DonFanucci

I would have to disagree with that, I can't think of a single anti trust case that I thought was justified. I can think of some really stupid ones off the top of my head... Microsoft for giving away a browser, IBM for dominating mainframes, Alcoa for literally being too efficient, Staples-Office depot was totally insane, the list goes on and on. It seems like more of a way for competitors to coerce each other because they can't compete in a voluntary market. Like Benioff at Salesforce trying to get his cronies in Europe to block Microsoft's bid for LinkedIn.

That ideal is the exact opposite of the founding principles of the United States. The declaration of independence isn't about feeling like you belong to a tribal collective. It's about the INDIVIDUAL and his inalienable right to live his life as he sees fit, no matter what the tribe says. The right has lost all understanding of this. Trump and Sanders are two sides of the same coin. Sanders thinks your life exists to serve the worse off and Trump thinks your life exists to serve the nation. Who today says that your life belongs to you, and that this freedom to live it is inalienable- even if 99% of people disagree with your choices- even if it means not buying health insurance, or not saving for retirement- even if it means hiring a Mexican?

Is someone going to make one for Hillary now?

I agree with dwy, the return on assets is usually not the issue. The way GAAP works is that there is a pension liability expense generated each year and that is netted against the expected return on assets to compute the pension expense on the income statement. Then the difference between the expected return and actual return on assets comes out of the Other Comprehensive Income statement. So too high of an expected return inflates the income statement by artificially lowering the pension expense and shifting the difference to OCI. The more important number for the balance sheet is the discount rate on the liability- does that look too high? This is the leverage here worth thinking about. Perhaps the assets are allocated in such a way as to match the duration of the liability so that both sides of the equation move up and down in tandem with rates. Totally. And this is really the case with anyone that is trying to earn a return to pay off fixed rate debt. The amount of cash that's ultimately going out the door to pay pensioners is a given amount (assuming no cost of living adjustment), the only question is whether you can come up with the cash to pay it. Lower discount rates (and higher liabilities) are just reflections of the fact that you need to invest more today to have the necessary cash in the future.

Right, I agree with everything you said here, so I think I was unclear. I definitely don't think everything should be open. My point is that you can ask the seller any question you want, but they have no obligation to give you an answer. If you purchase a product despite this, you are responsible for the risk you've taken. What creates fraud is misrepresentation of fact. You pay for a good/service as defined to you by the seller. If you receive other than what was represented to you, you've had your money taken from you against your will. In a transaction between people with different amounts of information, there isn't fraud unless the seller makes factual misrepresentations about what you're purchasing. Lacking some information is the risk that you have agreed to take by entering into the transaction without total information. In an anonymous transaction for a stock certificate, the only thing that you are getting from the seller is the stock certificate. There's no representation about the company itself or the operations- all of that is a risk you're taking so you'd better do your best to get smart on the company. Buying a new car is different from buying stock only in the representations made by the seller. The dealer tells you, 'This is a new car', which implies the corollary that it's going to drive off the lot in working condition. If it turns out to be a shell over a rusted out chassis, you've been defrauded. I agree about the secretary having access to valuable information etc. But my view is that the information represents a value (hence why people want it) that was created by the company and it belongs to the company accordingly. This is why it's the company's prerogative to have employees sign NDAs and employees that steal valuable information ought to be prosecuted for theft. That info isn't the employee's to do with as he/she pleases. Like all assets of the company, management can make the determination of how to control it. Hielko is right in that if companies just gave out material information willy nilly, the stock would need a larger risk premium and trade at a discount. Hence the huge incentive to control the information in a responsible way that lowers the company's cost of capital. There will be situations such as this where there is an investor who has shown himself to have integrity and be long term oriented, and whose ownership of the company is beneficial. Management should be allowed to give this investor inside information and there's nothing wrong with the investor trading on the information. It could turn out that the dissemination of the inside information has created more of an overhang on the stock rather than an increase in value. For example, the stock is viewed at a discount because there are people trading it who know more than you vs. the stock is trading at a premium because Leon Cooperman is in it and he has done thorough research- or because Leon Cooperman likes it so much he's locked up more of the float causing the marginal sale at a higher price. Either way, management can make mistakes with the allocation of company assets. The point is, there's nothing inherently wrong about trading on inside information and to try to prosecute someone because they knew non-public information communicated to them by management, and tried to balance their separately managed accounts is immoral.

