The bulk of jobs, and perhaps wealth, are created by small and medium sized businesses.
Small businesses might supply the jobs but you'd be surprised at how much those small businesses depend on big businesses to get their revenues. I've worked for a large part of the Fortune 500, but I did it indirectly through several layers of small businesses. Large businesses hire out an enormous amount of work they used to do in-house to smaller contractors.
Meanwhile, corporate insiders channel an increasing portion of cashflow into their own pockets via perks & stock options/buybacks. As Wall Street siphons off a portion in fees.
Yeah, but while it looks like it's in their pockets, the money immediately goes back into the economy seeking an investment return as opposed to being sent to China in the form of consumer goods consumed. I don't begrudge the rich, they can't spend what they make and they are lending it to guys like me at a ridiculously low rate. I can get a higher return on their cash than they can!
Thus quietly diminishing the hopes of a quality retirement for a broad swath of demographics commonly referred to as the 'boomers'.
In a macro sense this isn't bad. Right now we have 66% participation in the work force. If the boomers go into an extended retirement as their parents did then we could drop to below 50% participation. That would mean less than half the population is supporting the country. This is the actual problem that looms, not that boomers will have to continue to work into the years that they though they would be playing golf and watching TV in the middle of the day.
We wonder then about a perceived jobless recovery, and lack of investment opportunities, in a world where small enterprises may actually be starved for capital.
How bad is it that companies have learned to make profit without adding additional workers? There is no shortage of capital for small businesses, if anything there is a surfeit of capital. The world is swimming in a sea of cash, haven't you noticed?
If private equity creates the wealth, which relies on the share market as an exit strategy, and the share market seems to effectively transfer or destroy capital over time, how do we find and open up the investment opportunities of the future to J6P?
Well here's where we really disagree. Money doesn't create wealth, people do. People trying to get a hold of money create real wealth. They do it with ideas not cash. Like I said above, the problem isn't a lack of money, we have a ton of it floating around, too much. Some of the companies with the most cash are the least likely to create anything of value, there is almost an inverse relationship. It's the reaching for money that creates new jobs and creates real value in an economy. Wall Street has a long history of killing off whole sectors by throwing money at them. Look what it did to the tech sector. You want to look for the next investment opportunity, look for someone starved for cash. |
