The Great Split / We Quit / Casinos Roll / Tom Brady / The 140MM Buckeye Hotel Portfolio

The Great Split

This week, General Electric, once the world largest company by market cap, announced it is splitting into three companies, signaling the end of the conglomerate era.   

David Cote, a former GE executive who later ran rival conglomerate Honeywell International Inc. for 15 years, said he believed when Mr. Culp took over that a breakup was the only recourse for GE. It “just seemed too far gone to pull back together,” Mr. Cote said.

“The conglomerate is dead, and this is the end of the conglomerate,” said Bill George, a former chief executive of Medtronic PLC and now a senior fellow at Harvard Business School. GE units could likely invest more effectively on their own, he said.

GE once built the equipment that gave cities electricity, sold the appliances that modernized homes, broadcast the NBC TV network, financed home mortgages, invented the MRI machine and ushered in a jet age. Yet over the decades it abandoned many of those pursuits. The company barely survived the financial crisis, and its retreat took on greater urgency after 2018, when the company’s profit troubles prompted it to slash its dividend and change leaders.

“This was the largest company in the market by far, it was probably viewed as the best-run company in the market by far,” said David Giroux, chief investment officer at T. Rowe Price Group, a mutual-fund manager and major GE shareholder. “It fell so far for so long, principally because of really poor capital allocation and lack of operational excellence.”

Mr. Culp, the first outsider to run GE, sold off business units, replaced much of the company’s leadership, shrank the headquarters and revamped GE’s sprawling operations. Company finances improved, and GE paid off $75 billion of debt. But a breakup was never Mr. Culp’s plan when he took over, according to people familiar with the matter. “It was hard even for Culp, as an outsider, to make the decision,” one of these people said.

GE shareholders, employees, and former employees can thank Jeff Immelt, perhaps the worst CEO in modern history, for this stunning fall from grace.   Nevertheless, GE is not alone. Johnson & Johnson announced it was splitting the pharmaceutical and medical-device businesses.

The separation will kick off the biggest change in direction in J&J’s 135-year history. Disposable diapers, indigestion tablets and cough remedies powered J&J during its early history, then provided the diversification that helped the company ride out the ups and downs of its riskier but higher-reward pharmaceuticals and medical-devices businesses.

Toshiba announced this week that it is splitting up into three, just like Siemens did previously. The new conglomerates appear to be the tech companies, as they seem to be better at leveraging economies of scale. All of this is great news for shareholders as these smaller companies will be better-managed and more focused.

We Quit

Setting another record, 4.4 million workers quit their jobs in September. People are quitting in a variety of industries, especially in leisure, hospitality, manufacturing, and health care. Moreover, it’s not just lower-wage workers that are quitting their jobs.

JPMorgan Chase & Co.’s equity derivatives desk has faced a wave of defections this year, part of a growing trend across the financial industry, Bloomberg News’s Hannah Levitt reports. Unlike many Americans leaving their jobs, JPMorgan’s senior executives had positions lined up at rival powerhouses like Bank of America Corp., Citigroup Inc. and Millennium Management. But, like workers in other industries, bankers are increasingly basing their career decisions on more than just money. After more than a year of the Covid-19 pandemic, flexible lifestyles are in demand.

The fact that JPMorgan and other Wall Street institutions aren’t immune to greater turnover at their highest ranks is good reason to think the tightness is quite persistent. It’s been clear for a while that with job openings at near-record highs, including among restaurants and other front-line industries, employers have had to offer higher wages and bonuses to attract candidates who might otherwise rather wait out the pandemic. Hourly workers in the leisure and hospitality industry saw earnings jump by 12.4% in October relative to a year earlier, for instance, according to Labor Department data.

Either way, employees’ unusual propensity to quit raises the risk of a wage-price inflation spiral — not something the Fed or the Biden administration wants to contemplate with the U.S. consumer price index rising at its fastest pace in three decades. Powell, for his part, sees it as a mismatch between worker supply and demand. “You have people who are held out of the labor market, you know, of their own, they're holding themselves out of the labor market because of caretaking needs or because of fear of Covid or for whatever reason,” he said. To be sure, a return to a normal participation rate is possible.

But it could also be the case that some Americans 55 and older, who are more likely to have sizeable financial assets that have lately soared in value, aren’t particularly interested in returning to work, regardless of any salary boost. As my Bloomberg News colleague Cameron Crise noted, “there has never been a postwar recession where either the employment or participation of older workers has lagged this badly. That’s flashing an amber warning signal that something is different this time around.” On the opposite side of the spectrum, if you believe survey data posted on Twitter last week by Mark Cuban, a portion of the labor force (presumably on the younger side) has quit because of gains from trading crypto.

Its interesting that many workers are leaving companies that insist that workers return to their offices. In 2022, we will get some clarity on the durability of remote work. Most company CEOs insist their returning to their offices, but will they buckle when their works refuse?  

Casinos Roll

US commercial casinos just finished their best quarter ever, as Americans have returned to casinos at levels never before.

The nation's commercial casinos won nearly $14 billion in the third quarter of this year, marking the industry's best quarter ever, and pushing U.S. casino revenue past what it was for all of 2020, according to figures released Tuesday.

