Post-9/11 Option Grants Under Scrutiny

The WSJ continues its recent habit of burying killer stories in the under read Saturday edition. This week’s bombshell has to do with post 9/11 earnings grants:

"On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York’s Adirondacks, soldiers readied for deployment halfway across the world.

Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives.

The terrorist attack shut the U.S. stock market for days. When it reopened Sept. 17, stocks skidded more than 14% over five days, in the worst full week for the Dow Jones Industrial Average since Germany invaded France in May 1940. But for recipients of options, the lower their company’s stock price when options are awarded the better, since the options grant a right to buy shares at that price for years to come. The grants set recipients up for millions of dollars in profit if the shares recovered.

A Wall Street Journal analysis shows how some companies rushed, amid the post-9/11 stock-market decline, to give executives especially valuable options. A review of Standard & Poor’s ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.

Ninety-one companies that didn’t regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options."

What makes this so pathetic is that corporate executives could have stepped up AND BOUGHT STOCKS IN THE OPEN MARKET if they believed they were so cheap. It would have been reassuring to a nation to see the leaders of industry voting with their own dollars. It might have made the subsequent economic slow down and period of tense aftermath less painful.>

Instead, these weasels decided to loot the treasury at the first
opportunity. America was smouldering, the WTC lay in ruins, and this
group of classless pigs decided it was time to pocket some cash.

The Cream of American Corporate "Patriots"


Graphic courtesy of WSJ


I’m going to take it a step further: These assclown executives are unAmerican. They are not Patriots, they are not model citizens — they are merely a pathetic group of opportunistic whores who might as well hang outside the Holland Tunnel looking for a quick buck (although that would involve risk and work, something they have shown a distinct aversion to).

In 1929, when the stock market crashed, JP Morgan (and others) stepped in. They bought stock with their own dollars, they saved Wall Street. Oh, and they were rewarded for it — both monetarily, and in the history books.

What the more recent group of execs did is probably legal. It certainly isn’t ethical, and it reveals them to be "lacking in moral turpitude rectitude."  I wonder if there’s a morals clause in any of their employment contracts.   

What a pathetic group of weasels. Brain cancer is too good for these shitheads. They — and their lapdog Boards of Directors — should all be fired.


UPDATE: June 17, 2006 5:34am

A few emailers have asked why I feel so strongly about this; Perhaps this older 9/11 discussion — and the early forerunner of this blog — helps to explain why visceral reaction. 


Executive Pay: The 9/11 Factor
As stocks sank after the attacks, scores of companies rushed to issue options to top officials. Some reaped millions.
WSJ, July 15, 2006; Page A1

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Barry Ritholtz commented on Jul 15

    Fired — and then flayed alive.

    Am I a little upset? yeah, I’m pissed.

    At the time, my office was headquartered in 2 World Trade. I spent the week telling clients not to short into the mess — not only was it a money loser, it was simply the wrong thing to do.

    These other fuckers can all go to hell as far as I’m concerned.

  2. John commented on Jul 15

    I had the exact same reaction when I read the story. What really pisses me off is the bs excuses they are using for what is pure and simple greed and piggishness. The country is in a state of shock, families are mourning, firefighters and cops are busy inhaling all kinds of crap that will lead to cancer while digging out their fallen brethren, and all these assholes can think about is how to line their own pockets even more.

    My personal favorite is the company whose excuse is that the CEO just calls up the board whenever he wants more options and they are always approved. Sounds like it is in line with shareholder interests to me.

  3. Jason commented on Jul 15

    I didn’t short, all I had was a 401k with no short fund. But I did have a decent cash/bond hoard, I exchanged for stock funds at the end of the month, despite my distrust of the equity markets.

    Partly because it was right, and partly because I figured on a nice bounce. You can do right, and do well at the same time.

    Although I have occasionally wondered, did my “Go USA!” feeling make me decide that there would be a bounce? Or did my feeling that there would be a bounce cause me to feel that buying shares is patriotic, so I wouldn’t feel that I was making money off of the death of thousands?

  4. Ned commented on Jul 15

    This is what our capitalist system has evolved into: all reward and no risk for the guys at the top and their hand-picked compensation commitees. All men are created equal but some are a bit more equal than others. Yuck.

  5. Leisa commented on Jul 15

    It’s not just the stock options, but the entire CEO compensation issue. You know that something is wrong when a company sends a broadcast voice mail about why the CEO’s pay package is not exorbitant…and sends a PR letter to executives/top managers with “talking points”. This is in the midst of culling back the benefits to the balance of employees. It made me sick. I was paid well, enjoyed stock options (but they were very specific on the date on which they were granted and their basis–though if I am to find that the very top had something differently worded, I would be spitting bullets. ) Nevertheless, I was not going to defend what I considered indefensible.

    My own personal belief is that compensation should be tied to performance on a balanced score card that balances goals in operational and financial performance, service improvement to/satisfaction of clientes/customers, workforce development and others as necessary. Singular models that focus on financial peformance (bottom line/share price), typically produce singular action at the detriment of longer term goals that build value over time.

  6. Ned commented on Jul 15

    The problem is that the fox is managing the henhouse.
    If I could set my own pay (or pick a select group of my buddies to help me) how could it not get totally warped in my favor. The boards are not protecting the company owners, but this should surprice no one.
    Ever notice how the proxy works? Shareholders don’t pick the boards, they “vote” for the names picked by management. Or they can withohold their votes! Wow. That is power. Not. Leisa is right but we are a very long way from there now. Just look how CEOs are rewarded when they screw up so badly that the board has to get rid of them! They retire shamefully rich anyway. Bad business and for business.

  7. Larry Nusbaum, Scottsdale commented on Jul 15

    The more I read about these corporate scandals (such as Mario Gabelli paying a “fine” of $125 million and admitting NO WRONG DOING) the more I am convinced that it will continue to get worse until people actually are sent to jail.
    In fact, prosecutors and even certain attornies general (Eliot Spitzer) are part of the problem. They have become as money greedy as the executives. What do I mean? They only want large $ settlements and not actually convictions & jail terms for what is clearly illegal and criminal activity. All the money that was paid in fines in NY state went right into the treasury of the state of NY and not to defrauded shareholders. It was a resume builder for Spitzer to run for higher office.


  8. DBLWYO commented on Jul 15

    First, let me say for the record I agree with what everybody’s saying. That said can I introduce a question beyond the immediate and obvious ? What are the implications and consequences for the performance of these companies ? And for the general tenor of corporate ethics and performance or any organization ?

    The lawyers call it fiduciary responsibility but I like the military’s take on it. When you have accepted a position of command you have obligations extraordinarily far beyond the mundane and normal for the good of the whole organization. And on the other an officer who violates his obgliations to his troops for his own benefit is worse than the worst scum.

    Nobody thinks business is war but it’s not entirely everyone for themselves because any organization has to have a certain level of trust that everyone in it will focus on the general welfare not the particular gain of the individual. Organizations are institutions for social cooperation. Sorry if this sounds too abstract but it’s an important point.

    When it gets to the point where everyone is spending all their time watching their backs and working on their own interests the operating performance of the organizations drops by 50-90%.

