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It seems Carl Icahn will not be going activist on the S&P500 after all.

During the Reuters Investment Outlook Summit in New York on Monday, the 78 year old billionaire said that “I am still concerned that one day you’ll see a break like you had a few weeks ago but it won’t come back.”

Of course, that would suggest no more central bank interventions, of the verbal Bullard-kind, or otherwise. In other words, either the Fed losing control or losing all credibility with the market, at which point a stock market downturn would be the least of anyone’s worries.

And while most have dismissed the October near correction in the market, Icahn said he is more concerned and is predicting a downturn. “It’s really a question of when that is going to happen, in my opinion. It could be three years, it could be three months, it could be three days. But I really do believe there will be a major correction in the next three to five years, at least.”

Of course, with an interval of that length, the S&P may well be north of 3000, 4000 or even 5000 by then so the question becomes will the market then be like CYNK, when it climbed to record highs on no volume only to plummet on a sudden spike once the realization that the entire ascent was based on momentum and euphoria fades.

So what is Icahn doing to prepare? “We short S&Ps against a very large portfolio. We have the benefit of not having to worry that much about hedge fund partners,” he said, speaking at the Reuters Global Investment Outlook Summit. He also added that he likes “being a minority. I am not saying go short the market, I’m talking in general terms.”

He also commented on the quality of corporate earnings, a topic we have covered extensively here in the past: “I look at these earnings and I find them to be somewhat suspect,” he said. The earnings that are being reported are based on the ability of companies to borrow at very low interest rates, he said, and everybody is saying “‘Everything is great’.” However, he said many company executives he speaks to look at the economy and think, “it ain’t what it’s cracked up to be.”

This is not the first time Icahn has called for a major drop:

A year ago in an interview with Reuters, Icahn helped push the market lower with his comments and he took pains this year to be careful on adding a vague timeline, noting that there are many variables he can’t handicap.

 

He acknowledged he could be completely incorrect and the market could climb another 1,000 points. But he also pointed to his decades-long history of reading markets and making investments and said he’s been right more often than he’s been wrong.

Will he be right this time? Check back in 3 to 5 years. Or three months. Or three days.

via Zero Hedge http://ift.tt/1uH7JmP Tyler Durden

Even years after the Occupy protests (love 'em or hate 'em, they focused attention on inequality), Americans are still clueless about how much inequality we have in our country.

As we noted in 2011:

Dan Ariely of Duke University and Michael I. Norton of Harvard Business School demonstrate– Americans consistently underestimate the amount of inequality in our nation.

 

As William Alden wrote last September:

Americans vastly underestimate the degree of wealth inequality in America, and we believe that the distribution should be far more equitable than it actually is, according to a new study.

 

Or, as the study’s authors put it: “All demographic groups — even those not usually associated with wealth redistribution such as Republicans and the wealthy — desired a more equal distribution of wealth than the status quo.”

 

The report … “Building a Better America — One Wealth Quintile At A Time” by Dan Ariely of Duke University and Michael I. Norton of Harvard Business School … shows that across ideological, economic and gender groups, Americans thought the richest 20 percent of our society controlled about 59 percent of the wealth, while the real number is closer to 84 percent.

(Indeed, even those who assume they're educated about inequality may not realize that we're at lord and serf levels.)

Ariely subsequently explained that both Republicans and Democrats are passionately opposed to the degree of inequality we have in the U.S. … but that politicians may be trying to make us think we’re more equal than we really are (The media and Wall Street are also trying to hide the size of the gap).

Les Leopold reports today on a new study which confirms how clueless Americans are about inequality:

A[n] important study ("How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay") by Sorapop Kiatpongsan and Michael I. Norton provides insight on why Americans aren't more upset about rising inequality: It shows we are clueless about how bad it really is. Their analysis of a 2009 international survey of 55,187 people from 40 countries, found that when it comes to understanding the severity of inequality, we're the most clueless of all.

