DawgTalkers.net Forums DawgTalk Palus Politicus The Economy Part 2

From an earlier conversation I was having with Swish:


It's a huge problem. When you are a defense contractor doing 90%+ of your business with the federal government, what kind of message does it send that you spend that kind of money, over that many years, into repurchasing your stock. I'd be curious to see how much more F-35s and whatnot we could have gotten from them for that amount. I can see that some would retort on that front by saying "It's their money!" Just ask where they got it from and how they were able to get that much of it. For me to sum it up, would you (the universal you), a taxpayer, be content knowing that a business that gets its income almost entirely from the government earns enough to repurchase its own stock to that magnitude?

A lot of people are complaining about sending aid to Ukraine, but apparently most people feel comfortable that we give our defense contractor - just one in this case - that much cash that they can put that kind of investment toward just repurchasing your stock. It goes back to the Jack Welch era at GE where shareholder equity trumps all else, including capital investments and a quality product (see Boeing for a prime example on that front). It also doesn't end with Lockheed. Check out how much RTX has invested recently into repurchasing its own stock.

The other big problem is that they are prioritizing things like stock repurchases over prioritizing investing in their own capital. Some contractors aren't even reinvesting in their own capital at the depreciation rate. Why? Well, there is no competition. The long term problem, though, is that I don't know how this will affect our long term readiness. Boeing has already hit the drop zone, both on the commercial and military side. Years of prioritizing short-term shareholder gain at the expense of quality products and capital investment has done a number.

I have concerns.

It definitely feels like our economy has focused on selling junk just to sell junk more than actually effectively producing what the country/world needs. It seems there is too much focus on producing profits/ensuring the financial numbers go up with minimal regard for what is actually being produced.

I certainly agree with you there. But isn't that actually the goal of capitalism?


I suppose we could debate the part about "minimal regard for what is actually being produced" but it seems as though that isn't the actual premise of capitalism. Their duty is only towards maximizing profits for the shareholders. I would love to see them care about what they're producing as much as they do the profits they generate but I don't see why it would benefit them to do so.

I believe 05 covered the problems faced not only by the defense department for the conduct of their contractors but also it covers what all of us as consumers face as well.

Don't get me wrong, on paper, in theory capitalism looks to be a great system. In theory it promotes competition. That competition used to be who could build a better mouse trap. Now the competition seems to center around who can build that mouse trap the cheapest and get the most money for it.

We talked about the Jack Welch affect at my meetings last week on America's style of capitalism, and I think that was the watershed moment of where things went south. You can look at GE and a lot of public companies before his time talking about how there was a duty to employees and a duty to the customer, and hell, even a duty to pay taxes. He really ushered in the era of "screw everyone over except our shareholders" (I know that's a crude adaptation, but the message is there). He was what I consider another figure from the 80's that is historically revered for short-term gains that actually resulted in grave, long-term damage. It started with him, and then it went viral amongst a lot of the other companies. I think we are starting to experience the chickens coming home to roost.

Here is a good article on his affects from Forbes:

https://www.forbes.com/sites/kylewe...an-who-broke-capitalism/?sh=34a3b6cd95a6

It actually ties what we are currently seeing at Boeing to him.

What I think a lot of people cling onto as the pinnacle is the style of capitalism that existed in the United States from 1945 through about 1980. And you know what, I agree with that. It was great. However, that is not what we currently have. Just look at the individual tax rates and corporate behavior prior to figures like Welch and Reagan vs after, and it's easy to see when things started going off the rails.

Cause those defense contractors within the military industrial complex still are participating in the free market, which people want to have zero limitations on.

Honestly that’s the biggest conundrum our society needs to address - how do we deal with the policies that our taxpayer money (socialism) pays defense contractors billions of dollars to develop tech and given massive tax breaks, only for those billions to end up being used for stock buybacks (capitalism) and NOT be considered fraud and corruption?

I agree. I wasn't actually sure at what point it all changed or who spearheaded the change and I appreciate you heading me in the right direction on that.

Republican politics 101, been that way since they bought intto the trickle down BS. I can’y believe young me bought into the GOPs bull crap. Until George the 2nd, the second dumbest president of my life, I was sold on the GOP being good for businesses. But in retrospect, every major hit I ever took (the out of my hands type) come either during or on the hells of a Republican administration. I have watched dems repair the economy for almost the entirety of every Dem admin since Reagan. I don’t see how anyone can claim a dem president would be bad for the economy, not after the GOP’s record. I was to young to pay attention when Carter was in and don’t remember what cause those economic woes, but I’d be hard pressed to not suspect it was GOPer policy or actions that caused it.

And the fed not dropping rates won’t fix inflation, or at least not the current brand of inflation. This was caused by greedy ass corps not wanting to pay fair wages and a poorly managed global pandemic. Either way, Biden has done a hell of a job cleaning up the mess. Give him four more years with a dem congress, and America might actually be great again.

My biggest concern about them focusing on profits is the continuing of a dumbing down in public schools. If the latest generations can’t innovate their way out of these types of messes the country is doomed, we might as well let Putin have it now. And didn’t people like MGT, DJT, or MAGA in general ever take a history lesson? Some of the crap being spewed in congress sounds like a fire sale on democracy. I would have never imagined crap like the Putin love or excusing all the crap DJT has done from the GOP I knew. Never. The slightest imperfections used to send a candidate on the walk of shame, John Edwards coming to mind. What the hell happened to those republicans? They have are running a dog turd with a laundry list of imperfections, criminal behavior, embracing commie Russian and other less significant dictators, and bizarre bordering on insane world views and ideas. I can’t figure out what went so bad when we elected Obama to trigger all this anti-American authoritarian BS… whatever could it have been?

Well you know what they say, if you can't win it lie about it. And if lying about it doesn't work just figure out a way to take it.

Thanks. I didn't have a clue either. The two PhDs who presented on it last week shed a lot of light on them. One was a former CFO for a fortune 500 and the other was more of a modern tech geek who could put the numbers behind the theories. Together they made for one hell of a compelling case.

I think you and I fell into the same trap, initially, which was that we thought we were buying into that 1945 - 1980 style conservativism (Eisenhower, Nixon, etc.) with the modern era Republicans. I think you and I have diverted in that I still uphold that kind of ideal whereas you have gone down more the route of an FDR-like ideal, which I do understand, given how things have skewed since the 1980's.

I think the dynamic of where the modern-day far right wing of the Republican party is actually a somewhat logical step, given the direction of the party starting in the 2000's. Reagan got the ball rolling by his tax cuts. When you compare him and another Republican "legend" like Eisenhower, their tax rates were immensely different, yet both are Republican heroes. He also spent into oblivion (not a conservative approach) and instituted trickle down. That cascaded over the decades to the point that a lot of the poorer Republican base started to mistrust the party, as we saw with the rise of the TEA Party, rolling right into the 2016 election. They were mad because they were Republican, but they weren't getting anywhere.

They began to mistrust the political institution on the right, and they maintained their already-existing disdain of the left. The time became right for a change in 2016. That year really was the perfect storm. The Dems decided to put up a horrific candidate, and Trump demagogued his way by pandering to those aforementioned that were already ticked off with the Republican establishment. Add him pandering to the evangelicals with Pence, and, welp, here we are. The playbook was written, and all that people like Gaetz, MTG, Boebert, et al are doing is just calling plays from that playbook. A huge section of that playbook is devoted toward avoiding repercussions.

Really, we are the new ROME, you can get anything you want---but you have to pay for quality vs utility.

Both political parties have printed our money like Monopoly money for decades. Look at historical interest rates- the young have NO concept about what saving and scrimping for a down payment- Carter and 10 percent car loans - home loans in 70s- start at 7.9 went to 12. something at end of 70s.......we have been artificially keeping interest rates low for DECADES.

Stimulation checks have become the norm- bail out the auto makers, the students, small business= just print more money. It doesn't really matter. WOW- wonder what happens when the glass house breaks.

I think our current economic policies are still a little too tech heavy. China continues to secure physical resources across Africa and other regions, while we’re continuing to secure intellectual properties, such as semiconductors. I get the digital world is only gaining speed, but on the ground diplomacy/infrastructure development should still be the main focus.

