The Value and Performance of U.S. Corporations

Total Page:16

File Type:pdf, Size:1020Kb

The Value and Performance of U.S. Corporations BRONWYN H. HALL University of California, Berkeley ROBERT E. HALL Stanford University The Value and Performance of U.S. Corporations THE VALUE OF A CORPORATION is known from hour to hourin the stock market.The performanceof a corporation,from the shareholders'per- spective, is measuredby the corporation'sability to pay dividends, now and in the indefinitefuture. Our research investigates the relation be- tween value and performance. We use modern finance theory as a benchmarkfor valuation. Finance theory holds that, on average, the currentvalue of a share is the discounted value of the future dividends the share earns. The theory is explicit about the discountrate. If, on av- erage, over firmsand over time, shares sell for less than the discounted value of the dividendsthe shares ultimatelypay, it means that the stock marketundervalues those shares; investors requirea higherrate of re- turnthan theory suggests they should. Ourmotivation for this researchis the persistentcriticism that Ameri- can capitalism,with its focus on stock prices determinedby myopic in- vestors, diverts managersfrom efficient, long-terminvestments toward the style of managementmost pleasing to the stock market. We ask if certainmanagerial decisions or firmcharacteristics result in stock prices thatare higheror lower thanthe benchmarkprovided by financetheory. Is the marketsystematically shortsightedwith respect to all activities, placing too little value on deferred payoffs? Did this problem worsen We are gratefulto Chris Hall for assistance and to the EconometricsLaboratory at Universityof California,Berkeley, for massive computations.This research was sup- portedin part by the National Science Foundation.We benefitedenormously from the commentsof the discussantsand othersat the BrookingsPanel meeting. I 2 Brookings Papers on Economic Activity, 1:1993 duringthe 1980s?Does the marketfavor higher current accounting earn- ings? Does it put a highervalue on firmsthat invest in plant and equip- ment? Does it put a lower value on firms that invest in research and development (R&D), advertising, and other forms of intangible, diffi- cult-to-valuecapital? Does it put a highervalue on firms that pay high dividends?All of these are claims madeby the critics of Americancapi- talism. If the answer is yes to any of these questions, there is an unexploited opportunityfor arbitragein the U.S. stock market.For example, if the marketundervalues firms that follow a Japanese-stylestrategy of high investmentin productdesign and marketpenetration, then an investor can beat the marketby investingin these firmsfor the long term, deriving highnet value afterten or more years of holdingthe sharesuntil the pay- off becomes apparentto otherinvestors. Centralto the critiqueof Amer- ican capitalismis the absence of patient arbitrageurswith decade-long buy-and-holdstrategies. The whole focus of the professional money managerswho dominate shareholdingsin the United States is on arbi- trage strategieswith payoffs in minutes, hours, or at most months, say the critics. Our findingsgive strong but partialsupport to the critique. We find statisticallyunambiguous evidence of importantarbitrage profits from long-termstrategies. Three of our findingsfavor the critique. First, the stock marketis systematicallyshortsighted; it favors poli- cies that generate near-termdividends over those that requirewaiting. All investors who place theirfunds in the stock marketrather than in the bond marketearn large extra rewards over time after considerationof the relative riskiness of stocks and bonds. This findingconfirms earlier well-known results on the equity premiumpuzzle.' Second, although the bias againstdeferred payoffs lowers the incentive for investment of all types, the bias is smallerfor investmentin plant and equipmentthan for investmentsin intangibles.Third, the marketdisfavors intangible in- vestmentin advertising. On the other hand, we make three findings unfavorableto the cri- tique. First, the marketputs a lower value on firms with higher book earnings, after standardizingfor actual subsequent performance. In other words, the patient arbitrageurcan make money by buying firms 1. Grossmanand Shiller(1981) and Mehraand Prescott(1985). Bronwyn H. Hall and Robert E. Hall 3 with unusually high reported current earnings and holding them until subsequentperformance shows that the marketerred by placing such a low value on these firms. Second, the market puts a higher value on R&Dinvestment than is warrantedby subsequentperformance. The pa- tient arbitrageurcomes out ahead by avoiding R&D-intensive firms. (Thisfinding is at a lower level of statisticalconfidence than the previous ones.) And third,excess discountsfell in the 1980srelative to the 1970s. Our work looks at the values of the shares of a