Another Huge Bonanza

[wndysrf]

Yet another Epic Bonanza for the CEO class.

 

Never before has so much money been made in such a short period of time.

 

Funny how the PigMen purposely crave volatility and huge market selloffs.

 

It simply allows them to profiteer by shorting the market, then just before the market is U-Turned or McQueened, an "all clear" signal is given to the corporate CEO's so they can "reload" their options at 52-week lows.

 

How easy is that?

 

 

 

Excerpts from today's WSJ:

 

Open Spigot: Bosses' Pay

They Grew Into Font of Riches

And System to Be Gamed

 

By MARK MAREMONT and CHARLES FORELLE

 

Eugene Isenberg is the little-known chief executive of a modest-sized oil-services company in Houston. But he stands out in one way: He is among the highest-paid corporate executives in history. In the past 19 years, he has pocketed more than $450 million.

 

The key to this wealth: stock options, in abundance. His employer, Nabors Industries Ltd., has lavished more than 25 million options on him over the years.

 

Stock options were hailed two decades ago as a remedy for runaway executive pay. Academics, politicians and investors, tired of seeing CEOs pocket big money for a so-so job, pushed to have stock options become a primary method of compensating executives. Options -- granting the right to buy stock tomorrow at today's price -- would pay off only if the company's stock went up. To advocates they were the ideal carrot, an incentive for good work that aligned executives' interests with those of shareholders.

 

That happened -- sometimes. But at many companies, options morphed into the biggest executive bonanza yet, pouring out cash like a stuck ATM, and sorely disappointing those who thought options would moderate executive pay.

 

This year, options practices exploded in one of the biggest corporate-fraud scandals in decades. Some companies and executives stole from shareholders, by pretending that options had been issued earlier than they really were, at more favorable prices.

 

In 1985, Miami financier Victor Posner pulled down $12.7 million, putting him atop lists of best-paid CEOs that year. Last year, 393 executives earned more than that, thanks largely to gains from exercising options, according to Standard & Poor's ExecuComp, which tracks executive pay at about 1,800 public companies.

 

The top 2005 earner was Barry Diller of IAC/InterActiveCorp., with $295 million, nearly all from options.

 

Exxon awarded CEO Lee Raymond a similar number of options yearly from 1993 through 1999 -- 800,000 to 900,000, adjusted for later stock splits. Over that period, the stock rose sharply. The rise meant the value of the 1999 grant was $8.5 million, or six times that of the 1993 grant, by ExecuComp's tally.

 

At times, the value of options companies doled out has been equal to a large share of their profits. Retailer Abercrombie & Fitch Co. gave CEO Michael Jeffries 4.66 million options in 1999, a grant ExecuComp valued at $120 million. The firm's 1999 net income was $150 million.

 

Abercrombie didn't actually have to shell out $120 million when it gave the options to Mr. Jeffries, of course. But it incurred an obligation to issue 4.66 million shares someday at the 1999 price. And this obligation didn't have to be reflected as an expense on the company's income statement.

 

A spokesman for Abercrombie said the grant had a "delayed vesting" feature "intended to incentivize Mike Jeffries to remain with the company...and to continue to generate exceptional financial results." Under him, the stock has risen more than 750% since it began trading in 1996. Mr. Jeffries is eligible to exercise the big 1999 grant now, and if he did so would reap about a $120 million profit.

 

In the late '80s and early '90s, companies found another way to goose stock-option grants: "Reload" them.

 

Normally, options disappear when exercised. But with a reload plan, a person who exercises options automatically gets replacements. Typically the replacements number fewer than the options exercised. They carry the same expiration date but a different exercise price -- the current market price.

 

The king of reloads was Sanford Weill, who retired in April as chairman of Citigroup Inc. with an options fortune largely based on a single grant reloaded many times. In 1992, shareholders of his company, then called Primerica Corp., were asked to approve a reload plan. Deep into the legalese, on page 17, was a clause that would prove extremely lucrative for Mr. Weill: The reload plan applied to previously issued options, including a giant grant Mr. Weill got in 1986.

 

The plan initially also had an unusual element. Any options issued as a result of reloads wouldn't expire on the options' old expiration date, but could carry a new 10-year term.

