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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.

The "stockmarket" 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:

"James 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."

One director, 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.

Mr. Grasso 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." ...

The report, 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. ...

"This 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."

Off 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, click here.

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?"
The old man replied, "Got drunk once and had sex with a parrot. I was just wondering if you were my son."

Harry Newton

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 . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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