Archive for July, 2006

• Earnings Champions
  Eddy Elfenbein, July 19th, 2006 at 2:16 pm

  The following stocks have had 10 straight years of increasing earnings:
  NVR (NVR)
  Apollo Group (APOL)
  Moog (MOGA)
  Dollar Tree Stores (DLTR)
  Bed Bath & Beyond (BBBY)
  Compass Bancshares (CBSS)
  City National (CYN)
  Donaldson (DCI)
  Ross Stores (ROST)
  SEI Investments (SEIC)
  Expeditors International (EXPD)
  Toll Brothers (TOL)
  Patterson Companies (PDCO)
  Lincare Holdings (LNCR)
  Home Depot (HD)
  Health Mgmt Assoc (HMA)
  Knight Trans (KNX)
  Harley-Davidson (HDI)
  Paychex (PAYX)
  Applebee’s (APPB)
  Brown & Brown (BRO)
  O’Reilly Automotive (ORLY)
  Hilb Rogal & Hobbs (HRH)
  Heartland Express (HTLD)
  Capital One Financial (COF)
  Copart (CPRT)
  Walgreen (WAG)
  Sysco (SYY)
  Wal-Mart (WMT)
  D.R. Horton (DHI)
  Synovus Financial (SNV)
  General Electric (GE)
  Cathay Gen Bancorp (CATY)
  Trustco Bank Corp (TRST)
  Notice a lot of names from our Buy List.

