Dan Loeb's Third Point Starts Apple (AAPL) Stake: Top Positions & Latest Exposures

Dan Loeb's $4.6 billion Offshore Fund at Third Point finished February up 1% and is now up 4.9% for the year. As of the end of February, here are their top stakes:


Third Point's Top Positions

1. Yahoo! (YHOO)
2. Gold
3. Eksportfinans ASA
4. Delphi (DLPH)
5. Apple (AAPL)

Apple now makes an appearance in Loeb's top holdings and is the big takeaway here because the hedge fund did not own AAPL at the end of the year.

Third Point also revealed that one of their big winners in the month was the Medco Health (MHS) and Express Scripts (ESRX) arbitrage play. This is another new play that was not present in Third Point's portfolio at the end of the year. To read about this arbitrage play, check out a free excerpt from our newsletter as it's briefly discussed in the Omega Advisors section.


Latest Equity Exposure

In equities, Third Point is 53.2% long and -16.5% short, leaving them 36.7% net long. They've continued to ramp up their net long exposure as they were 28.2% net long just a month ago.

Their largest allocation continues to be in the technology sector at 16.2% net long (largely due to their activist position in Yahoo). Their next highest exposure is the consumer sector at 7% net long.

One of their losers in the past month was Marvell Technology (MRVL), a new stake they initiated in the fourth quarter. Apple (AAPL) was one of their big winners in the month as it ramped up right after they initiated a stake.


Credit Exposure

In credit, Loeb's firm is 18.7% net long (40% long and -21.3% short). This is up from 15.6% net long exposure in January. Their biggest net long allocation is in asset backed securities (ABS) at 14.3% net long and they continue to be net short government issues at -14.2%.

For some thoughts on their portfolio, head to Third Point's Q3 letter.

Nelson Peltz Sells Some H.J. Heinz (HNZ)

Trian Fund Management's Nelson Peltz has filed a slew of Form 4's with the SEC regarding his stake in H.J. Heinz (HNZ). Between February 24th and 28th, Peltz has sold 209,200 HNZ shares. He's reduced his position size by almost 20%.

The bulk of his share sales came at a price of $53.5713, though he also sold at $53.0968 just three days ago. HNZ currently trades around that level, at $52.98. As of February 28th, Peltz now owns 837,884 shares of Heinz.

Per Google Finance, Heinz "together with its subsidiaries is engaged in manufacturing and marketing a range of food products throughout the world. The Company’s principal products include ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant nutrition and other food products. The Company’s products are manufactured and packaged to provide safe, wholesome foods for consumers, as well as foodservice and institutional customers."

Warren Buffett's Annual Letter 2011: Key Takeaways

If you haven't seen it already, Warren Buffett is out with his 2011 annual letter to Berkshire Hathaway shareholders. Here are some key takeaways:


- Succession: Buffett puts the succession talk (somewhat) to rest as the company has identified a successor at CEO. They also have two backup candidates as well. The problem is, people will take issue with the fact that the identities still haven't been revealed.

So, when Buffett does finally decide to step down from Berkshire (or when he passes on, because he could certainly work there until the day he dies), the company will be able to transition to the next era. The question now becomes, how much "Buffett premium" is in the stock?

We've also long detailed how Buffett has chosen two new investment manager successors as well. He hired Todd Combs from hedge fund Castle Point Capital and Ted Weschler from hedge fund Peninsula Capital Advisors.


- Buybacks: The Oracle of Omaha clearly thinks his company's stock is undervalued and is anxious to buy back Berkshire Hathaway shares as high as 1.1x book value, which would be around $110,000 on the A shares (BRK.A) as of year-end. Shares currently only trade around 7% higher at $117,755.


- Acquisitions: The two most recent major acquisitions for Berkshire Hathaway, Lubrizol and Burlington Northern Santa Fe, have delivered record operating earnings. So yet again, Buffett has made some prescient buys.

It's also not out of the question that Buffett could possibly make some additional acquisitions in the near future. After all, his Berkshire businesses are throwing off around $1 billion per month as a whole that he could use. While he doesn't specifically mention anything in the letter, it seems like an obvious possibility. As to where he might look, we've detailed in the past how Buffett likes businesses with pricing power (Lubrizol).


