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Post by pjohns1873 on Aug 6, 2014 0:00:08 GMT
I agree that too many people nowadays think short-term. I disagree, however, with your equating a businessperson's (quite reasonable) desire to maximize his (or her) profits with a "screw the workers" mindset.
Personally I believe there is a fundamental problem with the philosophy of "maximizing profits" to begin with as I would contend that "maximizing income" based upon a mutually beneficial relationship between the customer(s), worker(s), and the owner(s) of the enterprise is far more important.
If you have a "fundamental problem" with the concept of maximizing profits, it would be intellectually consistent if you were to have a similar "problem" with the very existence of the stock market. After all, any company that is dedicated to "a mutually beneficial relationship" among all parties concerned, and utterly indifferent to the maximization of profits, is not likely to find (and retain) many major shareholders. |
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Post by ShivaTD on Aug 6, 2014 12:06:06 GMT
If you have a "fundamental problem" with the concept of maximizing profits, it would be intellectually consistent if you were to have a similar "problem" with the very existence of the stock market. After all, any company that is dedicated to "a mutually beneficial relationship" among all parties concerned, and utterly indifferent to the maximization of profits, is not likely to find (and retain) many major shareholders.
Long term investors are very interested in how the "profits" are obtained by the Corporation. Any corporation that is not basing it's income upon a mutually beneficial relationship between customers, workers, and the owners of the enterprise is not going to sustain long term profits and it is the long term profits that ultimately matter to the investors. Long term investors care about the "net income" of the corporation as opposed to the profit margin of the corporation. Corporations based upon a mutual beneficial relationship between the customer, worker, and owner always produce more net income over the long term. That's why major corporations like Boeing and Microsoft are so successful historically.
Day-traders don't really give a damn about the long term prospects of the corporation and are only interested in whether they can sell the stock for more than they paid for it. In truth they don't care about profits at all because they're not invested based upon the dividends paid to the stockholders by the corporation.
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Post by pjohns1873 on Aug 6, 2014 23:43:24 GMT
If you have a "fundamental problem" with the concept of maximizing profits, it would be intellectually consistent if you were to have a similar "problem" with the very existence of the stock market. After all, any company that is dedicated to "a mutually beneficial relationship" among all parties concerned, and utterly indifferent to the maximization of profits, is not likely to find (and retain) many major shareholders.
Long term investors are very interested in how the "profits" are obtained by the Corporation. Any corporation that is not basing it's income upon a mutually beneficial relationship between customers, workers, and the owners of the enterprise is not going to sustain long term profits and it is the long term profits that ultimately matter to the investors. Long term investors care about the "net income" of the corporation as opposed to the profit margin of the corporation. Corporations based upon a mutual beneficial relationship between the customer, worker, and owner always produce more net income over the long term. That's why major corporations like Boeing and Microsoft are so successful historically.
Day-traders don't really give a damn about the long term prospects of the corporation and are only interested in whether they can sell the stock for more than they paid for it. In truth they don't care about profits at all because they're not invested based upon the dividends paid to the stockholders by the corporation.
I find it rather odd that you would bring up the 1990s phenomenon of day trading. Very few people engage in that sort of thing in 2014. But many major shareholders do trade fairly frequently, based upon the projected next-quarter earnings of one company vis-Ã -vis the projected next-quarter earnings of another company. And they very seldom ask themselves if there exists "a mutually beneficial relationship between the customer, worker, and owner" before making that investment. (Like you, I prefer long-term investing; but I was always a 401(k) and IRA type of guy--not a major shareholder.) |
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Post by ShivaTD on Aug 7, 2014 10:11:16 GMT
I find it rather odd that you would bring up the 1990s phenomenon of day trading. Very few people engage in that sort of thing in 2014. But many major shareholders do trade fairly frequently, based upon the projected next-quarter earnings of one company vis-Ã -vis the projected next-quarter earnings of another company. And they very seldom ask themselves if there exists "a mutually beneficial relationship between the customer, worker, and owner" before making that investment. (Like you, I prefer long-term investing; but I was always a 401(k) and IRA type of guy--not a major shareholder.)
