Made in China sentiment

[Frederick Skelly]

And again to my point, a great example is Walmart and Apple. Walmart has consciously controlled its workforce and directly (though I am sure maintained enough legal distance) coached, directed, forced, is vendors down this very path in other countries with the top sitting pretty and the staff having a job but... Then you have the Apple/Foxcon "relationship" with a factory that was so wonderful to walk through the gates on your first day of employment (only to never be able to afford to leave due to your perpetual debt to the company store/housing) that employees began throwing themselves off the roof of the building. To the extent that Foxcon (soley producing for Apple) installed nets around the building in a program called "Nets of love".

I agree there sure is a lot of greed. Go read about the people that brought down Enron or Worldcom. And they go to country club prisons when they are caught. Geez.

I've often wondered if many of us "feed" some of that greed, albeit indirectly and unintentionally. For example, say I have an IRA or 401k in the market. Well, Mutual Fund Managers get paid to produce returns on investment. From what I've seen, they can/do exert pressure on companies whose stock they hold to pay dividends. And to pay dividends, they need profits. So in a backhanded way, arent I a small-fry contributor to the problem?

[Brian Holcombe]

Public companies are owned by the shareholders, if you are owning mutual funds which own shares of those companies then you are an owner of that company.

I prefer direct ownership because I would prefer to exercise my voting rights as a shareholder rather than pay someone to do that for me.

Shareholders take the majority of the risk in a company and therefore reap the reward when the company performs well. The current trend if vilifying dividends and stock buy backs is being confused for something else entirely. A public company may return capital to investors via dividends or stock repurchases. This is entirely different than a company, usually privately held, taking on debt for the sole purpose of paying dividends to the leadership and bankrupting the company.

Companies will behave differently in the future becuase of this, likely they will increase the amount of cash on hand, public or private. Prior to this, however, analysts and shareholders would typically be Leary of a company with too much cash on the balance sheet as it implies that the company does not know what to do with the money.

One of the most helpful things in my life has been the understanding of economics. Having an understanding of corporate finance, investing and markets is helpful as a person in society. It helps to break one from the Good/evil narrative and recognize that most often people are simply driven by incentive weighted against risk. That is not to say that fraud and or short cited decision making doesn’t happen (it sure does and I think it terrible).

If I could snap my fingers and change one thing about society it would be to teach people economics at a very young age so that it was a part of ones understanding early. Instead we teach neither economics nor personal finance until college, baffling. Kids understand this stuff much better than people expect. College is late for this but I still felt that devoting my college experience to Econ/finance was one of the better decisions I’ve made. It broke me of a fear of financial markets.

[Edwin Santos]

The current trend if vilifying dividends and stock buy backs is being confused for something else entirely. A public company may return capital to investors via dividends or stock repurchases. This is entirely different than a company, usually privately held, taking on debt for the sole purpose of paying dividends to the leadership and bankrupting the company.

Companies will behave differently in the future becuase of this, likely they will increase the amount of cash on hand, public or private. Prior to this, however, analysts and shareholders would typically be Leary of a company with too much cash on the balance sheet as it implies that the company does not know what to do with the money.

There's more to it than that Brian. The ethical objection to publicly company stock buybacks in certain circumstances is when companies buy back their own stock using stimulus money or bailout money (such as TARP). The intention behind the government stimulus has been partly to ensure the health of a threatened company or industry that is influential on the economy. But the goal is also that the money the Feds are giving will get deployed in the form of capital that will benefit the broader economy such as creating jobs, building plants, warehouses, stores, offices. When that money simply goes into the coffers of the recipient and then is used for a dividend, executive bonuses, or a buyback, then it only benefits the limited universe of its management and stockholders, not the broader economy, and certainly not the little guy. In this scenario, the taxpayers have been gamed.

In other circumstances, when there is no stimulus or subsidy money involved, buying back stock that the company perceives as being undervalued is a perfectly legitimate thing to do because they are utilizing their own earned capital.

Hoarding cash in an age of zero or near zero interest rates will continue to be questionable, at least strategically, especially if a company has access to the debt (and equity) markets for financing purposes. In fact, zero interest rate policy is intended by design to punish cash hoarding, whether it be a large company or retired saver living on a fixed income. The Federal Reserve has created enormous disincentive for capital to be stockpiled in savings and instead be deployed into the markets and economy instead. And there you have the engine that has been driving the escalation in appreciating asset values and wealth (at least for a certain segment) over the past 25 years or so.

