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cstauffer

cstauffer
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  • Currency Debasement [View article]
    Macro issue sure, macro problem definitely. So these things are macro issues, so what? They are macro problems, with means the business community must solve them with innovative gain sharing solutions or at some point, like elsewhere around the world, government will step and address the problems in a much less desirable way. One way to start, which would be consistent with Board fiduciary duties would be to approach executive searches globally. Heck, the CEO of Chrysler/Fiat is doing a spectacular job and makes a fraction of what the U.S. CEO's of comparable size companies. Why don't U.S. company Boards try to get the best person for the job for the least amount of money instead of simply looking at the highest paid in a peer group and upping the ante. Pay a fair wage for the responsibilities and heavy workload and reward actual achievements such as achieving consecutive year improvements in operating efficiencies, expanding operating capacity under an allotted budget and within a certain time-frame, etc. A higher stock price should result from these improvements, but it is the improvements that should be rewarded, not simply a higher stock price. There are many accounting gimmicks and ill-conceived M&A decisions that can be used to increase stock prices and trigger profits on options that as time passes prove not to create value. However, when this happens the CEO and executive management teams do not have to give back their previously awarded bonuses. The system is currently self-serving and the miss-aligned with rewarding actual value creation and this has lead to a perpetual growing disparity in reward between the very top and everyone else involved in making a company successful.
    Sep 17, 2014. 09:38 AM | Likes Like |Link to Comment
  • Currency Debasement [View article]
    Kramer,

    You say, "but you don't own the company, so why should your opinion count?" Neither do the CEO's own the company nor the Board Members when it comes to a publicly owned company, with the exception of someone like Mark Zuckerberg and other Founder CEO's. I am sorry that you got the sense that I was being rude. My point, in the context of the dialog that has developed on this reply thread was to point out that senior executives and the average worker in most publicly traded organization are both classified as employees, but because the deflationary forces of globalized labor has not been allowed to push down executive pay in the same way that it has for the average service and production worker, the two groups' compensation have gone in opposite direction over the last couple decades. The issues with how executive pay packages are derived is just another example of why the delta between executive pay and the pay of the average worker has exploded over the last 20+ years.
    Sep 17, 2014. 08:45 AM | Likes Like |Link to Comment
  • Currency Debasement [View article]
    Kramer,

    CEO's are negotiating with themselves for the most part. Most Boards of large publicly traded companies are made up of current or former CEO's whose self-interest is to perpetuate the ever growing levels of corporate executive pay within our large companies. It is not a free market negotiation as you seem to infer that it is because the market is kept very closed and controlled, otherwise a CEO candidate from Chicago would have to compete with a corporate CEO from Japan or Germany. If these boards were truly acting independently and fulfilling their fiduciary roles they would seek out the best candidates who are willing to work for the lowest compensation package. Instead, they keep their searches U.S. centric and they are complicit in allowing compensation packages to be bid up to whatever the latest sweetheart package a peer company was willing to dream up.

    You say that "Shareholders call it "alignment of interests." It creates a risk, not of capital invested but of future gains that may be earned". Tell me what are future gains? To me future gains are durable value creation, however that is not how most of these deals are structured. Most of these deals are structured based upon short-term stock performance which certainly cannot always be traced back to decisions made by the CEO and in far too many cases that short-term performance is not indicative durable value creation. Add to that the fact that they do not simply get a few thousand shares of out of the money stock options, they get tens of thousands of dollars of very favorably price options to start with and these options are not hard costs to the company, they are a cost to existing shareholders in the form of potential dilution.

    The fact remains that these highly compensated employees take no risk and invest no actual skin in the game, but reap enormous returns whether or not they perform or not and the Board Members voting for these packages have largely been the beneficiaries of exactly the same practice themselves.
    Sep 17, 2014. 12:04 AM | 1 Like Like |Link to Comment
  • Currency Debasement [View article]
    Kramer,

    Do you consider CEO's and other highly compensated executives within a publicly traded company employees? I know that I do. This is where the rub is because their compensation packages allow them to participate in productivity gains. The other rub is that all workers end up being subject to the globalized competitive labor environment, except these U.S. executives who have not seen their salaries and overall compensation come under pressure from lower compensated executives from peer companies overseas.