 

Americans are virtually blind to the growing gap between CEO pay and the pay of the average worker. As the chart below shows that gap has increased dramatically. In 1965, for every dollar earned by the average worker, CEOs earned 20 dollars. By 2012, that gap mushroomed to 354 to one.

 

 

But, when asked in the survey, Americans grossly underestimated this gap. Instead of 354 to 1, the Americans in representative survey think it is only 30 to 1. When asked what the ideal pay gap should be, Americans say that a fair gap would be about 7 to 1.

 

More amazing still, the survey results, combined for all countries, show that the misconception of inequality doesn't significantly vary by age, gender, income, political leanings or education.

 

To see if these finding also hold for the U.S., I waded into the database: Does political affiliation and education impact how the 1,581 Americans in the survey estimated the wage gap? (The data comes from the International Social Survey Programme: Social Inequality IV – ISSP 2009 on the website Gesis. )

 

 

As the chart above shows, "Strong Democrats" estimated that the actual ratio between a CEO of a large corporation and an unskilled factory worker was about 36 to 1. "Strong Republicans" said it was 40 to 1. A difference without a distinction.

 

When it comes to offering opinions about what the wage gap should be, the Strong Democrats thought 5 to 1 was about right, while the Strong Republicans thought it should be about 12 to 1. The two political extremes obviously are much closer to each other than to the current reality of 354 to 1.

 

***

 

When it comes to our ignorance of the pay gap, there are no blue states, no red states — only misinformed states of mind. We're the Know-Nothings of inequality.

 

Why are we so blind to inequality?
Most of us have no idea that our golden land of opportunity is the runaway leader among developed nations when it comes to inequality, (see chart below.) This dubious distinction runs counter to American Dream that we've been indoctrinated with since birth. As a result, we reflexively think that America is epitome of democracy — the fairest most just and most upwardly mobile country in history. That makes it hard for us to account for why we are more unequal than all these other countries. So, I suspect many of us just tune out the data. It's too jarring to the deep-seated doctrines that comprise our national identity.

 

***

 

We may still be living with this cultural hangover and operating from a societal self-image from yesteryear. We are likely to cling to it for quite awhile, in part, because it's comforting as new economic insecurities take hold. As workers from other nations pass us by, we look in the mirror and still hope we are the fairest of them all.

And see this.

Postscript: Occupy organizer David DeGraw says that – if people knew how much inequality we really have – they would revolt.  He may be right.

via Zero Hedge http://ift.tt/1xJH3C1 George Washington

What a difference a few years makes…

 

Here is “President” Obama this week at the G-20 Summit distancing himself as far as possible from Jon Gruber…

2014: President Obama on Jon Gruber

 

“some adviser who never worked on our staff expressed an opinion that I completely disagree with”

 

 

And here is Senator Obama speaking at a 2006 Brookings Institution meeting, cozying up to Gruber and other academics…

2006: Senator Obama On Jon Gruber

 

“the brightest minds from academia and policy circles, many of them I have stolen ideas from liberally, people ranging from Robert Gordon to Jon Gruber”

 

*  *  *

Once again, Obama is The King of Denial

 

via Zero Hedge http://ift.tt/1ETjbgt Tyler Durden

Koichi Hamada is a special adviser to prime minister Shinzo Abe and one of his closest confidants. That makes his comments, as The Telegraph reports, even more stunningly concerning. Focusing his attention on the fact that Japan must delay the 2nd stage of its planned consumption tax hike – for fear of derailing the ‘recovery’ – Hamada unwittingly, it seems, explains the terrible reality behind the so-called “godfather” of Abenomics’ perspective on the extreme monetary policy he has unleashed…

Select stunning quotes that everyone should ignore and just BTFPonziD in Japan…

“The consumption tax hike is a great big turbulence to the Japanese economy. It may have erased almost two thirds of the benefits of Abenomics,” he told the Telegraph. “At the very least, a third of this great experiment is gone.“

 

“I used to say that we should wait until the third quarter figures are out. However, by various economic indicators, the GDP figures cannot be very optimistic,” he added.

