20 July 2017: Bullying

Ton Büchner, the CEO of paint company AkzoNobel (2016 revenue: €14 billion, profit €1 billion), announced his resignation yesterday. It is not fully clear why Büchner leaves his position. Chairman of the Supervisory Board, Antony Burgmans, referred to health reasons. It is an open secret that Büchner had troubles when he was confronted with stressful situations. Five years ago, he took a time-out after getting overworked because of the many operational issues within AkzoNobel he had to take care of. Last year, AkzoNobel had to deal with a hostile takeover bid by industry partner PPG. Büchner turned away this takeover, but this caused a lot of anger by activist shareholders such as Elliott Advisors. Founder and CEO Paul Singer of Elliot did not shy away from legal action and those steps hit Büchner hard. He now quits because he is fed up with Elliot’s bullying practices.
How should we judge this situation? Is Büchner’s decision completely logical if he is not tough enough to play with the big boys? Or is this going a step too far: should the practices of activist shareholders, who do not refrain from attacking corporate directors and destroying healthy companies for no more than a thin slice of extra return, be assessed critically?

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All major US indices recorded all-time highs Wednesday. The Dow rose 0.31%, the S&P 500 added 0.54% and the NASDAQ trumped that: it gained 0.64%. Volatility eased as a result: the VIX dropped deeper into single-digit territory, closing at 9.79 points. UVXY ETFs lost another 2% and XIV ETNs added another 1%. There appears to be no limit to investors’ optimism.
Danny Daredevil saw another drop of his return. It closed at 205%. Danny’s return for 2015 is now close to -25%. Adventurous Anny is still holding cash. Her RSS remained at 33%. Solid Suzy and Lazy Larry keep partying: their RSS is approaching 40%.
None of our models gave a trading signal at the end of yesterday’s session.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

205.33%

-24.26%

-29.86%

105%

Adventurous Anny Cash 6 March 2017

32.57%

32.57%

-4.39%

113%

Solid Suzy XIV 6 March 2017

38.90%

38.90%

10.98%

142%

Lazy Larry
XIV 6 March 2017

38.90%

38.90%

10.98%

142%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

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‘O, m’n fiets gij zijt
Bron van al m’n blijheid;
O, m’n fiets gij zijt
Leven in der eeuwigheid.
Rijd, rijd
Aldoor;
Rijd, rijd
Aldoor;
Gewonnen verloren, gewonnen verloren,
De horizonnen zijn uit d’eeuwigheid.’

– Excerpt from the poem ‘Fietstocht II’ by Paul van Ostaijen (1896-1928), Music-Hall (april 1916)

 

Oh, my bicycle you are
Source of all my happiness;
Oh, my bicycle you are
Living for eternity.
Ride, ride
All along;
Ride, ride
All along;
Won lost, won lost,
The horizons are from eternity.

– English translation and photo: These Dutch Guys