Tuesday, December 17, 2013

Are you getting your share of the pie?

This morning I couldn't have read a better example of why your average Jane needs to own assets and support herself and her family and get away from relying solely on a paycheck model.

MMM announced today that they are raising their dividend by 35% and having $17-$22 billion share repurchase program. That is equal to 25% of the entire company that they plan to buy back. I get into conversations and debates with some family and friends on what the government needs or doesn't need to do. They say that companies need tax cuts and incentives to create more jobs for people especially under the socialist job destroying President Obama (their words not mine).

Whether you believe government should or shouldn't help companies is not the point here. Nor am I giving a political view, this is an investing blog after all. Some companies and some sectors might need help but not an across the board law impacting all of.
Its not a matter of companies unable to create jobs, its that companies do not WANT to create jobs.

I think this is an important lesson from 2008. We were losing millions of jobs. I cannot recall any headlines in the news since then, that's 5 years, that they were hiring even tens of thousands back. I don't think they are coming back. Not with large corporations at least.

I read a lot of earning reports and there is one common theme I keep seeing time and again in 2013.
Record profits, record sized cash hordes, dividend raises and share buybacks. $415 billion of share buybacks. We have 136 million total non-farm payroll employees. Let's say $80,000 to hire someone with a $40,000 salary. I'm roughly estimating that it costs double for vacation, benefits, health care, pension or 401k matching.... that is 5.18 million good quality jobs with benefits that could have been created.
There is money practically being thrown at shareholders. Next to nothing for employees.
Again, right or wrong is another topic and we can debate philosophy and ethics another time. The fact remains there is money and profit available and some are getting it and some are not.
Are you in the employee category wondering when people are going to create better jobs for you?
Are you in the shareholder category getting yourself a piece of the economic pie?

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

5 comments:

  1. Hey Pulling,

    I think politics are important a large government and high taxes will limit growth with less incentive to put capital at risk but like you said that is a different conversation. The problem is a paycheck mentality or the idea of I need a vacation yearly instead of maybe every other year or buying an Xbox instead of buying MSFT. There are always excuses to why people are where they are but even if you came from a poor family opportunities are everywhere most self made millionaires come from poor families.
    I love that we live in America!! I just finished the book "The Frackers" to me it shows why America is great: profit-motivated individuals, strong private property/mineral rights and contract law, access to capital, deep expertise, rapid decision making and many, many failures.
    The opportunities are right in front of us we just have to be willing to grab them!!
    Merry Christmas!!

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    1. Hey man good to see you. There are opportunities in America. They aren't always obvious though. Sometimes you have to wipe the mud and grime of them with elbow grease and tenacity.

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  2. I noticed the MMM announcement last night. Trust me, I'm kicking myself for not buying some a long time ago. I kept waiting for the price to come down and yeah, that never happened. All the more reason to be willing to pay for quality, as quality will win out in the long run. I don't expect much of the lower end of the labor force to be coming back, but I can't really blame the companies. Unless there's some kind of incentive why would you bring back jobs that cost more than doing your manufacturing overseas and shipping? There's a breakeven point on everything that makes another option better, unfortunately we've priced ourselves out of some jobs coming back. What does bother me though is all the regular jobs being cut, but then upper management is pulling in multi-million $ per year salaries, plus stock incentives & bonuses.

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    1. You make a great point about cost effectiveness.
      I've worked at Wendy's and Taco Bell and my heart goes out to those fast food workers trying to support their family. However demanding and striking for $15 seems like economic suicide. It won't be much longer until we have touch screen's where we place our own orders. I am seeing more and more self check outs at grocery stores (and I love em) but that is several jobs gone never coming back.

      Now at the same time... absolutely agree with you on upper management pay. Its beyond ridiculous vs what they actually do.

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    2. Hey guys, I take a different view on CEO pay or people making to much… I don't see it like that. First these upper management jobs are usually only for a few years because if you don't perform you are out. Its kinda like NFL or College football coach. You make a lot while your on top or when you start but the life span is short if you don't surpass expectation you' are fired. Also if anyone wants the best talent, it usually don't come cheap you have to pay for it. People don't make money for being mediocre they are replaced!! I know there are always some who make money and just suck but majority of the time pay depends on performance!! I plan on making a video on this in the future. With the president and pope knowing very little about economics trying to make this an issue it is really the performance of the people who make the money who end up creating less inequality

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