sample containing about half the publicly traded U.S. manufacturingcorporations from 1964through 1991. Within the frameworkof modernfinance theory, we study the relationbetween share value and actual subsequentpayouts to shareholders.Our approach is an applicationof the generalprinciples developedin RobertHall's workwith Steven N. Durlauf.2The approach permitsus to makerigorous statements about departures of shareprices from the level mandatedby valuationtheory and to associate those de- partureswith particularcharacteristics of firms.Although our approach puts a predictedfundamental value on each firmin our samplefor each year, these valuationsare quite noisy. We reach strongerconclusions by lookingat statisticalaverages of the differencebetween stock prices and fundamentalvalues over many stocks and manyyears, which eliminates most of the noise. Ourwork is a departurefrom the abundantrecent literatureon valua- tion anomalies.3That literatureshows that such a thing as an underval- ued firmexists. The findingsresult from a searchfor the most successful currentvariables for forecastinglater performance. The best forecasting variablesare invariablyratios with the currentstock pricein the denomi- nator.Thus the characterof the findingsis thatinvestment in stocks with high earnings-priceratios, high dividend-priceratios, or high book val- ue-priceratios will earnabnormally high returns. The researchersin this traditionadvocate value strategies and have impressive evidence that such strategiesearn high returnswhen appliedin the real world. In con- trast, we take as given that such a thing as an undervaluedfirm exists. We are interested in describingthe association of undervaluationwith the choices made by the firm's managers. For example, we are inter- 2. Durlaufand R. Hall (1990). 3. Basu (1977), De Bondt and Thaler(1985), Fama and French (1988), and Lakoni- shok, Shleifer,and Vishny (1993)are leadingcontributions. Scott (1985)shows the same thingin the frameworkof Shiller(1981) and LeRoy and Porter(1981). 4 Brookings Papers on Economic Activity, 1:1993 ested in measuringthe undervaluationof firmswith policies of heavy in- vestmentin plantand equipment.To achieve this objective, we must ex- clude the currentstock price from our right-handvariables. It would be uninterestingin our frameworkto conclude that firms with low stock prices suffer high discounting in the stock market, even though the stock-pickingrule that tells the investor to look for low stock prices gen- erates the highest expected returns. Our work is not a contributionto the financeliterature showing that valuationanomalies exist. Rather,we apply the methods of financein a new way to consider the issues raised by the critics of the stock market. A second importantwarning to the readeris that our research deals with the external valuation of the firm. We can comment on how the stock market responds to the observable variables as they are deter- mined by the firm's managers.We cannot comment on the internalre- sponses to the valuationerrors made by the stock market.For example, we show that the marketis shortsightedwith respect to investment; it puts a discounthigher than the one meritedby financetheory on the sub- sequent earnings from a capital project. We presume, but we do not show, that managersrespond by launchingtoo few capitalprojects with deferredpayoffs. Ourwork deals with stock marketmyopia, not corpo- rate myopia. Of the two majorelements of the case that capitalismis shortsighted,we consider only one. The restriction to issues of external valuation brings clarity to our work, we believe. Otherapproaches have to deal with conflictinginter- nal and external influences. For example, Michael Jensen has argued that the tendency for a firm's share price to jump when the firm an- nounces an investmentproject is a sign that the stock marketis not myo- pic, and so managersdriven by stock marketincentives should not be- have myopically.4But Jeremy Stein observed that the findingis hardly dispositive.5In his model, managersbehave myopicallyin equilibrium. They set a hurdlerate above the market'sdiscount rate, so the adoption of a projectgenerates a positive gain for the shareholdersprecisely be- cause of myopia. Our approachin this paper is complementaryto the approachtaken by Bronwyn Hall in previous work.6 She has studied the relation be- 4. Jensen(1988). He cites the event study of McConnelland Muscarella(1985). 5. Stein(1989). 6. B. Hall (1992, 1993a). Bronwyn H. Hall and Robert E. Hall 5 tween the currentreproduction cost of a firm's hardwareand software capital (plant and equipment, inventories, ownership of other firms, R&D capital, and advertisingcapital) and the total value of the firm's debt and equity. She estimatesan overallTobin's
Recommended publications
  • Requiem for a Heavyweight