    These guys aren’t just robbing the treasury they are destroying a fundamental asset, the level of trust and cooperation required for the surivial of their organizations. They are in effect saying that my compensation is more important than anything else that we’re doing no matter what happens to you or the company.

    These are people who belong in Dante’s 10th Circle of Hell because they’ve violated a public trust, not just a private one. And they’ve done it for mere short-term financial gain.

    American enterprise performance will not recover until, among other things, the role of values and ethics, the critical importance of public virtue becomes a central part of the operating philosophies of these organizations.

    For anyone interested I owe these insights in a way to Jim Stockdale and his discussions of ‘Public Virtue’ in Reflections of a Philsophical Fighter Pilot.

  9. rajesh commented on Jul 15

    This quote from Werner pretty much sums it all: “no one knew what direction the market was going to move in the future.” What a stand.

  10. Leisa commented on Jul 15

    One of the great problems in corporate america (IMV) is the notion that management serves the shareholders interests. (Don’t pelt me yet). I will continue to believe (I’m idealist) that if management focuses on the customers (service, products, value perception) and equipping its employees with requisite skills, processes and technology to provide distinctive service at a perceived value, then the shareholders always win (so long as you have enough customers!). ONe of my most disappointing corporate events in my professional life was when our parent company elected to spin off an internet division–a division absolutely critical to providing seamless service to our clients. This was in 1999/2000. By spinning it off and putting .com behind the name, the greedy bastards put their own interests over service to the client. The president of my division and I were vocal opponents recognizing the detriment to client service. OUr clients were scratching their heads and we could not give them any credible answer as to why that didn’t involve saying greedy bastard (but I’m warming up to Barry’s assclown label). The employees that were moving over to the .com portion were shameless in their gloating of the stock options that they were getting. I said, wait and see. Their gloating was amply rewarded with poetic justice that brings a tear to one’s eye (dab, dab, sniff). Crash and burn.

    What is interesting about the turmoil regarding back dating of optons, is that these options dating didn’t get any real air time until share prices began to fall–witness UNH’s fall from performance grace. Funny how that works.

  11. RW commented on Jul 15

    Actually these executives are “guilty of moral turpitude” and lack moral fiber, conscience, shame, patriotism, …a whole panoply of higher human values; if it’s worthy, they seem to lack it. Leisa is right, it is time, nay well past time, when boards and stockholders should demand real performance metrics to regulate executive compensation; there is simply no way to gauge what value executives add (if any) in the absence of such tools. Not that I see that happening given the control executives currently exercise over their boards but then that’s what morals is all about: Not what necessarily is but what ought to be.

  12. tjofpa commented on Jul 15

    and just to add fuel to the fire….
    I have been under the impression for a long time that even calling these “option” grants to senior mgt is a misnomer designed to assuage their political incorrectness. Don’t these grants function more like “warrants”, because when they are exercised NEW stock is issued making them more detrimental to shareholders? I mean, take a look at CSCO almost doubling out shares between 1993 and 2001, from
    4.4 BILLION to nearly 7.4 BILLION.

  13. CDizzle commented on Jul 15

    Barry – I assume comments such as these don’t exactly ingratiate you with this particular flock of CEOs (which probably encapsulates more of them than most of us would like to think). I admire the hell outta you for speaking your mind SO directly on this topic.

    One of the benefits of not answering to the Man, I reckon.

    At the age of 30, I’m pretty jaded to find that this is not the world that good ol’ Dad prepared me for.

    To best prepare me for the world, and certainly corporate America (I’m recently displaced from an S&P 500 regional bank where the “good ol’ boy” CEO is lining his pockets at the expense of, well, most everyone else), Dad should have taught me the importance of CYA, sandbox politics, and certainly the time-treasured act of kissing ass for the sake of self-denegration perceived as humility.

    Maybe that’s why I’m trying to get my ducks in a row to start a fund.

    In short, you’re my hero, Barry. The meek may inherit the Earth, but the bozos get to run the show in the meantime. Kudos to you for doing anything but helping them clear the path.

  14. RW commented on Jul 15

    Yup tjofpa. One of my pet peeves is the false inference, fostered by pundits and executives alike (and accepted as valid by far too many shareholders), that many of these companies are doing something positive by buying back their own stock when all they are doing is offsetting the dilution caused by their options program: net effect is really less than zero IMO; less cash but no concomitant capital investment.

  15. The Peking Duck commented on Jul 15

    Cashing in on 911

    Shocking. Hidden away in the Saturday edition of the WSJ….

  16. Whammer commented on Jul 15

    It is amazing to me how there has essentially been no pushback from institutional holders against all of these scoundrels.

    tjofpa and RW, agree with you both. The stock buyback is a charade.

    tjofpa, one additional reason the # of shares outstanding at CSCO went up so dramatically is that they issued stock to acquire a bunch of companies in those days.

  17. frankr commented on Jul 15

    How about some names. “from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants.” It would be good to see a DisHonor Roll published somewhere. Maybe as an AD in the NYTimes or WSJ?

  18. yc32 commented on Jul 15

    I would argue more likely than not good CEOs are not good people. If nobody is watching, they will steal shareholders’ money anytime they can. That is why agency problem is a big topic in ecomomics.

    I laugh everytime Larry Kudlow says that free market and capitalism can solve this kind of problem. Without oversight, rules and regulations, free market will become wild, wild west. Unfortunately, regulators and board memebers are too often ex-CEOs who have no incentives to look out for shareholders. Even mutual fund managers, they get more fees from corporate 401ks and pensions than from individual investors, so they will not criticize CEOs.

  19. R. Porrofatto commented on Jul 15

    In the amoral world of Wall Street and corporate boards, right and wrong have no meaning, and the phrase business ethics has been a quaint anachronism for some time. In their religion, it would have been immoral, even criminal to NOT take advantage of the opportunity that 9/11 presented to Make. More. Money. Just like the WSJ editorial board urged Bush to use 9/11 to further the right-wing agenda of tax cuts and deregulation, there is nothing they won’t appropriate to their financial benefit; in their philosophy money is an end that justifies any means necessary to get it. The only shame is in not making as much as possible.

    Plus, the Bush tax cuts worked out great for them, too. A lovely little rigged game, eh?

  20. advsys commented on Jul 15

    Thanks for taking such a strong stand. It is great to see that someone with a voice that will be heard standing up for something that is clearly so wrong.

    I hope for a day when “integrity” comes back into voque.

  21. Kerosene commented on Jul 15

    Erm, the one thing that they are not lacking is “turpitude”. Y’all might want to correct that. ;-)

  22. MaxSpeak, You Listen! commented on Jul 15


    Sounds like a movie, but it’s true. (Via the mighty Atrios.)…

  23. tsq commented on Jul 15

    Many of these proud, wealthy BlackSTOX businessmen don’t compete; they buy the refs in D.C. with campaign contributions. The refs then allow all manner of marketplace gouging of customers, employees and shareholders.

  24. Craig commented on Jul 15

    Suggestion: It will cost a few bucks per month.

    ASSCLOWN.COM A listing of the Greediest Corporate Enemies of American Free Enterprise and accountability.

    All listed stocks are to be shorted or sold. A permanent sell recommendation on all listed companies until the Board of Directors grows some NUTS and does their job.

