INVESTING: Fraud sparks furor only when stocks are slumping

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My wife and I recently saw the movie “Fun With Dick and Jane.” It’s the story of a CEO who cooks the books at a tech firm, and all the employees lose their jobs and are wiped out. I walked away thinking Wall Street could win best supporting actor in the film.

As the credits rolled, the producers of the movie thanked recent corporate evildoers, such as Kenneth Lay from Enron and Bernie Ebbers from WorldCom, for their inspiration. Coincidentally, I went to work a few days later, and Lay was on the front page of the paper, thanks to the start of his criminal trial.

Our government officials have been putting CEOs on trial in a public fashion because they want to restore investor confidence. The cases make for great stories. But the laws are typically overly burdensome, and most investors don’t care one whit about them when they’re deciding to place their money on the line.

My take on the Lay case is that he authorized some illegal acts in the kitchen. I think the oven was in full use at World-Com. Ebbers says he didn’t know, but since he was in charge, he was at fault as well.

I am not sure what to make of Tyco, and I think the only thing Stephen Hilbert was guilty of at Conseco was greed. He paid himself too much, and he shouldn’t have encouraged employees to buy company stock with borrowed money.

But if none of these things happens again, bear markets are still going to come. And by the way, the next rip-roaring bull market we see will show us an entire new wave of greedy executives and a few slobs who are willing to break the law.

The reason a majority of investors don’t care about the ethical fortitude of their corporate leaders is the same reason drug-using, wife-beating, gun-toting star athletes can always find work. As long as the investor thinks he can sell the piece of paper at some point in the future for a higher amount than he paid, he will buy stocks.

Look at China. A lot of Chinese stocks have been flying lately, and it is mostly American money pushing them higher. If you think you have a good idea about what is really going on inside some of these companies, I have a bridge to sell you.

One of the things I love about bull and bear markets is the cultural personality changes they force society to experience. In the late ’90s, no one cared how much a CEO was paid because stocks were tooling along like race cars. After six years of subpar performance, we want to know a lot more about a lot of things.

Let’s switch to the current state. It seems it is becoming more common to see a well-known stock taken out back and murdered. Apple, Google, Intel, Yahoo, Amazon, Pulte, and the list goes on.

The S&P 500 has gone more than three years without falling more than 8 percent from any recent high. This year is probably when it happens.

And don’t get worked up about how much more than 8 percent it can potentially fall. Be careful, be safe and remember how upset you were in 2001 after suffering giant losses. Don’t let it happen again.



Hauke is the CEO of Samex Capital Advisors, a locally based money manager. Views expressed here are the writer’s. Hauke can be reached at 566-2162 or at keenan@samexcapital.com.

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