I would suggest you do a little more research. Very few share of a corporation change hands based upon profit reports from a percentage standpoint. What 1/2% of investors do can change the current "stock price" of a corporation and will make the news but they're not representative of the vast majority of stock holders that are invested long term.
No, the investors don't literally ask themselves in the corporation is engaged in mutually beneficial relationships between the customers, workers, and owners but the long term growth of the corporation inherently depends upon it. Under-compensation of workers, for examply, results in high employee turnover and lower productivity and that harms the long term net earnings of a corporation. Over-charging customers where they're not receiving as much "value for their dollar" results in fewer customers over time which harms the long term net earnings of the corporation. There is a balance where the workers receive fair compensation that provides for their needs and comfort and where the customers are receiving exceptional value for their dollar and based upon that the enterprise will thrive returning the highest income to the owners even if the "profit margin" is relatively small based upon gross sales.
There's an old saying that it's better to have a small percentage of a lot of money than a large percentage of a small amount of money. Any long term investor that disregards this old adage by insisting on high short term profit margins is really a fool.
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Post by pjohns1873 on Aug 7, 2014 22:59:41 GMT
I find it rather odd that you would bring up the 1990s phenomenon of day trading. Very few people engage in that sort of thing in 2014. But many major shareholders do trade fairly frequently, based upon the projected next-quarter earnings of one company vis-Ã -vis the projected next-quarter earnings of another company. And they very seldom ask themselves if there exists "a mutually beneficial relationship between the customer, worker, and owner" before making that investment. (Like you, I prefer long-term investing; but I was always a 401(k) and IRA type of guy--not a major shareholder.)
I would suggest you do a little more research. Very few share of a corporation change hands based upon profit reports from a percentage standpoint. What 1/2% of investors do can change the current "stock price" of a corporation and will make the news but they're not representative of the vast majority of stock holders that are invested long term.
No, the investors don't literally ask themselves in the corporation is engaged in mutually beneficial relationships between the customers, workers, and owners but the long term growth of the corporation inherently depends upon it. Under-compensation of workers, for examply, results in high employee turnover and lower productivity and that harms the long term net earnings of a corporation. Over-charging customers where they're not receiving as much "value for their dollar" results in fewer customers over time which harms the long term net earnings of the corporation. There is a balance where the workers receive fair compensation that provides for their needs and comfort and where the customers are receiving exceptional value for their dollar and based upon that the enterprise will thrive returning the highest income to the owners even if the "profit margin" is relatively small based upon gross sales.
There's an old saying that it's better to have a small percentage of a lot of money than a large percentage of a small amount of money. Any long term investor that disregards this old adage by insisting on high short term profit margins is really a fool.
Your final words--referring to " ny long term investor"--underscore the fact that you seem to believe that these (relatively small) investors control the share price of a company.
Yet that "1/2% of investors," to whom you (pejoratively) refer, do, indeed, stand to "change" the stock price of any publicly owned company which they own. (And their total share holdings, of course, amount to far more--exponentially more--than a mere half of one percent of the company stock.)
Your suggestion that low wages inevitably lead to "high employee turnover and lower productivity," which, in turn, tends to "harm" the company and its eventual stock price, is most interesting. Walmart--the demon of the left--really does not pay high wages (nor do its major competitors, such as Target and kmart). Yet its stock price has not seemed to suffer (which continues to irritate the political left).
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Post by ShivaTD on Aug 8, 2014 10:31:42 GMT
Your final words--referring to " ny long term investor"--underscore the fact that you seem to believe that these (relatively small) investors control the share price of a company.
Yet that "1/2% of investors," to whom you (pejoratively) refer, do, indeed, stand to "change" the stock price of any publicly owned company which they own. (And their total share holdings, of course, amount to far more--exponentially more--than a mere half of one percent of the company stock.)
Your suggestion that low wages inevitably lead to "high employee turnover and lower productivity," which, in turn, tends to "harm" the company and its eventual stock price, is most interesting. Walmart--the demon of the left--really does not pay high wages (nor do its major competitors, such as Target and kmart). Yet its stock price has not seemed to suffer (which continues to irritate the political left).
One of the greatest misconceptions that I believe exists is that the stock prices establish the value of a corporation. That is an inherently false belief.
