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| Mr Biz on DougStephan.com |
LAKE WORTH, FLA. (Dec.
11, 2002)--Santa George looked down from his sleigh and decided that Wall Street
needs a new ribbon-wrapped Treasury Secretary, SEC Chairman, and Chief Economic
Advisor.
Santa George was wrong.
What Wall Street and the tens of millions of Americans need to restore confidence
in their investments, and a reason to climb on a Bull Market, is common sense
reform.
This week's action by the largest pension fund in the world (CALPERS), the California
State fund, was a good start. Calpers' board gave the boot to Merrill Lynch
and Credit Suisse/First Boston and told them their (alleged) portfolio management
skill and investment advice is no longer welcome, or needed. Thank you and good-bye.
Oh yes, don't let the regulatory door hit you in the butt as you leave.
While New York State's attorney general, and individual shareholder suits might
augment Justice Department action which seems slower than a squooshed Tootsie
Roll on an August Manhattan sidewalk, money managers can, and have taken action.
If the average Joe and Jane investor, big trust companies and mutual funds follow
suite, there will be a rush on Argus, Value Line, Wright Financial, Morningstar,
S&P, Moody's, Fitch, Duff & Phelps, and other truly independent researchers
or raters of stocks and bonds.
Here's my own Christmas list for Santa George to fill. Delivery on Christmas
Day will bring a smile to investors a year down the road:
MANDATORY RATINGS: Every brokerage firm "recommendation" must include
the S&P and/or Moody's rating on the stock, even if the broker is in competition
with these rating agencies. If the stock is non-rated, an explanation must be
included (e.g., too small, too cheap, too sleazy, etc).
CAPITAL GAINS TAX CUT: Farewell to capital gains taxes. Get with the program
which all other Western democracies have adopted. Stop billing citizens for
money they simply rollover and reinvest every year, such as CD's and mutual
funds. This is a middle class issue, not a "rich people" issue. Millions
of Americans don't sell stock for badly needed home improvements or other expenses
because of the "tax consequences."
WARNING LABELS ON NASDAQ: Federal regulators require serious looking warning
labels on booze, tobacco, and other items any reasonable person would find dangerous
to their health and safety. What about most Nasdaq stocks which are traded among
a clique of "market makers" with little transparency or scruples?
In between football games, and glitzy "business" reports from Times
Square, let us require a warning on print ads, on radio, or on the screen: "With
the exception of Microsoft, Intel, and a few select large capitalization stocks
which are also tracked in the major Dow Jones indices and have investment grade
ratings , many, if not most, Nasdaq issues are not investment grade, and not
prudent investments for poor and middle income people, or retirees seeking preservation
of principal and moderate, long-term capital gains."
FREE AGENT DIRECTOR LOTTERY: Each and every one of the S&P 500 listed corporations,
must add members which will cumulatively represent at least one-third of the
current board of directors. These directors shall be selected from the current
list of registered shareholders or designee (bank, trust officer, etc). This
will be an open, lottery-style drawing, similar to the procedure used successfully,
and fairly for years for the "extraordinary lottery (call)" feature
of old municipal coupon bonds. The new directors must: not be a current director
of any public company; must be 18 years of age; must be citizens of the United
States; must never have been convicted of a felony; and must possess a high
school diploma or GED. The new directors shall serve for a term of office not
less than three years, and then be replaced by the same method. Usual and customary
fees and expenses shall be afforded them. If followed, the overall quality of
decisions, oversight, and debate at board meetings will be improved.
DEFENSE-LIKE RULES: Pentagon contractors and officials can't resign and take
a government job without a waiting period. The same should be required of appointed
government officials. Wall Street and corporate execs from listed companies
should be required to be involved in paid or volunteer work outside of the investment
industry for a period of at least 24 months before showing up in the Cabinet,
an ambassador's spot, or at a regulatory agency. If nothing else, this will
put a damper on the Goldman Sachs- type patronage merry-go-round where Mr. Republican
Big Shot holds the corner office on the 26th floor, while a floor above or below
the resident Mr. Democratic Big Shot has a similar office. Depending upon whose
pals are elected, one of the two offices is vacant every few years. Now, that's
REAL campaign reform!
--
Mark Scheinbaum is chief investment strategist for Kaplan & Co. Securities,
www.kaplansecurities.com and shares a small office on the fifth floor with no
windows and no big shots.