I couldn't agree with you more wholeheartedly about the importance of a basic understanding of economics and personal finance at an young age.
On a somewhat related note, I've often thought a basic knowledge of nutrition and preventive health at an early age would go a long way toward improving our health care situation.

[Malcolm McLeod]

The last time I was an employee I wasn’t too impressed with the benefits so I decided that I would just open an IRA and make my own retirement. It automatically transfers money every month, so I don’t have the chance to consider spending that on something else. I have tried to max it out every year. We do the same with insurance now, bought our own through a broker.

I have little faith in social safety nets, given that they seem to be perpetually on the brink of failure and generally require one to plead their case and be left in the hands of someone deciding wether or not they should be helped. Personally I would rather plan for my own future and hopefully those things will add to it, rather than rely on them and wind up far worse off.

Drifting from OP topic, but your plan seems wise, responsible, and reeks of self-sufficiency. Hmmm.... could we be from the same far-away planet??

I pay SS tax 'to' my father, your folks, the retired couple down the street who failed to plan their retirement, or those who perhaps got the proverbial financial rug yanked out from under them. Unlike so many, I don't see it as my money. My plan is to never collect a dime from my children. Hopefully and my-plan-fully.

[Mark Bolton]

I've often thought a basic knowledge of nutrition and preventive health at an early age would go a long way toward improving our health care situation.

Been in place in the US for perhaps 40 years aggressively but also aggressively skewed by politics and corporate interest (meat industry, dairy, grain, run it on down to now the soda/cola industry has a foot in the door with school negotiations for cafeteria offerings).

Then it comes back around to the R/W agenda that these lessons are to be taught at home and not by the schools/government which means the idiots who breed will spawn children who eat crappy food because their parents werent smart enough or to busy working, screwing off, or out finding crack, to teach their kids that celery sticks are better than mountain dew. So then the idiot children become the burden on society that the R/W curses and should be left in the gutters to become compost.

Every incantation of this "moral compass" that goes round in these conversations has been in place for 40 years now in some form or fashion and sadly it always boils down to either someone doing what they know is right, or being forced to do what is right because they were scheisters. Sadly the second in the list is the norm due to greed.

[Edwin Santos]

Been in place in the US for perhaps 40 years aggressively .....

Well then, my two kids have missed out on it. One is in 7th grade, the other in 9th, and neither has had a class or even a chapter on nutrition. What they get at school is almost exclusively what the schools are rewarded on by the standardized state exams, basically a STEM curriculum. Anything outside of STEM is either non-existent or token. Nutrition and basic fitness and health? Not so much.
So yes, in our case it has been, and continues to be taught at home. Even when at the grocery store together, we try to make sure they know how to read labels, how to identify what is deceptive and what is not.

[Brian Holcombe]

There's more to it than that. The ethical objection to publicly company stock buybacks in certain circumstances is when companies buy back their own stock using stimulus money or bailout money (such as TARP). The intention behind the government stimulus has been partly to ensure the health of a threatened company or industry that is influential on the economy. But the goal is also that the money the Feds are giving will get deployed in the form of capital that will benefit the broader economy such as creating jobs, building plants, warehouses, stores, offices. When that money simply goes into the coffers of the recipient and then is used for a buyback, then it only benefits the limited universe of its stockholders, not the broader economy, and certainly not the little guy. In this scenario, the taxpayers have been gamed.

In other circumstances, when there is no stimulus or subsidy money involved, buying back stock that the company perceives as being undervalued is a perfectly legitimate thing to do because they are utilizing their own earned capital.

Hoarding cash in an age of zero or near zero interest rates will continue to be questionable, especially if a company has access to the debt (and equity) markets for financing purposes. In fact, zero interest rate policy is intended by design to punish cash hoarding, whether it be a large company or retired saver living on a fixed income. The Federal Reserve has created enormous disincentive for capital to be stockpiled in savings and instead be deployed into the markets and economy instead. And there you have the engine that has been driving the escalation in appreciating asset values and wealth (at least for a certain segment) over the past 25 years or so.

I couldn't agree with you more wholeheartedly about the importance of a basic understanding of economics and personal finance at an young age.
On a somewhat related note, I've often thought a basic knowledge of nutrition and preventive health at an early age would go a long way toward improving our health care situation.

