More stories of the looting of corporations seems to arise daily. And if one applies some simple logic, a lot more can be inferred. They - the ruling classes - all wanted "to dip their biscuit in that gravy while it was still hot".
Quiz: What fine movie and actor are the source of that quote ?
Some examples ...
Bernanke - "“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” he said. “There was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company.” The crisis at AIG stemmed from its activities in the market for credit default swaps – derivatives that function as debt insurance.
We now know that Lehman Bros, Bear Stearns and Merrill Lynch were the same - huge hedge funds attached to other stable businesses. As we know is Goldman Sachs.
Stock options: a way to loot the stockholders and give pay for no work. Holders made huge profits from simple market fluctuations and excessive risk is encouraged.
Stock buybacks: a way to prop up the value of stock options and reward the SELLERS of corporate stocks, at the expense of the long term holders.
Private equity: just a fancy name for leveraged buyout, where excessive debt is taken on, workers lose jobs and the corporation is looted of assets.
All those traders on Wall Street wanted to get paid like hedge fund managers. So they took on idiotic risks. The whole hedge fund industry - in the US and Europe - is just full of non-productive speculation, trading funds, worthless management running "fund of funds" and feeder funds, etc.
Europe seems more aware of the abuses of hedge funds than the US: (FT) "Paris has recently proposed clampdowns on hedge funds and bankers’ bonuses, in both cases using the threat of tougher capital requirements as a way of reducing what it believes to be excessive risk-taking."
Let's regulate hedge funds as investment companies, get rid of all derivatives, require much more collateral for currency trading, and a lot more that I can't think of now. And somehow the stockholders must be given real power to control upper management pay. Europe seems way ahead in that, perhaps by social custom.
How does this trading speculation exist ? Derivatives let them do it without adequate capital or regulation. Get rid of derivatives. The capital markets worked fine for the real economy before derivatives were created.
Get rid of derivatives. Get rid of executive stock options. Get rid of stock buybacks. Get rid of excessive executive pay.
The price of copper seems to be breaking out up from a long base. It may be a feint, or ...
China's PMI was reported to be over 50, as I just heard on Blabberg. Perhaps they have real consumer demand. I also note that Chinese stock prices seem perky, too.
Word of the Day
"Interdict" - noun and verb [$10]
Interdict means (noun) 1. an authoritative prohibition; 2. (church) a sentence debarring person, or esp. a place, from ecclesiastical functions and privileges; (verb) to issue or promulgate an interdict.
Sentence: Governments around the world need to interdict derivatives from the financial system.
Le Mot du Jour
"Bourde" - noun, feminine.
Une Bourde means a blunder, slip, mistake.
La Phrase: Hier matin, l'homme du bunker à fait une bourde dans la phrase pour son mot du jour. Il l'à corrigé plus tard.
Sentence: Yesterday morning, Bunkerman made a blunder in the sentence for his word of the day. He fixed it later.