False dividend bonanzas don’t benefit anyone but the rich
The first six months of what should be a flatlining year for business is showing big returns for those who are, um, big. And multinational. And being handed cheap aka free money by a combo of QE and Zirp from those
Libor-fixers careful money managers at the Bank of England.
Q2 dividends paid to shareholders by large UK-based companies leapt 18% to hit just under £23bn. The 2012 half-year total so far is £41.4 billion – up 21%. The slow-down reflects the fact that there was less free money in Q2 than in Q1…and Mervyn King was outvoted in his desire to have another bash with QE3 last week. Very litle of this profit growth reflects ‘business’. It is simple treasury investment by finance directors on the whole. The global business picture is awful, but that hasn’t stopped UK directors from slashing out on big dividends for investors in their own concerns.
The reason for this isn’t hard to discern: big dividends and profits push up share-prices, which in turn allow stockholders on the Board to cash in and take out cash at relatively low tax rates. But here’s the bad news for Britain…and capitalism:
1. The real sales picture in many cases is pretty dreadful. Now would be a good time, in fact, to invest in having better products and greater productivity, ready for the time when consumers start to consume again. Unfotunately,
2. The corporate investment sector is very depressed indeed. As in, lower in relative terms than it has been at any time this century.
It’s bad for capitalism because it’s just more short-term greed, and the vibrant, creative small business sector – the future - doesn’t have the economies of scale and financial clout to profit from slump…and central bank giveaways. But it’s good for omnivorous globalism, and even better for banks…still officially rebuilding their balance sheets.
Those banks, of course, are NOT lending to small business, thanks to a “heightened risk of default”. Monopolists, you see, don’t do risk: that’s what capitalists do. Corporate lending to the SME sector shrank by nearly 9% in the first six months of this year. Once again, the banks are being shored up with taxpayer money, and sitting on it – which stifles innovation and organic economic growth. The multinationals use the money to create false accountancy growth, but not to invest. And the stockbrokers, shareholders and stockholding directors take the money home, Ithangyoo.
Sitting above the real, struggling economy is a carpet-bagging class – the usual 3-7% – creaming off the easy monopoly money, and starving the real entrepreneurs. They could not be more selfish, anti-social and ethically dysfunctional in their behaviour. And what’s more, little birdies in New York and san Francisco are telling me that Ben the Money-sprayer is rumoured to be, finally, up for another round of QE. Watch that Dow rise on this expectation. Watch Obama talking about growth and profits. Watch the unemployment lines get longer. Wait for the first eurobank collapse and sovereign default.
You could take some gambling money and bet on NYSE’s top 50 for a month or two. But QE3 will put too many demands on an already obscene US deficit, and the smart money will move into gold at the next drop. I shall be among them.