    I was a VP of a non-profit corp…..honestly, it doesn’t really matter the size or capitalization, almost all boards are ASSCLOWNS too.

  25. busdrivermike commented on Jul 15

    Hey Bill. Look at those people jumping jumping off the WTC. Hey! I think I know that guy, played golf with him at Sahalee. What, the Pentagon has been attacked? There is an anthrax attack!

    Hey Bill, how can we make some quick, easy money off this thing?

  26. Robert Green commented on Jul 15

    I find this whole conversation kind of funny. lots of smart people discussing something that makes them so mad and is it moral? is it legal?

    such interesting questions.

    but of course, no one must ask the most obvious one (and here it comes, cliche alert–it’s the 800 pound gorilla in the room!):

    is this an inherent problem of capitalism, and of capital accumulation as the ultimate arbiter of success?

    OF COURSE IT IS! we’re capitalists, guys, get over it. if we can make a buck screwing out own children over in the name of short term profitability over…fill in the blank here–long term environmental stability, long term social health etc. ad infinitum…we make that buck. to do anything less is to be anti-capitalistic. that’s not speculation, or marxist raving, that’s the fucking law as defined in our late model of the system. shareholder value uber-alles. i’m sorry, but i don’t get the hand-wringing, and i don’t believe a single person who posts here hasn’t done something on a daily basis to make our world a little bit worse for our/their children in the name of capital accumulation (better defined for the middle and lower classes as “putting food on the table for my family” and for the upper as “having a second table in a second home for my family).

    stop whingeing, look at your own life. are these guys scumbags? sure. are they doing something illegal? no. are they even doing something wrong? no. they are following the same rules we all follow, they are just better at it than the rest of us.

    of course, let me be clear–i’m indicting myself in all of this. i traded my youthful socialist ideals in for a fancy life a long time ago, but at least i don’t lie to myself about it. and in not lying to myself i try to make things a bit better, but believe you me, it’s all picking around the margins.

  27. krrk commented on Jul 15

    Amazing how so many “professional” market players seem to think there’s not a free market for CEO’s. Good CEO’s are hard to find. Even people who would be mediocre CEO’s are pretty scarce. Why do people get so upset when a company spends what it costs to hire or retain somebody good?

    Now, I am not and will never be part of executive management, and none of my family is either. But I do have a friend who used to be a highly in-demand CEO (of real companies, not bogus ones), but after about ten years he moved to less stressful and more satisfying work. The money was just no longer a lure to him.

    Think about it, a person who’s capable of being a good CEO has probably amassed a substantial fortune already. The only incentives that will entice him are job satisfaction or HUGE amounts of money. It’s NOT an easy job, even at the smallest companies. That’s why it’s so expensive to keep proven talent. Companies thrive not because we’re sitting here trading shares off a PC, but because actual people do insanely hard work to make it happen. With exceptions, to be sure.

    I’ve never heard of a company that went under because they paid the CEO too much, but I’ve known plenty that failed under bad ones.

    And frankly, post-9/11 was a time when it was especially important to retain good leadership, and it was also a time when the lure of retiring with one’s family was the strongest. So there was a price spike in CEO’s. That’s just the market. Why do we get upset when CEO’s get a price spike, but when when some small-cap triples and we bail before it crashes, we act like we’ve earned it?

  28. Enslaved commented on Jul 15

    The demise of our democracy is so sad and sick.

  29. trader75 commented on Jul 15

    is this an inherent problem of capitalism, and of capital accumulation as the ultimate arbiter of success?

    No. This is an inherent problem of irresponsibility on the part of shareholders and citizens. Your statement has no merit because one could have asked the exact same question of all the socialist / communist systems that have crumbled to dust over the last century, replacing the second half of the phrase with some bit of Marxist babble.

    Jefferson once said the price of liberty is eternal vigilance. He might as well have said the price of just about everything worthwhile is eternal vigilance. Everything worthwhile that is.

    I have an old friend of high school who sadly chose to become a socialist. Now he spends most of his life in pursuit of bitter and useless causes that do more harm than good, calling everyone brainwashed when he is the one who has been conned, and continues to be conned, on a daily basis.

    Many socialists, and many of the raging anti-capitalist stripe, assume that capitalism is an inherently immoral system, that immorality springs from capitalist arrangements, that capitalism is immoral itself, and that there are ‘better’ systems out there free of the moral problems capitalism is burdened with.

    But this is psychological poppycock and total bullshit. The inherent problem is one of human nature. We are built to survive on the plains, nature red in tooth and claw. It is in our nature to take and not to give in return. Children are born with an animal-like sense of entitlement. Cultural virtues and moral responsibilities are taught, not innate. The altruistic impulses we have are the result of evolutionary tuning and mostly limited to collective survival issues.

    You can beat yourself up with guilt if you want (I’m a participant in the capital system, wah wah), but it doesn’t help anything at all. It’s not the system (capitalism) that deserves to be indicted, any more than democracy as a system deserves to be indicted. It is the irresponsibility and lax attitudes of the participants within it that is the problem. The same holds true of democracy in general. As a whole, we are the opposite of vigilant.

    This is an important difference. When people bitch about how capitalism needs to be thrown out, not only are they focused on the wrong problem, they contribute to the problem by drawing attention away from the real issue (and polluting people’s minds with bullshit whiny guilt to boot).

    I like the fact that Barry is good and mad. I hope more people get good and mad. Anger is a sign of progress if it helps shareholders in general wake the fuck up, pardon my french, and stop sitting on their collective asses. Blatant CEO malfeasance, like political malfeasance, is a problem that can be solved with a greater sense of vigilance on the whole, and in the long run I think it is an issue that can be remedied.

    But false self-righteous guilt is of no help here. And indicting the system that has produced more wealth, prosperity and innovation than any other system in the world is certainly a stupid waste of time.

    One last point: I agree with you that a grossly materialist culture has become a problem that is likely encouraging corruption and detracting from the quality of people’s lives. But indicting that is very different than laying the blame at the feet of capitalism itself. “Gotta get mine” is a wholly different attitude than “free markets for free men.”

  30. txchick57 commented on Jul 15

    I bought stocks in the premarket on September 11 before the first plane hit the WTC. Afterward, my broker offered to break the trades. I couldn’t do it. It didn’t feel right. I took a hammering on those buys.

    This makes me beyond sick.

  31. d commented on Jul 15

    The Big Picture has Now Jumped the Shark. It was fun to read; but now its jumped baby!!!!


  32. Brian commented on Jul 15

    I wonder if the decadent entitlement mentality of the US executive class is part of the reason for the underperformance of the US stock market relative to pretty much every other market.

    How about we outsource? Lets get our CEOs, CFOs, VPs, etc., in India and China. I’m sure the are guys there at least as good as our guys. (Damning with faint praise). And will work for a lot less.

  33. Leisa commented on Jul 15

    Trader75–I agree that the issue is human nature. And because of human nature, most of life’s “‘isms” stray from their intended ideals and many “isms” are birthed from schism’s within “isms” (as I remember the pornographer post, I should work in jism somehow–I’ll leave to those more clever than I). Further, the espousal of particular ideals (even by the loftiest minds) and the living of them can be widely divergent (Jefferson is a case in point).

