News What is wrong with the US economy? Part 2

[edward]

It appears that the only oversight of AIG was done by the Federal Office of Thrift Supervision. I would hope that they will be held more accountable with taxpayers money.
Bailing them out without more transparency is like pouring money into a bottomless pit.

U.S. regulators responsible for supervising American International Group now acknowledge that they failed to grasp the impact of provisions in the complex derivative contracts that pushed the world's largest insurance company to the brink of collapse.

Terms of the insurance-like contracts, called credit-default swaps, required AIG to post billions of dollars in collateral in the event of a market slide or credit downgrade.

"We missed the impact" of the collateral triggers, said C.K. Lee, who ran a little-known team in the U.S. Office of Thrift Supervision, or OTS, which oversaw AIG's finance unit. He said the swaps were viewed as "fairly benign products" until they overwhelmed the trillion-dollar company.

Because AIG bought a small savings and loan nine years ago, the OTS became responsible for supervising AIG's parent company. Its duties expanded when European regulators in January 2007 conferred on the OTS the authority to supervise the company's overseas operations. A report by the U.S. Government Accountability Office last year said the OTS lacked the needed expertise

http://www.propublica.org/feature/was-aig-watchdog-not-up-to-the-job/

The more I read about AIG the more I wander about how are they managing to influence the federal government.

Globally AIG has 100,000 employees. The auto industry has 100,000 auto related jobs in the state of Ohio alone. What jobs do we want to save?

 

[edward]

It only gets worse: In part a follow up on what Astronuc has posted about C.D.O's

The money is changing hands because AIG provided $441 billion in backing for Wall Street trades involving credit- default swaps, or transactions in which one party agrees to pay another to accept the risk of default. Those bets are packaged into larger securities called synthetic collateralized debt obligations. AIG's business was to insure the top-rated, safest part of those CDOs, also known as super-senior, from default.

Overall, the most considerable level of exposure was held by the Wall Street banks,'' said S&P's Clark in an interview. ``However, it was very diversified and contained some European banks.''

AIG spokesman Nicholas Ashooh said the company would not disclose its counterparties or the contents of the CDO portfolio. He declined further comment.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTzTYtlNHSG8&refer=home

Yet they can demand bailout money and get it, then ask for more??

 

[mheslep]

...

The Reckoning
How the Thundering Herd Faltered and Fell
http://www.nytimes.com/2008/11/09/business/09magic.html

This had nothing to do with the Community Reinvestment Act (CRA) or the democrats in congress.

The CRA applies to mortgage originators which ML clearly never was.

 

[fuzzyfelt]

Goldman CEO speaks as firm's future in doubt
http://www.reuters.com/article/ousiv/idUSTRE4AA4WA20081111
By Joseph A. Giannone - Analysis
Just remember, there will be an end to this tunnel - eventually.

Sad when any jobs are lost, but also significant or ironic that amongst those layed off at Goldman is their Investment Banking Analyst.

 

[russ_watters]

There are also positions in major league baseball, basketball, football, . . . . , that pay $1+ million/yr. But seriously, how many positions are there for top white collar engineers making $500 K?

What industry do you work in, Astronuc? It seems to me that every white collar job has a clear career path toward an upper-level management position*. It's just that engineers who want to stay engineers don't make the jump from engineer to engineering manager. But that doesn't mean the track isn't there.

Blue collar jobs aren't much different: if you flip burgers for McDonalds' for 5 years or so, there should be a relatively well-defined point where you jump into a white collar management track.

Just because there aren't many, it doesn't follow that it can't be done. Where do you think Senior VPs come from, anyway? Heck, I just started a new job and the higher-ups reworked and distributed their organizational chart: it maps out exactly, the pathway toward the upper levels of the company. And advancement is expected of me. In either of my jobs, I wouldn't have been hired if there wasn't at least the possibility that at some point I'd be capable of taking over the company. You seem impossibly naive about this for someone old enough to have seen people do it.

*Caveat: It seems to me that with certain fields such as academia, the path is not as clear - but it is still there. Still, you trade a rediculously high level of job securtiy for that relative loss of mobility.

 

[Astronuc]

What industry do you work in, Astronuc? It seems to me that every white collar job has a clear career path toward an upper-level management position*. It's just that engineers who want to stay engineers don't make the jump from engineer to engineering manager. But that doesn't mean the track isn't there.

