Comparing Median Household Income to Executive Compensation

In 2010 the median household income in the United States was $49,445. This is the median pre-tax income of all households ranging from married couples to non-family single individuals, and everything in between. In other words, the typical household in the United States, whether a family lives there or just one individual, earns around $49,445 per year. Obviously some families and individuals, if they are white or Asian, male, and have a college education, are making more than this, while others are making less than this. This is just the median, or the mid-point of the entire data set when arranged from lowest income to highest income. I’m not 100% certain of this, but I’m pretty sure that people with no income, the unemployed, are not included in this sample. Only those people who actually have an income are included.

If this number, $49,445, seems ridiculously small to you, that’s because it is and remember this is pre-tax income, so the actual take-home pay is even lower than that. This is what they mean when they say, “the working poor”. I guess this is why food stamp usage has been sky-rocketing lately.

But back to the main point of this article, comparing the typical US income to the compensation of corporate executives. For argument’s sake let’s take this number and create the hypothetical case of a 22 year old who just graduated from college and has landed his first real job at a starting salary of $49,445. Let’s also assume that he gets a 3% pay increase every single year (which at the moment would be a false assumption as median incomes have fallen by 2.3% from 2009 to 2010) and that he works for 40 years before retiring. How much money would he earn over the life-time of his career? We’ll figure that out then compare it to how much money a few CEOs made in 2010, just that one year.

Here is a chart of our 22 year old’s income over the course of 40 years:

As you can see he starts out his first year making $49,445 at age 22 and he gets a 3% pay increase every single year.

  • At age 32 he will be making $64,514
  • At age 42 he will be making $86,702
  • At age 52 he will be making $116,520
  • At age 62 he will be making $156,593

After 40 years of working he will have earned a sum total of $3.73 million dollars. Now let’s compare that to how much money the CEO of Goldman Sachs was paid in just 2010 alone, for just 1 year of work (“God’s work”), he was paid $13.2 million dollars. So in just 1 year he got 3.5 times more money than the typical American household makes in 40 years of work. And remember, 2010 was a “bad” year for Wall St, in 2007, right before the crash, he made $68.5 million.

How much did the CEO of JPMorgan Chase get paid in 2010? He got around $17.5 million dollars. In 2009 the co-president of Morgan Stanley got paid $15 million dollars. If you’re ever lucky enough to become the CEO of a big Wall Street bank, in just one year’s worth of work, you’ll make enough money to support the typical American household for 140 years. This is why #OccupyWallStreet happening.

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One way in which the European Debt Crisis is worse than the US Debt Ceiling talks

We all witnessed the dreadful consequences that the dispute between Republicans and Democrats in the Congress and the White House had on the stock market. While the deal was still being hashed out, the predominant fear was that the US might default on its bonds because of an inability to borrow more money. Once the debt limit deal was reached the focus shifted onto how truly broken and dysfunctional our government really was, and still is. It then became apparent that the Tea Party controlled GOP members in the House were willing, able, and crazy enough to jeopardize transforming the US Treasury from being the risk-free rate of return, an asset that had virtually zero chance of losing investors’ capital, into a junk bond. A move that would have dramatically altered the way people priced assets, interest rates, in other words a huge market crash.

If you thought that our debt ceiling debate was bad, wait until you read the rest of this paragraph. In our country, the debate was between politicians of the same country, in Europe however, the debate is not only between politicians of the same country but also between leaders of at least 7 different countries namely, Portugal, Ireland, Italy, Greece, Spain, Germany, and France. There are Prime Ministers and Finance Ministers from every single one of these countries arguing against each other on top of the internal conflicts between the different parties within each country. In order to illustrate how awful the European situation is, imagine if our US debt ceiling policy required the approval of other countries as well. Envision if President Obama had to plead his case against the Prime Minister of Canada and the President of Mexico because both Canada and Mexico had the power to vote in favor or against of raising our debt ceiling. All of this on top of the debate Obama had against the GOP in Congress. Such a situation would have made our US debt ceiling debate far more horrendous than the shit fest Washington put us through but this is what is happening in Europe right now. In this way the European Debt Crisis is far worse than the US Debt Ceiling talks. This is why, in my opinion, market participants are going to keep selling-off Greek and other PIIGS bonds, European financial stocks, and Global equities in general until either 1) Greece defaults or 2) the ECB and IMF totally and completely bail-out Greece. I’m talking about a TARP-like program here that would buy Greek paper (as apposed to the worthless mortgages and mortgage derivatives the the US Treasury and the Fed accepted as collateral).

The bottom line though is that things are going to get a whole lot uglier before they get even mildly unattractive.