    As is common on any attack–perceived or otherwise–on capitalism, the common retort is that it is the greatest system in the world. Our lens in which we view the world colors much, and that too is endemic to our being human. Frankly, I’m not sure that socialists are any more deluded than capitalists, and I certainly wouldn’t dare to engage a conversation about it for such discussions are fruitless. Such conversations denegrate into name calling, and all sorts of blather that leave everyone feeling uncomfortable. Why? Because we all feel like we’ve been poked in the eye when the lens through which we view the world is poked.

  34. Drew Yallop commented on Jul 15

    This is not concerning your blog but rather my ongoing logon problems. Now every email sent to your support address gets bounced back to me with the following message:
    ‘This report relates to a message you sent with the following header fields:

    Message-id: <000f01c6a7f6$b4f7a600$1ee6f200$@ca>
    Date: Sat, 15 Jul 2006 03:09:06 -0700
    From: Drew Yallop
    Subject: Problem

    Your message cannot be delivered to the following recipients:

    Recipient address:
    Reason: Remote SMTP server has rejected address
    Diagnostic code: smtp; ( [] is currently not permitted to relay through this server. Perhaps you have not logged into the pop/imap server in the last 30 minutes or do n
    Remote system: dns; (TCP||51568||25) ( ESMTP Exim 4.52 #1 Sat, 15 Jul 2006 03:09:06 -0700 )’

    Of course the classic computer Catch 22 – you have a problem but cannot resolve it because of another problem. If you read this would you kindly forward to your support people?

    Best regards,

    Drew Yallop

  35. Spooked commented on Jul 15

    The fact is, they were probably all in on the 9/11 scam. I hope everyone here realizes 9/11 was an inside job. If you don’t realize it, wake up.

  36. Drew Yallop commented on Jul 15

    Which is morally worse:

    1. Zero risk shorting on Sept 10 because you know the planes are going in?

    2. Zero risk option grants by greedy CEO’s and thier lapdog compensation committees struck on Sept 21?

    Answer: Cannot be determined because the question assumes that both actors have a moral centre that overrides the need to accumulate more wealth.

  37. eightnine2718281828mu5 commented on Jul 15

    The meek may inherit the Earth

    … but only in tiny six foot plots.

  38. tech98 commented on Jul 15

    For anyone interested I owe these insights in a way to Jim Stockdale and his discussions of ‘Public Virtue’ in Reflections of a Philsophical Fighter Pilot.

    Ironic, because I worked for Stockdale’s running mate who ran a grossly-dysfunctional organization rampant with self-serving greed, mendacity, disgusting ‘ethics’, demoralized bullied employees, and management mediocrity.

    Some people just talk a good game. Doesn’t mean they live up to it.

  39. Mike H commented on Jul 15

    It is easy to put all kinds of labels on the low-life corporate executives. I, as a shareholder, personally get furious every time I see this kind of abuse (especially when I saw this one) whether legal or not.

    That being said, the source of these severe abuses is due to the extremely laissez faire attitude of 1) us the shareholders and 2) the government. The bottom-line with human nature is that it’s greedy and unethical and it will flourish if not kept in check. The analogy is children who get whatever they ask for and is never reprimanded; they become spoiled rotten and intolerable over time! These Executives are probably not inherently “evil” but their behavior has become intolerable since no one has stepped in and said “NO” once and a while, nor have they been fired or even reprimanded.

    We, the shareholders, have to wake up to this and say “NO!” to Management and the Board of Directors. However, as long as these companies provide decent return we all tend to stay “fat and happy” and do not want to make any waves (after all that’s a lot of work and who wants to do that!). I suspect that NOTHING will happen until 1) some large institution or shareholder gets burned really badly or embarrassed on some of their large investments due to Executives “Gone Wild” or 2) the mainstream becomes aware of this and it makes it into politics (even then the government will like just find a couple of scapegoats until the masses calm down again – think insider trading and Martha Stewart).

  40. Brion commented on Jul 15

    tsq nailed it. The problem isn’t Capitalism or Free Markets…it’s the corruption of them that counts. There are vulnerabilities built-in to open societies and markets just begging to be violated by immoral folks (ask Mohammed Atta). In the case of piggie CEO’s the analogy would be if AlQuaida had had enough cash to bribe Congress to pass “Guest Flight School Student Visas” legislation before 9-11.

    Also to “D”, don’t let the door hit your ass etc….

    I don’t know if Barry went to parochial school growing up or what but he seems to be that rarity–a market scholar with conscience. It’s one of the big draws of the Big Picture for me.
    (BR might also be a fan of enlightened self interest as a successful business model-big bucks can be made from taking the long (moral)view. It’s simply made more difficult by the number of sharks swimming in the tank. Jump that D!)

  41. DBLWYO commented on Jul 15

    A minor comment regarding Jim Stockdale – he won the MofH for organizing an ethical society of POWs in the Hanoi Hilton and points to Epictetus as the source of his own moral courage and public virtue. If anybody walked his talked it’s that man.

    As a lab case it’s also pretty persuasive that public figures can, if they so choose, have public virtue.

    As for Stockdale’s running mate – well, I found his organizations to be pretty dysfunctional as well and agree with all that. But – as we all do on this site – let’s examine the available data to the best of our capabilities. :) !

  42. Alaskan Pete commented on Jul 15

    YEAH! My feelings exactly Barry. And it’s not just this particular options grant scam, but the general complicity of the boards and their compensation committees who award these ridiculous compensation packages that simulatenously screw the shareholders and the working man.

    Be careful though, because you wouldn’t want to be called “shrill” would you? They’ll start comparing you to Krugman.

    I just watched the movie “Network” last night for the first time in about 10 years. We need some righteous anger in this country today. So bravo for shouting it from the hilltop.

    Now I’m going fly fishing to ease my worried mind. Have a great weekend everyone.

  43. Jim Bergsten commented on Jul 15

    Were I not trying to stay in everybody’s good graces, and had I nothing better to do on a Saturday, I’d be tempted to ask (and this is not only a run-on sentence, but a rhetorical question):

    Who amongst you would have turned these options down?

    Jim B.

    p.s. A list of those who did turn down such options would be far more interesting to me than a list of those who accepted them.

    p.p.s.s. Barry, I’m gratified that you are angered by this, but when all is said and done, this is a “dog bites man” story. Sadly, nothing new.

  44. bluedog commented on Jul 15

    The purpose of war is for a few to make enormous amounts of money from the suffering of the many. Always has been, always will. Why should Haliburton and the chimp’s other friends make all the money off of our soldiers dying and tens of thousands of innocent civilians killed and maimed. We all pay taxes, and I think we are all entitled to a piece of that action. If I knew 911 was about to happen I would have taken all the money I had and bought a ton of put options on the market.

  45. DavidB commented on Jul 15

    I have been watching it grow for close to two decades of study in the financial markets. As the elite continue to pay themselves and hand what they can’t handle over to their friends and family in an increasingly vicious circle of corporate nepotism we are quickly approaching the day when some CEO will blindly utter the equivalent phrase of ‘let them eat cake’. Then people’s eyes will be open to what has been building for a while and then maybe things will start to change.