Russ, I agree with you. In theory there is clear path toward an upper-level management position - and there is one position for the hundreds of engineers at the bottom. As one ascends the corporate ladder, there are fewer jobs, just like for all kids in athletics/sports in high school and college, there few positions in the major leagues.

My experience with all the major companies in the industry in which I work, is that the appointments are more or less political and not based on merit. My experience includes working directly with two high level managers who had great reputations. I then found out they were managers and had limited scientific and technical capability, and their writing was poor. Their reputation was built on the work of the people who worked under them.

Elsewhere within those large companies (in the top 10 of Fortune 100 by capitalization), I saw the best and brightest engineers get passed over - time and time again. About 10 years ago, one of the best engineers in the industry, a guy who received top awards in his company, quit and left the industry. I overheard him talking to a colleague, and he mentioned that at age 41, he had about 10 years left with the company and then would be replaced with no further prospects. He took a job with a smaller company that manufactured magnetic and electronic storage systems.

 

[D H]

But seriously, how many positions are there for top white collar engineers making $500 K?

Per salary.com, "top engineering executives" in San Jose CA are paid $171K to $242K (2nd and 3rd quartiles), (see http://swz.salary.com/salarywizard/...AjaxDisplaySection1=1&hdAjaxDisplaySection2=0).

I would venture the answer to your question is "not very many", in fact "not very many at all".

 

[mheslep]

What's at stake if the automakers fail.


Obama Asks Bush to Provide Help for Automakers
http://www.nytimes.com/2008/11/11/us/politics/11auto.html

If GM, Chrysler and Ford shut down operations,
Center for Automotive Research estimates loss of:

                      Year  2009  2010  2011
Jobs, millions               3.0   2.5   1.8
Personal income, $billions   151   138   109 
Tax receipts, $billions       60    54    42

No I don't think those numbers are just for the big three; rather that is for all US auto jobs both direct and indirect (OEMS + suppliers), including Toyota - US, etc. Also, where is it suggested that a) if they default on debt they would necessarily 'shut down operations', and that b) all three of them would necessarily fail, versus three becoming two, etc.?
www.cargroup.org/pdfs/alliance-final.pdf[/URL] (table 1.1, 1998 all US auto related jobs 2.4M)

 

[edward]

A lot of companies are now wanting a share of the bail out. First they must go through Treasury's to business liaison Jeb Mason.

“Unfortunately, I don’t have a lot of good news for them individually,” said Jeb Mason, who as the Treasury’s liaison to the business community is the first port-of-call for lobbyists. “The government shouldn’t be in the business of picking winners and losers among industries.”

Mr. Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over the dozens of phone calls and e-mail messages he gets every week. “I was telling a friend, ‘this must have been how the Politburo felt,’ ” he said.

http://www.nytimes.com/2008/11/12/b...38800&en=f24a9509e53ce37f&ei=5087&oref=slogin

The good old boy system is indeed still intact.

 

[Astronuc]

No I don't think those numbers are just for the big three; rather that is for all US auto jobs both direct and indirect (OEMS + suppliers), including Toyota - US, etc. Also, where is it suggested that a) if they default on debt they would necessarily 'shut down operations', and that b) all three of them would necessarily fail, versus three becoming two, etc.?

The job numbers cited include the Big 3 Automakers + all the companies in their respective supply chains, e.g. parts companies, as well as dealerships, etc. Those are rough/gross estimates as far as I can tell.

As for the two or three, GM has been talking to Cerebrus Capital regarding merger with Chrysler. Chrysler is in worse shape then GM or Ford.

 

[Astronuc]

A lot of companies are now wanting a share of the bail out. First they must go through Treasury's liaison to business Jeb Mason.

http://www.nytimes.com/2008/11/12/b...38800&en=f24a9509e53ce37f&ei=5087&oref=slogin

This is just unbelieveable.

From the NYTimes article cited by edward -
"The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages.

The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s."

I just finished listening to a radio news article about Paulson explaining that the 'bail-out' money is not going to be used as originally intended, that is the Treasury is not going to buy troubled mortgage assets. So those lobbyists for plumbing and heating specialists can just go home. Rather Treasury is buying equity in banks and loaning money directly to financial institutions in order maintain liquidity in the markets. Meanwhile some mortgage lenders and service companies, Citigroup, have imposed a moratorium of foreclosures and are working with mortgage holders to restructure the payment terms.