• Fed Blogging
  Eddy Elfenbein, July 19th, 2006 at 9:40 am

  
  This might be an Internet first but I’m live blogging Ben Barnanke’s Humphrey-Hawkins testimony.
  In 1978, Congress passed the Humphrey-Hawkins Full Employment Act. Most of the bill’s original aims were stripped out, but one important development did come about. The chairman of the Federal Reserve is now required to testify on Capitol Hill twice a year. Before that, most Americans had little idea what the Fed was, what it did and who was in charge. Perhaps, they still don’t, but still, the Fed chairman must make twice-a-year visits to Congress.
  This usually happens once in the middle of summer and again in the middle of winter. Today is summer’s turn (and DC is in the midst of a blistering heat wave). Bernanke starts today in the Senate Banking Committee and tomorrow, he heads over to the House Financial Services Committee.
  The Chairman of the Banking Committee is Richard Shelby, a Republican from Alabama, although he started off his career as a Democrat. The hearings usually start off with some comments by committee members, then Bernanke’s testimony, and finally some questions from the senators. There’s also an accompanying report on monetary policy on the Fed’s Web site.
  The senator’s questions are often pretty embarrassing. The fact is, monetary policy is far less influential than many people realize. Sorry folks, but it won’t improve your golf swing. The members of Congress used to ask Alan Greenspan his opinion of everything. These guys are just bureaucrats—smart bureaucrats—but still bureaucrats. Jim Grant said that the Fed has two functions; set interest rates and give speeches. That’s about right.
  This testimony will receive particular scrutiny since it appears that the Fed’s interest rate campaign is coming to an end. Or perhaps, it’s merely a temporary pause. Over the last two years, the Fed has raised the Fed funds rate by 0.25% for the 17 straight meetings. The rate has climbed from just 1% to 5.25%. We’re now at the point where the overnight rate is roughly equal to long-term rates. In other words, the yield curve is flat.
  The yield curve is vitally important to the financial community. When the yield curve is wide (short-term rates are below long-term rates), it’s easy for banks to make money. Just borrow from the Fed and buy long-term Treasury bonds. You keep the difference. In Vegas, this is known as the “vig.”
  When the yield curve narrows, or even inverts, it becomes much harder for banks to make money. Banks become far more selective in making their loans. Not surprisingly, an inverted yield curve is often a warning sign of a slowing economy.
  The futures maket indicates that Wall Street is evenly split on the Fed’s next move. Historically, the stock market loves declining rates and hates rising rates. It almost doesn’t mind the level, just the direction. The next Fed meeting will be on August 8, and I think a pause from the Fed could spark a rally. That’s why today’s testimony is so important.
  One of the problems of monetary policy is that to work, it has to be secret. So we want to know everything that the Fed is thinking, but please don’t tell anyone. The FOMC meetings are private. The minutes are released three weeks later, and the transcripts are released five years later. As a result, every public utterance is a potential clue for what Bernanke is thinking. A few weeks ago, he made some comments to Maria Bartiromo at a dinner party and it moved the market. I think he’s learned not to do that again.
  Here goes:
  9:53: I made it! I’m in the (air-conditioned) Dirksen Senate Building.
  Two young aides are talking right by me. One asked the other if he went to see John Roberts yesterday. The guy said yes, and the first asked if it was “cool.” Apparently, it was. Yep, I’m in DC.
  9:57: Dude, I totally got an awesome seat. Third row inside aisle baby. Benny will be like twelve feet from me. This is better than my first Dead show. This is so cool! (Wait…did I just write that?)
  10:03: Benny is in the house! Dark suit. I guessed right. He’s sitting at the table and there’s like eight photographers snapping away in his face. He’s right next to me. Turn on your TV. I’m the guy three rows directly behind him. Look, I’m waving.
  10:05 Shelby has gaveled the meeting to order. It’s showtime!
  10:10: The senators are making their opening statements. Ugh. Here’s something you don’t see on TV. Senator Sarbanes is talking, but Senator Carper is yakking away with everyone around him. He’s jumping all around. There are aides walking in and out all the time. Did you know that Congress is really run by aides who look 12 years old, and think John Roberts is cool?
  10:24 Senator Bunning is reading his opening statment. He’s really laying into Ben. He’s “disappointed” with the rate hikes. Where’s the inflation, says he. This is very strange because he’s passionate but his public reading skills are extremely poor.
  10:32 Elizabeth Dole is making her opening statement. She seems really nice. Eight GOP members showed up to just four Democrats. The Dems are taking turns criticizing the economy.
  10:41: Senator Carper said that Bernanke is a rare witness who actually listens to the opening remarks. He said that cabinet members just look at their blackberries or read the paper. Ben is taking notes and everything. Such a good boy.
  10:43: Ben has much less hair than I thought. That’s not a criticism. Just something I noticed.
  10:45: Dodd just showed up, now it’s eight to five. By the way, senators now use charts to make their points. So you have a twelve-year-old aide hold up some big chart while you talk. Where do they make the charts? Is there like a Kinko’s in the basement?
  10:49: Now it’s Benny’s turn. This is from the Fed’s Web site which seems to be following closely.

  The U.S. economy continued to expand at a brisk rate, on balance, over the first half of 2006. Spending in the first quarter, which was especially robust, was temporarily buoyed by several factors, including federal spending for hurricane relief and the effects of favorable weather on homebuilding. The pace of the expansion moderated in the spring, to some degree because the influence of these special factors dissipated. More fundamentally, consumer spending slowed as further increases in energy prices restrained the real incomes of households. In addition, home sales and new homebuilding dropped back noticeably from the elevated levels of last summer, partly in response to higher mortgage interest rates. Outside of the household sector, increases in demand and production appear to have been well maintained in the second quarter. Demand for U.S. exports was supported by strong economic activity abroad, and business fixed investment remained on a solid upward trend. Early in the year, as aggregate output increased rapidly, businesses added jobs at a relatively robust pace, and the unemployment rate moved down further. Since April, monthly gains in payroll employment have been smaller but still sufficient to keep the jobless rate steady.
  Thus far in 2006, inflation pressures have been elevated. Higher prices for crude oil contributed to a further run-up in domestic energy costs; this year’s increases, combined with the steep increases in 2004 and 2005, not only boosted the prices of gasoline and heating fuel but also put upward pressure on the costs of production for a broad range of goods and services. Partly as a result of these cost pressures, the rate of core consumer price inflation picked up. Nevertheless, measures of inflation expectations remained contained, and the rate of increase in labor costs was subdued, having been held down by strong gains in productivity and moderate increases in labor compensation.
  Taking a longer perspective, the U.S. economy appears to be in the midst of a transition in which the rate of increase in real gross domestic product (GDP) is moving from a pace above that of its longer-run capacity to a more moderate and sustainable rate. An important element in the transition is the lagged effect of the changes in monetary policy since mid-2004, changes that have been intended to keep inflation low and to promote sustainable economic expansion by aligning real economic activity more closely with the economy’s productive potential. Moreover, longer-term interest rates have risen, contributing to increased borrowing costs for both households and businesses. Over time, pressures on inflation should abate as the pace of real activity moderates and, as futures markets suggest, the prices of energy and other commodities roughly stabilize. The resulting easing in inflation should help contain long-run inflation expectations.

