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Placing The Right Bet

Jan 12, 2015
by Caroline Miller
Adam Lashinsky, Amazon, Beth Kowitt, Google+, Jeff Bezos, justifying CEO salaries, Larry Page, McDonalds
8 Comments

A friend visited the other day and as she settled down with a cup of tea, she peered round the room, admiring my new apartment which is larger than my last.  I’m probably one of the few retired people who has upsized her space rather than downsized.  My friend must have wondered how I managed it all on a public employee’s pension.  The truth is, I didn’t. I got lucky in the stock market.  But luck really isn’t the word I should use.  I invested early and steadily, regardless of day-to-day stock fluctuations and that savings plan paid off. I believe investing in the stock market is a good strategy for getting ahead, though it takes a tolerance for uncertainty to do so. 

 I was reminded of the ups and downs of investing as I browsed through the December 2014 edition of Fortune Magazine.   A glance at the table of contents was an abridged version of those companies currently in favor and those which are not.  “Fallen Arches,” by Beth Kowitt is one example.  The article examines the trouble McDonald’s, former darling of retirement funds, is falling out of favor.  The company failed to anticipate the public’s growing appetite for healthy foods.  Now investors are jumping ship as the once golden company tries to right itself.

 Another pundit warns Amazon may be sailing against headwinds also.   (“Amazon Goes to War Again (and Again) by Adam Lashinsky, Fortune, December, pgs. 73-74)   The fear here isn’t that CEO Jeff Bezos is too far beyond the times, but too much in front of it.  Eager to catch the next wave, Bezos has diversified the company to such a degree that it is open to too many risks.  His latest attempt to enter the wireless phone market with Fire, for example, has cost the company $170 million not to  mention the $83 million in unsold inventory it carries on its books. (Ibid pg. 74)  So far, Amazon’s efforts to enter the book publishing business hasn’t fared well either. (Blog 1/2/15)  And not many hold out much hope for its efforts to take on Google in advertising, Microsoft in Cloud computing and AliBaba in e-commerce. Unlike Steve Jobs, Bezos is accused of being unable to stay focused and to do a few things well.  (“The Most Ambitious CEO in the Universe,” by Miguel Helft, Fortune, 12/14, pg. 143)

Bezos isn’t alone in his ambitions.  Larry Page CEO of Google, is also striking out in multiple markets and technologies.  The difference is that  Amazon is bleeding capital while Google has huge cash reserves.  But in either case, critics wonder if both companies will be around in 10 years or if their efforts to diversify will cause them to implode.

The questions that surround Amazon, Google and McDonald’s are important to investors because when they buy a stock, they put their money on what they hope will be a company’s  winning strategy.  Investing isn’t like betting on a horse race but gambling is involved.   A CEOs decision affects not only his or her company, but it affects investors, the economy and even the financial health of other nations.  It’s a huge responsibility which may explain why they get their large salaries.     

stockbroker

Courtesy of  Wikipedia.org

 

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8 Comments
  1. Bill Whitlatch January 12, 2015 at 8:51 am Reply
    " A CEOs decision affects not only his or her company, but it affects investors, the economy and even the financial health of other nations. It’s a huge responsibility which may explain why they get their large salaries. " And, of course, the hard working people who are the employees, their families and thousands of local economies. "
    • Caroline Miller January 12, 2015 at 11:26 am Reply
      As a long time trade unionist, I can't argue with your observation that workers contribute much to the success of a company. But CEOs come in for a lot of criticism, particularly about thire salaries. Are they overcompensated? Maybe. But it's always good to look at the other side of the coin.
  2. Susan Stoner January 12, 2015 at 12:07 pm Reply
    Sorry, I have to say I think they are WAY over compensated to a point of the amounts being obscene. They have excessive power in the choices you identified (although really, unnamed advisors probably do all the grunt work). I doubt they have anymore stress than the small businessman worrying about whether he's going to make payroll this month or have to lay people off. The heads of major corporations don't need more money. Their compensation needs to be capped! In my opinion, their excessive compensation messes with their heads and takes compassion out of their decisions.
    • Caroline Miller January 12, 2015 at 2:21 pm Reply
      Yes, so much money does probably mess with the heads of some CEO's. Yes, they are overpaid. But do their jobs involve decisions that affect more than themselves and their families and do those decisions ripple for good or ill around the globe? Yes they do. It's hard to feel sorry for billionaires, but they do have a story.
  3. Janet January 12, 2015 at 1:20 pm Reply
    this post has driven me to reflect on my own "luck" in life. I do believe that many factors affect our luck. Long time steady investing a percentage of ones earnings should enable one to move into retirement relatively comfortably based on ones own definition of comfort. But there is also, in my opinion, a stroke or two (or three) of luck that allows us to move through the many stages of life, besides also making some right decisions over time. Well, shoot, I am now going to have to continue to reflect some more on the luck I have been blessed with along with the results of investments made over the years! I still think most CEO's are overpaid compared to salaries paid to the basic workerbees that make the cogs turn so the engine will run.
    • Caroline Miller January 12, 2015 at 2:18 pm Reply
      Yes, the CEO's are probably overpaid. No argument there. But a lot rides on their shoulders. More than most of us give time to think about. As I said elsewhere, sometimes it's good to turn the coin over and see the world from the other side.
  4. Annie Stratton January 13, 2015 at 5:40 pm Reply
    Caroline, compared to large corporations in other countries, those in the US are hugely overpaid. And yet their CEOs make more massive mistakes (or deliberately short-sighted decisions), have poorer outcomes, and have a shorter tenure than executives worldwide. In addition, large mega-corporations an abysmal record when it comes to considering impacts on both local and national communities. I am having some trouble grasping the "other perspective" you are talking about. You bet they make huge decisions and have large responsibilities. That doesn't mean they are handling them well, And the oversize compensation packages are making that situation worse, Shareholders are rebelling. Yahoo is a case in point.
    • Caroline Miller January 13, 2015 at 5:58 pm Reply
      Well a difference of opinion makes a ballgame. I don't cry very much for CEOs but the theirs is no a cakewalk either.

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Contact Caroline at

carolinemiller11@yahoo.com

Portland, Oregon author Caroline Miller had distinguished careers as an educator, union president, elected official and artist/advocate.

Her play, Woman on the Scarlet Beast, was performed at the Post5 Theatre, Portland, OR, January/February 2015

Caroline published a serialized novelette, Marie Eau-Claire, on the website, The Colored Lens.  She also published the story Gustav Pavel,  a parable about ordinary lives, choice and alternate potential, on the website Fixional.co.

Caroline has published four novels

  • Ballet Noir
  • Trompe l’Oeil
  • Gothic Spring
  • Heart Land

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