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Jet-Lagged Randoms: Google Gets It, Grasso Gets Something Else, What Would Herbie Do?


"The legs feed the wolves!"

Greetings from depressingly soggy New Jersey where I'm shaking off a one day Out-and-Back to Minnesota yesterday. Some thoughts both on and off the topic of the "stocks" as I try to get my Mojo working for the weekend:

Google Gets It...

Google (GOOG) continues to be its own NASDAQ bull market as the stock rocks some 30-bones higher this morning. Are today's move and Goog's valuation "rational?" Ours is not to question why, good Minyans. Stocks are a game of Relative and Google continues to look absurdly impressive both Relative to expectations and, in particular, relative to its one time competition, Yahoo! (YHOO).

The expectations will, eventually, catch up to Google's stock. Whether it's a company talking to analysts or a golf opponent who tells you he's a 12-handicap but shoots 75 every time you play for money, you can only sandbag people for so long. That said, I wouldn't bet against Google anymore than I would play a high-stakes Nassau straight-up against a guy who has his name stitched on his golf bag. There are simply better and less aggravating ways to make money.

As for Yahoo!, the company may want to consider changing the exclamation point at the end of its name to a fork. It would be a hassle for the computer-age typesetters of the world but sticking a fork in the back of Yahoo is totally appropriate because Yahoo is done.

Google's competition is Microsoft (MSFT). My advice to Yahoo founders Jerry Yang and David Filo is to buy a Chexx Hockey machine and invite the Russian ex-pat Google founders over for a winner-take-all head to head. It's Yahoo's only chance...

Grasso Gets Something Else...

Dick Grasso has been ordered by a New York judge to repay the NYSE (NYX) nearly $100 million in compensation. This despite multiple members of the NYSE board of directors at the time of Grasso's leadership testifying that they knew of, and approved, Grasso's pay package. Another curious aspect of the ruling, despite the NYSE's not-for-profit status under Grasso, the exchange is now a public entity with a market cap in excess of $11 billion.

If you've read what I've written about this case in the past, it should be easy to guess my thoughts on the ruling. Since I'm too damn jet-lagged and water-logged to play Socrates, my main beefs can be summarized as these.
  • Who, exactly, was the victim of Grasso's malfeasance? As mentioned, the NYSE is now a major corporate entity worth an enormous sum of money. Whatever John Thain and his fellow current execs have done to create value at the exchange since Grasso left they didn't invent the NYSE. Surely Grasso can claim some responsibility for a portion of that $11 billion in value and should be entitled to market value payment for his labors.

  • What is the precedent being set here for American boards? Are the courts really prepared to adjudicate corporate pay-packages based not on specific laws being broken (eg: backdating stock options) but rather what judges view to be "reasonable?"

  • Boards set the compensation levels for CEOs. The NYSE board generally (but not to a person) testified that they were aware of Grasso's pay. Despite this, Justice Charles Ramos wrote that Grasso "failed to see to it that the board was fully informed" (emphasis added) of his pay.

    Is the implication that CEO's are now expected to argue against their own pay? We're talking about capitalists here, people, not public servants.

  • There's simply something deeply wrong about one group of "unreasonably wealthy" executives using unreasonably underpaid agents of the courts to force past executives to give back money. I don't particularly care what someone thinks Grasso should have been paid for his work, it's simply not a matter for the courts to decide. Courts should be used to settle matters of law, not personal grudges.

What would Herbie Do?

Speaking of capitalists, Russians and hard cases, I spent my flight time yesterday reading The Boys of Winter: The Untold Story of a Coach, a Dream and the 1980 US Olympic Hockey Team.

You already know the story of the Miracle on Ice. I've even written about it here. Indulge this native Minnesotan, if only for two reasons:

1. The book is a great re-telling of a story well worth remembering. Put it this way (as the book does): We can all remember where we were when we first heard bad news of a national scale but the same can't always be said for the good. I'll always remember where I was when the US beat those commie bastards and I bet you can as well.

2. I like to think the entire NYSE mess could have been settled long ago had the judge made everyone involved put on skates and do Herbies until they made-up and/or threw-up. At the very least it would have saved a lot of trouble and legal fees.

No positions in stocks mentioned.

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