  Ok, here’s the money part:

  For inflation, the central tendency of the forecasts is an increase in the price index for personal consumption expenditures excluding food and energy (core PCE) of 2-1/4 percent to 2-1/2 percent over the four quarters of 2006; in 2007, the forecast shows a slower rate of 2 percent to 2-1/4 percent, which is similar to the rate of core PCE price inflation in 2004 and 2005.

  There’s much more, but that gives you a feel.
  I’m surprised the Fed has such a bold prediction of slowing core inflation. Here’s a chart I did last month of core and non-core inflation. The trend seems to be upward.
  11:16: He’s done. That was faster than I thought. Ben has a clean delivery. He strikes me as a no-nonsense guy.
  11:18: It’s question time!
  11:37: Here’s another thing you don’t see on TV. Ben and the senators have this little clock thing in front of them with a light thing. The question time starts at 10 minutes with a green light and counts down. When the time hits one minute, the light turns yellow. And when time runs out, the light goes red. This seems to be rather liberally enforced. Sarbanes ran a full minute over. If I ran the committe, I’d have it like the Oscars and strike up the band when people run over. I can see Ben’s clock right in front of me. Here, I’ll wave again (did you see me?).
  11:52: Yikes, my battery is dying. Let’s just ignore the metaphorical implications. I’m going to power down for a few minutes.
  12:23: I’m up again. Yuck, these questions are boring. I think everyone heree is worried about home prices. Now my stomach is growling. I hope nobody heard that.
  12:37: We’re done. Shelby just gaveled us out.
  12:42: Wow! I just checked the market and we’re rolling. The Dow is up 150! Benny’s got to talk this way more often.

• Death Cross for the S&P 500
  Eddy Elfenbein, July 18th, 2006 at 3:30 pm

  The market is down for the fifth straight day:
  
  The market has given back all of its gains since November. Since then, the Fed has raised rates an additional 125 basis points.
  Mark Anderson of Alt Energy Stocks notes that today’s close could confirm a death cross–where the 50-day moving average falls below the 200-day moving average.
  On a side note, Death Cross would be a cool name for a band.
  Update: We just barely missed a Death Cross. The 50 DMA is 1264.487. The 200 DMA 1264.325.
  The 50 DMA has been higher than the 200 DMA continuously since November 2004.
  Since 1950, the 50 DMA has been higher than the 200 DMA for about 68% of the time. When it’s higher, the S&P 500 grows by 7.24% at an annualized rate. When it’s lower, the S&P 500 grows by just 0.95% annualized.

• The Advertising Slogan Generator
  Eddy Elfenbein, July 18th, 2006 at 2:34 pm

  Crossing Wall Street needs what every good organization needs, a slogan. So we’ve turned to the folks at Advertising Slogan Generator.
  Just hit refresh and a new slogan pops us. Here are some of our favorites:
  

  Good Honest Crossing Wall Street Since 1896
  Every Kiss Begins With Crossing Wall Street
  If Only Everything in Life was as Reliable as a Crossing Wall Street

  It’s like they know us!