Some of this seems a bit unfair. For example, I heard a Citibank agent talk about a 3% interest rate on mortgages. But many responsible borrowers are paying more like 5.5-6.5%, and they don't get better terms.

All this is still shaking out.


Update: Paulson: Government won't buy troubled bank assets
http://news.yahoo.com/s/ap/financial_meltdown

WASHINGTON – The government has abandoned the original centerpiece of its $700 billion rescue effort for the financial system and will not use the money to purchase troubled bank assets.

Treasury Secretary Henry Paulson said Wednesday that the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending. He also announced that the administration was looking at a major expansion of the program into the markets that provide support for credit card debt, auto loans and student loans.

Paulson said 40 percent of U.S. consumer credit is provided through selling securities that are backed by pools of auto loans and other such debt. He said these markets need support.
. . . .

 

[mheslep]

The job numbers cited include the Big 3 Automakers + all the companies in their respective supply chains, e.g. parts companies, as well as dealerships, etc.

Yes, and the numbers also include jobs from Honda-US, Toyota-US, Nissan-US, BMW-US, etc, which are mostly not at stake pending a taxpayer bailout.

 

[mheslep]

... Meanwhile some mortgage lenders and service companies, Citigroup, have imposed a moratorium of foreclosures ...

Somebody please explain why a moratorium on foreclosures will not lead to a moratorium on making timely payments.

 

[mgb_phys]

Somebody please explain why a moratorium on foreclosures will not lead to a moratorium on making timely payments.

If you are the bank- which would you rather have right now;
Some customers not making payments for a year, or an empty house that is unsellable which you have to insure, maintain and possibly pay property taxes on?
Remember these are the sub-prime customers that you have been charging higher rates to and who are likely to come back to you for loans in the future, not those nasty 'well behaved' customers that pay off early and never pay interest on their credit cards.

The tricky bit is going to be to stop smart home owners not paying and simply sticking the mortage payments in a savings account to make some money.

 

[mheslep]

If you are the bank- which would you rather have right now;
Some customers not making payments for a year, or an empty house that is unsellable which you have to insure, maintain and possibly pay property taxes on?
Remember these are the sub-prime customers that you have been charging higher rates to and who are likely to come back to you for loans in the future, not those nasty 'well behaved' customers that pay off early and never pay interest on their credit cards.

The tricky bit is going to be to stop smart home owners not paying and simply sticking the mortgage payments in a savings account to make some money.

Yes of course its desirable on both sides of troubled loans to stay out of foreclosure. The problem is avoiding creating a giant moral hazard for everyone else.

 

[mgb_phys]

My understanding was that (in the US at least) the mortgages company's insurance pays out if the owner defaults and the property is foreclosed, but doesn't pay out if there is any attempt at a negotiation. So foreclosure becomes the first and only option for the mortgage holder to keep it's legal obligation to it's shareholders.
The other problem is who has first call on the assests received. If you have $50K outstanding on a $200K mortgage but the house sells after foreclosure for $100K, the mortgage company takes it's full $50K first (depends on jurisdiction) so it's not in it's interest to wait for the market to pick up.

In the past the mortgage company would do it's best not to evict by renegotiating rates or payment holidays (this wasn't widely advertised!).

 

[Astronuc]

I agree with mheslep regarding the moral hazard of bailing out (or assisting) irresponsible borrowers, while effectively penalizing responsible borrowers.

On the other hand, if financial companies foreclose on properties as a result of mortgage default, they might find themselves holding properties that are worth much less than the principal, while at the same time being unable to find buyers. There is the fear that real estate prices collapse further.

I do think that many mortgages need to be restructured so that people can pay them, but I think the mortgage companies should retain an equity in those houses, such that the borrowers will pay the full mortgage when and if the property is sold. If necessary, make 40, 45 or 50 year mortgages, but don't be letting people off the hook when they over-borrowed or bought more house than they could afford.


Meanwhile - Dimon: Recession could be worse than market crisis
JPMorgan CEO Jamie Dimon says economic recession could be worse than markets crisis
http://finance.yahoo.com/news/Dimon-Recession-could-be-apf-13548684.html

Thanks a lot Jamie. That will really help build confidence.

 

[edward]

Ironically the Fannie/Freddie home owner bail out plan will only help those already behind on payments.

