Senator Mark Warner Sees Market “Renters” and We Need “Owners”

warnerPolitifact found that Sen. Mark Warner’s comment that average stock holding periods have changed from over 8 years in 1960s to 4 months currently is “Mostly True.” After looking at NYSE data, it is a bit more accurate to say that the holding period during the 50s and 60s was closer to 6 years and today’s estimates come in around 6 months.

So what’s the big deal? Senator Mark Warner points out a related trend: Corporations now invest little of their profits back into their company. During the 50’s and 60’s, the reinvestment rate was closer to 50% and now 95% of profits go to dividends and an unhealthy infatuation with stock buybacks that also happen to boost executive bonus payouts.

It’s hard to convince management to focus on the long term when their owners are suffering with a bad case of short-termism. <cough, cough>

 

Photo by Alex Guillaume on Unsplash