  46. RW commented on Jul 15

    On target again Leisa. Worldview disagreements tend to be profound (and intransigent).

    A good rant Trader75 but it appeared to conflate democracy and capitalism; the two are conceptually distinct and neither require each other nor necessarily support each other (cf. Singapore). Any country that highly values individuality such as the USA would likely choose the “invisible hand” of capitalism as opposed to the “invisible mind” of socialism but only up to the point where there is a perception of something close to a level playing field. That perception is what is damaged when cronyism, privilege and/or plutocratic advantage appear to trump merit; in particular when the rules of the game, laws and regulations, appear to support the continued playing of that trump even if only to make it more difficult for ordinary citizens to call the bluff.

    Natural disgust regarding rampant greed to say nothing of the implicit mockery of any common good inherent in the exercise of that greed aside, no can be blamed for suspecting corporate executives as unworthy of their pay if there is evidence they achieved their position and set their own compensation through avenues other than merit. That is where we seem to be now and neither capitalism, nor democracy if it comes to that, are served well thereby.

    As something of an aside here, Thomas Jefferson was quite aware of the dangers to democracy in a non-meritocratic system and strongly promoted a universally available public school system with further promotion beyond literacy based on merit alone as a result (he was defeated in that effort however).

    PS: Socialism’s emphasis on a common good is one of it’s strong points but the mechanisms for allocating resources I’ve seen proposed usually fall short, in the case of strong forms of socialism such as communism they not only fall short they appear antithetical to human nature entirely. In fact I think the best analysis of that was by E.O. Wilson and it was also the shortest: “Why did communism fail? Good ideology – wrong species.” (Wilson was a mymecologist, an ant guy).

    PPS: Jim, that’s a fair question. If the options had already been scheduled (before 9/11) I’d have to think about it but suspect I would have eventually refused on principle; the alternative scenario – scheduled to take advantage of that bloody catastrophe – would be a no-brainer: Refuse categorically.

  47. Monty (Dave F) commented on Jul 15

    Jim, isn’t a better question, how many would have thought to get the option grants the first time after 9/11 to begin with? It’s hard to think that someone on the board, even a rubber stamp came to the CEO and said,”you know, this is a great opportunity for you to loot the company…”

  48. Ned commented on Jul 15

    problem with the “would you turn these options down” question is that they were taken, not offered. and shareholders be damned. I don’t buy the high price of good talent argument either. Nobody “needs” this much money at the expense of all the other stakeholders in a corporation (employees, communities, and shareholders). That these guys run the government and the corporations is just a reflection of how lazy and complacent the average citizen has become. I am afraid (again due to human nature) that things have to get much worse before and reform with be enacted (historically revolutions have been the only way to redistribute wealth and power, with very mixed results if you ignore the meaningless labels of “communism”; “socialism” etc.
    It is the haves vs. the havenots and when things get too lopsided, (trickle down is replaced by outsourcing) bad stuff happens.

  49. Jim Bergsten commented on Jul 15

    Monty (and others):

    Since you brought it up, exactly how do employee or executive options (at any point) “loot the company”?

    This one isn’t a rhetorical question — I really haven’t boned up on the actual mechanics of such options from the company’s side of things.

    And, for whatever it is worth, I WAS a founder, CEO, executive, etc. of a company around 9/11 and the granting of options wasn’t even the last thing on my mind at the time (I was too busy glued to the TV and counting up my NY friends and relatives). I guess I just don’t have that “killer instinct.”

    Jim B.

  50. Monty (Dave F) commented on Jul 15

    I started my own company too, and I accuse you of nothing Jim, really. I just tried to limit the number of CEO’s involved to those that actively went after the cash. I suggest that it can be pretty lucrative being on a large board, and that a CEO suggests to the compensation committee members one t a time that stock options might work nicely, and that the program might work like this…

  51. kckid816 commented on Jul 15

    Another great thread, and responses. I wish I would have gotten to the computer earlier today to contribute.

  52. Steve J. commented on Jul 15

    Adam Smith KNEW the CEOs would be pigs:

    The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own..Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.

    The Wealth of Nations, Book V, Part 3, Article 1

  53. babycondor commented on Jul 15

    Interesting that Nardelli is on that chart. Also interesting that HD shareholders were basically told to go pound sand at the most recent shareholder meeting. The stock has taken a beating, but no doubt in a few months it will recover. Business as usual.

  54. trader75 commented on Jul 15

    As is common on any attack–perceived or otherwise–on capitalism, the common retort is that it is the greatest system in the world. Our lens in which we view the world colors much, and that too is endemic to our being human. Frankly, I’m not sure that socialists are any more deluded than capitalists, and I certainly wouldn’t dare to engage a conversation about it for such discussions are fruitless.


    Thoughtful commentary but I have to disagree with the thrust of what you’re saying if I am interpreting it correctly.

    The debate between capitalism and socialism is still important and still worth having precisely because there are still so many deluded participants out there. Think of it from a science vs pseudo-science perspective; the scientific community should not give up trying to discover and utilize knowledge just because there is a never-ending supply of pseudo-scientists willing to ignore them or shout them down.

    The debate between capitalism and socialism as most people see it is actually a cartoon caricature; there is really no such thing as pure “capitalism” that one can root for like a football team. A functioning capitalist system has unavoidable collective elements; people must agree on a rule of law, a framework of regulations, and so on; capitalist frameworks will look different from society to society based on self-determined tradeoffs and cultural norms; and of course there are certain “tragedy of the commons” type elements which pure capitalism cannot solve.

    So when I vigorously defend capitalism, I don’t intend to be mistaken for one of these rah-rah-sis-boom-bah types who think free markets can solve everything. Free markets are a vital foundation, not a cure-all or a be-all end-all.

    In the same way that the laws of physics are universal, certain economic outcomes are universal and quantifiable too. There are just some habits and practices that, quite frankly, do not work as advertised, and all too often these practices are supported by emotional rhetoric and special interest pandering where clear-headed thinking and a sense of responsibility would have rooted them out.

    Back to my point of disagreement: because so much BS and apathy still runs rampant, I think it’s dangerous to write off capitalist vs socialist viewpoints as if they are the same and as if all debate is pointless. That’s the nihilist road. We can’t afford to cop out here. If anything we need to engage in more debate, not less, and to encourage more critical thinking, not less, precisely because the questions are of such importance. Those who refuse to think critically and prefer to engage in cartoon caricatures are the real problem, on both sides of the aisle. (Not accusing you of this at all, just pointing out that shouting is as useless as shrugging.)

    To the degree that two particpants of a capitalism vs socialism debate agree on what the desired societal / economic outcome should be, and to the degree they share an appreciation for logic, reason and the scientific method, it should be possible to come to real conclusions based on evidence rather than just go round in rhetorical circles. Of course, many so-called participants in the debate aren’t particpating at all, they are just blathering / shouting / etc, which is part of the problem. I highly recommend E.O. Wilson’s Consilience for more insight into this subject, particularly his chapter on the social sciences.

