Wildhawk's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/44166/comments http://seekingalpha.com/article/179152-the-volcker-inspired-financial-reform-bill?source=feed#comment-815807 815807 Mon, 21 Dec 2009 11:26:04 -0500 http://seekingalpha.com/article/179106-at-t-s-iphone-service-has-been-excellent?source=feed#comment-815734 815734
The thing I have to disagree with, however, and the one thing that has kept me constantly second-guessing my switch to the iPhone, is the coverage area (I live and work in the Minneapolis/St. Paul metro area). In 2 1/2 years with Sprint, the only place in the entire country I went and didn't get at least 4 bars was in the middle of Chippewa National Forest (in Northern Minnesota). Every other place I went with my old Sprint phone, even the most remote areas of South Dakota and Northern Minnesota, I got 4-5 bars and great call quality.

My iPhone however has been a much different story. I had over 2 dozen dropped calls in the first 3 months with the phone and actually had 3 dropped calls in one day last fall in the middle of Manhattan. When traveling to the Black Hills, SD area this spring, I actually went 3 ENTIRE DAYS without getting even a signal- that's no coverage at all, completely stranded with no data or voice coverage anywhere I went (for reference, I was in the same area with my Sprint phone a few years earlier and had no coverage problems at all- 4-5 bars the whole time I was there).

From what I hear anecdotally, my experience has been maddeningly similar to the majority of iPhone customers. I can't say whether it's a problem with the phone or a problem with AT&T's network (though I suspect the former), it's a problem nonetheless, and a big reason why, even with the cult-like popularity of the iPhone, there are vocal detractors.]]> Mon, 21 Dec 2009 10:49:41 -0500
The thing I have to disagree with, however, and the one thing that has kept me constantly second-guessing my switch to the iPhone, is the coverage area (I live and work in the Minneapolis/St. Paul metro area). In 2 1/2 years with Sprint, the only place in the entire country I went and didn't get at least 4 bars was in the middle of Chippewa National Forest (in Northern Minnesota). Every other place I went with my old Sprint phone, even the most remote areas of South Dakota and Northern Minnesota, I got 4-5 bars and great call quality.

My iPhone however has been a much different story. I had over 2 dozen dropped calls in the first 3 months with the phone and actually had 3 dropped calls in one day last fall in the middle of Manhattan. When traveling to the Black Hills, SD area this spring, I actually went 3 ENTIRE DAYS without getting even a signal- that's no coverage at all, completely stranded with no data or voice coverage anywhere I went (for reference, I was in the same area with my Sprint phone a few years earlier and had no coverage problems at all- 4-5 bars the whole time I was there).

From what I hear anecdotally, my experience has been maddeningly similar to the majority of iPhone customers. I can't say whether it's a problem with the phone or a problem with AT&T's network (though I suspect the former), it's a problem nonetheless, and a big reason why, even with the cult-like popularity of the iPhone, there are vocal detractors.]]> http://seekingalpha.com/article/176928-the-financial-meltdown-absolutely-nothing-has-been-fixed?source=feed#comment-795934 795934 Tue, 08 Dec 2009 08:29:50 -0500 http://seekingalpha.com/article/175811-why-bonds-aren-t-good-investments?source=feed#comment-784238 784238
The single most successful investor I know personally made (and kept) his fortune by 1) always living below his means 2) starting his own business, 3) selling out of that business after about a decade of blood, sweat, and tears to a buyer who offered him a ridiculous price, 4) and investing the majority of his money outside the business (and post sale) in municipal bonds and inflation-indexed treasuries, using the balance (about 20%-30% of his total wealth) to provide seed capital to promising local startup businesses. The most interesting thing to me from this scenario is that he didn't become dynastically wealthy until long after he sold his business. His business simply helped him get to the point of being "comfortable" for life. He became impressively wealthy (both financially and psychologically) by investing in those startups. He lost money more often than he made money, but when he made money, it was multiples of 100's of times what he invested. ]]> Tue, 01 Dec 2009 09:34:56 -0500
The single most successful investor I know personally made (and kept) his fortune by 1) always living below his means 2) starting his own business, 3) selling out of that business after about a decade of blood, sweat, and tears to a buyer who offered him a ridiculous price, 4) and investing the majority of his money outside the business (and post sale) in municipal bonds and inflation-indexed treasuries, using the balance (about 20%-30% of his total wealth) to provide seed capital to promising local startup businesses. The most interesting thing to me from this scenario is that he didn't become dynastically wealthy until long after he sold his business. His business simply helped him get to the point of being "comfortable" for life. He became impressively wealthy (both financially and psychologically) by investing in those startups. He lost money more often than he made money, but when he made money, it was multiples of 100's of times what he invested. ]]> http://seekingalpha.com/article/175285-will-obama-replace-geithner-with-dimon?source=feed#comment-778328 778328 Thu, 26 Nov 2009 09:45:02 -0500 http://seekingalpha.com/article/175258-shorting-the-market-by-going-long-the-dollar-and-volatility?source=feed#comment-776974 776974
I read an article a few months back by another SA contributor noting that the act of shorting BOTH the 2X Long and 2X Short broad market ETFs had a tremendously high correlation to the VIX futures price (something on the order of close to 90). I'm not a fan of taking actual short positions (margin requirements, etc.), but have considered that as a medium term hedge trade recently, as well. Would love to see your analysis of that if you have the time and inclination.