Embedded below is what value investors have deemed a must read every year: Warren Buffett's annual letter to Berkshire Hathaway shareholders (you can download a .pdf copy here):




For more resources from one of the greatest investors ever, check out:

- Warren Buffett's recommended reading list

- Top 25 Warren Buffett quotes

- A compilation of Buffett's partnership letters

- Buffett's worst trade

Jeremy Grantham's 10 Investment Lessons

GMO's Jeremy Grantham is out with a February 2012 letter which he has entitled, "The Longest Quarterly Letter Ever." In it, he outlines 10 investment lessons for individual investors.

Jeremy Grantham's 10 Investment Lessons:


1. Believe in history: "history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away."

2. Neither a lender nor a borrower be: "Unleveraged portfolios cannot be stopped out, leveraged portfolios can. Leverage reduces the investor's critical asset: patience."

3. Don't put all your treasure in one boat: "This is about as obvious as any investment advice could be ... Several different investments, the more the merrier, will give your portfolio resilience, the ability to withstand shocks."

4. Be patient and focus on the long term: Wait for the good cards. If you've waited and waited some more until finally a very cheap market appears, this will be your margin of safety."

5. Recognize your advantages over the professionals: "The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals."

6. Try to contain natural optimism: "optimism comes with a downside, especially for investors: optimists don't like to hear bad news."

7. But on rare occasions, try hard to be brave: "You can make bigger bets than professionals can when extreme opportunities present themselves because, for them, the biggest risk that comes from temporary setbacks - extreme loss of clients and business - does not exist for you."

8. Resist the crowd, cherish numbers only: "this is the hardest advice to take: the enthusiasm of a crowd is hard to resist. The best way to resist is to do your own simple measurements of value, or find a reliable source (and check their calculations from time to time) ... and try to ignore everything else."

9. In the end it's quite simple, really: "GMO predicts asset class returns in a simple and apparently robust way: we assume profit margins and price earnings ratios will move back to long-term average in 7 years from whatever level they are today. We have done this since 1994 and have completed 40 quarterly forecasts ... Well, we have won all 40."

10. This above all, to thine own self be true: "To be at all effective investing as an individual, it is utterly imperative that you know your limitations as well as your strengths and weaknesses ... you must know your pain and patience thresholds accurately and not play over your head. If you cannot resist temptation, you absolutely must not manage your own money."



Grantham elaborates on each lesson and address other topics in his full quarterly letter, embedded below:



For more insight and market commentary, be sure to also check out Howard Marks' latest letter, as well as Eric Sprott's commentary.

What We're Reading ~ 3/1/2012

Tiger Global gets rich off IPOs long before you see them [Forbes]

Shifting hedge fund landscape: operations & due diligence [AllAboutAlpha]

Hedge fund risk management a work in progress [Simon Kerr]

A peak at Einhorn on the job [Dealbook]

Wall Street was never on your side [Abnormal Returns]

Hedge funds faulted for not being short-term enough [Reuters]

Also: Howard Marks on the hedgie performance paradigm [Market Folly]

Why hedge fund managers need fewer friends [eFinancialNews]

Dan Zwirn's fall a horror story of doing right [Bloomberg]

Warren Buffett is wrong about gold [AR+Alpha]

On what David Tepper sees in Boston Scientific [CapitalObserver]

Write up on Media General (MEG) [Kinnaras Capital]

Newer hedge funds saw $12.4 in deposits since 2009 [Bloomberg]

A secretive hedge fund legend prepares to surface [CNBC]

Confessions of a reformed stockbroker [BusinessWeek]

The new ETF that could kill mutual funds [Fiscal Times]

Bill Gross' Investment Outlook: Defense

PIMCO's Bill Gross is out with his latest 2012 investment outlook, entitled "Defense." Given all the equity commentary on the site lately, we thought we'd add some fixed income color.

In his commentary, Gross outlines the core tenets of PIMCO's "offense" from 1981 to 2011. Now, from 2012 onwards, Gross says that "successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills."

