Subject:
SEC Rule 10b-18 In 1982, the US Securities and Commission adopted Rule 10b-18,4 which provides that an issuer will not be deemed to have violated Sections 9(a)(2) and 10(b) of the Exchange Act, and Rule 10b-5 under the Exchange Act, solely by reason of the manner, timing, price, or volume of its repurchases, if the issuer repurchases its common stock in the market in accordance with the safe harbor conditions.
Rule 10b-18’s safe harbor conditions are designed to minimize the market impact of the issuer’s repurchases, thereby allowing the market to establish a security’s price based on independent market forces without undue influence by the issuer.
The practical effect of this rule was to encourage massive stock buybacks by corporations as a means of manipulating prices upwards in order to give value to executive stock options.
Corporate Governance:
By John Schroy, on July 7th, 2010 | 
M. A. Gumport of MG Holdings has published the July 2010 edition of the Buyback Monitor, showing corporate stock profits for 275 firms over the period 2000-2010. Without buybacks, share prices for the group now would be at least 5.3% higher (nearly 10% higher after adjustment for foregone interest income).
The lack of attention to protecting long-term investors against the massive fraud of stock buybacks is just one more sign that it will be some considerable time before the US works its way out of the present financial morass.
Commonsense Economics:
By John Schroy, on May 16th, 2010 | 
Eventually, at some point, without an efficient market, common stocks become mere baseball cards.
Sooner or later, some Baby Boomer, pressed to pay his bills in retirement, will find that one can’t live off the dividends of common stock and that when everyone is trying to cash out their holdings at the same time, market prices plunge to levels that seemed inconceivable for generations. But it will simply be the cost of allowing an inefficient market to flourish for so long.
This article discusses the concept of inefficient markets and the practical consequences.
What would Adam Smith say?
By John Schroy, on March 11th, 2010 | 
Most corporate executives of giant companies today are, in actuality, mere employees (‘workers’ in communist jargon) and are not capitalists or entrepreneurs at all.
Their extraordinary remuneration schemes are provided without executives having employed or having risked any of their own capital and is often paid, even as a corporation slides into bankruptcy.
Adam Smith recognized self-interest as a useful trait, but one that should not be allowed to override the nobler virtues.
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