Not always, the most recent round of these objections was applied to companies which were behaving normally in a normal environment and were then impacted by a health crisis which was not within their normal realm of concern. Frankly, if a top executive at an airline were pushing to hoard cash in mid 2019 for the chance that there would be a complete shutdown of the global economy they would have been oustered and replaced by someone deemed to be sane. We look at it with a different mindset now because it happened. At that point one should not go back and blame these companies for behaving normally in a normal environment. If they do not alter their behavior going forward than it's the shareholders who should be requesting such changes and if not they will fail and be replaced possibly by a type of company better suited to the current environment. Personally I do not want them to fail, I want them to survive and succeed while altering behavior.

If we offer them help, sure then it is reasonable to have some strings as to how to they use the money during the time period for which it is used. Outside of that it's between the shareholders and the company's executive board as to what get distributed as long as it is legal.

Mandating the restriction of dividends generally harms retirees whose incomes are reduced because of it. Those retirees are then forced to choose between selling stock on a timeperiod basis to create income or search for those same distributions via taking larger risk. This also causes reduced incentive to own stock in a down market. This combined with a market in which bonds do not create much income is recipe for a situation in which people need much larger pools of money to retire and feel as if they must work for many more years reducing the amount of jobs available to younger folks.

WRT to TARP please do keep in mind that many of those banks were healthy and the forces that be wanted them to buy up those troubled banks only to then start bashing them after the fact for having done so. Also, TARP benefited the tax payer in the long run. Meaning the program was profitable for the government.

https://projects.propublica.org/bailout/

Shareholders are the broader economy and includes every single person who owns a mutual fund and it is highly inclusive. Any person who can open a brokerage account or retirement account through their own self or their employer (practically everyone) can invest in stocks and participate in the success or failure of a company....ANYONE. I made my first investments as a poor college student with money earned from a welding job.

Healthy companies do create jobs, the banking sector was nearly demolished in 2008 and within years had recovered, expanded and created a huge number of jobs.

As a shareholder I want companies to behave, I don't want them to take extraordinary risk and I dont want them to be so cautious that they can't move. I also like them to be well behaved good citizens. No shareholder in their right mind wants a company to behave irresponsibly. I vote with my allocation, if they make poor decisions I do not invest. If they make decisions I deem wise then I invest.

[Nicolas Silva]

Quality is NOT important in this day of the 'Walmart' generation - Price is. You (and by that I mean China) make it cheap and people will buy it.
Having said that - There are obstacles to manufactured goods being Made in USA. Let's see:
1) Where will the labor force come from? Millennials don't want to work in a manufacturing environment. They think being on a computer all day is hard work. How do you think they will react to a hot mfg. floor?
and of course they expect to be paid $60-$80k for even the smallest job. Of course those of us of the boomer generation are now retiring which is why skilled labor is hard to find.
2) The same employers that are complaining that skilled labor has dwindled will not support an apprenticeship program. Hence, it goes overseas.

[Jim Becker]

Nicolas, $60K/yr is subsistence living in many parts of the country at this point...that said, I absolutely agree that things like apprenticeship are needed as well as a validation mindset that trades and manufacturing are "worthy" when it comes to providing strong income. We had a lengthy thread about that awhile back, as a matter of fact.

[Malcolm McLeod]

Nicolas,
This morning, my Millennial sons (x2) helped me demolish and stack for bulk trash p/u ~180ft of 8ft tall stockade fence, including cutting off galvanized posts at the ground. Counting clean up, we were 4 hrs., and you will be aware of the local temperature and humidity today. They hustled to get done and I paid them with a handshake, a 'thank you', and a yet-to-be-delivered hug - - after they shower!

It is too easy to paint with a wide brush. Please be careful lest you judge all too harshly.

[Frederick Skelly]

As a shareholder I want companies to behave, I don't want them to take extraordinary risk and I dont want them to be so cautious that they can't move. I also like them to be well behaved good citizens. No shareholder in their right mind wants a company to behave irresponsibly. I vote with my allocation, if they make poor decisions I do not invest. If they make decisions I deem wise then I invest.

Absolutely agree.

[Jerry Bruette]

2) The same employers that are complaining that skilled labor has dwindled will not support an apprenticeship program. Hence, it goes overseas.

In the 23 years I've been working for my present employer I've helped train at least 7 millwright apprentices, and I've watched as many industrial electrical apprentices get their journeyman card. I can think of at least four other companies within 20 miles of my home that also support apprentices in the trades, millwright, pipefitter, industrial electrician, instrumentation.