    Co-ordinator: Jean-Paul Meyer – Chief Editor: Brent Manley – Editors: Mark Horton, Brian Senior & Phillip Alder – Layout Editor: Akis Kanaris – Photographer: Ron Tacchi IssueREQUIEM No. 10 FOR A HEAVYWEIGHTTuesday, 9 October 2007 Some of the 54 volunteers from the Shanghai International Studies University. There will be a new Bermuda Bowl champion in 2007. A team South Africa’s next challenge will be USA 1 in the semi-final from South Africa that barely qualified for the quarter-final round round, while Norway and the Netherlands play in the other pulled one of the biggest upsets in the history of the event on match. Monday, defeating the powerful Italian team 184.7-167. South Africa earned the final qualifying spot on the last deal of the round robin and, with their carryover, stormed out to a 95.7- 36 lead after two sets in their head-to-head with the defending VUGRAPH Bermuda Bowl champions. MATCHES ...continued on page 20 Semi Final Session 1 (11.00-13.20) Contents VG: Table 21 USA 1 - China Global Times (VC) BBO 1: Table 41 USA 1 - USA 2 (SB) Today’s Program & Results . .2 BBO 2: Table 22 France - Germany (VC) VC: USA 1 v Egypt - QF Session 1 . .3 SWAN : Table 1 Norway - Netherlands (BB) BB: Chinese Taipei v South Africa - Round 21 . .6 OurGame: Table 2 USA 1 - South Africa (BB) A Bridge Player’s Inferno . .7 BB: Italy v South Africa - QF Session 1 . .9 Semi Final Session 2 (14.20-16.40) The Search for Perfection . .11 To Be Decided BB: Italy v South Africa - QF Session 4 .
    [Show full text]
  • The Principles of Economics Textbook
    The Principles of Economics Textbook: An Analysis of Its Past, Present & Future by Vitali Bourchtein An honors thesis submitted in partial fulfillment of the requirements for the degree of Bachelor of Science Undergraduate College Leonard N. Stern School of Business New York University May 2011 Professor Marti G. Subrahmanyam Professor Simon Bowmaker Faculty Advisor Thesis Advisor Bourchtein 1 Table of Contents Abstract ............................................................................................................................................4 Thank You .......................................................................................................................................4 Introduction ......................................................................................................................................5 Summary ..........................................................................................................................................5 Part I: Literature Review ..................................................................................................................6 David Colander – What Economists Do and What Economists Teach .......................................6 David Colander – The Art of Teaching Economics .....................................................................8 David Colander – What We Taught and What We Did: The Evolution of US Economic Textbooks (1830-1930) ..............................................................................................................10
    [Show full text]
  • Changemakers: Biographies of African Americans in San Francisco Who Made a Difference
    The University of San Francisco USF Scholarship: a digital repository @ Gleeson Library | Geschke Center Leo T. McCarthy Center for Public Service and McCarthy Center Student Scholarship the Common Good 2020 Changemakers: Biographies of African Americans in San Francisco Who Made a Difference David Donahue Follow this and additional works at: https://repository.usfca.edu/mccarthy_stu Part of the History Commons CHANGEMAKERS AFRICAN AMERICANS IN SAN FRANCISCO WHO MADE A DIFFERENCE Biographies inspired by San Francisco’s Ella Hill Hutch Community Center murals researched, written, and edited by the University of San Francisco’s Martín-Baró Scholars and Esther Madríz Diversity Scholars CHANGEMAKERS: AFRICAN AMERICANS IN SAN FRANCISCO WHO MADE A DIFFERENCE © 2020 First edition, second printing University of San Francisco 2130 Fulton Street San Francisco, CA 94117 Published with the generous support of the Walter and Elise Haas Fund, Engage San Francisco, The Leo T. McCarthy Center for Public Service and the Common Good, The University of San Francisco College of Arts and Sciences, University of San Francisco Student Housing and Residential Education The front cover features a 1992 portrait of Ella Hill Hutch, painted by Eugene E. White The Inspiration Murals were painted in 1999 by Josef Norris, curated by Leonard ‘Lefty’ Gordon and Wendy Nelder, and supported by the San Francisco Arts Commission and the Mayor’s Offi ce Neighborhood Beautifi cation Project Grateful acknowledgment is made to the many contributors who made this book possible. Please see the back pages for more acknowledgments. The opinions expressed herein represent the voices of students at the University of San Francisco and do not necessarily refl ect the opinions of the University or our sponsors.