Finally, I listened to your podcast with Andrew Horowitz on TDI. Entertaining, but I don't think it did you justice. Sounds like he's a tough host to maintain a coherent train of thought with, as he seems to jump around from topic to topic on a whim.

As always, keep up the great work!]]> Wed, 25 Nov 2009 09:29:59 -0500
I read an article a few months back by another SA contributor noting that the act of shorting BOTH the 2X Long and 2X Short broad market ETFs had a tremendously high correlation to the VIX futures price (something on the order of close to 90). I'm not a fan of taking actual short positions (margin requirements, etc.), but have considered that as a medium term hedge trade recently, as well. Would love to see your analysis of that if you have the time and inclination.

Finally, I listened to your podcast with Andrew Horowitz on TDI. Entertaining, but I don't think it did you justice. Sounds like he's a tough host to maintain a coherent train of thought with, as he seems to jump around from topic to topic on a whim.

As always, keep up the great work!]]> http://seekingalpha.com/article/172115-cds-regulation-just-one-simple-rule?source=feed#comment-754767 754767 CDS) and equity (put option). Just as the put option cannot drive a company out of business, neither can a CDS contract.]]> Tue, 10 Nov 2009 23:31:27 -0500 CDS) and equity (put option). Just as the put option cannot drive a company out of business, neither can a CDS contract.]]> http://seekingalpha.com/article/172044-the-new-version-of-depression-apple-selling?source=feed#comment-753572 753572 Tue, 10 Nov 2009 08:31:09 -0500 http://seekingalpha.com/article/169240-how-did-the-wage-benefit-gap-between-public-and-private-sectors-get-so-huge?source=feed#comment-734333 734333
Here's a link to the 2009 federal pay grade scale:
www.opm.gov/oca/09tabl...

There deserves to be considerable discussion over whether or not the types of jobs the government employs are really necessary, and there deserves to be considerable discussion about the richness of government benefits in comparison to private sector workers. However, the pay debate is completely misguided. Most government "professionals" make orders-of-magnitude less pay than they could otherwise make in private industry. If you truly compare comparable professional jobs in the private sector versus the public sector, the debate is not even close: private sector jobs make laughably more money on a total compensation basis than public sector jobs, even when you factor in benefit loads. ]]> Wed, 28 Oct 2009 14:46:17 -0400
Here's a link to the 2009 federal pay grade scale:
www.opm.gov/oca/09tabl...

There deserves to be considerable discussion over whether or not the types of jobs the government employs are really necessary, and there deserves to be considerable discussion about the richness of government benefits in comparison to private sector workers. However, the pay debate is completely misguided. Most government "professionals" make orders-of-magnitude less pay than they could otherwise make in private industry. If you truly compare comparable professional jobs in the private sector versus the public sector, the debate is not even close: private sector jobs make laughably more money on a total compensation basis than public sector jobs, even when you factor in benefit loads. ]]> http://seekingalpha.com/article/166874-goldman-sachs-this-is-an-investment-bank?source=feed#comment-717622 717622 Fri, 16 Oct 2009 11:31:25 -0400 http://seekingalpha.com/article/164655-banks-don-t-intentionally-overcharge-credit-card-customers-or-do-they?source=feed#comment-702272 702272
What drives me nuts about so much of the commentary on both this site and the broader media is that government is automatically assumed to be incompetent and the free market (such as it is, which it ISN'T in American banking) is automatically assumed to be supremely omniscient in finding the perfect solution to everyone's problems.