• 9/11 Options Part II
  Eddy Elfenbein, July 18th, 2006 at 1:57 pm

  Barry Ritholtz lays down a challenge to me and Professors Ribstein and Bainbridge.
  So Barry, but I won’t bite.
  Let me briefly restate my argument. I am not an apologist for these executives. Nor am I saying that they’re “fine human beings.” I am, however, a critic of the unfair accusations made against them in Saturday’s WSJ. It was highly unprofessional journalism.
  The article used stilted language and sloppy juxtapositions to create a sense that these were shadowy executives using illegal or unusual methods to profit off people’s misery. It wasn’t illegal. It wasn’t unusual, and some of them didn’t make money.
  In fact, the article later goes into detail explaining just that, which in my opinion, makes the journalism even worse. They introduce the charge and back away from it. That’s like saying, “they say he’s a wife-beater, which I don’t believe.” Then don’t say it.
  If you want to ban stock options, fine. If you want to call them greedy, fine. If you want to say that they’re lousy executives and don’t serve shareholders well, go right ahead. But it’s grossly unfair to imply that they profited off 9/11, or were uncaring to the suffering of the terrorist attacks.
  (Do you want an example of war profiteering? How about…paying to avoid military service and then selling shoddy guns to the army. Just like J.P. Morgan.
  About Richard Whitey, well…the less said the better. And Thomas Lamont, Ned’s great-grandfather btw, was rather a big fan of Mussolini. Not to mention, he drove Keynes nuts at the Paris Peace Conference of 1919.)
  Actually, I do own both Home Depot (HD) and UnitedHealth (UNH), so perhaps I do meet Barry’s challenge. What’s more, I’ve defended both positions on this site, and suffered the consequences. My Buy List is free for all to see.
  Were the actions of the executives slimy? Probably. Evil? No.
  Update: Here’s Professor Ribstein’s response. Also, John Carney has a vote tally at DealBreaker.

• The NASDAQ-to-Dow Ratio
  Eddy Elfenbein, July 18th, 2006 at 10:36 am

  Every so often I like to look at the ratio of the NASDAQ Composite to the Dow 30. Traditionally, the Dow goes for about 5 times the NASDAQ, or a NASDAQ-to-Dow ratio of 0.2.
  As you can see from this chart, the 5-to-1 rule has held up surprisingly well for a long time:
  
  If you have a sharp eye, you may have noticed that something seems…missing from the chart. Well, you are right. I cut out two-and-a-half years from the chart.
  Here’s what the whole thing looks like.
  That really shows you how crazy the NASDAQ got. At its peak, the ratio topped 0.5. Yet even after all that madness, the traditional range reasserted itself.
  As of yesterday’s close, the NASDAQ was going for 0.1896 of the Dow which is a bit below the heart of its long-term range.

• Yahoo Finance to Have Blogs
  Eddy Elfenbein, July 18th, 2006 at 6:54 am

  Say goodbye to those unsightly wrinkles, Yahoo Finance is getting a makeover.
  This seems to be a niche where Yahoo is clearly kicking Google’s ass. Here’s a shocking stat: During the last week of June, Yahoo Finance had 108 times more unique visitors than Google Finance. Of courese, that’s not an entirely fair comparison since Google Finance sucks.
  So what are the changes?

  Yahoo Inc. on Monday will unveil an upgraded version of its top-ranked financial information site that features new stock charting tools, improved investor chat rooms and financial video news.
  In a bid to expand the audience for its investor tools, Yahoo Finance also plans to allow other Web sites to embed stock charts, quotes, and financial news headlines from Yahoo, free of charge, on other sites using a small amount of code.

  That’s not all. The new Yahoo Finance will offer something that Google Finance already offers–blogs!

  Financial blogs will be added shortly as well, perhaps filtered by a third party. By offering a new reputation system that allows readers to rate the value of postings on its stock message boards, Yahoo has recently begun seeking to breathe life into the decade-old stock chat room phenomenon.
  Investor message boards long ago degenerated into a mosh pit of harsh invective and uncorroborated rumor traded between bullish and bearish advocates of specific stocks.

