Opinion

Ben Walsh

from Counterparties:

Wall Street’s thin white line

Ben Walsh
Jul 30, 2013 22:01 UTC

The ink on SAC’s indictment is barely dry, but Dylan Matthews argues that the entire case should be dropped. In fact, he writes, insider trading should be legalized. Laws against insider trading are “justified as providing an even playing field for small investors” despite the fact that a “playing field doesn’t exist”.

Bethany McLean looks at the history of the market-as-level-playing-field notion and concludes it “isn’t level, it never has been, and I’m not sure it can ever be”. Attempts to achieve fairness have all sorts of perverse effects, she writes, from the deteriorating quality of stock research, to financial folly by individual investors. “Nobody”, Matt Levine says, “goes around saying ‘let the little guy compete with trained neurosurgeons in neurosurgery’”.

John Carney, who has been, in his own tongue-in-cheek description, “an insane idiot on insider trading” for years, notes that the argument for legalizing insider trading isn’t new: it was first proposed in 1966 by academic Henry Manne. (The WSJ has a good summary of his arguments, or if you’re looking for something lighter, an animated bear.)

Matt Yglesias takes an opposite tack: insider trading should remain illegal, in part, because legalizing it would mean a huge diversion of management resources away from running companies and toward personally profiting from their inside information. Regulators should minimize that “diversion of effort” by making insider trading illegal, Yglesias argues, and those laws “ought to be a model for looking at further curbs on speculative activity”.

Justin Fox, meanwhile, wonders why authorities aren’t focusing on more important financial misdeeds:

from Counterparties:

The fight for Dell

Ben Walsh
Jul 18, 2013 21:32 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Michael Dell is in an awkward position, and not just because earlier today a lack of shareholder support forced him to postpone a vote on his $24.4 billion, $13.65-a-share buyout proposal to July 24. Dell is trying to convince shareholders that the growth prospects of his eponymous company are limited. Supporting the founder’s buyout, write Reuters’ Nadia Damouni and Anna Driver, are investors who are “ready to cash out of a company increasingly vulnerable to a crumbling PC market and already a shadow of an earlier self that led the global market and stood as a model of industry innovation”.

Dell's gloomy pitch seems to be winning last-minute converts. Michael de la Merced reports that “a number of big institutional investors switched their votes to yes” last night, including Blackrock, Vanguard, and State Street. Some of those investors, Merced says, may have been waiting in hopes that a higher offer would materialize.

from Counterparties:

Banks’ problem with success

Ben Walsh
Jul 16, 2013 22:16 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Things are almost too good for US banks right now, Tom Braithwaite argues. Goldman Sachs is the prime example: it handily beat expectations for its quarterly earnings today, making $1.93 billion in profit. That’s double last year’s number. Wells Fargo’s second quarter earnings were $5.5 billion, up 20% from a year ago. And JP Morgan’s profits in the second quarter jumped 31% to $6.5 billion; the bank is now on track to earn $25 billion this year -- that’s basically $100 million every working day. Even the phrases “Citigroup earnings” and “soundly beat Wall St expectations” are now appearing in the same sentence.

The problem, Braithwaite writes, is that these are the exact banks who “have spent a lot of time, energy and money warning of the potential ill-effects of ramping up regulation”. Kevin Roose doesn’t think we should pay attention to what bankers had to say about regulation at all.

Being a CEO has never been more valuable

Ben Walsh
Jul 2, 2013 22:13 UTC

There are a number of reasons no one is particularly worried about wage stagnation among CEOs:

    Over the last 30 years, CEO pay increased 875%, according to the Economic Policy Institute

    In 2012, CEO pay at large companies rose 6.5%, according to Equilar

    The average ratio of S&P 500 CEO pay to employee pay is 204 to 1, according to Bloomberg (the ratio rises to 273 to 1 when companies outside the S&P are included).

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