    [Show full text]
  • Flat Tax: an Overview of the Hall-Rabushka Proposal
    . Flat Tax: An Overview of the Hall-Rabushka Proposal James M. Bickley Specialist in Public Finance November 29, 2011 Congressional Research Service 7-5700 www.crs.gov 98-529 CRS Report for Congress Prepared for Members and Committees of Congress c11173008 . Flat Tax: An Overview of the Hall-Rabushka Proposal Summary The President and leading Members of Congress have stated that fundamental tax reform is a major policy objective for the 112th Congress. The concept of replacing individual and corporate income taxes and estate and gift taxes with a flat rate consumption tax is one option to reform the U.S. tax system. The term “flat tax” is often associated with a proposal formulated by Robert E. Hall and Alvin Rabushka (H-R), two senior fellows at the Hoover Institution. In the 112th Congress, two bills have been introduced that included a flat tax based on the concepts of Hall- Rabushka: the Freedom Flat Tax Act (H.R. 1040) and the Simplified, Manageable, and Responsible Tax Act (S. 820). In addition, Republican presidential candidate Herman Cain has proposed a tax reform plan that includes a modified H-R flat tax. This report analyzes the Hall- Rabushka flat tax concept. Although the current tax structure is referred to as an income tax, it actually contains elements of both an income and a consumption-based tax. A consumption base is neither inherently superior nor inherently inferior to an income base. The combined individual and business taxes proposed by H-R can be viewed as a modified value- added tax (VAT). The individual wage tax would be imposed on wages (and salaries) and pension receipts.
    [Show full text]
  • CURRICULUM VITAE August, 2015
    CURRICULUM VITAE August, 2015 Robert James Shiller Current Position Sterling Professor of Economics Yale University Cowles Foundation for Research in Economics P.O. Box 208281 New Haven, Connecticut 06520-8281 Delivery Address Cowles Foundation for Research in Economics 30 Hillhouse Avenue, Room 11a New Haven, CT 06520 Home Address 201 Everit Street New Haven, CT 06511 Telephone 203-432-3708 Office 203-432-6167 Fax 203-787-2182 Home [email protected] E-mail http://www.econ.yale.edu/~shiller Home Page Date of Birth March 29, 1946, Detroit, Michigan Marital Status Married, two grown children Education 1967 B.A. University of Michigan 1968 S.M. Massachusetts Institute of Technology 1972 Ph.D. Massachusetts Institute of Technology Employment Sterling Professor of Economics, Yale University, 2013- Arthur M. Okun Professor of Economics, Yale University 2008-13 Stanley B. Resor Professor of Economics Yale University 1989-2008 Professor of Economics, Yale University, 1982-, with joint appointment with Yale School of Management 2006-, Professor Adjunct of Law in semesters starting 2006 Visiting Professor, Department of Economics, Massachusetts Institute of Technology, 1981-82. Professor of Economics, University of Pennsylvania, and Professor of Finance, The Wharton School, 1981-82. Visitor, National Bureau of Economic Research, Cambridge, Massachusetts, and Visiting Scholar, Department of Economics, Harvard University, 1980-81. Associate Professor, Department of Economics, University of Pennsylvania, 1974-81. 1 Research Fellow, National Bureau of Economic Research, Research Center for Economics and Management Science, Cambridge; and Visiting Scholar, Department of Economics, Massachusetts Institute of Technology, 1974-75. Assistant Professor, Department of Economics, University of Minnesota, 1972-74.
    [Show full text]
  • HOLD-UP PLAYS and DANGEROUS HAND in NOTRUMP by Maritha Pottenger
    HOLD-UP PLAYS AND DANGEROUS HAND IN NOTRUMP by Maritha Pottenger The purpose of a hold-up play is to exhaust one defender of cards in a particular suit. This is especially true at no trump. Once one opponent no longer has cards in that suit, that opponent becomes the “safe” hand and the partner is the “danger” hand. Your challenge is to develop your tricks without allowing the dangerous hand to gain the lead. The general “rule” in NT is to hold up an Ace twice if you and dummy have only 5 cards in the suit; hold up once if you and dummy and 6 cards in the suit and don’t bother to hold up if you and dummy have 7 cards in the suit. (This rule only applies with the Ace.) If for example, you hold Axx in spades and dummy has xx, and a 4th-best spade is led, you will generally hold up twice (taking your Ace on the third round). You hope that one opponent (presumably right-hand opponent) has no more spades by then. Do not hold up when there is a more dangerous suit to which your opponent might switch. Thus, if you hold Axx in spades and xxx in dummy and a 4th-best spade is led, but you have Ax of hearts opposite 10xx, do NOT hold-up in spades. You can not afford to have a heart switch! When there is a dangerous hand, you must tailor your play to that fact. You will try to take finesses only into the “safe” hand.
