Giving Credit Where Credit Is Due…Thank You Daniel Loeb

avatar By: IS
Date posted: 07.25.2012 (5:00 am) | Write a Comment  (4 Comments)

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There are a few things that I feel many people get wrong. One of them that I discuss here is the idea that simply taxing the rich is a solution to every money problem. Another one that I wanted to discuss briefly is the idea that hedge funds, activist investors and other large funds are the root of all evil and bad for the markets in general. The actual example occurred last week when Yahoo named its new CEO, Marissa Mayer, an incredible hire.

The fact is that like so many others, I have been extremely critical of Yahoo over the years. Its leadership, coming from the very top was terrible, leading a company that once was a jewel into the ground slowly but surely. Worst of all was the board. You can blame Carol Bartz all day long but when CEO after CEO that not only performs poorly but reflects poorly on the company, led to massive talent losses, etc…

Something Had To Be Done

In a situation like this, everyone was losing. Shareholders, employees, users, etc. But what could be done? It’s difficult and sometimes even possible for small investors to get together and fire a board…

In Comes Dan Loeb

Daniel Loeb, CEO of Third Point LLC bought a big stake in Yahoo and decided to start working on the board. He asked for board seats, for influence on who would lead, etc. It proved to be very difficult as the board had no interest and was able to fight back successfully most of his attacks.. Then he had investigators digg up the past of Scott Thompson, Yahoo’s CEO at the time and found some lies in the resume he had presented which caused huge drama. In the end, he got what he wanted as Thompson was dismissed and he got some seats on the board…

The Big Catch

Of course, what good would that be if he couldn’t pull off a great leader. He ended up doing just that as reports are that he had a major role in getting newly named CEO Marissa Mayer to move to Yahoo. This marks a huge shift for Yahoo which at least has a shot of turning things around, of retaining and attracting top talent, etc. It won’t be easy but Mayer is the right person for the job according to almost anyone you can find to ask.

Big Funds Like Third Point Have A Critical Role

Such funds or activist shareholders are able to have influence, to change things that you and I cannot do. I personally am happy both as a user and as a potential shareholder to see Yahoo being turned around in a way that I was starting to believe would never happen… Hedge funds and other large funds are the main players that have enough capacity to rectify the market like this…I think we should credit them when they do

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4 Comments »

  1. Comment by Vitalogy80 — July 25, 2012 @ 3:25 pm
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    While it’s easy to say Tax The Rich and you’ve been against such a tactic, the fact is that since 1970 the wealthiest 1% of the US population saw their average household income quadruple from $500,000 in 1979 to almost $2 million in 2007, using 2007 pretax dollars. In contrast, the top 20% saw mild income growth during that time and the remainder of the population had essentially flat growth.

    When the rich are getting an ever increasing chunk of the pie, something needs to be done. The richest 1% control over 35% of the US wealth…how long before it’s 50%?

  2. Comment by IS — July 26, 2012 @ 5:51 pm
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    @Vitalogy80 – I would argue that it is also a big reason why the US has done so well.. so how exactly would you get this done? I’m not closed to the idea but just raising tax rates seems to be the wrong way of getting it done

  3. Comment by Vitalogy80 — July 26, 2012 @ 10:54 pm
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    I’ve been reading a book by Joseph Stiglitz called the The Price Of Inequality…it basically states that being successful financially in America has more to do with how rich your parents are and what kind of education they have compared to any other developed country in the world.

    “While the top 1 percent was doing fantastically, most Americans were actually growing worse-off” (p. 3), even though real per capita GDP has increased by nearly 80 percent, “most American male full-time workers have seen their income go down”

    Personally I think the US is headed in the wrong direction and has been for the last 30 years or so.

    What are my ideas? It’s obviously too big of a problem for me to figure out since much smarter people than myself can’t seem to or don’t want to, but I think any system that distributes more and more wealth to a smaller amount of people isn’t the country or system I want to be a part of. Personally I think income taxes should drop for actual “work income” and increase significantly for income gained from investments, or at least start increasing tax from billion dollar companies. Companies like GE or other massive multinational corporations paying almost 0 tax is ridiculous.

    I think Government spending should be reduced, especially Military spending. Let the Military do fund raising if they want a new helicopter and make sure my kids schools don’t need to fund raise to buy new computers.

    Anyways, it’s a massive problem and there’s no simple solution, but it seems obvious to me that with the debt the US Government is in, money coming in has to increase and money going out has to decrease.

  4. Comment by IS — July 27, 2012 @ 8:38 am
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    @Vitalogy80 – Thank you very much, that is very helpful and I’ve actually added that book to my wish list:) Will keep you updated when I do get to it.

    That being said, I don’t think the US has been headed in the wrong direction for 30 years.. maybe just the last 5 or 10 years.

    Thing about companies like GE is that they have virtually no income in the US.. so no matter what the tax rate, they’d pay nothing.

    I do agree that some spending including the military needs to be cut though

    Lots of good points and I appreciate the time. If ever you’d like to write a full post about your thoughts, it’d be very interesting, no doubt about it.

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