Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record • Hacker News Board

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#71

Post by mywittyname » Fri, Apr 24, 2020, 4:04 PM UTC

quickthrowman wrote: post #34

mywittyname wrote: post #4

Earlier quoted context omitted.

A stock buyback is theoretically the same as a dividend, in that it should reduce market cap by roughly the amount of the buyback. I do agree with your sentiment though. I feel like the wealthy in this country have developed the perfect scheme for leeching the wealth from this country. We will only know how bad it was after the postmortem, at which point, we will be (figuratively) dead.

Only it isn’t the same. Dividends are taxable, capital gains are only taxable upon closing a position.

Yes. The reason I say theoretically is because, from a business perspective, they aren't different. Whether you buy your own stock or distribute a dividend shouldn't matter from a market cap perspective. It's still cash the company used to have, but no longer does and the market cap will reflect both equally.

Now some investors prefer buybacks for tax reasons, others may not. It depends entirely upon how they invest. If you're a buy-and-hold, then it's favorable due to lack of taxes, but if you rebalance a lot (which most mutual funds do), then it doesn't matter.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#72

Post by fallingfrog » Fri, Apr 24, 2020, 4:08 PM UTC

core-questions wrote: post #46

fallingfrog wrote: post #29

Here’s how I see this going (obviously just a guess): the entire corporate financial system is now unprofitable without being bailed out with zero interest loans every 10 years. This time around, the recovery will be slow, 10 years, then another, bigger bubble will form, that will pop and get bailed out again, but the next time around it will cause fast rising inflation. The fed will have to choose between either all…

> At that point, the right wing, funded by the desperate corporate state which needs to stem the rising tide of labor activism, will blame coastal elite liberals and immigrants for their problems and there will be some kind of fascist coup, followed potentially by war, (but probably not). You had me until "funded by the desperate corporate state", who want absolutely nothing to do with the right wing. If anything, we…

The corporate state in Weimar Germany was faced with a popular communist movement, and to defeat it they threw money at the fascists, who they saw as the only credible opposition. But, history never repeats, it may go down differently next time. Just look at how the supposedly left wing media responded to Bernie Sanders. When money is on the line, they will align with the right wing. Plus, left wing is by definition a movement that opposes the current power hierarchies in society. Look it up on Wikipedia.

https://en.m.wikipedia.org/wiki/Left-wing_politics

By that standard, none of the people you would call totalitarian liberals are left wing at all, they’re just corporatists with socially liberal virtue signaling. Trust me when I say that those people are the very first to suppress labor strikes or call the cops on protesters. They would absolutely support a fascist coup if it was their only way to keep their money, power and influence.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#73

Post by codeisawesome » Fri, Apr 24, 2020, 4:08 PM UTC

est31 wrote: post #21

jonfw wrote: post #5

Earlier quoted context omitted.

You're not giving the whole picture if you don't mention that IBM's market cap has seen very significant decline over that time period. IBM has been producing insane cash-flow over this period and their strategy was to pay out dividends/buybacks rather than to invest in new markets Is IBM even getting bailout money? What does IBM have to do with the bailouts?

And dividends/buybacks are a reasonable choice. It moves the choice of whether to invest into new markets to the investors instead of dictating it from above. Companies like Google are blown out of proportion in comparison to the part that actually makes the money, all in order to find the next toothbrush product that may never come. The core Google products barely changed in the last 5 years, yet the employee count…

> The core Google products barely changed in the last 5 years

Frontend development and UI updates are not the only way progress is made on the technical infrastructure in technology companies. How do we know that Google isn't battling an adversarial web with 1000s of engineers just to keep the search quality where it is? It must be quite an arms race to behold between Google teams and the coordinated and well motivated spammers, scammers and other bad actors (who also might be leveraging automation, AI and more!)

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#74

Post by mrlala » Fri, Apr 24, 2020, 4:10 PM UTC

gbasin wrote: post #60

throw0101a wrote: post #42

Earlier quoted context omitted.

> IBM did 140 billion in stock buy backs in the last decade. And? What is the alternative, and is it any better? > IBM has effectively been dead money for the last decade. They’re up 20%, including dividends, versus 315% for the tech index (XLK). IBM currently has a market cap of ~$100 billion, so when people hear they spent $45 billion on buybacks while their share price went down 38%, people get angry. I get it, it…

Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders?

>Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders?

I think it's a bunch of bs the way you are wording this. I know these are not your words alone, it's what people say.. but it's so misleading!

You say "return it to shareholders". Well, no. A dividend is returning to shareholders.. that's what a dividend is.

A stock repurchase is basically nothing more than the company buying back stock, and giving holders the option to sell theirs to the company..

The investor can sell the damn stock any time they want... this is NOT "returning it to shareholders".

It is a completely convoluted way to arbitrarily do a bunch of fancy things to both use cash, get stock, prop up the price even more since there is a buy pressure..

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#75

Post by ardy42 » Fri, Apr 24, 2020, 4:13 PM UTC

gbasin wrote: post #60

throw0101a wrote: post #42

Earlier quoted context omitted.

> IBM did 140 billion in stock buy backs in the last decade. And? What is the alternative, and is it any better? > IBM has effectively been dead money for the last decade. They’re up 20%, including dividends, versus 315% for the tech index (XLK). IBM currently has a market cap of ~$100 billion, so when people hear they spent $45 billion on buybacks while their share price went down 38%, people get angry. I get it, it…

Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders?