What most commentators fail to realize, and which you've alluded to here, is that large banks in the US do not operate as part of a free market- they are oligopolies, which are antithetical to free market capitalism. They receive innumerable competitive advantages (e.g. the near-free borrowing from the Fed window; government guarantees of their debt, etc.) that bank alternatives like money market funds and peer-to-peer lending (e.g. Prosper) institutions do not have. In addition to the transparent advantages, they also clearly have the less transparent advantage of enormous influence in Washington, which has shown a propensity to do whatever big banks ask them to do, regardless of consequences. This, my friends, is not a free market, but crony capitalism where the oligopoly has all the advantage over the consumer. This is a classic situation where government MUST step in to break up the oligopoly and restore balance to the relationship between banks and consumers where none currently exists. It's precisely why anti-trust and consumer protection laws were enacted.]]> Sun, 04 Oct 2009 09:37:58 -0400
What drives me nuts about so much of the commentary on both this site and the broader media is that government is automatically assumed to be incompetent and the free market (such as it is, which it ISN'T in American banking) is automatically assumed to be supremely omniscient in finding the perfect solution to everyone's problems.

What most commentators fail to realize, and which you've alluded to here, is that large banks in the US do not operate as part of a free market- they are oligopolies, which are antithetical to free market capitalism. They receive innumerable competitive advantages (e.g. the near-free borrowing from the Fed window; government guarantees of their debt, etc.) that bank alternatives like money market funds and peer-to-peer lending (e.g. Prosper) institutions do not have. In addition to the transparent advantages, they also clearly have the less transparent advantage of enormous influence in Washington, which has shown a propensity to do whatever big banks ask them to do, regardless of consequences. This, my friends, is not a free market, but crony capitalism where the oligopoly has all the advantage over the consumer. This is a classic situation where government MUST step in to break up the oligopoly and restore balance to the relationship between banks and consumers where none currently exists. It's precisely why anti-trust and consumer protection laws were enacted.]]> http://seekingalpha.com/article/157197-the-middle-ground-with-global-warming?source=feed#comment-647650 647650
That having been said, it's clear to anyone who cares to look that we are squandering our natural resources. The calls to simply drill more on US territory miss the point: our natural resources are finite and we're burning through them (literally) now at a faster rate than ever before. Regardless of what resource to which you refer, ultimately they are going to run out, and possibly in our lifetimes for some resources. To me, that says it's incumbent upon us to conserve and find ways to do as much as we can to recycle what's used into something usable again and spend aggressively on research into renewable sources of energy (wind, solar, hydro, geothermal, etc.). It doesn't mean we stop using what natural resources we have, especially here in the US, but anything we can do to slow the pace of that usage is something we should be pursuing wholeheartedly.

It's good for the human race broadly because it makes our planet a safer and more enjoyable place to live, and is good for Americans specifically because we would have to rely less on foreign sources of energy (e.g. oil). ]]> Wed, 26 Aug 2009 13:59:22 -0400
That having been said, it's clear to anyone who cares to look that we are squandering our natural resources. The calls to simply drill more on US territory miss the point: our natural resources are finite and we're burning through them (literally) now at a faster rate than ever before. Regardless of what resource to which you refer, ultimately they are going to run out, and possibly in our lifetimes for some resources. To me, that says it's incumbent upon us to conserve and find ways to do as much as we can to recycle what's used into something usable again and spend aggressively on research into renewable sources of energy (wind, solar, hydro, geothermal, etc.). It doesn't mean we stop using what natural resources we have, especially here in the US, but anything we can do to slow the pace of that usage is something we should be pursuing wholeheartedly.