Under the program announced Tuesday, a homeowner who lives in the home in question and misses at least three loan payments could qualify for a streamlined workout designed to reduce the monthly payment to 38% of the borrower's gross income.

http://latimesblogs.latimes.com/laland/2008/11/bailouts-push-t.html

This would give a lot of people a good reason to quit making payments. I agree with Astronuc about stretching out the mortgages to 40 years or more.

It seems to me before this all began banks were lobbying to get 40 year mortgages approved.

As the general economy tumbles more people will be unable to make their mortgage payments. Workers who must change geographical locations will be unable to sell their existing homes.

A good example: Honeywell Aerospace recently cut 100 jobs in Phoenix, but was able to transfer those people to their Tucson facility. Many of the 100 workers are stuck with up- side -down mortgages because prices have dropped by 20 to thirty percent.

Stabilizing home prices has to be included in any financial bail out because foreclosures only make the problem worse.

 

[Astronuc]

Intel chops more than $1 billion from 4Q sales forecast, profits wounded by dimming PC demand
http://biz.yahoo.com/ap/081112/intel_outlook.html

SAN FRANCISCO (AP) -- Intel Corp. whacked more than $1 billion from its fourth-quarter revenue forecast and ratcheted down its profit expectations because a clampdown on spending is reducing demand for its chips.

Intel's announcement Wednesday illuminates how the economic crisis is rippling across industries. As consumers and businesses cut back on buying all kinds of things, their reduced purchases of PCs are harming computer makers and their suppliers. Intel is the world's largest supplier of microprocessors, the brains of personal computers, with roughly 80 percent of the global market.
. . . .
Intel blamed "significantly weaker than expected demand in all geographies and market segments" and PC makers buying fewer new chips as they burn through existing inventory to save money.

Intel's profit is being hurt badly. The company's closely watched gross profit margin will now come in around 55 percent of revenue, plus or minus a couple of percentage points. The previous guidance was for roughly 59 percent.

Gross margin measures profit on each dollar of revenue once manufacturing costs are stripped out. It's an especially important measurement for chip makers because upgrading and maintaining their factories is hugely expensive.
. . . .

Morgan Stanley to cut 10 pct of institutional securities staff, 9 pct in asset management
http://biz.yahoo.com/ap/081112/morgan_stanley_cuts.html

NEW YORK (AP) -- Morgan Stanley on Wednesday outlined plans to cut 10 percent of staff in its biggest business, which covers everything from investment banking to stock trading.

The nation's No. 2 securities firm, which converted into a bank holding company in September, plans to scale back its most capital-intensive businesses before the end of the year. The layoffs inside the institutional securities group follow a 10 percent cut made earlier this year to the same group.
. . . .

Already in NY, the state government is freezing programs, cutting spending and raising tuition to the state/public universities.

 

[jal]

Where is all the money going?
Who is making money while you are losing your money?
The BIG boys!
http://www.ft.com/cms/s/0/0f8c0216-b193-11dd-b97a-0000779fd18c.html
Hedge fund managers defend industry
By Stephanie Kirchgaessner and Henny Sender in Washington
Published: November 13 2008 15:15 | Last updated: November 13 2008 16:47

The California congressman did however signal concern over “special tax breaks” that allow managers to treat the vast majority of their earnings as capital gains, meaning some portion of their earnings are taxed at a rate as low as 15 per cent.
“That’s a lower tax rate than many school teachers, firefighters, or even plumbers pay,” Mr Waxman said in a wry reference to “Joe the Plumber”, who became a fixture of the 2008 presidential campaign after he challenged president-elect Barack Obama on his tax plan.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azZGwY05SZ9M&refer=home
Soros, Falcone Defend Hedge Funds at House Hearing (Update3)

Paulson, 52, runs a New York-based fund that manages about $36 billion. His Credit Opportunities Fund soared almost sixfold in 2007, primarily on wagers that subprime mortgages would tumble. Paulson's Advantage Plus fund has climbed 29 percent this year through October while many managers are enduring the worst year of their careers.

Falcone also profited from a drop in subprime mortgages last year, when his fund, now about $20 billion, doubled. This year the fund was up 42 percent at the end of June and has since tumbled to a loss of about 13 percent. He told the panel that his father, a utility superintendent, never made more than $14,000 a year, and his mother worked in a local shirt factory.

