D_Virginia

Three lunchtime reads: 1) Five myths about executive pay 2) Could have been worse: the economic bomb that didn’t drop 3) Too-big-to-fail resolution: why one size can't fit all

These "myths" are gonna be fun:

1. The Wall Street bonus culture led to the financial crisis.

Not a myth. Come on, it's obvious that reward structures /vastly/ weighted short-term gains over long-term growth and stability -- and any half-decent leader knows people inevitably do what their rewards dictate, not what their job description says. There were lots of other factors, but I bet a /lot/ of different decisions would have been made if people got vesting stock over 5 years instead of cash every quarter.

2. Wall Street is totally indifferent to Main Street.

Fine, maybe this "myth" should be rephrased as "Wall Street /Executives/ are totally indifferent to Main Street".

Lots of WS finance workers lots their jobs, and feel as bad for (most of) them as I do for all the laid off blue collar folks -- it wasn't their fault, but it became their problem thanks to their bosses.

And yes, lots of WS fat cats lost a lot of money -- but as a Main Street resident, I really have a hard time feeling compassion for someone who went from having $10 million to only having $5 million -- cry me a river, maybe you'll just have to buy a Lexus next year instead of a Mercedes. How about hardworking people whose livelihoods disappeared entirely? How about people whose houses lost half their value, leaving them underwater by more than they make in a year?

Wall Street Executives don't care. They're back to raking in their millions, so what else matters?

3. With the job market like it is, Wall Street doesn't need to pay huge bonuses to retain key people.

Not a myth. Most of these "key people" are /traders/. Not company leaders providing vision, not risk managers keeping things straight, not financial officers unwinding this mess -- just /traders/. These firms were bailed out with taxpayer dollars so they could remain stable and keep lending, etc -- which, coincidentally, they aren't doing. They were NOT bailed out so they could gamble with tax dollars for their own profits.

Social commentary alert: we really need to stop disproportionately rewarding professions that don't add value, like day traders. How about we start rewarding crucial societal roles like leaders, teachers, and scientists? We've seen what havoc is wrought by rewarding financial "brilliance", how about we try rewarding other kinds of brilliance a little more instead?

4. Wall Street will never restrict its own pay.

Not a myth. Yes, there are checks and balances in place on paper, but in reality they don't matter due to what amounts to industry-wide collusion. There are so many conflicts of interest regarding executive pay it would be almost funny -- if it weren't so wrong.

5. Wall Street pay is so out of line, only the government can fix it.

I'm no fan of the government either, but it's clear that this industry simply cannot regulate itself. They need some external entity to do it for them, some organization whose motive is the good of the country, equal opportunity for all investors large and small, and full disclosure and transparency -- but since no such organization exists, the government may have to suffice.

D

Recovery? What recovery? The question: "Thinking about your own experience of economic conditions, would you say that from your point of view the recession is over, or not over?" Result: Not over, 82%.

It's all perspective.

If you're a Wall Street executive, you've been dancing on air since you started laying off massive numbers of people in 2008.

If you're a day/swing trader, you've been loving life for months now.

If you're an active investor, you might be feeling like you're almost back to even.

If you're a white-collar worker, your investments (mostly institutional, some personal) still haven't recovered fully, you might have only taken a minor pay cut, but at least you're still employed, though your house might be underwater.

If you're a blue collar worker, your investments (all institutional) still haven't recovered fully, you're either unemployed or underemployed, and the threat of layoffs is still looming large, and your house might be underwater.

How Apple's Market Share Will Propel Stock to $500, Part 1

> believe new OS launches from Microsoft may have even acted as
> a ‘delayed accelerant’ to Apple’s computing sales.

I saw that chart -- I think the numbers are kind of skewed based on some Microsoft fiascoes (Windows ME, Vista).

Windows 95 was strong, for its day.

Windows 2000 was an excellent release.

Windows XP was an incremental improvement that was received well over time.

Windows 7 is a true next-gen OS for Windows users -- what Vista should have been.

If nothing else, only a small fraction of businesses ever migrated to Vista over the past few years -- almost all of them will migrate to Windows 7 in the next 1-2 years.

Low margins or not, the sales volume will be enormous.

Newegg Files for IPO: What's Behind Their $2 Billion in Sales?

Newegg is better than Amazon for buying most of the stuff they sell.

They ship fast, have nearly the best prices, great customer service, and a fantastic website with an incredibly useful review system.

I'd buy that stock.

Microsoft (MSFT) cut the total pay of its top five executives this year, and cut bonuses 29%, according to its proxy statement today. CEO Steve Ballmer - considered "underpaid" by the pay committee - got $1.2M and is not receiving stock compensation. The board approved a salary freeze for 2010 for the execs.

$1.2 million with no stock is a tiny fraction of what most banking CEOs make -- pretty fair, even generous, for a guy who runs a company with more than twice the market capitalization of Goldman Sachs. (Note that $1.2M is about what Lloyd Blankfein makes...though he also gets like $15M in stock.)