 

…

 

“We should increase the consumption tax in the intermediate future,” he said. “This first shock starting in April has been countered by a monetary counter-move. But can we risk another shock in this way?”

 

He also said that while he fully supported the Bank of Japan’s bond buying spree, he said there would be diminishing returns from quantitative easing the longer it went on.

 

“I completely agree with Kuroda’s direction of policy, as well as his strategy of keeping quiet and surprising the market. Of course, if you repeat the same kind of action then the impact will be weaker,” he said.

 

…

 

Marc Faber, the famous Swiss investor, has accused Japan of “engaging in a Ponzi scheme” because the BoJ is hoovering up most of the debt that has been issued by the government. While Mr Hamada agreed that Japan had created a “mild ponzi game”, he also said it was a “feasible” one because of Japan’s huge foreign reserves.

 

“In a Ponzi game you exhaust the lenders eventually, and of course Japanese taxpayers may revolt. But otherwise there are always new taxpayers, so this is a feasible Ponzi game, though I’m not saying it’s good.”

 

Mr Hamada said it was important that Japanese policymakers sent a clear signal that the government was willing to do whatever it takes to smash deflation and pave the way for wage increases for millions of workers.

 

“I’m optimistic about wages, but the uncertainty is how long it takes,” he said. Business is still in doubt about whether Abenomics will continue. If they know it will continue and the profits of export firms are really soaring, they will start to share that with their employees.”

 

Read more here at The Telegraph…

*  *  *
So to sum up… as long as the BoJ keeps buying stocks and bonds in ever-greater amounts (and Japan has more taxpayers to foot the bill) then the ponzi scheme can survive in its fiscally unsustainable way… what a total farce.

The next time someone comes on business media and says Buy Japan (for whetever reason), maybe a reminder that the architect of Abenomics has said that the policy is nothing short of an attempt to keep the Ponzo scheme of Japan alive.

via Zero Hedge http://ift.tt/1xg67l4 Tyler Durden

Despite the promise of increased transparency, if you felt that deciphering Fed policy (other than uber-dovish, lower-for-longer, willing-to-wait, BTFD) became more and more confusing as the last few years progressed, you would not be alone. In fact, the complexity of the Fed’s statements (not just the wordcount which we have noted numerous times) has surged from “Secondary School” reading level throughout Greenspan’s era to “Post-Grad” comprehension at the peak of Bernanke’s reign. Yellen, so far, has reverted modestly. As The Economist notes, this increased baffle-em-with-bullshit “Fedspeak” complexity is very reminiscent of the George Orwell’s 1984-esque “oldspeak” or “doublespeak” used to keep a quiescent public bemused.

 

As The Economist notes, in  George Orwell’s “1984”, there was “oldspeak”, “duckspeak”, “doublespeak” and “newspeak”. In modern central banking, there is “Fedspeak”. One of the Federal Reserve’s principal means of communicating its views on monetary policy is to issue a press statement after its regular Federal Open Market Committee (FOMC) policy meetings. These statements have become longer and more complex, according to a recent report by Rubén Hernández-Murillo and Hannah Shell of the Federal Reserve Bank of St Louis, perhaps contradicting their original purpose.

 

 

A noticeable uptick in the complexity of the FOMC statements occurred shortly after the Fed announced the start of quantitative easing in late 2008. As its balance-sheet ballooned, so too did the length of its press statements. Twice during this period the Flesch-Kincaid reading level reached 20, suggesting that Fed-watchers would need four years of postgraduate education just to parse what was going on—an onerous hurdle for a press statement that is meant to inform the public. (No such pattern is discernible for the European Central Bank, whose press statements have maintained a consistent undergraduate reading level of around 14 over the past decade.)

*  *  *

So there it is… baffle em with bullshit writ large.

via Zero Hedge http://ift.tt/1EWuUNm Tyler Durden

From the Slope of Hope: A handwritten letter arrived in my mailbox last week from a reader. In it was a note from whom I would guess is an elderly gentleman, thanking me for my work both on Slope and on Tastytrade, but politely asking me to use the phrase “God damn it” less frequently, since he found it upsetting.