    Also, RW said A good rant Trader75 but it appeared to conflate democracy and capitalism; the two are conceptually distinct and neither require each other nor necessarily support each other…

    I don’t disagree RW; my main point was that the responsibilities of democratic government and the responsibilities of shareholder capitalism are very similar. In both cases ultimate responsibility for vigilance lies with the investors; in the democratic sense we are all investors in the societies we live in, and government is obligated to act in our interest just as the public corporation is obligated to its shareholders. I drew the comparison to point out that while a socialist might be happy to condemn capitalism for its failings, I doubt that a socialist would condemn democracy for its very similar failings. We the people really do still hold the power, as cliched as that sounds; the question is whether we still have the gumption to get off our asses and do something useful with it.

  55. Robert Green commented on Jul 15

    back to the socialism thing–it’s a bit of red herring for me. here’s what i care about; the fact that people like Barry (clearly on the side of goodness and righteousness, as far as i’m concerned) still are ultimately using tools that are inherently short-term capitalist in nature: econometrics.

    let’s face facts. oil doesn’t cost 78 dollars a barrel. that’s the amount of filthy lucre one must part with in order to buy said barrel, but if one were to factor in costs to the environment, to human health, to our collective well being 50 years from now and so on, we’d find out a very simple fact: oil is fucking vastly underpriced. oil should cost 500 dollars a barrel as a commodity in a sane world where all factors are used to measure “value”. only in the crazy late model of capital type car that we are driving (to extend and batter a metaphor) right over a cliff can anyone rational believe anything else. that PHD economists still allow such measurements (whether for oil or for coal plants or whatever, i’m not trying to keep this only in the realm of the environment) to be the arbiters of right/wrong good/bad is pathetic. it’s delusional.

    all of us are deluded. i know i sound like crazy guy on street corner here, but come on: can anyone justify what we are doing to our planet and the justifications we use, given the hideous and probably deadly consequences? to me, economics as a field (responding, recursively, to the capitalist pressure to…support capital accumulation) has been a whore to a false definition of profit–NOT a false god of profit. i like to make a buck as much as, if not more than, anyone. i just hate seeing statistics thrown around that have no relation to the real world we will and do live in.

  56. trader75 commented on Jul 15

    here’s what i care about; the fact that people like Barry (clearly on the side of goodness and righteousness, as far as i’m concerned) still are ultimately using tools that are inherently short-term capitalist in nature: econometrics.

    I looked up econometrics on and got this: “Application of mathematical and statistical techniques to economics in the study of problems, the analysis of data, and the development and testing of theories and models.”

    Gosh, that sounds like the stuff climatologists use to get the skinny on global warming. What’s inherently short-term capitalist about econometrics?

    Economics itself is basically all about the allocation of scarce resources. Again, there is nothing “inherently” short-term here is there?

    I agree with you that there are many important considerations served poorly or not served at all by a pure free market perspective. Hence the “tragedy of the commons” observation in my last reply. But why bag on econometrics? Why bag on economics?

    Your beef–which is certainly legitimate in some respects–seems to be with the value inputs to the system, not the system itself. People aren’t putting enough of a premium on clean air and sustainable development, and they will ultimately regret their short-sightedness, okay, I can see the case for that.

    But if that’s what you believe, aren’t you better off trying to get people to change their value systems, to change the inputs, instead of questioning the tools at hand?

    Ironically this goes back to the original point. If there is a failure in the system, it is the failure of individuals to act responsibly and in accord with posterity’s interests. But how can capitalism be specifically and “inherently” to blame for environmental tragedy when the environmental destruction of socialist regimes has made capitalism look mickey mouse by comparison? Again, pigheadedness and shortsightedness are human-nature problems, not ideological ones.

    What you’re hoping to do, as far as I can see, is to change people’s belief systems by getting them to place far more weight on environmental considerations as a social and economic good. A noble sentiment. But why not just focus on that, then, instead of lobbing tangential criticisms at economics and econometrics that don’t really apply to your goal?

  57. Leisa commented on Jul 15

    Trader75: I appreciate the discussion. Thanks for the E. O. Wilson reference. I have his book and have read it several times. If I ever have a boat big enough to put a name on the back, I will name it Consilience. Peter Singer has some interesting books on morality and ethics which I own and enjoy. I’m particularly intrigued with economic morality issues, but it has been a long time since I’ve thought critically about it.

    With respect to debates regarding ‘ism’s’. Despite your elegant outline of a successful debate, these debates are ideological not logical. Nor can the merits of ideals stand up to the scientific method. No variable control. So I’m still shrugging the debate. Plenty of smart folks have had it. I’m not going to add anything new, and I’m not really trying to seek out POV’s nor persuade others to my own. I guess I’m an ideological agnostic.

    When others are inflamed about something, I ask them what they are doing about. My standard advice that if you are angry about something, seek to change it. If you cannot change it, then either adjust your point of view or get. So rather than debating ism’s, I merely focus on the things that I know that I can influence.

  58. Leisa commented on Jul 15

    RW: Wilson is a evolutionary sociobiologist–not just an ant guy!

  59. Robert Green commented on Jul 15

    a) E.O. Wilson story: as an 18 year old, living at a friend’s parents house on Martha’s Vineyard (said friend was going to harvard and working at the MCZ for Wilson) i had the pleasure of drinking beers with him on the veranda of my friend’s house for an evening. it remains at the very top of my special moments in life–truly extraordinary. and i was trying to tear him down on “Sociobiology” which i always found…yucky. i failed.
    b) what i’m arguing is that it is a sad fact of the life we live that economics AND econometrics are both practiced by humans, who live in the world where money is king. and to have their value inputs support the current system is not a bug, it’s a feature! that’s the way the world works. you sit inside the colored part of the venn diagram and comment as if you were somewhere outside looking in. but you, and me, and us, we aren’t: we’re part of the problem. i know, it sucks, maybe the problems of economics are coincidentally in line with the problems we face in the world of the future (a nasty brutish and short one IMHO) but i don’t think it’s a coincidence, i think it is a necessary reaction to capitalist non-spoken diktats.

    fuck it. what do i know?

  60. Leisa commented on Jul 15

    <> It’s not what any of us know. It is what we do.

  61. rgf4 commented on Jul 15

    interesting stuff everyone ….. so what ?!?!?!? ………. what will the markets do next week ???? let’s get to something important

  62. illegitimi commented on Jul 15

    I’d be interested in knowing what you think ‘turpitude’ means.

  63. commented on Jul 15

    9/11 Options

    The W$J reports that:On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York’s Adirondacks, soldiers readied

  64. RB commented on Jul 15

    “What is interesting about the turmoil regarding back dating of optons, is that these options dating didn’t get any real air time until share prices began to fall–witness UNH’s fall from performance grace. Funny how that works. ”

    Leisa, you make a lot of good points. I suppose that is what makes a secular bear market — people no longer are willing to ignore these offenses.

  65. ~ Nona commented on Jul 15

    txchick57: About that hammering you took when you declined your broker’s offer to break your 9/11 premarket trades: Socrates once said “Better to endure an injustice than to commit one.”

    I’ve always felt the philosopher’s words are a valuable guide to contemplated behavior. I’ll also say this (which is easy for me to say, but I’ll say it anyway): Your financial loss is more than offset by your moral gain. Likewise, I think that the options game is one that should not be played, even if offered, for the same reason you declined the trade reversals.

