This is the first time in the history of Jamaica, as far as I am aware, that this information will be presented in this fashion. I have written that it has been a travesty of justice that the Jamaican government does not own at least 100,000 shares of Alcoa stock. Alcoa has been mining our bauxite for 40 years and we own not even a single share! Outrageous! The strategy Alcoa used to outwit the government and which many similar companies use against many third world countries, is to form a local company which they both jointly own. The third world country then does not even think about a ownership stake in the overseas headquarter operations, where the majority of the wealth is generated.
HERE IS THE PLAN WE SHOULD HAVE FOLLOWED AND WHICH WE CAN USE IN THE FUTURE
When Alcoa was negotiating for mining rights, we should have proposed securing stock options on Alcoa
stock and we should have been using some of the Bauxite levy to buy say 10,000 shares per year. Over
the past 40 years we should have accumulated by now at least 500,000 shares of Alcoa stock. How would that
benefit us? In three ways but let us focus on just two.
1. Alcoa Declared Dividend 0.17 recently
500,000 shares (.17) = $85,000
The dividend yield is 2.09% per year.
2. Using a conservative investment strategy called selling covered calls we could generate the following
additional income from our 500,000 shares. There are several scenarios:
Alcoa call option information for April 2007
Symbol – AADG
Last – 0.65
Bid – 0.65
Ask – 0.75
Strike – 35.0
500,000 shares ($0.65)= $325,000
We could do this five times per year
5 ($325,000)= $1,625,000
Alcoa call option information for July 2007
Symbol – AAGG
Last – 1.50
Bid – 1.45
Ask – 1.55
500,000 shares ($1.45) = $725,000
We could do this twice per year!
$725,000 (2) = $1,450,000
The calculations are simple. It is the number of shares owned times the bid price of the call option that you think will give the most cash!
Let us do the math now.
Dividend Income + Covered call option income
$86,000 + $1,625,000 = $ 1,710,000 Per year!
Then use the 1.7 million and buy an additional 534375 shares $1,710,000 / $32 (Alcoa stock price)giving us a total of what?
And we keep repeating the process until we own say 50 million shares of Alcoa stock. At 50 million shares
the total yearly income from the strategy is about US$100,000,000!
When you own that amount of shares you get to come to shareholders meetings and appoint members to their board. You can also oppose management decisions and influence company policies!
TAKING RESPONSIBILITY PEOPLE MASSING EGOS INSTEAD OF PRESENTING SOLUTIONS.
YOU KNOW it is rather outrageous that we have groups like the taking responsibility people and Damien King
of UWI massaging their egos with worthless quantitative “research” which is nothing more than a history lesson, discussing (remember I said Jamaicans are fascinated with dialogue) whether we had real prosperity or not in the past when there are many practical useful strategies that they should have focussed on like the above bauxite scenairo and showed government how many hundreds of milllions they left on the table! These UWIites are just hopelessly egomaniacs talking about they are going to make recommendations to the government with worthless quantitative history lessons!
Any so-called research group without professor Gary Whittaker to present his model for decentralized
government, is frankly a waste of time and proof that they are not into solutions as they are into history
lessons and intellectual massages.
* Please note that these opinions are those of the authors and do not necessarily reflect the views of Jamaicans.com