qval blog

Suck it up! Great Work does not require Great Resources.

[Sunspots] The type edition - (37signals): "‘Sometimes greatness comes from not having resources’

‘To illustrate his point, [Director Doug Liman] recalled a commercial he was shooting for Nike in the late 1990s starring golfer Tiger Woods. Liman noticed Woods bouncing a ball on the edge of a club during breaks from shooting. Liman grabbed a shoulder-held camera and, away from the crew, asked Woods to bounce the balls while being filmed…The shot, which became a classic, was natural, unrehearsed, and driven by imagination rather than millions of studio dollars, Liman said.’"

(Via 37signals.)

The White Stripes, an amazing band, are another great example of embracing constraints. As previously mentioned in the 37signals blog, "The White Stripes embrace restraints by sticking to a simple formula: two people, streamlined songs, childlike drumming, keeping studio time to a minimum, etc."

Embracing and working within constraints can be a wonderful thing if you have the right attitude.

--
Bill Carroll

Anti-procyclicaity

Headline reads "PE firms close big middle-market funds" up 32% from the first quarter of 2007. Hold on a minute, nice eye catcher but the reality is that the largest funds are distressed debt vehicles. Don't be fooled -- private equity is not buying us out of this one. Banks and more importantly S&Ls definitely aren't buying anyone out of anything unless their hand is forced by regulation, which by the way I don't condone.

"Procyclicality" meaning that bank lending fuels economic crisis by loosening credit standards and in reverse fuels economic downturns by clamping down on credit terms. Also known as irrational exuberance and greed. WaMu, of course, is the poster child this week. In 2006, WaMu was recognized as No. 3 in Mortgage Services Category of America's Most Admired Companies, and their CEO was CEO of the Year in the state of Washington. The similarities between WaMu and the S&L crisis of the 80s are striking. Basically, it all comes down to bad loans extended on overinflated values. This time however, most are blaming it on credit terms, while in the S&L crisis one of the main scapegoats was the appraisal industry approving overinflated property values.

Buying an S&L that you know well, as a former board member, whose value has deflated by 66% in the last year, there has to be a term for that ... "anti-procyclicality"?

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Brett Suchor