Mismanagement – Ranting Against the Machine

Third time’s the charm right?

I’m struggling a bit tonight to find a proper voice/tone for a post. Got about halfway through two others and it just didn’t feel right. I hadn’t generally thought of myself as relying so much on “intuition” when writing, but I should give that some further thought.

I find it both sad and amusing to observe new front-line managers. I remember so well when I was in their shoes. Young, ready to follow the rules, get the job done, and climb that career ladder. It’s so hard now to identify exactly where that changed. When I realized the rules were generally more like guidelines that only applied to some of the people some of the time. When I realized that looking out for your team members was way more useful than literally anything the boss said.

I’ve been watching the “newbie” running that area I’m in close proximity to as he slowly turns his team on him and itself. Not usually in large sweeping gestures, but mostly in small subtle ones. The most prominent of which is a very nitpicky application of the stated rules without any consideration for his team members.

A popular one, at the moment, is the stated rule that nobody should be allowed a bathroom break 30 minutes before or after a scheduled break. I understand the reasoning and logic, there are certain individuals that will abuse the privilege by asking for one five to ten minutes before and simply not coming back until after the scheduled break. It’s easier to create a rule for “everybody” than it is to confront a single problematic individual. At the very least it allows you to say that it’s “fair” because you’re making everyone do it instead of singling them out.

In reality, the human body isn’t always compliant with such arbitrary time limits. So what if break is 20 minutes away? We work in an active, hot, and humid environment where people who don’t consume fluids tend to end up laying on the floor. At some point you must accept that the downside of safety is acknowledging that sometimes when you gotta go, you gotta go.

If I would be a better or worse manager for thinking there’s another way, I don’t know. Both the manager and the fill-in have asked me specifically not to give them the breaks. I’m not in their chain of command, so I’ve largely ignored that. In fact, it’s far more beneficial to me to have the workers happy and paying attention than it is to enforce the dumb rule for people who aren’t abusing it, especially when their overlord is typically halfway across the plant. In his defence, that isn’t entirely his fault, just a foolish decision from his superiors.

The whole problem is a sort of metaphor for the larger labor shortage. Draconian policies created partially for business reasons and partially to punish a few exploiters, who always find new exploits anyway, make it difficult to live like a normal human being. It seems to me that it’s the very incarnation of humans as a resource instead of humans as people. I could list off a whole pile of examples, but I fail to see how that would help.

It also seems I have inadvertently tapped into my disgruntledness.

I wish there was some way I could point out to him exactly what it’s going to cost him, but I didn’t listen when I was there and he doesn’t really listen now. It seems to be one of those lessons that is often learned the hard way. I know I did. I know my best friend did.

I suppose that’s enough rant for one day. Certainly has a lot more energy behind it than my other two drafts.

Y’all take care. Remember that workers and laborers are people too, and deserve to be treated as such.

Robinhood – A Brief Follow-Up

Robinhood has put forth a statement regarding the choices they made that limited trading. Before I offer my own opinion, I will reproduce that message here for the curious.

A note from Robinhood
Hi [SDWeasel],

We wanted to reach out to you after a transformative week in the markets to answer a question we know many of you are asking: “Why did Robinhood limit certain stocks?” 

We understand that the temporary limits we placed on certain stocks this past week were frustrating for many, especially since we built Robinhood to expand access to investing. We have always sought to put our customers first and we want you to be able to invest on your own terms. 

To help explain what happened and why we had to take action, we wrote a letter to our customers and captured the key understandings for you below:

* For Robinhood to operate, we must meet clearinghouse deposit requirements to support customer trades.
* Deposit requirements are determined in part by how much stock a firm’s customers hold. If a firm’s customers’ holdings are volatile, a broker (in this instance Robinhood) is obligated to meet higher deposit requirements.
* Last week, in part due to volatility in some popular stocks, Robinhood’s deposit requirements rose tenfold. The combination of the deposit increase and the extraordinary increase in volume on these particular symbols led us to put temporary buying restrictions in place on a small number of those stocks.
* We had to take steps to limit buying in those volatile stocks to ensure we could comfortably meet our deposit obligations. We didn’t want to stop people from buying stocks and we certainly weren’t trying to help hedge funds.

