Stock Prices and other Nonsense

Written by: A. Allan Schmid

Primary Source: The Troublesome Economist

The stock market is at an all-time high with the Dow Jones at 16,695, while the economy is mixed and lots of unemployed are hurting and the housing market is still weak. There seems to be a lot of money sloshing around. Its owners do not want to accept the low returns from ordinary investments so are seeking high returns from those more risky.

Big companies are using their profits to buy other companies. AT&T is willing to pay $50 billion for DirecTV. The Republicans say that we can’t tax these profits because they provide jobs. Bloody nonsense! Many companies are cutting R & D spending. More than a quarter of the 121 companies in the S&P 500 reported spending less than they did last year. (USA Today) Investors rewarded these companies with higher stock prices. Everyone knows that if you cut spending, you increase profits! And their CEOs are paid big bonuses for this logic.

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A. Allan Schmid
Alfred Allan Schmid, University Distinguished Professor Emeritus. Taught at MSU for 47 years in the Dept. of Agricultural, Food, Resource Economics. In addition to scholarly books, he more recently published a historical novel entitled "The Quest for Land and Fortune."
A. Allan Schmid

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