  Yes, I’m glad blogs are here to end that unpleasantness.
  It seems as if Yahoo Finance is moving towards the model pioneered by David Jackson’s excellent Seeking Alpha. A few months ago, Joe Weisenthal of The Stalwart (and DealBreaker and Techdirt) said that Yahoo Finance might as well go all the way and buy a brokerage. I think he’s right.
  If/When I become King of Yahoo Finance, these are the changes I’d make.
  1. Get rid of the Motley Fool as a news provider. Or at least, make them provide real content. Look at “news stories” under a hot stock like Hansen Natural (HANS). Almost none of that is news. It’s mostly advertising for the Motley Fool’s paid content disguised as news. The frustrating part is that the Motley has excellent commentary.
  2. Better charts. There’s a reason why I use Big Charts on this site. At a minimum, you should be able to use charts with customized dates. The “Rolling EPS” and “P/E Ratio” functions are also very good, although I think the EPS data at Big Charts is often a bit bizarre. (See here for an example).
  3. Clean up the historical data. This probably isn’t Yahoo Finance’s fault but their data provider’s. There are several mistakes in the historical data for major indexes like the Dow and S&P 500.

• Harley-Davidson’s Earnings Were In line
  Eddy Elfenbein, July 17th, 2006 at 9:43 am

  This will be a busy week for earnings. Harley-Davidson (HDI) leads off by reporting 91 cents a share which matches the Street’s estimates.

  Motorcycle maker Harley-Davidson Inc. on Monday said second-quarter profit grew 3 percent, helped by double-digit growth of international sales.
  Earnings rose to $243.4 million, or 91 cents per share, for the three months ended June 25 compared to $237.4 million, or 84 cents per share, during the same period last year.
  Revenue grew 3 percent to $1.38 billion from $1.33 billion last year.
  Analysts predicted a profit of 91 cents on revenue of $1.36 billion, according to a poll by Thomson Financial of 19 analysts.
  The company said U.S. retail motorcycle sales grew 8.1 percent, while international sales jumped 17.3 percent.
  Worldwide, Harley-Davidson’s dealer network sold 125,000 motorcycles during the quarter, a 10 percent rise over the prior-year period.

  The shares are up in early trading.

• Karl Marx the Artist
  Eddy Elfenbein, July 16th, 2006 at 12:37 pm

  Karl Marx’s unfinished masterpiece, Capital, is a disjointed and incoherent mess. But as Francis Wheen argues, that’s the point. Marx believed capitalism was a disjointed, incoherent mess. Don’t read the book as a work of economics, but read it as Marx intended—a work of art:

  Marx was a modernist avant la lettre. His famous account of dislocation in the Communist Manifesto – “all that is solid melts into air” – prefigures the hollow men and the unreal city depicted by TS Eliot, or Yeats’s “Things fall apart; the centre cannot hold”. By the time he wrote Das Kapital, he was pushing out beyond conventional prose into radical literary collage – juxtaposing voices and quotations from mythology and literature, from factory inspectors’ reports and fairy tales, in the manner of Ezra Pound’s Cantos or Eliot’s The Waste Land. Das Kapital is as discordant as Schoenberg, as nightmarish as Kafka.
  Marx saw himself as a creative artist, a poet of dialectic. “Now, regarding my work, I will tell you the plain truth about it,” he wrote to Engels in July 1865. “Whatever shortcomings they may have, the advantage of my writings is that they are an artistic whole.” It was to poets and novelists, far more than to philosophers or political essayists, that he looked for insights into people’s material motives and interests: in a letter of December 1868 he copied out a passage from another work by Balzac, The Village Priest, and asked if Engels could confirm the picture from his own knowledge of practical economics. Had he wished to write a conventional economic treatise he would have done so, but his ambition was far more audacious.