Not to mention the fact that intellectual property is only as good as the country enforcing the laws surrounding it. We see them as the gold standard here, while China sees them as opportunity to lower R&D costs to a minimum by........basically not respecting IP Rights at all. On top of that, they are securing physical property and mining rights.

They truly have a locust mentality.

lol, there’s something poetic about your locust analogy as we’re experiencing a great emergence of cicadas in the US.

Or maybe it’s always been a scheme designed by the deep state #freeQ

Lol, well, I'm sure MTG will be tweeting about how it's a pestilence plague designed to make us repent again.

https://www.linkedin.com/news/story/us-economic-growth-slows-sharply-6004564/


US economic growth slows sharply
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By Alessandra Riemer, Editor at LinkedIn News
Updated 2 hours ago


U.S. economic growth expanded at the slowest pace in almost two years during the first quarter, as consumer spending cooled and inflation picked up. Gross domestic product grew at a 1.6% annualized rate, the Commerce Department said Thursday, undershooting economists’ expectations for a 2.5% pace. Last quarter’s growth also trailed the 3.4% pace of the prior period. With a key price gauge jumping in the report, an initial estimate, the Federal Reserve may need to refrain from lowering borrowing costs for longer than had been expected.

The Personal Consumption Expenditures price index showed that inflation, excluding volatile food and energy prices, accelerated to 3.7% during the first three months of the year, from 2% in the prior quarter.
The GDP report also showed that, while spending on services rose, it fell for the first time in more than year on goods, including cars and gas.

https://www.cnn.com/2024/04/25/markets/wall-street-reaction-gdp-report/index.html

Dow sinks nearly 700 points after GDP report, heading toward its largest drop of the yearEconomic growth appears to be floating back down to earth after notching a very strong second half of 2023. GDP grew by 4.9% and 3.4% in the third and fourth quarters of last year.

At the same time, Thursday’s data showed that inflation accelerated in the first three months of the year: The annualized GDP chain price, which measures how much prices have gone up or down in the economy, helping to track inflation, jumped from 1.6% up to 3.1%.

“The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing, so if neither are headed in the right direction then that’s going to be bad news for markets,” wrote Zaccarelli.


Those sticky inflation rates have pushed investors to slash their expectations for interest rate cuts by the Fed. They’re now anticipating just one cut this year, according to the CME FedWatch tool. That’s down from an expectation for six at the beginning of the year.

It’s also brought back fears of stagflation — when the economy stops growing but inflation persists.

In a talk at the Economic Club of New York on Tuesday, JPMorgan Chase CEO Jamie Dimon warned investors about a potential period of stagflation.

“Stagflation has the negative effect of no growth and inflation. That hurts profits and consumers and jobs. And yes, I think there’s a chance that could happen again,” he said. “I worry that it looks more like the 1970s than we’ve seen before.”

Between 1966 and 1981, a period encompassing much of the stagflation era, investors in the US stock market lost more than 35% after adjusting for inflation, according to analysis by Ben Carlson at Ritholtz Wealth Management.

Fed will hike rates again now… smfh. I think this is China’s housing crisis showing up here. We should help them fill those 40 million housing units by sending the Anti-American Putin loving MAGAts to them.

Curious to know how consumer demand can decrease, but inflation can increase?

No corporate price gouging here…

I mean, what other explanation could there be? I am no economist so I can't say that for sure. We do already have proof though that gouging has definitely occurred. It's a "pigs get fat, hogs get slaughtered" scenario. Corps get exorbitantly greedy with their margin opportunities, while at the same time demanding that the Govt stay out of their business. You can't perpetuate that coexistence for long, ideally. However, we have had so much lax antitrust enforcement and so much corporate lobbying in politics that I don't know when the fever pitch point will be anymore.

And that seems to be a common theme when people concentrate on what the problem is more than what caused the problem. We all know what the problems are.

The problem is multi-faceted. I could blame it on COVID, but it's more fairly blamed on greed. At least greed is the biggest slice of the pie chart.

