stockholders.com

OK lots of spam - I’ll update to spam karma 2 soon and clean up the mess.

The SEC is considering revising the corporate governance provisions.

If they take any sort of “stakeholders” position, by which I mean that people who do not have any equity invested at risk in a given corporatio’n should have influence over the direction of that corporation because they have some sort of amorphous “stake- as in they own the next property over and their hot dog stand suffers if the company does not give 90 minute lunch breaks - then we are up a creek without a paddle.

If they take the single shareholder may submit for a vote any political thing they are dreaming of - ignore the law that places the direction of the company not in the hands of shareholders but in the hands of elected directors, than things are even worse.

Man have I been remiss,

Forget the emerging markets, Ben scratches his *ss and I lose $ 150 K. I never saw so much money evaporate into thin air.

Emerging Markets shaved off a few grand too.

I was just about to buy a Ferrari 360 Spyder. Talked myself into it in various unsupported grounds. Inflation hedge. Lower depreciation than the crap I buy now. Really big bang for the buck.

Auggh!! The full price of the car plus one year expenses was lost in the last few weeks.

Crap.

A few weeks ago I bought into a developing market mutual fund. I was coerced by my investment adviser - against my better judgment.

I liked small capitalization domestic stocks. I was over weighted and the ETF was on fire (IWM in a retirement account). I was up 33% in a year, and my mind told me the story why I bought was just as valid today as then.

I thought: for decades large corporations had a big advantage over smaller corporations. Double taxation of dividends required large corporations to keep and invest their profits. Paying profits to owners involved corporate taxes at around 35% and then additional dividend taxes at around 35% making the dividend worth little to the owner. It was so tax distorted that Peter Lynch coined “de-worse-ification” for the wanton spending of shareholder profits on buying anything.

The reduction of the dividend tax rate to 15%, while still high with double taxation, meant pressure for large corporations to pay out their profit to their owners. The owners would have to reinvest the dividends (or deinvest) and the place where money does good, grows, and makes people rich is in small enterprises.

The Internet was not commercially developed by Ma Bell or Cable-vision or Microsoft or Apple - it came from Ma and Pa ISP’s growing until AOL and Compuserve noticed and others jumped on. New entities for new ideas.

So I feel the play out of the dividend tax reduction is still going on - money is flowing from GE and Exxon to littler unknowns who can grow at a 40% per annum rate, and it will probably go on.

My investment adviser said International/developing markets are hot - while small stock/big stock is a cyclical thing and my 33% return is evidence that it is a trend played out and I should invest in developing countries.

I followed his advice (I am paying him) to an extent and my great Int’l fund is down while my IWM is still on fire.

Globalism makes governments compete with each other. In the late 20th Century the United States inflated its currency and achieved much of its objective in so doing. The government confiscated wealth, value was transferred from savers to debtors, overextended debtors (such as the government itself) were relieved of their obligations to repay value for value. Most people just had to live with the results.

Today, if the United States is perceived as running an inflationary monetary policy, if it demonitarizes its money, the world will look up and take notice in days. The billions invested by Chinese government agents will take notice, and if convinced that the United States is inflating, will take flight. There are lots of other places to invest money, not as good as the US today but if the US money became debased, plenty good in comparison. Even domestic investors are increasing their international exposure - as Sorbaine-Oxly and other ill advised regulations hobble US productivity, money flows to investment in other places.

I think of it as the gelding of nation states. Enact whatever nonsense in your borders that you wish. Capital flows will go wherever freedom reigns.

The new Fed Chairman reportedly looks at the US unemployment rate in trying to determin how much money they should make available.

Hello . . .

Since much of our manufacturing is done in China should not the Chairman look a the unemployment rate and capaciy utilization of China before deciding that things are tight and inflation will soon follow?

Once you are an investor, it is hard to spend money for foolish things.

Look at it this way. Whatever my income and savings it gives me a certain capital account. It gives me a pool of money that I can do with what I wish. I could buy stones for my wife (and have a better domestic life) or a Porsche (and enjoy driving more); but every little drip of capital out of my account means fewer workers contributing to my well being.

As long as my capital is invested in business enterprise - each dollar of mine is earning income for me. I collect the income without so much as a word of protest from my “workers”. I own my capital as no person can own a worker - my capital works for me without complaint or demand.

