%); MARINE PASSENGER TRANSPORT (74%); FOOD INDUSTRY (73%); FOOD & BEVERAGE (73%); DIVESTITURES (68%); MARKETING & ADVERTISING AGENCIES (64%); CLOTHING & ACCESSORIES STORES (51%); MARKETING & ADVERTISING (51%); AMUSEMENT & THEME PARKS (89%) Restaurants; Mergers, Acquisitions and Divestitures COMPANY: SIX FLAGS THEME PARKS INC (57%); PARAMOUNT PICTURES INTERNATIONAL (56%); ROYAL CARIBBEAN INTERNATIONAL (54%); WASHINGTON FOOTBALL INC (58%); ESPN INC (50%) ORGANIZATION: WASHINGTON REDSKINS (91%) Johnny Rockets (Restaurant Chain); Washington Redskins; RedZone Capital PERSON: TOM CRUISE (71%) Andrew Ross Sorkin; Daniel Snyder GEOGRAPHIC: DUBAI, UNITED ARAB EMIRATES (90%); MIAMI, FL, USA (59%) DUBAI, UNITED ARAB EMIRATES (90%); CALIFORNIA, USA (79%); FLORIDA, USA (59%) UNITED ARAB EMIRATES (90%); UNITED STATES (79%) LOAD-DATE: February 9, 2007 LANGUAGE: ENGLISH CORRECTION-DATE: February 16, 2007 CORRECTION: An article in Business Day last Friday about the acquisition of the Johnny Rockets hamburger chain by Daniel M. Snyder, the owner of the Washington Redskins, referred incorrectly to the car that was repossessed during Mr. Snyder's earlier financial troubles. Although it was a Lotus sports coupe, it was not an Elise. GRAPHIC: Photo: Johnny Rockets, the restaurant chain known for dancing waiters, was not exactly hopping during a recent rainstorm in Miami Beach. (Photo by Carlo Allegri/Associated Press)(pg. C6) PUBLICATION-TYPE: Newspaper Copyright 2007 The New York Times Company 1153 of 1258 DOCUMENTS The New York Times
Late Edition - Final Nelson W. Polsby, 72, Author And a Scholar of Politics BYLINE: By DOUGLAS MARTIN SECTION: Section A; Column 1; National Desk; Pg. 17 LENGTH: 746 words Nelson W. Polsby, who marshaled intellectual rigor, lucid writing and a knack for drawing striking lessons from real-life observation in his enduring studies of Congress and the presidency, died on Tuesday at his home in Berkeley, Calif. He was 72. The cause was complications of congestive heart failure, his daughter Emily Polsby said. Mr. Polsby, a political scientist, wrote or edited at least 15 books and scores of articles and edited The American Political Science Review, the most prestigious political science journal. He was especially known for his studies of Congress, the presidency, political parties, policy making and the media. In an interview with Harry Kreisler of the Institute for International Studies at the University of California, Berkeley, in 2002, Mr. Polsby said it was all so much fun that he at first had trouble believing ''people paid you American money to study this stuff.'' As a youth, he gobbled up newspapers, newscasts and family talk about politics. Then , as a college student he eagerly pursued his fascination with how Senator Joseph R. McCarthy, the anti-Communist crusader, managed ''to scare the daylights'' out of Washington power brokers. Using public opinion research and his instincts, Mr. Polsby attributed McCarthy's success to support from the Republican Party, a novel notion to more senior social scientists. Mr. Polsby had already fallen in love with Washington while ''hanging around'' the Capitol as a student and watching lawmakers, and he was beguiled by its complexity. He perceived elites competing with one another in often unexpected ways. ''There are often too many facts and not infrequently too many different versions of the facts,'' he said in the Berkeley interview. ''Rather than speaking for themselves, various facts have what we have come to refer to as spokespersons.'' Mr. Polsby taught at the University of Wisconsin-Madison and Wesleyan University before moving to Berkeley, where he was the Heller professor of political science and director of the Institute of Governmental Studies. Among the subjects he analyzed was how electoral rule changes in the major parties changed the political landscape. Edwin M. Yoder Jr., reviewing one of Mr. Polsby's books, ''Consequences of Party Reform'' (1983), in The Washington Post Book World, called him the ''Newton of the post-1968 political dynamics.'' His influential works on Congress began with an article in The American Political Science Review in 1968. Titled ''Institutionalization of the U.S. House of Representatives in 1948,'' it told how the House