And it's not just corporate America, it's at every link in the chain. COVID created the largest excuse shirt in our history, it make the Browns QB jersey look like a crop top. No matter how high your price hike is, no matter where you resided on the food chain, just start every excuse with "Well, with COVID...

A friend that's still in the restaurant biz kept bragging "I raised chicken parm to 23 bucks, bro, they're paying it. When they ask why, I just say 'because COVID'. When they ask anything I just say 'because COVID'."

Was he paying more? Of course, but not enough to reflect his price changes. Nor was that true with any of the markups along the chain. The purveyor that was charging more because "broker". The broker who was charging more because "contract producer". The contract producer that was charging more because "manufacturer". The manufacturer that was charging more because "feed prices". The farmer that was charging more because "labor"... and on and on. It was a free ticket that, by definition, meant we wouldn't have stability again for years.

Add the perfect storm of labor and labor shortages. So many people simply scared to work. Free checks from the govt -- I'm not saying it was wrong or not needed, but we're all a product of our environment. For a certain amount of our able bodied youth, that turned into "hey, do I really need to work??" (+mom and dad wants me to stay home and "be safe"). Then, one of the most overlooked part of that sh*tstorm, was mass exodus by the boomers. And that impacted Main St much more than Wall. Do you know how many of those part-timers were the glue holding this ship together?? Now they're out, and for good reason, a big fat pandemic driven dose of reality: life IS too short.

I'll stop ranting there lol.

I had hoped that during this big "reset" competition and new business would eventually drive prices back down to a reasonable level. It seems that greed has toed the line and that won't be happening for a while.

While I agree with you in large part those "free checks from the government" that people are blaming on the labor shortage stopped quite come time ago. Including both stimulus checks as well as increased amounts and extensions of unemployment benefits.

Otherwise I think our thought line up pretty well on this topic.

This $#!+ is getting scary!

Yeah, I'm probably being a little hyper-analytical in that respect. But I'm not "blaming" as much as "naming"... as a contributing factor. I know more that a handful of this people, and know that they've explored other options of the free ride as we came out of this mess. And I've heard out loud how easily they justify it.

I'll put it this way: it's not a real hard sell for some people to see that working part time and receiving benefits is way easier than "the old way". Again, not screaming bloody murder, just pointing out one of the straws on the camel's back.

I can verify what you said as well. Most of the Big 5 contractors nowadays are integrators, because it's a better return on investment capital if you basically assemble the planes/weapons vs build them from the ground up. Lockheed, Boeing et al only account for around 30-35% of the direct costs for the weapon systems they produce, with the rest coming from suppliers and subcontractors. Those suppliers can also be Big 5 integrators as well whose own product is comprised mostly of supplier/subcontract costs. Add into all that, most of the companies are sole source - we have no other alternative contractors to buy these products.

Anyhow, it was VERY common for Lockheed, Boeing et al to scream "COVID!" for both their stuff and their supplier costs increasing. When you drill down to the supplier to ask them "WTF?" they go "COVID!" and then when you drill down to the second tier supplier, you know the response, and so on and so forth.

Well, lo and behold, if you check the Producer Price Index data that covered the height of the COVID years, defense contractors were largely unaffected by COVID/inflation. Most of that was due to the safeguards that were put in place by the Government. Akin to the handouts that you mentioned. These weren't handouts per se, but it was things like increased cash flow and financing. Huge to a public company's bottom line and incentive metrics. So, basically, they were unaffected, but still got to drive their costs up by taking the opportunistic flavor of the month and shouting "COVID!" So they essentially had their cake and ate it too.

Now in current acquisitions, they are pressed to get escalation over previous contract agreements, despite the fact that the margin is oftentimes wholly unfair. Heaven forbid the price actually drop on something. So the gouge is perpetuated. But again, they are sole source, so they put their fingers in their ear and stomp on the ground until they get what they want.

#Greed

Another aspect of the job market I really hadn't considered since I am of the age of no longer having children at home is the high cost of and lack of accessible child care. However I saw an article that made some sense to me about lower wage women and even educated women leaving the work force because the cost and access of childcare was so high and hard to come by that it made working somewhat of a futile endeavour especially in two income households.