To learn what exactly that means, here is Gross' entire commentary below:

• ​Over the past 30 years, an offensively minded Federal Reserve and their global counterparts were printing money, lowering yields and bringing forward a false sense of monetary wealth.
• Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills.
• The PIMCO defensive strategy playbook: Recognize zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. Emphasize income we believe to be relatively reliable/safe; seek consistent alpha.

They say defense wins Super Bowls, but the Mannings, Bradys and Montanas of gridiron history are testaments to the opposite. Putting points on the board, especially in the last two minutes, has won more games than goal line stands ever have, even if the scoring has been done by the field goal kickers, the names of whom have been confined to the dustbins of football history as opposed to the Hall of Fame in Canton, Ohio. Canton, however, has an approximately equal number of defensive in addition to offensively positioned inductees, so there must be a universally acknowledged role for both sides of the scrimmage line. What fan can forget Mean Joe Greene, Deion Sanders or Dick Butkus? The old, now politically incorrect showtune laments that “you gotta be a football hero, to fall in love with a beautiful girl,” but football and any of life’s heroes can play on either side of the line, it seems.

My point about pigskin offense and defense is the perfect metaphor for the world of investing as well. Offensively minded risk takers in the markets have historically been the ones who have dominated the headlines and won the hearts of that beautiful gal (or handsome guy). Aside from the rare examples of Steve Jobs and Bill Gates, however, the secret to getting rich since the early 1980s has been to borrow someone else’s money, throw some Hail Mary passes and spike the ball in the end zone as if you had some particular genius that deserved monetary rewards 2¹⁰ times more than a Doctor, Lawyer or an Indian Chief. Nah, I take that back about the Indian Chief. The Chiefs, at least, have done pretty well with casinos these past few decades.

Still, the primary way to coin money over the past 30 years has been to use money to make money. Although the price of it started in 1981 at a rather exorbitantly high yield of 15% for long-term Treasuries, 20% for the prime, and real interest rates at an almost unbelievable 7-8%, the gradual decline of yields over the past three decades has allowed P/E ratios, real estate prices and bond fund NAVs to expand on a seemingly endless virtuous timeline. Books such as “Stocks for the Long Run” or articles such as “Dow 36,000” captured the public’s imagination much like a Montana to Jerry Rice pass that always seemed to clinch a 49ers victory. Yet an instant replay of these past few decades would have shown that accelerating asset prices weren’t due to any particular wisdom on the part of academia or the investment community but an offensively minded Federal Reserve and their global counterparts who were printing money, lowering yields and bringing forward a false sense of monetary wealth that was dependent on perpetual motion. “Rinse, lather, repeat – Rinse, lather, repeat” was in effect the singular mantra of central bankers ever since the departure of Paul Volcker, but there was no sense that the shampoo bottle filled with money would ever run dry. Well, it has. Interest rates have a mathematical bottom and when they get there, the washing of the financial market’s hair produces a lot less lather when it’s wet, and a lot less body after the blow dry. At the zero bound, not only are yields rendered impotent to elevate P/E ratios and lower real estate cap rates, but they begin to poison the financial well. Low yields, instead of fostering capital gains for investors via the magic of present value discounting and lower credit spreads, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to banking, money market funds and the pension industry. The offensively oriented investment world that we have grown so used to over the past three decades is being stonewalled by a zero bound goal line stand. Investment defense is coming of age.

This transition is not commonly observed, although it is relatively easy to prove statistically and even commonsensically. Take for instance the rather quizzical notion that lower yields must produce an equal number of winners and losers since there is a borrower for every lender and the net/net therefore should have no effect on the real economy or its financial markets. Chart 1 shows that since 1981, which marks the beginning of the secular decline of interest rates, personal interest income has rather gradually (and now somewhat suddenly) shrunk relative to household debt service payments.

It is Main Street that has failed to keep up with Wall Street and corporate America in the race to see who can benefit more from lower yields. As the interest component of personal income gradually weakens, the ability of the consumer to keep up its frenetic spending is reduced. Metaphorically, it’s akin to a 4th quarter two minute Super Bowl drill, but one where the receivers haven’t been properly hydrated. They’re a half step slow, their legs are cramping, and it shows. Lower interest rates are having a negative impact on households because their water bottles are filled with 50 basis point CDs instead of Gatorade.

