Oct. 8th, 2010
Over at Mother Jones, Kevin Drum writes a spirited piece on this week's profit news:
"I've always hated companies that do share buybacks. I know all the arguments in favor of it, but as far as I'm concerned it's nothing more than a desperate effort to curry favor with shareholders and meet short-term bonus targets, carried out by a management team that has no idea how to grow their business. And if they don't know how to grow their business, they should just announce that they've decided to adopt the corporate model of a regulated utility and start paying out regular, steadily growing dividends."
Perhaps he's correct. The very concept of risk for expansion may be lost on these executives. It begs the question, what the hell are we teaching in our business schools today.
Showing posts with label record profits. Show all posts
Showing posts with label record profits. Show all posts
Friday, October 8, 2010
The Enemy of Growth, ctd.
Oct 8th, 2010
by F. Grey Parker
Several days ago, I noted the announcement of stunning profit gains amongst the S&P 500. I used the figures coupled with the apparent disinterest amongst those companies to hire or expand to advance my theory that their is a now a slavish and crippling devotion to stockholders over all other concerns. It is, in my estimation, the real enemy of growth.
In spite of some blowback from readers (one chastised my "simplistic thinking"), I was not alone in expressing alarm at the "hoard and keep" phenomena.
Jia Lynn Yang writing in the Washington Post yesterday:
"Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates, a stock market research firm. But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth."
Over at the Daily Beast, there was a blurb earlier in the week stipulating a causal relationship between higher unemployment and higher profits. That it's plausible these companies are making more money because they are not hiring bodes poorly for recovery any time soon.
by F. Grey Parker
Several days ago, I noted the announcement of stunning profit gains amongst the S&P 500. I used the figures coupled with the apparent disinterest amongst those companies to hire or expand to advance my theory that their is a now a slavish and crippling devotion to stockholders over all other concerns. It is, in my estimation, the real enemy of growth.
In spite of some blowback from readers (one chastised my "simplistic thinking"), I was not alone in expressing alarm at the "hoard and keep" phenomena.
Jia Lynn Yang writing in the Washington Post yesterday:
Over at the Daily Beast, there was a blurb earlier in the week stipulating a causal relationship between higher unemployment and higher profits. That it's plausible these companies are making more money because they are not hiring bodes poorly for recovery any time soon.
Wednesday, October 6, 2010
The Enemy of Growth
Oct. 6th, 2010
by F. Grey Parker
It has become increasingly clear over the last decade that the number one enemy of growth is actually profit. Sustainable expansion of markets has taken a back seat to quarterly profit taking.
Few stories could illustrate the continuing problem better than a report today from the Wall Street Journal:
"companies in the Standard & Poor's 500-stock index posted second-quarter profits of $189 billion, up 38% from a year earlier and their sixth-highest quarterly total ever, without adjustment for inflation."
Let's take a closer look at that big number.
$189,000,000,000
If one third of that number was dedicated to expansion and, in turn, another third of that set aside was used to hire workers at just $25,000 per year, the number of jobs created would total 840,000. There would still be 126 billion dollars in profit.
Those 840,000 workers would begin to reliably consume. Markets for goods and services would subsequently expand. This would drive profits higher. Unfortunately, the market gain could not possibly be achieved in a 90 day period. Stockholders would rail against the drop in dividends. Thus, there is no longer a management philosophy in this country that places any value on longer term thinking.
by F. Grey Parker
Few stories could illustrate the continuing problem better than a report today from the Wall Street Journal:
"companies in the Standard & Poor's 500-stock index posted second-quarter profits of $189 billion, up 38% from a year earlier and their sixth-highest quarterly total ever, without adjustment for inflation."
Let's take a closer look at that big number.
$189,000,000,000
If one third of that number was dedicated to expansion and, in turn, another third of that set aside was used to hire workers at just $25,000 per year, the number of jobs created would total 840,000. There would still be 126 billion dollars in profit.
Let's take a closer look at that big number.
$126,000,000,000
Those 840,000 workers would begin to reliably consume. Markets for goods and services would subsequently expand. This would drive profits higher. Unfortunately, the market gain could not possibly be achieved in a 90 day period. Stockholders would rail against the drop in dividends. Thus, there is no longer a management philosophy in this country that places any value on longer term thinking.
Subscribe to:
Posts (Atom)
