obama proposes pointless regulation on banks

#51
#51
shootermcgavin7 said:
You are incorrect. CEO A has lost $10 per share, but CEO B has lost nothing. CEO A still owns the stock....his weath has gone from $50 per share to $40 per share.

CEO B only owns the option on the stock. It makes no difference to her if the stock is $50, $40, $10. It is out of the money.
If your response does not display an understanding of this convex payoff you should definitely ask Berkley for a refund. Options encourage risk-taking. Open an UNDERGRADUATE investments text and glance at the payoffs to a long-call.
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bs. it means nothing if the stock is $10 out of the money rather than $40? it sure means a lot if the stock goes up $20 tomorrow. and what's my "weath" worth if I can't sell the stock or get at it? zero.
 
#52
#52
i'm not sure why you are arguing a ceo would be a better manager if he's handed stock for nothing. in reality a CEO should be given out of the money options. simply getting bonuses for not torpedoing the company or simply matching market returns is exactly the type of pay for no performance gripe obama has about the bonuses from the banks.
 
#53
#53
droski said:
bs. it means nothing if the stock is $10 out of the money rather than $40? .
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Let's do the same scenario.

A company gives me 100 stocks...at $50.

I shout "Yay! I have $5000 in assets".

A company gives you 100 options with a strike of $50. You shout, "Yay! I have a free claim to $5000 in assets".





Tomorrow the stock price goes UP to $60.

Both of us still have the same wealth.




Now change things, assume it goes DOWN to $40.

I have lost $10 x100 = $1000

You've lost nothing, you never exercised your options.



It is plainly obvious you LIED about "trading options", or else you would understand the concept of "vega" and how risk-taking incentives shift due to the moneyness of options. What a load of BS.
 
#54
#54
droski said:
i'm not sure why you are arguing a ceo would be a better manager if he's handed stock for nothing.
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Hey droski, I'm talking about INCENTIVES, and risk-taking INCENTIVES.

I'm specially talking about OPTIONS, which you claim to TRADE (this is obviously a lie, you have spent the entire day exhibiting no understanding about vega or any other greeks which vary with risk, etc.)
 
#55
#55
shootermcgavin7 said:
By the way, what I was getting at is the following:

If you believe in free/perfect markets, the current stock price fairly reflects the risk-adjusted return of the company.

If you believe anything else, it means free/perfect markets are not currently the case.
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Free perfect market assume guys like CEOs aren't making decisions that impact price of stock they have. That isn't the case.
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#58
#58
BigPapaVol said:
Was there a point here? Maye something PhD in finance learns that those in the real world are unaware of?
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Not at all. But perhaps someone who attempted to differentiate "options" and "incentive pay" (I'm referring to you) could let the rest of us in on the difference.
 
#59
#59
All i understand is you have read a bunch of books and have not thought practically. real people don't think this way. the CEO A didn't have anything before he was given the stock and doesn't lose a cent if it goes to zero. something that is completely illiquid isn't worth anything in practicality. and you still haven't answered the fundamental question as to why it's better to encourage a ceo to do nothing than encourage him to actually raise the price of the stock,.
 
#60
#60
droski said:
All i understand is you have read a bunch of books and have not thought practically. real people don't think this way. the CEO A didn't have anything before he was given the stock and doesn't lose a cent if it goes to zero. something that is completely illiquid isn't worth anything in practicality. and you still haven't answered the fundamental question as to why it's better to encourage a ceo to do nothing than encourage him to actually raise the price of the stock,.
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Real people? I guess Joe the Plumber should be making economic decisions now.
 
#61
#61
shootermcgavin7 said:
Hey droski, I'm talking about INCENTIVES, and risk-taking INCENTIVES.

I'm specially talking about OPTIONS, which you claim to TRADE (this is obviously a lie, you have spent the entire day exhibiting no understanding about vega or any other greeks which vary with risk, etc.)
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i don't know crap about options because i don't believe CEO's are robots that follow academic formulas of payoff/no payoff? i haven't seen any discussion of vega or greeks or option pricing or whtaever. all i've seen is your opinion.
 