It's good for the human race broadly because it makes our planet a safer and more enjoyable place to live, and is good for Americans specifically because we would have to rely less on foreign sources of energy (e.g. oil). ]]> http://seekingalpha.com/article/151580-an-open-letter-to-kenneth-feinberg-and-american-taxpayers?source=feed#comment-608428 608428
I'm as much (maybe more) a proponent of ensuring the sanctity of contract law as the next guy, but the argument of paying him in order to uphold contract law rings hollow when he shouldn't have an enforcable and contractual right to a job at all right now, much less a $100 million bonus. If we are so concerned about upholding contract law, we never should have stepped in with the bailouts to begin with.

And speaking as a compensation consultant, the fact that Mr. Hall has a contract that even allows for such outlandish upside potential is mind-numbingly anti-social and creates incentives to do nothing other than take spectacular risk for personal gain with all the downside taken on by shareholders if he fails (or in this case, taxpayers). If I were a shareholder, I'd be livid at this kind of compensation arrangement, only because there appear to be no safeguards in place to protect the very existence of the company if he fails (remember, there is no shortage of high profile banks going out of existence in the recent past because of "rogue traders", e.g. Barrings). I don't begrudge someone making huge profits if they deliver shareholder value, but without clawbacks or offsets in the contract for losses/failure, Mr. Hall's natural incentive is to take as much risk as possible in order to reap the greatest personal reward possible, with little or no downside if he fails.

Unfortunately, this type of compensation structure is largely the norm on Wall Street, and the biggest reason why so many banks blew up and needed taxpayer funding to begin with.]]> Thu, 30 Jul 2009 13:50:51 -0400
I'm as much (maybe more) a proponent of ensuring the sanctity of contract law as the next guy, but the argument of paying him in order to uphold contract law rings hollow when he shouldn't have an enforcable and contractual right to a job at all right now, much less a $100 million bonus. If we are so concerned about upholding contract law, we never should have stepped in with the bailouts to begin with.

And speaking as a compensation consultant, the fact that Mr. Hall has a contract that even allows for such outlandish upside potential is mind-numbingly anti-social and creates incentives to do nothing other than take spectacular risk for personal gain with all the downside taken on by shareholders if he fails (or in this case, taxpayers). If I were a shareholder, I'd be livid at this kind of compensation arrangement, only because there appear to be no safeguards in place to protect the very existence of the company if he fails (remember, there is no shortage of high profile banks going out of existence in the recent past because of "rogue traders", e.g. Barrings). I don't begrudge someone making huge profits if they deliver shareholder value, but without clawbacks or offsets in the contract for losses/failure, Mr. Hall's natural incentive is to take as much risk as possible in order to reap the greatest personal reward possible, with little or no downside if he fails.

Unfortunately, this type of compensation structure is largely the norm on Wall Street, and the biggest reason why so many banks blew up and needed taxpayer funding to begin with.]]> http://seekingalpha.com/article/148280-income-tax-not-wealth-tax-that-s-another-story?source=feed#comment-586023 586023
There is an enormous difference between corporate tax RATES and corporate taxes PAID. You are correct that the US has the second highest RATE of corporate taxes in the developed world. However, the US is middle of the pack when it comes to corporate taxes actually paid as a percentage of total revenues when compared to the rest of the developed world.

While we may have a high marginal rate of income for corporations, we also have inumerable loopholes allowing for reductions of taxable income that many other countries do now allow. While I don't have the source readily available, I read last year (perhaps two years ago now) that while the highest marginal tax rate for US corporations was 35%, the total effective tax rate which US corporations PAID was approximately 7%, which puts US corporations somewhat less than median for corporate taxes paid in the developed world.

The corporate tax rate is a joke- no corporation actually pays 35% tax rate on income- they either don't repatriate foreign-earned income or defer the taxes to a later date. And it they are paying an effective 35% tax rate, the CFO should be fired tomorrow because he isn't doing his job effectively. ]]> Mon, 13 Jul 2009 13:20:02 -0400
There is an enormous difference between corporate tax RATES and corporate taxes PAID. You are correct that the US has the second highest RATE of corporate taxes in the developed world. However, the US is middle of the pack when it comes to corporate taxes actually paid as a percentage of total revenues when compared to the rest of the developed world.

While we may have a high marginal rate of income for corporations, we also have inumerable loopholes allowing for reductions of taxable income that many other countries do now allow. While I don't have the source readily available, I read last year (perhaps two years ago now) that while the highest marginal tax rate for US corporations was 35%, the total effective tax rate which US corporations PAID was approximately 7%, which puts US corporations somewhat less than median for corporate taxes paid in the developed world.

