Re: shock doctrine
On Sep 16, 2007, at 12:45 PM, bhandari@berkeley.edu wrote:
How can capital be rolling in great investment opportunities if
investment is too risky to undertake?
I said that stockholders - institutional money managers - find
capital investment to be too long-term and too subject to risk when
compared to the immediate disgorgement of cash into their pockets.
By most conventional measures - profits divided by the capital stock
say, or profits as a share of GDP - corporate profitability in the
U.S. is very high, but capital expenditures remain quite low. Why
should there be such a great gap between average profitability and
marginal profits on new investment?
And why aren’t debt financed buy backs a sign of underlying difficulties, a sign of a mature and declining
industry ?
Why? Shareholders want cash on the barrelhead, and corporate managers
happily comply. They’re big shareholders themselves, and the cash
injected into their own pockets doesn’t hurt either?
And where would stock prices be today if the rate of interest had not fallen sharply?
Probably lower, but who knows?
Doug