The First Five Things to Know: Impact of the Child Care Crisis on Women & Mothers

https://www.ffyf.org/resources/2023...-the-child-care-crisis-on-women-mothers/

https://abcnews.go.com/US/wireStory/1-4-us-adults-age-50-expect-retire-109580378

1 in 4 older adults expect to never retire.

That’s 25%. Not a big deal. Also lots of older people work to stay active. And expectations change.

My dad was one such person. He worked until he was 80, somewhat because of me, his oops baby, but also because it was his own business and it was hard for him to give it up. Having that business basically laid the foundation for my whole family to succeed. Retired at 80. Dead just before 81. Depending on what people's passions are, I don't think his story is out of the ordinary.

Same here with our family. My father worked well into his 80’s and died at 94.

I remember being in my late twenties, early 30's trying to account for the $1,200/month daycare costs. I can't even imagine what it's up to nowadays. I have to think if I owned a large enough business, I would try to entice talent by looking to open up on-site daycare, if feasible. Being at the vanguard of the millennial generation myself, I think Gen Y and Gen Z would consider that a pretty meaningful perk in today's workplace.

Just hypothetical brainstorming on my part, though.

I remember being about 10 and knowing my step mom was paying a whole $1 an hour for the babysitter to watch three of us.

It's insane now. My BIL pays a small fortune for two grade-school-aged kids.

I can't imagine. I think it'll end up in one of two scenarios. One, there will be a move back to single-income households because the cost/benefit analysis of having two working parents won't be there. That could cause a major drop in spending with resulting economic impacts. Two, it'll drop the birth rate even further, which could also have resulting economic impacts.

It's not unusual for family to take care of children while the parents work. Such as the grandparents, etc.

I see that, too. That's one thing I missed, and a bunch of other people I bet miss too when they move to another place.

The disadvantage of my location is that I don't have family close by. However, the advantage of my location is that I don't have family close by.

I do imagine if people work more and more into retirement age that the dynamic of grandparents being able to take care of grandchildren may dissipate some. I do know that my wife already threw out to my kids that if they lived close, she would offer to do that for them. That's way down the road, though.

And that's the how things have become and continue to become. My daughter and son in law moved here to the Nashville area for far better job opportunities and it paid off very well for them. My parents had both passed years earlier so since all my grandkids were moving here my wife an I relocated here as well.

But that isn't how it works for most families. It's crazy to hear the same people say, "Well if you can't find a good job, move the where the jobs are" on one hand and then say, "Let your family help you with childcare" on the other hand.

Then there's the fact that many people simply feel that since their families have their own life it wouldn't be fair to intrude by imposing on them to help raise your children.

https://www.linkedin.com/news/story/job-openings-lowest-since-2021-5916513/

Job openings lowest since 2021
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By Cate Chapman, Editor at LinkedIn News
Updated 1 hour ago


Job openings fell to the lowest in three years during March, while the rate at which Americans voluntarily left their jobs dropped to a 4-year low. Available openings declined to 8.49 million, from a revised 8.81 million in February, according to the Labor Department’s Job Openings and Labor Turnover Survey. The hiring rate across industries, 3.5%, is also the slowest since the pandemic hit in 2020. The signs point to a softer labor market, something the Federal Reserve has sought while holding interest rates at a 23-year high to slow inflation.

A separate report from ADP showed that while companies stepped up hiring in April, wage growth for those switching jobs fell nearly a percentage point.
The U.S. jobs report Friday is expected to show a gain of 240,000 farm and nonfarm payrolls last month, slower than March’s blowout 303,000.

https://www.linkedin.com/news/story/fed-seen-holding-rates-steady-5907441/

Fed seen holding rates steady
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By Cate Chapman, Editor at LinkedIn News
Updated 2 hours ago


The Federal Reserve, while widely expected to leave borrowing costs on hold Wednesday, is likely to concede that officials “have less conviction about when and how much to reduce interest rates,” The Wall Street Journal reported. No new projections are scheduled, but Fed Chair Jerome Powell may take the opportunity to revisit projections made in March for at least two rate cuts this year. Those prospects appear to have diminished in light of faster-than-expected inflation and wage growth, raising the likelihood that rates will remain at a 23-year high for longer.