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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: yard_man who wrote (1160)1/30/1999 8:08:00 PM
From: Knighty Tin  Read Replies (1) of 1722
 
Tip, I think the last thing on these guy's minds is building long term value at a co. They are gunslingers who shoot up one town and then move to another, or retire, with tons of blood money in their pockets. But I don't really blame them. There have always been sleazeballs in business. I blame shareholders, as we are paying them to play games to build short term market price. Every time somebody comes out with tarted up eps, the herd only reads the headlines and never asks how the eps were "earned."

In all honesty, we cannot expect venal people to do anything other than what it is in their immediate best interest to do. Sometimes we are pleasantly surprised by a new era CEO being a decent person, but it is an exception to the rule. If you pay somebody for short term market action instead of long term building of a co., they will rape the co's future to kick out their bonus numbers right now. If they have to use debt and low quality accounting, they will. If they have to stuff distribution channels, they will. If they have to play games with Esops and share buybacks, they will.

But don't get me wrong. There is absolutely nothing wrong with share buybacks when the stock is priced under fair value. However, borrowing money to buy shares is a scam from day one. And buying at the top of this type of bubble isn't but should be criminal.

MB
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