When the going gets tough, the tough might have to get more active

Jeffrey Sachs, in the current issue of Fortune, writes that he sees many disturbing parallels between today's U.S. and global economic picture and the economic downturn of the 1970s. Indeed, striking similarities exist: rapid increase in the price of oil and other commodities, the U.S. fighting a costly and unpopular war, a weak dollar, among others. The result, back then, was 15 years of slower global growth. Should the scenario recur, it certainly will hurt retail investors looking (nervously) at retirement, but it also will make things harder for hedge funds and mutual funds seeking growth in a stagnant, albeit probably volatile, market.

In low-growth or stagflation the business-as-usual mindset of corporations, clearly, won't cut it. Hedge funds might have to increasingly turn to activist tactics to convince companies to unlock value and pursue unconventional growth strategies.

Lehman Bumps Up Earnings Call

Lehman Brothers might release earnings this week -- earlier than its regular schedule -- in an attempt to stem the tide of speculation about the quality of its balance sheet. Lehman officials spent much of last week publicly quantifying its cash and liquid reserves in hopes of calming investors and trading partners. Even if investors aren't going to like the news about earnings and the need to raise capital, it's about time Lehman gave the market more insight into the scope of writedowns and its plan to catch up to other banks in writing down assets. The decision to release early leads me to believe that Lehman realizes that Bear Stearns was prepared to announce strong earnings two days after it was bailed out by JP Morgan.

Rumors, Fact and Fiction in Bear Stearns Collapse Show Limits of Traditional Media

A recent three-part series of articles in the Wall Street Journal chronicled the collapse of Bear Stearns. As part of the company's effort, CEO Alan Schwartz, appeared on CNBC to dispel rumors about Bear's eroding solvency. In the old days, this might have worked, or at least have helped the bank buy time. Unfortunately, there was no real way for Bear Stearns to contain what was happening. No matter what the company said to CNBC and other major media was enough to convince traders around the world who were refusing to do business with Bear Stearns. The degree to which informal information networks among traders showed how banks, hedge funds and other financial institutions are all at risk of public crises of confidence, especially in this jittery market.

Time Warner Cable CEO Unabashed about $10 bn Debt Load

The Wall Street Journal recently interviewed Time Warner Cable CEO Glenn Britt about the long-awaited spinoff from Time Warner. Surprising to analysts and deal watchers was the proviso that TWC would assume $10 billion in debt to pay a one time dividend, mostly to its parent company. In the interview, Mr. Britt claims that TWC's debt load is lower than the industry average and levering up was part of the effort to bring its capital structure in line with competitors. Sure TWC generates a lot of cash, but developing and delivering the next-generation services that customers want is not cheap. Why take a company that is at a competitive advantage (more free cash flow) and constrain it by borrowing to feed not its own growth, but the needs of the parent company?