Getting To The Bottom Of The Stock Market Problems

Two different analyses of the underlying reasons for the recent drop in the stock market.

A satire, with an element of truth:

Stocks were dropping precipitously last week as investors realized that corporate leaders, thought to be working for the good of humankind, were actually busy trying to make a lot of money for themselves.

The serious truth:

Stock options were not a new development in the early 1990s. However, they became a much more important part of corporate compensation plans as a direct result of the Democrats’ exploitation of class envy by disallowing any tax deduction for salaries of corporate executives of more than one million dollars per year. As always, the Dims exempted this rule from applying to their leftist pals in the entertainment industry.

As always happens when tax laws are changed, people and companies change their behavior in order to minimize their personal pain. Stock options as an alternative to salaries over a million dollars were as natural an answer as any I can think of. Because stock options are worth more based on the market value of the stocks, executives often took shortcuts (aka creative accounting) to give the investment world the false impression of higher profitability than existed. It doesn’t take a rocket scientist to connect these dots.

KMK

Investment Advice

A good friend from the Bay Area, Bruce Howland, who has been an active stock trader for the past few years, passed on this bit of advice.

If you had bought $1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.

Based on the above, my current investment advice is to drink heavily and recycle

Ironically, Bruce’s second avocation, music, is now starting to look like the more dependable and less risky one. His group, The Living Water Band, has its own section on mp3.com. They describe themselves as Christian Country. With Bruce’s mandolin, it also has a touch of good ole bluegrass.

Fortunately, Bruce’s daughter, Catherine has inherited his passion for music instead of gambling in the stock market. I downloaded some songs from her section on mp3.com and was very impressed. Her music is completely original; but does remind me a little of Jewel. Catherine, who also has her own stand alone web site, definitely has a much more dependable and lucrative future ahead of her in the world of music than in stock trading.

KMK