    This is a huge problem that causes great discontent and resentment. This resentment and discontent should not be felt by workers alone, but from entrepreneurs as well. I have know a number of very successful entrepreneurs who have spent decades building and running companies which they have invested their own money and put their homes up as collateral in order to grow the companies. At the end of the day they have sold these companies for $10, $20 or $30 million, which are sums of money that are regularly paid to corporate executives of public companies in this country for one year's work, having invested zero of their own money and if they happen to fail they get large financial payouts when they are fired.

    I don't know about you, but in a capitalistic society investors and risk takers should be rewarded far above those who did not take risk and put skin in the game.

    Maybe the answer is to water down these executive packages enough so that all employees receive financial rewards when the company does well instead of just a select few.
    Sep 16, 2014. 01:10 PM | 1 Like Like |Link to Comment
  • Currency Debasement [View article]
    Kramer and Angeles, I completely agree that labor is an input cost and for global enterprises labor intensive operations are going to go where the lowest cost labor can be found, however with the caveat that the unit of labor per dollar needs to be at least as efficient and effective as labor elsewhere that might command a higher wage. This can be most easily measured by a manufacturer, but the consideration for service companies of efficiency/effectiveness also must be weighed. I for instance, as an American, will purposely seek out companies who employ customer service representatives who are native English speakers. It is not that I have any thing against a person who has a heavy accent from another language as an individual, it is just that my time is valuable and I can explain a problem that I am having or make an inquiry and have my inquiry resolved much more effectively and more quickly when their is no language barrier. That is just one example of where a global workforce might work against a company in ways that are very hard to measure.
    Sep 15, 2014. 07:29 PM | Likes Like |Link to Comment
  • Currency Debasement [View article]
    LJK, the solution is to elect politicians who can discern the difference between spending and investment. Unfortunately the opposition to the current inhabitant of the White House took office by riding the misplaced sentiment of a large swath of voters who thought that deficit reduction was the solution of all of our problems. I remember the talking points from the 2010 and 2012 election cycle of these folks were that we were going to have trillion dollar deficits as far as the eye can see. In fact, we have had falling deficits ever since and now the deficit as a percent of GDP is lower than it was in 2007. We have 2 trillion dollars in deferred infrastructure investment and it confounds me why it would have been a bad thing to aggressively address these deferred investments at a time when unemployment was high and growth was low.
    Sep 15, 2014. 01:57 PM | Likes Like |Link to Comment
  • Currency Debasement [View article]
    The article was an interesting exploration of the state of today's economy relative to monetary policy decisions and what may happen under differing future policy decisions. Think that the whole argument that ZIRP and QE have held back investment and economic growth is very weak. It is more likely, in my opinion, that ZIRP and QE in the U.S. has prevented what we have seen and continue to see unfold in Europe (e.g. slowing growth, deflation and much lower interest rates). What has been the missing ingredient from U.S. growth oriented policy decisions has been fiscal stimulus. In fact, since 2011 we have actually had a contraction in fiscal stimulus which has necessitated more aggressive stimulative monetary policy than would have been necessary to keep us from falling back into a recession had fiscal stimulus been present.
    Sep 15, 2014. 01:31 PM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Stephen, I was not referring to the size of the population, I was referring to the size of the denominator in the GDP growth equation, that is GDP. GDP was $8.9 Trillion in 1990 and it was $15.7 Trillion last year. So a three percent growth on $8.9 Trillion dollars in 1990 was $26.7 billion. The same $26.7 billion dollars in growth in 2013 would have only been around 1.7%. It is the same reason why Apple's growth has slowed down from 30% to 7% over the last 10 years.

    Regarding tax incentives, I believe that tax incentives/policy, within reason, has a very minimal affect in this country. We are still the best country in the world to create wealth in and if someone or some business chooses not to create wealth because they don't like a particular tax policy, that is a poor business decision if you ask me or I suppose if you ask Warren Buffett. When I invest for my clients I tell them that tax considerations are always secondary to investment considerations and that has always served me and my clients well.

