Tom Sosnoff is a serial entrepreneur, trader and a true capitalist. Here’s his take on recent developments in corporate America.
“In trying to find some topics that I think we can all agree on, here are two things that I’m having trouble processing. First, why is it so important to backstop or prop up the junk bond market with taxpayer money. This is not 1987 nor is it the end of free markets. I can’t imagine there is a single person who is struggling or unemployed who could care less about owning theoretical equity in junk bonds. In fact, in all my experience, there is barely a single active or passive investor who even understands the junk bond markets let alone invests in them. If left to mother nature, prices will naturally find a level whereby yields value the risk. And if institutional investors have to write down principal in speculative junk bond investments so be it. That’s why they’re not called risk-free bonds. Those tens or hundreds of billions could be better spent supporting mankind. My second topic is Disney. But Disney is just a sample case and by no means an exclusive example. Here are some back of the envelope numbers. Disney furloughed 43,000 mostly hourly employees this past weekend. Disney has almost $7B in cash reserves. DIS also pays a semi-annual dividend of $.88 per share or the equivalent of approximately $1.6B or $3.2B annually. The annual cost of 43,000 hourly employees working 40 hours per week and making $13 or so per hour (their numbers not mine) is only $1.16B. So, the math is easy. Cut your dividend by a third and the shareholders will understand. So will Wall Street. Then, fire all your billionaire board members who are still getting paid millions for doing nothing except making stupid decisions and teach the rest of the corporate world an important lesson. This is not a life or death sacrifice. Frontline healthcare workers are risking their lives for the sake of humanity. Certain corporations can cut their dividends to keep people employed. The stock market will survive and so will you.”