I disagree. In your example the seller without the material information would be harmed, because he sold at a discount to the potential "true" price once the news were out and known to all investors. Just like buying a used car, where the seller knows of some (hidden) defects and the buyer overpays therefore. You can't argue the buyer had bought it anyway on that day for that price. I agree with Scott 100% In the case of buying a car, you are allowed to ask the seller questions about the vehicle. If they lie to you, that's fraud and they should be prosecuted. If they say, "I'm not going to answer", and you still purchase it- then you are responsible for the outcome of the (silly) risk you took. In the case of a new car, you don't need to ask questions because the product is presented to you as a new, working car. If they deliver otherwise, you should have a legal right to reparation. For a stock, the seller isn't representing anything to you other than "you will own this stock certificate which is legal ownership in this corporation". You can ask the seller questions if you'd like (they probably won't say a thing), or you can just click a button on your brokerage account. The essential issue is whether you are getting what was represented to you (with a clear distinction between fact and opinion). If you're not, it's fraud. If you look in your brokerage account and you received Monopoly cards for an interest in Atlantic Avenue, you have been defrauded. A stock promoter who goes around selling his penny stock shares in a bankrupt company to the same people to whom he promoted it as solvent, he should be prosecuted. A regular stock trade, however, is nothing like that because nothing about the company is represented to you. Caveat emptor. If there are companies that routinely give inside information to select people then their equity will rightfully suffer a discount. It's in the company's own best interest to control the information, which means having people sign legal agreements etc. The information has value and that value is the property of the company to use and dispose of like every other piece of the company's property. If an investor steals that information through espionage and appropriates the value to themselves, that should be illegal for the reasons theft is illegal. For example, lawyers who steal information on deals from the company's network and sell it for cash should be prosecuted for theft- not for insider trading. In the Cooperman situation, you have an executive giving information to an investor doing deep due diligence, who then makes minor trades for reasons unrelated to that specific information. It is crazy to bring legal action against him and no one has been wronged.

99.999% sure this is incorrect. The standard is material, non public information obtained from somebody that had a duty not to disclose. You can't ask the CFO of a company what earnings will be next quarter then trade on it and say I never agreed not to trade on it. Is that even Cooperman's argument?? It's not his defense at all in the response he sent to his investors (https://www.scribd.com/document/324904447/Omega-Advisors-Inc-Letter-to-Investors-9-21-16#fullscreen&from_embed), so where is Roark getting that from? Roark also accused Cooperman of making his career on insider information. We still await the evidence for that accusation.

Evidence?

People think that because billionaires are rich that they can be maligned, and there's never anything unjustly said about or done to them, or if there is, that it doesn't matter because they're rich. I think that's ridiculous. We owe our modern way of life to businessmen, including billionaires, and they receive no praise for it. Quite the opposite, and this is a good example. We have here a man with a storied career as a great investor and by all accounts I've seen, a great man. Yet it's already assumed by many here that he's guilty before it's proven in a court of law, and that he has been doing this for many years despite no evidence at all for that. He chose not to settle which indicates he thinks he's innocent, and that's interpreted as potential hubris. Who else in society is treated this way? Name another group of people that is 1) assumed guilty until proven innocent 2) is constantly the scapegoat for the problems created by others (housing bubble, etc) 3) is forced to operate under non-objective laws that in many cases are impossible to know whether you have broken or not (insider trading being one) 4) is penalized for success (anti-trust against Microsoft/Alcoa/Google/etc)

Amazing how many experts on this case there are here.

I don't see why you would find it so nonsensical. In a situation when people are over levered and have a desire to delever they prefer savings (pay down debt) to goods. This is turns depresses the demand for credit which drives down interest rates and yes if that desire to delever is widespread enough and strong enough it can make the price negative. Also keep in mind that for the people who delever the interest rate is positive because they're paying down debt they've accumulated years ago at higher rates so effectively they're getting a pretty good deal. The theoretical reason why interest rates can't go below zero is that is that you can keep physical cash which pays zero, but physical cash does have carry costs that makes the minimum price for cash below zero how much below we don't know for sure yet. As you can see that's all market driven supply and demand no government. What exactly are you saying here? People would rather pay down debt than take it on creating a lack of debt. This reduction in supply of debt is so large and demand so high that investors are willing to lose money to get the debt?? The whole point of owning debt is to make money. This reminds me of philosophical arguments that become completely detached from reality and end in absurdity. The question that needs to be answered is, why would someone knowingly lend money at a loss? To claim this is market driven is bizarre given that central banks have printed trillions of dollars to artificially increase demand for debt for the very purpose of lowering interest rates. There's a reason this has never happened in the history of the world.

