1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market.
2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit markets to collapse, the stock market to collapse, and the rest with it. They can buy 50B worth of their own stock, but cant pay employees for a month without revenue.
This whole mess is in part due to financial engineering taken down by a black swan event. CEOs should be in jail and so should finance professionals. Laws need to be passed so that finance individuals cannot ruin the market for their own financial gain.
All of the things you're saying are the direct result of the market incentives created by low interest rates. Companies borrowed money and used it to buy their own shares for the same reason everybody was borrowing money to buy shares with it -- it's what people do when it's cheap to borrow money.
If your competitors are all borrowing money at low interest, you do the same or you're not competitive.
The problem is we lowered interest rates in response to the housing crisis and then left them there. Because doing so inflated (really reinflated) such a ginormous credit bubble that it would take more than an entire market cycle for real economic growth to catch up to it, and (absent printing money) you can only raise interest rates to the extent that borrowing demand from real economic growth exceeds the reduction in credit caused by the higher interest rates, or you cause deflation and an economic downturn.
This is also why the rate of inflation has been below historic norms since the housing crisis -- reduced to that level just by raising rates the tiny bit that they did. And now even that's gone and interest rates are at zero.
This is what the fallout of long-term low interest rates looks like. The only way out of it within our lifetimes would be mass defaults (which would cause a depression) or enough inflation to devalue the outstanding debts.
Considering that we're also now facing deflationary forces from these quarantines, maybe it's time to start printing some money. Certainly countering the deflation by encouraging even more borrowing would just be trying to dig our way out of a hole.
People are completely underestimating how much leverage and pumping there was on those companies, and how thats effecting us now. Companies dropping 75% because they might lose 3 months of revenue is not an expected outcome.
It really doesn't matter. If 20% of the economy is zeroed out because it's not safe under current conditions, the stock market will crash. Nothing you could have done beforehand, and no hobby-horse you've ridden for no matter how long, can fix that.
I disagree that nothing one could have done beforehand could fix that. The argument is not that there would not be a decline in share prices at all but the magnitude of it.
You need to have enough saved to survive 6 months w/o income is preached a lot in personal finance and somehow this is not practiced for businesses.It is understandable that cash-strapped startups can't afford to do this but the companies buying back shares to increase their stock price certainly could.
Massive publicly traded companies are not the companies that are collapsing. It's mostly small business that aren't publicly traded let alone doing buybacks.
This is an article about small businesses, which make up the backbone of the economy. It makes 0 financial sense to save up 6 months of savings for any company, big or small. This is literally a once-a-century event.
Nope. It does matter. The credit markets which deal with corporate debt could fail as a result. This will drag down the rest of the economy. The main issue is most people dont understand the contagion and risks taken on by the practices I laid out in my main post.
The fed discount window is wide open for business. But seriously, aggressive monetary policy should keep the credit markets working even if mostly by adding to fed's balance sheet.
I really think we should stop conflating bad economic decisions with the current pandemic. Yes, maybe stock buybacks are bad.
But even if they were banned, these companies wouldn't just have piles of cash reserves sitting around. To remain competitive, they would've had it invested in resources like additional personnel that would've gotten the axe either way when the belt has to be tightened.
There needs to be better financial planning and regulations - a lot of them.
But the best thing that could've helped here is better planning for national emergencies like a pandemic. Bill Gates and others have been clamoring for a long time about these dangers and we should've taken them more seriously.
Some companies are famous for their piles of cash reserves. Apple, for instance. Other companies are definitely focused on the pump at the expense of their brand, product, and long term prospects. No C level executive sheds a tear when their company folds and they are handed their golden parachute to invest at market lows.
They would unquestionably have more cash on hand though. That matters. There is also a lot of research showing that management does buy backs at exactly the wrong time. How wasteful is it in retrospect that companies did buy backs over the last two years at the peak of the market. Now they might have to sell stock to raise money at the bottom (assuming we find it soon). Mean while warren buffet was sitting on cash and building his reserves. Watch him swoop in now and just pick up businesses for pennies on the dollar.
