Wall Street Breakfast: Must-Know News [View article]
A few years ago, if someone had told me that the govt will loot productive taxpayers to pay egregious bonuses to wealthy bankers, who are so idiotic that they cannot manage their own business on a sound basis, I would have thought they were joking.
But the bad joke has come true, and keeps getting worse, because now we appear set for an endless subsidy from productive Americans to all irresponsible consumers of houses, autos, vacations, etc, just to maintain an ecologically disastrous level of unmerited, immoral, and destructive over-consumption.
This process is endless and feeds on itself, and will snowball as more people discover that they can simply consume things without paying for them. Unless the madness is halted, and soon, the collapse in public morality and responsibility will become irreversible.
I'll suggest the Yen is strong because Japan manufactures many products that the rest of the world wants to buy, while consuming less of the rest of the world's output than they produce and export.
On Jan 12 11:52 AM secmaven wrote:
> And Japan's currency is the strongest in the world and getting stronger > by the day!
Government's Best Move in 2008? Letting Lehman Fail [View article]
The real mistake was TARP and all the gyrations that siphon trillions of taxpayers' funds to prop up failed financial companies.
Any bank that put itself in a position to fail should have been nationalized before taxpayers' money was put into it. The management should have been replaced by the government receiver, and once stability has been restored the nationalized banks would have been sold, recovering some of the taxpayers' money.
This is the model that was employed by several major European countries, whether it be banks, mines, or other strategic industries. It preserves the system for the greater good without rewarding the irresponsible.
I posted the comment below in response to another article on this website, just a few days ago. It bears repeating, as I believe many shareholders may not have realised how management uses share buy backs to defraud them:
Dividends benefit all shareholders equally, while buybacks disproportionately benefit management who have options.
If you are a CEO of a company with a stock price of $20 and have an option on a million shares at $22. A year later, the stock price has gone up to $23. Your options are now worth $1 each, i.e. $1,000,000. Now the company has $1 per share of surplus cash which can either be paid in dividends or used to buy back, let's say, 10% of the outstanding shares.
If you pay out the $1/share in dividends, all shareholders, you the CEO included, benefit equally, and your take is modest, just the dividend on the shares you already own.
If you buy back 10% of the stock, the price per share for the 90% remaining outstanding share increases by 1/0.9=11%, so your options are now worth 1.11x23 minus the strike price of 22 = $3.53 per option, i.e. $3,530,000 instead of $1,000,000 that they would have been worth if you paid the $1/share as dividend.
Thus, you the CEO, get $3.53 m instead of $1m if you buy back shares, whereas if you paid dividends your extra income per share that you already own will just be as modest as what the other shareholders get.
If company proxies were voted by knowledgeable shareholders, share buy backs would either be disallowed, or any outstanding options should be re-priced upwards to reflect the reduced number of shares outstanding.
The reality, however, is that most shares are voted by mutual fund managers, who are either ignorant of the basic math, or who are members of a "club" that includes the management, so options are not re-priced to adjust for fewer shares outstanding, and share buybacks are used to enrich option holders at the expense of the other shareholders.
Wall Street Breakfast: Must-Know News [View article]
But the bad joke has come true, and keeps getting worse, because now we appear set for an endless subsidy from productive Americans to all irresponsible consumers of houses, autos, vacations, etc, just to maintain an ecologically disastrous level of unmerited, immoral, and destructive over-consumption.
This process is endless and feeds on itself, and will snowball as more people discover that they can simply consume things without paying for them. Unless the madness is halted, and soon, the collapse in public morality and responsibility will become irreversible.
Economic Themes for 2009 [View article]
On Jan 12 11:52 AM secmaven wrote:
> And Japan's currency is the strongest in the world and getting stronger
> by the day!
Government's Best Move in 2008? Letting Lehman Fail [View article]
Any bank that put itself in a position to fail should have been nationalized before taxpayers' money was put into it. The management should have been replaced by the government receiver, and once stability has been restored the nationalized banks would have been sold, recovering some of the taxpayers' money.
This is the model that was employed by several major European countries, whether it be banks, mines, or other strategic industries. It preserves the system for the greater good without rewarding the irresponsible.
Don't Buy Into Share Buybacks [View article]
Dividends benefit all shareholders equally, while buybacks disproportionately benefit management who have options.
If you are a CEO of a company with a stock price of $20 and have an option on a million shares at $22. A year later, the stock price has gone up to $23. Your options are now worth $1 each, i.e. $1,000,000. Now the company has $1 per share of surplus cash which can either be paid in dividends or used to buy back, let's say, 10% of the outstanding shares.
If you pay out the $1/share in dividends, all shareholders, you the CEO included, benefit equally, and your take is modest, just the dividend on the shares you already own.
If you buy back 10% of the stock, the price per share for the 90% remaining outstanding share increases by 1/0.9=11%, so your options are now worth 1.11x23 minus the strike price of 22 = $3.53 per option, i.e. $3,530,000 instead of $1,000,000 that they would have been worth if you paid the $1/share as dividend.
Thus, you the CEO, get $3.53 m instead of $1m if you buy back shares, whereas if you paid dividends your extra income per share that you already own will just be as modest as what the other shareholders get.
If company proxies were voted by knowledgeable shareholders, share buy backs would either be disallowed, or any outstanding options should be re-priced upwards to reflect the reduced number of shares outstanding.
The reality, however, is that most shares are voted by mutual fund managers, who are either ignorant of the basic math, or who are members of a "club" that includes the management, so options are not re-priced to adjust for fewer shares outstanding, and share buybacks are used to enrich option holders at the expense of the other shareholders.