The Underbelly of Corporate America: Insider Selling, Stock Buy-Backs, Dodgy Profits…”I have never seen such rot before.”

Tuesday, September 2, 2014
By Paul Martin

Charles Hugh Smith
Oftwominds.com
September 2, 2014

The hollowing out of corporate strengths to enable short-term profiteering by the handful at the top leads to systemic fragility.

Anonymous comments on message boards must be taken with a grain of salt, but this comment succinctly captures the underbelly of Corporate America: massive insider selling, borrowing billions to buy back their own stocks to push valuations to the moon so shares granted as compensation can be sold for a fortune, and dodgy accounting strategies that boost headline profits and hide the gutting of investments in long-term growth.

Here’s the comment:

“I’m occupying a vantage point that allows me to see what is going on inside the top Fortune 50 companies. I have never seen such rot before. Of the 50, at least 30 have debt at 120% of cash. Most have cut capex, R&D and maintenance by 80%. Most have been borrowing money to do stock buy-backs, while simultaneously selling off business units and doing layoffs.

Of the 50, at least 20 have 100% insider selling. For some, you would have to go back decades to find a point where all of the acting board of directors are selling. In essence, they are paying the mortgage with their credit cards. Without bookkeeping games, there are no solid earnings. There will be no earnings growth.

“Executive compensation based on stock performance” is killing corporate America.

A black swan is not needed to make it fall, a gentle breeze will do just fine.”

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter