S&P heads to first quarter ever of negative earnings

[swag]

Source: MarketWatch

NEW YORK (MarketWatch) - As Wall Street tracks Washington's moves to help the beleaguered banking sector and pass more economic stimulus, nearly 400 of the S&P's 500 companies have weighed in and reported a collective loss -- even excluding financials.

"This is the worst, after the sixth quarter of negative growth, it will be the first quarter ever of negative earnings," said Howard Silverblatt, senior index analyst, at Standard & Poor's.

A sixth quarter of negative growth ties the prior record set when Harry Truman was president, and ran from the first quarter of 1951 to the second quarter of 1952.

"And next quarter we're expected a new record of seven quarters of negative growth," Silverblatt said.

Read more: http://www.marketwatch.com/news/story/Financials-lead-way-SP-heads/story.aspx?guid=%7BA077A0AC%2D3404%2D42D2%2D843E%2D19706D565667%7D

[Sarah Ibarruri]

1. I never studied business but I do wonder....

Why did we set up business systems where people's emotions and psychic abilities play the most important part in whether or not stocks go up or down, and determine how well the economy will do? Also, do we need to continue such a system, and if so, why isn't there an alternative to an emotional financial system?

[DrDebug]

2. Because it was very profitable during good times.

The first multinational corporation was the Dutch East Indies company. The merchants in Amsterdam wanted to compete with England and Spain in the India trade, however they could not afford to build such a large organisation and it was decided to raise the capital by listing the stocks of the company on a stock market (both corporations and stock exchanges are existed however weren't that successful). The result was that they raised 6.5 million guilders (current value ~$300,000,000,000) from 1,143 investors including 340 foreigners which made it multinational from its conception.

The first decade(s) were such that the price of the stock skyrocketed and the 40% (!!) dividend made the investors richer beyond their wildest dreams and allowed the company to build one tallship a week. Of course the idea was soon replicated all over the world leading the current chaos. The Dutch East Indies company ultimately went bankrupt because of massive corruption and the second multinational corporation, the British East India Company also went bankrupt. In fact ALL of the early 17th century corporations self imploded under the weight of corruption, nepotism, and mismanagement. Yet we still think that the current multinationals are somehow different...

[Sarah Ibarruri]

3. Very interesting. Thank you. nt

[Skink]

4. Yeah but the Dutch east India Co. got to use slave labor.

[DrDebug]

5. And wage war and engage in piracy

Especially the piracy part was very lucrative, because it was a lot cheaper to raid a competitor, steal its cargo, kill the crew, and sink the ship.

Even though some excesses are no longer allowed, the VOC was a trend setter with unbridled corruption, excessive salaries for the top management, and allowing investors to buy and sell parts of the company on an exchange allowed the company to raise immense capitals.

Prior to 1602, the world was divided in three classes: peasants, nobility, and royalty. And even though the merchants had considerable wealth, they still envied the wealth and power of the nobility.

A merchant which bought stock of the VOC in 1602, saw a Return On Investment in 1609 and doubled its investment by 1616. The result was that merchants wanted to live in modest dwellings (buildings with more than 3 floors were rare up to the 17th century because the elevator had not been invented yet) like:




In fact, the main reason why Amsterdam more or less looks like it did in 1650 is because the 5,000 canal houses were excessively expensive and still average about E 2 million despite the extremely high maintenance costs.

But that is just the exterior and tourists generally do not get to see added benefits like:

Tiny gardens:



http://www.studiokoning.nl/Foto_Amsterdam_3/Grachtentuinen.html

Modest interiors:





http://www.studiokoning.nl/Foto_Amsterdam_3/Achter_de_gevels.html

In short, it was the birth of predatory capitalism with capitalists becoming wealthier than nobility. So it was a copied even though the basis of the wealth was unfair trade, dirty deals, and excessive profits in good times and excessive losses when mismanagement, bureaucracy, corruption, and changes in market conditions started to take their toll. It is funny to note that both the VOC and the BEIC went through several bailouts and nationalizations to no avail because they folded anyhow...

Nevertheless the stock exchange were you can sell and buy companies allows companies to become many times bigger than by the merit of their trade, and it allows investors to become excessively rich. Also it leads to companies becoming overpriced many times thus allowing them to swallow any non-public competitor even if the competitor is much more efficient and much better organized. Also the profits become the ultimate goal, so the companies have to show more and more profits at the expense of "fair trade" which means that Economic Hit men, Jackals, and the Army are used to ensure that the trade remains unfair.