The benefit of being a thinly traded public company is that it doesn’t take much for your stock to bounce back from a sharp drop.
Both days, just 2oo shares of stock traded hands, according to information on Yahoo! finance.
While Congaree has had a bit of difficulty in recent weeks, with the resignation of founder and CEO Hank Ray, and the announcement that it has received nearly $3.3 million in federal bailout money, neither factor likely had much to do with the wild fluctuation in its stock price.
Thinly traded stocks, particularly those of newer companies, are notoriously illiquid. If can be tough to get in or out of the stock for a price anywhere near previous levels.
When millions of shares of company stock trade hands daily, as with GM and Microsoft, it’s much easier to get a price you’re comfortable with.
But with the likes of Congaree, you’ve often got to take what you can get. If you have to sell, you may have to settle for $1 a share. If you really want in, you may have to pay $10 a share.
Neither are necessarily good or bad signs, just indications that you’re dealing with a start-up, going through typical start-up growing pains.
So, what kind of impact has the government bailout of troubled US banks had on lending to consumers and businesses? None, according to this Washington Post report.
In fact, the Post says, lending has actually declined, and banks that got government money on average have reduced lending more sharply than banks that didn’t.
That’s because rather than investing in the banks best equipped to increase lending, the government invested disproportionately in banks that needed money to solve problems. Those banks often were ill-equipped to increase lending because of financial limitations such as a lack of deposits, the Post reports.
Wow, that’s a real surprise, isn’t it? A government scheme that didn’t go as planned. In the old days, we used to call it “throwing good money after bad.”
Oh, well. We’re only talking about several hundred billion dollars, right?
Now, for a bit of common sense, a blog post from The Austrian Economists:
“What we have here in the case of the bank bailout is another confirmation of a general rule that is seen in a variety of walks of economic life – aid just doesn’t work, whether to a foreign country or your local bank or to a private citizen, unless it is (a) embedded in a favorable rule environment, and (b) results in fundamental change to the practices of the recipient. Ironically, if the receiver is already embedded in a good rule environment, they would already be making the fundamental changes due to profit/loss signals. … local banks that are in a rule environment that protects private property, permits free price adjustment, and works on the basis of profit and loss statements will either act in ways to meet consumer demand in the most profitable way available to them, adjust in that direction, or go out of business.
“Government bailouts only reinforce BAD decisions by making the consequences of those bad decisions less detrimental than they should be to the firm and the individuals making them. So we are back to an age old economic concept – if you subsidize something you get more of it, if you tax something you get less of it. It is an empirical question about ‘how much,’ but the tendency and direction is a theoretical point.
“In the efforts to kick start the banking industry, US policy has simply subsidized bad decision making. The money transfers have ‘recapitalized’ banks in name only. Insolvent banks have used the funds to stay afloat, to cover their acquisitions of other failed banks, to cover their own bad decisions, etc. They have NOT used the funds to lend and fuel investment.
“The relationship between savings and investment isn’t broken as in the simpliest Keynesian model. But, it is the Keynesian policy responses that have been pursued which are preventing private actors from making the correct adjustments to the new economic realities and thus bring into alignment saving and investment in a prudent and productive manner. Why is it so hard for everyone to see this?”
Imposing a pay cap on executives whose firms receive government bailouts, as President Obama appears ready to recommend, may appease class-envy aficionados and fans of socialism, but government intervention rarely remedies free market economic woes.
To be sure, government bailouts in and of themselves go against the idea of free market economics, as do the policies which allowed financial services providers to eagerly dig themselves into the holes they currently find themselves.
But limiting executive pay at government-assisted companies to $500,000 will only hinder corporate efforts at hiring the leadership necessary to help corporations navigate through troubled waters.
Certainly, embattled companies do themselves no favors when they reward CEOs with seemingly exorbitant salaries while sales and stock prices plummet. And idiotic public relations ploys such as this don’t help, either. But the best recourse is to leave the marketplace to its own devices rather than bring in the heavy hand of the government.
This measure smacks of demagoguery, and will do nothing to restore confidence in the marketplace and much to increase growing concern that increased government intervention is going to be the rule going forward, rather than the exception.
According to The Economist, this is likely to be the biggest single-owner sale in auction history.
To get an idea of the scope of the sale, which will take place in Paris, consider this excerpt from a preview in The Economist:
“Saint Laurent’s grand salon lies at the end of an oval lacquered hallway. A glance to one side of the long rectangular room takes in a large cubist Picasso, a delicate painting of a countess by Jean Auguste Dominique Ingres, an iconic mechanical nude by Fernand Léger, an odd portrait of two children by Théodore Géricault and a rare wooden primitivist sculpture by Constantin Brancusi that was once in Léger’s own collection. In the mirror behind the Brancusi are reflected three more Léger paintings and a splendid Giorgio de Chirico of a man with a tailor’s dummy (pictured below). The combined low estimate for these nine pieces is €73m ($94.8m).”
Saint Laurent, the French fashion designer, died last June at the age of 71. He and Bergé, his business and personal partner, assembled the collection together over 50 years.