The handwriting on the paper trembled like leaves in an autumn breeze, and it was obvious it took time and effort to send me this two-page missive. It meant something to him.

It never occurred to me that I ever used this phrase in a video, let alone often enough to cause concern. All the same, the letter, as with the many other letters I have received over the years, made an impression. For one thing, it made me wonder how angry I must be in order for this kind of sentiment to seep through, since I wasn’t even aware I was saying it.

Which leads me to the topic at hand. Specifically, a man. A terribly deformed man whom I think about almost daily. For now, I’ll call him Sup.

One summer evening, a few months ago, I was walking with my family down University Avenue, the central boulevard in our town, and the location of dozens of high-end retail stores that cater to the insatiable appetite of the affluent consumers in my fair city.

“Sup?” came from the voice from below. (As is: “What’s up?”) I glanced around and didn’t see the speaker. That is, until I looked lower. There, standing on the brick sidewalk on the corner of Bryant and University Avenues was a person unlike any I had ever seen before.

His head, torso, and arms were normal. There were two things obviously terribly wrong with him: first, his back was completely malformed, with a huge hump, and second, his legs – – – or what passed for legs – – were just a few inches long. He appeared to be mixed race (the politically incorrect term, I think, is “mulatto”) and he had a big afro.

“How you guys doin’ this evening?”, he asked. I stammered that we were pretty good, although I confess being a little surprised. That brief exchange ended the conversation, and my family and I continued on to Umami Burgers for dinner. In the receding distance, I heard this fellow chatting up other people as they passed, asking for a dollar from anyone who would listen.

From that day forward, I paid attention to that corner whenever I passed it in my car or walked by it during my downtown errands. Sup, as I called him, was on that corner more often than not. On occasion, I’d see a special wheelchair near him, which I suppose he could hoist himself onto and roll to wherever it was he lived (if such a place existed). But he was never in it. He was also on the sidewalk at knee level.

What struck me about Sup the most was his attitude. This guy was seriously and, dare I say, grotesquely deformed. When he moved from one place to another, he typically did so by pressing his hands against the ground and swinging his torso and tiny legs forward, much like an ape at the zoo. Although his short stature made him easy to miss, once people saw him, they couldn’t help but take note. I can only imagine the range of reactions he’s ever received.

But back to his attitude: this guy was relentlessly positive. And I don’t mean grinning, giggling, and thumbs-up positive. I’m talking about a self-evident confidence, determination, and cachet. He gave salutations to everyone who passed; he casually smoked on a cigarette while chatting up people who would talk to him; and he made verbal passes at good-looking women as they strolled by (enjoying, incidentally, a supremely good view of their legs from his two-foot high vantage point). In spite of all this, most people tried their best to ignore him. They just felt too awkward (as if they were the ones who were entitled to feel uneasy).

Since I’m an unrelentingly self-referential twit, I pondered these observations in the context of my own behavior. Here was this guy who had every reason to feel sorry for himself. His tremendous physical deformities were going to dominate whatever impression he might possibly give to someone. He was begging on a street corner for dollar bills. He was being passed every day by countless numbers of people, many of them affluent, some of them stinking rich, while he begged for a little money to eat. And yet he was totally unfazed (in spite of, I wager, some cruel reactions or mean utterances offered by heartless strangers).

I, on the other hand, have a PhD in self-pity. I’m a white American male – by definition, a privileged class – who has a perfectly good body, good health, a zillion dollar house, and enough money to live the rest of my life without working another day. I’ve got a beautiful wife, magnificent children, and a good income that doesn’t rob me of any personal freedom. And yet I am seized on a virtually daily basis with how miserable and rotten my life is, and how I don’t deserve any of the bad things that have ever happened to me. I dare feel sorry for myself due to solvable personal problems or the fact the stupid stock market refuses to fall.