Simons, 70, runs his $29 billion fund out of East Setauket, New York. The former academic makes money by using computer models to trade. His Medallion Fund, made up of his own money and that of his employees, is up more than 50 percent this year.
Griffin, 40, runs the $16 billion Citadel Investment Group LLC in Chicago, and has faced the toughest year out of the five billionaire managers. His funds dropped 38 percent this year through Nov. 4.

 

[edward]

It’s easy to call it a flip-flop.

Two months ago, Henry M. Paulson Jr., the Treasury Secretary, was lobbying hard to pass his $700 billion bailout plan, called the Troubled Asset Relief Program. He heralded the idea of buying subprime mortgages and other distressed assets from banks as a way to shore them up and get them lending again.

But on Wednesday, Mr. Paulson announced that the Treasury had effectively abandoned that plan in favor of making direct investments — something he had previously said he wanted to avoid — in all sorts of different companies, possibly including credit card firms and companies that make auto loans.

http://dealbook.blogs.nytimes.com/2008/11/12/sorkin-in-praise-of-changing-your-mind/

Could it be that the sub prime mortgages are so split up and conglomerated into computer generated derivatives that the Banks really don't know where individual mortgages are??

Or would it be taking money away from guys like John Paulson below??

Either one could explain the sudden change of mind.

I hope Henry Paulson is keeping good records of who is lobbying him. $700 billion is a very large sum to be flip-flopping around.

 

[edward]

John Paulson show us the shady side of Wall Street. You bet you he will defend his fund.

John Paulson made billions betting that you could lose your home.

The Queens-born hedge fund titan scored big by making complex investments that would reap huge profits if housing prices drop and mortgage foreclosures rise.

As the housing market tanked, Paulson made $2.7 billion in the first nine months of 2007 to lead all hedge fund bosses.

Things are looking even better for him in '08 as real estate prices crumble and millions of Americans struggle to stay in their homes.

"I've never been involved in a trade with such unlimited upside," Paulson, 52, boasted to The Wall Street Journal.

http://www.nydailynews.com/money/2008/01/16/2008-01-16_queensborn_john_paulson_makes_fortune_on.html

 

[jal]

Too Ponzi-like to prosecute.
If I remember, most gangsters could not be prosecuted for crimes due to lack of evidence, as a result they were convicted for tax evasion.
If you want to know what is wrong with our financial system…read the following and do your evaluation.
http://www.counterpunch.org/martens11132008.html
A Credit Crisis or a Collapsing Ponzi Scheme?
The Two Trillion Dollar Black Hole
By PAM MARTENS

Purge your mind for a moment about everything you've heard and read in the last decade about investing on Wall Street and think about the following business model:

 

[mgb_phys]

The purpose of hedge funds is to insure or 'hedge' against changes in the market, as in "hedge your bets"
So the banks that just betted on ever rising house prices and mortgages are now demanding a bailout while those hedge funds that thought - it couldn't go on like this and must crash, are criminals profiteering from peoples losses?

 

[Astronuc]

Retail sales fall by record amount in October
http://news.yahoo.com/s/ap/economy

WASHINGTON – Retail sales plunged by the largest amount on record in October as the financial crisis and the slumping economy caused consumers to sharply cut back on their spending.

The Commerce Department said Friday that retail sales fell by 2.8 percent last month, surpassing the old mark of a 2.65 percent drop in November 2001 in the wake of the terrorist attacks that year.

The decline in sales was led by a huge drop in auto purchases, but sales of all types of products from furniture to clothing fell as consumers retrenched.

The 2.8 percent drop marked the fourth consecutive monthly decline in retail sales, the longest stretch of weakness on record, and was much bigger than the 2 percent fall economists expected.

In a second report showing weakness, the government said businesses cut back on their inventories by 0.2 percent in September, the first decline since March 2007 and the biggest setback in more than three years.

. . . .

I wonder if economists are like weatherpersons - they're right about half the time.

The Eurozone is officially in recession for the first time in its history, i.e. since the Euro was adopted.

 

[OmCheeto]

The purpose of hedge funds is to insure or 'hedge' against changes in the market.
So the banks that just betted on ever rising house prices and mortgages are now demanding a bailout while those hedge funds that thought - it couldn't go on like this and must crash, are criminals profiteering from peoples losses?

The key word I see here is "insure".
You can correct me if I'm wrong as I'm still not sure I understand the whole picture.

Most people pay insurance on their house so that if it burns down, the insurance company will buy them a new one.

