Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

S&P 500 Buybacks Now Outpace All R&D Spending in the US

thesoundingline.com

Post reply on HN
Print view View original

51–60 of 402 posts

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#51

Post by stopads »

whatshisface wrote: post #37
stopads wrote: post #18

Earlier quoted context omitted.

It is drowning out real investment, this conclusion is correct because the companies themselves are saying so in their statements. Some companies are taking on huge debt to keep up in the buyback races despite having bad products that are losing market share. Oracle is probably the biggest example of this buyback insanity via debt, but there are many other companies doing the same thing. https://www.cnbc.com/2019/12/…

That's very interesting because that is what you would do if you wanted to liquidate a company and shut it down (on a leisurely timescale). Exactly how much of the US economy is being wound down? Maybe this is a great opportunity for new businesses with an appetite for R&D risk, maybe this is the US laying down so that China will replace it faster.

Absolutely. What we are witnessing is people extracting as much money as possible from healthy and unhealthy companies just because they can. This has been going on in the private equity/hedge fund world for decades, buybacks are the mechanism that is now being used on the public markets in similar, unethical ways.

Oracle is betting on not having a future, they are extracting as much money as possible from the vehicle before it goes off a cliff.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#52

Post by jcims »

Every time i read these threads i feel criminally incompetent in finance. You would think that putting your money to work for you would be incentive enough to dig deep, but i don’t seem to have the mental stamina to figure it all out. There’s probably a latent fear that I’ll also realize just how much money i haven’t made and regret that too.

I need a course or something that i can walk into with $20k or whatever and do all the things. Self-directed education doesn’t seem to help and Edward Jones just wants to sell me their shit.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#53

Post by ww520 »

try-perforate wrote: post #4

Read an idea in American Affairs in support of taxing buybacks. The logic goes that if all companies have a fiduciary duty to shareholders because the market is the most efficient capital allocator, AND all companies are giving their cash back to shareholders, THEN it must be true that the market can not figure out how to efficiently allocate this $1T of capital. Thus, the government should have “next dibs” for items…

The buyback money presumably is the money after corporate tax so it has gone through one round of taxation. The stock holders selling the stock will pay capital gain tax again, so the money will go through another round of tax.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#54

Post by baq »

kolbe wrote: post #43
try-perforate wrote: post #4

Read an idea in American Affairs in support of taxing buybacks. The logic goes that if all companies have a fiduciary duty to shareholders because the market is the most efficient capital allocator, AND all companies are giving their cash back to shareholders, THEN it must be true that the market can not figure out how to efficiently allocate this $1T of capital. Thus, the government should have “next dibs” for items…

Here's the problem: you're asking governments to have first dibs over the actual owners of the capital. The whole reason that companies are doing buybacks is that they cannot turn all of their money from $1 into $1.05 anymore, and they give it back to shareholders to go figure out how to get returns. When the government uses it, they turn $1 into somewhere between -$0.20 (wars) and 0.10 (infrastructure with myriad br…

That money doesn’t just disappear, right? It gets spent to private contractors on all too often outrageous terms but it goes back into the economy, too.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#55

Post by crazygringo »

try-perforate wrote: post #4

Read an idea in American Affairs in support of taxing buybacks. The logic goes that if all companies have a fiduciary duty to shareholders because the market is the most efficient capital allocator, AND all companies are giving their cash back to shareholders, THEN it must be true that the market can not figure out how to efficiently allocate this $1T of capital. Thus, the government should have “next dibs” for items…

That doesn't make any sense. The market is the most efficient capital allocator because shareholders are the market, not companies.

Companies are giving their cash back to shareholders because each individual company thinks their shareholders can better allocate the cash, rather than the companies themselves. This is equally true for both buybacks and dividends.

This is because most companies have no wish to operate like broad VC firms or investment firms. While plenty of shareholders do.

The government has all the infinite "dibs" it wants, they're called taxes. If the government wants to tax buybacks further it doesn't need any particular logic of "dibs" to do so. And right now buybacks are taxed in exactly the same way as capital gains, which is the same way qualified dividends are taxed too. And corporate profits are already taxed too.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#56

Post by rogerkirkness »

mrfusion wrote: post #46

I’m not getting this headline. Buy backs are something done with profit. So replace the headline with “s&p 500 Profits now outpace all R&D spending in the US”.

Technically you can borrow money very cheaply and do buybacks with it, which is actually happening as much as using profit.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#57

Post by [deleted] »

mrfusion wrote: post #44
try-perforate wrote: post #4

Read an idea in American Affairs in support of taxing buybacks. The logic goes that if all companies have a fiduciary duty to shareholders because the market is the most efficient capital allocator, AND all companies are giving their cash back to shareholders, THEN it must be true that the market can not figure out how to efficiently allocate this $1T of capital. Thus, the government should have “next dibs” for items…

I’m confused. Companies are using profits for the buy backs. Corporate profits are already taxed.

[deleted]

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#58

Post by loourr »

This is robbery by the management class, and who can blame them.

If I can take on debt at a corporate level and personally enrich myself, by increasing the value of the stock through buybacks and then selling it, why wouldn't I?

This is all made a whole lot worse by stock option packages that give managers equity at major discounts.

I think we'll look back at this as the largest heists in history. Should serve as a good lesson to central bankers in creating wack incentive schemes (but it probably won't)

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#59

Post by thekingofh »

jcims wrote: post #52

Every time i read these threads i feel criminally incompetent in finance. You would think that putting your money to work for you would be incentive enough to dig deep, but i don’t seem to have the mental stamina to figure it all out. There’s probably a latent fear that I’ll also realize just how much money i haven’t made and regret that too. I need a course or something that i can walk into with $20k or whatever and…

The game wasn't designed for you and me. It was designed for the ones that can take advantage of it with massive amounts of cash, connections, and staff to exploit it for them. Bet on the companies to figure it out for themselves and just stick to index funds over the long haul. That way at least you're not playing a game that was designed to take your money.

Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US

#60

Post by rwmurrayVT »

jcims wrote: post #52

Every time i read these threads i feel criminally incompetent in finance. You would think that putting your money to work for you would be incentive enough to dig deep, but i don’t seem to have the mental stamina to figure it all out. There’s probably a latent fear that I’ll also realize just how much money i haven’t made and regret that too. I need a course or something that i can walk into with $20k or whatever and…

I'm sure there are many courses available at your local convention center where they'll be happy to tell you what to do with your $20k!
Post reply on HN