We hope you take away this: at Robinhood, we stand with everyday investors participating in the markets.Standing by our Robinhood community means being there for our customers through any trading environment. We’ll continue to improve as we break down barriers in the financial system to open it for all.

Thank you for being a part of the Robinhood community.

Sincerely,
The Robinhood Team

Now, this is quite a decent reasoning for why they made the choice they did. They’ve already had their fair of run-ins with the SEC over their monetization model so doing whatever it takes for compliance reasons is, well, probably a little fair. Banking and investment regulations like reserve requirements tend not to care much about circumstance.

Still, they would have been way better off explaining that when they did it, rather than after the fact. I would be far more sympathetic if the timing didn’t suggest damage control. As the old saying goes, it’s easier to ask forgiveness than permission.

Regardless, their choice has an obvious chilling effect on events that worked directly to the benefit of one side more than the other(s). Saying that you “didn’t want to” does little to change the fact that you did, knowing full well what it would do.

It seems a bit misleading, in a letter about why you had to shut down your target market of everyday investors, to continue on and say you “stand with everyday investors participating in the markets.” I mean, do you really though? When push came to shove, seems like you weren’t.

Of course, this is a no-win situation for Robinhood. Even if they manage not to alienate a good portion of their user base, there’s always a chance that the SEC will decide what they did was improper and fine them anyway. Again.

Does any of this affect my decision to find a different way to invest my money? Maybe. To be honest I went straight from reading their statement to writing this post, so this is more of a knee-jerk reaction than a well thought out response.

Anyway, I think I’ll simply leave it there for now. Y’all take care.

The Great GameStop Short Part 2 – Robinhood and His Merry Redditors

Now that I’ve had some time to reflect on the events that are, for all practical purposes still unfolding. I figured I would address them more directly. The topic is certainly a complicated and multifaceted one

First, I see very few people in the right here. Yeah, it’s easy to pick on the big guy at the top. Easy to look at a few hedge funds and call them the enemy. A sort of symbolic stand-in for American capitalism. As someone displeased with the current corporate culture, I can certain empathize with their desire to strike the system however they could.

In many ways, I feel that the overconfidence and complacency of the professional traders set these events in motion. I mean, shorting more shares than actually existed? I reminds me of the same reckless abandon that led to the financial problems in 2008. In that case, the risky assets were creative mortgages presumed to be made safe because they were bundled together with a lot of other mortgages.

Given the far-reaching consequences of that particular disaster, the actions of the group exploiting the mistake seems… shortsighted. Of course, they have done a magnificent job of highlighting how little the professional investors have learned.

All this aside, I cannot but feel that the Robinhood brokerage has made itself public enemy number one as well. For a platform that claims to be all about bringing trading “for everyone,” they seem to have gone well out of their way to shut down the… financial protestors. Other brokerages took actions to restrict the trading of GameStop and other stocks as well, but none quite as severe as Robinhood, who went so far as to alter the rules for cryptocurrency as well.

Though the actions of the protestors are questionable, they are (probably) not illegal and they had a right to make really bad investment decisions for reasons that were allegedly not about profit.

Ultimately I feel that nearly everyone was in the wrong. The motivation of the protestors was commendable but ill-advised. The rhetoric was absolutely deplorable, and smelled more of vengeance and hatred than justice. The professional investors have learned nothing in the last decade and displayed a need for additional regulation. Several investment platforms have shown their true colors, when the chips were down.

I think I still need more time to absorb all these things. I try my best to judge slowly, if a bit harshly in this case. None quite as harsh as Robinhood, though. I’ve been using their app infrequently since early 2019. Unfortunately I feel rather strongly about some of their actions in the last week. They haven’t really impacted me personally. I happened to own one of the stocks of interest, though not one of the ones that’s getting any attention. I sold my shares of GameStop back in March because I was dissatisfied with some of their business decisions. It bothers me enough that I intend to sell all the assets I have on their platform and move my money somewhere else.

Y’all take care, and watch yourselves out there. The stock market is rather unforgiving to the impatient.

EBITDAC – Good Idea or Bad Idea?

It’s very common in the business and investing world to use Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as a metric of health and performance. In a more general sense, we could call it net income, gross income – cost of goods and operation.

I have seen several headlines and even an episode of The Indicator, a podcast, speaking about a more recent trend, EBITDAC. It’s basically the same thing, but also adds back an amount of money allegedly equal to the losses due to COVID-19. I say allegedly because nobody can necessarily know what that number is, only guestimate it. Since we’re just sort of guestimating financial numbers, why not do so in your favor yes?

