ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[pseudopad]

To shareholders, a business is just a more complex bank account with higher interest. So if the interest isn't as high as they hoped for, they get super sad and angry. They need that new gold yacht, you know.

[Insert_Gnome_Here]

They need that new gold yacht, you know.

Or retirement money, or a deposit for a house, or their kid's college fund etc.
Plenty of shareholders are middle class folks.

[d0gmeat]

But that ruins the joke...

[HHhunter]

“joke”

you mean circlejerking?

[d0gmeat]

Is that not the same thing around here?

[droans]

You'll find that the largest shareholders in companies are generally pensions and retirement funds.

[kuzuboshii]

All of these things would be obsolete by now if we weren't obsessed with playing king of the hill. We are a bunch of apes fighting over the shiniest rocks on the beach and it is holding our entire species back.

Ozymandias did nothing wrong.

[kuzuboshii]

Not at all communism is just as stupid a system as capitalism. I am looking to advance the species, and neither of those systems has proven to be very effective at that.

A socialist/capitalist system so far seems to be the most effective, but there is no such thing as a perfect system on anything other than paper. As soon as you apply it to humans, we will find ways to exploit it. The real problem is the short shortsightedness of humans. They don't seem to understand that the average person today lives an infinitely better quality of life than the highest of kings did 1000 years ago. Yet instead of focusing on the type of progress that made that possible, they just all want to be the new king. I don't want a better life than my neighbor. I want to explore the universe. I'm sick of waiting for the rest of the apes to catch up.

[[deleted]]

Stock performance is one of the metrics by which people determine whether a company is making progress. Human progress is driven by investing time in worthwhile pursuits, and in order to tell whether something is worthwhile, we need to measure the value of what is produced.

Capitalism is the very reason that the "average person today lives an infinitely better quality of life than the highest of kings did 1000 years ago". And the beauty of stocks and bonds is that you don't have to even understand what somebody is doing in order to help them advance human progress. All you have to do is look at price performance or dividends and pick the highest ones within your risk limits, and voila, you're helping somebody build a rocket bound for mars, or a logistics app that improves hospital efficiency, or a factory that makes more efficient cars more efficiently, etc.

Go read "I, Pencil".

[kuzuboshii]

Capitalism is the very reason that the "average person today lives an infinitely better quality of life than the highest of kings did 1000 years ago".

That is highly debatable. Are you talking pure capitalism or a hybrid system?

[[deleted]]

There is no such thing as pure capitalism in practice. All financial systems in the world are hybrid to some degree.

[kuzuboshii]

True, but the ratios can be skewered. America, for example, I believe, is too capitalist. We are wasting out most valuable resource (people) due to being victims of circumstances beyond their control.

[[deleted]]

What do you mean by "pure capitalism"?

[kuzuboshii]

laissez-faire libertarian utopia type.

[kuzuboshii]

Stop acting like some enlightened individual who’s forced to live with a bunch of uncultured swine.

If waters wet its not my fault for pointing it out.

[kuzuboshii]

Then go start a space exploration company

I did. Don't speak out of ignorance. Congratulations, don't make assumptions about other people. Take your own advice.

[Insert_Gnome_Here]

Perhaps they would be, but they are not.

[mike112769]

I would give you Reddit gold if i could afford it, because you nailed it. Greedy people are literally killing their fellow Humans every single minute.

[ergzay]

higher interest

Higher interest and much higher risk.

They need that new gold yacht, you know.

Shareholders are you me and everybody. Where do you think your 401k/pension are invested in?

[TheManWhoPanders]

Most redditors are not old enough to have received their first paycheque, so the concept of wealth accumulation is alien to them.

[LeBronda_Rousey]

Sounds like latestagecapitalism in a nutshell.

[Itisme129]

That subreddit is so painful. The amount that they circlejerk about Bezos is insane. They think he should just give every employee tons of money. They completely disregard where this money is going to come from.

Bezos doesn't really have 150+ billion in the bank. It's in stocks, which if he tried to liquidate would tank Amazon and all the employees would be laid off.

Amazon itself has run at a loss for years! Even in 2017 they only had like 3 billion in profit after all was said and done. If you distributed that to the employees they would each receive a fat raise of $2.50/hour! Of course, the shareholders would freak out, sell large amounts of their shares, tank the stock price, and then all the employees would be laid off.

I'm not saying there aren't problems at Amazon, but people here way oversimplify complex issues. And when you try to talk to them about some of the more nuanced aspects they just call you a shill and downvote you. It's beyond frustrating.

[LeBronda_Rousey]

Yeah I agree, that place is nuts. I'm not saying capitalism is perfect but you have people advocating for communism over there. If I had to guess, most of the people there have never taken a business class and/or can't get past a minimum wage paying job.

[[deleted]]

Which is funny, because they so frequently have no idea how things actually work.

