S&P 500 Buybacks Now Outpace All R&D Spending in the US • Hacker News Board

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

#271

Post by CuriouslyC » Wed, Dec 11, 2019, 8:13 PM UTC

mrep wrote: post #80

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.

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).

You can borrow against the stock, and defer gains basically forever as long as it appreciates more quickly than the interest rate of your loan.

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

#272

Post by CuriouslyC » Wed, Dec 11, 2019, 8:17 PM UTC

friedman23 wrote: post #88

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.

You understand that when a company does a stock buyback, somebody is selling their stock and that stock they sell is taxed with capital gains?

Or they could buy a different stock and pay nothing.

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

#273

Post by aidenn0 » Wed, Dec 11, 2019, 8:26 PM UTC

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…

Why not just tax capital gains at the same rate as dividends?

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

#274

Post by Redoubts » Wed, Dec 11, 2019, 8:31 PM UTC

frockington1 wrote: post #260

Redoubts wrote: post #151

Earlier quoted context omitted.

I can understand this. I know my company has a bug backlog a mile long, and some real issues we should put substantial time into; but it would rather have HR put downwards pressure on compensation while pursuing record buybacks. It gives a sense for what the priorities are.

Well a bug backlog that long isn't going to motivate execs to improve compensation. If there are too many bugs it might be time to pivot the business

Of course I don't mean more money for existing players, but to encourage strong new hires. But good talent tends to cost money, so...

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

#275

Post by marvin » Wed, Dec 11, 2019, 8:32 PM UTC

minikites wrote: post #191

marvin wrote: post #181

Earlier quoted context omitted.

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?

Savvy investors should know the laws of physics and be able to make a decent educated guess regarding what limitations are caused by fundamental limits, and what are instead the result of a e.g. any random local maximum, institutional inertia, lack of imagination, a long-standing duopoly and so on. Plus factor changing technological possibilities into this.

I don't think it's such a big deal if a few private investors lose their investment to a con, but there are a lot of smart people out there. Not everyone stated boldly that reusable rockets are impossible, that no social network could have better success than MySpace, that mobile phones had to have a keypad and only run pre-installed software or that electric cars could never be a viable competitor.

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

#276

Post by colinmhayes » Wed, Dec 11, 2019, 8:33 PM UTC

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…

Buybacks don't increase share value. The loss of assets used to purchase the shares cancels out the decreased shares.

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

#277

Post by thebradbain » Wed, Dec 11, 2019, 8:42 PM UTC

ChrisLomont wrote: post #41

papito wrote: post #24

Earlier quoted context omitted.

Yeah, Amazon paid $0 last year.

Since 2019 is not yet filed I assume you mean 2018 as "last year". Here's Amazon's SEC filing for 2018 [1]. They paid 1+ billion on income taxes (page 37) on 11B in profits. They paid billions more in property taxes and other regulatory taxes. Note that annual taxes also are affected by previous year issues. This is why from the same document, same page, you see them paying 1.4B on 3.9B of profit. So getting upset ab…

They paid $1+ Billion local, state, and international taxes. They paid $0 in federal taxes. Definitely worth noting, imo.

https://www.google.com/amp/s/www.forbes.com/sites/stephanied...

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

#278

Post by gzu » Wed, Dec 11, 2019, 8:48 PM UTC

stopads wrote: post #51

whatshisface wrote: post #37

Earlier quoted context omitted.

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 vehicl…

Take a look at balance sheets. Price to Book ratio has been growing on major company names. Book value is the equity remaining after assets - liabilities. Assets are dwindling/remaining constant and liabilities are growing due to debt funded buybacks. There will be no equity left many big names in the public markets due to the debt load.

It’s all a big wealth transfer game. The entire world is along for the ride hooked on index funds owning enormous stakes in these large companies and will be left with the bag in any downturn. No downturn can ever happen now and everyone knows it, especially the Fed. The current system can never correct otherwise it would implode. CEOs are exploiting this fact to full potential and will be gone/dead before any consequences arise.

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

#279

Post by bluecalm » Wed, Dec 11, 2019, 8:49 PM UTC

CharlesColeman wrote: post #269

bluecalm wrote: post #239

Earlier quoted context omitted.

But why do that? We accept that if I hope a stock or any other asset which value increases I am not liable to pay the tax until I actually realize that profit by selling. It makes sense to do it this way as well as otherwise you would be losing money to taxes just because the price fluctuates (one year it increase, another it decreases). When the company buy backs stock it actually triggers the tax event: people who…

> It makes sense to do it this way as well as otherwise you would be losing money to taxes just because the price fluctuates I'm unsure how you're reaching this conclusion. I said nothing about eliminating capital gains and moving to some kind of system where investors are taxed on yearly stock price fluctuations. All I proposed was to forbid companies from purchasing their own stock for the purpose of manipulating i…

The point is that purchasing their own stock is not for the purpose of manipulating its price. The price increase is a natural consequence of there being less outstanding shares. Less outstanding share = one share is worth more.

>>Dividends exist and have a long history as being the the way of returning cash to shareholders. Forcing their use for that purpose would make it easier to make and enforce policies on that activity.

Buybacks has many advantages though. The biggest one is that if you want to reinvest dividends into stock you would have to pay taxes which creates a situation where you are liable for taxes even if you didn't make any money (if the price fluctuates). Buyback is like automatically reinvested dividend. I don't think it should be taxable for the reasons outlined above.

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

#280

Post by mcguire » Wed, Dec 11, 2019, 8:51 PM UTC

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…

Pssst! Hey, Bud, there's a problem...

Fact 2 is true-ish, sort-of, but largely irrelevant. Except in extreme cases that tend to make headlines, shareholders vote for the people management selects.

And when was Fact 4 last seen in public?