Microsoft's Highly Profitable Layoffs

In July Microsoft announced intentions to layoff 14% of it's global workforce.  This equates to 18,000 employee pink slips.

Since then:

1. The company increased shareholder dividend payments by 11% 
2. Wall street has boosted it's total stock market value by 7%  
3. Steve Ballmer* and Bill Gates equity holdings gained $2,019,000,000

"I Knew I'd Make That $2 Billion Back Somehow",
Steve Ballmer thought to himself

The software giant has accomplished all this just halfway through the layoff binge.  Just imagine how profitable it will be when thousands more of their people are shown the door.


*Ballmer bought the NBA franchise Los Angeles Clippers for $2 billion this summer.  Since he purchased the team, the value of his stock in Microsoft increased $1 billion. 

Malinvestment is Poison says Charles Hugh Smith

Charles Hugh Smith explains "How Malinvestment Poisons the Entire Economy":

Today's asset bubbles in stocks, junk bonds, housing, art, bat guano futures, etc. are being driven by the Federal Reserve, which has replaced the nuisance of no-document liar loans with unlimited liquidity for bankers, financiers and insiders. The super-wealthy and corporate cronies can borrow as much nearly free money as they want from the Fed, without even bothering with qualifying for the credit.

Read more at OfTwoMinds.com 

Why Rent? Because You Can Move.

Melchior Palyi was an economist who fled National Socialist Germany in 1933.  Five years later he issued stern warnings to economic policy makers:

Palyi warned in 1938 that a push toward universal home ownership would "make the population fixed to the ground" by "overburdening them with housing costs." 

Renting offers mobility.  This allows you to take advantage of economic opportunities and personal relationships that become available in other regions.  For these and other reasons, home ownership is not always profitable.        

Full article about Palyi by Jason Zweig at The Wall Street Journal published in late 2010.

Inflation Rears It's Nasty Head

Speaking of a housing bubble.  Prices of homes in England increased nearly 4% last month.

But don't worry the "fears of a housing bubble are misplaced" says Christopher Hope of The Telegraph:

A breakdown suggested fears of a nation-wide housing bubble are misplaced, with London leading the way with a 16.3 per cent year-on-year increase, compared with a more modest 4.9 per cent in the rest of the country.

So according to the story a 5% annual increase in rent is modest.  Is the average wage earner garnering 5% annual salary increases to keep up with inflation?  Not likely.    

Full story from The Telegraph.