Sure, if I cornered you and shared a couple of drinks, I could probably conjure up enough tales-of-woe to get you to agree that, yeah, poor Tim is a pathetic sumbitch, and it’s no wonder he’s often tempted to jump in front of the next CalTrain that passes by. Indeed, most people on this planet would be able to surgically extract some sliver of their lives and make it seem sad. Hell, Elon Musk could surely give grisly tales from his multiple failed marriages, although I imagine it would be a Herculean feat for anyone to actually conjure up sympathy for the guy.

Sup, in sharp contrast to this morose malaise, was just plain cool. On more than one occasion, I’d see that he had managed to coax a couple of women – attractive young women – over to talk to him, and he was just smoking his cig, chatting them up, casual as could be. I don’t know what he said to get their attention, but whatever it was, it worked. God knows the guy has chatted up more good-looking women than I ever have in my own life. That’s me in the corner.

I’ve long been tempted to interview the guy, because there’s so much I want to know about him. Where is he from? What’s his background? What’s his physical malady all about? What are the most interesting, kind, and nasty things people have said to him? What are some interesting stories from the many months he’s been hanging out at this particular corner? What does he hope the future brings to him? How does he manage to stay so upbeat?

I haven’t done the interview yet, and I’m not sure if I ever will. I mean, it takes a certain amount of gumption to start quizzing a guy up and down; he might react poorly to the whole thing. But I’ve got a suspicion he would be all too glad to tell his story. I’m more worried about my ability to do the interview than his interest in answering my questions.

However, I took one baby step in that direction a few days ago. I was walking by, and as usual, he tosses out – – “Sup, man? Got a dollar for me?” I was on my way to my mailbox, so I replied, “In a minute.” I suppose he gets this kind of brush-off all the time, but I was sincere. I was going to come back with a dollar in a minute, because there was something I wanted to buy with it.

“Yo, yo!” he said as I returned to the corner. I handed him a dollar and asked, “What’s your name?” In my mind, the question was “What’s your real name?”, since I had known him as “Sup” all these months.

“Zachary.”

“OK, have a good night.” And I left.

So now at least I had a real name for this person. That was a more dignified, after all, since I had heretofore attached a goofy moniker to him. But I really need to interview this guy one of these days. In a way, I admire him, even though his disposition and attitude just make me loathe myself even worse than before. I mean, seriously, what right do I have?

So be it. Zachary is one tough hombre. Respect.

via Zero Hedge http://ift.tt/1wPZvWs Tim Knight from Slope of Hope

Presented with no comment…

 

 

Source: Investors

via Zero Hedge http://ift.tt/1wPZuSk Tyler Durden

Submitted by Jim Quinn via The Burning Platform blog,

The chart below might be the most powerful indictment of the Federal Reserve and our corporate fascist empire of debt ever created. Some people don’t get charts. Charts tell a story. This chart tells the story of elitist bankers supporting the agenda of a corporate fascist state, resulting in the gutting of the middle class. Anyone who views this chart in a positive manner is either a Federal Reserve banker or their paycheck is dependent upon the continuation of the pillaging of the working class. Corporate profits are at all-time highs. Profit margins have always reverted to the mean throughout modern history. If they remain at all-time highs then something is terribly wrong.

“Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system and it is not functioning properly.” – Jeremy Grantham, Barron’s

 

Here is the story I see in that chart. Corporate profits as a percentage of GNP have averaged 6.5% over the last 67 years. As you can see, it is a volatile figure. Corporate profits rise during expansions and fall during recessions. That has been a given over time. The reason corporate profits have always reverted to the mean was due to the basic tenets of free market capitalism. When a company is generating outsized profits, that industry will then attract new competitors, resulting in price competition and lower profits. From 1950 through 1971, corporate profits as a percentage of GNP fluctuated in a narrow range between 5% and 7%. This was a reflection of a market driven by competition, a non-interventionist Federal Reserve, and a government not captured by corporate interests.

