June 2, 2016
But a new generation of owners like Ballmer, with fortunes made in technology, private equity, and venture capital, are accustomed to being intimately involved with their investments. They’re not just looking to win championships and trophies. They’re looking to build a great business. ... More than that, these tech-enabled owners have helped turn the NBA into North America’s most forward-thinking sports league. Other leagues struggle with aging fans and restrictive views on intellectual property; the NBA has the youngest TV audience of any US league and lets its content flow through the wilds of the Internet. While the other US leagues struggle to build international interest in their games, the NBA has leveraged social media and new technology to build a huge global following. If the league has its way, the Golden State Warriors’ three-point-shooting machine Stephen Curry won’t be merely an ambassador for America’s most exportable sport. He’ll be the biggest star of the biggest league on the planet. ... the overall composition of NBA ownership groups has radically changed. Today roughly half of NBA teams have controlling owners with backgrounds in tech and investment management. ... These owners don’t talk to each other about on-the-court matters, but they’re all in touch regularly on issues of how to run their businesses and reach fans. ... The NBA began this past season with 100 players from 37 countries and territories, 22 percent of the league. That adds up to a huge international audience. ... The biggest potential prize here is China. By some estimates, almost as many people play basketball in China as there are people in the United States—300 million. The NBA dreams of turning the massive Chinese market into the engine that propels the league into the global economic stratosphere.
The New Normal is when plain logic no longer applies; when common sense takes the back seat. I have for a long time been defending the Federal Reserve Bank, and have not at all agreed with all those hawks who thought the Fed was sitting on its hands. Until recently, I felt very comfortable taking that view, but I am no longer so sure. Common sense suggests to me that the Fed ought to tighten a great deal more than they have already done, but does common sense apply? That is what this month’s Absolute Return Letter is about. ... something is not quite right, but what is it? Before I answer that question, let me share one more observation with you. Because the Fed is so inactive, there are signs of moral hazard growing in magnitude. Complacency appears to be sneaking in through the back door yet again. We humans never learn, do we? ... As GDP growth slows, more debt needs to be established in order to service existing debt, which will cause GDP growth to slow even further. I therefore think that, unless it suddenly becomes fashionable to default, debt will continue to rise and GDP growth will continue to slow in the years to come. ... I have changed my view in one important aspect. As debt levels continue to rise (short of any massive debt restructuring), governments will bend over backwards to keep interest rates at very low levels, as the only realistic alternative to low interest rates is default. ... Historically, when central banks have sat on their hands for too long, the end result has almost always been a bout of unpleasantly high inflation, and that has nothing whatsoever to do with the changing demographics.
Over half a century (the company will celebrate its 50th anniversary in August) Vitol has never suffered an annual loss. Profits surged from just $22.9 million in 1995 to a record $2.28 billion in 2009, according to documents reviewed by Bloomberg. At its peak, Vitol’s return on equity, a measure of profitability compared with the money that partners have invested, was a geyserlike 56 percent. Even Wall Street pales in comparison; Goldman Sachs’s best ROE since going public in 1999 is 31 percent. ... Vitol, which trades about 6.5 percent of the world’s oil, fights in a tough arena. It competes with other independents such as Glencore, Trafigura Group, Mercuria Energy Group, Gunvor Group, and Castleton Commodities International. It also grapples for market share against Big Oil’s in-house trading arms, including those of BP, Royal Dutch Shell, Total, and, increasingly, state-owned Chinese oil companies. ... As for the future, Vitol faces a daunting fact: The best days of oil trading are almost undoubtedly in the rearview mirror. Margins are shrinking as the market becomes ever more transparent and competitors emerge fighting for the same barrels. Even as Vitol sinks more capital into assets such as refineries and terminals, returns are falling. Last year’s ROE was 16 percent—for Vitol, a less-than-stellar number. ... In August 1966, two Dutchmen, Henk Viëtor and Jacques Detiger, invested 10,000 Dutch guilders (about $2,800 at the time) to start a Rotterdam company with the aim of buying and selling refined petroleum products by barge up and down the Rhine. They crunched Viëtor and “oil” to get Vitol. The money was a loan from Vietor’s father and the pair agreed to pay an annual interest rate of 8 percent. ... The modern Vitol began to take shape in 1990, when Detiger and seven other partners sold the company for $100 million to $200 million (the actual figure wasn’t disclosed) to a group of about 40 employees, including Taylor.
The weapon is called a railgun and requires neither gunpowder nor explosive. It is powered by electromagnetic rails that accelerate a hardened projectile to staggering velocity—a battlefield meteorite with the power to one day transform military strategy, say supporters, and keep the U.S. ahead of advancing Russian and Chinese weaponry. ... The Navy developed the railgun as a potent offensive weapon to blow holes in enemy ships, destroy tanks and level terrorist camps. The weapon system has the attention of top Pentagon officials also interested in its potential to knock enemy missiles out of the sky more inexpensively and in greater numbers than current missile-defense systems—perhaps within a decade. ... The future challenge for the U.S. military, in broad terms, is maintaining a global reach with declining numbers of Navy ships and land forces. Growing expenses and fixed budgets make it more difficult to maintain large forces in the right places to deter aggression. ... Railgun research leans heavily on commercial advances in supercomputing to aim and on smartphone technology to steer the railgun’s projectile using the Global Positioning System.