Conservative Economics

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Subject: intrinsic value

In security analysis, intrinsic value is the value of a security justified by the facts, as opposed to market value.

US Equity Market

US equities in peril; dividends slashed!

Cash dividends are slashed ... will the market notice?

Over the last five quarters, the annual rate of dividends paid by US non-financial corporations has fallen by two-thirds, from $462.2 billion to $160.5 billion.

The apparent reason for this negative trend is the intent of corporate management to radically increase stock buybacks in order to boost the value of executive options.

Fund management

Legg Mason argues for stock buybacks

Avarice disguised as prudent management

Legg Mason, the giant asset management company that was recently sold off by Citigroup, issued a report on January 10, 2006 by Michael Mauboussin, Chief Investment Strategist, entitled, “Clear Thinking About Share Repurchases”.

The general tenor of the Legg Mason commentary seems to be favorable towards buybacks, especially extremely large buybacks that are aggressively pursued and that, presumably, are more effective in jacking up stock prices and making investment managers look good.

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Featured articles on inside pages

Stock buybacks

Stock buybacks dry up

Since 1982, US equities have been driven upwards by stock buybacks. Federal Reserve statistics show corresponding sales of stocks as executives exercised options to take advantage of manipulated prices. More ...

Securities Analysis

Is big bank complexity irreversible?

The root problem with big banks today is organizational and product line complexity. Excessive complexity in banks can be traced to the reorganization of Citibank in 1956, under Walter Wriston, following the advice of McKinsey and Company.
More ...

US Politics

What is the future of private pension plans?

Between 1999 and 2002, US private pension funds lost US$ 1.2 trillion in value. It would almost seem that pension fund managers had been speculating with retirement money, attempting to beat each others' short-term performance statistics, with little interest in safeguarding the assets of plan beneficiaries. More ...

US equities

Do stocks offer protection against inflation?

There is a common belief that a managed, diversified portfolio of US common stocks provides protection against inflation. However, there is reason to question whether this protection currently exists.
More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2010-10-29 16:02