Plus MSFT produces ACTUAL goods and services, unlike most financial companies. Say what you want about Windows, Office, etc, but let's face it, hundreds of millions of people worldwide use them every day to get a lot of things done.

I say good for MSFT. This is how I want to see companies behaving.

Why Capital Regulations Didn't Cause the Mortgage Crisis

Sure, the government didn't cause the crisis, but it did allow it to get way out of hand.

The alcohol analogy is a pretty good one.

Yes, you can drink your bottle of Scotch every night.

But the government says you can't drive afterward. Nor can you be drunk and disorderly. You also can't drink on a public street. Nor in your car. If you operate heavy machinery while drunk, you can be put in jail for negligence. Etc, etc...

So yes, you can drink. And you can even drink to excess if you like, but only in certain situations, and only when it doesn't adversely affect others.

If you end up inflicting the negative repercussions of your drunkenness on others, you get smacked down by the law.

That's what's still missing. No one is getting in trouble for this mess (except homeowners, naturally). In fact, the bankers are being helped with their lending hangovers, and are no doubt planning on getting drunk all over again.

What's worse: nothing has changed that might get people in trouble for this in the future when they do it again.

Over Half a Million Strategic Defaulters in 2008

> Am I overthinking this?

I think so. I think the article and the study are referring to how lenders identify strategic defaulters in the foreclosure proceedings, not in lending decisions -- that ship has long since sailed.

It's to the bank's advantage to have some good insights regarding who to pursue and who to let go.

However, in most states, the banks are pursuing almost everyone that has even the slightest chance that they can pay. The banks know those house prices aren't springing back anytime soon, so they need to lock in those borrowers.

Increased shareholder democracy could make financial firms less stable, not more, as investors demand too much risk in the pursuit of greater profit.

Lack of bailouts would help too.

Companies, their management, and their investors would get really cautious really quick, once a few went under due to taking on too much risk.

Kids go back to school tomorrow, as parents breathe a collective sigh of relief. Here's what President Obama plans to tell them.

> My name is Rozuli (the Slayer of Moons) and I shall prove my point
> when I wish; we are just drawing the stupid ones out.

Are you drunk, right now? Because...you sound pretty drunk.

Just sayin'....

The eye-popping run-ups of some companies considered essentially bankrupt can only mean one thing: Already, speculation's back. Possibly signaling the end of the up cycle.

Sure, but weren't people saying that in May? And again in July?

I'm not saying that continued gains would make sense, just that those gains haven't felt the need to make sense in the past, so why should they start to make sense now?

How My Real Estate Bottom Prediction Is Similar to Cramer's

I guess it depends what you mean by a bottom.

Sales might bottom this year, but /prices/ will not bottom for some time...

Lawyers take pro bono cases, and doctors treat the uninsured in medical emergencies, giving up profit to do so. So Joe Nocera wonders: What is banking's moral obligation to the country that fished it out of the abyss?

My point is that bankers, brokers, loan officers, etc, all are very self-centered professions.

Yes, the banking /industry/ is good for society, but bankers just aren't trained to help people. They're trained to make money for their firms and for themselves -- I'm not sure which comes first, but I do know that the client seems to come /last/.


On Aug 01 11:33 PM Illusional Delusion wrote:

> I'd mostly agree, but I think it is more that bankers ignored their
> moral and contractual (legal) obligation to manage people's money
> properly than sheer abuse of OPM.
>
> On Aug 01 05:35 PM D_Virginia wrote:

Lawyers take pro bono cases, and doctors treat the uninsured in medical emergencies, giving up profit to do so. So Joe Nocera wonders: What is banking's moral obligation to the country that fished it out of the abyss?

Lawyers and doctors have knowledge and skills that can actually help people.

Bankers don't know how to do anything except make money for themselves.

AT&T, Apple Can't Win Fight Against VoIP

SMS (text message) charges have been outrageous and uwarranted for some time now, I can see why AT&T would be protective of that cash flow.

Also, AT&T's data network can barely handle iPhone users downloading farting apps all the time -- it will never bear the burden of lots of VoIP traffic (which isn't exactly what GV does, but whatever) and voicemail streams.

However, if AT&T would invest all the highway robbery money from SMS charges into network bandwidth, and cut down on stupid moves like revenue sharing with Apple, they wouldn't have these kinds of problems.

FCC launches an inquiry over AT&T (T) and Apple's (AAPL) rejection of Google Voice (GOOG). TechCruch has a copy of the letters sent to all three companies. Right about now, Apple probably wishes it had never pulled Google's tail.

I don't think this is a Google or Apple thing so much as an AT&T thing.

Let's face it, fair competition in the mobile phone service business is basically nonexistent. Collusion runs rampant. Advertisements make blatantly false claims. Customer service is horrible, often outright dishonest. Text message charges are outrageous (given their miniscule impact on networks).

This is an industry that /needs/ a good smackdown.