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Thank you Bill Ackman!


jeffmori7
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I'm quite mitigated about the activist investors like Ackman. Is it really a good thing to see a business like Canadian Pacific cut 4500 jobs, a quarter of its workforce, just for the benefit of the shareholders? I'm not sure that sucking all the juice to get the last penny of profit is the way to go and I know that in our capitalist world profit is everything and all the shareholders are asking is too improve the margins, but at what price? Does it really worth it?

 

I understand long term we should aim at increasing productivity, but if the people who are not required anymore can not find a suitable job elsewhere, does the society really benefit?

 

I'm throwing all this after hearing about the news, but I don't know this particular CP case, more a general thought on the subject.

 

http://www.theglobeandmail.com/globe-investor/canadian-pacific-cuts-deep-as-hunter-harrison-makes-his-mark/article5969733/

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I'm quite mitigated about the activist investors like Ackman. Is it really a good thing to see a business like Canadian Pacific cut 4500 jobs, a quarter of its workforce, just for the benefit of the shareholders? I'm not sure that sucking all the juice to get the last penny of profit is the way to go and I know that in our capitalist world profit is everything and all the shareholders are asking is too improve the margins, but at what price? Does it really worth it?

 

Yes

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As a large holder in CN Rail, I enjoyed the incompetence of former management as it allowed me to tremendously benefit off it!!!  It's a shame HH is running CP and will whip that company into shape.

 

Tks,

S

 

I'm quite mitigated about the activist investors like Ackman. Is it really a good thing to see a business like Canadian Pacific cut 4500 jobs, a quarter of its workforce, just for the benefit of the shareholders? I'm not sure that sucking all the juice to get the last penny of profit is the way to go and I know that in our capitalist world profit is everything and all the shareholders are asking is too improve the margins, but at what price? Does it really worth it?

 

I understand long term we should aim at increasing productivity, but if the people who are not required anymore can not find a suitable job elsewhere, does the society really benefit?

 

I'm throwing all this after hearing about the news, but I don't know this particular CP case, more a general thought on the subject.

 

http://www.theglobeandmail.com/globe-investor/canadian-pacific-cuts-deep-as-hunter-harrison-makes-his-mark/article5969733/

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I'm quite mitigated about the activist investors like Ackman. Is it really a good thing to see a business like Canadian Pacific cut 4500 jobs, a quarter of its workforce, just for the benefit of the shareholders? I'm not sure that sucking all the juice to get the last penny of profit is the way to go and I know that in our capitalist world profit is everything and all the shareholders are asking is too improve the margins, but at what price? Does it really worth it?

 

I understand long term we should aim at increasing productivity, but if the people who are not required anymore can not find a suitable job elsewhere, does the society really benefit?

 

I'm throwing all this after hearing about the news, but I don't know this particular CP case, more a general thought on the subject.

 

http://www.theglobeandmail.com/globe-investor/canadian-pacific-cuts-deep-as-hunter-harrison-makes-his-mark/article5969733/

 

The short answer is yes... go pick up "the wealth of nations" by adam smith from your local library (you seem to understand this, but it's still a good read).  Once done read FA Hayek's "the road to serfdom."

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It seems that alot of others agree that folks like Ackman are a good thing.  Ackman named CEO of the Year:

 

http://www.theglobeandmail.com/report-on-business/rob-magazine/rob-magazines-ceo-of-the-year-bill-ackman/article5795408/?page=all

 

I like the fact that certain activists hold boards accountable.  Boards can get away with murder, with other peoples money and then golden parachute from the burning plane.  I would love to see less of that.  CHK's previous board comes to mind as far as incompetent, self-dealing, and no skin in the game.  However, as someone who had to fight the job market of 2010, to see 4500 lost jobs does make me wince.  As people and machines become more productive and automated, coupled with stagnant growth, it will be interesting to see how it impacts jobs. 

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If an activist or PE shop runs capital that is long-term focused, then yes, it's a good thing.  If it's someone looking to juice short-term numbers at the expense of the business's long-term viability - in order to flip it quick or IPO it - then no (this all presumes that analysts and investors cannot detect that type of behavior).  PE gets accused of this quite a bit, and I'm sure it happens sometimes.  Not sure if CP is a good example though.

 

It's always too bad to see people layed off, but the usual "feel-good" response does more harm than good.  We need to ensure that our labor markets are low-friction to get people working again.  Smart policymaking should encourage transparent and low-friction labor markets, not the retention of unproductive jobs for their own sake.  My $.02.

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Maintaining jobs for the sake of giving job is good politics, but a bad policy.

 

BeerBaron

 

BeerBaron possesses the uncanny (and very uncommon!) ability to communicate big ideas with small (but very clear!) sentences. It seems to me the hallmark of every great investor!

 

Or is it just the alcohol in all the beers you drink...?! ;D ;D ;D

 

Just joking! I am most certainly a fan of yours! :)

 

giofranchi

 

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Maintaining jobs for the sake of giving job is good politics, but a bad policy.

 

BeerBaron

 

BeerBaron possesses the uncanny (and very uncommon!) ability to communicate big ideas with small (but very clear!) sentences. It seems to me the hallmark of every great investor!

 

Or is it just the alcohol in all the beers you drink...?! ;D ;D ;D

 

Just joking! I am most certainly a fan of yours! :)

 

giofranchi

 

Thanks Gio, that's a nice compliment. I don't invent those quotes usually I borrow from the great minds and leaders that went before me (this one borrowed from Brian Mulroney on VAT tax reductions). I like quotes they bring a solid point to an argument :)

 

Have a nice day

BeerBaron

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Thanks for you point of view guys. Always appreciated to learn from everyone with quality answers.

 

Since you seem so appreciative I will expand upon my answer.

 

If I owned a company and I found out a bunch of people were standing around or doing 2 hours of work and getting paid for 8 hours, I would want those people fired.  I would want the management of companies that I am a shareholder of to do the same as I would as an owner.

 

There are also benefits to society (less so with high unemployment).  You have a mis-allocation of human capital.  By firing people you are freeing them up for more productive uses of their time.  Capital allocation, and by extension value investing, is serious.  Capital should seek out its highest and best use as that benefits people in the most in the long run.

 

"Capitalism has created the highest standard of living ever known on earth. The evidence is incontrovertible... Yet those who are loudest in proclaiming their desire to eliminate poverty are loudest in denouncing capitalism. Man's well-being is not their goal."

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Thanks Jay. What I had in mind when I asked the question was kind of, doesn't worth tout ,let's say a thousand job to get 1% on the margins? Not being specific at all about CP, but in general, I think you're right, but is there a point where the last tiny little percentage are not worth fighting for, or at least not at the expense of slashing an awful lot of employees? Will we benefit globally from that, probably, yes,if those people can be reaffected somewhere else. If it's not the case,not so sure.

 

And by the way, the subject title was meant To draw attention more than anything.

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There are also benefits to society (less so with high unemployment).  You have a mis-allocation of human capital.  By firing people you are freeing them up for more productive uses of their time.  Capital allocation, and by extension value investing, is serious.  Capital should seek out its highest and best use as that benefits people in the most in the long run.

 

"Capitalism has created the highest standard of living ever known on earth. The evidence is incontrovertible... Yet those who are loudest in proclaiming their desire to eliminate poverty are loudest in denouncing capitalism. Man's well-being is not their goal."

 

+1 Well put.

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