14 April 2015

Hoe Lee She It

Regular Reader has certainly surmised that the issue of micro, macro, and quant with regard to flation and interest has been a bugbear for the last little while. To reiterate: The Great Recession resulted from trillions of dollars chasing high yield, yet risk free, instruments, preferably without the ugly detail of real investment. Those trillions have only grown since then, not least due to the QE bucks tossed the way of corps., hedge funds and .1%ers. Dullards all.

Anyway, the punch line from my perspective is that The Masters of the World who presume to be Job Creators and general all around geniuses of finance, are simply incompetent as capital allocators. They buy back shares, merge into oligopolies, and borrow yet more moolah to send off to shareholders as dividends. I decry it all as foolish and ultimately fatal to the economy.

Also, on occasion, I've noted that the editors of the NYT exhibit a bit of humor in their choice of stories and presentation. Or, it could be cynicism for all I know. In any case, today's Business Day front page (dead trees version, of course) leads with GE's Immelt dismantling Welch, which many of us have argued was long overdue. Welch, first among many, created the financialized economy. Fie on him. Read the piece at your leisure, as the topic of this missive is the other story on the page.

And, that would be, the CEO of BlackRock (the hedge fund, not the town of movie fame) telling the world,
He is planning to tell the leaders that too many of them have been trying to return money to investors through so-called shareholder-friendly steps like paying dividends and buying back stock.

Holy shit!
"The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy," Mr. Fink writes in the letter. He says that such moves were being done at the expense of investing in "innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth."

Gad. A hedgy telling The Masters of the World to get off their dullard asses and make real investment with all that moolah they've been granted.
Mr. Fink says the move "sends a discouraging message about a company's ability to use its resources wisely and develop a coherent plan to create value over the long term." Moreover, he argues that "with interest rates approaching zero, returning excessive amounts of capital to investors" isn't helpful because they "will enjoy comparatively meager benefits from it in this environment."

Vindication, thou art mine.

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