While Wall Street and levered investors have fared better than their Main Street counterparts, it’s not as if they’re in “primetime Deion Sanders” shape either. Conceptualize the historical business model of any financially-oriented firm for the past 30 years and you will see what I mean. Insurance companies, for instance, whether they be life insurance with their long-term liabilities, or property/casualty insurance with more immediate potential payouts, have modeled their long-term profitability on the assumption of standard long-term real returns on investment. AFLAC, GEICO, Prudential or the Met – take your pick – have hired, staffed, advertised, priced and expensed based upon the assumption of using their cash flows to earn a positive real return on their investment. When those returns fall from 7% positive to an approximate 1% negative, then assumptions – and practical realities – begin to change. If these firms can’t cover inflation with historical real returns from their float, then they begin to downsize in order to stay profitable. The downsizing is just another way of describing a transition from offense to defense in a zero bound nominal interest rate world where almost any level of inflation produces negative real yields on investment.

Not only insurance companies but banks suffer from this inability to maintain margins at the zero bound. In the process, they close retail branches that once were assumed to be the golden key to successful banking. Defense! And here’s one of the more interesting anecdotal observations on our current zero-based environment, one to which my investment paragon – Warren Buffett – would probably immediately admit. His business model – and that of Berkshire Hathaway – has long benefitted from what he has described as “free float.” Those annual policy payments, whether for hurricane, life or automobile insurance, have long given him a competitive funding advantage over other business models that couldn’t borrow for “free.” Today, however, almost any large business or wealthy individual can borrow or lever up with minimal interest expense. Buffett’s “Omaha/West Coast” offense is being duplicated around the world thanks to central bank monetary policies, placing an increasing emphasis on stock and investment selection as opposed to business model liability funding. Buffett will succeed based upon his continued strong offensive play calling, but the rules of the game are changing.

The plight of Buffett of course is in some respects the plight of PIMCO or any investment/financially-oriented firm in this new age of the zero bound. And it seems to us at PIMCO that successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills. What does that mean? Well, let’s briefly describe PIMCO’s own historical investment offense for the past 30 years in order to provide a defensivecontrast:

PIMCO Offensive Strategy 1981 – 2011

Ready, Set, Hut 1, Hut 2 –

1. Recognize downward trend in interest rates and scale duration accordingly.
   
   A. Emphasize income and capital gains. PIMCO Total Return Strategy.
   B. Utilize prudent derivative structures that benefit from systemic leveraging – financial futures,
   swaps (but no subprimes!)
   C. Combine A and B along with careful bottom-up security selection to seek consistent alpha.
   

PIMCO Defensive Strategy 2012 – ?

Ready, Set, Hut, Hut, Hut –

1. Recognize zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible.
   
   A. Emphasize income we believe to be relatively reliable/safe.
   B. De-emphasize derivative structures that are fully valued and potentially volatile.
   C. Combine A and B along with security selection to seek consistent alpha with admittedly lower nominal returns than historical industry examples.
   

So there you have it – the PIMCO playbook. I suppose if I had any common sense I would hold up that clipboard to the front of my mouth like sideline coaches do during big games. Don’t want to chance any of the competition reading our lips to get a heads up on PIMCO’s next offensive play call. But then that’s never been my or Mohamed’s style, given the importance of informing you, our clients, of what we are thinking when it comes to investing your hard-earned capital. Go ahead competitors and read our lips, we’ll just pound that pigskin down the field anyway. Besides, as I’ve pointed out, the emphasis these days should be on the defensive coach. Leveraging has turned into deleveraging. 15% yields have turned into 0% money. The Super Bowls of the future will have their Mannings and Bradys, but the defensive line may record more sacks and make more headlines than ever before.

William H. Gross

Managing Director
Source: PIMCO

For other market commentary, we've posted up Jeremy Grantham's 10 investment lessons as well as Oaktree Capital and Howard Marks' latest letter.

Top 10 Hedge Funds By Net Gains Since Inception

Bloomberg is out with an interesting piece examining the top 10 hedge funds by net gains since inception. The list contains the who's who among the hedge fund elite and is pretty much who you'd expect to be on it.