 

Not long after the plan was adopted, Mr. Weill exercised nearly all of his original 1986 options, for a gain of more than $60 million. He then received replacements for most of them, restarting the clock with 10 more years to run. Year after year Mr. Weill exercised some of the replacements, each time getting more new options -- some of which he then exercised, once again getting more replacement options, and so forth.

 

From 1992 through the end of last year, Mr. Weill racked up total option profits of $964 million, roughly $870 million of which came from the original 1986 options and their generations of reloaded progeny.

[wndysrf]

New, all-time, record highs again.

 

China has definitely entered a 1999-2000 NDX-type Blowoff.

 

Or maybe we are now just entering the Full Blown Acceleration Mode of a Weimar Run, led by the Paulson/Bernanke "Formula" secretly given to the Chinese Plutocrats.

 

And its pushing the rest of the world up with it.

 

Any coincidence that this acceleration started immediately after Paulson/Bernanke left China?

 

I don't think so.

 

 

[I_Am_Madness]

GOOG, how bout a straddle?

[wndysrf]

One by one

 

New, all-time highs on these Dow stocks.

 

[realist]

Bearz are gonna have to wait it out until the New Year...

[wndysrf]

[wndysrf]

Clean breakout to new, 52-week highs.

 

Nice.

 

[wndysrf]

Wow....

 

A licorice company buys a check printing company.

 

Yeah, that makes a lot of sense.

 

 

[wndysrf]

Isn't shorting stocks fun???

 

[Private Skidmark]

The dreaded bat wing pattern fails yet again.

[alceringa]

Always thought Jerry Ford was a decent, hard-working fellow.

 

The "Ev and Jerry Show" was must see TV in its day. Maybe because Dirksen's brilliance made Ford seem even more the dullard, which I don't think he actually was.

 

Who feels compelled to watch any politician, anytime these days?

 

The '76 election against Jimmy Carter was the last time there was a real choice between two honorable, honest, principled men to be POTUS, IMO.

[alceringa]

Licorice scented checks?

 

A cash cow is a cash cow.

 

Check out the list of Berkshire Hathaway's cash cows the Warren has cobbled together. Only common thread is that they print money and send it back to Omaha.

 

Berkshire Hathaway Subsidiaries

 

Imagine, just taking one example, what See's Candies is worth as a stand alone business.

[Tzu]

GOOG, how bout a straddle?

<{POST_SNAPBACK}>

 

 

Strong Buy with half position. Cost average on the rare chance that the gap gets filled. Add other hlaf on a pullback after nice gains only.

 

That's my take.

 

I may possibly buy 10000 Mar 07 RIMM 15 puts for insurance.

 

Cost: $299.99 Current fire sale pricing.

 

Time to go to TT to see what crash stocks I will be gaming long tomorrow.

[wndysrf]

Two headlines on Drudge Report

 

"Dow Closes Above 12,500"

 

"Saddam's Baath Party Threaten's U.S Targets"

 

Bad news once again ignored.

 

Therefore, the market's uptrend must be respected.

[linrom]

Why you might not upgrade to Vista

 

 

DMRs

----------------------------

 

Content-protection "features" like tilt bits also have worrying denial-of-

service (DoS) implications. It's probably a good thing that modern malware is

created by programmers with the commercial interests of the phishing and spam

industries in mind rather than just creating as much havoc as possible. With

the number of easily-accessible grenade pins that Vista's content protection

provides, any piece of malware that decides to pull a few of them will cause

considerable damage. The homeland security implications of this seem quite

serious, since a tiny, easily-hidden piece of malware would be enough to

render a machine unusable, while the very nature of Vista's content protection

would make it almost impossible to determine why the denial-of-service is

occurring. Furthermore, the malware authors, who are taking advantage of

"content-protection" features, would be protected by the DMCA against any

attempts to reverse-engineer or disable the content-protection "features" that

they're abusing.

 

Even without deliberate abuse by malware, the homeland security implications

of an external agent being empowered to turn off your IT infrastructure in

response to a content leak discovered in some chipset that you coincidentally

happen to be using is a serious concern for potential Vista users. Non-US

governments are already nervous enough about using a US-supplied operating

system without having this remote DoS capability built into the operating

system. And like the medical-image-degradation issue, you won't find out

about this until it's too late, turning Vista PCs into ticking time bombs if

the revocation functionality is ever employed.

 

Very interesting article. Could affect the whole upgrade cycle and the companies that seek to benefit from it.