Regardless of the many hard working people within these establishments, one theme is a constant known to all. And yes, even to those working within: innovation, diligence to customer service, meritocracy, sustainable business models and more are absent at best, dead-and-buried at worst.
The primary reason for this is simple: They’re business model relies on never-ending bailouts and/or government mandated protection from competition to stay in business. Without it, who knows what would take its place. However, via this model? We’ll surely never know. And that’s the problem.
The above is not suppose to be a problem for corporations in an unadulterated capitalistic marketplace. However, this is precisely what is and it’s getting worse with every passing Federal Reserve or other central bank iteration of quantitative easing (QE).
In a truly free flowing capitalistic model and economy (which we used to have but no more) unprofitable entities, poor customer service and innovative laggards either sold themselves to their competitors that did it all better or, went out of business entirely.
Today? They just buy back their stock at low to nil interest rates rewarding the entire Board and C-Suite (and then some) with bonuses, stock options.
For some it even allowed the ability to claim ignorance when it found a fully manned, yet empty second corporate jet shadowed his around the globe as he hobnobbed, seemingly more focused on his own image as a corporate titan rather, than what he’s doing to the image and shareholders of the company. Hint: He claimed years of ignorance of the plane. Do you think he was that ignorant of his “parachute?” Politicians everywhere probably looked on in awe over that one, but I digress.
As of this writing the “markets” (yes, the once bastion of capitalism for the allowing of capital formation to create great companies to provide great things now needs quote marks for accurate definition) are at record levels. And how have we got here?
Improving GDP growth? Nope. Signed trade deal? Again, nope. Expanding earnings? New and increasing buyers in the markets? Highest retail sales? Nope, nope and nope. We are here via one mechanism and one mechanism only: Money printing facilitated via the central banks and especially, as of late, the Federal Reserve. Period.
As the markets sit at these nosebleed levels the Federal Reserve is now set to have pumped by year end well over $300 Billion ($300,000,000,000.00 that’s almost 1/3 of a Trillion and this is only the start) and they are still trying to figure out if this will even be enough.
What they have figured out and agreed upon is the inane argument that if they don’t call it QE, it’s not. Even though this is more money printed and made available ex nihilo in so little time in the history of mankind. And yes, it even dwarfs anything during the entirety of the financial crisis. Think about that.
The truly grotesque issue the above brings into the marketplace is that companies that should be penalized or rewarded via the self-perpetuated evaluating and price affirming market auction facilitated through a neutral positioned market facilitating entity known as “Exchanges” is now anything but.
Today these are now nothing more than facilitators, accommodating only those that will pay the highest fee for privileged information as to front run any and all orders.
Today market advantage is no longer an art of insight and acumen made up by humans. No, today, it’s about microwaves vs light-speed, line of sight, abstract calculations executed via bots to mimic human emotional buying, which connection or portal you’re plugged into, et cetera.
Or, better yet, who can fool the regulators into submission for agreeing that today’s “market making” isn’t really what used to be known as “spoofing.” Hint: The regulators seem to no longer know, which is just the way this increasingly perverted “marketplace” not only likes it, but profits by it. Literally.
What this has allowed is the gaming for reduced expectations (While carefully managed and massaged during said quarter.) then via buybacks at little to no interest rates used to buyback shares, reducing the overall float to where a headline of “EPS Beat!” sends the headline reading, algorithmic trading bots into a buying frenzy. Even though the underlying metrics that were “beat” were actually worse, sometimes much worse, than prior YoY comparisons.
Apple™ today is the undisputed king of this. Is it any idea as to why innovation, product releases and more have been either long in the tooth, lackluster or barely “innovative” at all? Yet, the stock keeps rising. Week after week, after week.
It has now been calculated that under Tim Cook’s tutelage with his near immediate 180º reversal of Jobs adamant stance on buy backs and more. The most “innovative” thing he will be remembered for since Jobs passing is to, so far, repurchase a third of its shares. Remember, that’s since 2013 or just six years.
Or said differently, Apple has already purchased 1/3, in cash, one of the most valuable tech corporations the world has ever known. e.g., itself.
At the current rate and history as a guide for doing so: Tim Cook will singlehandedly bring Apple to the point of a private company (a self perpetuated LBO) owning nearly every last share within the next ten years or so. All with a backdrop of slashed revenue guidance and reduced metrics.
The issue here is that Apple is at least a company that still makes profits. However as far as innovative? All I’ll ask is this: Are the new products (those that have actually been released) setting the bar higher as it used to? Or, is it in many ways just catching up?
If you looked at the stock value for guidance, you would be terribly misinformed as to what the correct answer was.
You have others such as HP™, IBM™, GE™ and far too many more to list which over the years are now nothing more than a shell of what they used to represent. Why? Easy…
Rather than innovate – the buy backs keep everything afloat rewarding the top while the lower 2/3rds of the company wonder and worry why they seem to be continually feeling like their stuck in the mud. Just like a post office employee in a cargo van during rain, sleet and snow week.
As far as the DMV analogy. You would do much better trying to garner information for help at the local DMV than trying to gain any “customer service” at most tech spaces today.
Try getting a human on the line at Amazon™, Facebook™, Google™, Twitter™, ____________(fill in your choice here).
As a matter of fact, try getting a response of almost any type whether it’s email or otherwise. Hint: When you don’t get any reply back? You know it’s them.
And yet, just like many others, the “market” has done nothing more than reward them month after month, after month.
Want to compete with one of them? Sorry – they’ll crush you out of existence. Why?
They have the coveted stock market bullseye called “included in an index.” As long as they remain, the largess of central banks will be used to proliferate within these vehicles as to ensure they remain as strong as the index. Because regardless if no one buys – the index must for weighting purposes. That is – until it can’t. Then it’ll just drop and refill it with another in kind. Rinse repeat.
It took 10 years for the fallacy of today’s current IPO debacle to be brought to light, then crash and burn. But not without burning through $Billions upon $Billions of Mom and Pop 401Ks and IRAs as these now publicly traded companies are spiraling into investor purgatory.
The problem today is if we have to wait another ten years form here?
Getting a job in the once considered “high flying tech space” is going to be nothing more than the equivalent of today’s Post Office or DMV. And there will be little if any comparable benefits going forward for those putting in “their time.” Why?
Because those are always the first things jettisoned rather than any possible quarterly miss. Well, not always the first. Sometimes…
It’s the employees first.
© 2019 Mark St.Cyr