Along with every other major newspaper, LAT current-events/political reporters are treating Junior’s insistence that the economy is booming as if it were an open question: this one says Yes, that one says No. But in the business pages all that pussyfooting disappears.
The blue-chip Standard & Poor’s 500 stock index’s return is exactly flat year-to-date, counting dividend income.
The average domestic stock mutual fund is down 1%, according to Morningstar Inc.
The Pimco Total Return fund, the nation’s biggest bond mutual fund, is up a mere 1.2% this year. You’ve earned even less than that in the typical money market fund.
Gold? It’s down 6% this year.
No wonder people still are paying ridiculous prices for residential real estate. There doesn’t seem to be much incentive to look anywhere else.
“A slough of despond” is how Wall Street veteran Jeffrey Applegate, chief investment officer at Fiduciary Trust Co. International in New York, characterized the stock market’s mood in July — a month in which the S&P 500 dropped 3.4% in price and the Nasdaq composite index slid 7.8%.
When strategists like Applegate start quoting from “The Pilgrim’s Progress,” you know it’s a tough market. (emphasis added by me)
If you’ve been following FTT, you know that wages are depressed and have been for 20 years, and that the “new jobs” Bush brags about are mostly in the lowest possible wage-zone, barely above minimum wage. Corporate earnings, however are generally up, in some cases waaay up. So here’s the question:
If all this profit isn’t going to higher wages–and it isn’t–and it isn’t going to investor dividends–which it appears it isn’t–then where the hell is it going? Let’s see if I can guess.
# NPR’s Marketplace reports that executive salaries have increased 22% just this year.
# The German newspaper Deutsche-Welle reported last week that the Daimler-Chrysler Board have raised their own salaries more than 30% a year for each of the past four years at the same time they were announcing pay cuts and lay-offs of workers due to “the slow economy”.
# Two years ago, in the depths of the recession, Doug Conway & Kylie Walker noted in a book called Corporate Paradise on executive compensation that:
IN corporate paradise, company credit cards come without spending controls. Bosses can have one for themselves, one for the wife and another for the kids. They enjoy interest-free home loans of up to $400,000 that may or may not be repaid.
They are given $10,000 watches and a $1.1 million Christmas party, limos all round, to lighten a year when they lose $2.1 million.
An executive living in his own apartment collects rent from the company. The top dog enjoys a marble and gold bathroom, including spa, in his office.
He spends $9000 on restaurant meals in one month, $2000 of that in tips.
His wife racks up $50,000 worth of first-class air travel a year.
In this business paradise, the head honcho’s personal assistant lives on the Gold Coast but he flies her to Sydney for the working week and puts her up a the Intercontinental hotel.
The annual cost: $63,000, but who’s counting?
He gives an old mate $486,000 of company money as an interest-free, unsecured loan. After seven years without a single repayment, the friend also receives a $1600 box of cigars.
At HIH, none of this was a dream. It was all reality.
The book is Australian but everything it says about Australian corporate greed goes double for here, sometimes more: In the last two years, corporate executive salaries in Oz have averaged 75X the salaries of workers–a divide that was considered scandalous Down Under. But in America, exec salaries in the same period are 300-400X workers’ salaries.
I think I’m getting a pretty good idea where the profits are going.
Filed under: Economy |