When an enterprise goes public it sells 100% of the enterprise to the stock holders. From that day forward all of the value of the enterprise is based upon re-investment of profits generated by sales by the enterprise.
Even subsequent sales of stock by the corporation are merely a redistribution of ownership of the corporation by the existing stock holders (i.e. you can't sell over 100% ownership and 100% of the enterprise was sold with the initial IPO).
Stock prices merely reflect a change in who the "owners" are and how much they're willing to buy/sell ownership in the enterprise. They don't benefit the enterprise at all nor do they actually affect the value of the enterprise.
If you really want to know how well the enterprise is doing then check it's bottom line relative to the initial IPO price. If, for example, the original IPO price was $1 and the enterprise has grown over the years and is paying out all profits as a "dividend" to the owners (stockholders) with a dividend payment of $1/share then the return on investment is 100% for the year. The fact that the stockholder might have paid $10/share for the stock when they purchased it from someone else and is only realizing 10% on their personal investment has absolutely nothing to do with the "return on investment" in the actual corporation that was established by the IPO price for the stock. What the percentage of gross sales results in profits is really unimportant when it comes to the return on investment for those that actually purchased the corporation when it went public.
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Post by pjohns1873 on Aug 8, 2014 20:04:08 GMT
Your final words--referring to " ny long term investor"--underscore the fact that you seem to believe that these (relatively small) investors control the share price of a company.
Yet that "1/2% of investors," to whom you (pejoratively) refer, do, indeed, stand to "change" the stock price of any publicly owned company which they own. (And their total share holdings, of course, amount to far more--exponentially more--than a mere half of one percent of the company stock.)
Your suggestion that low wages inevitably lead to "high employee turnover and lower productivity," which, in turn, tends to "harm" the company and its eventual stock price, is most interesting. Walmart--the demon of the left--really does not pay high wages (nor do its major competitors, such as Target and kmart). Yet its stock price has not seemed to suffer (which continues to irritate the political left).
One of the greatest misconceptions that I believe exists is that the stock prices establish the value of a corporation. That is an inherently false belief.
When an enterprise goes public it sells 100% of the enterprise to the stock holders. From that day forward all of the value of the enterprise is based upon re-investment of profits generated by sales by the enterprise.
Even subsequent sales of stock by the corporation are merely a redistribution of ownership of the corporation by the existing stock holders (i.e. you can't sell over 100% ownership and 100% of the enterprise was sold with the initial IPO).
Stock prices merely reflect a change in who the "owners" are and how much they're willing to buy/sell ownership in the enterprise. They don't benefit the enterprise at all nor do they actually affect the value of the enterprise.
If you really want to know how well the enterprise is doing then check it's bottom line relative to the initial IPO price. If, for example, the original IPO price was $1 and the enterprise has grown over the years and is paying out all profits as a "dividend" to the owners (stockholders) with a dividend payment of $1/share then the return on investment is 100% for the year. The fact that the stockholder might have paid $10/share for the stock when they purchased it from someone else and is only realizing 10% on their personal investment has absolutely nothing to do with the "return on investment" in the actual corporation that was established by the IPO price for the stock. What the percentage of gross sales results in profits is really unimportant when it comes to the return on investment for those that actually purchased the corporation when it went public.
you may choose to measure a company's success, would you deny that Walmart--according to any reasonable metric--has been enormously successful? (And this, irrespective of the low wages it pays--and presumably, therefore, its high rate of turnover.) |
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Post by ShivaTD on Aug 9, 2014 12:20:07 GMT
However you may choose to measure a company's success, would you deny that Walmart--according to any reasonable metric--has been enormously successful? (And this, irrespective of the low wages it pays--and presumably, therefore, its high rate of turnover.)
Walmart's dividends for the last year have resulted in about a 1% return on investment for current investors. That's not a very successful enterprise IMHO.
Getting back to Obamacare please check out my next post.
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Post by ShivaTD on Aug 9, 2014 12:38:26 GMT
The House GOP is apparently moving forward with it's lawsuit on the delayed implementation of the Employer Mandate based upon executive orders by President Obama. Ignoring the issue of whether the House GOP can establish that it's suffered any direct harm from the executive orders that is required for "standing" under the US Constitution I wanted to look at another issue of "standing" under the US Constitution.
