But, if they shut down the shopping malls, where will Roy Moore go to meet girls?
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Also anecdotal, but this captures the experience I have shopping at places like Home Depot or Lowes.
I’m just as picky about books. It’s very hard shopping via the browser interface. Sure, telling me the number of pages and dimensions is pretty objective, but I also check a copy for dings and defects.
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Three quotes all linked by one factor. People and short-term thinking.
It is quite possible to view the stock market as the greatest gift to socialism ever invented (I don’t insist on it though 
) . It literally allows anyone to own part of a business. Does it mean that rich people will own more of a company than any one poor person? Of course.
Can poor people together own more shares than rich people? Depending on the company, in many cases, yes. Can they own enough that their shares have meaningful voting power? Definitely.
Are shareholders taking action that increases their long-term benefit or letting people concentrate on their own short-term gain?
I would say it’s mostly the latter. As long as the next dividend looks good, who thinks much beyond that?
Ironically, the “world’s greatest investor” constantly promotes much longer term thinking and his latest letter to shareholders sets out his views on stock markets, ‘reported earnings vs. what actually matters’ and hedge funds quite nicely.
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I don’t think that this article is any good. It describes the situation in the USA only while, as far as I know, the collapse of retail is a worldwide phenomenon (although I am not so sure about Asia). I would also think it has the relation between debt and decreased profit wrong: retail chains went into debt because their sales were down (or did not increase as fast as projected), not the other way around.
I think that the underlying problem is one of overshoot. Every investor went to retail as a growth opportunity, but it grew beyond what was sustainable. Then retail chains tried to sustain growth with credits, discounts, and basically lots of advertising, but they were basically canibalising each other. When a percentage of the customers went away, the system was primed for collapse.
Why did some of the customers go away? Some indeed went online to Amazon and others. Some had to reduce their spending in times of recession. And another reason, which I did not see listed in the article: shopping is not trendy any more. Plenty of people decided that they have all what they needed and either increased their savings or spend on different things, like travel. Tourism is up.
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But at some point, after larding the companies with debt the PE managers sell the debt choked zombie. If the price that they got when doing so accurately reflected the business prospects of a company with that high a debt load, the process wouldn’t be profitable.
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I’m reading the Ascent of Money. The book details the history of finance. What Barfundle says is not wrong. Financial innovations have allowed for ordinary people to gain more wealth. After all, a dollar buried in the forest will always be a dollar, but a dollar invested in the stock market may grow. In my mind the issue is a political system that favours investment over labour. My Dad went to Germany for a business trip and was impressed by how unions were part of the Board of Directors, thereby ensuring the welfare of the employees is always a present concern. Here in N. America labour and investment have always been at odds. It seems that here in N. America the average CEO has a pernicious thought that they would be better off if only they didn’t have to pay their workers. They then bribe politicians to further that goal. Capitalism is not the problem, unchecked capitalism is. The stock market is not the problem, the adoration of it is. When nearly half of a country has been convinced that publicly funded health care is a menace to be feared, any attempt to reign in the arcane aspects of stock market gambling will be met with unassailable resistance.
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That is not how it works.
Let us say that a market is divided between 2 large players A and B (and several smaller unimportant players, maybe). They would like to merge, but that is not allowed. Yet, A is bigger and could buy B.
What happens is that Z, a finance trust, buys B. Then it sells parts of it around, usually to A across a few dummy corporations. Then it runs it to the ground. The remnant of it after bankruptcy may be sold to A as there is no other bidder left. Destroying B was profitable all the time, it is just that the general public does not see it.
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Actually, if more people were buying stocks based on their dividend history instead of just betting the share price will go up, it would be a good thing for the economy and for jobs.
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Agreed. Although Berkshire Hathaway would look pretty bad by that measure, I’m not sure they’ve ever declared a dividend 
I find one of the interesting developments in recent years (is it a development? is it recent?) is the rise of speculation as a legitimate investment strategy.
I see it most in residential lettings in the UK. The only way the vast majority (I suspect nearly all) landlords make any money in residential lettings is on the rise in property prices.
They’re certainly not making any on the rents once you include the costs of letting, void periods, risk of defaulting tenants, etc.
Speculation is the only investment strategy - when cash earns a quarter of a percent per annum.
Know of anyone seeking political office who wants to bring back 4-5 percent on CD’s? I’m ready to join up.
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I suppose it depends by what you mean by speculation.