    (Different matter: Socrates’s deeply held conviction may have been responsible for his willingness to drink that hemlock. I prefer Aristotle’s take on the mortal danger he likewise faced. When he realized his danger, he got the hell out of Dodge! Aristotle explained to admirers that by fleeing, he could ensure that “Athens would not sin twice against philosophy.”)

    Trader75, your comments are interesting. I especially appreciated the distinction that ” ‘Gotta get mine’ is a wholly different attitude than ‘free markets for free men.’ ”

    As for democracy: There is a distinction that must be made. For the record, the U.S. is not, repeat, IS NOT a democracy. It’s a republic.

    Mindful of the power that majorities could command, and would seek to command, knowing human nature, the Founding Fathers deliberately devised a republican form of government with its carefully calibrated system of check and balances to protect against too much power accreting to any one or any group of interests. But the Fathers were not naifs; they understood the enormity of this self-governing challenge. This is why, when asked by a bystander, what kind of a government he and the other delegates had created, Benjamin Franklin famously replied: “A republic — if you can keep it.”

    Leisa, over the years I have known several people who once held collectivist views ranging from communism to socialism who came to embrace — and wholly embrace, at that — a free market world view. By contrast, I know of no one whose thinking moved from a free market view to any form of collectivism. But most people, I’ve found, continue to view the world through the an unchanged lens. And, you’re right, they don’t like their lenses poked!

    And, truth be admitted, I guess I don’t like my lens poked either.

  66. Cherry commented on Jul 15

    Collectivism and Individualism are both healthy parts of any Republic, it is just the values we would consider “good” for Collective or Individual to be.

  67. DBLWYO commented on Jul 15

    Kant resist…so if we all care so much what do we do ? ONe thing of course is to watch out and discount for the wolves in the forest and go on about our business. Sine qua non.

    But, albeit markets have provent to be the most efficient way of organizing human behavior, the markets vs ethics misses several important pre-reqs for markets. 1) They have to be defined which requires enormous cooperative effort to define the weights, standards, and other things – see the formation of early exchanges history 2) markets cannot exist without a foundation of law and property rights – justice and civitas if you like. There’s a several decades of brilliant research on that. And 3) Ford’s paradox – when we have a fair exchange we’re all better off. In other words, ethically, morally and privately, the more other people are doing well the larger the opportunities for me and you. It’s the fundamental paradox of a market-based economy.

    For anybody interested in digging a tad deeper highly recommend Mancur Olsen’s ‘Power and Prosperity” (the perfect complement to Smith) as he discusses the political economy of the visible hand. And Douglas North (many great books) but in particular ‘Structure and Change in Economic History”. If anybody’s interested in how following the rules if both good and does well for us all as well as ways to move forward here’s the ‘fundametnal particle physics’.

    So, in the spirit of Barry’s excellent blog, how do we look at what is and do what’s best ?

    I confess to being puzzled.

  68. juan commented on Jul 16

    To debate, or even consider, capitalism vs socialism requires an objective grasp of social systems, relations of production and REproduction, of history, of dynamics which constitute the driving contradictions within and of each.

    To deny the centrality of profit maximization and capital accumulation within the capital system is to deny reality.

    To replace these with ideological notions such as ‘human nature’ is at best trivial unless an explanation of human nature is provided, and one which gets beyond the ahistoric concept of some immutable qualities, themselves so handy when imagining the capital system to have always been and, by doing so, imply its future permanance.

    Systems have life spans, they rise, mature, decay – what’s discussed in the above posts are phenomena of decay. Sure, they have been present over the life of the system, aren’t new, but it certainly seems that the quality has changed as financialization has risen to prominence.

    ‘Socialism’? Who knows what that might be, especially since it has not and does not exist. Accepting a can’s label as indicative of content, most have been well trained to believe that the Soviet system of state capitalism was not that but, rather, just what it was labeled. Needless to say, presenting two forms of the same thing as strictly antithetical was a handy means to justify decades of wastage.

  69. Brion commented on Jul 16

    So, in the spirit of Barry’s excellent blog, how do we look at what is and do what’s best ?….

    “ya now, them wolves is GOOD eatin’! Taste a bit like pork”

  70. JRG commented on Jul 16

    from another site:
    “Ninety-one companies that didn’t regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. They were worth about $325 million when granted, based on a standard method of valuing stock options.

    The 91 companies included such corporate icons as Home Depot Inc., Black & Decker Corp. and UnitedHealth Group Inc. It included two companies directly touched by the tragedy. Merrill Lynch & Co., across the street from the Twin Towers, lost three employees. On Sept. 24, Merrill granted its president options to buy more than 750,000 shares, at a price 15% below the pre-attack level. At Teradyne Inc. in Boston, an employee delayed a business trip until Sept. 11 to attend a son’s soccer game and died on American Flight 11. Teradyne that month gave its CEO more than 600,000 options at a price enabling him to buy stock at 24% below its pre-attack level.

    There’s nothing illegal about granting options after the market plunges. But acting so quickly after a national tragedy drove down stocks shows the eagerness of some companies to increase their executives’ potential wealth. These grants also offer important new fodder for an already fractious debate over what constitutes the proper use of options in executive compensation.
    click here …

  71. Mike/a.k.a.Sage commented on Jul 16

    If you are as angry as I am at this kind of activity, you would go to your HR department or 401k plan administrator, first thing Monday morning, and re-allocate all your 401k money and withholdings, and put 100% of your 401k money in money market funds.

  72. trader75 commented on Jul 16

    interesting stuff everyone ….. so what ?!?!?!? ………. what will the markets do next week ???? let’s get to something important

    As JP Morgan once said, “they will fluctuate.”

    Energy and metals stocks (XLE / OIH / GDX etc) held up well in the face of all the sell programs that kicked in last week A lot of investors are probably cursing b/c they didn’t go up w/ oil and gold, but when you’re walking headfirst into a windstorm it’s a feat just staying upright. Might be a good place to be when the sell programs kick over to buy, but only for the fleet of foot.

    Things are ugly here and getting uglier but I’d be surprised if the sunshine gang gave up the ghost this easy. Maybe some more bloodletting and then the program traders cut the buy juice loose just to keep the little guy bamboozled?

  73. tjofpa commented on Jul 16

    On the subject of what can we DO about it…
    Go to the polls and vote Anti-Incumbancy. We’ve got a candidate in every race.

  74. trader44 commented on Jul 16

    and JP Morgan had a hard time buying stocks and supporting the market in 1929 ……. he died in 1913

  75. Leisa commented on Jul 16

    Given that I’ve seen M. Zweig referenced in a couple of places over the last couple of weeks, I pulled out my Zweig book (Winning on Wall Street, 1990, Warner Books, autographed–my ONLY brush with with anyone famous.) How I envy Robert Green’s beers with Wilson! (I keep my financial stuff in a different bookcase than Wilson and Singer! Gotta keep things separated despite Consilience!). Anyway, perhaps everyone here already has this book and knows this stuff. But I remembered that MZ had three requirements for a bear market. I’ll list them here for a change of scenery:

    First off, his definition of Bear Market: There must be a 15% decline in each of the following: Dow, S&P and Zweig unweighted/Value Line Index. When all do not participate, he classifies those as borderline bear markets, intermediate declines or mixed markets.