Redressability: A favorable court decision must be likely to redress the injury.
If the Court were to determine that President Obama violated the law by delaying the employer mandate then what possible order could the Court issue that would address this?
The only thing I believe the Court could do is to order President Obama and the Executive Branch to implement the employer mandate as expeditiously as possible. As I understand it the employer mandate is already scheduled for implementation for 2015 so the court order would change nothing because it's too late to implement for 2014.
The Court certainly can't strike down the employer mandate that the House GOP is demanding must be implemented.
There is also the remote possibility that the Court decision could strike down the exemptions from the tax penalities that have been deferred for enterprises forcing the IRS to collect those penalties from employers that haven't provided insurance. I believe that is a very remote possibility that would actually "harm" the House GOP's political standing with the business community.
In either case what does the House GOP accomplish with it's lawsuit? I'm curious as to your take on what the possible outcome, assuming standing is granted, might be.
I don't see anyway that the House GOP accomplishes anything beneficial for either their political agenda or for the American people by their lawsuit. Maybe I'm missing something here.
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Post by pjohns1873 on Aug 10, 2014 2:28:25 GMT
However you may choose to measure a company's success, would you deny that Walmart--according to any reasonable metric--has been enormously successful? (And this, irrespective of the low wages it pays--and presumably, therefore, its high rate of turnover.)
Walmart's dividends for the last year have resulted in about a 1% return on investment for current investors. That's not a very successful enterprise IMHO.
Getting back to Obamacare please check out my next post.
Well, if you seriously do not consider Walmart "a very successful enterprise," you sound just as churlish as the rest of the left, in this regard. (A company's market capitalization--which you blithely ignore--is a far more accurate determinant of its success than its percentage of ROI is. After all, a company does not exist merely for the sake of its investors.) |
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Post by ShivaTD on Aug 10, 2014 10:02:32 GMT
Walmart's dividends for the last year have resulted in about a 1% return on investment for current investors. That's not a very successful enterprise IMHO.
Getting back to Obamacare please check out my next post.
Well, if you seriously do not consider Walmart "a very successful enterprise," you sound just as churlish as the rest of the left, in this regard. (A company's market capitalization--which you blithely ignore--is a far more accurate determinant of its success than its percentage of ROI is. After all, a company does not exist merely for the sake of its investors.)
I was actually using the market capitalization value of Walmart in calculating the return on investment of only 1% for Walmart.
Always remember that the value of the stock (market capitalization value) is often disconnected from whether the enterprise is successful or not. For example Walmart "earned" less than $1/share in 2013 while the stock was selling for well over $70/share. Based upon the "market capitialization value" Walmart was an extremely poor performer as an enterprise. Of course someone that purchased Walmart stock at $10/share personally realized almost a 10% ROI based the dividend payments by Walmart for 2013. The initial (1972?) investor in Walmart realized a huge return on their investment because they're a long term investor.
I would agree with you that an enterprise doesn't exist solely for it's investors (owners) but also exists for it's workers and customers as well because if it doesn't then ultimately it's going to fail for all of them. That's why I've repeatedly stated that the enterprise needs to be based upon a mutually beneficial relationship between the customers, workers, and owners of the enterprise. Everyone involved with the enterprise must benefit from the existance of the enterprise for it to be truly successful over the long term.
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Post by pjohns1873 on Aug 11, 2014 3:17:20 GMT
Well, if you seriously do not consider Walmart "a very successful enterprise," you sound just as churlish as the rest of the left, in this regard. (A company's market capitalization--which you blithely ignore--is a far more accurate determinant of its success than its percentage of ROI is. After all, a company does not exist merely for the sake of its investors.)
I was actually using the market capitalization value of Walmart in calculating the return on investment of only 1% for Walmart.
Always remember that the value of the stock (market capitalization value) is often disconnected from whether the enterprise is successful or not. For example Walmart "earned" less than $1/share in 2013 while the stock was selling for well over $70/share. Based upon the "market capitialization value" Walmart was an extremely poor performer as an enterprise. Of course someone that purchased Walmart stock at $10/share personally realized almost a 10% ROI based the dividend payments by Walmart for 2013. The initial (1972?) investor in Walmart realized a huge return on their investment because they're a long term investor.