Investing in a nice profitable business and receiving your dividends, I would personally not class as speculation.
Investing in say Uber in the hope that it will at some unknown point in the future become profitable? That’s speculation.
Investing in a company not caring whether it will ever be profitable and just hoping to sell your investment at a future point for more than you paid for it? Speculation.
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Thank American business schools for that – for decades they’ve trained graduates that anything that happens beyond the next fiscal quarter shouldn’t matter to an executive.
Very often investors don’t want dividends thrown off at all, because dividends have different tax implications (not unjustified ones) than do increases or decreases in the price of the equity itself. This situation further encourages speculation and vulture capitalism and hedging as a way of life over building long-term value in companies (i.e. Buffett’s approach to investing).
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I’ve also noticed quite a tendency for people to invest money in companies by way of debentures rather than taking share capital.
At the end of the day, if you’re only in it for the money, contractually required loan repayments are better than dividends (which might or might not get paid) and if the company owes you enough, you’ve got defacto control anyway.
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Exactly. That’s the basis of the phenomenon Cory is describing. Being a creditor is not the same thing as being an investor, but the banks that loan these companies money at the behest of the buyout firms take the opposite view. When the bust-out eventually happens, they’re at the front of the line to collect, with vendors and pensioners way at the back.
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But usually PE firms are no longer in control of the debt choked remnants of B with it finally goes tango uniform. They usually get in cheap (buy a stake in companies that are already troubled) sell off parts, fire people load the remains with debt and fees, and sell the carcass. Which often drifts on for a year or two before succumbing. Sometimes they can’t manage to get out before the reckoning and they shrug their shoulders and say “Well it was in trouble when we bought it.” And there’s some truth to that because vulture capitalists keep their eyes open for chances to take over control cheap. Although looting the company and filling it up with debt rarely helps matters. But quite often, the debt choked zombie carcass lives long enough for the PE companies to sell off their stake. Although they have often impaired the profitability by signing sweetheart management and lease deals, things like selling the stores to a real estate concern that the PE firm has a controlling interest n and then having the target company take long leases. But PE firms do try and often succeed in selling their stake in the debt crippled company. And the fact is, that the price that they get often FAILS to reflect the even worse state that the “turnaround management” has left it in.
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I really miss Sears ( it’s gone completely in Canada, now) . Always satisfied. Even had a re-roofing done by them; no one else would take the job . BUT, removing that sign with a backhoe? Who does that? Why not just get a field gun and blow it off? And ya, hedge funds suck, but they do provide incentive for those who run publicly traded businesses to run their business efficiently (presuming they don’t want to be predated upon).
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That is the notion of “stakeholder value” I mentioned earlier in the thread, in contrast to “shareholder value” that is emphasized more in the USA.
That all depends on the levels of subordination on debt and most creditors are institutional in nature (not “retail”), with this kind of debt tranched; suggesting that banks are at the front of the line and everyman pensioners and vendors are at the back to collect any leftover scraps is an unrealistic narrative. As for vendors, highly leveraged companies, such as those targeted by an LBO, would likely have restrictive credit terms that protect their retail suppliers; e.g., inventory in receivership.*
*That doesn’t mean the inventory’s value could not diminish in value in a liquidation, but it is a claim on collateral.
My apologies, I missed that post first time through. You will find me in complete agreement on this point. Funny thing, when you mention shareholder, my immediate idea is of ordinary people like me with money in the stock market as retirement savings. When I mention investors, I’m thinking of professional investors. Those whose primary income is derived from manipulating the stock market for gain. Which I admit are only personal differentiations, since the words mean the same thing. A focus on stakeholder is not only good for the stakeholders, but also shareholders, since their investments are kept safe. The focus on short-term gains is only good for professional investors since they have the means to make money on the volatility.
I met a currency speculator in a bar one night. His entire job was convincing banks to give him millions of dollars to invest. He’d leave it in for a couple of minutes and then would pull it out again. He said he could net a couple hundred of thousand from that. He’d give the bank back it’s initial investment with whatever gains he made, minus his % cut. I was very nice to the guy, but it kind of makes me sick to think he made all that money without adding any value, and then only having taxes calculated on 50% of it since it was a Capital Gain (The tax part I don’t know for a fact, he could have had to claim it as earned income, which would make it a little more palatable).
In retrospect, I think people were arguing due to differing personal definitions of what the stock market and shareholders are.
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