Hi DJ: I'd add an extra party to your division of "haves" and "have nots".
I would add "Have nots who used to have".
These are the most desperate of the creatures, for they have in their minds seen "have" snatched from their grasp.
Haves are secure now. If they are truly haves.
The pure have nots don't know what they are missing and are not disgruntled. But the have-nots-who-used-to-have...
well, if there is such a thing as a gruntle, these folks have had theirs stripped from them!
Such a person is easily found in corporate America. These folks purchased goodies and paid down mortgages on stock options cashed in as they vested. A seemingly endless supply of extra money. Diversify? Sell and take the tax hit? They weren't crazy! Their nest egg was those remaining unvested or unexercised stock options!
Like the folks at OptionPyramidCO. You can construct a hypothetical grant portfolio. Maybe 40,000 options with weighted average strike price of $23 ranging from $7 to $60. This time last year they did the simple math: $83-$23=$60 x 40,000 = 2.4 M$ ... Worth waiting the next 4 years to retire on even if the stock doesn't go up a dime. The American dream, safe and secure... Aaaah... buy another toy and celebrate the good life...
... one year later...
Today they do a different math... Maybe 20,000 above water, average strike of these about $12, stock down 75% to $21... = 0.18 M$ After the tax man bites and divide by the 2 years until these all vest (we are forgetting about the underwater options)... hmmm... honey, I shrunk our dream.
Maybe we should sell the boat. Or the house. Or the SUV which is costing us a lot in gas money.
Most unsatisfying.
These folks haunt the topic threads now. If they can get their option portfolio up by $10-$20 per share again, they'd gladly take the half a million off the table. Put it in bonds or some safe place. Let the rest ride. Enough going from rags to riches to rags again... how about putting the brakes on when we get to 'riches' next time?
Not just the topic threads either. The streets too. I talk with many of my old co-workers and all agree this is what they will do. It's what I would do if in their shoes too.
Everyone from joe workingstiff to jack fundmanager to elected officials to stockbrokers to corporate executives to network anchors... they all need the stocks to go up... at least to where they can dump!
So I think we rally, and rally hard. And see feverish hope driving the markets up for one last gettin' out while the gettin's good.
But is there enough fungible money actually behind the market so that everyone with a piece of paper could exchange it for the dollars it's "worth"? Let alone all of these people somehow finding someone to exchange their pieces of paper with in return for their currency? When OptionPyramidCo has printed enough shares to give one to every man, woman and child on the planet? And despite the perception of those on each of the topic threads, their particular beloved is only one of many equities in the same position. Uh Oh.
I don't want to be there.
Food for thought.
John. |