It is no coincidence since Nixon closed the gold window in 1971 and unleashed greedy bankers, feckless politicians, and self serving corporate executives to utilize easy money and prodigious amounts of debt to financialize our economic system and deform capitalism, corporate profits have boomed and busted. The Fed created booms and busts are clearly evident on the chart. Nixon toady Arthur Burns created an inflationary boom in corporate profits to 8% of GNP in the late 70’s followed by the collapse to 3% caused by Volcker having to raise rates to extreme levels to crush the Burns created runaway inflation.

You can see exactly when the Maestro assumed command at the Fed and proceeded to introduce the Greenspan Put, encouraging speculation, borrowing and mal-investment. His easy money boom led to the dot com bubble that doubled corporate profits from their 1987 low. Of course the profits vaporized in an instant and plunged to 4% of GNP in 2001. Greenspan and then Bernanke  proceeded to drive interest rates to record lows creating a prodigious housing bubble resulting in the greatest level of mal-investment and financial fraud in world history. Corporate profits as a percentage of GNP skyrocketed from 4% to 10% in the space of six years. The banking cabal had captured the system.

The Fed orchestra kept the music playing and Wall Street kept dancing the rumba with their corporate CEO dates. The Keynesian acolytes were ecstatic. The Austrians warned of the impending bust. No one listened. The collapse of the worldwide financial system was portrayed by the corporate mainstream media, bankers like Dimon, corporate CEOs like Immelt, billionaires like Buffet, captured government bureaucrats like Paulson, and politicians like McCain and Obama, as a systematic risk that required a taxpayer rescue of criminals.

The $800 billion gift to bankers and mega-corporations by the Washington DC Party of captured politicians was chicken feed compared to the $3.5 trillion of newly printed fiat handed to Wall Street and corporate America by Bernanke and Yellen. Five years of 0% interest rates have impoverished senior citizens and savers, but they have done wonders for Wall Street and mega-corporation profits, along with executive bonuses. Corporate profits soared from 4.5% of GNP to an all-time high of 10.5% in the space of three years and have remained at this elevated level.

Who Needs Wage Earners Anyway?

Is it a coincidence that corporate profits as a percentage of GNP are at record highs while employee compensation as a percentage of GNP is at record lows? Is it a coincidence that employee compensation as a percentage of GNP peaked at 51% in 1971? That year certainly seems to be a turning point in U.S. economic history. Gold’s purpose as a check on statists, Keynesians, politicians, bankers, and the military industrial complex couldn’t be any clearer. The decline has multiple causes, but the storyline about technology being the major cause is patently false. My observations are as follows:

• From the end of World War II until the mid-1970s employee compensation as a percentage of GNP was consistently between 49% and 51%. The middle class saw their standard of living rise as wages outpaced inflation, savings rates were high and led to capital investment, debt was used for long term purchases like a home or automobile, and bankers accepted deposits and made safe loans. Technological progress over the thirty years was constant, but did not result in declining wages.
• From the moment Nixon closed the gold window, employee compensation as percentage of GNP relentlessly declined for the next quarter of a century from 51% to 44%. Over this time frame our economy deformed from a goods producing system driven by savings and capital investment into a service/financial economy built upon consumer debt, conspicuous consumption and market gambling. Our iconic mega-corporations fired Americans and hired Chinese slave laborers, lobbied for tax breaks, invested in their own stock, kept wage increases below the level of true inflation, and paid extravagant compensation packages to their Harvard MBA executives.
• The brief upturn created by Greenspan’s irrational exuberance 90’s boom was short lived. The relentless decline resumed after the dot com collapse, even as Greenspan and Bernanke blew their epic bubble. Their financial engineering machinations on behalf of Wall Street did nothing for the average worker on Main Street. Employee compensation as a percentage of GNP declined from 47% to 44% BEFORE the financial collapse.
• Unequivocal proof that Bernanke’s sole purpose of QE and ZIRP was to benefit his Wall Street owners can be seen in the continued decline from 44% to 42% since 2008. There has been no recovery for the average American. Wall Street is rolling in dough. Corporate America is rolling in dough. Politicians are rolling in dough. The average American worker is rolling in dog shit.

