Monday, March 12, 2007

Don't Turn Wall Street into Atlantic City or Las Vegas

Don't Turn Wall Street into Atlantic City or Las Vegas

If I want to gamble, I'll go to Atlantic City or Las Vegas. I don't want to gamble with my hard earned savings or retirement money. I know there is always some risk investing in Wall Street securities, but I want to be protected from senior executives that cook their books and from corporations run for the financial benefit of the executives rather than for the owners and debt holders. I want to be protected from sales people who have their interest at heart rather than trying to help you make sound financial decisions.

Individual investing was not a problem for my parents or grandparents because they depended upon defined retirement plans, CD's and savings bonds. I think I am the first in my family to open a broker account. I worked for a major bank and had a deferred tax account that I needed to move to a broker. That account grew with 401k money from other employers. I do not have a defined retirement plan. The only guaranteed retirement income is from Social Security when I retire.

I learned a lot of broker lessons the hard way over the past 20 years. I did not obtain sound advice from the full service broker that I was with initially. I had difficulty obtaining an appointment for the portfolio reviews I was entitled to because I think my account was not large enough compared to other clients. I could not believe the rotten stocks that were suggested to me. I heard about broker "buy lists" prepared centrally at each broker for recommended stocks to buy, but this stuff could not have been on it. I paid excessive fees for the privilege also. The best and only advice was to have a good foundation of treasury zeros so that no matter what happened, I would always have something in the soundest investment in the world. I built a 5 year zero ladder and still have a couple of the original zeros left and purchased more.

Intermittently, I receive notices that I am part of 4 class action suits against corporations that I invested in and something went wrong. They include Worldcom, Global Crossing, and Enron, and something else, I believe. I do not pay much attention because the money was lost for me and the rewards, if any, may be pennies per share. I know millions of small investors like me got hurt including rank and file employees of those firms. I do not know who failed the public the most from the senior executives, the auditor firms, the SEC, or the exchanges where they traded.

I would like to see the senior executives that criminally are found guilty to be financially wiped out like the stockholders, employees, and debt holders of the companies they ran. America confiscates holdings of drug dealers, why not do the same for executive criminals?

It is also difficult for me to handle the excessive salaries and bonuses of many chief executives. I am convinced that many corporations are plundered by the top executives with little or nothing remaining for the stockholders. Sure they may show high increases in revenue and profits, but the profits are absorbed by the executives. I do not think that the fully loaded corporate expense of chief executives are publicly exposed which they should be. All expense should be expensed on the financial statements including exercised stock options. There should be some accountability on excessive payments to senior executives.

Two chief executives that effectively were fired recently received more than 200 million dollars each to go away which I thought was excessive. What are these guys, kings? I do not think the ransom for King Richard was as great. If the companies thought so highly of these men, why did they not keep them?

Outside directors are usually chosen by executive management, where they are going to choose people friendly to them. Rarely is there a fight for outsiders to gain one or more seats on a board. Some board members seem to do a good job, but others seem to just rubber stamp management on everything including excessive salaries, bonuses, and golden parachutes. There seems to be no oversight on the Boards of Directors in America for the shareholders, employees, and debt holders.

I think corporations should be encouraged to pay quarterly dividends equal to half of their annual profits or more. This way, the executives will be very aware about their responsibility to pay the regular dividend and also to increase it over time. Stockholders will gain something from purchasing the stock, whether the stock price goes up or down.

It has come to my attention that some senior executives run a profit plan of the corporation for their benefit. Sometimes it can be seen that corporate profit can be steered low when the executives can load up on the stock and then over a few quarters, steered up when they can sell the stock at a big profit. And these executive have accomplished this time and again. From the outside you cannot tell what they are doing and they are not telling the public either. They are knowledgeably trading their shares while the rank and file employee shareholders and public suffer. They mastermind the budget and financial statements for their benefit. I think the stock and option purchases and sales should be restricted further so that the senior executives cannot manipulate share price.

There are thousands of mutual funds and most of them are not doing well for their holders. There should be accountability of the fund managers and advisers.

Millions of Americans now have investments for their future in the financial markets. Some individuals sought professional management for their assets and some try to invest on their own. When you use the retirement calculators, 8 or 9% growth are usually chosen for the assets to grow if invested properly, but that is a difficult achievement each year. And 1% or less for money market funds and 4 to 5% for treasuries or other government notes is safe, but low yield.

Safeguards must be brought in so that rank and file employee stockholders and investors are protected. I think the Sarbanes-Oxley Act of 2002 was a good first step. There are rumors that Sarbanes-Oxley Act of 2002 is expensive and difficult to follow by corporations and there is pressure on Congress to reduce its requirements. We must not allow them to reduce Sarbanes..., but to enhance it. I think there should be added protections for the stock buying consumer. If I want to gamble, I'll go to Atlantic City or Las Vegas.