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Share the Wealth – June 11, 2018

 
 
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Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour with small gains on little economic news. Bitcoin breaks below $7,000 on another exchange hack and more crypto currency thefts. The G-7 Meeting ends in disarray with name calling and finger pointing as Europe gets ready to bring its own set of trade tariffs forward beginning July 1st.

One of the requirements of the Dodd-Frank financial reform legislation that was passed in 2010 required that exchange traded companies report publicly how much the CEO makes compared to the median salary of workers. The latest figures show that the average CEO makes 339 times what the average worker makes. To put this in perspective in 1965 the ratio was just 20-1 and this underscores various wage studies showing that what little earned income growth that has occurred in the last 30-years or so has primarily gone to the top 1%, some to the next 9% and very little to everyone else. Hence the record income and wealth inequalities currently plaguing America. With much of CEO pay coming across in the form of stocks options and the like the strategy of use all available cash flow and borrow up to the hilt to finance corporate buybacks to boost the share price, keep the analysts happy, and energize dividend payouts takes on a whole new meaning. The byproduct of course is record corporate debt levels and declining credit quality as the two tend to go hand in hand. Record debt, record asset valuations and rising interest rates are as close to a sure recipe for financial disaster as one can get.

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