    [Show full text]
  • Turnover in the Labor Force
    ROBERT E. HALL* MassachusettsInstitute of Technology Turnover in the Labor Force EVERY MONTH, AN IMPORTANT FRACTION of the populationmoves from one economicactivity to another:Some are laid off and mustseek work, or they quit to take newjobs; young people leave school and look for work; workersleave the labor force becauseof disabilityor duties at home. The continualprocess of turnoverseems to be the characteristicof the modern Americaneconomy that distinguishesit from those of other developed countries,where the experienceof individualworkers appears to be much more stableover time. Is high turnoverinevitable in a postindustrialecon- omy?How do the variousdemographic groups in the laborforce differ with respectto turnover?What is the relationbetween turnover and unemploy- ment?What are the social benefitsand costs of turnoverand unemploy- ment?These are some of the criticalquestions that I addressin this paper. Any moderntreatment of turnoverand unemploymentmust distinguish betweenthe role of eventsoutside the controlof the individualand the role of his responseto his economicenvironment. Fluctuations in the demand for labor are the most importantexternal source of disturbancesin an in- dividual'scareer, so it is conventionalto distinguishbetween the demand side of the problemand the supplyside. Turnover among jobs wasthe tradi- tional explanationof the frictionalunemployment that exists to some ex- tent in everyeconomy, but until recently,it receivedlittle discussion.Even ten yearsago, economistsconsidered unemployment a simpleshortage of * I am gratefulto Zvi Body, RichardKasten, Meir Kohn, and Steven Shavellfor able assistance.This researchwas supportedby the National Science Foundation. 709 710 Brookings Papers on Economic Activity, 3:1972 jobs, withoutasking how the distributionof the laborforce among the jobs changesfrom month to month. The federalgovernment's accidental experimentation with a high-pres- sure economy startingin 1965 broughtabout two importantshifts in the thinkingof economistsabout unemployment.
    [Show full text]
  • Mario Crucini
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Jones, Charles I. Article Life and growth NBER Reporter Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: Jones, Charles I. (2013) : Life and growth, NBER Reporter, National Bureau of Economic Research (NBER), Cambridge, MA, Iss. 2, pp. 17-19 This Version is available at: http://hdl.handle.net/10419/103247 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Life and Growth Charles I. Jones* During the twentieth century, life functions — of the kind that economists After all, some new technologies save expectancy in the United States rose use to study asset pricing, the labor-lei- lives — new vaccines, new surgical tech- from less than 50 years to 77 years, sure tradeoff, and macroeconomic fluc- niques, anti-lock brakes, and pollution while average incomes rose by about tuations — already contain a key ingredi- scrubbers.
    [Show full text]
  • The Time Series Consumption Function Revisited
    ALAN S. BLINDER Brookings Institution and Princeton University ANGUS DEATON Princeton University The Time Series Consumption Function Revisited THERELATIONSHIP between consumer spending and income is one of the oldest statistical regularitiesof macroeconomics-and one of the stur- diest. Like the aging movie star, it needs a little touching up now and again, but always seems to come bouncingback. A dozen yearsago, boththe theoreticalderivation and the econometric form of the aggregateconsumption function were considered settled. Most economists adheredto one of two ways of puttingFisher's theory of intertemporaloptimization into operation: Milton Friedman's per- manent income hypothesis (henceforth, PIH) or Franco Modigliani's life-cycle hypothesis (henceforth,LCH). ' Since each variantseemed to have sound theoretical underpinnings,and since the two had similar econometricforms that explainedthe data well and had similarimplica- tions for policy, there was not a greatdeal to quarrelabout. Perhapsthe most contentious empirical issue was the apparently large marginal This paperhas benefitedfrom the commentsand suggestionsof AlbertAndo, Whitney Newey, and members of the Brookings Panel and from seminar presentationsat the Universityof Warwick,Princeton University, and Johns Hopkins University.We thank Peter Rathjensand Lori Gruninfor researchassistance and the National Science Foun- dationfor financialsupport. 1. Milton Friedman, A Theory of the Consumption Function (Princeton University Press, 1957); Franco Modigliani and Richard Brumberg,
    [Show full text]
  • Massachusetts Institute of Technology Department of Economics Working Paper Series
    Massachusetts Institute of Technology Department of Economics Working Paper Series The Rise and Fall of Economic History at MIT Peter Temin Working Paper 13-11 June 5, 2013 Rev: December 9, 2013 Room E52-251 50 Memorial Drive Cambridge, MA 02142 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://ssrn.com/abstract=2274908 The Rise and Fall of Economic History at MIT Peter Temin MIT Abstract This paper recalls the unity of economics and history at MIT before the Second World War, and their divergence thereafter. Economic history at MIT reached its peak in the 1970s with three teachers of the subject to graduates and undergraduates alike. It declined until economic history vanished both from the faculty and the graduate program around 2010. The cost of this decline to current education and scholarship is suggested at the end of the narrative. Key words: economic history, MIT economics, Kindleberger, Domar, Costa, Acemoglu JEL codes: B250, N12 Author contact: [email protected] 1 The Rise and Fall of Economic History at MIT Peter Temin This paper tells the story of economic history at MIT during the twentieth century, even though roughly half the century precedes the formation of the MIT Economics Department. Economic history was central in the development of economics at the start of the century, but it lost its primary position rapidly after the Second World War, disappearing entirely a decade after the end of the twentieth century. I taught economic history to MIT graduate students in economics for 45 years during this long decline, and my account consequently contains an autobiographical bias.