The corporate tax rate is a joke- no corporation actually pays 35% tax rate on income- they either don't repatriate foreign-earned income or defer the taxes to a later date. And it they are paying an effective 35% tax rate, the CFO should be fired tomorrow because he isn't doing his job effectively. ]]> http://seekingalpha.com/article/147741-money-market-funds-basically-unregulated-banks?source=feed#comment-582663 582663 Fri, 10 Jul 2009 15:45:40 -0400 http://seekingalpha.com/article/146822-the-scandal-of-overdraft-fees?source=feed#comment-576114 576114
I bank with US Bank, having switched from TCF because of several $35 NSF fees a few years ago when I was buying a home (long story, boils down to a check being held for 2 weeks to clear and TCF whacking me with fees every day until it cleared). When I signed up with USB, I asked for a way to avoid NSF charges, for which they suggested an overdraft line of credit.

The overdraft line works like a credit card, and has a $3,000 limit. If I overdraft my account, USB automatically transfers money from the credit line to my checking account (in increments of $200) to cover the overdraft. No transaction fee is charged, but I pay a fairly usurious level of interest on the credit line balance (last I checked, it was something like 21% annualized, prime plus 18% or something to that effect, with a 25% cap).

This serves to eliminate the aggravation of a $35 fee being completely out of proportion to the potential transaction size (e.g. the $6 lunch noted above), but still serves as a profit center for the bank, as I'm paying a credit card-like interest rate until I shift money back from checking to cover the credit line balance.

It works for me, makes me very leary of overdrawing the account due to the usurious interest rate, is completely transparent, and allows me to avoid overdraft fees. What's not to like, as long as I'm informed about the high interest rates, just like with a credit card?]]> Mon, 06 Jul 2009 16:10:32 -0400
I bank with US Bank, having switched from TCF because of several $35 NSF fees a few years ago when I was buying a home (long story, boils down to a check being held for 2 weeks to clear and TCF whacking me with fees every day until it cleared). When I signed up with USB, I asked for a way to avoid NSF charges, for which they suggested an overdraft line of credit.

The overdraft line works like a credit card, and has a $3,000 limit. If I overdraft my account, USB automatically transfers money from the credit line to my checking account (in increments of $200) to cover the overdraft. No transaction fee is charged, but I pay a fairly usurious level of interest on the credit line balance (last I checked, it was something like 21% annualized, prime plus 18% or something to that effect, with a 25% cap).

This serves to eliminate the aggravation of a $35 fee being completely out of proportion to the potential transaction size (e.g. the $6 lunch noted above), but still serves as a profit center for the bank, as I'm paying a credit card-like interest rate until I shift money back from checking to cover the credit line balance.

It works for me, makes me very leary of overdrawing the account due to the usurious interest rate, is completely transparent, and allows me to avoid overdraft fees. What's not to like, as long as I'm informed about the high interest rates, just like with a credit card?]]> http://seekingalpha.com/article/144687-just-5-etfs-and-you-re-set-buy-n-hold-silliness-still-carries-on?source=feed#comment-558856 558856
I can assure you that you are not a Registered Investment Adviser with the SEC, but that your firm may be. People are not Investment Advisers- firms are. You are an Investment Adviser Representative, a representative of your firm, which is an Investment Adviser, registered with the SEC. It's a nit, but it's the kind of nit that can get you fined by FINRA (if you are member of a B/D) or the SEC for false advertising. It's also the kind of thing that the CFP Board of Standards looks very unkindly at.

Just a word of advice from a former industry guy who spent several years having to look at disclosures and the like...]]> Tue, 23 Jun 2009 10:07:55 -0400
I can assure you that you are not a Registered Investment Adviser with the SEC, but that your firm may be. People are not Investment Advisers- firms are. You are an Investment Adviser Representative, a representative of your firm, which is an Investment Adviser, registered with the SEC. It's a nit, but it's the kind of nit that can get you fined by FINRA (if you are member of a B/D) or the SEC for false advertising. It's also the kind of thing that the CFP Board of Standards looks very unkindly at.

