Greed

Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis.

How To Out-Buffett Warren Buffett

From the Wall Street Journal...

Here's the Buffett alternative available to any investor: You can't get the warrants he got, but you can get something quite similar for far less than $5 billion. When I last checked, Goldman call options with a strike price of $105 expiring in January 2010 were trading for about $10 each. (A call is an option to buy a security at a specific price.) That's the equivalent of the right to buy Goldman shares at $115, which is what Mr. Buffett got.

Instead of preferred stock, you can buy Goldman bonds. A week ago, I bought some at a yield close to 10%. When I last checked the Finra Web site, the best I saw was a little over 8%.

True, this strategy only makes sense if you believe in the future of Goldman. The firm may never return to the glory days when shares were $250 (circa Halloween 2007). But it still has the talent and the resources to be the world's pre-eminent investment bank. That should be worth far more than $60 a share, not to mention bonds trading at 80 cents on the dollar.

Economic World has Changed Radically

I just read a fascinating article by Robert V. Green that lays out the real problems of the US economy.

This is a sea change... and deserves your immediate, close attention.

Here's what he said, in part...

The Economic Drivers Are Gone

This means that all four of the major economic drivers of the past twenty-five years are now gone.

* The demographic driver is gone, as the baby boomer bulge has passed.
* The technology driver is gone, as new investment is curtailed and current technology has matured.
* Tax rates will not be used to provide stimulus.
* Credit is now restricted, in strict contrast to its ubiquitous presence.

This leads, then, to the major question.

What's Next?

What is the next major driver of the economy?

At the moment, the answer to that question is unclear.

Although there is a lot of optimism and well-being created as a result of Barack Obama's win, the truth is that a president cannot do much about creating major drivers.

No one, not even a president with Congressional support, can create demand. They can only encourage or discourage existing demand.

The only real impact presidents can have is through tax policy. The hope of lower tax rates vanished on Tuesday and the sharp decline of the market in the following days reflects the market's recognition of this. (See the Ahead of the Curve column of Monday, November 3, 2008, where we predicted this reaction.)

So what major new driver will spur growth in the U.S. in the coming years?

At the moment, we do not know the answer to this question. Neither does the market.

Mark Cuban : Insider Trader

The following from the New York Times...

The Securities and Exchange Commission said Monday that it had charged Mark Cuban, the billionaire Internet entrepreneur and owner of the Dallas Mavericks basketball team, with insider trading for selling 600,000 shares of an Internet search engine company.

The S.E.C. said Mr. Cuban sold the stock in the company, Mamma.com, based on nonpublic information about an impending stock offering. The commission asserted that Mr. Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.

The commission’s complaint, filed in the Federal District Court for the Northern District of Texas, asserted that Mamma.com invited Mr. Cuban to participate in the stock offering in June 2004 after he agreed to keep the information confidential. The complaint further asserted that Mr. Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.

Within hours of receiving this information, the S.E.C. alleged in its complaint, Mr. Cuban called his broker and instructed him to sell his entire position in the company.

When the offering was publicly announced, the commission said, Mamma.com’s stock price opened at $11.89, down $1.215 or 9.3 percent from the prior day’s closing price of $13.105.

“As we allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic information after he promised to keep the information confidential,” Scott W. Friestad, deputy director of the S.E.C.’s enforcement division, said in a statement. “Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares. It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market.”

The S.E.C. accused Mr. Cuban of violating federal securities laws and said it was seeking to impose financial penalties and confiscate gains from the trades.

“Insider trading cases are a high priority for the commission,” Linda Chatman Thomsen, director of the commission’s enforcement division, said in the S.E.C. statement. “This case demonstrates yet again that the commission will aggressively pursue illegal insider trading whenever it occurs.”

All this proves, I suppose, that someone can have a lot of money but still lack basic ethics and even a cursory understanding of US securities laws.

Great Comments on Financial Crisis

Charlie Rose had another outstanding guest, Bill Ackman, major investor and hedge fund manager of Pershing Square Capital Management LP.

He makes some pertinent and useful comments about the current financial crisis.

This is another video which is not to be missed!