When shares of stock owned by an equity mutual fund are bought back by the company, the fund uses that money to buy shares of other companies. The money does not disappear or immediately go to consumption. Buybacks allow money to be transferred from companies with poor growth prospects to companies with better growth prospects.
S&P 500 Buybacks Now Outpace All R&D Spending in the US
111–120 of 402 posts
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#112Amazon has done 0 buybacks in the past 30 quarters [0] and is one of the best-performing components of the S&P 500 index. I'm not convinced that all corporate executives are right to assume that the best use of capital is to simply repurchase stock. Look what it's done for Amazon: it's delivered great economic value.
[0]: https://www.marketwatch.com/story/amazon-doesnt-buy-back-any...
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#113This 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 g…
It's no such thing. As a shareholder I am happy for companies to buy back shares and thereby increase the value of the remaining shares.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#114Earlier quoted context omitted.
How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).
The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at th…
Sure, when a company BUYS stock someone SELLS it to then. The selling party incurs capital gains and pays taxes on it.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#115Earlier quoted context omitted.
How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).
The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at th…
OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#116Perhaps I'm being simple, but I don't really understand the problem here. Companies are sitting on too much cash that they don't know what to do with. There is only so much that can productively be spent on R&D. If they don't do something with their cash, investors will start demanding a dividend. Once you start giving dividends it becomes hard to stop giving them. To prevent perpetual dividends, companies perform a…
But what's wrong with perpetual dividends? I think the relationship between investors and dividend-paying companies is a lot healthier than non-dividend-paying companies. If buy 1 share of DividendCorp I can rationalize it as a stream of future dividends generated by the company's profits. I want the company to succeed in the short term and the long term. If I buy 1 share of OtherCorp which pays no dividends I am pur…
You're not speculating on price, you are trusting that the company will make sound decisions which will result in growth and future profits, thereby increasing the stock's value. People mostly invest in stocks that don't pay dividends as opposed to instruments that pay fixed returns or companies that pay dividends because there is far more upside potential. I don't want all the companies I invest in to start being big dividend paying companies because that impedes their ability to grow.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#117Large US corporations have been buying back their own stock in record amounts, while investors have been cashing out of US stocks at a record pace , recent data shows: https://www.msn.com/en-us/money/markets/investors-bail-on-st... -- money is not being plowed back into IPOs, secondary offerings, etc. According to orthodox economic theory , large US corporations must be buying back stock with earned profits and new d…
Investors might be cashing out because the stock market is at a high. This is literally investing 101. Buy low sell high.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#118Earlier quoted context omitted.
The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.
The largest beneficiary of buybacks isn't the ultra-wealthy. It's retirees. It's grandma: "Of the $22.8 trillion in stock outstanding... retirement accounts owned roughly 37%, the most of any type of holder." [1] [1] https://www.businessinsider.com/who-actually-owns-the-stock-...
Retirees are also going to be selling down their portfolio as they age for living expenses. The ultra-wealthy are probably not systemically selling out of the equity market.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#119Good. Markets without buybacks and dividends are a ponzi scheme. The whole point of selling equity in a business is to raise funds, use it to grow, then return funds to investors.
Re: S&P 500 Buybacks Now Outpace All R&D Spending in the US
#120Earlier quoted context omitted.
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.
The velocity of MZM sits at around 1.3 right now, so it goes back after almost a year of being wasted. But who it goes to after that year matters as well. I would prefer Larry Page get the money because he will be able to intelligently allocate it. Or a productive poorer citizen get it to consume wisely. The myriad rent seeking morally defunct (and likely intellectually defunct) people who receive the government kickbacks are a bad set of people to end up with the money after a year. They invest poorly and spend frivolously. But sure, after several years, the money that didn't end up in the China's and the Cartels' pockets will probably back in circulation among the intelligent members of the economy.