The data was compiled by LCH Investments NV (part of the Edmond de Rothschild Group) and is based on audited reports from each investment firm, discussions with the funds, as well as confidential sources.


Top 10 Hedge Funds By Net Gains Since Inception

1. Ray Dalio's Bridgewater PureAlpha: $35.8 billion net gain since 1975
2. George Soros' Quantum Endowment: $31.2 bn net gain since 1973
3. John Paulson's Paulson & Co: $22.6 bn net gain since 1994
4. Seth Klarman's Baupost Group: $16 bn net gain since 1983
5. Brevan Howard: $15.7 bn net gain since 2003
6. David Tepper's Appaloosa Management: $13.7 bn net gain since 1993
7. Bruce Kovner's Caxton Associates: $13.1 bn net gain since 1983
8. Louis Bacon's Moore Capital: $12.7 bn net gain since 1990
9. Thomas Steyer's Farallon Capital: $12.2 bn net gain since 1987
10. Steve Cohen's SAC Capital: $12.2 bn net gain since 1992


One interesting tidbit here is that Louis Bacon's Moore Capital makes the top ten, but his mentor Paul Tudor Jones (Tudor Investment Corp) does not. Tudor was largely responsible for seeding Bacon's fund by sending him investors that Tudor had to turn away back when he was first getting started.

Compare the above to the top 10 biggest hedge funds in 2010 and it's no surprise that there's considerable overlap as some of the most successful hedge funds have become some of the largest. Also, the two funds that have been around the longest on the list (Bridgewater and Soros) are the two that occupy the top positions.

Five of the managers above are featured in our Hedge Fund Wisdom newsletter and you can see their latest investments in our brand new issue.

Oaktree Capital's Howard Marks on Assessing Performance Records

Oaktree Capital's Howard Marks is out with his latest market commentary. In it, he details a case study on assessing performance records.

Marks writes: "the ability to ignore relative performance depends on the circumstances and, in particular, the constituencies the performance has to please."

This is an interesting point, because more often than not in markets, investors are fixated on relative performance (comparing returns to the S&P 500 or other benchmarks relevant to their strategy).

If a manager doesn't want to focus on relative performance, Marks says that it's very important he/she effectively manages expectations from the start, or finds an investor base that shares the same vision.

Take an all too common scenario on Wall Street: a manager underperforms a benchmark and flippant investors quickly move their money to the next hot manager. Managers who are constantly compared to benchmarks by their investor base obviously have little to no chance of ignoring relative performance.

Marks then touches on a point that's very relevant to the hedge fund industry:

"In order to survive and have a chance to produce long-term performance, investors have to live up to their constituents' expectations in the short run. Of course, it's important to inculcate reasonable expectations, or to choose clients who have them. But ultimately, the manager's job isn't to make money, it's to deliver client satisfaction, so expectations have to matter."

A prime example of short-term expectations from investors influencing things is Chris Shumway's now defunct hedge fund, Shumway Capital Partners. Shumway returned capital to investors largely because investors were fixated on short-term performance, while he argued his performance was largely driven by taking longer term positions.

Marks makes a bunch of excellent points in his piece and as always his full missive is worth reading. Embedded below is Howard Marks & Oaktree Capital's commentary:




For more from this hedge fund manager, be sure to check out Marks' book: The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

You can also scroll through Marks' past commentaries here.

Strategist Jeff Saut Cautious, But Likes Certain Dividend Stocks

It's been a while since we've checked in on what market strategist Jeff Saut has had to say. Given the drastic run up in equities this year, Saut is cautious. Yet while he's cautious, he doesn't want to bet on the downside.

This is because he thinks there's a likelihood the market could just as well see a sideways consolidation. In general, Saut has long believed it's imprudent to be bearish because a turn in the economy would translate into profits exploding, inventory rebuilding, and a capital expenditure cycle, topped off with a reduction in unemployment.

Lack of Down Days in the Market

Saut is most intrigued by the fact that the market has been able to jump over a ton of hurdles (a 21% rise in the price of gas being one of them).

He writes, "the SPX has now gone 35 trading sessions in 2012 without suffering a 1% down day. There have been 12 other years since 1928 where the SPX has traded higher for 30 sessions, or more, without a 1% down day. In all but one of those occurrences the SPX was higher at year's end with a median gain of more than 15%."