Pretty sure the parents of this girl are re-considering their vote for Pneumonia Hillary. http://www.theamericanmirror.com/hillary-hugs-child-despite-contagious-pneumonia/ That video was too darn funny. Instead of just coming out and saying she's dehydrated, her first instinct is to start lying. "I feel great!!" "It's a beautiful day!!" ... meanwhile she has pneumonia and can't even stand. I'm sure she feels totally fantastic. Lol.

I'm responding to what you wrote and the article you posted. Not sure what I assumed incorrectly. No one has supplied a reasonable argument about why the ratio of CEO pay to worker pay is a relevant metric to anything. I've written several times about why it's meaningless and a focus on inequality causes envy. No one really responded. I agree about the dead horse too.

As I said before, these arguments are necessary to justify envy and theft. If you can show that the rich don't deserve their money then a personal desire for the rich to lose their money is just. Warren/Obama tried this with the 'you didn't build that' speech. This is all a corruption of what responsibility means and what it means to merit something. Look at the professor's own example of people with skill and what happens when you introduce luck. But the skill itself can be the result of luck. Some people are simply born with great skill. Buffett was lucky that he was born in the right century etc. Gates was lucky to have been born with a great mind. He was also lucky to have access to a computer during high school. You say luck plays a bigger role than skill but the issue isn't whether skill or luck plays the larger role. The issue that is completely left out of that article is CHOICE. The choices people make are what creates their responsibility for the results of their choices. The standard of merit and responsibility cannot be total control over every aspect of reality. If that's the standard of evaluation for merit, no one merits anything. There is ALWAYS luck involved. The only pertinent issue is what choices you made given the luck- good or bad. The standard of merit is not skill either. Plenty of skilled people don't make use of their capacities and consequently don't deserve anything. The econ professor himself says he is only alive because of luck. That means that everything subsequent to his car accident would not have happened if he were not lucky. Does that mean that luck is responsible for everything in his life subsequent? No way. Post accident, the fact is that he survived and now the issue of responsibility pertains to what choices he made given his survival. He deserves everything he achieves post accident even though everything he achieved post accident was contingent on a lucky break. Regarding the importance of the impact of luck on final outcomes, the professor makes bald assertions regarding the increased importance of luck and backs it up with a ridiculous 'simulation'. The only conclusion you can draw from that is that luck plays a role in outcomes. Anyone with two eyes can tell you luck exists and affects people. And as far as Jamie Dimon is concerned, I have no idea about his merit but I do know that they way you've presented it is not a valid way of thinking about his merit. Evaluating a person requires looking at the full context of their actions which means including both their mistakes and their good decisions, and then using a proper standard against which to evaluate them. For example, is it possible for ANYONE to know all of the risks a large bank is exposed to? Is this total knowledge a valid standard to evaluate him against? This is what's frightening about investing in banks, but as far as the analysis of Dimon is concerned, you can't ignore the facts of his situation. And then you can't ignore all of the good decisions he's made. You could apply the same method of thought to make Warren Buffett look bad. 'If Buffett were so good he would have known not to invest in Dexter Shoes.' That analysis would be ignoring all of his good decisions and evaluating him against a false standard of a 100% investment hit rate. This issue is about a lot more than politics, it's about the soul of Americans. Historically Americans believed that people were self-made. They were ultimately responsible for their own lives. Now the regressive left is pushing ideas and arguments that attempt to strip Americans of this sense. If people think life is just a bunch of luck, they can justify hatred for the successful. They can also justify their own lack of success. As even the professor acknowledges, this false idea undercuts motivation to get yourself out of bad situations. Why bother? It's all luck anyway.