Hedge fund managers use someone else's money to pay insurance so that if someone else's house burns down, the insurance company is supposed to buy the hedge fund manager a thousand houses?

Just because there's no law against doing something doesn't mean you're not a crook.

 

[mheslep]

Retail sales fall by record amount in October
http://news.yahoo.com/s/ap/economy

Somebody has figured out how to sell retail in this market. Walmart 3rd qtr sales are up 7.5% over last year, earnings up 9.8%, far better than the pack. Part of it is credited to the last stimulus package, which could now rightfully be called the Walmart stimulus package.

Wal-Mart Stores, Inc today reported its sales and earnings for the quarter ended Oct. 31, 2008. Net sales for the third quarter of fiscal year 2009 were $97.6 billion, an increase of 7.5 percent from $90.8 billion in the third quarter last year.

http://www.marketwatch.com/news/story/Wal-Mart-Reports-Third-Quarter/story.aspx?guid={C362A8EA-9571-4583-BB82-672D627C13BC}

On Thursday, after a week of bad news from retailers such as Best Buy Co. and Starbucks Corp., Wal-Mart said earnings for the third quarter rose 9.8% while sales rose 7.5%. At stores open at least a year, sales rose 3%, twice as much as a year before, and far better than nearly every other U.S. retailer...

For every $1 spent in the last year on goods other than cars in the U.S., 8.2 cents went to a cashier at a Wal-Mart store or a Sam's Club, the company's membership warehouse chain, according to Michael Niemira, chief economist at the International Council of Shopping Centers...

Even with unemployment rising, Wal-Mart said that it had hired 33,000 new employees in the 12 months prior to October. Its U.S. work force now stands at 1.45 million, making it an economic driver for millions of other jobs dependent on Wal-Mart...

About 18 months ago, Wal-Mart forged a plan to turn things around. It slowed new store growth in the U.S. and returned to its low-cost roots. It also began executing a makeover featuring a sunny new logo, a heavily publicized environmental campaign, tidier stores, and a more targeted mix of free-trade Argentine wines and high-definition videogames to go along with the diapers and dog food.

http://online.wsj.com/article/SB122656558027724083.html
sub'd requ'd

 

[mgb_phys]

Hedge fund managers use someone else's money to pay insurance so that if someone else's house burns down, the insurance company is supposed to buy the hedge fund manager a thousand houses?

Hedge funds are supposed to allow you to hedge against changes in the market.
So if you are a pension fund with lots of investments in the stock market you might hedge this by buying a something that goes up when the market goes down - like gold.

Another way to hedge is to short stock, ie bet that it will go down when everyone else is betting it will go up. Shorting stock isn't necessarily wrong, it's like betting that the Chicago Cubs will NOT win this years world series - it might be a safer bet than trying to pick who will win.

Hedge funds normally lose, after all if you are betting against the market and you are as good as everyone else in the market you will lose. In general most people in the market do worse than average - a few do very well. The very best tend to be hedge funds, they charge the most fees, take the biggest cut and get the best people.
This does sometimes fail - there was a super 'dream team' hedge fund which was so famous it could never make any money, because as soon as it tried to bet against the market - the market assumed it must know something and immediately followed, so it could never get ahead!

 

[Astronuc]

Somebody has figured out how to sell retail in this market. Walmart 3rd qtr sales are up 7.5% over last year, earnings up 9.8%, far better than the pack. Part of it is credited to the last stimulus package, which could now rightfully be called the Walmart stimulus package.

That's great - cheap stuff, low wages. How many PFers would be satisfied doing their respective work for Walmart wages.

If Walmart is so great, why do they have such a low dividend/yield.

Share price $54 +/- $1 today.
Market Cap: 209.13B
P/E (ttm): 15.81
EPS (ttm): 3.36
Div & Yield: 0.95 (1.80%)

Walmart is great if one owns 100,000 or 1 million shares. It's great for the Walton family and upper management. It's not particularly great for most of the employees, or other retail businesses, or domestic manufacturers.

Based on yield GE is a much better investment.
Market Cap: 159.19B
P/E (ttm): 7.86
EPS (ttm): 2.036
Div & Yield: 1.24 (7.60%)

 

[mheslep]

That's great - cheap stuff, low wages. How many PFers would be satisfied doing their respective work for Walmart wages...

Well Walmart was known for hiring smart 20 somethings to manage the super stores - $100k/yr. But good grief, this thread is not all about jobs for PFers.