#62
#62
droski said:
All i understand is you have read a bunch of books and have not thought practically.
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Child. I would like for you to show me that CEO A & B have the same risk incentives.

That is all.



real people don't think this way.
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I'm sorry. I believe I have cited REAL PEOPLE empirical studies. I'll cite the Coles, Daniel and Naveen Journal of Financial economics paper AGAIN because you keep muttering that "real people dont' think this way".

Real people ACT this way. Your whining doesn't change that.





Seriously. Ask Haas for a refund. It is embarrassing. I would expect this from a Big12 graduate but not a kid from Berkeley. You're ruining my preconceived notions.
 
#63
#63
shootermcgavin7 said:
That's not true at all.

However, that assumption does claim that that CEO is acting in the best interest of shareholders.
Do you believe this?
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It is true. Perfect markets assume all possible information is impounded into the stock price, which isn't remotely true.

No, CEOs aren't alway acting in the best interest of all shareholders, since all have different agendas, including the CEO himself. My point is that CEOs holding hordes of Class A shares tend to take a short term view in decision making.
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#64
#64
droski said:
i don't know crap about options because i don't believe CEO's are robots that follow academic formulas of payoff/no payoff? i haven't seen any discussion of vega or greeks or option pricing or whtaever. all i've seen is your opinion.
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Refer to my last post. I have repeatedly cited EMPIRICAL literature. Sorry kiddo. Like I said, hopefully it isn't too late for a refund.


I have met multiple bright graduates from Haas, though, so my guess is that they just admitted someone too hard-headed to understand the business world.
 
#65
#65
bam15 said:
Real people? I guess Joe the Plumber should be making economic decisions now.
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He would fare better than any person on any level of gov't.

The local crack whore would be 100% more effecient than any person on any level of gov't.

:hi:
 
#67
#67
BigPapaVol said:
It is true. Perfect markets assume all possible information is impounded into the stock price, which isn't remotely true.

No, CEOs aren't alway acting in the best interest of all shareholders, since all have different agendas, including the CEO himself. My point is that CEOs holding hordes of Class A shares tend to take a short term view in decision making.
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We are getting close to common ground. Evidence suggests that both A & B are forced into short-term decision making. This appears to be a fallout from the attempts to privatize social security (although causality is not certain). However, this is completely irrelevant to the current topic.

In short, I think we agree on the investment horizon in general, but it isn't relevant to the current discussion on risk-taking incentives. I would love to hear your view through PM or another thread, however.
 
#68
#68
shootermcgavin7 said:
Refer to my last post. I have repeatedly cited EMPIRICAL literature. Sorry kiddo. Like I said, hopefully it isn't too late for a refund.


I have met multiple bright graduates from Haas, though, so my guess is that they just admitted someone too hard-headed to understand the business world.
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internet_tough_guys.jpg
 
#69
#69
droski said:
i see so since they were officially split during the great depression they didn't remain split until the 90s? what happened from 30s to 90s exactly? are you really this dim? or are you just some internet dbag arguing semantics?

University of California, Berkeley Bachelors in Economics
CFA Charter
10 years as a portfolio manager

Your turn big shot.
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OrangeEmpire said:
internet_tough_guys.jpg
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:ermm:
 
#70
#70
BigPapaVol said:
I specifically said options as incentive pay.
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I am wrong. I went back and looked at your post.

I am not sure that in all cases stock is better than options, however. I'm not sure that anyone knows.

Again, I apologize, my statement was incorrect.
 
#71
#71

Thanks Orange.

I have repeatedly asked you to contribute to the threads I post in, yet you do not. I can only assume you are a frequently-posting and crowd-pleasing troll.

Feel free to drop pictures all of my threads, and make irrelevant comments along the way.
 
#73
#73
shootermcgavin7 said:
Thanks Orange.

I have repeatedly asked you to contribute to the threads I post in, yet you do not. I can only assume you are a frequently-posting and crowd-pleasing troll.

Feel free to drop pictures all of my threads, and make irrelevant comments along the way.
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whining.jpg
 
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