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Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

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Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#61

Post by adrianN »

downandout wrote: post #56
sabalaba wrote: post #49

Earlier quoted context omitted.

Taxing capital gains at 39.6% (our current top income bracket as of 2016) would be bad for business, job creation, and growth in the US economy. California also taxes long term capital gains (LTCG) at a top rate of 13%. It would mean that an investor in California would experience a LTCG rate of 52.6%, the highest in the entire OECD. Capital has legs and having a non-competitive capital gains rate would incentivize i…

>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in s…

Maybe they're rich enough that it doesn't matter to them. Whether you make 10 Million a year or 15 maybe doesn't have an impact on your lifestyle at all.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#62

Post by ChuckMcM »

Does anyone know if you can use foreign funds in a buyback as a way to repatriate funds? Wondering if you have cash sitting in a foreign bank, can you use those funds to buy your own stock? Probably not since it would be a giant loophole you could drive a bunch of cash through.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#63

Post by kgwgk »

walterbell wrote: post #11

Are there public companies where projected buybacks would result in the company being taken private, after N years?

No. "Going private" is an option when a company has less than 500 shareholders. A share repurchase or buyback is when a company buys its own shares, typically in the open market, to reduce the numbers of shares outstanding. It is extremely unlikely that as result of buybacks the number of shareholders will go below 500. It would require all the others to voluntarily sell their shares.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#64

Post by lyncnshare »

djrogers wrote: post #47
cecilpl wrote: post #31

Earlier quoted context omitted.

Right. The remaining shareholders own a larger percentage of a company that now owns less cash. Say the only thing my company owns is a bank account with $100 in it. There are 5 shares outstanding worth $20 each. The company buys back one share for $20, so now there are 4 shares outstanding in a company that owns $80.

People don't invest in companies that merely have cash. Growth and recurring revenue are more important metrics to most

It depends on the industry. Some stock valuations show that investors in certain industries like companies to hold on to cash reserves. This is especially true in the technology space where investors want companies to be able to cash in on the next big thing. Utilities, though, see their stock punished for holding onto excess cash.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#65

Post by iofj »

ChuckMcM wrote: post #62

Does anyone know if you can use foreign funds in a buyback as a way to repatriate funds? Wondering if you have cash sitting in a foreign bank, can you use those funds to buy your own stock? Probably not since it would be a giant loophole you could drive a bunch of cash through.

Yes you can. From [1]:

While U.S. tax law is currently making it unattractive for Apple to spend its foreign earnings on buybacks, that pile of overseas capital (now above $200 billion) is effectively guaranteeing bonds that raise cheap capital Apple can use to buyback its shares at an extreme discount.

Steps:

1. Loan "US" cash, guaranteed by foreign cash (doesn't need profits repatriated)

2. Use loaned cash to buyback shares

Optimization:

1. Loan "US" cash, guaranteed by foreign cash

2. Buyback using loaned cash

3. Have your foreign subsidiary buy the loan from whoever you loaned from

4. Use the interest payments to transform US income into foreign (non-taxable) income

(it's not quite unlimited, there's a number of problems with this)

[1] http://appleinsider.com/articles/15/10/27/apple-inc-snatches...

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#66

Post by freddie_mercury »

downandout wrote: post #56
sabalaba wrote: post #49

Earlier quoted context omitted.

Taxing capital gains at 39.6% (our current top income bracket as of 2016) would be bad for business, job creation, and growth in the US economy. California also taxes long term capital gains (LTCG) at a top rate of 13%. It would mean that an investor in California would experience a LTCG rate of 52.6%, the highest in the entire OECD. Capital has legs and having a non-competitive capital gains rate would incentivize i…

>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in s…

You pay state taxes based on where the income is generated from (for most states but definitely for California), not where your house is. Putting their house in Tahoe/Reno but leaving the HQ in California wouldn't affect their income taxes.

They'd have to move the company HQ to Reno/Tahoe to avoid the taxes.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#67

Post by makomk »

superuser2 wrote: post #51
virmundi wrote: post #29

Earlier quoted context omitted.

I no longer wonder about such things. The simple fact of the matter is that the system is designed to work against wage earners. It focuses on the benefit of our corporate overlords. For example, I use to work for a company as a wage earner. I left, moving my 401k into a self-directed IRA. Since the market has been bad lately, I remained in cash. I want to put that money somewhere else: property. I would love to buy…

I don't want to be rude, but this doesn't make much sense. Preferential tax treatment for retirement savings accounts was created with the the specific intention of encouraging people to save for retirement, in order to minimize the extent of poverty among senior citizens. It is a feature, not a bug, that these accounts make it difficult to speculate, because the speculation decisions of amateurs and even most profes…

> It is a feature, not a bug, that these accounts make it difficult to speculate

Except that IRAs do let people invest their retirement savings in risky speculative investments like buy-to-let properties - they just have to give the IRA holding company a cut of they money in fees and pay someone else to deal with the repairs and maintenance, both of which have the effect of making their returns worse.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#69

Post by cperciva »

spectrum1234 wrote: post #57
cperciva wrote: post #6

Remember, in a perfectly liquid market without taxes, a company which executes a share buyback will have no change in its stock price, since the shared redeemed will be exactly balanced by a reduction in the value of the company; and this is also exactly equivalent to distributing profits in the form of a dividend. On the other hand, when the rate of taxation on capital gains is lower than the rate of taxation on cor…

But none of this explains the main reason they would do this (a buyback or a dividend) instead of reinvest the profits. Yes the have lots of cash, but they have for awhile. So the interesting question is why are they doing this now given the medium/long term ROI a company with cash looks generate. It could mean they stopped seeing obvious medium/long term investments. Maybe a small bubble is 5-10 years away.

It's trivially true that not all companies can provide ROI surpassing the market average. The more interesting question to me is why they ever stopped.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#70

Post by lyncnshare »

downandout wrote: post #56
sabalaba wrote: post #49

Earlier quoted context omitted.

Taxing capital gains at 39.6% (our current top income bracket as of 2016) would be bad for business, job creation, and growth in the US economy. California also taxes long term capital gains (LTCG) at a top rate of 13%. It would mean that an investor in California would experience a LTCG rate of 52.6%, the highest in the entire OECD. Capital has legs and having a non-competitive capital gains rate would incentivize i…

>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in s…

The tax only applies to realized gains. As long as they aren't selling their shares they aren't being taxed. They can also sometimes contribute the shares to tax advantaged vehicles (remember Romney having $101 million in his IRA [1]) or set up other structures to minimize their tax burden. That being said, Northern California is a wonderful place and housing and cost of living prices indicate that many people are willing to pay to live there.

[1] http://www.reuters.com/article/us-usa-campaign-romney-ira-id...

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