I would agree with you that an enterprise doesn't exist solely for it's investors (owners) but also exists for it's workers and customers as well because if it doesn't then ultimately it's going to fail for all of them. That's why I've repeatedly stated that the enterprise needs to be based upon a mutually beneficial relationship between the customers, workers, and owners of the enterprise. Everyone involved with the enterprise must benefit from the existance of the enterprise for it to be truly successful over the long term.
In a capitalist society (as opposed to a socialist society) any company exists precisely because one or more people have decided that it is worth the risk--they could lose all of their startup capital, or they could realize enormous profits--and the resulting benefits to their employees (and to society at large) are ancillary. You appear to want a company's raison d'etre to be "a mutually beneficial relationship" with others. Whereas that may, indeed, be a tangential benefit, it is hardly the core reason for the company's very existence. |
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Post by ShivaTD on Aug 12, 2014 13:27:28 GMT
In a capitalist society (as opposed to a socialist society) any company exists precisely because one or more people have decided that it is worth the risk--they could lose all of their startup capital, or they could realize enormous profits--and the resulting benefits to their employees (and to society at large) are ancillary. You appear to want a company's raison d'etre to be "a mutually beneficial relationship" with others. Whereas that may, indeed, be a tangential benefit, it is hardly the core reason for the company's very existence.
How strange. I've literally known hundreds of business owners in my lifetime and not a single one of them ever exprssed a desire to "realize enormous profits" from their business. I believe if you ask the local business owners in your community if they're seeking to simply earn a "comfortable living" or if their goal is to "realize enormous profits" that probably 100% of them will state they just want to earn a comfortable living.
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Post by pjohns1873 on Aug 12, 2014 23:39:09 GMT
In a capitalist society (as opposed to a socialist society) any company exists precisely because one or more people have decided that it is worth the risk--they could lose all of their startup capital, or they could realize enormous profits--and the resulting benefits to their employees (and to society at large) are ancillary. You appear to want a company's raison d'etre to be "a mutually beneficial relationship" with others. Whereas that may, indeed, be a tangential benefit, it is hardly the core reason for the company's very existence.
How strange. I've literally known hundreds of business owners in my lifetime and not a single one of them ever exprssed a desire to "realize enormous profits" from their business. I believe if you ask the local business owners in your community if they're seeking to simply earn a "comfortable living" or if their goal is to "realize enormous profits" that probably 100% of them will state they just want to earn a comfortable living.
Your deification of "local business owners" ignores an important fact: Local businesses (i.e. mom-and-pop businesses) are dinosaurs nowadays. Since they do not purchase in massive quantity, they cannot negotiate with their distributors for the lowest possible price; and they must therefore pass along these higher prices to consumers--most of whom would prefer to shop at the mega-stores that do sell for much less. |
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Post by ShivaTD on Aug 13, 2014 11:27:38 GMT
How strange. I've literally known hundreds of business owners in my lifetime and not a single one of them ever exprssed a desire to "realize enormous profits" from their business. I believe if you ask the local business owners in your community if they're seeking to simply earn a "comfortable living" or if their goal is to "realize enormous profits" that probably 100% of them will state they just want to earn a comfortable living.
Your deification of "local business owners" ignores an important fact: Local businesses (i.e. mom-and-pop businesses) are dinosaurs nowadays. Since they do not purchase in massive quantity, they cannot negotiate with their distributors for the lowest possible price; and they must therefore pass along these higher prices to consumers--most of whom would prefer to shop at the mega-stores that do sell for much less.
Four facts you are apparently unaware of:
1. Publically traded corporations only represent about 5% of all enterprises in the United States. 2. Large corporations typically seek about an 8% net profit margin on gross sales. 3. Sole proprietorships typically pay double the federal taxes (or more) when compared to corporations. 4. Some of the largest corporations revolve around small franchise (mom-and-pop) businesses such as many insurance companies, real estate companies, insurance companies, fast food chains, etc. and the owners of these businesses are not seeking massive profits.
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