Low interest rates are the biggest culprit in this. Low interest rates have given these CEOs to borrow money to pump their stocks. Had interest rates been higher, say 6 percent, (a) these CEOs wouldn't have borrowed money to pump their stock, and (b) many investors would not have invested 60 to 90 percent of their portfolio in stocks. Another consequence of these low interest rates is (c) the inflation of real estate in many markets. That means, the middle class (say, employees of FAANG types) have loved this gravy train. Politicians, as a class, have benefited from this: inflated equities; inflated real estate. Greenspan, Bernanke, Yellen, Powell and the political class (both Democrats and Republicans) have all contributed to this.
People who invested in index funds fared better than hedge funds. And there was no real price discovery thanks to Fed put; even many small hedge funds closed their shops when they couldn't beat ETFs based on indices like SPY, VOO, QQQ, etc.
Now both bonds and stocks are crashing, as the commercial paper becomes junk.
Absolutely this. Someday we need to have interest rates somewhat sticky at ~5% (or whatever the sensible figure is), and lean more on fiscal policy to control the economy. Whether there is a viable path to that point is unclear. Perhaps the money printing required to cushion the economy will spike inflation, and once we get back on our feet we hike rates to control it?
While I mostly agree with #1 and #2 - not sure what this has to do with the crises we're in.
The core of the current financial crisis is that demand has evaporated over the course of a week or two and / or businesses can't operate; both due to COVID-19. As a result many small business won't survive. By extension many people are impacted, won't make rent, won't make lease payments, won't make credit card payments.
The stock market dropping is reflecting the above reality unwinding. And yes prices were inflated, and still are (QE is trying to hold them, we'll see how long that lasts...).
Unlike the 2008 crises that had synthetic derivatives, and shitty rating agencies to blame - this isn't the case here.
Though don't get me wrong I still think there are many sketchy things that go on, and many people who need to answer for them. Let's starts with the politicians that sold their shares given insider information, followed by others who curry favor with wall st.
Businesses that rely on walk-in customers will have to go for what looks like more than a month with little to no income. Same thing with travel related industries, surely over-leveraged portfolios exacerbated the problem but there are many other factors at play.
The stock market is collapsing because the population is increasingly unable to go anywhere or do anything. As a result whole sectors of the economy are almost completely unable to function. They're predicting 25% GDP contraction and 25% unemployment which about the same as the peak of the Great Depression in 1933. And we don't know when that's going to end and it will probably take most of a year at least.
Everything is related. Imagine if the market only dropped a bit, large companies could support their employees, the credit markets wouldnt require massive trillion dollar spending. Supporting small businesses would be a walk in the park.
It's not really possible for the market to drop only a little bit in response to half the economy shutting down. Stock prices are an expectation of future cash flows, so they have to drop on news that a huge chunk of those future cash flows are cancelled.
If that 3 months risks a bankruptcy, that might be right. Long-run valuation for shareholders doesn’t matter if the bond-holders end up with the company.
I suspect this is a 12-24 month economic event, maybe longer before it fully rolls through.
You're right about the financials but wrong about the direct economic impact. It's a 3 month hit that people are accepting, with the underlying fear that it will be a year-long hit, and the sickening feeling that recovery from this will take at least 5 years.
I agree, CEOs that bought back stock should not have the option of a bailout. That was a self-enrichment strategy built upon cheap debt, and now it is time to pay the bill.
Generally speaking, Boeing and others should not be bailed out. Capital should flow to the small businesses to keep their doors open, their people employed.
I'd also argue strongly against bailing out companies that shifted their work overseas. There needs to be a price to their actions. This is a just price IMO.
No. It's because of everything in the posted presentation - 50% of companies are SMBs (in the States), and they understandably don't keep enough reserves to weather 3 months of losses.
The stock market is reflecting that the damage this will do on the economy is real, and currently unknown but expected to be pretty bad.
One could argue that the airline CEOs acted rationally and strategically—they know the airline industry’s importance to the US economy gives them great odds of a bailout if a black swan event were to occur, so there was more value to shareholders generated by stock buybacks than reserving cash for a worst-case event.
So in this case, the cash ends up with the stock owner, isn't it? What are the differences between cash in the hand of company vs cash in the hand of stock owners?
I'm not even that old and this is the 3rd black swan event in the last 2 decades: terrorist attacks of 9/11/2001, financial meltdown in 2008-2009, and this 2020 global pandemic.
