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

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

#161

Post by dcolkitt »

loourr wrote: post #58

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 g…

I don't exactly understand who you think is being "robbed" here. Shareholders?

Because if that's the case there's little evidence of it. US equity returns have had one of the best decades in all of history. That certainly does not support the narrative that American shareholders are being ripped off on a systematic scale.

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

#162

Post by happycube »

Thriptic wrote: post #83

Perhaps 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…

True for Apple, but much less true for companies putting 100%+ of free cash flow into buybacks.

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

#163

Post by hippich »

take_a_breath wrote: post #126
crazygringo wrote: post #98

Earlier quoted context omitted.

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-...

Your data does not say what you are claiming it says. It is possible (or even probable) for the ultra-wealthy to have retirement accounts. Once we admit that, then the obvious question becomes: Who do you think owns most of the money in those retirement accounts, the rich or the poor?

Retirement accounts are limited by the amount one might deposit annually. The most perhaps one can make is 19k in 401k and perhaps somehow max out SEP IRA - $56k (which I find quite tough to max out). Regular IRAs are out of questions, since at the income level dealing with 401k and SEP IRA, one does not get any benefits of funding regular IRA afaik.

So... The best-case scenario is $75k per year someone might be able to stash away in a retirement account. Let's say someone is able to do it for 50 years - it leads to $3.75m. It is a decent amount for retirement in my opinion, but 1) it is unlikely to optimize it fully to get there, and 2) doesn't really look stratospheric to make a difference in retirement funds ownership categorizations (i.e. 0.1% owns large part of retirement investments).

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

#164

Post by JumpCrisscross »

dcolkitt wrote: post #158
JumpCrisscross wrote: post #152

Companies are buying back shares. Individual investors are selling shares [1]. Private equity [2] and VC are raising record sums [3]. Alternate title: financial markets shifting capital from public to private companies. The economy’s R&D engine has shifted. Financial markets are following. [1] https://www.wsj.com/articles/investors-bail-on-stock-market-... [2] https://www.wsj.com/articles/private-equity-firms-are-rai…

Yeah, I don't really understand the negative sentiment here. If a company's buying back stock, then someone's selling those shares. That investor now has extra cash on hand to invest somewhere else. It's not like that capital just gets thrown into an empty pit. Mature companies returning money is a pretty natural state of affairs. Unless you believe that all growth and investment over the next 25 years is going to be…

Prohibiting buybacks might increase dividends. It’s more likely to boost M&A. What it unlikely is for internal R&D, capital investment or hiring to benefit.

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

#165

Post by AnthonyMouse »

This is a misleading comparison. When you spend money on R&D, it's spent. Somebody is actually consuming man-hours to do work that then can't be used for something else. When you "spend" money on buybacks, it's just moving money around. No scarce resources are consumed, it's just a meta-determination of who gets to decide how to actually spend the money.

And moving the money from huge risk-averse corporations to investors that may have a higher risk tolerance may increase investment into innovative new ventures.

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

#166

Post by beefield »

twoodfin wrote: post #11
rjkennedy98 wrote: post #6

Earlier quoted context omitted.

At the very minimum it should be taxed the same as dividends. Essentially tax buybacks are a tax loophole for giving money back to the shareholder.

It is taxed the same as dividends, just deferred until the outstanding equity is sold, no?

Not sure why it should be the case that you are allowed to defer these taxes?

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

#167

Post by ultraluminous »

asdfasgasdgasdg wrote: post #100
cs702 wrote: post #12

Large 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…

Doesn't one require the other? You have to buy back the stock from someone. That someone is necessarily divesting themselves of the stock as a result.

If you're referring to "...investors have been cashing out of US stocks at a record pace", than to further clarify - investors are divesting out of the public stock market entirely. They're not selling their Apple stock in a buyback to invest the proceeds of the sale into an exciting IPO, or a deep value small cap. They're just taking it out of entirely. Think what that implies about the macro structure of a "market economy" when the majority of new money going into stocks is executive/company initiated stock buy backs, and not "investment".

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

#168

Post by onlyrealcuzzo »

AnthonyMouse wrote: post #165

This is a misleading comparison. When you spend money on R&D, it's spent. Somebody is actually consuming man-hours to do work that then can't be used for something else. When you "spend" money on buybacks, it's just moving money around. No scarce resources are consumed, it's just a meta-determination of who gets to decide how to actually spend the money. And moving the money from huge risk-averse corporations to inve…

There's the bit about 60% of money being managed passively, and these passive funds will buy Microsoft stock at $100 or $1M (proportionally). The stock buybacks shouldn't affect the market cap (it's just moving money). It's impossible to know if the buybacks have actually affected market caps, but consensus seems to be that it's increasing market caps. That means you're getting free money from passive funds. Seems like a problem for pensions and most 401ks.

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

#169

Post by topkai22 »

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…

We don't need a new tax, just a fix to an old tax- tax all capital gains the same as normal income. Even better if we enabled a refund of some sort in years with negative capital gains to act as an automatic stimulus.

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

#170

Post by JackFr »

voxic11 wrote: post #132
jcfrei wrote: post #125

Earlier quoted context omitted.

I don't think I can follow your argument. What's intrinsic value? The market is supposed to arrive at a fair value for a stock (and there's no reason to assume it doesn't because that would create arbitrage opportunities). If you buyback at the fair value no shareholder value is created or destroyed, the only change is in the ownership of the assets and future dividends.

Don't stock buybacks basically transfer wealth from the company to the shareholders? The major advantage this has over other means of transferring wealth is that shareholders get to realize their gains with only capital gains tax applied, rather then the much higher dividend tax rate.

> Don't stock buybacks basically transfer wealth from the company to the shareholders?

That is to say from the shareholders to themselves.

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