The mouthpieces for the Deep State insist corporate profits have reached a permanently high plateau. It’s another new paradigm. Just like 1929, 1999, and 2007. Jeremy Grantham is right. The system is broken. The inmates are running the asylum. But financial engineering will not work permanently.  Baijnath Ramraika and Prashant Trivedi in their outstanding article Why Jeremy Grantham is Right about Corporate Profit Margins prove that corporate gross margins have not grown, technological advancement has not been a major factor, innovation and capital investment are non-existent, and corporate CEOs have utilized one time schemes to boost profits.

There are a few major reasons for record corporate profits. The Fed’s gift to banks and mega-corporations of zero interest rates have allowed S&P 500 corporations to refinance their existing debt and take on new debt at below market interest rates. The avereage interest rate paid by S&P 500 companies is now at all-time lows. Any normalization of interest rates would crush corporate profits.

 

Even though you hear constant propaganda from the corporate MSM, corporate CEOs, and captured politicians about the dreadful level of corporate taxes, the truth is that mega-corporations are paying record low levels of actual taxes. When profits are at record highs and tax payments at record lows you know they have captured the system. “Creative” tax avoidance and the FASB allowing banks to mark their assets to fantasy have played an enormous role in record profits.

 

The short term oriented casino mentality of corporate CEOs can be plainly seen in the fact depreciation expense as a percentage of revenue is at 25 year lows, resulting in short term profits but long-term decline. Instead of investing in capital to increase efficiency or expand their business, greedy myopic CEOs have chosen to buy back their own stocks at all-time high prices. They did the same thing in 2005 – 2007. Driving up quarterly earnings per share to boost their own stock option compensation is how it rolls in corporate America today. Investing in their workers through higher wages isn’t even a consideration. They don’t teach that in Ivy League MBA programs. SG&A expenses as a percentage of revenue have been driven to all time lows, as outsourcing, downsizing, and working people to death have done wonders for corporate profits.

Ramraika and Trivedi reach damning conclusions of corporate America, based on their detailed unbiased research:

As the world moved increasingly towards the idea of shareholder-value maximization, time horizons for management and the shareholders have shortened. As Montier shows, the average lifespan of a company in the S&P 500 in the 1970s was about 27 years and is down to about 15 years now. In tandem, the average tenure of CEOs is down from about 10 years in the 1970s to about 6 years now. Combine this with the incentive systems prevalent today (think stock options), and it is only logical that a CEO who is going to be around for as few as six years and is going to get a large chunk of her rewards in stock options will want to see higher stock prices.

Cutting SGA expenses and postponing capital investments — actions that carry positive short-term earnings impact at the expense of a business’ competitiveness in the long-term — look promising to managers whose payoffs depend on stock prices in the short-term. Not surprisingly, the renters (there are hardly any owners any more) clamor for just such actions. The problem with this thinking is that the long-term eventually shows up. And when it does, profit margins will have no choice but to remember their long forgotten tendency to revert to mean.

Are interest rates going to be driven lower for corporations? Are taxes going to be driven lower? How many more people can corporations fire? Have economic downturns been eliminated by the Federal Reserve? Will record profits not result in increased competition and price wars? Can wages be driven even lower?

The financial, economic and political system has been captured by corporate fascist psychopaths. The Federal Reserve has aided and abetted this takeover. Their monetary manipulations have resulted in this deformity. Psychopaths always go too far. The American middle class has been murdered. Decades of declining real wages have left them virtually penniless, in debt up to their eyeballs, angry, frustrated, and unable to jump start our moribund economy by buying more Chinese produced crap. Yellen, her Wall Street puppeteers, and the corporate titans should enjoy those record profits and record stock market highs. It won’t last. Short-term profits will be wiped out, as long-term consequences always arrive when you least expect it. The artificial boom will lead to a real depression. Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won’t notice the difference.

“True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.” – Ludwig von Mises

via Zero Hedge http://ift.tt/1ESX2yO Tyler Durden