Wisconsin has/had a very good apprenticeship program. But in the 25 years since I've earned my millwright card I've watched the program go from active classroom discussion between the instructor and all students in the classroom to a self paced program of computer classes and tests. Read the information on your computer screen and take a test. Show up for every school day and pass the tests and you are now the proud owner of a journeyman card.

How did the indentureship program get to where it is? Industry drove it there. There are advisory boards made up of salary employees from industry that dictate to the tech colleges what they want taught and that they want faster results i.e. get the apprentices through the program quicker.

There's an enormous amount of knowledge and experience that's not being passed on to these apprentices because of the missing discussions and interaction between students in the classroom. Knowing what I know I don't think I could/would want to do an apprenticeship under the current system, knowing how much knowledge I would be missing out on.

[Brian Holcombe]

Drifting from OP topic, but your plan seems wise, responsible, and reeks of self-sufficiency. Hmmm.... could we be from the same far-away planet??

I pay SS tax 'to' my father, your folks, the retired couple down the street who failed to plan their retirement, or those who perhaps got the proverbial financial rug yanked out from under them. Unlike so many, I don't see it as my money. My plan is to never collect a dime from my children. Hopefully and my-plan-fully.

Much appreciated! My father and grandfather are/were both firm believers in being self-sufficient.

[Edwin Santos]

Not always, the most recent round of these objections was applied to companies which were behaving normally in a normal environment and were then impacted by a health crisis which was not within their normal realm of concern. Frankly, if a top executive at an airline were pushing to hoard cash in mid 2019 for the chance that there would be a complete shutdown of the global economy they would have been oustered and replaced by someone deemed to be sane. We look at it with a different mindset now because it happened. At that point one should not go back and blame these companies for behaving normally in a normal environment.

Brian, IMO the issue of stock buybacks, even the recent criticism of them, is considerably more complicated than you may think. There are arguments in favor and arguments against. Given your interest in this area, you may find this particular article interesting:

https://www.investopedia.com/article...ing-or-not.asp

I felt it laid out some of the pros and cons in an objective way and I hope you find it useful.

There is a also an interesting accounting interplay between a company's book value and market value that arises out of a stock buyback that the article doesn't cover. Basically when a company buys back its stock, it is driving down it's book value insofar as it's assets are being debited against a credit to the equity side of the balance sheet. The result? A reduction in outstanding equity, hence a short term boost to EPS and a short term boost to stock price, P/E being equal. Is this a bad thing? Not necessarily, but if the incentive for doing so is a boost to executive compensation tied to a stock price boost, the move might not be aligned with a long term investor because it is an undeniable matter of accounting that the result is a smaller balance sheet and a reduction in book value. Most of the time, a long term investor is interested in a growing book value, not a declining one masked by a concentration of outstanding equity.

Under historically normal circumstances, an excess cash situation like this would have resulted in a dividend. But in recent years, the nature of P/E ratios on stock prices caused some smart people to figure out that buying back stock was an inventive way to boost EPS, and influence stock price (and maybe executive bonuses) in a way that dividends will not do. This is one reason why stock buybacks have become the new dividend as a matter of fashion.

I say the boost to price is often short term, because usually the market recognizes when a company is buying back stock in lieu of expansion of its business and the P/E ratio will invariably lose some of the growth factor and usually drop, negating the initial price increase. The other question is whether the cash was utilized in this manner in lieu of reinvestment in the business or other deferred capital spending.
However if the cash had no other uses, and the company feels it's market stock price is not reflective of it's market value, then a buyback can be a perfectly legitimate thing to do. So this is why I say it's complicated.
Some of the hearings on Capitol Hill have gone into the weeds on this subject, and the criticism runs much deeper than Monday morning quarterbacking in light of Covid-19. Basically the complaints are either misappropriation of Federal subsidy or companies stripping their balance sheets to drive up stock prices and executive compensation as described above.

To be clear, I'm in favor of stock buybacks, but only based on the right incentives and under the right circumstances. I know we're way off topic, but I'll end it there.

[Kev Williams]

Just a tongue-in-cheek observation after reading thru the last 2 pages of this thread... Y'all are making Puerto Rico and Haiti sound like great place to get away from it all, where all there is to worry about is food, water and shelter...