“All of this has led to weird idiosyncrasies, euphoria, and contradictions. Stocks ballooned, tripling in value since 2009”
This is like 9% compounded for 13 years, which is in line with historic averages.
What if your entire worldview was just because of near-zero interest rates?
11–20 of 393 posts
Re: What if your entire worldview was just because of near-zero interest rates?
#12Earlier quoted context omitted.
If a company does a buyback, shouldn't you still have a higher percent control if you dont sell any of your holdings, and the same % control if you do sell the dividend equivalent Imagine a company has 100 shares and I own 10. If they company buys back 50, the stock price will double, and my % ownership goes up from 10 to 20%. I can sell down to 10%, the same control I had before to take my profits. What am I missing…
Wouldn't that friend on who's voting the stock that company holds in itself? Is it the CEO? The board? The chairman? Or are the stocks cancelled from the total?
I can't parse all of your question. What friend?
To answer what I think you are asking, the buyback shares are usually destroyed. It isn't like the CEO gets to vote with them instead of shareholders. In fact, they company does not destroy the shares, and holds on to them for whatever reason, they do not get to vote with them. those are called "treasury stock".
Apple is a classic case. Around 2010, the company had 26 billion shares outstanding. They've spent the last decade buying them back, and now have about 16 billion shares. This contributes significantly to the increase in stock price. The portion of the company 1 share represents is 60% larger today than it was in 2010 because there are fewer of them
Re: What if your entire worldview was just because of near-zero interest rates?
#13People who complain about extreme fed policy should look to congress. The inability of congress to address core economic and financial issues forces the feds hand.
Re: What if your entire worldview was just because of near-zero interest rates?
#14“All of this has led to weird idiosyncrasies, euphoria, and contradictions. Stocks ballooned, tripling in value since 2009” This is like 9% compounded for 13 years, which is in line with historic averages.
It continuing unabated for 13 years is a historical anomaly, however
Re: What if your entire worldview was just because of near-zero interest rates?
#15I think the article brings up too many separate concepts without sufficiently tying them together. One of the most basic concepts you have to accept to agree with the premise of the article is that the Fed kept interest rates low to transfer wealth to the wealthy. > After the Great Recession, the Federal Reserve instituted a zero or near-zero interest rate regime. The philosophy behind it was simple: > > The Fed’s “s…
Regardless of Wolf Richter, the Wealth Effect is an actual philosophy tapped into by Ben Bernanke and others post-2009
> In defending the Fed’s bond-purchasing plan late last year, Bernanke said that “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion” (2011)
Re: What if your entire worldview was just because of near-zero interest rates?
#16I think the article brings up too many separate concepts without sufficiently tying them together. One of the most basic concepts you have to accept to agree with the premise of the article is that the Fed kept interest rates low to transfer wealth to the wealthy. > After the Great Recession, the Federal Reserve instituted a zero or near-zero interest rate regime. The philosophy behind it was simple: > > The Fed’s “s…
I never understood the negative attention stock buybacks have received relative to dividends. They do basically do the same thing, but nobody is offended when companies pay a dividend.
Dividends create an immediately taxable event, the value gained in a stock buyback is only taxed when the stock is sold. It’s one contributor to the low amount of taxes paid by the so-called 1%.
Re: What if your entire worldview was just because of near-zero interest rates?
#17Earlier quoted context omitted.
I never understood the negative attention stock buybacks have received relative to dividends. They do basically do the same thing, but nobody is offended when companies pay a dividend.
In a stock buyback, the investor only is made whole by "exiting" the stock. I.e., if that stock has voting rights, and you're more interested in being able to influence as a shareholder, you're left out of the "lifting of every risk sinker" when a company does a buyback. In fact, it guarantees that the amount of shareholder influence as a whole decreases, because if someone were to reacquire that share it would be mo…
So by your line of reasoning, a stock split should leash a company and hold them accountable since the cost to acquire or require shares is now much less than before.
We don't need the SEC, we just need to force companies to perform stock splits!
Re: What if your entire worldview was just because of near-zero interest rates?
#18Earlier quoted context omitted.
If a company does a buyback, shouldn't you still have a higher percent control if you dont sell any of your holdings, and the same % control if you do sell the dividend equivalent Imagine a company has 100 shares and I own 10. If they company buys back 50, the stock price will double, and my % ownership goes up from 10 to 20%. I can sell down to 10%, the same control I had before to take my profits. What am I missing…
Wouldn't that friend on who's voting the stock that company holds in itself? Is it the CEO? The board? The chairman? Or are the stocks cancelled from the total?
Bought back shares are either retired or held in the company’s treasury stock. Either way, there’s no voting right for these shares.
Re: What if your entire worldview was just because of near-zero interest rates?
#19Earlier quoted context omitted.
I never understood the negative attention stock buybacks have received relative to dividends. They do basically do the same thing, but nobody is offended when companies pay a dividend.
In a stock buyback, the investor only is made whole by "exiting" the stock. I.e., if that stock has voting rights, and you're more interested in being able to influence as a shareholder, you're left out of the "lifting of every risk sinker" when a company does a buyback. In fact, it guarantees that the amount of shareholder influence as a whole decreases, because if someone were to reacquire that share it would be mo…
If a company believes its own stock to be undervalued, why not invest in themselves by buying it? In that case it's an investment, vs a dividend which is not.
Re: What if your entire worldview was just because of near-zero interest rates?
#20Earlier quoted context omitted.
I never understood the negative attention stock buybacks have received relative to dividends. They do basically do the same thing, but nobody is offended when companies pay a dividend.
Dividends create an immediately taxable event, the value gained in a stock buyback is only taxed when the stock is sold. It’s one contributor to the low amount of taxes paid by the so-called 1%.
Isn't stock sold in the event of a buyback? And isn't that event taxable? Are dividend taxes higher than capital gains from stock sale taxes?