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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

#191

Post by minikites »

marvin wrote: post #181
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.

>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.

If this is the desired outcome, how do you tell the difference between an entrepreneur and a con-man?

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

#192

Post by 6gvONxR4sf7o »

ISL wrote: post #82
pc86 wrote: post #9

Earlier quoted context omitted.

What would this look like from a practical standpoint, though? Dividends are a taxable event because you're giving someone money. In a buyback, the value of the stock simply goes up, which isn't a taxable event. How do you determine the cost basis on something like that? If there's a stock buyback over the course of 6 months, how do you determine which proportion of the price increase is due to the buyback, as oppose…

In a buyback, a shareholder must sell shares back to the company. When they do, the shareholder's gains are taxed with capital-gains tax. Furthermore, whenever shareholders sell shares after the buyback, their shares are generally worth more, so they pay increased capital gains, too. I don't know which yields more tax revenue in the long run, but buybacks definitely generate some tax income. The only time I could see…

>one would expect the market capitalization of the company to be smaller, as the company has paid out money

This doesn't make sense to me. If I spend $X to buy a widget worth $X, I've paid out money, but I haven't net lost anything. I'm worth the same in total. If the widget is a share in a company, even my own, that shouldn't change the fact that the net change in total value is zero.

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

#193

Post by pinkfoot »

thehappypm wrote: post #153
pinkfoot wrote: post #146

Earlier quoted context omitted.

> I have never heard of extinction as a possible consequence of climate change If things get nasty, the nuclear-armed folk might just light up the 14,000 nukes lying around. That could do it.

Still, how would that kill everyone ? Small pockets of humanity would still hang on.

Hence ‘could’. A possibility, not a certainty.

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

#194

Post by dahdum »

loourr wrote: post #140
Bostonian wrote: post #113

Earlier quoted context omitted.

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.

Sure as a shareholder I also like stock buybacks. For instance, when Berkshire Hatheway does it, it's almost certainly a good thing. I don't think that's what we're seeing in the vast majority of cases though. I think what we're seeing is managers personally enriching themselves by taking on corporate debt and doing so in a very tax-advantaged way. Keep in mind they're not buying the stock they own in the first place…

If this were true, why aren’t we seeing an incredible surge of shareholder lawsuits? Those managers are ripping off all those long hedge funds and activist investors, and none of them are crying foul?

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

#195

Post by l2p »

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…

As costs to borrow continue to fall, the search for yield is exacerbated. Buybacks seem like a rational choice for executives to meet their performance goals/incentive structures given that the list of other options is becoming shorter/harder.

Here is link to an updated data set for [a] https://fred.stlouisfed.org/graph/?id=QUSNAM770A,

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

#196

Post by matthewdgreen »

hippich wrote: post #163
take_a_breath wrote: post #126

Earlier quoted context omitted.

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…

Mitt Romney’s IRA was valued at over $100m. Hell, this was widely publicized during an election. https://www.google.com/amp/s/mobile.reuters.com/article/amp/...

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

#197

Post by 3pt14159 »

partiallypro wrote: post #90

Why do people think that if you pour more money into something like R&D you'll get more results? That isn't how it works. You get diminishing returns on anything, do you not think internal statisticians and economists at the company haven't calculated that?

Sometimes it's about timelines, not sheer ROI. Apple is in a position to make long term R&D bets because they don't face the same board pressure that many other companies do.

Also, it's not only R&D. Long term capital outlays like building new factories are also something that buybacks compete against, and some companies like Telsa do the opposite: Raise more from the capital markets and invest in long term spending in both R&D and capital outlays.

Looking at the system as a whole, though, board pressure aside, we should want companies like Tesla raising cash for longterm spending while other companies issue share buybacks or dividends.

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

#199

Post by wutbrodo »

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?

Since the ultra-wealthy are by definition a small portion of the population, and retirement contributions are capped at a low annual rate, it does in fact make the point that the parent commenter is trying to.

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

#200

Post by robocat »

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.

Another advantage for many different kinds of shareholders (foreign, non-profit, tax-loss-holders, long-term-holders etc) could be that the taxation rules for buybacks are specific to the shareholder.

Dividend and company taxes can really screw certain types of shareholders.

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