Whiny is an odd word to describe people who protest having their property stolen. Pfizer employees/investors don't have any obligation to give away their time and effort for free. People are not slaves to one another. Pfizer already provides the world with incredibly valuable products. Is that not enough? Apart from being unjust, a tariff on non-locally produced Pfizer products would raise the price of medicine. That is bad for the customer, bad for Pfizer, and bad for the economy in general.

Maybe you should just read the foundation's public report that those GOP partisans linked to yourself.

But how can you take lessons from the bond market given the unprecedented distortion by central banks?

Great quote! +1

When people don't have food or a job that's poverty. Inequality is difference. Warren Buffett and the millionaire next door are massively unequal but neither are poor. Americans probably enjoy the highest standard of living in world history, and while poverty can still be a problem, the existence of differences between people is not. If someone who should know better (like a public intellectual) is making the false equivocation between poverty and inequality, they are using a trick on you. They are counting on you having only a fuzzy understanding of what they're saying. I'm just repeating myself now but if two people are swimming poorly and one starts swimming well, the insane growth of the swimming gap is not a problem. It's indicative of progress. Do you think China got more or less equal as millions of people lifted themselves out of poverty? That pay structure you bring up is just a risk that some companies are willing to take. It doesn't always work out, but it is fair in that everyone involved has voluntarily consented to the arrangement. A CEO's job is incredibly important and so companies are willing to pay big bucks/take risks to get a rock star. $12.4 million in total average comp on a $45 billion average EV company does not seem out of line with the value they're responsible for. If they increase the EV 1%, or $450 million, but are only paid $12.4mm, how is this fair? Well, it's fair because that's the agreement they agreed to. They are free to leave. If you don't like the CEO compensation, vote against it or sell your shares. That's the arrangement you agreed to when you obtained title to the shares.

But why is this wrong? The mere fact that there is a difference doesn't mean anything. A lot of people are operating on the assumption that a big difference between people's pay is wrong as such. That was the premise of the website I got the average CEO pay from: http://www.aflcio.org/Corporate-Watch/Paywatch-2016 and this website LongHaul just posted: http://work.chron.com/ceo-compensation-vs-world-15509.html. All that you can glean from these is that CEO pay is a lot more than employee pay. And that's it. It's too far from equal. Things need to be more equal like they are in Germany. The CEO and the employee in America might both enjoy a higher standard of living than their more equal counterparts, but this is not considered relevant to the analysis. Why should equality be the ideal? People are different. They're going to produce different amounts of value. That's a metaphysical aspect of reality. The earth rotates around the sun and people are unequal. Why should we want everyone to be more similar and how can it be wrong when they're not? Some have made the point that CEO success is just due to lucky outside factors: If CEOs didn't earn their success, it's not so bad to take it from them ("You didn't build that"). But the fact is that there are always outside factors in everything you do. All it means to be responsible for an outcome is that your actions were under your own control and you knew what you were doing. To earn something can't mean that the results are entirely of your own making every single step of the way without outside influence. Otherwise, no one earns anything. The concept of earning would have no meaning. Ballmer is responsible for the Nokia acquisition- the choice to acquire was his. As randomep said, Warren Buffett did earn his money. He made the investment choices. It doesn't matter if luck helped him along or hindered his performance. If the government nationalizes BNSF, Buffett is responsible for the loss to Berkshire shareholders because he made the choice to buy it. It doesn't matter that Buffett was born in the right century etc. All that matters is that he made the choices to capitalize on these facts. It's scary to me how much press inequality is getting. It feels like I'm constantly assaulted by it. There are gender gaps of every type. There are racial gaps. There are economic class gaps. There are some-parents-read-to-their-kids-more-than-others gaps (http://www.abc.net.au/radionational/programs/philosopherszone/new-family-values/6437058) Gaps gaps gaps. The gap mentality focus on equality is exactly the opposite of Buffett's inner score card. It's an outer score card that creates envy (the worst sin according to Munger). The more successful have a supposed obligation to give to the less successful in order to reduce inequality. Successful people become an affront to justice in the eyes of the less successful and envy/resentment is the result. Those above average see the entitlement and either feel this is unjust (creating resentment in return), or they feel guilty for not doing what they're "supposed to do". This is not a recipe for harmony. Inequality doesn't cause social problems. The belief that inequality- a fact of reality- is wrong causes social problems.

