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S.&.P. Companies’ Divestment
If anyone who wondered why many U.S. companies fell behind in international competition in recent years these S&P numbers via Floyd Norris tell part of the story (last line added):
Over the last four years, since the buyback boom began, from the fourth quarter of 2004 through the third quarter of 2008, companies in the S.&P. 500 showed:
Reported earnings: $2.42 trillion
- Stock buybacks: $1.73 trillion
- Dividends: $0.91 trillion
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De-capitalization: $0.22 trillion
Over the last four years the S&P 500 companies did not invest one dime of their earnings into additional or new business or increased productivity. Instead they divested and gave $220 billion of their basic equity back to their shareholders.
This was an extremely shortsighted behavior. Sure, these companies used part of their revenue to replace depreciated capital expenditures (machinery and the like). But if anything was spend for additional research or new opportunities at all, it must have been financed by taking on additional debt. This debt will turn out to be poisonous in the downturn.
Most of this can likely be laid on the idiotic practice of paying short term bonuses to CEOs for rising stock prices. A stock buyback will lead to a rising stock price as it increases demand and lowers supply of that stock. Buybacks were just a simple way for greedy CEOs to increase their personal income at the cost of the long term validity of the business.
Nice numbers b. Imho the US has not seen any real growth – whatever that is – except in population since about 2000. How to measure that, what charts to link to.. a small selection in the next post to bypass the spam filter.
We know the public numbers are massaged and pretty worthless without adjustment and interpretation (ex. GDP).
US Job growth has been, in the main, in the Gvmt. or para-gov. sector, rising slowly / steadily with a bit of flat here and there. Health – because there is still money to squeeze out while the general level of ‘health’ stays stable or sinks, depending at what figures you care to look at, and a small rise as well in Education, as that is a racket, ppl will pay/borrow to obtain a degree or ‘be certified’… (Note, these are the areas where Obama plans to ‘spend’ as well.)
Around 2000 a perception that BOA was no longer realistic and ‘the world had changed’ (global competition biting in, or making new openings, energy crunch coming up, industrial base shunted overseas, Chinese toys are but a minuscule part, etc.) and thus the old order, limping along, bit the dust and Bush was selected – mostly because malleable, dopey, an available figure-head, a prop.
That brought on a burst of US triumphalist aggression, Afgh, Iraq, biting Iran, prodding the sleeping ‘defeated’ bear, in brief more of the usual but without the hoped for results or the capacity to wash them away. Concurrently, a bubble economy at home, dot com, then housing, the ill fated ‘service economy’ (as if Americans could survive by doing each other’s nails!), the hype of ‘hydrogen economy’ etc. with Gvmt. paying for minor expansions (ethanol, security, etc.)
At the same time, clumsily ensuring that some State apparatus would be able to contain what is seen as an inevitable upcoming chaotic state.
An outside enemy, personalized, that is the Muslim terrorist, both within and without, applicable to anything, person, country, idea, was constructed. And the powerful and rich had one aim only – make as much as possible and save their asses.
Posted by: Tangerine | Dec 12 2008 17:04 utc | 8
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