Further proof that the stock market worshiping is the reason for the divergence between corporate profits and (barely) rising wages:
Evidence showing that investment behavior diverges most strongly in industries in which stock prices are particularly sensitive to current earnings suggests public firms may suffer from managerial myopia.
– “Corporate Investment and Stock Market Listing: A Puzzle?” by Alexander Ljungqvist, Joan Farre-Mensa, and John Asker
On this account we are reaping the bitter fruits of the “shareholder value” revolution. Executives at publicly traded companies are paid to generate higher share prices, which is done by hitting quarterly earnings targets. This leads to underinvestment relative to the behavior of managers of privately held firms. Not because managers of private firms are indifferent to the interests of shareholders, but because there’s less need for creating the shareholder value link via a simplistic relationship between compensation, share price, and quarterly earnings.
In other words, publicly traded company managers are far too interested in their own personal performance instead of a sustainable, long-term business plan which would require more investment from their companies.
Sounds to me like we could use higher inflation to get these asshats to use that money sitting around. Cheap money spent today means higher revenue and profits later to make up for the higher inflation.
That or we can tax these unused profits even more (or hit the dividends even harder) to get the ball rolling toward more investments