Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Thursday, February 3, 2005:
My readers think I've abandoned the stockmarket in favor of real estate because
I haven't written much about the stockmarket recently. Not permanent abandonment.
Just temporary. Ecclesiastes has that wonderful poem about a time for reaping
and a time for sowing. So it goes with Investments. Now is not the time
for the stockmarket. It's just too hard. The "hot" stocks are icy cold.
The few that have moved up -- e.g. Google -- are far too hard to predict
and are way overpriced. And the ones that have crashed -- e.g. eBay and
Amazon -- are far too hard to predict and are also way overpriced. The big-stock
market "leaders" aren't going anywhere. Let the whole thing fall a bit
more and it may become interesting.
is actually making me sick to the stomach at present. First, there's the ripoff
by the manual, antiquated New York Stock Exchange. Todd, my broker tells me,
"Never place an order on the day's open. The specialist will see your
order and take advantage of you." (In contrast, Nasdaq and the London
Stock Exchange and virtually every other modern stock exchange don't use people
to trade. They use computers.) Then there's the looting of the New York Stock
Exchange by Dick Grasso. And third, there is senior management benefiting more
from selling the company than running it. The attitude among many
senior managers is "Screw the shareholders. Let's get rid of the company.
It's too difficult to fix."
I haven't seen the numbers from the AT&T/SBC deal, but I bet Dave Dorman,
AT&T boss, secured millions for himself by peddling AT&T to SBC. Indicative
of what's happening is this Wall Street Journal piece:
Kilts had millions of reasons to sell Gillette Co. to Procter & Gamble Co.
-- 153 million of them, to be precise. Mr. Kilts, Gillette's chairman and chief
executive, cited the need for more heft in the global personal-care industry
in explaining why it made sense to subsume the 104-year-old company in P&G.
But he also had a financial incentive to do the deal, which he initiated: Mr.
Kilts stands to reap more than $153 million, including gains on his Gillette
stock options and stock rights, a one-time sweetener from P&G valued
at an estimated $23.9 million, plus a "change in control" payment
of $12.6 million. Mr. Kilts will also stay on at the merged company for
a year, as P&G vice chairman, earning what one compensation expert estimated
would be about $8 million....
Mr. Kilts certainly
isn't alone, even in Gillette's hometown of Boston. Charles K. Gifford has profited
handsomely after twice selling Boston banks he ran, most recently with the sale
of FleetBoston Financial Corp. to Bank of America Corp. last year. Among features
of his recently revealed deal to retire at the end of January: $16.4 million
in severance stemming from an earlier merger, a $3.1 million annual pension,
access to a Bank of America corporate jet and his pick of choice Red Sox baseball
tickets. Filings indicate that Mr. Gifford holds Bank of America shares worth
about $120 million."
Move on to Dick
Grasso... The NYSE employed Dan K. Webb, of the law firm of Winston & Strawn
in Chicago, to find out what went on. Some findings from his pricey report,
according to today's New York Times. (This stuff is fascinating.)
"Mr. Grasso "had the unfettered authority to select which board
members served on the compensation committee and, likewise, to select the committee
chair." As a result, "Grasso hand-selected the members of the committee
charged with reviewing and recommending his yearly compensation." Who was
picked? The report says that Mr. Grasso chose directors who were themselves
highly paid, and thus less likely to be surprised by big payments. And he chose
people "with whom he had or developed friendships or personal relationships."
not identified by Mr. Webb, was said to have told Mr. Grasso that he had little
time to devote to the exchange, and "was assured by Grasso that he did
not have to attend all the meetings and it would not be that much work."
The director was put on the compensation committee. The committee often did
little work as Mr. Grasso built up a web of interlocking payments under a bewildering
set of management compensation plans that reinforced each other in ways the
board members often did not understand. Directors asserted that they relied
on a consultant who later said that he had never endorsed the big payouts [to
Grasso] and had objected to them in 2001.
was forced to resign after the exchange disclosed that it had paid him $139.5
million in 2003, largely in accrued retirement benefits. The report concludes
that his pay from 1995 to 2002 was "far beyond reasonable" and calculates
that during his tenure as chairman and chief executive, Mr. Grasso was overpaid
by at least $113.6 million. ...
When Mr. Grasso
was running the exchange, he often said that the directors were chosen by a
nominating committee that was independent of both him and the board, and that
he had no say in his own compensation. The report says he actually had great
influence in all those areas. "Against proper governance procedure,"
it declared, "Grasso was involved in or connected to the process that determined
his own compensation." ...
compiled by Dan K. Webb, a former federal prosecutor and the exchange's lawyer,
portrays a culture of excessive pay: for example, Mr. Grasso's executive assistant
was paid $240,000 a year and his two drivers $130,000 each. ... Mr.
Grasso received $192.9 million in compensation and paid pension benefits in
his eight years as chief executive, according to the report. ...
is like the gang that couldn't shoot straight," said Frank Christensen,
a principal at the direct-access trading firm Kelly & Christensen and a
seat owner since 1964. "No one knew what was going on, and no one got hurt
but the owners."
to Phoenix tonight: I'm
talking on Saturday morning before the Real Estate Investors conference which
Arizona Real Estate Investors Association in running at the Civic Plaza.
To learn more, click
here. Mention you're
a reader of our new real estate investor magazine, Personal Real Estate
Investor and you can get in for free. For more on the magazine,
The parrot and the boy
An old man was sitting on a bench at the mall.
A young man walked up and sat down. He had spiked hair in all different colors:
green, red, orange, blue, yellow. The old man just stared. Every time the young
man looked at him, the old man was staring.
The young man finally said sarcastically, "What's the matter old
timer, never done anything wild in your life?"
man replied, "Got drunk once and had sex with a parrot. I was just wondering
if you were my son."
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
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