The reason that nothing seems to work anymore is maybe because it does not. Virtually every single organization seems to have been co opted and overrun with people that simply do not know what they are doing. Anyone of any competence is systematically purged from the organization over time for fear of making people of less merit ‘look bad’.
Part of what has driven this trend is the ultra low interest rates and The Federal reserve buying up all manner of assets, causing sky high asset prices. The end result, is ‘making companies look better than they really are’ has been rewarded by large multiples to stock prices and anyone that has sufficient control over such to award themselves stock or options on these large run up in prices, benefits from it.
In many cases we have companies where large parts of their profits are spent on stock buybacks; meaning any re investment in the business has to come from borrowing or not done at all. One example of this shocking development is Apple Computer ($APPL). Their recent 10K report shows record annual profits of $150 billion, and also a stock purchase plan of $330 billion. How can a company keep purchasing more stock than it makes every year? The answer is that is can’t, eventually any company that goes down such a path will have nothing on its balance sheet except treasury stock and debt used to buy said stock and a product line that will be all ‘hollowed out’ from lack of reinvestment in its business. I am surprised that any company in the tech industry would engage in such financial engineering since within tech things can changed within the space of a few years. Blackberry in the late 1980s/early 1990s was the leader in pagers and messaging devices and within the space of several years it simply faded away, and that was without the drag of all these financial engineering gimmicks.
It is hard to stay in the front of technology, harder when one throws their profits away on gimmicks to boost stock prices.
Good Luck and Take Care
Louis J. Desy Jr. – Thursday, Jan 13, 2022