    [Show full text]
  • Around Game10
    All Around Game 10 All course materials designed by World Champion & Master Teacher Donna Compton. 8 Week Course ~ Classes may be taken on an individual basis. Material presentation and Real Time Play of Hands. Live class, video and handout included with lesson. Replay lesson hands on Shark Bridge following live class. Lesson 1 Law of Total Tricks Join Donna for Law of Total Tricks. You and your Opponents are bidding, bidding, bidding. Join Donna to learn the expert tricks to competing to the two, three and four level. Lesson 2 LOTT Conventions Join Donna for LOTT Conventions. The Responder does delay raises all the time. Join Donna to explore Opener’s delay raises and how they find 5-3 fits on the third round of bidding. Lesson 3 Deceptive Declarer Plays Join Donna for Deceptive Declarer Plays. As declarer, your partner is dummy so you can play any cards you want to deceive the defenders. You can’t fool dummy! This lesson looks at playing known cards, hiding lower spot cards, playing higher of touching cards while making your play believable and feigning weakness among other techniques. Lesson 4 Suit Defense, Pt 1 Join Donna for Suit Defense, Pt 1. You are on lead again a suit contract. We will look at the elements of deciding when to lead trumps, when to lead partner’s suit and when to lead sequence combinations. Leading unsupported aces, AK combinations or short-suit leads are also explored. Lesson 5 Reverses & Lebensohl Defense Join Donna for Reverses & Lebensohl Defense. I hear players say, “I don’t do reverses.” The problem with reverse is the name! If we could go back to the 1940s and rename the reverse the “forcing partner to a higher level” bid, it would make more sense.
    [Show full text]
  • Post Mortem Club Manager: Mary Carns Chris Wang………...First at the Post Unit Recorder: Judi Sonon ([email protected])
    Editor: Arlene Port 220 N Dithridge #404 Unit 142 Pittsburgh, PA JULY 2019 WEBSITE AT www.pittsburghbridge.org Pgh.PA. 15213 c President: Chris Wang Tel: 412-521-3637 [email protected] Vice President: Craig Biddle Secretary: Mary Paulone Carns Treasurer: John Alioto Associates: Phyllis Geinzer……. Memoriam Post mortem Club Manager: Mary Carns Chris Wang………...First At The Post Unit Recorder: Judi Sonon ([email protected]) All the news that fits in print BRIDGE BYTES ……….by arlene port ………………...By Ernie Retetagos How does it feel to be at the top of your game? I wouldn’t know, GADGETS but we have two in our Unit that do. Jan Assini and Asim Ulke attained that level of excellence in June. Both of these very accomplished bridge Most of us like to have a few gadgets on our convention cards. Fairly players reached a total of 10,000 master points; Jan, as a Grand Life recently I added a couple of gadgets that have worked out well, and the situations Master, which indicated a National event win and Asim,, as a Platinum occur frequently. Life Master. They now share, with very few others in the ACBL, and the The Flannery convention is an opening bid that shows 5 hearts and 4 spades other 5 in our Unit,, the title of “The Best We Have To Offer”. with 11-16 HCPs. A Flannery overcall is a 2 diamond overcall over a 1 club Congratulations to you both. opener that shows 5 hearts and 4 spades with enough strength to act, about 8-16 HCPs.
    [Show full text]