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Tom Au, CFA
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In the early 1990s, during the middle of a secular bull market, I began work on "A Modern Approach To Graham and Dodd Investing," that was not particularly suited for the decade of the 1990s, but was ideally suited for the following "Lost Decade" of the 2000s.
My book:
A Modern Approach to Graham and Dodd Investing
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  • Generations in Corporations
    Much has been written about Generations in American society by the "experts," William Strauss and Neil Howe, James Quinn, Michael Clark, yours truly. This may derive from the fact that many corporations also have generational cycles.

    In the early 1980s, when the use of the royalty trust for increasing the net present value of oil and gas companies was a novel concept, T. Boone Pickens presented it to one of his oil company CEO friends. To Pickens' surprise, the oilman, after acknowledging its merits, rejected the concept--because of "other considerations."

    "We have regular and long-term shareholders like you do," Pickens quoted him as saying. "But we also have future shareholders to consider, which you don't."

    What he meant was that he (then in his early fifties), and his peer group had just taken over control of the company, and were just beginning to accumulate stock. (The like-aged Pickens had become CEO of Mesa Petroleum in his mid-30s, and had been so for a decade and a half.) The last thing they wanted to do was to interrupt this process, even for the benefit of "outside" shareholders. In this case, the time to talk to him about "wealth maximization" was ten years or so down the line when he and his cohort had finished the accumulation phase and was looking for an "exit."

    At Cigna, where I used to work, early members of generations seem to get first dibs on the CEO-ship. Wilson Taylor, born 1944 (at the beginning of what the experts consider the cultural, rather than demographic Baby Boom), was the main Boom representative. The current CEO David Cordani, was born in 1965, at the front end of generation X.

    On the other hand, General Electric seems to prefer late born members of generations. Reginald Jones (born 1917) was a late-born member of the World War II generation. Jack Welch (born 1936) was a late-born member of the Silent generation. Jeff Immelt (born 1956) was a late-born Baby Boomer. And the next chairman of GE will probably be a Gen-Xer born around 1976.

    I knew that "my generation" had arrived when I telephoned my high school English teacher and said, "Do you realize that Jeff Immelt, the new head of GE, is all of three days older than the girl I courted (from your class) in high school?"
    Dec 07 12:41 PM | Link | Comment!
  • Obama a Captive of the Political Winds
    When he thought he was on top, President Obama was too heavy-handed. He rammed through a major health bill with practically no Republican support, that disquieted a lot of members of his own (Democratic Party). But when he "had the votes," he went for "all or nothing," even at the expense of Democratic seats in one or more future Congresses

    But now that he "lost" the mid-term Congressional elections, he went the other making major concessions on the tax bill, without a fight. Basically, he gave the Republicans their version of the stimulus package, whether or not it was good for the country without making a try for a reasonable compromise that would have allowed him to stand up for his principles. (It is the "try," and not the "compromise," that does this.) Earlier, he expected the Republicans to do the same for him when they were out of power.

    And the "kicker" to both the health bill and the tax bills is that they both defer the main issues to after the 2012 elections. This is playing politics at its worst, trying to defer the impacts of bills that may be unpopular, because you don't want to pay the political price.

    This is not a political system, this is a "spoils system," to the victor go the spoils. This was a major bugaboo of the nineteenth century, that we were able to put off for most of the twentieth century, but not the twenty-first. But the total lack of regard for principle, and the sheer use of force, is what has corrupted the American political system, almost beyond recognition.
    Dec 07 11:18 AM | Link | Comment!
  • The Perils of Plastic
    Much has been written on this site about the perils of conventional plastic, specifically credit cards, that lured people into spending money that they didn't have, and "hoping" to pay for things later. The fact that such a large amount of harm has been allowed to be inflicted on the public testifies to the great benefits of "plastic," to the ISSUERS. But there is another kind of plastic that is being foisted on SOLVENT customers, again, to the benefit of issuers.

    There are a number of service providers, such as the New York City Transit Authority, and laundry machine operaters (among others), that will not accept coins or currency, but rather insist on consumers paying in plastic. (One laundry machine operator won't accept currency less than $5 for its card.) This in effect amounts to a "pre-paid" use. The operator benefits from the "float" between the time the buyer pays, and the time that the buyer uses the service. And if the buyer losses the a card with money on it, it is just pure profit to the operator.

    Advances in financial theory have made financial managers very smart. Unfortunately, it has just given them new ways to take advantage of the public. Given the opportunity, very few resist the temptation.

    Dec 06 11:27 AM | Link | Comment!
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