Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19
Crude Oil Price Fails At Critical Fibonacci Level - 15th May 19
Strong Stock Market Rally Expected - 15th May 19
US China Trade Impasse Threatens US Lithium, Rare Earth Imports - 15th May 19
Gold Mind Reader's Guide to the Global Markets Galaxy: 'Surreal' - 15th May 19
Trade Wars and Other Black Swan Threats to Your Investments - 15th May 19
Our Long-Anticipated Gold Momentum Rally Begins - 15th May 19
Defense Spending Is Recession Proof - Defense Dividend Stocks - 15th May 19
US China Trade Issues Will Drive Market Trends – PART II - 14th May 19
The Exter Inverted Pyramid of Global Liquidity Credit risk, Liquidity and Gold - 14th May 19
Can You Afford To Ignore These Two Flawless Gold Slide Indicators? - 14th May 19
As cryptocurrency wallets become more popular, will cryptocurrencies replace traditional payments? - 14th May 19
How US Debt Will Reach $40 Trillion by 2025 - 14th May 19
Dangers Beyond a Trade War with China - 14th May 19
eBook - Greatest Tool for Trading? - 14th May 19
Classic Pitfalls for Inexperienced Traders - 14th May 19
Stock Market S&P 500 Negative Expectations Again - 13th May 19
Why Rising Living Standard in China Offers Global Hope - 13th May 19
Stock Market Anticipated Correction Starts On Cue! - 13th May 19
How Chinese Trade Issues Will Drive Stock Market Trends - 13th May 19
Amazon SCAM Deliveries for Fake Verified Purchaser Reviews "Brushing" - 13th May 19
Stock Market US China Trade War Panic - Video - 13th May 19
US Stock Market Leading Macro Economic Indicators Update - 12th May 19
SAMSUNG - BC94.L - Investing in AI Machine Intelligence Stocks - 11th May 19
US Increases Trade Tariffs Against China – Stock Markets, Gold, and Silver - 11th May 19
Who Has More To Lose In A No Deal Brexit? - 11th May 19
Gold at $1,344 Will Start Real Fireworks on the Upside - 11th May 19
Make America’s Economy Great Again - 10th May 19
Big US Stocks’ 2019 Fundamentals - 10th May 19
Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - 10th May 19
Stock Market Shake-Out Continues – Where Is The Bottom? - 10th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

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

6 Critical Money Making Rules