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Friday Value Overview

July 29, 2011 | About:
The end of the week edition hopefully will be the last to have to mention the debt ceiling debate, other than hopefully to say it’s over. I’ve also got a fascinating long form article on Pfizer’s (PFE) sacking of CEO Jeffrey Kindler at the end of last year, a test from Business Insider for those who have desires to be CEOs themselves, and one more look at Genworth Financial (GNW).

The debt ceiling is on track to hit on Tuesday and this finally prompted some action earlier this evening. The House passed a stripped down short term bill. The Senate rejected it. The House will reportedly vote on the Senate-proposed bill on Saturday. After that, there will be some compromises on each side. President Obama is now even willing to sign a short term bill after previously refusing to. The Senate bill has a lot of fake savings in it, but no tax increases. I expect a variation of that to ultimately be passed with some Republican support in the Senate and Democrat support in the House. If this happens, what will the stock market do? I don’t know, but I do know that myself and other portfolio managers have raised cash positions over the past few weeks. I suspect many will put that money back to work.

CNN Money detailed Jeffrey Kindler’s exit at Pfizer. The article will appear in the next issue of Fortune Magazine. If you remember, Kindler had a rather bizarre exit on December 5 last year. Kindler resigned and the press release included this quote: "The combination of meeting the requirements of our many shareholders around the world and the 24/7 nature of my responsibilities has made this period extremely demanding on me personally." That was only a small part of it. It turned out senior executives and, ultimately, the board began to figure out Kindler’s poor decision-making and excessive micro-managing. This article is long, but well worth the read not just for details about Pfizer, but as a case study about extremely poor executive behavior.

On the subject of CEOs, Business Insider has an article entitled, 20 Signs That You Are a Psychopath. “Basically, high-scoring psychopaths can be brilliant bosses but only ever for short term...they always want to make a killing and move on.” They’ve even got a nice test for you to take yourself with statements like, “You have glibness and superficial charm,” and “Grandiose sense of self-worth.” Sounds like some politicians as well.

I’ve talked about Genworth Financial the last few days, so I may as well mention the positive news today. The stock was up more than 6% on comments from CEO Michael Frazier that the company may spin off its struggling mortgage insurance business. The rest of the company, which does life insurance and wealth management, is doing just fine. The mortgage insurance segment only makes up 7% of its revenues, but is killing the company. They’re also trying to move up a repurchase program to 2012. For those who don’t know Genworth’s history, they were spun off themselves from General Electric in 2004 with an IPO that raised more than Google did that year.

Have a great weekend!

Disclosure: Long PFE

About the author:

Steven Kiel
Steven Kiel is the president and chief investment officer for Arquitos Capital Management, a Virginia-based investment management firm. He is a graduate of George Mason School of Law and a captain in the Army Reserves. He manages two spoke funds, The Freedom Fund, a value-oriented portfolio, and The Hayek Fund, a portfolio dedicated to free market principles. He can be contacted at steven.kiel@arquitos.com or through the firm's website at www.arquitos.com.

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