Just a word of advice from a former industry guy who spent several years having to look at disclosures and the like...]]> http://seekingalpha.com/article/142150-morningstar-cef-ratings-worse-than-random?source=feed#comment-539900 539900
Since, to my knowledge, all closed-end funds are actively managed, rather than indexed, all the above data shows is that managers of closed-end funds were consistently inconsistent in their ability to outperform their peers- the top managers in one time period became the worst managers in a later time period, not unlike what other studies have shown are similar results from open-end actively managed funds.

Anyone who's read a prospectus understands that past performance is not indicative of future returns. If fund investors are using Morningstar's open-end and closed-end fund ratings systems as forward-looking, predictive measures, they're barking up the wrong tree.]]> Tue, 09 Jun 2009 23:52:21 -0400
Since, to my knowledge, all closed-end funds are actively managed, rather than indexed, all the above data shows is that managers of closed-end funds were consistently inconsistent in their ability to outperform their peers- the top managers in one time period became the worst managers in a later time period, not unlike what other studies have shown are similar results from open-end actively managed funds.

Anyone who's read a prospectus understands that past performance is not indicative of future returns. If fund investors are using Morningstar's open-end and closed-end fund ratings systems as forward-looking, predictive measures, they're barking up the wrong tree.]]> http://seekingalpha.com/article/136815-shooting-for-100-return-in-one-month?source=feed#comment-499157 499157
So you're saying that if professional money managers can't double their money by this time a year from now, they're not worth being money managers? And what, bychance, is your yardstick for this determination? Why 100% and not, say, 112%?

And at what expected level of risk (feel free to use either beta or standard deviation, whichever you'd prefer)? Should money managers who target a market neutral strategy, or those managing, say, municipal bond portfolios, also leave the business if they can't achieve the "easy" 100% return over the next year?

It's that easy, is it? Right.

The primary point your comment misses is that there are a whole host of professional money managers out there whose investable universe consists of something other than just 100% long-only smallcap equities with an expected portfolio level beta of at least 1. Even those who do have that singularly focused mandate are likely to find it challenging to achieve the sorts of returns you apparently think are so easy without taking positively laughable amounts of risk.

Comments from ignorant commentators like this detract from the real value of these blogs on what is generally a reasonably respectable site...]]> Mon, 11 May 2009 13:26:07 -0400
So you're saying that if professional money managers can't double their money by this time a year from now, they're not worth being money managers? And what, bychance, is your yardstick for this determination? Why 100% and not, say, 112%?

And at what expected level of risk (feel free to use either beta or standard deviation, whichever you'd prefer)? Should money managers who target a market neutral strategy, or those managing, say, municipal bond portfolios, also leave the business if they can't achieve the "easy" 100% return over the next year?

It's that easy, is it? Right.

The primary point your comment misses is that there are a whole host of professional money managers out there whose investable universe consists of something other than just 100% long-only smallcap equities with an expected portfolio level beta of at least 1. Even those who do have that singularly focused mandate are likely to find it challenging to achieve the sorts of returns you apparently think are so easy without taking positively laughable amounts of risk.

Comments from ignorant commentators like this detract from the real value of these blogs on what is generally a reasonably respectable site...]]> http://seekingalpha.com/article/135302-10-highest-paid-ceos-for-2008-unbelievable?source=feed#comment-491326 491326
So why are shareholders letting the institutions vote their proxies for them? Because most individual investors don't have the foggiest notion of how to read a 10-K or a 144A (proxy statement), and so couldn't even begin to tell you what the senior management teams of the companies they own make each year, much less what metrics those execs are paid on. Call it laziness, call it ignorance, call it what you will, but BODs don't get voted out because shareholders don't take the time to read disclosures or have the skill set to interpret those disclosures without it being spoonfed to them by the mainstream media. Even then, most have no idea that they even have an ability to vote on it, and when they do, virtually none of those votes are binding to the company (see all the drama and discussion around "say on pay" proposals, which also wouldn't be binding to companies).

Our current regulatory framework isn't in place to make this stuff easily accessible and understandable to the individual shareholder; it's set up to cater to ramming through whatever BODs want to do with a minimum of supervision and consequences from the true owners of the companies. Heads they win, tails we lose.

Not every company acts this way, but the ones that don't are the exception, not the rule.

