Should we pay attention to stock prices? Ultimately, yes. They are important. However, when corporate executives are paid according to the value of their company’s stock, they may make decisions that increase profits for the short-term but hurt the company for the long-term. Executives are cutting capital investment, decreasing research and development, laying-off skilled employees, and buying back the company’s own stocks at premium prices (business theory says they should only buy their own stocks if the company is undervalued). All of this increases the stock prices for the short-term. However, when you have a corporate nation all acting in a similar manner, it’s bad for our country and it’s bad for you for the long-term. Listen to financial expert Jonathan Edwards talk about whether stock prices are important anymore.
Guest: Jonathan Edwards
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A Tramp’s Thoughts by Tom Neilson