There were also 3 other localized outbreaks (SARS in 2003, Swine Flu in 2009, MERS in 2012) so that to me sounds like we were 3 viral mutations away from this being the 4th global pandemic in 20 years.
If we're structuring business and our economies such that they fall over or require ~1 trillion dollars for bailouts, every 4-7 years on average, then something is vastly, massively, completely, extremely wrong with our approach.
I don't care how many economics nobel prizes are racked up by theorists; or about efficient market theory and blah blah blah. These systems are failing in the real world and that's the only existence proof needed.
Running a just-in-time razor-thin-margins all-profits-reinvested-no-savings business is great in theory but apparently the wind blowing from the wrong direction destroys it all. It has the feeling of the economics/finance version of a physicist assuming a spherical car in a perfect vacuum with a point source of gravity when designing a system that has to survive actual usage.
1969, 1973, 1981, 1990, 2000, 2007 - a recession of US economy at least every 10 years, like a clockwork.
So, if you're a CEO of an airline and you're giving away 90% of your cash to shareholders instead of saving it to last few months when business declines, then it's an obvious failure of planning.
Or, more accurately, it's yet another case of "It Is Difficult to Get a Man to Understand Something When His Salary Depends Upon His Not Understanding It."
CEO salaries and bonuses are tied to performance of the stock (because they are set by board of directors, who are there to represent shareholders). So they spend the money to buy back the shares which increases the share price and their bonuses.
Failing to predict the business cycle should require retaking business school...
The big problem is that companies are focused on the quarter rather than the decade. Imagine the innovation we would have in technology if companies were willing to take a loss for years on worthy inventions, rather than only putting forward readily profitable projects.
The nature of a black swan event, what and when, is unpredictable. That one will happen is not. Any prudent leader must prepare to weather a financial downturn, a natural disaster, a terrorist attack, a war. The list goes on and preparation for one is likely the same as for all.
The point is, unprepared leaders will see their firms go out of business, but based on the number of firms that seem to never be prepared, it seems the standard incentive isn’t enough. Thus it warrants discussion on how to align leadership incentives to prepare in advance. If we had businesses that could weather 3 months of crisis, whatever the crisis without triggering a depression the entire economy would be better off. Yet here we are.
I think we're learning that while the manifestation & exact timing is unpredictable, looking at the big picture one black swan or another seems to show up with surprising regularity. 1973, 1987, 2001, 2008, 2020...
Companies should be most definitely punished for not being robust to black swans. You can't predict a particular black swan, but you can definitely predict that black swans happen regularly. There is a reason why options have the "volatility smile" -- the risk tails are fat!
I'm not sure how you got to this post after reading the OP.
Company leadership should focus on returning capital when appropriate. They should not be repurchasing shares at obviously inflated prices as a last-ditch effort to further raise share prices so they can cash out their bonuses. They should be using that money to improve the business.
Basically, leadership needs to think about long-term health, instead of making poor business decisions to improve executive bonuses.
They were repurchasing shares for years and years. If shareholders were unhappy about that, they had every opportunity to replace the board. Or if they are a minority, they can sell. If you’re not a shareholder, you’re free to mind your own business.
All debt is an alternative to raising capital by selling shares and diluting ownership. It doesn’t matter what order you do it in, and sometimes you get a good deal on a loan.
If they were taking money out of the company by buying back stocks and sucking it dry, who are the people loaning them money to do this? Your story implies they're throwing billions into these companies without expecting to get their money back.
My story does not imply that at all. Prevailing interest rates are low so investors seeking returns are willing to take increased risks, especially if the bond is still prime (so as to match their mandate). Thus the rise of BBB. At the same time, bond ratings underestimate fragility of corporate debt (what's new, history is littered with "bond ratings underestimated fragility of X"). Combined with a bunch of moral hazard on the part of people packaging everything, you have the current situation. Basically, I fundamentally blame ultra low interest rates for creating incentives, but a more proximate cause is debt financing of buybacks.
I want to see companies run well, too. Nonetheless, companies should be able to take on debt and return money to shareholders at the same time. A simple example might be moving to a new headquarters. They decide to buy a property and build an office building. They finance this with a loan or bonds, because, well, they need cash to run their company, and that's the right financial vehicle for them. At the same time, they're doing dividends or share buybacks, because their owners want them to. Another example is just, you know, buying stuff or services and getting invoiced with a later due date. That's taking on debt.
1) Pretty sure you're misinformed on this point. The hedge fund sector that has gotten attention and partial blame for this meltdown is the risk-parity segment of hedge funds. These funds target a specific range of volatility, so when the market becomes wildly volatile they are forced to reduce their overall holdings. The entire risk-parity segment of the market is at most $400bn and they are levered 2-3x on average. In the grand scheme of things, this is pennies when compared to broader money flow.
2) Stock buybacks are simply a more tax-efficient way of distributing profits to shareholders. Redistribution of profit to shareholders is a fundamental trait of capitalism, so you can't really blame the CEO for doing this. You seem to be blaming CEO's for not preparing for a black swan event. If CEO's are forced to prepare for every possible black swan event, their companies would go nowhere.
As for your last point, there appears to be a black swan event quite regularly. It seems logical to prepare for this.
Secondly, stock buy backs are often performed at horrible times simply because CEOs want to boost their own salary. This has repeatedly bitten them in the ass. This is what happens when short term gains are prioritized over long term strategy.
I can accept viewpoint only if we ALSO allow all unprepared companies to fail. This will then inform the next generation of CEOs to prepare more. If we socialize losses while privatizing gains we create wrong incentives.
I think the general sentiment is that we cannot just organically let most companies fail, so we are forced to bail out. But if we are breaking capitalism by bailing companies out, we should at least try to incetivize them to learn from mistakes rather than learn that they can do whatever when the times are good and get bailed out when the times are bad.
1) Hedge funds didn’t crash the market. There’s just no evidence for that. The market crashed because there’s enormous uncertainty and people would rather be liquid while they wait to see what happens vs losing a huge percentage of their wealth.
2) Businesses exist to make a profit for their shareholders. Yes, they should have some retained earnings as a rainy day fund, but some of these companies are losing 75-100% of their revenue (airlines, cruises) and it doesn’t make sense to try and self-insure for the most extreme tail risk ever. So they return profit to shareholders. And for various reasons, buybacks are often preferred to dividends.
Would you be this up in arms if they had never done a buyback but had been paying a regular dividend to return those profits?
Business does not have to be structured as a Corporation with limited liability. That is a privilege allowed by the sovereign power of the people through an elected government. If companies don’t behave responsibly they should lose that privilege and the owners could be held liable for debt and these kinds of mistakes personally. The fetishized obligation to shareholders and ONLY shareholders is not some holy pronouncement from on high. It was made up by a professor at University of Chicago and ran contrary to the history of business and limited liability company structures. If we, as a society, determine that such a practice is harmful based on the evidence we can and should end it.
> If companies don’t behave responsibly they should lose that privilege and the owners could be held liable for debt and these kinds of mistakes personally.
What mistakes? Is it a mistake to not keep a rainy day fund that will allow a company to weather a once-in-a-hundred-years shutdown of the entire economy? If this turns out to last a year, will you think it's a mistake that companies didn't keep a year's worth of reserves?
Especially since we're talking about SMBs here. Your local electrician, who has a staff of 3, should keep enough money saved up to pay all staff for the next year just in case?
You're saying a bunch of buzzwordy slogans kind of like "limited liability is bad" or "obligation to shareholders was invented by Friedman", but not dealing with the actual facts on the ground or the current catastrophe.
My analysis was in response to and in the context of large companies conducting stock buy backs which is in no way related to the position SMBs find themselves. So yes, those buy backs were mistakes.
In the last 20 years we have had at least 3 “once in 100 years events”, so yes, maybe corporations should be required to be more prepared for down turns as a condition of being granted the right to operate with limited liability.
These are not buzz words, I practiced law in New York and worked on the bankruptcy of American Airlines, Lehman, GM and others. I saw the conditions on the ground, the incentives management responded to; I saw $200M bonuses for traders that lost $1B, I saw how decoupled management was from the risks they engineered. There is a prevalent attitude that as long as the short term reward hits before they quit then they should do it.
Since 2008, airlines have experienced one of the most profitable periods in their history with drastically lower competition and low oil prices. What did they do with that? They wasted significant amounts of cash on buy backs. American Airlines reduces outstanding stock by 37%, thats massive. Why? Because executives are taught in business school that there is an obligation to maximize shareholder value. No such obligation exists in law and I am arguing that is really bad social policy.
Employees are going to be decimated as this unfolds, are they more responsible or in a better position to plan for these once in 100 year events?
> My analysis was in response to and in the context of large companies conducting stock buy backs which is in no way related to the position SMBs find themselves. So yes, those buy backs were mistakes.
Fair enough - I was mostly talking in the context of the article (SMBs).
And to be frank, it sounds like you're much more knowledgeable about this issue than I am, certainly in terms of actual practice.
That said, I still disagree with you and not sure why you arrived at your conclusion.
Let's put aside for a second the question of whether shareholder primacy is good social policy or not in the general case - and I agree with you here - it's not mandated by law, and even if it were, we could change that if we decide it's bad policy.
Your specific contention here is that companies are using buybacks to prop up their share price, and thus are reducing their reserves. And that they should keep more reserves around.
So firstly - tax structure aside, I've never understood why anyone treats buybacks differently than dividend payments. It's just a way of giving money back to shareholders. Do you agree with that or not?
Secondly, how much reserves should a company actually keep? If this situation/recession drags on for a year, will you be saying that it's bad that companies didn't keep a year's worth of reserves? Two years?
I think that's both an unrealistic demand, and a supremely inefficient one. No company could've, nor should've, had to predict this kind of disaster happening, and been prepared for it. I'm generally a libertarian, but this is exactly the reason we have governments - this kind of crisis should be prevent by the government - both in terms of preventing a pandemic in the first place, and in terms of fixing the economy once we're in this situation.
In other words, I don't see any good way to change the market to incentivize companies to keep tons of cash lying around as a rainy day fund - and I don't think it would make sense for so many companies to hoard so much money. Much better to have them return the money to shareholders, to go invest in new companies.
> It was made up by a professor at University of Chicago and ran contrary to the history of business and limited liability company structures
Who is this guy? Also where can I learn more about this and related topics. I’ve taken an interest to learning about our economic system in my free time and would love it if someone could point me to some good resources/podcasts/whatever.
The amazing thing is when you compare this with the history of corporate structures. For much of history after the joint stock ventures were created in the 1600s they were extraordinary one time grants from the king and only for very very risky ventures. Basically they were used to induce businesses that wouldn’t exist but were vital for society. In exchange there was an express charter that laid out the obligations of the firm. There were expectations on how the company would act in society. There were obligations to employees, bond holders, the community etc.
I don't know how you do your financial planning, but when I invest my money, I expect to see a return. I expect most folks do. Everything else falls out of that.
> when I invest my money, I expect to see a return
If that return is at the cost of the stability and welfare of society at large then sorry, but no. No-one "deserves" a return and nothing happens in a vacuum. Larger society comes first, full stop. Seems this is a lesson we humans forget, and need to collectively and painfully relearn, every few decades.
Dividends that leave the business effectively insolvent in an emergency or financial downturn are irresponsible and should be disallowed. It should be remembered that direct stock by backs were illegal until recently as they were seen as a violation of insider trading and presented conflicts of interest. Further stock based compensation for executives is also relatively new. So we now have a situation that the incentives are clearly aligned for executives to pump stock prices to boost their own compensation through a previously illegal means of stock buy backs. Just look at the ratio of dividends to stock by backs in the last few years. You will see the result of those incentives.
By and large most publicly traded companies are not insolvent right now and don't look to be in the near future. For the most part, all that's happened is their stock price is down, some are double-checking if they have sufficient liquidity to weather the pandemic and how long they have, some have drawn on their revolvers, started hiring advisors to rethink capital structure, and some very few are thinking about restructuring.
Wasn't buybacks banned for a longtime in the century? Perhaps you consider this to be socialism and that's why it was unbanned, but given the perverse incentives politicians seemed to have had for the past few decades, I don't see an unbiased argument why it was in the interest of the public to unban stock buyback.
Clearly the past year has proven why it should have stayed banned.
Should dividends be banned? Would you be equally upset if these companies paid out their profits in dividends?
Or maybe you’re suggesting we should have liquidity requirements for all businesses like we do for banks? That’s actually not the worst idea in a world where we’re going to be bailing companies out. If you want a bailout, you have to have a rainy day fund to make it less likely you’ll need one.
Dividends are fundamentally different than stock buy backs. They are the distribution of profit to owners of a business. No nonpublic information involved. No misaligned incentives.
Yes, liquidity requirements and add personal liability for executives if their firm goes through bankruptcy, or restructuring. Goldman Sachs was a partnership until the 90s with each banker personally liable for the firms debts. They took risk much more seriously then.
No they are not. They reduce the amount of equity and raise the stock price but unless the share holder sells there is no real gain. That’s not to say buy backs don’t convey possible value but it’s not accurate to say they are the distribution of profit any more than if the company bought stock of another company (like yahoo buying alibaba stock) or a piece of equipment. In all cases the company has value reflected on its balance sheet. There is no true net gain.
You have made dozens of posts repeating this argument. It’s just mathematically inaccurate. Modulo taxes, in liquid markets, existing shareholders are compensated identically with share buybacks and with reinvested dividends.
If you wouldn’t have chosen to reinvest your dividends, you can sell a fraction of your shares to achieve the same effect.
You may think there are social or cultural reasons why one return of capital is preferable to another (I can’t tell, you haven’t made any of those arguments as far as I can see), but mathematically, a return of capital is cash in existing shareholder hands, and there’s no difference between the two approaches.
Share buybacks have an impact on taxes paid, but we have a system where people are encouraged to minimize taxes, so you’d need to make an argument about tax rates for that to make sense.
It’s true that changing the number of shares for the same size pot of money has an impact on share based compensation schemes, but that’s an argument about not liking share based compensation.
I am not arguing they are mathematically identical. I am highlighting some of the meaningful differences. Stock buy backs make stock prices go up. Dividends do not. Stock buybacks have timing risk dividends do not.
If an executive is paid in stock, and has compensation tied to stock price then there is an incentive to conduct stock buy backs and not issue dividends. Further, declaring a dividend sets future expectations of performance that management is hesitant to be tied to as missing dividend payments lowers stock prices.
My point is that these incentives causes management to spend more company resources on buy backs than they would on dividends because there is a personal benefit. This harms stockholders because they lose the option to use the dividend. Not every investor wants to reinvest, some want to use the dividend. So no, they are not equivalent as you say. There are meaningful practical considerations that make dividends better for shareholders and buy backs better for managers.
This response is not productive in moving discourse forward. If you have something constructive to add then do so without ignoring the bulk of my arguments while only focusing on one element and interpreting it in the weakest possible way. To that point of course dividends affect stock price to some extent. So does almost everything, paying off debt would, buying new equipment. But for the sake of simplicity and conciseness I made a generalization. I look forward to a reasoned debate. These are important issues for leaders of companies and society at large.
> If an executive is paid in stock, and has compensation tied to stock price then there is an incentive to conduct stock buy backs and not issue dividends.
You're touching on agency costs (https://en.wikipedia.org/wiki/Agency_cost), which is a broader issue than stock buybacks. Management can always game their actions to favor their self-interest (compensation) over shareholder interests. They can also choose to invest in projects that will make the company look good in the short-term at the expense of long-term profits to shareholders, because management can always just stick around for a few year before shit hits the fan. See, e.g. what Jack Welch did to GE https://www.foxbusiness.com/markets/ge-ceo-feud-welch-vs-imm...
My point is the fact that share buybacks are yet another avenue for management to mismanage a company for their own benefit doesn't make them bad per se, or worse than stock dividends. Investors should evaluate share buybacks on a case-by-case basis to assess whether they believe
The solution is improved corporate governance predicated on having an top-tier Board of Director structure with a significant share of independent directors vs. an entrenched BoD. That's why ESG is an increasingly relevant theme. https://en.wikipedia.org/wiki/Environmental%2C_social_and_co...
1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market.
2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit markets to collapse, the stock market to collapse, and the rest with it. They can buy 50B worth of their own stock, but cant pay employees for a month without revenue.
This whole mess is in part due to financial engineering taken down by a black swan event. CEOs should be in jail and so should finance professionals. Laws need to be passed so that finance individuals cannot ruin the market for their own financial gain.