Look at MCHP's claim that their cost of capital on the Atmel acquisition is 1.8% per annum. I believe that they are doing what your hypothetical inefficient company is doing, which is to treat the cost of cash as the opportunity cost of keeping cash in treasuries. The problem here is that excess cash doesn't belong to the company, or rather, the company's cash belongs to the shareholders. The true cost of cash is the equity discount rate, which represents the shareholder's opportunity cost at the given level of risk. The inefficient company theoretically should be punished for taking excess cash worth face value, and investing it at a lower rate of return than the equity discount rate. They are destroying value. But suppose that both companies have made it clear that neither is going to be returning capital to shareholders. The business that reinvests its cash into low returning investments is going to be more valuable than the company that just sits on it. I think there are a fair amount of companies that are punished valuation wise because it's clear that management has no plans to run the correct capital structure.

This comparison is not correct. Unlike swimming which is unlimited sum game (if you teach everyone to swim really really well, there is no limit or restrictions how well they can do apart of human capacity to swim), salaries are limited by the revenues of the businesses. Even if you taught everyone to be Buffett or Jamie Dimon or John Malone - which is admirable and I would be very happy if this happened - some people would still have to serve Big Macs, some would have to assemble cars, and some would still be CEOs. And unfortunately, even if you are trained to be Buffett, you will not get paid CEO salary while serving Big Macs. Tech startup model with options is the only model that somewhat pays low level workers big bucks. But this is not gonna happen in other industries. So the problem exists even if you trained and educated the workers as much as you can. The comparison is correct. Salaries are definitely limited by the revenues of the business at any given time. This is just a reflection of the fact that the money you make is limited by the value you create. No one is going to pay you more value than you offer to them. That's proof that value being created is finite at any given time, not that value creation is zero sum. Higher employee productivity can increase the revenue of the business (that was my point re the CEO example above). CEOs create tremendous value, and we need to get employees to a position where they too are creating tremendous value. If you also look big picture you can see that the swimming example is spot on because value creation is NOT zero sum. Now someone below the poverty line in America can afford a TV and air conditioning even though the average pay of a CEO relative to that employee may have increased (or not... I don't know and it's inconsequential) relative to a time when someone below the poverty line would have starved. How can that be if one person's salary comes at the expense of everyone else's? This is how progress occurs. Everyone learns to swim better. Concern with the gap between people is fundamentally different than concern with maximizing opportunity for people. Someone with a 'gap mentality' sees fixed revenues and a zero sum world. The CEO's success is a threat to you, and cutting down the most successful people in society is a valid method of reducing the gap. Someone with a 'maximization mentality' sees the opportunity for higher employee productivity across the company. The CEO's success is something to be celebrated. I'm not saying everyone should necessarily aspire to be a CEO specifically, but everyone should aspire to their highest level of success in whatever job they choose and aspire to practice the virtues which gets you there.

I tried to explain why this is not the right way to think about the issue. All else is not equal. If you hire a new CEO and pay him $30mm more than the last CEO, and the new CEO implements a strategy at the $45B EV company that expands the EV by 1%, then the CEO AND the company have made more money. It's not zero sum. Of course any given person can not deserve their pay. If your point is merely that some companies have made bad hires, then I think everyone would agree. But you're saying that CEOs as a class of people don't deserve their pay. I posted some numbers about the value they're responsible for because my standard of what is deserved or not is based on how much value you create- or don't. The only numbers I've seen anyone else post are numbers about relative earnings which indicates to me that their standard of evaluation for whether something is deserved is how much money other people are making. I don't see any justification for that. In fact, I think it's unjust because someone who creates tremendous value is looked down upon by such a standard, when in reality CEOs by and large practice the virtues of hard work, building successful relationships, and have achieved success in their careers. It's something we should aspire to achieve ourselves. It also creates resentment between people when their focus is on how everyone else is doing. This thread is not about why employees are not making enough money, this thread is about the gap between employees and CEOs. Some people are swimming extremely well, some people are doing OK, and some people are drowning. Instead of focusing on how to maximize everyone's swimming ability, the focus is on making everyone's swimming abilities more equal. Why? And the proposals put forth are all proposals to shackle the people who are swimming well which is a perfectly valid way of closing the swimming gap. IMO the focus on the gap is toxic.

