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The dinner in early October was hardly a success. The other Korean politicians present were underwhelmed by Kim’s youth and lack of grace. The more crucial introduction—the public one—came in mid-October, at a mass rally in the Northern capital, and the day proved something of a disappointment to a large crowd eager for the introduction of an important Korean nationalist. The people had apparently expected to see and hear a venerable leader, who had served their cause for many years, and who would reflect their own passion for a country now officially free from foreign domination. But it was a Russian show. Kim spoke flatly, in a monotone, in words written by the Russians, and what the crowd heard was a young, rather inarticulate politician with a “plain, duck-like voice.” One witness thought his suit too small and his haircut too much like that of “a Chinese waiter.” But what really bothered many in the crowd was his adulation of Stalin and the Soviet Union. All praise went to the mighty and wondrous Red Army. Here they were, hoping for distinctly Korean words of freedom, and his words were reflecting a new kind of political obedience, Korean words bent to Russian needs, too much of “the monotonous repetitions which had [already] worn the people out.” There are two very different photos, each of which tells its own truth about that occasion. In the first, Kim, looking young and anxious, is flanked by at least three senior Soviet generals; in the second, doctored version, produced later as Kim was re-creating his own mythic story, one of greater personal independence, he is on the same podium, the angle is slightly different, and the three Russian generals have magically disappeared. Cho Man Sik’s days were already numbered. By early 1946 he had disagreed with the Russians on a number of things important to a Korean nationalist, and had thus become in their eyes even more of a reactionary. General Shtykov had sought and gotten Stalin’s permission to purge him. Soon after, he was put under what was ever so gently called protective custody, in a hotel in Pyongyang. No one was allowed to see him. In fact, no one ever saw him again.
The Coldest Winter
David Halberstam
Walmart stock closed out 1999 at $69.13, and later reported earnings per share (EPS) of $1.25 for the fiscal year ending January 2000, up from $0.99 in the previous year. This gave it an earnings yield of 1.8 percent, or a P/E of fifty-five. Obviously, investors were counting on returns that would match the return on equity of 20 percent, or the earnings growth rate, not the tiny earnings yield. For fast growers, I try to tie together the growth rate and the earnings yield. To produce an earnings yield of 8 percent, Walmart would have needed EPS of $5.53 (8 percent × $69.13). Then I calculate how many years of an assumed growth rate it would take to reach that target. In the best case, the crossover is not many years away, I trust my forecast, and I believe that when it is attained the enterprise will still be growing dynamically. I thought Walmart’s growth rate would continue, perhaps at a less torrid pace, closer to the 12 percent gain reported the following fiscal year. As the already dominant American retailer in many categories, Walmart couldn’t keep grabbing share indefinitely. While Mexico became a stunning success for Walmart, its other international expansion has been a mixed bag. Assuming a 12.1 percent compound earnings growth rate, it would take thirteen years for Walmart’s earnings to reach an 8 percent earnings yield hurdle on the initial purchase price. Some analysts were more enthusiastic about Walmart’s future growth and believed it would get to the target sooner. But, my calculation ignored the compounding of time value of money for those thirteen years, so the target should have been even higher. Historically, few companies have been able to grow earnings 12 percent every year for thirteen years. Surprisingly, Walmart’s earnings did advance in an unbroken string at an 11.3 percent compound rate over the next thirteen years, yet its stock stagnated. The low price for Walmart in 2012 was $57, which, along with cumulative dividends of just over $10 per share would have summed to a negative total return. The average price of Walmart stock in 2012 was close to its price at the end of 1999, or zero capital appreciation, so its dividends were the stock’s total return. Cumulatively, the total return and dividend yield were a lot closer to the initial earnings yield of 1.8 percent than the earnings growth rate or return on equity. Uncharacteristically, shoppers of Walmart shares in 1999 had not demanded a bargain, perhaps because it was otherwise an irresistible story. The realized return on Walmart undershot the discount rate of 8 percent used in my example partly because earnings disappointed, but also because P/Es are prone to mean reversion. Walmart’s actual earnings of $5.02 were not that far behind the initial target of $5.53. But over thirteen years the compounded effect of that technical detail about the difference between the required earnings and actual earnings was substantial, which implied a much higher earnings target to…
Big Money Thinks Small
Joel Tillinghast
What, then, is the future of the $5 trillion global oil and gas industry that supplies almost 60 percent of world energy? The industry will continue to need to find and develop another three to five billion barrels a year just to make up for the natural decline in oil fields, which happens after a field has been in production for some time. The International Energy Agency estimates that over $20 trillion of investment in oil and gas development will be required over the next two decades.
The New Map
Daniel Yergin
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