• The WSJ Breaks a Pseudo-Scandal
  Eddy Elfenbein, July 15th, 2006 at 9:03 pm

  The Wall Street Journal has a front-page story today on how corporate boards awarded stock options to senior executives in the wake of 9/11.
  The story has the look and feel of uncovering some insidious corporate scandal. Look at the juxtaposition presented in the first two paragraphs:

  On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York’s Adirondacks, soldiers readied for deployment halfway across the world.
  Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives.

  Not very subtle is it? The soldiers readying for deployment was nice touch. Those evil corporate plutocrats just couldn’t wait to profit off 9/11.
  But hold up, how exactly did those boards know that the options grants were, as the Journal points out, “bargain-priced”? The answer is, they didn’t (assuming the options were at-the-money). More importantly, they couldn’t have known. The grants were based on nothing more than faith in the future, which was hardly in overabundance at the time.
  It’s true that stocks nosedived when the markets reopened, but that doesn’t by itself mean the options were a bargain. After all, the market had already been falling and it continued to fall for more than a year. In fact, the S&P 500 was still below its pre-9/11 level nearly three years after the attacks (and, of course, those soldiers readying themselves).
  The article continues:

  A Wall Street Journal analysis shows how some companies rushed, amid the post-9/11 stock-market decline, to give executives especially valuable options. A review of Standard & Poor’s ExecuComp data for 1,800 leading companies indicates that from Sept. 17, 2001, through the end of the month, 511 top executives at 186 of these companies got stock-option grants. The number who received grants was 2.6 times as many as in the same stretch of September in 2000, and more than twice as many as in the like period in any other year between 1999 and 2003.
  Ninety-one companies that didn’t regularly grant stock options in September did so in the first two weeks of trading after the terror attack. Their grants were concentrated around Sept. 21, when the market reached its post-attack low. (Wrong! The markets continued to fall.) They were worth about $325 million when granted, based on a standard method of valuing stock options.

  Before I get myself into any more trouble, let me make the usual disclaimers. If the executives back-dated their options against company policy, that’s fraud. Fine. Toss them away for good. But that’s not the issue here.
  As Larry E. Ribstein points out, this article arrives with the back-dating scandal to give the appearance of flowing from one river into a new branch. It’s not.
  Or, if the issue is the use of stock options. Fine. Let’s talk about that. But then, you have to address Congress’ silly law that caps the tax deductibility of salaries at $1 million. That’s what’s led to the soaring use of stock options. I say, let’s have that debate. The two sides of the WSJ can square against each other.
  Or, if the issue is corporate boards being the poodles of CEOs. Fine. I think that’s an important issue that needs to be looked at. But again, that’s not what this article is about. Instead, we get more juxtaposing:

  The 91 companies included such corporate icons as Home Depot Inc., Black & Decker Corp. and UnitedHealth Group Inc. It included two companies directly touched by the tragedy. Merrill Lynch & Co., across the street from the Twin Towers, lost three employees. On Sept. 24, Merrill granted its president options to buy more than 750,000 shares, at a price 15% below the pre-attack level. At Teradyne Inc. in Boston, an employee delayed a business trip until Sept. 11 to attend a son’s soccer game and died on American Flight 11. Teradyne that month gave its CEO more than 600,000 options at a price enabling him to buy stock at 24% below its pre-attack level.
  At Stryker Corp., a Michigan maker of orthopedic products, onetime stock-option-committee member John Lillard said he didn’t regret the decision to award options nine days after the attack. “If you believe the company is going to do well, and here is an external event that is affecting the market and you’ve made a decision to reward executives, you go ahead with it,” Mr. Lillard said. “Life goes on.”