I… find that prospect horrifying. It’s not entirely unfair, allowing those adjustments. I realize there are business losses far above and beyond anything we could have predicted and it’s a bit harsh to force a lot of companies into default because COVID pushed income below the level allowed in their debt agreements. This also softens the blow to the workers they employ and helps rein in things like unemployment and furloughs.

It also seems like a massive level of burying our head in the sand and denying reality. How long are they allowed to report EBITDAC? A year, two years, a decade? What happens when they stop and the numbers snap back to reality? As always, the infamous 2008 questions, what if they fudge the numbers to pick up too much debt, or the wrong kind of debt, on a large scale that’s eventually going to lead all those companies into default anyway? Could we be using this recession to set up the next one?

Of course, I am by no means an expert on corporate finance. Everything I have been taught in my formal education has focused on the importance of accuracy and ethical reporting, and this seems to fall somewhat short.

On the bright side, I don’t think it’s in widespread use. The only report I’ve looked at recently is Activision-Blizzard and I know they did not use it. With the amount of fuss it’s stirring up, maybe it’ll die out before it becomes an issue.

Worker welfare and investment risk seem to represent a hard balance to find. We really don’t want to see the widespread unemployment and losses that stem from the collapse of large companies, but if we prevent them from failing entirely, where’s the risk that’s supposed to match the reward? On that same note, most of these debt agreements were signed before COVID was on the radar. Quite plainly, that was the risk the investors and corporations took when they accepted the arrangement, knowingly or not. If we take away the consequences of that risk, what incentive remains to invest or use debt wisely?

Okay, that’s enough of that for today, I think. Y’all take care. Invest carefully, don’t put all your eggs in one basket, and keep your head out of the sand, yeah?

Q3 2019 Earnings Reports

While I don’t exactly have time to dig into these in detail, I stopped for a moment to check out the latest Activision/Blizzard and Starbreeze Q3 reports. It’s almost scary how much more sense they make with a basic understanding of accounting.

I mean, just looking at the consolidated balance sheet for AB, I get it. I know what those things and at least vaguely understand what they mean. Hopefully, that means I’ll have something more meaningful to say when they year-end report rolls around in a few months.

That knowledge sure doesn’t make Starbreeze look any better. I noticed an announcement buried in there that their partner for Payday: Crime Wars, a mobile title, has shut down most of the mobile publishing wing. This is probably one of the reasons why Payday 2 development began again recently. While the resumed Payday 2 income is certainly going to help, but probably not enough to offset the 80ish million SEK (roughly 8.4M USD) their VR parks are costing them. I realize most of the cost is an impairment, but still, they’re posing an overall operating loss of 20M SEK (~2.1M USD). They have 113.2M SEK (~11.7M USD) of cash(ish), so we don’t exactly have to worry about them sinking tomorrow. At this rate they have roughly a year to year and a half of operation. I’m sure the new paid DLC for Payday 2 will help extend that further.

Either way, y’all know the drill. None of this should be considered financial or investment advice. Likewise, I don’t own any stake in either of these companies. Partially because I have yet to find a way to buy shares internationally.

Y’all take care.

Automattic and Tumbr – A Follow-Up

So I mentioned this a couple of days ago, the purchase of Tumblr by Automattic, and now The Verge has a rather good interview with the CEO of Automattic, Matt Mullenweg, that addresses some of the questions I was wondering about.

He does seem genuinely excited about the whole thing. Normally I would chalk this up to making investors feel good about the decision, and even private corporations have investors, but the extremely fickle stock exchange isn’t an issue, so maybe it’s a little less over-sold than normal.

He’s especially cagey about some topics, like the actual cost of this transaction. Saying that it’s basically up to Verizon when and how they announce that.

There’s a lot of talk about changing and working with ad selection, placement, and possibly frequency. He says that Tumblr’s revenue is much lower than one might expect for something of its size, and they want to make sure it becomes profitable and sustainable.

Advertising is definitely something we’re going to explore. We do definitely want to grow Tumblr’s revenue. Right now, they’re burning a lot of money. But long-term, I would say I’m also super interested in experimenting with upgrades. WordPress.com has always been an upgrade-centric model. It’s freemium: use it for free, and then you can buy plans anywhere from $40 to $450 per year to get added functionality.