So I look at a Ford GT and think it would be really sweet to drive it, show it off, park it out front. But I would spend $150,000 out of my workforce to buy it and never see those workers again. Really is the car so great? The capital should give me $15,000 per year forever from investing. I could pay $15K of whatever tuition my kids have just by resisting sending some of my workers to Ford. He does not make cars out of the goodness of his heart. He sees that my dollars are worth more than his stamped metal or he would not sell his stamped metal for my dollars.

Consumption is exactly what it sounds like - a disease out of a Mann novel that eats away your essence. Sure if you earn six figures and have a capital account of $3 mil, buy things. If you have a big income, no capital and lots of debt, buying things makes it impossible to ever live on the backs of others.

Here is what you have to do.

First, get out of debt. I know, the credit cards make buying easy. If you want to be where I am, cut the cards and pay off the credit card debt. It is mucho expensive. If you run $10K credit card debt forever, you only had one moment of spending 10K more than you earned - ever after, you spend what you earn and pay interest on the one $10K fix never to be paid off. When you go into debt you get to spend more than you earn. Forever after, you pay debt carrying charges so you can spend less than you earn or go further into debt.

Out of debt, save one or three month’s salary for emergency. You will need it once you become an INVESTOR. Once you become a person of substance, you will be surprised how many ways there are of taking away what you created and saved.

Have no unmanageable deb and have a safety account that can get you through a job loss or a stupid choice?

Then you are an INVESTOR.

Having a dollar beyond what you need to pay your bills or saved for your safety net is like:

Well It is so good I can hardly write what it is like.

It is like having a spouse who gets up before you get up and packs a lunch in a lunchbucket and goes off to work the entire day and turns over all their earnings to you, and never requires anything for their support at all. A worker who gives everything they earn to you and has no overhead, eats no meals, sleeps in no bed, never has a fight with you.

Investments. Bring em on!

No one believes in Capitalism in the USA. They believe in Capitalism in the People’s Republic, and in Eastern Europe, and in Hong Kong and Singapore. However, they believe in a seriously modified capitalism in those places. They believe in taking the growth and the creation of value, yet thy balk at providing their citizens freedom or honest financial reporting or rule of law or business failure. You can’t have one without the other.

That is why I predict that the People’s Republic will implode sooner or later. It will be expected that the world press and the Western elites attribute the implosion to Capitalism and lack of central planning. Yet they never had Capitalism there. A company’s books are what the Red Soldier with a gun says they are. In Eastern Europe and the Far East, banks hold significant nonperforming loans that are never written off because of political issues. No capitalism there, a shadow at best.

Sadder yet the good ol’ USA. Once a pinnacle, now reduced to calculating what one stupid politician can convince others is a good idea.

I was watching Cramer’s Mad Money when something occurred to me.

When Cramer talks about a stock often there is a flash disclaimer to the effect that Cramer’s Charitable Trust holds a position in the stock. There is never a disclaimer that Cramer holds a position in the stock.

So I thought, if Cramer beneficially owned any shares of any stock that he recommended on Mad Money there would have to be a disclaimer about his ownership. There never is. Only his trust owns any shares of any stock he talks about.

It is hard for me to believe that Cramer owns no stock for his individual beneficial interest. He just does not seem the vow of poverty type.

Perhaps my assumptions are running away with me. Perhaps Cramer’s Charitable Trust is tax exempt and created for charitable purposes - but it pays its agents as well as the Red Cross does. Why could it not pay Cramer a market salary for his investment management of say $700 K per year? Why could it not provide a car and driver for Cramer as many companies and charitable institutions do to their administrative staff? Why could it not provide benefits like health insurance and club membership? A private jet? A zero interest home loan?

Remember the investment gains of the Charitable Trust would accumulate tax free and compound. Of course salary to Cramer would be taxable to Cramer, but health insurance, a car and a jet are more murky. Does the CEO of GE pay income tax on the fair market value of a corporate jet ride from his sumer home to a weekend business meeting? Add to this non profits file very sketchy tax returns.

Cramer might have his own little consumption tax system going. No tax on his investment gains until he pays them out to himself or family members for services to the trust.

Anyway, I wonder about his 100% stock ownership in Charitable Trust. Most humans need some investments in individual ownership to live their lives.