The figures from the American Gaming Association, the casino industry's national trade group, show U.S. casinos are poised to have their best year ever in 2021 as more consumers feel comfortable visiting casinos amid the COVID19 pandemic, and as online and sports betting revenues continue to grow.

U.S. casinos are on pace to break the annual record of $43.65 billion, set in 2019, the group said.

Bill Miller, the association's president and CEO, noted that the second quarter of this year also broke records.

"Two straight quarters of record gaming revenue is an incredible accomplishment in any context, let alone after the most challenging year in industry history," he said in a statement. "Our recovery is not a flash in the pan, but rather a sustained result of our leadership in responsible reopening, world-class entertainment offerings and widespread favorability."

The nation's non-Native American casinos won $13.89 billion in July, August and September of this year. For the first three quarters of this year, U.S. casinos have won nearly $39 billion, surpassing the total for all of 2020, and exceeding the total for the first three quarters of 2019 by 18%.

Jane Bokunewicz, director of the Lloyd Levenson Institute at New Jersey's Stockton University, said pent-up demand among pandemic-weary customers played a big role in the industry's resurgence as restrictions were lifted.

"After a year of restrictions and quarantines, people were anxious to get out and enjoy in-person experiences again," she said. "The casino industry responded quickly to implement clean and safe protocols providing a welcoming environment to people seeking safe social activities. 

"The explosive growth of internet gaming during the pandemic engaged a new audience of consumers who may have become curious about brick-and-mortar casinos and the in-person gaming experience," she added. "Encouraged by casino marketing and loyalty programs they may have decided to try something new." 

David Schwartz, a gambling historian at the University of Nevada Las Vegas, agreed that eagerness to get out and do things among gamblers who had been reluctant to visit casinos in Las Vegas or in their local regions is one factor driving the higher numbers.

Despite Delta, Americans seem to want their 2019 back.

Tom Brady

Tom Brady’s success well into his 40s is a function partly of his extraordinary self-discipline.  

At 44, with most of his peers retired, limping or clutching at the disks in their backs, Brady is on a blitzing pace to throw for more than 5,000 yards and 50 touchdowns this season as he and the Tampa Bay Buccaneers approach Sunday’s game with the Washington Football Team. This is a feat worthy of gaping incredulity, and it raises the question of what makes Brady’s clock tick.

It would be sooooo convenient to think Brady came preloaded with some unattainable, far-fetched genetic gift not relevant to you. The simple truth may be more banal — and exposing — than that. His longevity may just be the product of better habits than yours and mine.

The behavioral-science term for the inability to reject immediate gratification in favor of a bigger gain is “delayed reward discounting.” People who delay-discount tend to perceive something as less valuable the longer they have to wait and work for it. Whereas others are stronger at setting and attaining more distant-horizon goals. This is “one of the most relevant predictors” of long-term success, according to Michael Sofis, a senior scientist with health services consultant firm Advocates for Human Potential. And it’s undoubtedly a contributor to Brady’s sheer longevity. He was in his 30s when he started training for his 40s, quitting sugar and white flour, among other steps. And he works in May for what might happen in February. Consider this story about him.

In the spring of 2020, in the midst of the coronavirus outbreak, Brady participated in the Match II, the made-for-TV golf exhibition with Phil Mickelson and Tiger Woods in Florida. It was hot and raining. Nevertheless, a couple of hours before tee-off, Charles Barkley saw Brady in the parking lot of the golf club. He was running sprints. “What the hell are you doing?” Barkley said.

“I’m trying to win a Super Bowl,” Brady replied.

Brady’s unquenchable ambition is of course a mystery — but what really separates him is that he marries it to method. Without that method, year-round rigor, he would be just another guy with big aspirations who couldn’t live up to them. “If I don’t really work at it … and if I don’t play to my strengths, I’m a very average quarterback,” he said years ago, and it’s true.

The author ponders whether many people would give up a food they love to eat for just a 2% gain in their conditioning?   The short answer is not many.   

The 140MM Buckeye Hotel Portfolio

Clark Street Capital's Bank Asset Network ("BAN") proudly presents: "The 140MM Buckeye Hotel Portfolio." This exclusively offered portfolio is offered for sale by one institution ("Seller"). Highlights Include:

  • A total outstanding balance of $135,716,048 comprised of thirteen loans and nine relationships

  • The loans are secured by first mortgages on fifteen hotels located in Ohio (77%) and Indiana (23%)

  • The properties have a weighted average age of 9 years with 79% constructed since 2013

  • The weighted average LTV of the entire portfolio is 73.62%

  • All loans are performing without any current modifications, except for a single relationship in bankruptcy

  • 98% of the properties are major hotel franchises (Hilton, Marriott, Choice, IHG)

  • All loans include personal guarantees

Files are scanned and available in a secure deal room and organized by credit, collateral, legal, and correspondence with an Asset Summary Report, financial statements, and collateral information. Based on the information presented, a buyer should be able to complete the vast majority of their due diligence remotely.


  • Sale announcement: Thursday, October 28, 2021

  • Due diligence materials available online: Monday, November 1, 2021

  • Indicative bid date: Monday, November 22, 2021

  • Closing date: Tuesday, December 14, 2021

Bids will be entertained on individual assets, a combination of assets, or the entire portfolio. 

Please click here for more information on the portfolio. You will be able to execute the confidentiality agreement electronically.