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The Fed Just Unleashed The Next Stock Market Boom
AtomicPiss
Administrator, Swaye's Wigwam Posts: 64,435 
In brief, Bill Clinton campaigned in 1992 on "putting people first". Wanted to limit CEO pay to no more than $1 million a year. It became law a year later.
In 1992, 35% of CEOs earned $1 million or more. In 2020, it is 95% of CEOs.
CEOs still got their compensation, but it came in the form of stock options instead of salary. So, the emphasis became less on long-term growth and stability, and more on increasing value of stock options at all costs.
"Putting people first" sounded good, but it had unintended consequences. For example, from 2018-2019, Apple revenue went down, but stock value went up $1 trillion. It was no longer based on a company's long-term performance.
Companies buying back their own stock is the only thing keeping the stock market growing right now.
The Fed just announced that they are going to allow banks to resume buy backs. In April, the Fed will pump more liquidity into the banks. The banks will be able to get some of the cash off their balance sheets. This will send the stock market skyward in the short term.
Mark Moss thinks more than $10 trillion will be printed in 2021. "You do not want to be stuck holding these fiat dollars". He says to buy tangible assets, gold, bitcoin and productive real estate.
https://www.youtube.com/watch?v=5n31oBzeEiU
In 1992, 35% of CEOs earned $1 million or more. In 2020, it is 95% of CEOs.
CEOs still got their compensation, but it came in the form of stock options instead of salary. So, the emphasis became less on long-term growth and stability, and more on increasing value of stock options at all costs.
"Putting people first" sounded good, but it had unintended consequences. For example, from 2018-2019, Apple revenue went down, but stock value went up $1 trillion. It was no longer based on a company's long-term performance.
Companies buying back their own stock is the only thing keeping the stock market growing right now.
The Fed just announced that they are going to allow banks to resume buy backs. In April, the Fed will pump more liquidity into the banks. The banks will be able to get some of the cash off their balance sheets. This will send the stock market skyward in the short term.
Mark Moss thinks more than $10 trillion will be printed in 2021. "You do not want to be stuck holding these fiat dollars". He says to buy tangible assets, gold, bitcoin and productive real estate.
https://www.youtube.com/watch?v=5n31oBzeEiU
Comments
Yes ONLY thing
Tying executive compensation to short-term stock performance has been nothing short of disastrous. As a CEO, or any other exec, who cares if your strategy is short-sighted? Worst case scenario you pump up the price for a few years, make millions in SBC, and if everything comes crashing down because you stopped giving a shit about the long-term forecast, well there's always a nice severance package waiting at the exit.
Believe it or not it was your boy Trump who actually came in and reformed section 162(m) through the TCJA, which now requires stock compensation to be factored into the $1m limitation. I don't think enough time has elapsed to really study how much this has influenced corporate behavior, but it was a long overdue change and will hopefully start bearing fruit soon. There have already been rumblings of public companies trying to steer away from quarterly earnings calls because this obsession with 3-month earnings is exactly the kind of short-sighted analyses that isn't helpful or indicative of a company's long-term prospects. Hopefully this is a positive sign of things to come.
So many stupid decisions tied to short-term stock price. Causes irrational behavior and decisions. The faggotry of managing by stock price cannot be overstated. Dealing with it now and I'm about ready to call in Tony Sopranos boys to eradicate the problem.
Stock buy backs are not the only thing keeping the market afloat. I can't get there. It's not like buy-backs are reflected on a 1 to 1 basis in the share price ... and sometimes not at all. Yes, it may enter into TRS for compensation performance goals (usually not ... people tend to frown on that), but it's lolz that it's the reasons the market is doing what it's doing. At my companies over the years, buy-backs haven't done shit to the share price. I think it's a waste of cash myself. Pay me the cash in a fucking dividend and that's money in the bank. Not make believe, theoretical value transfer.
There is a lot to unpack here. As you might be able to tell, you're getting into my wheelhouse as it relates to executive comp. Suffice it to say, the proxy advisory firms (ISS & Glass Lewis) will recommend to institutional shareholder clients that they vote against the board or the chair of the comp. committee and against the company's "Say on Pay" vote if executive comp. isn't balanced between long and short-term incentive compensation. CEO salaries are mostly a detail. The incentive comp. is where the real numbers are.
Happy to discuss further.
I've been following a shareholder action and it's provided some good drama. New CFO quit after a few days claiming accounting improprieties and improper controls. Creditor is the one who put the CFO in place. Claims of self-dealing by the CEO. Gonna be some good popcorn material. In this case ISS is siding with the activists/whisteblowers. Good shit.
And that advisory vote on executive comp. was the most brilliant thing to come out of Dodd-Frank. It's an advisory vote with teeth. If you ignore a shitty SOP vote, the proxy advisors will recommend against the Comp. Chair, then the board chair, then board if you don't do something about the issue.
And when ISS recommends "against" anything, you are going to have a vote problem. Most institutional money will vote with ISS recommendations unless there are extenuating circumstances.
And when you have >5% shareholders, you answer the phone when they call, and you return letters when they write.
It's not like the old days. I've spent 1/2 my career laughing at ISS, and half living in fear of them during proxy season.
In this case, I'm Team Kick their Ass Sea Bass in favor of ISS because management is a bunch of do-nothing fuckwads. Couldn't happen to nicer chaps.
Imagine...govt completely misreading economics and incentives...
@HoustonHusky , arguably those rules have been in place since time immemorial. We're talking about Regulation S-K Item 402 and Schedule 14A (proxy rules). In the old days, yes, the lawyers were paid to obfuscate as much as possible, but there was only so much you could do. In 2006 there was an aircraft carrier amendment to 402 that required, among other things, two key changes: (1) stock-based compensation had to be fair valued in accordance with GAAP accounting standards and disclosed on that basis in the comp. tables and (2) the creation of the requirement to include a Compensation Discussion and Analysis (CD&A). The CD&A requires pretty clear disclosure of how the comp. programs work, and a clear explanation for why the comp. committee made the salary and other compensation decisions it made for the prior year. So for this proxy season's SOP vote, the voters will be voting on whether to approve the 2020 comp. decisions "as set forth in the compensation tables and discussed in the CD&A" in the proxy statement.
I would say it's about as clear as it's going to get. Sure, for the average retail investor, some of the disclosure isn't obvious because most people don't spend their time thinking about how to compensate and incentivize senior executives.
I'll say this: absent a situation where they're gaming the system, which is harder to do than many think, I like the free market approach here as I usually do: let the market decide what these guys are worth. Plus, you have the ability to vote out the board if they continue to employ a dead beat who's being paid a ton of money to do a bad job. Running a company is a big deal and most people aren't equipped to do it, nor are most ready to make the personal sacrifices it takes to do it. To be a good CEO, you almost need to be obsessive about the company.
Not a metric I use when deciding to buy a stock.
It's just too far removed. I mean, MAYBE if in a concentrated period of time a huge amount of the float were repurchased so people could get their heads around it ("hey, they bought back 40% of the company last quarter; our shares are worth so much more now!") ... but that's never how it goes.
Again, I say, if you have that much cash burning a hole in your pocket, declare a huge ass dividend and send me the $$. If I want to use that to buy stock, then I will.
Not a fan.