Another one bites the dust. Morgan Stanley (NYSE: MS) lost its chief investment strategist, Henry McVey, today. He had held the job since early 2004. The company said he would be moving to another firm, but its name was not mentioned.

It is probably a safe bet that his new home will be in private equity or at a hedge fund. And as those sectors grow, the need for the kind of advice that Mr. McVey and his department put out is dwindling. According to Bloomberg, "fund companies cut spending on Wall Street research to $4.9 billion in 2006 from $5.4 billion in 2004 and will reduce it to $4 billion in four years."

The news comes on the same day that is was disclosed that Blackstone CEO Stephen Schwarzman and his co-founder will get $2.33 billion when the company completes its IPO. They will also retain a 28% interest in the firm. Studies of hedge fund compensation have turned up a number of managers who made several hundred million dollars.

Mr. McVey is not likely to make what Mr. Schwarzman does, but, if he can only get a little piece of that pie, it is easy to see why he is changing jobs.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Morgan Stanley loses chief strategist as mainline firms bleed talent originally appeared on BloggingStocks on Mon, 11 Jun 2007 13:14:00 EST. Please see our terms for use of feeds.

An article in the latest issue of Barron's (log-in required) laments the decline of dividend-paying stocks. A quote form Morgan Stanley's Henry McVey is telling: "A lot of corporations are missing the seismic shift in retail demand for yield" and adds that Americans over 65 have equity portfolios with an average yield of 2.6%, versus 0.8% for those under 65.

I'm sure I'll get some angry feedback from the pro-dividend crowd on what I'm about to say here. I already got some flack for an earlier piece on the problems with dividends, and I frequently wonder why people care about yield. McVey's comment and statistic is telling. I believe that it is further evidence of the old-fashioned nature of dividends and their irrelevance in the current investment landscape.

The chief culprit behind the demise of the dividend is the advent of widespread share buybacks, and with good reason. Buybacks just make more sense, especially from a tax perspective. When you receive a dividend, you must pay taxes on it immediately. The increase in per-share value caused by a buyback is allowed to compound for as long as you own the shares. So buybacks start out ahead in that regard. It seems to me that the only reason you should prefer a dividend over a buyback is that you think that cash in your pocket (taxable) has a better future than additional shares of the company. If that's the case, it begs the question: Why do you own the stock?

Continue reading Should Corporate America up the ante on dividends?

Should Corporate America up the ante on dividends? originally appeared on BloggingStocks on Tue, 22 May 2007 17:48:00 EST. Please see our terms for use of feeds.