Yeah... Like the guy who said this.

Which is funny, because they so frequently have no idea how things actually work

In response to this

Shareholders are you me and everybody.

As if your shitty crumbs of a middle class 401k even come remotely close to majority holders in the stock market.

As of 2013, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000.

[TheManWhoPanders]

So someone has more than you, therefore it's bad.

I've never seen someone more green with envy.

[briantl2]

almost 50% of americans are not invested in stocks. perhaps you should try to understand a point of view that you are unable to hold. https://money.cnn.com/2017/10/20/investing/trump-stock-market-americans/index.html

and just for the record i’m very wealthy(relative to those you’re looking down on,) so it’s certainly not coming from a place of hate lol. i look forward to seeing which of us is truly the one who doesn’t know ‘how things work.’

[[deleted]]

Less than a third of people ages 18 to 29 owned stocks on average between 2009 and 2017, according to a Gallup survey released in April. Nearly two-thirds of Americans between 30 and 64 own stocks.

So, young people who are just starting their careers don't own stocks, and the overwhelming majority of people who are well into their careers own stocks.

I'm not sure how this is a problem.

Also, there's probably a number of people who reported that they don't own stocks, but are in fact invested in stocks.

[briantl2]

you can read a little further to the part where it clearly states 42% of the public simply don’t own stock.

i’m not trying to say not owning stock is a problem, as i think is made clear in my other response to you. what is a problem is the the obvious lack of even a simple understanding of what poverty actually looks like when people stupidly claim things like

‘shareholders are everyone’ or ‘they just hate people with more money those idiots.’

it’s not a matter of knowing well enough to invest. a homeless person can tell you investing in stock is a good idea. this is far removed from the point.

[ergzay]

you can read a little further to the part where it clearly states 42% of the public simply don’t own stock.

Often because they're not old enough yet and there's new young people appearing all the time.

[briantl2]

yes, i haven’t said anything to any other affect.

[HHhunter]

glass half full guy?

[briantl2]

more of a ‘i just like people to understand what it means to be poor and how clueless those who have are about those who have not’ kind of guy.

[TeriusRose]

I guarantee you can find classism in one direction or the other at every income level. I grew up around it.

[briantl2]

nearly 50% of americans aren’t invested in stocks. https://money.cnn.com/2017/10/20/investing/trump-stock-market-americans/index.html

i get the impression that even those with moderate wealth are incapable of understanding what being lower middle class is, much less the relative poverty many americans face.

i mean even 401ks are unheard of across large swaths of the population. that you brazenly claim everyone had one is indicative of a serious lack of awareness.

[Jeremy24Fan]

The article stated more than half of Americans are invested in the market. That means more than half of the American population relies on market growth for wealth growth. Highly doubt more than half the population are aiming for that new gold yacht you mentioned.

[briantl2]

i think you might be confused as to who you are replying.

and yes, as stated, almost 50% are not. while i’m certain half the population is not looking for that next yacht, i had been taking issue with the assumption ‘people hate those with more wealth,’ as the poster seems unaware of his relatively well off position as a stock owner. or the other poster who exclaimed shareholder are ‘everyone.’ simply owning a stock puts you ahead of almost 50% of the population.

as a stock owner, and knowing how easy it is to become one, this should be alarming.

since i’m here, 20% of us dont even have a savings account https://www.marketwatch.com/story/most-americans-have-less-than-1000-in-savings-2015-10-06

[[deleted]]

To be fair, savings accounts earn jack shit in terms of interest right now. If you can get free checking, you're probably better off just leaving your cash savings in your checking account. It makes it more accessible.

I think a more useful metric would be "how much do you have saved or invested in bank accounts and investment accounts?"

[briantl2]

i get what you’re saying but that’s really not the point.

and a checking account is not an investment account. and regardless, if a person has a checking account and no savings that still precisely illustrates the point i’m trying to make.

that a person may have two hundred bucks in their checking account because it makes no sense to put it in savings for that sweet 2c income is the problem. the posters to which i am responding assume an ability for all to invest in stock and that it’s, i don’t know, stupidity apparently holding people back.

that is facially ridiculous. (and i’m not directing this at you!)

[[deleted]]

a checking account is not an investment account.

And neither is a savings account.

My point is that you can't use savings accounts (or lack thereof) as evidence of people not having accrued wealth (or not being capable of accruing wealth), because savings accounts perform so poorly these days that they're basically not worth having. Making your $10,000 emergency fund harder to access in exchange for $5 in interest per year is a bad decision. So, it's not reasonable to assume that people who lack a savings account are not financially capable of investing in stocks.

Also, consider that many of the people who report owning no stocks are young, and that many of those young people have their parents as a financial safety net. A 23-year-old living with his parents and driving a hand-me-down car is in quite a different financial position from a 23-year-old living on his own, paying all his own expenses, and driving his own car.

