Yes, the markets are in a tailspin and sure it's because of Covid19. It's also because the market was overinflated. Companies with worse EVA than others also got wrecked. Why are companies dropping their staff so quickly and begging for buyouts? 1. Because they can. 2. Because they literally don't have emergency funds. Why? Institutional investors.

Many corporations truly want to fire zero employees, give them wage increases, invest in the future of the company, etc. Instead, they're focusing on stock buybacks, dividend payments, and making sure their TSR doesn't slip and their EPS stays solid. This is because institutional investors (blackrock, vanguard, fidelity, ssga, etc.) will all drop the stock if they fall below peers. A few examples:

1. If you're a bank and you decide to give all your employees a pay increase and other banks dont, they'll smoke you in EPS and other key metrics.
2. These key metrics matter for 2 reasons: 1. Executive comp is designed on metrics like GAAP Adjusted EPS, Relative TSR, etc. Thus, if they dont hit these goals, they don't get paid (salary is usually ~10% of CEO pay). 2. Institutional investors really only care about TSR for obvious reasons. So they encourage all this bad behavior and stock buybacks because it pumps up the TSR. If these companies DON'T act that way, they'll get absolutely destroyed and risk being devalued to the point that a hedge fund comes in and puts up a proxy fight and hostile takeover. And if the company did something shareholder friendly like taking out their poison pill, then they're fucked in a proxy contest. So these companies are fucked left and right because institutional investors control their every movement.

Thus, I don't really blame corporations. I blame the investors who actually own them.

shareholders should be burned alive slowly

Additionally time between buying and selling of a stock has plummeted in modern times. Short-term metrics are overvalued relative to long-term solvency because investors will probably get out of a company within a year.

I don't know if the jargon you used also says this, I don't speak financialese.

There's a lot of issues with how our economy is currently set up. Most of it can be traced directly back to allowing a greater amount of corporate influence over politics, and from there to favorable deregulation.

This post was edited by Thor123422 on Apr 5 2020 09:47pm

yeah i agree with the premise of your post. short-term thinking over the long-haul has been very lucrative for these parasites. i’ve seen it devastate stock prices for well-run companies that decided to use surpluses to invest in long-term strategies with overall genuine aims (sure the goal is to make money but there are ways of doing it that aren’t purely scumbag level) rather than “ooo look at how nice my short-term thinking looks versus the competition”. like endless alluded to “shareholder value” is a laughable concept because the shareholders that matter are the Institutional investors.

i’d say the ‘hotshot’ analysts and the idiots on financial tv are also to blame for this. a good lot of them are in bed with whoever they’re pumping anyway (indirectly, like a side-piece) and so long as they disclose that there is “no conflict” it’s ‘all good’

gone are they days of buy and hold and reinvesting dividends, or goodness forbid making investments in firms that you know provide value and service that any person can benefit from - that’s for little people and dinosaurs like buffett.

This post was edited by excellence on Apr 5 2020 10:48pm

I think one of the things that really needs to happen after this is a wholesale break in corporate management from a GDP and shareholder value-based management style to one that promotes the value of employees and operates ethically.

Will this happen? Not bloody likely. Should it happen? Abso-fucking-lutely.

Too late, unionism is dead.

It theoretically can happen without unions, but that would require the shift away from shareholder value as the primary fiduciary responsibility of the company. Which I already said is pretty much not going to happen.