naked capitalism

Anonymous says:

Re: Floyd Norris’ article: Shareholder Value.

A number of companies were beseiged by hedge funds who took large, short term positions with the objective of “wringing” cash payouts from the hapless companies. Phelps Dodge is a case in point.

The hedge fund buys the stock, driving the price up. They are joined by the me too “trading” arms of the investment banks, pension funds, private equity firms, and mutual fund companies. The hedge fund forces the company to lever up and/or disgorge cash reserves by buying back stock at the inflated prices.

In round two, the weakened company is then shopped and sold in a buyout to a stronger firm. Real Gordon Gecko stuff.

River says:

RE: Kenneth Rogoff…

Mr Rogoff’s prescription: Lets do more of what got us in this mess. I wonder if Rogoff has considered what his prescription would do to the credit rating of the U.S.?

‘Fortunately, creating inflation is not rocket science. All central banks need to do is to keep printing money to buy up government debt. The main risk is that inflation could overshoot, landing at 20 or 30% instead of 5-6%. Indeed, fear of overshooting paralyzed the Bank of Japan for a decade. But this problem is easily negotiated. With good communication policy, inflation expectations can be contained, and inflation can be brought down as quickly as necessary.’

fresno dan says:

I’m with you “Dave”
It wasn’t that long ago (OK, it was) that dividends were the predominant reason for stock investing. And cash can’t lie was, and IMHO, still a good rationale for paying them.
The idea that every company can be an investment genius, and make more money doing that than by running their business, should be self evidentially ridiculous. By booms and busts are made of such things. I predict a strong comeback for the practice of paying dividends.

Andrew Bissell says:

Jeez, you hope maybe Marc Faber was being a little melodramatic when he said central bankers would print money in a fit of “insanity.” Then you read guys like Buiter and Rogoff and realize they just might lead us over that cliff.

Anonymous says:

Rogoff’s blithely inane penultimate paragraph (all you need to cure inflation is “good communications policy”) completely undermines his argument and frankly makes him sound like a lightweight who hasn’t thought anything through.

Annals of “communications policy”, July 15 2008 edition:

“If you have a bazooka in your pocket and people know it, you probably won’t have to use it.” — Hank Paulson

Oops. I seem to recall the markets called Paulson’s bluff, and then some.

Once unleashed, inflation will roar, with apocalyptic consequences for the dollar and much else besides. The worst part is, Rogoff may be right that this disastrous scenario is in fact the the lesser evil, since default is the only alternative. Since a man of his accomplishments can’t possibly be as obtuse as he comes across here, he is knowingly lying about the endgame because he couldn’t sell it otherwise. That’s the trouble with lesser evils, though: in the end, they’re still plenty evil.

Anonymous says:

Another take on Iceland …

Excerpt;

"The road to ruin for this snowy North Atlantic island, featuring a pit stop at Fort Worth's AMR Corp., was paved with American-style capitalism.

Over the last six years, a group of about two dozen young, U.S.-educated financiers took Iceland on a Viking voyage of acquisitions, grabbing airlines, banks, mortgage lenders and securities traders from Texas to Hong Kong.

One of the new Vikings was Hannes Smárason, an MIT-educated McKinsey & Co. veteran in his early 40s. In 2004, Mr. Smárason led a group of investors who bought Icelandair. The airline had a large cash pool to cushion it from shocks in fuel prices and ticket sales. Mr. Smárason, as head of a holding company called the FL Group, used that cash to go on a buying spree."

http://www.dallasnews.com/sharedcontent/dws/bus/stories/121108dnbusiceland.31cc1d2.html

i on the ball patriot

ndk says:

Buiter’s written a real gem. I’m in Florida taking care of my parents, but I’m going to pick it over a few times, particularly given that he hits on a lot of the concerns I’d expressed here. Just here to applaud quickly before slipping back out into the night to walk some pier in some trailer park under one of those bad moons I always hear talk about.