    1. Extreme deflation: PPI decreasing 10% on a 6 month average of annualized m-t-m changes;

    2. Ultrahigh P/E ratios: (Upper teens/20’s). “10-14 are roughly normal. Very low P/E’s in the 6-8 zone, tend to be bullish in the long run, while P/E’s in the upper teens and twenties generally reflect excessive spectulation, gross overvaluations, and poor future stock price performance; and

    And the third item….drum roll (you already know it)

    3. Inverted yield curve. He used Mood’ys Aaa Corporate Bond Yileds as the long-term rate, and six-month commercial paper rates as the s-t rate. He notes that the inversion may only last a month or two and the bear market may not develop. BUT “if the spread between commerical paper rates and bond yields keeps widening in the negatie directions, the odds for stocks get worse and worse.

    “In sum there is no guarantee that a bear market will begin when one of the three extremely bearish market conditions is first present. But the longer such a condition persists, or the more severd it becomes, or when a seond or third negative condition joins the first, the odds on a bear market become overwhelming. On the other hand, should the major averages experience a decline of, sa, 10% or more with none of these three negative conditions present, the odds of that decines’ becoming a major bear market are quite small”.

    For any of you who do not have Marty’s book. I highly recommend it.

  76. MikeF commented on Jul 16

    trader44, I think that Barry was probably referring to J.P. Morgan, Jr., the son of the gentleman whom you correctly cited as having died in 1913. Good catch .

  77. jockL commented on Jul 16

    you guys are speaking of Richard Whitney , the former head of the NYSE , who went from post to post supporting stocks ……. (sad to say , he was indicted for embezzlment years later )

  78. trader75 commented on Jul 16

    I’ve got that book (Zweig’s winning on wall street), haven’t cracked it open in 5 or 6 years though.

    Also interesting to note the S&P 50 day EMA is threatening to submerge below the 200 for the first time in many moons, what some have called the “death cross.”

    On the bright side, the most powerful rallies have historically occurred in bear markets, not bull, which should make for some fun.

  79. Nathanael Nerode commented on Jul 16

    They’re just thieves. Any intelligent investor should know by now that the majority of corporate executives are simply thieves, stealing the companies’ money.

    It makes investing rather difficult. If you apply a no-thief filter to your stocks — and you should — there’s a pretty should list left. Starting with Berkshire Hathaway, of course.

  80. nneW commented on Jul 16

    Berkshire Hathaway’s General Re thieves ?!?!? ha , that’s a good one

  81. anon commented on Jul 16

    i agree with your view on the issue, but i don’t see how you can say it was ‘burried’… it was on the front page.. top fold no less! people still read the paper on saturday. i did.

  82. Al_K commented on Jul 16

    Strange you should mention the Teradyne employee who died on 9/11. A friend of mine worked for that manager. He was well thought of by his employees and his managers. He had a very successful organization. Within a year of his death all the jobs in his organization were outsourced to India including my friend’s

  83. MrMarket commented on Jul 16

    ►►► Faith takes another hit
    …day by day…
    …week by week…
    from the Fall of the Wall
    to the height of global obsession
    it is still early in Capitalism’s Fall from Grace

  84. Reconstitution commented on Jul 16

    Options Probe-IV, A New Beginning.

    Saturday’s Wall Street Journal included another blockbuster article on Corporate America’s dishonest use of Stock Options. Executive Pay: The 9/11 Factor begins:
    On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. A

  85. random_guy commented on Jul 16

    To those who feel no compunction defending those engaging in such behaviour, here are some questions from a humble pleb with no aspirations of entering the business world.

    How much money is enough for you?

    Perhaps that question was hopelessly naive. How about these instead;

    What are the limits to the behaviour you would engage in just to get money? If Al Qaeda had stock options, and you could guarantee to make a bucketload, would you invest in them? Would you (like Prescott Bush) have traded with the Nazis during WWII? When, if ever, would your consciences kick in?

  86. critter don commented on Jul 16

    all you capitalist putzes are gonna fry in hell
    “i gave up my socialist youth to capitalist reality” crap
    it’s karma
    you will die, you will face a judgement
    good luck
    cry now
    it’s too late
    you sold your collective souls for few bux

  87. ccf commented on Jul 16

    critter don

    just another chimp

  88. jcf commented on Jul 16

    Reading this post and thread has been like an day spent in Plato’s Academy.
    Maybe Barry and the gang ought to start a school of Late Capitalist Philosophy. Less remunerative but far more stimulating than trading.

  89. MDDwave commented on Jul 17

    Is there a list of CEO names? Is there any collusion between the names?

  90. alex commented on Jul 17

    Barry – Thanks for the clear comments and your bravery to name the beast. Well, I hope we will hear who those people are who thought taking advantage of the crisis is their first duty. Another question is: how can we avoid such things in future? It is really one of my concerns that we need to find better/more enlightened ways to deal with money. It would help a great deal…

  91. heat death of the universe commented on Jul 17

    Profiting from disaster

    According to the Wall Street Journal, some companies rushed to grant stock options to executives in the days after the September 11 attacks. The company’s stock price had fallen after the attacks and the options were pegged to the current…

  92. commented on Jul 17

    9/11 Options Dating: Pseudo-Scandal or Un-American Assclownery?

    The Wall Street Journal’s Saturday edition carried a story about executive stock options granted shortly after September 11, 2001—when share prices had plummeted so that the options granted were relatively cheap compared to what they would have been be…

  93. bartkid commented on Jul 17

    If CEOs are supposedly to run public companies for the benefit of shareholders, why is there never a move to outsource this position to a management consulting firm or an accounting firm for a flat annual fee?

  94. A Pond Full Of Pigs Plus commented on Jul 18

    A Pond Full Of Pigs Plus

    Spoon full of holes, pointless task, this looks like a job forpatches, fruit trees, wildlife garden and frog pond in a le…

  95. The Big Picture commented on Jul 18

    The Apologist’s Fund: a 9/11 Options Grantee Investment

    One of the tools available to investors when determining where to put their money is the ability to evaluate corporate management. For this purpose, a Crisis can be a wonderfully telling thing. Under pressure, without all the slick IR and PR folks arou…

  96. MaxSpeak, You Listen! commented on Jul 18


    Sounds like a movie, but it’s true. (Via the mighty Atrios.) UPDATE: More here….

  97. albiegf13 commented on Jul 18

    I’m glad to see that someone benefited from 911, I guess it that it wasn’t a total loss….

  98. Dr. BLT commented on Sep 10

    Sometimes good intentions are not enough to make good things happen. I believe the best example of altruism, if it exists can be found in the passengers of the doomed flight, United 93. I’d suggest renting or picking up a copy of the DVD, United 93. It’s a pretty good movie. It could use a theme song, however. That’s why I wrote this one:

    United 93
    (the song)
    words and music by Dr. BLT (c)2006

    If you’d like to check out my 9/11 podcast, feel free to do that at my website:

    In the meantime, here’s another song:

    One September Mournin’
    performed by Sacramento Bands Together
    words and music by Dr. BLT (c)2001, 2006

    That’s all folks, I’ve got more blog n roll songs to write.

Posted Under