Share the Wealth – December 29, 2017
Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with small losses on the last trading day of the year. Since Tuesday both the NASDAQ and Standard and Poors 500 Indexes are essentially unchanged. For the year the NASDAQ looks to close with a 27.7% gain, while the Standard and Poors 500 Index looks to finish 2017 up 19.1%.
Like a lot of things this year there’s much more to the picture than meets the eye. When I started in this business 20-years ago there were about 7,300 publicly traded companies in the USA. Fast forward to the present and we have just 3,700 a decline of nearly half. Amongst other reasons this reduction represents the merger and acquisition craze seen in the last 20-years. Other noteworthy items related to this is the sharp decline in new small business formation over the same period. The leveraged share buyback craze in the post crisis period since 2009 speaks volumes about corporate America’s assessment of the economy, essentially not worth investing in. The accounting firm Ernst and Young noted early this year that just 140 companies made up more than half of total market value. The too big to fail or jail crowd got far larger in the post crisis period with JP Morgan Chase, Wells Fargo, Bank of America and Citibank holding $6.7 trillion in assets out of the $15.9 trillion total held by all 6,000 commercial banks, or 42% of the total. All of which speaks volumes about the ongoing wealth and income concentration that has been the pattern of America in the last 30-odd years. A trend that saw the destruction of the middle class, a sharp drop in the homeownership rate, record wealth and income inequality as evidenced by a Gini coefficient of .81, an all time record high beating South Africa’s .78, our closest competitor for this dubious honor.