Traders are hotly debating Stan O'Neal's $160 million exit package from Merrill Lynch ...which, the firm emphasizes, does not include a bonus or a severance package. What? Critics say, you mean he wipes out a significant part of the firm's capital and, uh, only gets $160 million in pension and stock grants? Could I speak to the compensation specialist who designed this package?
But our correspondent covering the story, Mary Thompson, notes that this is the total he has accumulated over his twenty-one years at the firm. So what to do? Part of the problem is, we know how to adequately reward people for performance, but how do we adequately penalize people for poor performance or poor judgment?
Separately, steel stocks are weak today, for a couple reasons:
1) Concerns the Fed may not cut rates, a concern traders do not share.
2) U.S. Steel and Commercial Metals both issued disappointing earnings and poor guidance.
Goldman Sachs, commenting on U.S. Steel'sreport,noted that for the Q4 "Shipments were expected to fall, with prices in line or up slightly compared to 3Q. Higher costs will pressure margins, and operating profit should decline in each division."
3) Miller Tabak's bond strategist just noted, "Steel output fell to a 6-week low in the week ended Saturday, according to new data released late yesterday by the American Iron and Steel Institute. The decline was fairly large and supports a variety of indicators suggesting weakness in demand for durable goods, including last week's report on durable goods orders for September and today's report on consumer confidence, which indicated that a very low percentage of consumers planned to buy appliances over the next six months."
Put together, this is another example of how there is ample evidence for some further weakness in the U.S. economy, which should help support an additional Fed rate cut.
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