One step closer to Fascism...

[FUEGO]

So, does anyone think that it's time to shift Asset Allocations away from US-based stocks?

The point of the OP (I think) is that gov't meddling in profit-seeking firms will decrease the profitability of those firms. If this is true, US stocks are less desirable, while bonds and foreign stocks are more attractive. Hence, people who feel strongly enough about this should be changing their personal AA. Is anybody moving?

No; I already have an allocation with 50% US, 50% international. I didn't want to take on too much single country risk. And this approximates the total world market capitalization.

Other countries interfere with profit seeking firms to a much greater extent than the US does (via taxes, regulations, labor laws, corporate governance, etc). But it is a logical fallacy to say that "other countries are worse than the US" and therefore the US is justified in its actions. The US could always improve its policies.

 

[jug]

The fact that the average working slob is worried about the capping of exec's salaries is amazing and amusing.

Big time execs have nothing more then comtempt for the average working Joe, if you don't believe it, just try contacting one of the big boys when you have an unresolved complaint about one of the products their firms are hawking. There are layers upon layers of barriers between you and them. To worry about the salary caps on big boys who are trying to con us that they are not expendable is absurd. They can all be replaced in view of the fact that their true job performances these past few years are nothing to jump about.

As a matter of fact, I'll run GM for a cap of 750k a year, probably can't do much worse than Wagoner, or even Lewis, I'll take another 750k a year. My only problem would be scheduling the meetings, the parties, the over excess of eating and drinking, and yes traveling in private jet would probably test my patience after a while. Only so many things I can do!!!!!!!!!!!!

The lackies and advisors run the company, the CEO or big boys simply flip the coin on decisions.

jug

 

[ERD50]

So, does anyone think that it's time to shift Asset Allocations away from US-based stocks?

The point of the OP (I think) is that gov't meddling in profit-seeking firms will decrease the profitability of those firms ....

(I have a semi-relevant story from 1980, but I'll postpone it.)

Like FUEGO said, it does not mean the US is "worse" than others, so tough to call. Also, the pendulum may swing back before long, who knows? And while I tend to agree these actions will have a negative influence, that doesn't mean it won't still be positive growth - in spite of the meddling.

Good to think about, but for me personally, I don't think the crystal ball is clear enough to make any big AA changes. Others may have stronger convictions on this.

Tell us about 1980.

The fact that the average working slob is worried about the capping of exec's salaries is amazing and amusing.

jug

And why not cap actors and athletes and performers? The average joe pays for movies, shows and sports.

[satire] The nerve of some of these crooks to make the kind of money they do, for talking, singing, or throwing a ball! [/satire]

BTW, I do think there is a breakdown in free markets when it comes to CEO/BOD - something maybe should be done, but I don't think caps are a solution.

-ERD50

 

[ziggy29]

BTW, I do think there is a breakdown in free markets when it comes to CEO/BOD - something maybe should be done, but I don't think caps are a solution.

There's an incestuous and mutually self-serving thing going on in corporate boardrooms. Often times different companies will put each other's executives on their board and they can mutually agree to give each other outlandish pay. It's certainly not done (in most cases) for the benefit of the shareholder. If the shareholders were in mind, executive pay would consist of a fairly modest base rate plus corporate performance incentives as a bonus. No profit, no bonus. More profit, bigger bonus. You deliver results, you get rewarded.

It's not the executive pay itself that bugs me or even the incestuous nature of the composition of corporate boards. It's the appearance of a complete and utter lack of "pay for performance" that has me flummoxed.

 

[ERD50]

It's not the executive pay itself that bugs me or even the incestuous nature of the composition of corporate boards. It's the appearance of a complete and utter lack of "pay for performance" that has me flummoxed.

Agreed, however I'm not sure that some of the proposed solutions, like having shareholders approve pay would be so great.

Take a hypothetical (but not unrealistic) case where a company has been in the pits, and due to a brilliant and hardworking CEO, the company suffers a far smaller loss than they would have. So in that case, the CEO certainly earned a good salary, but the company still reported a loss. It's tough to measure, and would shareholders have the judgment to measure that and reward it? Questionable.