had become more complex. In 2004, in ''The Importance of Constituents,'' he attributed the shift of power in the House to demographic changes. One reason for these, he said, was the availability of residential air-conditioning, which drew Republicans to the South, where they seized the conservative banner from traditional Democrats. His 1984 book, ''Political Innovation in America,'' examined eight postwar initiatives, from the creation of the Council of Economic Advisers and the Atomic Energy Commission to Medicare. He told how these innovations resulted from the interaction of ''policy entrepreneurs'' like university researchers and politicians on the prowl for ideas. Nelson Woolf Polsby was born on Oct. 25, 1934, in Norwich, Conn. His father, a businessman, died when he was 11. He attended the Pomfret School in Connecticut and liked to visit the Capitol on breaks, when he visited his mother, who had moved to nearby Chevy Chase, Md. He attended the Johns Hopkins University in Baltimore, which also let him spend time in Washington. His doctoral thesis at Yale concerned power relationships, but differed from the case studies of cities that were popular at the time. Norman J. Ornstein, a resident scholar at the American Enterprise Institute, said Mr. Polsby put issues in a much broader context. Mr. Polsby is survived by his wife of 48 years, Linda; his daughters Emily, of Berkeley, and Lisa Susan Polsby of Naperville, Ill.; his son, Daniel, of Mountain View, Calif.; his mother, Edythe Woolf Polsby Salzberger of Washington; his brothers Daniel, of Fairfax, Va., and Allen, of Bethesda, Md.; and two grandsons. Mr. Polsby did not turn neoconservative, like many intellectual Democrats of his generation, but remained ruthlessly bipartisan in his prickliness. ''He could rip the bark off Bill Clinton just as easily as he could George Bush,'' Mr. Ornstein said. URL: http://www.nytimes.com SUBJECT: POLITICAL SCIENCE (91%); POLITICS (90%); DEATHS & OBITUARIES (91%); HUMANITIES & SOCIAL SCIENCE (90%); INTERVIEWS (89%); POLITICAL PARTIES (89%); RESEARCH INSTITUTES (89%); LEGISLATIVE BODIES (89%); US REPUBLICAN PARTY (89%); PUBLIC POLICY (78%); RESEARCH (78%); LEGISLATORS (78%); STUDENTS & STUDENT LIFE (77%); US POLITICAL PARTIES (76%); NOVELS & SHORT STORIES (76%); BOOK REVIEWS (71%); CARDIOVASCULAR DISEASE (57%); MARKET DEMOGRAPHICS (50%); COLLEGE & UNIVERSITY PROFESSORS (88%) Deaths (Obituaries); Biographical Information COMPANY: WASHINGTON POST CO (51%) ORGANIZATION: UNIVERSITY OF CALIFORNIA BERKELEY (83%) TICKER: WPO (NYSE) (51%) INDUSTRY: NAICS517510 CABLE AND OTHER PROGRAM DISTRIBUTION (51%); NAICS515120 TELEVISION BROADCASTING (51%); NAICS511120 PERIODICAL PUBLISHERS (51%); NAICS511110 NEWSPAPER PUBLISHERS (51%); SIC4841 CABLE & OTHER PAY TELEVISION SERVICES (51%); SIC4833 TELEVISION BROADCASTING STATIONS (51%); SIC2711 NEWSPAPERS: PUBLISHING, OR PUBLISHING & PRINTING (51%); NAICS517510 CABLE & OTHER PROGRAM DISTRIBUTION (51%); NAICS517110 WIRED TELECOMMUNICATIONS CARRIERS (51%) PERSON: Douglas Martin GEOGRAPHIC: SAN FRANCISCO BAY AREA, CA, USA (94%); MADISON, WI, USA (74%) CALIFORNIA, USA (95%); WISCONSIN, USA (79%) UNITED STATES (95%) CATEGORY: Colleges and Universities Nelson Woolf Polsby LOAD-DATE: February 9, 2007 LANGUAGE: ENGLISH GRAPHIC: Photo: Nelson W. Polsby (Photo by Liz Weiner/University of California, Berkeley, circa 2000) DOCUMENT-TYPE: Obituary (Obit); Biography PUBLICATION-TYPE: Newspaper Copyright 2007 The New York Times Company 1154 of 1258 DOCUMENTS The New York Times
Late Edition - Final Not Their Parents' Russia BYLINE: By THOMAS L. FRIEDMAN SECTION: Section A; Column 1; Editorial Desk; Pg. 19 LENGTH: 774 words DATELINE: MOSCOW Russia today is a country that takes three hands to describe. On the one hand, it is impossible any more to call Vladimir Putin's government ''democratic,'' given the way it has neutered the Russian Parliament, intimidated or taken over much of the Russian press, subordinated the judiciary and coercively extended its control over the country's key energy companies. On the other hand, it is obvious talking to Russians how much the humiliating and dispiriting turmoil that accompanied Boris Yeltsin's first stab at democracy -- after the collapse of Communism -- left many people