I think by and large CEOs do deserve their pay. The average S&P500 CEO made $12.4mm in total compensation for 2015 while the average enterprise value (according to my back of the envelope calc) is $45 billion. These are like the Lebron James of CEOs too. Minor changes in strategy on a $45B company can create or destroy tremendous value. $12.4mm actually seems quite low I think comparing CEOs to lottery winners is really unjust. People have good and bad luck over their life, it's what you do with the luck that matters. Most CEOs have worked incredibly hard and deserve their pay by virtue of the value they bring to the table. Fairness is not equality, fairness is getting what you deserve. Why does the relative standing of CEOs/employees matter to anyone? The idea of a CEO/employee ratio is purely to look at their relative standings. Life is not zero sum. The fact that the CEO gets paid more doesn't mean employees get paid less. Sometimes you see the argument that a company makes a given number of dollars, and if the CEO gets a lot, employees must get less. In reality, how much money a company makes isn't some preset amount. It depends on the strategic and operational prowess of the CEO. Because I understand that life isn't zero sum, when I look at a CEO who makes a lot of money my reaction is to say 'wow good for him'. That's what goodwill among people looks like. I think historically the reaction of most Americans toward the successful was, that's great now I'm going to be successful too. Now we are approaching the point where someone sees a CEO that has made a lot of money and their reaction is along the lines of 'that's unfair (by which they mean unequal) he must have done something wrong'.

Well, I was going to use a more sophisticated argument, but based on your reasoning thus far, I figured you wouldn't understand it. Economics means that we produce as much energy as is efficient to use. We produce where the supply curve intersect with the demand curve, and if we produce anywhere where these curves don't intersect, we are producing non-economically. However, there are huge negative externalities in oil production, such as the destruction of farmland, acidification of the oceans, extinction of organisms that can't handle the environmental changes, and death of people through wars and famine resulting from global warming. Thus, while the benefits are taken into account in the supply and demand curves, the negative externalities aren't. Thus, the reason people often focus on the bad things (i.e. negative externalities), rather than the good things is that the good things are already in the price of the commodity. If there were more good things that could be done efficiently by burning more oil, they would already be done. This fact means your argument makes no sense. Or, to put it another way to be more comprehensible to you: Eating is good, but overeating adds no extra value--it actually adds negative value. It's really that simple. It's simply not true that "the good things are already in the price" of any good. If you purchase a plane ticket so you can see the birth of your grandson, the value is far in excess of the $200 paid. If you drive your daughter to the hospital to give birth, does the $4 you paid for gas price in "all the good things"? Not even close. Actually the whole point of paying a price for something is that you expect to get value in excess of the price. Second of all, it's also not true that if there were more good things that could be done efficiently by burning more oil, they would already be done. There will be people burning fossil fuels tomorrow and the next day. They didn't burn it all today? The cheaper it is for them, the more energy they can use, the higher their standard of living. I'm confused as to how this invalidates anything being said or really even if I understand what you're saying. Thirdly, if you're going to talk about negative externalities, then in the spirit of objectivity you'd have to also consider the positive externalities- benefits received but not paid for. Just as a back of the envelope calculation, how do you think the negative externalities compare to the benefits you don't pay for which arise from everyone in a free society having access to cheap plentiful reliable energy? It's not even close in magnitude. Just the extension of life expectancy and the ability of other people to stay alive through industrial fossil fuel powered agriculture has created more benefits for you that you didn't pay for than any negative externality I can think of. Someone who really wants to be right on this issue should be a little disturbed by the fact that the negative externality argument is constantly put forth with no discussion of positive externalities, nor a discussion of how the value received exceeds purchase price. The negatives are often exaggerated to a Hollywood-apolocypse degree, and you see a real drive to invent problems (see "car dependency" above). At the least this should indicate that something is going wrong here. Once you understand the right way to think about this issue, you just see a million variants of the same wrong way of thinking. As in the case of JeffMori above, enumerating the problems with fossil fuels is not a valid argument against them. It's one piece of an argument. I hope we can at least agree that the framework I talked about is the right framework for thinking about the issue: name your standard of evaluation (human flourishing), and look at the full context (positives and negatives) evaluated against the standard. Fossil fuels have downsides, but big picture they are fantastic for us. Hopefully poorer nations can start to use and benefit from more fossil fuels too.