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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

#181

Post by marvin »

eloff wrote: post #157

This supports Peter Theil's theory that innovation has stagnated. When companies give their profits back to the shareholders instead of investing in continued innovation, because they can't figure out a way to innovate with that capital. The world needs more Elon Musk type of entrepreneurs.

Your praise for Musk can't be repeated enough. Whatever you think of the guy, he is completely fearless regarding big investments in things that are possible in principle, but with a large risk of failure.

Most people shy away from those kinds of risks. I really wish we had more people with capital that took big risks on things that are unlikely to succeed, but would materially bring the world forward if they did.

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

#182

Post by ajmurmann »

Mikeb85 wrote: post #117
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…

Investors might be cashing out because the stock market is at a high. This is literally investing 101. Buy low sell high.

Yeah, 101 for people who think they know more about market timing than the average other person who shares the same believe.

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

#183

Post by svachalek »

jvanderbot wrote: post #19
nabla9 wrote: post #3

> drowning out real investment. The conclusion that buybacks are alternative for real investments is wrong. The aggregate change between R&D and capex versus buybacks and dividends is not just some arbitrary decision. ROI from R&D and investments is slowing down for various reasons. Instead of investing more without reason to do so, companies should give profits to owners or pay off excess debt. There is wrong and ri…

OK. You're probably right. I still hate it. There's not a viable explanation that doesn't make it seem shortsighted and greedy (personally, and possibly due to HN filter). Why is R&D not a good investment suddenly? Shortage of tech workers (blah blah) ...?

I suspect regulatory capture is part of the equation too. It's overall cheaper to effectively ban competition than to actually compete.

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

#184

Post by toast0 »

anotherman554 wrote: post #49
twoodfin wrote: post #11

Earlier quoted context omitted.

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

No because inheritances can have stepped up basis. It may never be taxed.

The basis step up on death is a byproduct of going through the estate tax. Yes, for the vast majority, the estate tax is $0, but it's not untaxed.

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

#185

Post by s_r_n »

tw04 wrote: post #67
crazygringo wrote: post #55

Earlier quoted context omitted.

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…

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.

To add to this, the ultra-wealthy, university funds, funds-of-funds, etc. are interested in capital preservation, according to the article. This means they likely will not reinvest their profits into companies that will grow; they're more likely to reinvest into other companies that will do buybacks.

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

#186

Post by CharlesColeman »

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…

> Read an idea in American Affairs in support of taxing buybacks.

Honestly, at their most supportable, share buybacks seem to be just dividends in all but name with different tax consequences (i.e. they're a tax dodge). I'd support a law that declared the only legal way to intentionally return cash to shareholders is via dividends, to close the loophole and increase tax revenues.

In other cases, they just seem like financial engineering employed by CEOs and other interested parties to game their personal job performance metrics.

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

#187

Post by streb-lo »

JackFr wrote: post #173
tw04 wrote: post #67

Earlier 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 ultra-wealthy that are the beneficiaries of the vast majority of these buybacks The S&P 500 is > 80% owned by institutions. That is mutual funds, pension funds and insurance companies. The main beneficiaries arent fat cats, but rather anyone with a 401k.

Are you claiming that a mutual funds' performance evenly benefits anyone with a 401k?

In the last 40 years 0.00025% of Americans have tripled their share of the wealth. Of course everyone with a 401k has benefited but they are nowhere close to the main beneficiaries of capital gains.

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

#188

Post by mattmanser »

derefr wrote: post #147
code_sloth wrote: post #122

Earlier quoted context omitted.

> 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_ doesn't make any sense. Companies don't think. They're legal entities that are controlled by a small group of people. This group of people can decide that they would prefer to do share buybacks to meet their own performance targets.

Five facts, and one generally-held assumption: Fact 1. Companies’ brains (for this level of executive decision-making) are their boards of directors. Fact 2. Boards of directors are made up of people elected by shareholders. Fact 3. “Making the shareholders money” (either through dividends or equity) is the most obvious “platform” on which to get elected to this position; and “not making the shareholders money” is us…

These are obviously not "facts" and companies obviously do not operate in that way.

Really obviously. Just observe any company.

I appreciate you might have a real hard-on for capitalism, but making up stuff like you just did doesn't help.

Companies are cess-pools of politics, incomplete information, petty rivalries, and disparate power. Most shareholders are clueless, poorly informed or spreadbetting.

Given this is all true, your "facts" are all objectively false.

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

#189

Post by cryptica »

crazygringo wrote: post #55
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…

Shareholders and companies are equally inefficient at allocating capital. If not for buybacks, the company would probably have wasted the money on creating more useless jobs which would add no value to the company.

Instead, the company prefers to give the money back to shareholders in the form of capital appreciation so that they will either hold it or sell some of it and use the proceeds to buy shares of another equally wasteful corporation.

Eventually these corporate stock buybacks will lead to grotesque wealth inequality and if we're lucky, complete collapse of the international fiat monetary system which facilitates such atrocities.

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

#190

Post by riversflow »

rayiner wrote: post #99
tw04 wrote: post #67

Earlier 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.

Corporations are paying taxes. US corporate tax receipts as a percentage of GDP are a tick higher than the OECD average. Also, it’s not the “ultra wealthy” primarily benefitting from these buybacks. Most corporate equity is owned by the bottom 99% and pension funds.[1] (Someone with a $5 million retirement account may be very comfortable, but they’re not hiding their money in offshore accounts.) [1] Most corporate eq…

Considering the US’s keystone position in global economics, providing safe passage for trade (and relatively stable oil/NG prices, but never mind that) at the cost of a large standing navy, I think a single tick over other OECD countries is a joke. The multinationals owe the US better infrastructure.
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