Of course, I’m not really a user of Tumlr, so I don’t know how those users would feel about something like the “upgrade model.” I do believe it works very well for WordPress.com because it creates a very low barrier of entry. I have always used the free plan, myself, though I’ve considered upgrades. I just can’t justify the cost of those upgrade for something that’s doing pretty much what I want it to do, especially since it’s more of a hobby side-activity and not a business.

I didn’t get the impression that they had plans to do much regarding the adult content policy Verizon put in place, but they seem to be laying that at the feet of Google and Apple regarding how they manage their respective app stores.

He briefly mentioned bringing RSS feeds back to Tumblr as well, as a way to integrate content from other platforms like, I dunno, WordPress?

I would say, for all of those things, expect things to be kind of the same until we do the close. Think of that being October.

Of course, the business world is pretty slow about things like this. All the lawyers, all the government departments, they all have to make sure all the Is and dotted and the Ts crossed. Paperwork has been signed but must be approved and all that.

I probably won’t hear about it again until they actually do something remarkable enough to get people’s attention.

Y’all take care, read the interview if you’re interested. There’s a lot there.


BlaugustBOnlylogoIn case you haven’t heard, we’re in the middle of an event called Blaugust. The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

Business – Automattic Buying Tumblr

This is a bit of a strange one for me. I don’t really follow Automattic, the owner of the very platform you’re reading this one, all that closely. In fact, I don’t really follow WordPress itself all that closely. I just do my thing and deal with changes as they come up.

Likewise, I don’t know a whole lot about Tumblr, nor do I use it. I am aware of it’s position as a current and/or former blogging platform and that it’s oft-maligned on reddit. I wasn’t even aware of the fact that it’s owned by Verizon and, before that, Yahoo.

To that end, the news that it’s being sold to Automattic for around 3 Million USD doesn’t really evoke much, beyond how absurdly low that price tag is. It’s a little debatable, apparently, the first article I read stated around 3M, but I don’t have a link to it. Most other sources are reporting “below 10M.” That’s just sad compared to the 1B+ USD that Yahoo paid to acquire it less than a decade ago. It’s just… sad.

Still, it’s a good fit for Automattic, I think. They’re already in the blogosphere and Tumblr seems like a complementary product, at least from my perspective. I’m curious if they have any designs on integrating the platforms in any way. I guess time will tell.

I tried to look up a valuation for Automattic itself, and the only number I’m getting is right around 1.16B USD mark from the launch in 2014ish. I was going to look up financial statements to see just how this fits into things. Alas, Automattic is a private corporation and not required to divulge those sorts of details.

I thought it was interesting, anyway. Y’all take care. Maybe don’t buy really expensive social networks then drop the ball.


BlaugustBOnlylogoIn case you haven’t heard, we’re in the middle of an event called Blaugust. The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

Activision Blizzard – 2019 Q2 Earnings

Okay, I didn’t get a chance to listen to the whole call. In fact, I missed most of it. You can find the recorded call, the slideshow, and a financial spreadsheet here. Feel free to double-check any and everything because I’m working primarily off the slideshow. There wasn’t a whole lot I thought was particularly interesting. That said, I’m not really a very active player of their products.

This is the obligatory “I don’t own any shares in this company” statement. Too rich for my blood, as they say.

I was honestly more interested in what they didn’t say, or how they phrased it, than what they actually said. In the grand scheme of things, this is a slam dunk of a financial report. They had pretty conservative guidance for Q2 and they exceeded that by a good bit. Investors seem to love it when a company “does better than it thought it would.”

Having said that, net revenue, operating income, and earnings per share are all down compared to last year. Just not as down as they expected it to be.

All of their monthly active users are reported as increasing or steady year over year, except WoW. They have a much more cagey “increased since mid-May” thing to say about that, though I don’t think it’s fair to compare the pre-expansion period last year to the mid-expansion position they’re in now. I’m fairly confident that’s why they didn’t issue a similar statement.

In the same fashion, King and CoD time spent are reported as “total time spent” which is growing for each title. Blizzard has a more predictable increase in “time spent per player.” As an MMO player, that seems fairly normal. One way to make that number go up is to lower the number of active players, which is probably a bit low in the pre-patch Q2. I suspect the Q3 will show a more positive WoW report.