  I think we’re all agreed not to use Mr. Lillard as a PR spokesman. It may be flippant, but he’s got a point. This is exactly what was being said at the time, “get on with you lives, get on with your work.” If you recall, there was an urgency to open the markets as soon as possible.
  The Journal notes that the Merrill Lynch options were granted at a price 15% below the pre-attack level and for Teradyne, the options were 24% below the pre-attack level. Wouldn’t it also be true to say that the executive at those companies saw their share values drop by 15% and 24%? This also could have erased millions of dollars of previously granted options. The article doesn’t say, but in the eighth paragraph we learn:

  There’s nothing illegal about granting options after the market plunges. (Oh!!). But acting so quickly after a national tragedy drove down stocks shows the eagerness of some companies to increase their executives’ potential wealth. These grants also offer important new fodder for an already fractious debate over what constitutes the proper use of options in executive compensation.
  Dozens of companies are under investigation for possibly backdating option grants to a day when the stock was lower, a practice that could mean the companies have made false disclosures and perhaps reported financial results incorrectly. Other companies are being investigated on suspicion of timing options grants ahead of good corporate news.
  The multiple options grants after 9/11 raise a different question: Did companies take unseemly advantage of a national tragedy?

  Let me see if I have this right. It’s not illegal. It’s not backdating. Although if it were, it’s definitely possible that it could be illegal assuming the possibility that it is legal is incorrect. And backdating, the thing it’s not, is going on now which is raising fodder which this adds to. Or perhaps this is the one raising fodder which adds to earlier fodder that’s already been raised. I’m really not sure.
  But they’re absolutely guilty of one thing—being unseemly. And rushing. And eagerness. I got it: They’re unseemly rushing towards their eagerness to increase their wealth. I mean, potential wealth. Those bastards!
  Sorry folks, but this is what options grants are all about. They have to be granted at some point. Some points will be better than others. There’s no guarantee. Despite barrage of indefinite pronouns, this is not “profiting off 9/11.” These were events caused by 9/11 but the executives had no assurance that it would make money for themselves or anyone else. Remember that Saudi prince guy who gave money after 9/11 and used the moment to denounce Israel. That’s abusing 9/11. Not this.

  Minutes after the bell rang Sept. 17 at the New York Stock Exchange, New York Mayor Rudy Giuliani, who’d attended the solemn reopening ceremony, told CNBC, “Everybody should step up to the plate right now and show the strength of the American economy.” He added: “We depend on this. A lot of jobs and the future of America and the world rests on what happens here.”
  The market fell nonetheless. And on that Monday, Home Depot broke with a regular pattern of issuing stock options in February and made a huge grant to its chief executive, Robert Nardelli. The grant permitted Mr. Nardelli, for the next 10 years, to buy one million Home Depot shares at that tumultuous September day’s closing price of $36.20 a share. This was 10.7% below the Sept. 10 closing price of $40.55.
  The following day, Home Depot gave more grants: 50,000 options to each of four other executives, all of whom had already received options earlier in 2001. With Home Depot shares now trading at about $34, the options are currently out of the money.

  This is truly a first. The WSJ is reporting on a scandal that’s not scandal involving profiteering that didn’t make money. (At least, not in Nardelli’s case). Wow, that is unseemly.
  This pseudo-scandal is that what went on didn’t “look right.” Essentially, Wall Street is accused of being gauche. Is this news to anyone? Of course they’re greedy bastards, it’s Wall Street. That’s the idea.
  Or as Professor Ribstein put it:

  One reason our markets were so resilient is because we had managers who were focused on money. Should they have been thinking only about how to fill the shareholders’ wallets with the nasty stuff? So what we really want from our corporate executives is people who are greedy enough to be thinking about money after 9/11, but altruistic enough only to be thinking about how to make it for the shareholders? Aren’t we getting a little picky?

  Exactly.
  The problem with the “how it looks” accusation is that it can be thrown around very easily. How long are we supposed to wait? What about last week? Or is that profiting off Hezbollah’s terrorist attacks on Israel? I fail to see how murdering civilians with Katyusha rockets affects the price of oil, but apparently, it does.
  Now there’s an unseemly juxtaposition for you.
  Update: Barry Ritholtz has a very different take here and here: “Brain cancer is too good for these people.” Except he didn’t call them “people.”
  Stephen Bainbridge has more thoughts here.