I still think the solution to all of this is to institute fiduciary responsibility for everyone who handles the money or financial assets of others as an intermediary (it basically requires financial intermediaries of any kind to follow the "prudent person" rule, and to always act in the best interests of the end client). That would include C-level execs and BODs. I venture to say you wouldn't see this sort of negligence and recklessness from BODs and management teams if the consequences of their decisions could result in jail time. Incentives just would not be this out of whack if the decision makers might go to jail as a result.]]> Wed, 06 May 2009 00:21:26 -0400
So why are shareholders letting the institutions vote their proxies for them? Because most individual investors don't have the foggiest notion of how to read a 10-K or a 144A (proxy statement), and so couldn't even begin to tell you what the senior management teams of the companies they own make each year, much less what metrics those execs are paid on. Call it laziness, call it ignorance, call it what you will, but BODs don't get voted out because shareholders don't take the time to read disclosures or have the skill set to interpret those disclosures without it being spoonfed to them by the mainstream media. Even then, most have no idea that they even have an ability to vote on it, and when they do, virtually none of those votes are binding to the company (see all the drama and discussion around "say on pay" proposals, which also wouldn't be binding to companies).

Our current regulatory framework isn't in place to make this stuff easily accessible and understandable to the individual shareholder; it's set up to cater to ramming through whatever BODs want to do with a minimum of supervision and consequences from the true owners of the companies. Heads they win, tails we lose.

Not every company acts this way, but the ones that don't are the exception, not the rule.

I still think the solution to all of this is to institute fiduciary responsibility for everyone who handles the money or financial assets of others as an intermediary (it basically requires financial intermediaries of any kind to follow the "prudent person" rule, and to always act in the best interests of the end client). That would include C-level execs and BODs. I venture to say you wouldn't see this sort of negligence and recklessness from BODs and management teams if the consequences of their decisions could result in jail time. Incentives just would not be this out of whack if the decision makers might go to jail as a result.]]> http://seekingalpha.com/article/132492-elizabeth-warren-unqualified-advocate?source=feed#comment-475462 475462 Fri, 24 Apr 2009 08:30:33 -0400 http://seekingalpha.com/article/131808-the-plight-of-the-overpaid-banker?source=feed#comment-474025 474025
While I can't speak to the apparent hubris that comes from working on Wall Street, I do think there is a very simple way to take the systemic risk out of Wall Street: change the compensation structure to tie compensation to attainment of multi-year goals, paying that compensation out over longer timeframes (e.g. 3-5 year payout at 25%-33% per year for attainment of 3 year rolling profit targets), and pay it as a mix of cash and stock. That would serve to incent longer viewpoints on trading, and keep "skin in the game" over multiple years, rather than resetting the compensation clock every year.

Couple this with an early comment I've made about making everyone who handles financial transactions fiduciaries, and you get a longer term viewpoint joined at the hip with stiff incentives for avoiding fraud and malfeasance (i.e. huge fines and jail time for those people who ignore their responsibility to comport themselves in a prudent manner).

Putting these two things together allows Congress/regulators to not have to put hard compensation limits on Wall Street (which are doomed to fail, if ever seriously considered), and creates a very simple and straightforward regulatory framework without it being overbearing, complicated and heavy-handed, and still incentivizes risk-taking and capital investment, but in a more prudent and thoughtful way.]]> Thu, 23 Apr 2009 09:46:54 -0400
While I can't speak to the apparent hubris that comes from working on Wall Street, I do think there is a very simple way to take the systemic risk out of Wall Street: change the compensation structure to tie compensation to attainment of multi-year goals, paying that compensation out over longer timeframes (e.g. 3-5 year payout at 25%-33% per year for attainment of 3 year rolling profit targets), and pay it as a mix of cash and stock. That would serve to incent longer viewpoints on trading, and keep "skin in the game" over multiple years, rather than resetting the compensation clock every year.

Couple this with an early comment I've made about making everyone who handles financial transactions fiduciaries, and you get a longer term viewpoint joined at the hip with stiff incentives for avoiding fraud and malfeasance (i.e. huge fines and jail time for those people who ignore their responsibility to comport themselves in a prudent manner).