I did find it interesting that they also reported viewtime for Overwatch League and CoD World League. Naturally, those numbers are up and increasing year over year. I imagine the current climate towards video games and violence, as well as ESPN dropping Apex Legends, may slow that down just a bit.

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Looking at the data in the financial spreadsheet though, it’s important to note that the company as a whole has been, and continues to, operate at a profit. Even broken out into Activision, Blizzard, and King, every segment is currently pulling a profit. They aren’t “losing money.” At least not yet.

There does seem to be a downward trend for Activision and Blizzard over the last few years while King has held pretty steady. I’ve been under the impression that the games industry as a whole is kinda down right now, so that’s to be expected.

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I find it particularly interesting that the platform that has taken the hardest hit is PC, though both it and console seem pretty volatile and both appear to be down compared to Q2 in other years.

Either way, time will tell I guess. Y’all take care, and remember not to put all your eggs in one basket.


BlaugustBOnlylogoIn case you haven’t heard, we’re in the middle of an event called Blaugust. The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

Gamestop – A Slow Motion Train Wreck

Almost two months ago, I went over GameStop’s Q1 earnings report. (link) It wasn’t good news, and their stock price had dropped by $3, roughly 35%, as a result. I’ve been loosely following the ongoing… situation… since then. Now that I’m posting again I’m going to run through some of the stuff that’s come up real quick so the topic will be “caught up.”

I vaguely remember them announcing a stock buyback program and apparently so many people signed up that they hit the cap and some people aren’t going to get what they expected. It ended a couple of weeks ago and the stock price has dropped another $1 and some change since, to around $4.11. Right around that time they announced a partnership with R/GA to “help reimagine the in-store experience.”

Among the things they’ve tossed around are the idea of in-store esports competitions, and purely retro-gaming oriented stores. I honestly don’t know if I’ve ever been inside a GameStop that had room for any manner of in-store competition, but I guess that’s the point of thinking outside the box, as it were.

The good news for GameStop is that the sales figures I quoted last time seem to be industry-wide. That is, hardware sales are down for the entire industry, not just GameStop, and they’re down roughly the same percentage. That suggests that GameStop isn’t entirely at fault. On the other hand, it reflects poorly on the industry as a whole, though I imagine there will be a large surge for the next console cycle.

It’s going to be a rough ride on the way there though. The first time I talked about GameStop was back in January when their stock price was close to $15 instead of $4. That means it’s dropped about $11 in six months, down roughly 70%.

They’ll more than likely be around for a good while yet, including the next console release. I would normally like to point out that businesses this size don’t tend to keel over quickly. They haven’t exactly rolled out mass store closings and/or layoffs yet, so it’s bad, but they aren’t exactly at death’s door. At least, they don’t appear to be.

I wouldn’t mind seeing one of their retro-focused stores myself. That might convince me to actually visit one of their stores again, so maybe they’re onto something.

Y’all take care, I’m sure you’ll hear about this again in a month or so when their Q2 earnings become available.

Gamestop – Q1 Lack of Earnings Report

Right… first things first, here’s a link to the report.

q1 marketwatch

And this is what their stock is doing, courtesy of MarketWatch.

Their stock price dropped like their new hardware sales, which declined by 35% also. That’s including the fact that Switch sales are still strong, so it’s PS and XBOX sales that got flushed.

That’s not their only problem though. New software is down (4.3%), Pre-owned is down (20.3%), and digital is down (6.7%). Accessories are “up” 0.6%, which is flat as far as I’m concerned, and collectibles are actually up 10.5%. To put some numerical perspective to it, the Q1 net income for last year was $28.2M USD. The Q1 for this year is $6.8M.

Their quarterly dividend is being halted immediately to save money and their current guidance is -5% to -10% sales. To be fair, the cutting of the dividend is a major reason why the stock price has dropped so hard, I imagine.

I mean, I’m at a loss. To borrow a word from the internet’s current slang, “oof.” This is… not a good sign for Gamestop. I get it, though. We’re now towards the end of the PS4/XBO life-cycle and most of the people that want one likely already have one. Anyone who doesn’t, well, may as well at least wait and see what E3 has in store, yeah?

Y’all take care, I just don’t know what else to say.