here starved for a strong leader, a stable economy and stores with Western consumer goods. Mr. Putin is popular for a reason. And on the third hand, while today's Russia may be a crazy quilt of capitalist czars, mobsters, nationalists and aspiring democrats, it is not the totalitarian Soviet Union. It has more than a touch of the authoritarianism of postwar Gaullist France and a large spoonful of the corruption and messiness of postwar Italy -- when those countries emerged from World War II as less than perfect democracies. But 60 years later, after huge growth in their per capita incomes, France and Italy now help to anchor Western Europe. For all of their shortcomings, their postwar governments provided the context for the true democratic agent of change to come of age -- something that takes 9 months and 21 years to produce -- a generation raised on basically free markets and free politics. I still think Russia will follow a similar path -- in time. ''In historical terms, the transition will be very fast,'' Boris Makarenko, deputy chief of Russia's Center for Political Technologies, said to me. ''But I am 47. I am in a hurry. I am very optimistic [though] for my daughter, who is 15. I can see the normal middle class rising here. It's all about shape and pace. When will we get there, I don't know -- we will get there, but probably not fast enough for me to see.'' The Yeltsin democratic experiment is over, to be sure, added Rose Gottemoeller, director of the Carnegie Endowment's Moscow office, ''because it was delegitimized by the 1998 ruble crash and because it was a time of supreme corruption and dominance by oligarchs -- but the Russian democratic experiment is not over because Russia is such a changed place.'' Ms. Gottemoeller, an American, told me she recently visited Ulyanovsk, Lenin's birthplace, in the heart of Russia's aging industrial rust belt, and went out to dinner with three Russian couples, all new entrepreneurs. ''After they plied me with drinks,'' she recalled, ''they said: 'O.K., we have a question. We want to know how you define middle class' -- and did I think they were middle class? And that just flummoxed me. They wanted to know what middle class was in America. It meant a lot to them to think they were linked up to a broader community of middle class. [They] are not out in the streets with a banner, but their aspirations are huge and in the right direction.'' People who identify themselves as middle class often end up fighting for legal and civil rights to protect their gains, without even knowing they are fighting for them. That said, the pace of democratization here will most likely depend on three things. One is whether this emerging middle class gets so preoccupied with material gains -- thanks to the trickle-down of high oil and gas prices -- that ''it just disconnects from politics,'' Ms. Gottemoeller noted. (Russia today has more cellphones than people!) Another is the genie of Russian nationalism, which can always pop up and derail democratization. Just down the street from my hotel, the Movement Against Illegal Immigration held a march denouncing Jews and immigrants. Third is the price of oil and gas. Anyone who observes Russia can see that the price of oil and the pace of freedom here operate with an inverse correlation. As oil prices go down the pace of freedom goes up, because Russia has to open itself more to the world and empower its people to get ahead. As oil prices go up the pace of freedom goes down, because the government can get by drilling oil wells, rather than unleashing its people. ''When oil prices became higher, the reforms became slower,'' said Vladimir Ryzhkov, a liberal Russian Duma member from Altay. ''Russia became a more closed country with a more state-oriented economy. Last year we saw record oil prices and not one reform. [That is the] reason Freedom House last year proclaimed Russia a 'non-free country. ' The question for you Americans is: When will prices go down? It is the only hope for us Russian democrats.'' Directory: ~hesterj -> Entrepreneur Entrepreneur -> Byline: By armand limnande section: Section mm; Column 0; T: Men's Fashion Magazine; Pg. 76 Length Download 4.36 Mb. Share with your friends:
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