> Bingo. Would you rather have a poorly managed company hold on to their cash and spend it internally, or return it to shareholders?

It's not an either/or. A poorly managed company can make itself more dysfunctional by neglecting investment and returning too much cash to shareholders.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#76

Post by compiler-guy » Fri, Apr 24, 2020, 4:13 PM UTC

est31 wrote: post #21

jonfw wrote: post #5

Earlier quoted context omitted.

You're not giving the whole picture if you don't mention that IBM's market cap has seen very significant decline over that time period. IBM has been producing insane cash-flow over this period and their strategy was to pay out dividends/buybacks rather than to invest in new markets Is IBM even getting bailout money? What does IBM have to do with the bailouts?

And dividends/buybacks are a reasonable choice. It moves the choice of whether to invest into new markets to the investors instead of dictating it from above. Companies like Google are blown out of proportion in comparison to the part that actually makes the money, all in order to find the next toothbrush product that may never come. The core Google products barely changed in the last 5 years, yet the employee count…

Google annual revenue in billions of dollars[1]:

        Revenue
  2019: 160.74    
  2018: 136.36
  2017: 110.55
  2016:  89.98
  2015:  74.54

Google's stock price is well over double today compared to five years ago--and that's even after the recent volatility. It is quite far ahead of the S&P 500 over those five years.

If you think that's "not great for investors", then I don't know what to tell you.

It's a little hard to eyeball, but profits per employee has been on a long upward trend too, except for 2019, where it fell substantially, but note the revenue gains above--that didn't just magically appear [2].

[1] https://www.statista.com/statistics/266206/googles-annual-gl... [2] https://www.theinformation.com/articles/after-hiring-binges-...

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#77

Post by [deleted] » Fri, Apr 24, 2020, 4:14 PM UTC

logicslave wrote: post #3

One interesting fact I learned the other day: IBM did 140 billion in stock buy backs in the last decade. They have a 100 Billion dollar market cap. I think that is a bit of what we have going on right now. A system propped up by injected cash, which works for now because everyone plays along. Most of this injected money goes into the pockets of the rich, who are the ones holding the assets that the FED is bailing out…

[deleted]

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#78

Post by isoskeles » Fri, Apr 24, 2020, 4:14 PM UTC

yeldarb wrote: post #43

throwanem wrote: post #36

Earlier quoted context omitted.

I was about to make a joke that it looked like they could go about another 69.8%. Now I'm glad I waited. What does that even signify, a federal bank owning >100% of its attached country's GDP? Debt in excess of produced value, i.e., the country being underwater?

GDP is per year. Analogous to a person making $100k/yr with a $110k mortgage. Edit: Although perhaps not that analogous because is this even technically "debt"?

What if we alter that analogy to a person who makes 100k/yr with a 110k mortgage, and next year they make 101k with a 115k mortgage, and next year they make 102k with a 120k mortgage, and so on?

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#79

Post by jetrink » Fri, Apr 24, 2020, 4:15 PM UTC

codeisawesome wrote: post #70

throw0101a wrote: post #42

Earlier quoted context omitted.

> IBM did 140 billion in stock buy backs in the last decade. And? What is the alternative, and is it any better? > IBM has effectively been dead money for the last decade. They’re up 20%, including dividends, versus 315% for the tech index (XLK). IBM currently has a market cap of ~$100 billion, so when people hear they spent $45 billion on buybacks while their share price went down 38%, people get angry. I get it, it…

If IBM invested the money into actual research and product development - that would mean the money still enters the economy via the workers doing the research and development. I feel like this point isn't emphasised well enough in the quote above - and I wonder if the "anti buyback crowd" would have anything to say against that.

That presumes that IBM knows how to create something of value with its R&D department. If the R&D department is just finding faster ways to answer Jeopardy questions, real resources are going to waste. Those smart people could be doing important work somewhere else.

Re: Fed Prints Another $205B This Week, M2 Growing at Fastest Pace on Record

#80

Post by mywittyname » Fri, Apr 24, 2020, 4:16 PM UTC

brianwawok wrote: post #39

zaroth wrote: post #11

Earlier quoted context omitted.

I’m not sure what your last paragraph has to do with the first three. A main purpose of buying a stock is to receive dividend payments. Buybacks are just a tax efficient dividend. The latest craze to make paying dividends sound evil is just strange.

One strategy is dividends. Another is to buy a stock at X, sell later at Y and hope Y > X Both are valid. Oddly they are taxed differently.

> Oddly they are taxed differently.

Most dividends are treated as 'qualified,' meaning that they are taxes as LT cap gains. So in that respect, the tax treatment is the same as selling the appreciated stock at a profit.

The big difference is that you're forced to pay taxes on a dividend the year you receive it, while you can theoretically defer capital gains taxes forever in a reinvestment scenario. Practically speaking though, most people own mutual funds that rebalance every year or so (think, S&P500 index fund), and pay out LT Cap Gains quarterly/yearly. So for most investors, there's not a huge difference between the two.

Additionally, there are schemes to allow for different tax treatment on dividends, such as capital dividends or stock dividends.