May 7, 2012 Comments

As of Sunday and even as of Monday morning it looked like markets would be down noticeable on Monday. Instead they ended up fairly flat on the day.

Banks including Wells Fargo and Bank America were up (1.4% and 2.8%, respectively). Berkshire Hathaway was up 1.9%.

Yellow Media reported today and wrote off all of its goodwill. What a sad story this is. I have not looked at it too closely but basically it appears it way over-paid for various business and blew its brains out (assuming it had any) with debt. As of the end of 2009 it reported equity of $5.2 billion but assets included $6.3 billion and another 2.0 billion in intangibles. So it had no tangible equity. Sometimes, that is okay, goodwill can sometimes be worth what was paid for it and more. But not in this case. Today it reports negative equity, in other words it reports its net worth to be significantly less than zero. Disgusting. But I suspect Mark Tellier and his top managers will still have done okay over the years. Must not be a proud moment for his dad, Paul Tellier (former highly competent CN President, among many other accomplishments)

There are probably a lot of lessons in there for investors.

And Yellow Pages was to some degree a product of the financial engineering and tax evasion scheme called Income Trusts. Many of those defined gravity by paying out more in distributions than they made in earnings. Well, for a while they did. When something can’t go on forever, it doesn’t.

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