In 2008, EVERY category of MKTX's business experienced declines in revenue, YET employee compensation rose to $43.8 million. Overall revenues were $93 million, but expenses were a whopping $80 million. The firm spent $7.6 million in consulting fees alone. Where does all this money go, and more importantly, how does it serve to create additional revenue and shareholder value.

This company was originally formed to bring efficiencies and transparency to the credit markets through the use of an electronic medium for trading. Inherent in this value proposition is an understanding that there is significant leverage built into such a business model. At MKTX, the leverage NEVER gets realized. As revenues grow (slow as they may), expenses grow just as quickly. Why does it cost so much to run a utility that services the odd-lot bond market?

Once again, the number which stands out most glaringly is net income - $7.9 million! I ask all you fourth grade mathematicians out there, if I gave you $100 million dollars and you invested it in government bonds with a 4 pct yield, how much would you earn? That's right $4.0 million. So, MKTX, the market's leading electronic trading platform, employer of 185 people globally, managed to earn 1.7X the UST 30yr risk free rate on its $120 million cash position. Stellar! Bravo! Give McVey and Millet a cigar, or build them each a monument.

This firm is supposed to be a growth company! Its CEO has managed to replicate a corp bond index fund, while paying he and his merry band of elves roughly the same amount in executive comp as the company's net income. Why not return a dividend to shareholders given the market value of the stock is not much greater than the cash on hand? I'll tell you why, because its far more lucrative for Rick to keep stocking his own closets full of restricted stock and options. Note to management, have you not seen the latest with respect to incentive based compensation? Its the pariah of Corporate America, and in much the same way Rick accelerated a 405,000 restricted stock distribution for himself, corporate titans around the America have been generous when it comes to their own comp.

Stock is overvalued here...