I could see something where shareholders vote to approve a pay POLICY (rather than specific pay) that is tied to the long term success of the company. Easier said than done, and maybe some really sharp "turn-around" experts would feel they could do better jumping from one troubled company to another.

There is definitely room for improvement, no easy answers. I guess redefining the BOD/CEO and "I'll be on your board if you come to my board" arrangements would be a step, and maybe not that hard to codify. Though I would prefer the companies to do it on their own to attract investments, rather than have govt intervention. Looks like not too many companies are stepping up to the plate though.

-ERD50

 

[Gone4Good]

But I would think it could not be argued that legally this govt move is illegal, and without precedent.

Wow, both illegal and unprecedented. If only that were true.

Richard Nixon, August 15, 1971 . . .

I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days. In addition, I call upon corporations to extend the wage-price freeze to all dividends.

August 15, 1971 Speech : Nixon Announces the end of Gold to Dollar Convertibility by History of Gold

BTW, the 90 day freeze extended for something like 1,000 days.

And, according to a paper by Vanderbilt University . . .

One of the best examples of a deferential statutory test is the courts’ interpretation of the president’s power under the Federal Property and Administrative Services Act of 1949. The Act includes a broad authorization of power to the president . . . Presidents have invoked this authorization to initiate a wide range of policies, from imposing wage and price controls to requiring government contractors to post a statement of workers’ rights not to participate in a union. In a line of decisions spanning three decades, the courts of appeals have sustained presidential orders under the Procurement Act so long as the president could point to some “nexus” between the order and the values of economy and efficiency

 

[unclemick]

Ya do know - back in the good ole days in SW Washington - we would let the office exec's out of the PUD office once in a while so they could suit up - climb power poles and stuff.

That way they could get dirt under their fingernails and improve their self worth.



heh heh heh - .

P.S. Anybody still have their 1975 Whip Inflation Now button?

 

[Independent]

Like FUEGO said, it does not mean the US is "worse" than others, so tough to call. Also, the pendulum may swing back before long, who knows? And while I tend to agree these actions will have a negative influence, that doesn't mean it won't still be positive growth - in spite of the meddling.

Good to think about, but for me personally, I don't think the crystal ball is clear enough to make any big AA changes. Others may have stronger convictions on this.

Tell us about 1980.

Sorry for the slow response. In 1980, one of my co-workers explained why the future looked dim for stock investors. His argument was political, not economic. He pointed out things like: It seemed we never heard a congresscritter say "profits", the PC term was "obsceneprofits". Congress had just passed a "windfall profits" tax on oil companies. We had seen a Republican president impose wage and price controls. The Fed was allowing inflation because they couldn't bear the thought of high unemployment. Corporate annual reports listed all the "responsible" things that companies were doing about consumer safety, affirmative action, women's issues, environmental concerns, community strengthening -- each of these issues was getting legislative attention. But they didn't seem to get around to mentioning "increasing shareholder value".

His argument made a lot of sense to me at the time. We know what happened to stocks after 1980. A lot of it was Reagan, some was sensible economists getting through, but I didn't foresee the political change.

My point is that, like you, my crystal ball isn't very good. Political winds shift. I've seen times when politicians seemed much less friendly toward business than they seem today. Based on my past experience, I'd be very slow to predict anything about which way politics will go next.

 

[unclemick]

Sorry for the slow response. In 1980, one of my co-workers explained why the future looked dim for stock investors. His argument was political, not economic. He pointed out things like: It seemed we never heard a congresscritter say "profits", --------
My point is that, like you, my crystal ball isn't very good. Political winds shift. I've seen times when politicians seemed much less friendly toward business than they seem today. Based on my past experience, I'd be very slow to predict anything about which way politics will go next.

I've always wondered whether Thatcher goosed Reagan off camera to get him jump started or not.

heh heh heh - Or was it Volcher?