Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Schumer & Sanders Want One Thing: Your Money

Politics / US Politics Feb 16, 2019 - 03:51 PM GMT

By: Rodney_Johnson

Politics Senators Bernie Sanders and Chuck Schumer have proposed legislation that would stop public companies from paying dividends or buying back their shares unless they first meet certain conditions.

The senators aren’t worried about viability (companies are financially stable before they send cash back to their shareholders). Instead, they want to verify that companies have done enough to support employees before they give anything back to investors.

That’s not so subtle code for, “Make sure you redistribute wealth before giving anything back.”

The senators make their case by pointing to last year’s tax reform and how much of the corporate windfall was spent on stock buybacks (almost $1 trillion), even as companies refused to invest, closed locations, and fired employees.


But in making their point, Sanders and Schumer…

Miss the point!

Companies don’t choose to buy back shares or pay higher dividends because investors demand it. They take those actions because they think it’s the best use of investor money. And that’s the crux of the issue.

Who owns the cash? Is it yours as an investor, or do workers have a claim on it, as Sanders and Schumer suggest?

When I save some of my income and invest it in corporate stocks, I’m pretty sure that it’s my money. It doesn’t magically become partially owned by someone else just because I chose to invest.

And these senators are part of the reason that most people must invest in equities. They’re part of the system that increases government deficit spending and eats away at the dollar, all while the Fed holds interest rates near record lows.

We can only get ahead if we can beat inflation, which pushes us to equities, where Senators Schumer and Sanders want to chip away at our cash from a different angle.

As for workers, the senators claim in their New York Times opinion piece that companies and workers lived in a loving, kumbaya world from the mid-20th century until the 1970s, a time of joyous symbiotic goals and dreams between owners of capital and employees.

That’s a load of bull, and it only covers a paltry 25 years (1950 to 1975), which is less time than many politicians have been in office.

They’re Missing the Whole Story

We’ve discussed this at Dent Research many times. The situation wasn’t born of some enlightenment or appreciation for one another’s feelings.

The only reason workers had power in the mid-20th century is because America played an away game in World War II while the rest of the developed world was essentially bombed back to the Stone Age.

When it came time rebuild, the world needed everything from us: factors of production, food, capital, etc. We simply didn’t have the manpower to provide everything the world needed, and our labor force was the bottleneck.

As other nations brought their factories and equipment back online, they didn’t need us as much. In fact, other countries eventually outstripped us in terms of efficiency, which caused us to lose ground in manufacturing.

Back to Sanders and Schumer.

They want to recreate the value proposition of workers from that small window in time, but without any of the other characteristics of the time.

If companies were desperate for workers, they would pay more. If America was the most efficient, growing producer in many areas, we’d need more workers… and would pay more. But that’s not the way it is, so Schumer and Sanders want to force it by simply demanding higher pay, no matter what the business environment.

Companies aren’t closing locations because they’re so profitable, and they aren’t declining to invest because they have so many wonderful opportunities. We’ve had near zero interest rates for almost a decade. If a company saw a great investment, it could access plenty of cash to chase it.

As we noted last year, corporate tax reform leveled the playing field between the U.S. and many other nations in terms of what we charge companies to do business, but it didn’t change economic dynamics. We’re still stuck in a low growth environment.

What To Do Instead

I agree that many public companies are terrible stewards of investor capital, but my beef runs up and down the corporate ladder. I can’t imagine that any CEO is worth $20 million, or even $10 million. And there are plenty of employees who’ve been contributing to corporate profits for years without enjoying the benefits of their company’s success.

It would be much more American to slash executive compensation and put all employees in a profit-sharing pool voted on by investors than to have the government require some minimum level of payment.

Obviously, those at the top would share at a higher level, but everyone would be part of the ebb and flow of business. This is not about stock options, which can be gamed by stock buybacks and other sleights of hand. Profit sharing should be based on true, GAAP accounting profits.

This is a problem created by the incestuous relationship among Corporate America and their boards. Those who run one company serve on the board of another, and they all play the same game of guaranteeing outrageous payouts at the top. If we shook up corporate boards, we might get better results.

I also think we should do the same with politicians, such as Senators Schumer and Sanders.

They’ve been part of a government that has run deficits for many years, and have been part of government shutdowns where they still drew paychecks and have guaranteed pensions.

How about they feel the financial effects of their mismanagement? Or better yet, why not just yield their positions through a term limit system, and forgo their government pensions altogether?

But that’s a topic for another day.

Rodney Johnson

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2019 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in