Selling Wall Street Journal Subscriptions Against My Will

City Lakes Real Estate Blog 2.0:
Due Early 2011

A capitalist will sell you the rope to hang him with.

--Lenin

I suppose the blogging equivalent of Lenin's famous line is, "a blogger whose ads are served by Google will end up promoting that which they denounce."

Which explains all The Wall Street Journal ads bracketing my last post (Google samples key words, and serves ads that appear to be related -- never mind the context).

Amongst other upgrades (Wordpress platform, "jumps," customizable format, etc.), the new-and-improved version of this blog will have better control over ad-serving.

Look for it in early 2011!

P.S.: Personally, I always thought that The Journal should charge for its (time-saving) annotations, and give away the unabridged articles. Instead, it's the other way around.

On RealClearMarkets.com

"Batting 8th Today . . ."

To a blogger, making RealClearMarkets.com is a bit like a novelist being mentioned on Oprah's book list: it delivers an instant, nationwide "pop" in your traffic (actually, international -- RealClearMarkets.com reaches readers in dozens of countries, not to mention senior policy makers in Washington, Wall Street-types, etc.).

So, it's nice to be on today's lineup -- along with people like Paul Krugman (NY Times), Robert Samuelson (Washington Post), and Fareed Zakaria (Newsweek).

As befits this blog's tiny profile, my post appears further down, in a section called "Off the Street."

Titled "The Wall Street Journal Whiffs on Warren," it discusses why Elizabeth Warren seemed liked a defensible choice to head the watchdog agency . . . she proposed creating, and why the Journal's attack on her appointment falls apart on closer (OK, not so close) scrutiny.

To someone who's been reading the Journal for 40 years (since I was 10), it's both sad and dismaying to see it now stumble so badly under Rupert Murdoch's ownership -- sort of like witnessing a visiting baseball slugger who's eviscerated your home team for years start to lose a couple steps.

The Journal I grew up with never used to be such an easy, broad target . . .

Parsing Occidental CEO Ray Irani's "Excellent Performance"

Obscene Exec Pay: Exhibit A

In a year when pay for chief executives overall fell, Ray R. Irani came out on top.

The longtime head of Occidental Petroleum was awarded total compensation of $52.2 million, up from $49.9 million in 2008.

The oil company's directors believe in "excellent pay for excellent performance," and Mr. Irani's leadership resulted "in exceptional returns for stockholders," said a spokesman.

--"Occidental Chief Tops Pay List"; The Wall Street Journal (4/1/2010)

Gee, if only I'd bought stock in a company like Occidental, I thought to myself, my portfolio would have done so much better last year (instead of melting down, like almost everyone else's).

Then I realized: I did buy stock in Occidental.

In 1989.

"Ray and Me"

That coincides almost perfectly with Mr. Irani's tenure at the helm of Occidental, where he has been CEO since 1990.

So, how has my investment done in the 21 years I've been an Occidental shareholder?

Not nearly as well as Mr. Irani.

From a purchase price of $15 per share then, my Occidental stock has appreciated to almost $87 today.

That's an almost six-fold increase -- not too shabby, huh?

Parsing the Returns

While it may not be shabby, it certainly doesn't qualify as stellar, either.

That's for the following three reasons:

One. Inflation. A dollar in 1989 isn't worth a dollar anymore; it's worth just a little over half that. That's because the CPI has just about doubled during that interval.

So $15 in 1989 buys the same as $30 today, reducing my 6x return to a little less than 3x.

Still not bad, though.

Except that you have to factor in how much time it took for that to happen.

Two. Annual Rate of Return. Tripling your money over two-plus decades certainly sounds good.

In fact, however, that corresponds to a rather mediocre annual return of just over 5%.

For much of that period, plain vanilla CD's yielded 5%-plus.

Three. Taxes.

If I sold my Occidental stock today, I would pay capital gains taxes -- a tame 15% by historical standards, but still not nothing.

Because capital gains taxes aren't indexed for inflation, the taxable gain would be $87 minus $15, or $72; 15% of that comes to $11. So, that leaves me with $76 for my two-plus decades as an Occidental shareholder.

How much of that is attributable to Mr. Irani's "excellent performance?"

And how much did Occidental's board of directors -- ostensibly representing shareholders like me -- think Irani should be compensated for that?

Mr. Irani's "Excellent Performance"

The answers: "less than you might think," and, "a sh*tload."

What casual readers of The Wall Street Journal don't know, but long-time Occidental shareholders (like me) do, is that Irani's 2009 jackpot was hardly an aberration.

According to Forbes magazine, here's what Mr. Irani has been paid the last several years:

2009: $52.2 million
2008: $49.9 million
2007: $54.4 million
2006: $415 million
2005: $81 million
2004: $64.1 million

Surely, Moses was paid less for shepherding the Jewish people out of Egypt.

So is that what Mr. Irani did?

Hardly.

Go back to the $15-to-$87 appreciation in the stock during his tenure.

Just using "nominal" dollars (the normal kind), that corresponds to a compound annual return of just under 9%.

Not 20% a year. Not 50% a year. Nine measly percent!! (Not even).

Making that number look even worse is what the average S&P 500 stock did during Irani's two decade tenure: it appreciated almost 7% a year.

So, is Mr. Irani a consummate corporate talent?

You bet he is: at getting a pliant board of handpicked directors to pay him a ransom that would make a king blush.

Reform Shorthand: Where's Volcker Standing?

The Wall Street Journal's Take on Wall Street

President Barack Obama proposed new limits on the size and activities of the nation's largest banks, pushing a more muscular approach toward regulation that yanked down bank stocks and raised the stakes in his campaign to show he's tough on Wall Street.

--"New Bank Rules Sink Stocks"; The Wall Street Journal (1/22/2010)

So, government's iron fist is once again coming down (too) hard on private enterprise, imposing (more) bureaucratic red tape on businesses, and hurting job growth and the stock market.

Right?

Umm . . . well . . . not exactly.

If the Journal had asked me to re-write the lead, here's what I would have said instead:

President Obama belatedly announced the first, limited steps to address the root causes of today's economic melt-down: reckless Wall Street banks that have required trillions in taxpayer bailouts to deal with the consequences of their highly leveraged, bad bets -- bets that have caused millions of Americans to lose their jobs, savings and homes.

In other economic news yesterday, Goldman Sachs announced blowout earnings from . . . making more, reckless bets with taxpayers' money.

In my opinion, the only thing worse than 'governing-by-poll' is 'governing-by-Dow-Jones,' i.e., doing whatever makes the stock market go up, and refraining from whatever makes it go down -- at least in the short run.

With the market now down a couple hundred points in the wake of the newly announced bank "reforms," it will be interesting to see if Obama sticks to his guns.

P.S.: want a short-hand way to tell? Figure out how close (or far) Paul Volcker is standing from him (yesterday, he was standing at his side).