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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

#301

Post by eloff »

dlp211 wrote: post #290
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.

Or we could tax excess capital and reinvest it in ourselves as a country upgrading our infrastructure, educational attainment, health, and the common wealth.

This is not a popular idea in the US, but I think it would be smart to invest in the common health, education, and infrastructure.

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

#302

Post by esoterica »

topherPedersen wrote: post #261

This is a disturbing trend that's been developing over the past 100 years, and I believe it is the main reason for our country's stagnating economic growth. Let's take a look! 100 years ago, companies on average dispersed 90% of their earnings back to shareholders as dividends. But by the 1970's however that number fell to below 50%. Fast forward to the 2000's and the payout ratio is down to around ~30%. What happene…

Buybacks also represent profits being returned to the shareholders. They aren’t different from dividends in that respect. Companies are still paying out shareholders, they are just doing it in a different way.

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

#303

Post by airstrike »

mcguire wrote: post #294
airstrike wrote: post #288

Earlier quoted context omitted.

October 15, 2019 https://www.cnbc.com/2019/10/15/de-shaw-gives-searing-indict...

" Emerson’s stock price, which has already responded to stories of D.E. Shaw’s potential activism, was up slightly Tuesday. "

One day stock price changes aren't meaningful.

I was only asked to provide a recent example, not an example of an effective campaign.

Look up the Elliott / Arconic saga to name an older example of a successful activism campaign.

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

#304

Post by xadhominemx »

CuriouslyC wrote: post #272
friedman23 wrote: post #88

Earlier quoted context omitted.

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.

No, you have to pay for each individual stock

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

#305

Post by phkahler »

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?

No. It drives up the share price. That's nice for people who want to sell, but does little for the long term. A company that has dividends might be able to increase them if the number of shares is reduced, but buybacks are often done by companies that dont have dividends. There are companies doing both and I'm not sure what to make of that.

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

#306

Post by walshemj »

dahdum wrote: post #178
voxic11 wrote: post #132

Earlier quoted context omitted.

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.

Most dividends are qualified and thus taxed the same as capital gains.

Not really dividends are taxed as income which Is normally higher than capita gains for good reasons.

Your basically taking more risk with capital that income to reward you for putting your capital at risk

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

#307

Post by roenxi »

OscarCunningham wrote: post #202
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…

> In reality, executives and directors could very well be authorizing stock buy-backs to keep share prices up so their stock options remain in-the-money for as long as possible. If that's the case, the buybacks are meant more for the benefit of executives and directors than for the benefit of the business or its shareholders. This plan shouldn't work because buybacks shouldn't cause stocks to rise unless the market t…

> This plan shouldn't work...

It works fine in the short term. It even makes the company more attractive to people who think it is a bad deal - maybe I expect them to go bust in 12 months, but there is an opportunity right now for me to buy shares off Trader A and sell them to a company for a slight markup, leaching money out of a failing concern. I've actually bought government bonds using very similar logic. I can't say if my logic on that specific trade was right, but as long as traders expect buybacks in the near future the price will be artificially elevated.

Essentially, for a shortish time-frame (don't know how long) stocks trade as tokens giving access to a cash flow instead of a measure of the intrinsic value of the company.

The issue is that the price will drop immediately on the prospect of further share buybacks ending. The shareholders who didn't sell are left holding the bag - a company with less cash, more debt and likely a wealthy executive bowing out while the going is good. As soon as something goes publicly wrong that suggests the end of buybacks (maybe a corporate debt crisis of some sort) the stock prices will probably drop further than usual because the buybacks end.

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

#308

Post by walshemj »

jdsully wrote: post #174
voxic11 wrote: post #132

Earlier quoted context omitted.

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.

No the shareholders own the company so they “own” the cash either way. Buybacks and dividends return control of the cash back to shareholders so they can allocate it elsewhere.

Not exactly a 10% buy back is not 100% guaranteed the same return as a 10% dividend - and this Ignores the time value of money.

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

#309

Post by Sohcahtoa82 »

drelihan wrote: post #141
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.

Buybacks are effectively taxed at the same rate as dividends, at least qualified dividends, just timing differs: Simple case with a corporation worth $200 with two equal shareholders, who each paid $100 for their half of the company and are in 20% capital gains tax bracket, ignoring net investment tax of 3.8%: Dividends: Corporation pays $100 in qualified dividends, $50 to each shareholder. Each shareholder pays thei…

> Corporation buys back $100 of shares from 1 shareholder. No taxes were due there as there were no capital gains for shareholder 1. Shareholder 2 now owns 100% of the corporation, so their investment is now, all other thing equal, worth $200.

Maybe I don't understand how stock works, but wouldn't shareholder 2 still own only 50%, with the corporation still owning 50% of itself?

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

#310

Post by walshemj »

take_a_breath wrote: post #298
wutbrodo wrote: post #199

Earlier quoted context omitted.

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.

==All told, 630,000 millionaires — about 1% of all IRA savers — cumulatively had more than $1 trillion in IRA accounts, accounting for 22% of all IRA assets.== https://www.marketwatch.com/story/how-to-shelter-hundreds-of...

So what a $millionaire is not in the super rich or even the rich class - well of middle class yes.
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