Putting these two things together allows Congress/regulators to not have to put hard compensation limits on Wall Street (which are doomed to fail, if ever seriously considered), and creates a very simple and straightforward regulatory framework without it being overbearing, complicated and heavy-handed, and still incentivizes risk-taking and capital investment, but in a more prudent and thoughtful way.]]> http://seekingalpha.com/article/128573-how-the-current-crisis-has-simplified-the-search-for-solid-investment-advice?source=feed#comment-448181 448181 Wed, 01 Apr 2009 14:10:43 -0400 http://seekingalpha.com/article/114091-a-new-goal-for-tarp-funds-create-mutual-banks?source=feed#comment-352896 352896
And I couldn't agree more about the actuary comment. Still, that didn't stop companies like AIG and The Hartford getting into deep water. Apparently either the actuaries at Travelers and Chubb are better than those at AIG and HIG, or management at TRV and CB actually listen to their actuaries!]]> Sun, 11 Jan 2009 23:20:07 -0500
And I couldn't agree more about the actuary comment. Still, that didn't stop companies like AIG and The Hartford getting into deep water. Apparently either the actuaries at Travelers and Chubb are better than those at AIG and HIG, or management at TRV and CB actually listen to their actuaries!]]> http://seekingalpha.com/article/113312-keynes-vs-von-mises?source=feed#comment-348866 348866
I have little to argue with your points, but the "gub'mint" comments complete detract from the weight and believability of your argument. ]]> Wed, 07 Jan 2009 13:51:25 -0500
I have little to argue with your points, but the "gub'mint" comments complete detract from the weight and believability of your argument. ]]> http://seekingalpha.com/article/108533-the-convertibles-collapse-offers-investment-lessons-for-all-investors?source=feed#comment-322358 322358 Sat, 06 Dec 2008 08:50:09 -0500 http://seekingalpha.com/article/104230-the-free-lunch-approach-to-finance?source=feed#comment-302152 302152 Mon, 10 Nov 2008 13:52:08 -0500 http://seekingalpha.com/article/93688-hydroelectric-vs-slow-volcanic-power?source=feed#comment-245892 245892 BPO) and Brookfield Homes (BHS)).
Disclosure: Long BAM]]> Thu, 04 Sep 2008 22:25:50 -0400 BPO) and Brookfield Homes (BHS)).
Disclosure: Long BAM]]> http://seekingalpha.com/article/83860-10-signs-of-a-recession?source=feed#comment-200345 200345 Solutions to this mess? Heck if I know, but I do know that a "Manhattan Project" endeavor on alternative energy sources would produce real tangible change and significant energy sources in far less than 50 years- more like 10-15. Look at how far solar has come just in the last few years (I read somewhere that solar panels have increased efficiency 3X in less than 10 years). Or even research on hydrogen or electric cars- heck a decade ago, people were saying we wouldn't see electric cars for 30 years if we were lucky and now we're looking at a strong likelihood of a reasonably affordable ($35k) commercially available electric car in 2010.
Bottom line is we still live in a great innovative country and can work our way out of this if we put our minds and our money to work in the right places- alternative energy and infrastructure. Stop spending billions on Iraq that could be spent on research and development of new energy and shoring up our sagging infrastructure- bring our money and our focus back home for once.
]]> Tue, 08 Jul 2008 00:12:16 -0400 Solutions to this mess? Heck if I know, but I do know that a "Manhattan Project" endeavor on alternative energy sources would produce real tangible change and significant energy sources in far less than 50 years- more like 10-15. Look at how far solar has come just in the last few years (I read somewhere that solar panels have increased efficiency 3X in less than 10 years). Or even research on hydrogen or electric cars- heck a decade ago, people were saying we wouldn't see electric cars for 30 years if we were lucky and now we're looking at a strong likelihood of a reasonably affordable ($35k) commercially available electric car in 2010.
Bottom line is we still live in a great innovative country and can work our way out of this if we put our minds and our money to work in the right places- alternative energy and infrastructure. Stop spending billions on Iraq that could be spent on research and development of new energy and shoring up our sagging infrastructure- bring our money and our focus back home for once.
]]> http://seekingalpha.com/article/24246-morningstar-analysts-confused-on-fair-value?source=feed#comment-80156 80156 Tue, 16 Jan 2007 22:48:19 -0500