Notre-Dame de Paris: ever standing and ever changing

When her roof became engulfed in flames and her spire toppled over, I couldn’t help remembering 9/11 and the Twin Towers collapsing under huge volutes of black smoke and flying debris.

Miraculously though the twin towers of Notre-Dame and much of her structure have survived this month’s fire.  The world now awaits and wonders how modern technologies will help restore this iconic monument.

We shouldn’t worry too much, for Notre-Dame has always found ways to survive disasters, adapt to successive crises and draw on human talents to stay forever young.

Consider her history.  Her construction started around 1162, under the reign of Louis VII, at a time when the king’s authority extended over a fraction of what is France today and was threatened by Henry II of England.

It took a century to complete her construction, mostly; by 1260, the first wooden central spire was erected, only to be taken down in 1790.  From the 14^th to the 18^th century, Notre-Dame was the scene of innumerable additions (new chapels, the great organ), interior redesigns, major repairs (twin towers, roof, buttresses), sloppy repainting and repurposing (the cathedral was twice used as a giant cemetery for royals and princes, and functioned as a food and wine depot during the Revolution of 1789).

After centuries of vandalism, haphazard redesigns and repairs, Victor Hugo published in 1831 his famous novel Notre-Dame de Paris and launched a nation-wide wave of support to restore the cathedral.

Then as today, captains of industry competed to fund this effort.  In 1845 architects Viollet-Leduc and Lassus submitted their project and won the right to implement it.  This would be the start of the most ambitious, comprehensive and, when Lassus died, unrestrained restoration project in Europe. 

Viollet-Leduc produced over 1,000 drawings and plans for Notre-Dame.  Deep down, he wanted to rebuild the cathedral as it should have been in the first place. 

His restoration project was extraordinarily thorough, touching all parts of the cathedral: statues, the spire, foundations, flying buttresses, the façade, the roof, the paint, the windows, etc. 

Viollet-Leduc’s imagination and ambition were boundless, as his drawing below of what Notre-Dame should look like shows.

After this massive undertaking, Notre-Dame was left more or less to herself until the 1960s when Culture minister André Malraux decided to clean her up, exposing for the first time in a century the exquisite details of her façade, sculptures and stone work.

Another period of benign neglect and meager restoration budgets ensued, until the recent fire.

Throughout her life, Notre-Dame has survived wars, revolutions, plagues, insurrections, fires and haphazard care.  She is now over 850 years old, and not a day older[1].  Time for a new make-over.  Time also to learn lessons from the past.

---

[1]  Much of the historical information was derived from a book by Jean-Louis Chardans.

Of brain waves and electric dreams

The human brain is a wonderful construct, ceaselessly recording inputs, sorting them, storing them, creating links for faster and more meaningful future use, and at times making jumps which can be baffling, one moment weighing the merits of an investment in GE and the next remembering a slightly salacious Colombian joke.

Which joke?  That of the philandering husband caught in flagrante with his mistress in a motel room by his wife.  Sobbing, screaming, in pain, his wife keeps asking:” How could you do this to me!”  The hard-pressed husband, denying any infidelity but running out of arguments, finally demands:” Are you going to believe your eyes, or are you going to believe what I am telling you?”

So where is the connection between his situation and GE’s?

When the GE stock price fell into the $7-$9 price range, the whole company became worth no more than its aviation unit[1], a natural benchmark being Safran SA from France, its joint-venture partner in the commercial jet business.  Safran SA has a market value of $56 billion with revenues which are ¾ those of GE Aviation.

GE’s Healthcare unit remains very healthy and profitable; in a 12/3/18 article, Barron’s valued it at $60 billion.

GE has retained a 50.1% stake in Baker Hughes which is worth over $12 billion at today’s stock price.

It is about to sell its Transportation unit for over $3 billion.  Its Renewable Energy unit is probably worth that much or more.

So far, these units add up to a lot more than $74 billion.  Factoring in GE’s Industrial net debts (i.e. using enterprise values rather than market capitalizations as benchmarks) lowers valuations, but not conclusively.

The big negatives though are the Power division and GE Capital.  Here, the quarterly conference call of today was helpful in shedding light.

GE’s CEO stated that while he wouldn’t absolutely guarantee that all skeletons had been removed from the GE Capital’s closets, he felt that there shouldn’t be any new material liabilities beyond those which had already been identified.

 

As for Power, while its 4Q18 revenue were down, its results in the red and the global market was still shrinking, GE’s CEO felt that it could reduce production capacity to better match expected demand and improve management to shore up results.

While GE is not out of the woods, it no longer appears in dire needs of funds, there shouldn’t be more large skeletons in the closets, its top management ranks have been upgraded and it is moving decisively to get into shape.  That is not to say there are not major liabilities, rather, that, by now, there are fairly well quantified.

The unfortunate wife of the joke was asked to believe her husband’s denials.   GE shareholders, so far, have been asked to believe short term pessimists.  Instead, they all should believe their eyes.

---

[1] $60 to $80 billion vs. $56 (Safran mkt value)/0.75 or $74 billion.

Entitlement Reform, the Sweden way

Tired of watching Alabama and Clemson fight it out for the college football Championship?  Of watching PSG sleepwalk through the French Division 1?  Nonplussed by the Gunfight at OK Corral remake starring Donald, Chuck and Nancy?  Feeling that Sudoku at the “Difficult level” has become a bore?

Why don’t you read the following paper which describes how the Swedes went about reforming their pension system?  It is very clever politically and it is sound financially.

Just imagine; if Bernie Sanders, who went to the University of Chicago in the 1960s to study political science, had instead picked economics under Milton Friedman, he could have authored such a paper and been elected US president in 2016. 

 Mitt Romney, the Republican senator of private equity fame, would have sailed through the 2012 election had he gone on a sabbatical at the Landsorganisationen i Sverige (the Swedish trade union umbrella organization) in 1994 instead of returning to Bain Capital.

 Well, there it is below, THE PAPER: www.aei.org/wp-content/uploads/2018/03/Automatic-Adjustments-Within-Entitlement-Programs.pdf.