Biggest Corporation Profits
Are Still Rising.
That Explains Why DJI and SP-500
Are Still Rising.
But Capitalism is
Not Building
The US Economy,
as It Once Did.
Corporate profits are not being increased by investments in the US.
Instead they are being created by
1) Strictly limiting wages, benefits and job security, except to CEOs.
2) Corporate Buybacks of Stocks
Consider the 449 companies in
the S&P 500 index that were publicly listed from 2003 through 2012.
During that period those companies used 54% of their
earnings—a total of $2.4 trillion—to buy back
their own stock, almost all through purchases on the
open market.
In 2012 the 500 highest-paid executives named in
proxy statements of U.S. public companies
received, on average, $30.3 million each; 42% of
their compensation came from stock options
and 41% from stock awards. By increasing the demand
for a company’s shares, open-market
buybacks automatically lift its stock price, even if
only temporarily, and can enable the company
to hit quarterly earnings per share (EPS) targets.
http://hbr.org/2014/09/profits-without-prosperity/ar/1
3) Mergers and buying out competition.
3) Investments overseas.
Charts by Cris Sheridan
A few observations/remarks:
Chart showing eight different corporate profitability measures since 2009.
Peak in corporate profits: Q3 2006
Peak in S&P 500 (noted with a dotted line): Q4 (October)
2007
Recession: Q4 (December) 2007
Peak in corporate profits: Q3 1997
Peak in S&P 500 (dotted line): Q1
(March) 2000
Recession: Q1 (March) 2001
Peak in corporate profits: Q4 1988
Peak in S&P 500 (dotted line): Q3
(July) 1990
Recession: Q3 (July) 1990
Source:
http://www.financialsense.com:8080/contributors/cris-sheridan/corporate-profits-market-peaks