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Monday 08/08/2011 – Momentum Stocks $CEF

New 52w highs with positive sales growth:
GOLD MCHX AUY RGLD CEF BKT CL KFT UL UN

Biggest Daily gainers with positive sales growth:
GOLD AUY EGO RGLD AZK CEF AEM AU NEM AUQ

The top 10 “growthiest” companies are:
CEF BKT AEM AUY RGLD GOLD AU AUQ EGO MCHX

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Friday 08/05/2011 – Momentum Stocks $MCHX

New 52w highs with positive sales growth:
CBOU JCOM MCHX MA NUS UL PCN ARR CYS UN

Biggest Daily gainers with positive sales growth:
WWWW CBOU MCHX THS RST SPRD BLKB LOPE FLT XOXO

The top 10 “growthiest” companies are:
ARR CYS SPRD WWWW JCOM MA MCHX FLT PCN BLKB

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Thursday 08/04/2011 – Momentum Stocks $MKTX

New 52w highs with positive sales growth:
LQDT CBOU RGLD MKTX PCN BLX MHP TEI BTZ NPM

Biggest Daily gainers with positive sales growth:
WWWW ATSG NSIT FIRE MRGE TLK THS GOLD PMT SWI

The top 10 “growthiest” companies are:
PMT MRGE NPM RGLD WWWW GOLD MKTX BLX SWI THS

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Wednesday 08/03/2011 – Momentum Stocks $HURN

New 52w highs with positive sales growth:
GMCR QLTY CBOU LSI DECK LQDT MA JCOM RGLD PEET

Biggest Daily gainers with positive sales growth:
QLTY CBOU FIX PRMW SIMG MA REXX JCOM HURN HSNI

The top 10 “growthiest” companies are:
GMCR PRMW RGLD SIMG REXX JCOM LQDT FIX HURN MA

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My Checklist for Wed. 8/03/2011 – We are not in an uptrend

This is the checklist that I go through everyday when deciding whether or not to initiate any new long positions. They are in no particular order and I only buy when all of them are checked off.

  1. Is the $SPXEW (The S&P500 Equal Weighted Index) above its 20DSMA? : No
  2. Is the slope of the $SPXEW ‘s 20DSMA positively sloped? : No -0.41%
  3. In my universe of stocks which is comprised of stocks that have an average daily volume of at least 100k shares, trade above $5, and have positive sales growth versus the year ago quarter, is the ratio of new 52w highs to the sum of new highs + new lows 80% or greater? : No 19.10% (Wow, we’re below 20%)
  4. Of the S&P500 stocks is the ratio of new 52w highs to the sum of new highs + new lows, known as the $RHSPX, 80% or greater? : No 2.63% (This is insane!)
  5. Have you read at the last 10 press releases that the company you are looking at has issued?
  6. Does the company you are looking at have a CQGR of 3.75% or higher in their Sales, roughly equating to a 15% or higher yearly growth rate?
  7. Does the company you are looking at have a CQGR of 3.75% or higher in their Earnings, roughly equating to a 15% or higher yearly growth rate? (However, I am not dogmatic on this one, as sometimes stocks with negative earnings can still rip higher on the expectations of future profits)
  8. Have you listened to the company’s latest earnings conference call? Do you know what was/is their guidance for the next quarter?
  9. Do you know when the company you are looking at will report their next quarterly earnings?
  10. Can you name at least one, but preferably 2, of the company’s peers? For example Nike, Under Armor, Lululemon. Do you know when your company’s peers report earnings?
  11. Have you checked if this company history of beating analyst’s estimates? You can check here by typing in the ticker you want.
  12. Do you know what the short interest is on this stock? Both the number of days to cover and the percentage of the float.
  13. Do you know how many analysts cover the stock? How many are a buy, sell, or hold? Are there enough negative analysts to have future upgrades serve as positive catalysts?

Sold $SPXU for a 10% profit. I really enjoyed making that trade. That is the type of trade that makes you feel like a God because you basically went short the entire S&P500, times 3, and nailed it! Any idiot can make money on the long side in a bull market but it takes a very skilled trader to profit on the short side. And I nailed it, fucking nailed it! 🙂

We may have found a bottom today with that wicked hammer candle, the lower wick is so long it’s sexy. Of course the Jobs number is coming out this Friday and it is August, which means, if the NFP number is horrible (and I fully expect it to be horrible) it might just be bad enough to force Bernanke to initiate a QE3 at Jackson Hole. In other words, if the jobs number is horrible (and I mean Fugly) the market will rip higher in anticipation on QE3. We will probably keep selling off until Friday, gap down much lower after the print, and then rally for the rest of the day.

I love trading, this shit is so much fun!

PS: Buy a little $MITK before it reports earnings this Monday.

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