ARE CEOs DUMB, GREEDY OR CORRUPT?

Everyone knows the key to investing success – Buy low, sell high. So why do the CEOs of the biggest companies in the world buy back their company’s stock at all-time highs and when prices were at decades lows in 2009, they bought nothing? These MBA geniuses aren’t dumb in the traditional sense. But their decisions to squander hundreds of billion of shareholder money making horrible investment choices points to their greed and corruption.

Executive compensation is tied to earnings per share. Since these dimwits are too narrow minded and myopic to figure out ways to increase revenues and profits through capital and intellectual investment, they turn to Wall Street stock buyback schemes to boost EPS artificially, while suppressing wages of their workers and shipping jobs overseas. Boosting their own wealth is all that matters to these greedy bastards.

It’s baked in the cake that these CEO “investments” will result in hundreds of billions in losses. And not one of these dumbass CEOs will lose their job for doing so. Because all the other dumbass CEOs were doing the same thing. Who coulda knowed?


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Bea Lever
Bea Lever

All of the above.

Who here would not turn into the greediest bastard on the planet with a $400 million golden parachute waved under their nose? Stock buybacks have kept these flaming turds afloat and hidden the real state of things much like EBT hides the bread lines.

MuckAbout

The article as a whole is dead on. By buying back their own shares, the total number of shares is reduced, the EPS goes up and the CEO, even if he’s an incompetent asshole, gets a bonus. Something wrong there but thee and I will never fix it. Also, as is perfectly visible on the above chart, the very act of Corporation Buy-backs tend to run the averages up and down as they buy and sell, thus distorting the true pricing function of the market.

But first of all, the opening sentence is incorrect. No one can reliably predict a low for a buy or a high for a sell. Or predict a high for a “short” and a low for a “cover”.

The formula for success in trading is to buy a little bit high (after an up trend is established) and sell higher after things have topped out and a reaction has set in. Never try to catch the bottom 10-15% to buy and never try and catch the top 10-15% to sell. Never be greedy and never use money you can’t afford to lose. The reverse is true for those who like to play the short end. (I prefer long positions as I can limit losses better!)

I’ve traded stocks and various other financial instruments for 50 years. If I make one really good trade out of four, I’ll make modest gains overall. I may lose nickels and dimes on three trades and make 400% on the winner. Let your profits ride and NEVER take more than a minimal loss. You buy a stock today and it goes down tomorrow, dump it. If it goes up, hold it until it wears itself out, then sell it. Another trade will come along the next day.

Another mistake traders make is “chasing the market”. Setting a “limit” price on a buy order to try and shave a few cents off the purchase price is a fools’ game. Setting a similar “stop” on a sell price to try and get the highest sell price is also a fools’ game. Just buy and sell at market prices – the deal is done in a second and your position is in place (for a buy) or gone (for a sell). The few cents a share you try and “shave” or “add” just clutter your mind and keep you hanging around long after a position should have been liquidated or keep you waiting for a lower price to buy as your stock climbs right up a ladder. Bad practice..

That’s $10,000 worth of advice for free. Enjoy..

Muck

Fabulous
Fabulous

Firstly, the job of the CEO is to drive stock price. Everything else is secondary. Share holders like to see their investments grow, forever. Second, for muck, stops and limits are very useful. I don’t think you fully appreciate their versatility. Maybe for an individual they are not as functional, but try and monitor two or three thousand investments without them. Take profit early if you need to dump large positions. Other than that your advice is fairly solid. Hobby or job? Daytrade? Ever play forex? Bonds?

Swamp Fox

CEO is about running a company that produces something, making that process efficient and profitable. Bonuses are part of their comp pkg., thus their focus there. The corporate CEO, working for a board of directors elected by shareholders, should not focus on anything but doing their job. Corrupting the focus by chasing higher stock prices to enhance their bonus should not be a consideration. That’s the CFO’s job.

Swamp Fox

A couple thoughts on this. (Disclosure: I’m a retired CEO)

The green-eyed monster of most people who never put in the effort to reach their full potential in life is truly awe inspiring. Most haven’t a clue as to what they speak to.

I played poker every week with PhDs from the local university, and found them to be brilliant and retarded at the same time. It’s as if they were trapped in a bubble having no contact with the real world. They couldn’t solve the simplest of real world problems, but could speak to things that never existed in the real world. I’m not so eloquent as they, being more pragmatic and blunt.

Back to CEOs, they are real world problem solvers, but most of the upper echelon are trapped in the same bubble as the docs were. They are academics, and follow trends. They are (or seem to be) unable to distinguish theory from reality. They drink their own Kool-Aid.

I ran three very successful enterprises, but never wanted to reach for the power others seem hell bent to seize. All I ever wanted was personal security and a checkbook I didn’t have to worry about balancing. I never did greater than $12 million in business a year. One of my main objectives, after becoming secure, was to provide my employees the very best jobs they ever had. I did that.

I wholly owned my businesses, unlike most upper echelon guys, and therefore had no reason to bamboozle corporate owners. You’re right about today’s corporate sharks, they feather their own nest, with malice aforethought, at the expense of their employers. They are detestable.

kokoda
kokoda

1. Explain the green-eyed monster bit; didn’t understand that sentence.
2. Last para; next to last sentence – did you mean employees?

Swamp Fox

Kokoda,

Jealousy is the green-eyed monster. The take away should be, those casting aspersions against those who’ve reached the pinnacle of their chosen pursuit in life, should be examined as to their own station in life. The point being that the sloth denigrating the Cheetah for being too slow is laughable and worthy of scorn, NOT admiration.

Edit: No, sharks refers to the CEOs.

starfcker
starfcker

I saw Muhtar Kent on Charlie Rose maybe ten years ago when he got the job, and he seemed so different than anybody in that kind of position i’ve ever known. He struck me as a sociopath. There was no conciousness there. Totally foreign to my way of thinking. Listen to Richard Branson in the last couple of days. Or Tim Cook. I think they identify these guys early, and groom them, or in Branson’s case, finance them. I don’t think they rise on merit, the way they once did.

Westcoaster
Westcoaster

Lots of sick fucks rise to the top because other sick fucks identify and embrace them. I’ve known some of these guys and they don’t view the world as normal folk. Their boards of directors back the stock buyback game because they profit as well. Meantime the stockholders (eventually) get the shit sandwich.

food for thought
food for thought

CEOs are not at fault. The market incentives that allow CEOs to conduct near zero percent buybacks through issuing bonds in the market are part of what is causing this kind of behavior. Inventors are so yield starved that they throw money at these companies who use it not on capital improvement but on equity markets. It is therefore a rational decision to act in the way that they do. They have been incentived to do so by interventionist monetary policy and investors who expect central bank backstops on any losses. It is unfortunately another downstream aspect of Cantillon Effects and the mis-allocation of capital caused by central bank policy.

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