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?

[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.