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U.S. Housing Bear Market Cash for Clunkers Solution

Housing-Market / US Housing Aug 13, 2009 - 04:49 AM GMT

By: Mike_Shedlock

Housing-Market

Caroline Baum sent me the following Bloomberg clips.


14:58 *TOLL BROTHERS CHIEF ROBERT TOLL MAKES COMMENTS ON CONF CALL
14:57 *CASH FOR CLUNKERS FOR HOUSING MARKET WOULD JUMPSTART ECONOMY
14:57 *CASH FOR CLUNKERS FOR HOUSING MARKET IS `NO BRAINER,' TOLL SAYS
14:57 *U.S. SHOULD DO `CASH FOR CLUNKERS' FOR HOUSING, TOLL SAYS

Caroline also had this comment on the record that I heartily endorse: "Yeah, no brainer. You have to have no brains to think this is answer!"

For more on the brainless nature of such proposals please see Government Bailouts and the Stock Market - The Seen and the Unseen.

One might wonder if Robert Toll is really as brain dead as he sounds or if he is simply speaking about what is good for Robert Toll, not the economy.

A timely Exodus

Inquiring minds are reading Before the Bust, These CEOs Took Money Off the Table.

Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis. Four of those executives, including the heads of Lehman Brothers Holdings Inc. and Bear Stearns Cos., ran companies that have filed for bankruptcy protection or seen their share prices fall more than 90% from their peak.

The study, which examined filings at 120 public companies in such sectors as banking, mortgage finance, student lending, stock brokerage and home building, showed that top executives and directors of the firms cashed out a total of more than $21 billion during the period.

Some experts say huge paydays inevitably coincide with economic booms. In the tech bubble of the late 1990s, more than 50 individuals each made more than $100 million from selling shares just prior to the crash. Many had just founded companies that had never turned a profit.

"The system tends to reward people for participating in bubbles," says Roy C. Smith, a finance professor at New York University's business school.

Dwight Schar, chairman of NVR Inc., a Reston, Va., home builder best known as the parent of Ryan Homes. He made more than $625 million in the five years, nearly all of it from selling stock. Mr. Schar's own home these days is an 11-acre oceanfront compound in Palm Beach, Fla., with a tennis court, and two pools, purchased in 2004 and 2005 for $85.6 million from billionaire investor Ronald O. Perelman.

Robert Toll, CEO of Toll Brothers Inc., and brother Bruce Toll, a company director, together garnered $773 million in compensation and stock proceeds over the five-year period. A big chunk of Robert Toll's stock sales were in a one-month period just as Toll Brothers' stock roared to its all-time peak in mid-2005. A Toll Brothers spokeswoman declined to discuss the timing of stock sales.

Angelo Mozilo, realized $471 million during the five-year period as he piloted Countrywide Financial Corp. [now part of Bank of America] into a leading subprime lender.

R. Chad Dreier, 61, chairman and chief executive of Ryland Group Inc., a Calabasas, Calif., home builder, made $181 million over the five-year period. Mr. Dreier's bonuses, many tied to short-term profits, totaled $31.2 million in 2005 and 2006 alone. Ryland paid him another $20.5 million over the five years to cover some of his tax bills. He made another $85 million from stock sales, most of them regularly scheduled.

Bubble Blowers Rewarded

"The system tends to reward people for participating in bubbles," says Roy C. Smith, a finance professor at New York University's business school.

Indeed. And that is exactly why Robert Toll wants another bubble. Why should he care if it further wrecks the economy?

In conclusion, Robert Toll is not really brain dead, he just sounds like it. One simply needs to separate what he says from his real motivation. Besides, who can possibly live on $773 million?

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved


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