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Big Boys of BK

Lots of Chapter 11 news today.


Kodak finally filed last night.  It had been in trouble for a long time (I think I'm one of the few fossils remaining who uses film.), but it was trying to reshape itself as a printer company.  To do so, it was relying on a revenue stream from its patent portfolio (At one time that portfolio rivaled the likes of Bell Labs and IBM.).  Unfortunately, Kodak didn't account for aggressive (i.e. predatory) behavior by some major license users, including Apple and Research in Motion (I have to say I don't use much of anything from Apple.  I hate black boxes, so I didn't care much for the products, and I didn't care for the culture, either.  Seemed too much like a religious cult.  I see people walking around festooned with 500 i-Crap products, and I wonder why anyone needs to be so simultaneously plugged-in and cocooned from the world.  They remind me of Neo in The Matrix before he's released from his pod.  RIM, though, hurts.  I've rocked the Crackberry for over a half-dozen years now.).  The big users decided to stop paying for the licenses, forcing Kodak to litigate.  They wouldn't buy the patents outright, either, at least not for more than a dime on the dollar.  So Kodak is in Chapter 11, where it might be able to force a few things.


American Airlines, on the other hand, might be getting forced.  It's nearly two months since it filed, and American has barely gotten off square one.  As I blogged the day it filed, American's big motivation was to take down the labor contracts and pensions.  It hasn't, and everyone (including Your Truly) is confused about the delay.  Confused about it, but still willing to take advantage of it.  Delta and US Airways are making noises about rival bids, and others are getting into the game.  If American doesn't have a reorganization plan in front of creditors in two months, it's looking at getting parted out.


And of course we can't let the day go by without some more mess from MF Global, this time with a heapin' helpin' of JPMorgan Chase.  It seems that back in October, right before it filed, MF Global was selling piles of assets to raise cash.  Problem was, it was selling them through JPMorgan, which decided to do a by-the-book slowdown of the transactions.  Consequently, MF Global had neither the assets nor the cash and couldn't meet the inevitable margin calls.  Welcome to bankruptcy.  Now the creditors and trustee are finally getting around to asking JPMorgan where the money went, because it certainly hasn't been turned over.


JPMorgan's involvement in "where did it go" scenarios is getting to be a habit, and it's long past time someone pulled the curtain back and took a look.  Somebody needs to look at where Washington Mutual's assets went, because they were there until JPMorgan stepped in.  And unless something drastic has happened this week, JPMorgan is still sitting on piles of cash involved in investment schemes from five and six years ago (I have to be careful here.  I've had two, executive-VP-level in-house counsel lie to me about the creation and handling of those accounts, so it's hard to say what the "official" records look like any more.  And I've had outside counsel threaten me with bar discipline for daring to represent anyone opposing JPMorgan.  But then that's SOP for Utah.  The Bar doesn't care if an attorney makes a groundless threat like that so long as he is representing a 1% client and he makes it against an attorney with a 99% client.).  Any wonder I refer to the place as "JPMorgoth"?  We'll see if anybody decides to use the big microscope this time or if JPMorgan skates again.

If You Don't Promote, Your Business Won't Float

No apologies at all to Johnnie Cochran.

Yesterday, while waiting for a kid to finish a rehearsal, I swung by Trolley Square just to see what was going on there these days.  It was about 0915, and I was surprised to find the parking lots and new garage already pretty full.  I walked inside and discovered that Trolley had leased a space to the Sundance Film Festival for ticket sales and that there were several hundred people in line waiting for the ticket office to open at 1000.  I thought, "This is a great idea by Trolley.  Sundance audience, relatively hip, some discretionary income.  Exactly the target market for Trolley-style shops.  And a captive audience to boot, with nothing to do but stand around until the ticket office opens."


And then I noticed that I wasn't seeing any shops open.  I walked through the whole place.  Not a single shop was open.  No one was working the lines, handing out fliers or coupons or samples, offering to hold a place in line while someone shopped, taking food orders and bringing them back.  Nothing.  All those customers, and no one approaching them.


First, to Trolley Square management: Kudos, you did your job.  You brought in a mass of potential customers the likes of which has rarely been seen around that tomb.  And you'll be bringing those crowds in all week.  It isn't your fault if your tenants aren't taking advantage.  When they come whining to you for concessions because they aren't getting enough traffic, you should rub their noses in the photos and videos you're taking of this event.  Why should you give concessions to businesses that act like they're hobbies?


Second, to Trolley Square tenants: You blew it, and you'll probably blow it all week.  Yes, you opened at 1000, but so what?  Those customers had already been there for an hour with nothing to do but wait.  They didn't even have a moving line to keep up with.  They were just standing there.  And you were nowhere.  You weren't visiting with potential customers, you weren't telling them about your inventory and specials, you weren't learning about their shopping habits and needs, you weren't getting their contacts for your email list, you weren't having them like your Facebook page.  You were a no-show.  I know you'll whine about lack of traffic all Summer, but it's really your own fault.


Third, to everybody: I've seen grundles of small businesses that acted either like they were hobbies or they had a divine right to customers.  Both attitudes are fast tracks for the Fail Train.  Hobbies are not designed to make money; they need to stay in your garage.  And the last folks who claimed a divine right to something got their heads lopped off.  The only people who don't have to work for money are the ones who were born with it.  Your business is there to make money, and that requires work, your work.  If you don't bring it, don't expect success.

Merry Red Ink Christmas

Throughout the holidays, I saw people buying like mad.  I kept thinking, "Wait a minute.  The job picture stinks, about every asset and investment class is dropping, and everyone below the top 10% is getting absolutely rocked.  How is everyone buying?"

The old-fashioned way, apparently: debt.  The Fed's figures for November are out (December won't be out for another month, but I can't imagine it won't look worse.).  Consumer debt rose at an annual rate of 9.9%.  Revolving debt (credit cards, lines of credit, etc.) rose at an annual rate of 8.5%, and nonrevolving debt (mostly secured purchase money loans and student loans) rose at 10.7%.
This is a mess in the making.  We have learned nothing from four years ago.  People are once again buying by spending money they don't have by taking out loans they can't afford from people who don't care if they (or, more accurately, their clients/customers) get repaid or get stuck with collateral they can't unload so long as they get their origination fees.  And when this new house of cards collapses, where does the bail-out come from this time?

I see bankruptcies trending back up soon, but that isn't the real concern.  With the President, the House, and one-third of the Senate up for election this Fall, D.C. will pull any smoke-and-mirrors to kick the economic can past November.  But what kind of hangover will we get in 2013?  If what we've seen is any kind of prologue, you may want to find yourself a place to hide in the high grass.