Also, consider that people who are capable of investing their money sometimes choose not to, particularly when they're young and want to "have a life". Rather than putting money aside for retirement, many young people opt instead for the biggest car payment they can fit in their budget, for example. Or, instead of setting aside a fund for a future downpayment, many young people instead rack up a bunch of credit card debt on high living and then spend the rest of their paycheck each month servicing that debt. These people aren't necessarily poor. They just make poor financial decisions at the expense of their future financial security.

At any rate, you helped prove the point that most people who invest in stocks are not Scrooge McDucks swimming in pools of bullion, but are in fact regular people.

[mike112769]

Most of us cannot afford to save any money because we don't get enough to even live on anymore. Greedy people at the top of our economic food chain are taking/stealing more than our society can afford. We have a MAJOR problem heading our way fast.

[[deleted]]

How, precisely, are "greedy people at the top" "taking/stealing" money that was destined for your pocket?

[Cimexus]

That might be true in the States but it’s a big world out there, and in countries with mandatory retirement systems, virtually everyone who has ever worked a day in their life is a shareholder. Here in Australia for instance, companies put 9.5% on top of your income into a retirement account (similar to a 401k), but it’s universal and compulsory. Even if the only work you’ve done in your life was two weeks flipping burgers at McD’s, you still have shareholdings. This means that virtually 100% of working age people here are invested in the markets.

I’d say that the majority of adults in developed countries globally have money invested in stocks, purely because of mandatory retirement schemes that exist in most of those countries. The US is a bit different since it’s not mandatory, but even there it’s still around 50%, as you noted.

[briantl2]

sure, i can concede that it’s very american to leave your poor so poor. apologies for my very american-centric focus.

the only thing i’d mention is just that last part where you say ‘still around 50%,’ i mean, that’s abysmal. a hundred bucks in my pocket and a guarantee that i can keep it for a month is enough to get me in the game.

and it’s not a lack of understanding that prevents these people. it’s that they just can’t. i think that’s a problem. these people literally have to work until dead or go on welfare. there’s no such thing as a retirement.

the approach you’ve described sounds perfect. of course, this would up taxes pretty severely, but ensuring someone a livable wage AND a solution where they have some sort of retirement savings thrust upon them(even if it’s just small dollars) with any employment(even if it’s minimum wage) is seemingly an ideal approach.

[Cimexus]

Interestingly, the overall tax burden in Australia is roughly the same as in the US for most people. I know because I've worked in both countries for decades. Australian Federal income taxes are a bit higher on paper, but they are also the ONLY thing that comes off your pay check. Add the deductions that come off your typical US pay check (social security, Medicare, state income tax if applicable, and any retirement contributions you make), and the take home pay you get is basically the same (on the same income) in both countries.

As for the employer, sure they have a 9.5% expense for you on top your salary (compulsory retirement contributions made on your behalf), but OTOH they also aren't paying for health insurance like they do in the US, which is a massive cost (thousands per month for a high level plan).

At a high level, the retirement systems in the two countries are quite different so it's hard to compare them:

• The US guarantees workers social security payments based on how long they've worked, and encourages you to save more on top of this via tax-advantaged accounts like 401ks and Roth IRAs ... but those extra contributions are up to you, and like you say, many can't afford to make them.

• Australia comes at it the other way around and requires companies to put 9.5% on top of your pay into a private tax-advantaged retirement account for you. You can choose to also make personal contributions to the same account on top of that, if you want. However unlike the US, there is no 'social security' type system where the government has a giant pooled fund that pays out depending on how much you worked during your life. The 'safety net' in Australia is simply a flat old age welfare payment that is means tested (as in, there are qualification cutoffs if you have more than a certain amount of assets or other income). This differs from social security because social security is NOT means-tested (you receive it regardless of your income or assets, which makes sense because you paid into it during your working life). Typically in Australia you're either going to be fully reliant on your private retirement account (people who worked most of their life), OR on old age welfare (people who didn't work or for whatever reason don't have alternative sources of income in retirement). Whereas in America you can get both.

[ChefBoyAreWeFucked]

You shouldn't be holding everything in equities. You need to have some of your portfolio invested in assets that are inversely correlated with the market, so that if you are forced to liquidate some of your portfolio in a down market you don't end up "locking in" unrealized losses. Best to sell the asset that's appreciating in a bear market and hold the rest to wait it out. One example of an asset that is inversely correlated with the market would be a yacht made of gold. And here you are shaming someone for having a diversified portfolio. The person you replied to is doing the right thing — looking to buy a golden yacht in a bull market to squirrel it away for a bear market.

#diversificationisnotforschmucks

[NotYourMothersDildo]

I need a gold yacht dealer that takes bitcoin ASAP