Dividend Stocks Saut Likes

So while he does think this bodes well for the market, he is still a bit cautious in the near-term as the market's recent rise has felt "unnatural" to him. As such, he has recommended the following conservative dividend stocks: Abbott Labs (ABT), Aflac (AFL), Chevron (CVX), McDonald's (MCD), Norfolk Southern (NSC), and Huntington Bancshares (HBAN).

Embedded below is Jeff Saut's recent commentary:



You can download a .pdf copy here.

For more recent market commentary, yesterday we posted up Eric Sprott's February commentary on why 2012 is the year of the Central Bank, as well as Passport Capital's John Burbank saying this is a stockpicker's market.

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Passport Capital's John Burbank: 2012 is a Stockpicker's Market

John Burbank of $4 billion hedge fund Passport Capital recently sat down with Bloomberg TV to discuss his outlook on the markets and oil, among other things.


On Why This is a Stockpicker's Market

The founder touched on his fund's strategy for those looking for more insight into his ways:

"We’re stock pickers. In fact, this is a great year to be long and short individual securities. In 2008, everything went down. In 2009, everything went up. In 2010, everything moved together and eventually ended up. Last year, things started separating. Our strategy is to be picking individual securities, companies that are not depending on economic growth.”

You can see Passport Capital's latest equity holdings in the brand new issue of our Hedge Fund Wisdom newsletter that was just released.


On Healthcare & Biotech

He also went on to say that, “Biotech and healthcare is one of those sectors. There hasn't been an obesity drug approved in over 30 years and we thought QNEXA would have a good chance of being approved…We were one of I think four big holders in the stock. We think it can double again because we think a large pharma would probably like to own the company at some point."

QNEXA is the drug made by VIVUS (VVUS). In addition to Passport, large holders of the stock at the end of Q4 were Caxton Associates, Citadel Advisors, D.E. Shaw & Co, and SAC Capital.


On Oil

Burbank also addressed some macro topics like oil. "[Oil] is up 16%, more than any of the indices. It's a big problem for the rest of the world - central bank easing and liquidity providing presents a lot of problems for the average consumer here but also for emerging markets around the world.”

Burbank also mentioned where he has allocated a sizable portion of his capital:

“The one market it really helps is the Saudi market. We have 15% of our capital in the Saudi market - only about 1% is held by foreigners. It should be opening up this year. So we think unfortunately QE3, which is now being pursued in Europe and Japan, essentially in the U.S. with other programs, has negative feedback loops. And oil we think is the one. Gold goes up 10%, 20%, 50%, it doesn't cause any problems with people the way banking is done these days, but oil does… I don't think oil is going to stop until the economy breaks which is a real risk."

Embedded below is the video of John Burbank's interview with Bloomberg TV:

Eric Sprott's Latest Commentary: 2012 is Year of the Central Bank

It's been a while since we've covered Eric Sprott and his Canadian firm Sprott Asset Management. He's out with his February 2012 commentary entitled, "Unintended Consequences." In it, Sprott discusses how 2012 is shaping up to be the year of the Central Bank.

He writes,

"There is unfortunately no economic textbook to guide us through these strange times, but common sense suggests we should be extremely wary of the continued maneuvering by central banks. The more central banks print to save the system, the more the system will rely on their printing to stay solvent – and you cannot solve a debt problem with more debt, and you cannot print money without serious repercussions.

The central banks are fueling a growing distrust among the creditor nations that is forcing them to take pre-emptive actions with their currency reserves. Individual investors should take note and follow-suit, because it will be a lot easier to enjoy the “Year of the Central Bank” if you own things that can actually benefit from all their printing, as opposed to things that can only be destroyed by it."

One of the main 'things' he is referencing there is obviously gold. Sprott has long been an advocate of the precious metal and has called gold the ultimate Triple-A asset.

We've also highlighted how Sprott started a physical gold trust (ticker: PHYS) back in 2009 that competes with the popular exchange traded fund SPDR Gold Trust (GLD).

Embedded below is Sprott's February 2012 commentary, Unintended Consequences: