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  • Capitally Challenged Stocks That Could Be Diluted or Extinguished [View article]
    This is an excellent article and a prudent view of current valuation metrics:
    (a) Balance Sheets Rule the Day.
    (b) Cash is King
    (c) Debt is Death.

    Unfortunately, many of our largest companies are managed by overpaid incompetents supervised by ignorant and irresponsible boards, who have failed to think through the sobering reality your article brings to light. Thus, they continue to embark on debt-fueled, cash-wasting mergers, ignoring the obvious lessons of a de-leveraging world. Dow Chemical was first, and has thus managed to morph, miraculously, from a US corporate powerhouse into a zombie on life support. Pfizer, then Merck followed close on Dow's heels, in an astonishing display of foolishness.

    The lesson I learnt in the past few months, is that one has to apply a "mismanagement discount" to stocks, since the probability of arrogant managers demolishing the value of perfectly excellent companies has to be added to the other uncertainties of this complex market climate.

    (disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)
    Mar 14 10:11 PM | 12 Likes Like |Link to Comment
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