    That being said, on the subject of corporate tax reform, I say we should get this done ASAP because the tax code is a mess.
    Sep 1, 2014. 11:19 PM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Stephen,

    I have an economic paper sitting on my desk written in 2006 by a Morgan Stanley economist titled "The Falling U.S. Economic Potential". This paper did not foresee the financial crisis or the Obama tax, regulatory or healthcare policies. This paper discussed at length demographics, technology, globalization and the falling labor force participation rate. Beyond that there simply is the law of large numbers. Just like mega cap companies that can no longer grow at the rates that they could when they were mid-cap and even large-cap size, the U.S. economy is the largest in the world and that is a detriment if the only yardstick of measuring economic success is GDP percentage growth. China is going through the same issue. China's growth rate has fallen from 10%+ just a few years ago to around 7.5% although in absolute monetary terms it is growing in size as much or more each year. If China keeps growing at the pace they are its growth rate will certainly have to drop to the 5-6% pace within the next 10 years. I cannot see how one can empirically ignore the very fundamentals that drive economic growth such as where major portions of the population are relative to their peak spending years, what the globalization of labor has done to the real wages of 90% of U.S. workers, what impact technological innovation has had on the domestic labor markets. You seem to saying that "yeah these factors may be headwinds, but just because we the U.S. and we have enjoyed 3% plus GDP potential growth over the last 40 years, that this should magically continue to be the case not matter what. As someone who like facts, I cannot let that type of non-rigorous thinking to drive my view of the world.
    Sep 1, 2014. 07:56 PM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Coins, inflation is simply another way of talking about spending power. You say a 97% destruction of the spending power of the U.S. dollar over 100 years, if you are right than the average person in the U.S. should have seen there standard of living fall by 97%. In fact over the same 100 years the average American's standard of living has vastly improved. If your analysis is relative to gold or some other finite commodity, then I am sure that you are right, but really who cares? How would a currency that by it very nature must expand continually in terms of supply in order to support and ever growing population and economy hold its value against a commodity that has finite supply and increasing demand over time?
    Sep 1, 2014. 04:46 PM | 3 Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Secular stagnation has very little to do with government policies, it is secular, which means that there are very long-term forces at play such as demographics, globalization and the rapid pace of technological innovation. Blaming secular stagnation on one administrations policies over another is simply a convenient excuse to bash the administration or party that you oppose.
    Sep 1, 2014. 04:38 PM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    I too believe that many businesses are on strike against this administration and I think that it is even more prevalent with private businesses. This is why that there is such a disconnect between how Warren Buffett operates and invests during a time like this and how many other less rational businesses behave.
    Sep 1, 2014. 04:35 PM | 1 Like Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Hey Coin, which President, Carter or Reagan had a higher deficit as a percent of GDP at the end of their Presidency? How many years did it take Reagan to get the unemployment rate back to where it was at the end of President Carter's term? Do some research and get back to me on these things and maybe you will not be so sure of yourself.
    Sep 1, 2014. 04:28 PM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    I should like to point out that when you boil it down, Reagan's tax cuts, which coincided with a very large expansion of Federal Government spending, which coincidentally was deficit led economic stimulus, came at the expense of federal support to the states. As a result states and municipalities had to increase taxes, thus total taxes were not cut for the average person very much, if at all.
    Sep 1, 2014. 04:20 PM | Likes Like |Link to Comment
  • Supply-Side Versus Keynesian Economics [View article]
    Stephen, I have to say that this comment on Zimbabwe does not even warrant a minute of the author's time or mine. Regarding Krugman wanting more money printing, I think that you have very little understanding of money printing in the first place. What Krugman has been writing about since 2008 is the need for fiscal stimulus concert with monetary stimulus. What we have largely gotten since 2010 or so is more monetary stimulus than would have been necessary had we also had fiscal stimulus. Instead we have gotten fiscal drag. By the way QE and the size of the Fed's balance sheet is not the same as money printing as you like to call it. We have actually not had a disproportionate increase in M3 over the last 6 years and the U.S. dollar is trading slightly higher versus a global basket of currencies than it did back in 2007.
    Sep 1, 2014. 04:10 PM | 1 Like Like |Link to Comment
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