Is the current cadre of politicians trained to set policy under high interest rate? I ask of those from main economies.
What if your entire worldview was just because of near-zero interest rates?
21–30 of 393 posts
Re: What if your entire worldview was just because of near-zero interest rates?
#22Earlier 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…
> Stock buybacks are therefore not equivalent in any way to paying of dividends.
They are extremely similar. The differences are around timeline and tax advantages, none of which you covered.
In a buyback, your percent ownership in the company will go up and the price will go up (barring other factors). You can sell some stock to keep your percentage flat and get some cash, making it like a dividend. Or, you can make a dividend like a buyback by reinvesting the dividend. Your percentage of ownership will go up.
Re: What if your entire worldview was just because of near-zero interest rates?
#23Earlier 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%.
Of course unrealized gains won't be taxable, but they can't be spent either.
For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself.
I don't think it is desirable to force realization just to increase tax revenue.
Re: What if your entire worldview was just because of near-zero interest rates?
#24“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.
Hm, but we've had zero interest rates that entire time so shouldn't we have expected even higher returns? E.g. what would the 90s have looked like with zero rates?
Re: What if your entire worldview was just because of near-zero interest rates?
#25People 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.
Complete nonsense.
The Fed isn't supposed to address any "issues", but simply be neutral.
Instead they've spent a century saving entities that socialized private losses.
Re: What if your entire worldview was just because of near-zero interest rates?
#26People 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.
Complete nonsense. The Fed isn't supposed to address any "issues", but simply be neutral. Instead they've spent a century saving entities that socialized private losses.
The fed has a mandate to follow:
https://en.wikipedia.org/wiki/Federal_Reserve_Reform_Act_of_...
Re: What if your entire worldview was just because of near-zero interest rates?
#27> The point of this silly question is to consider just how much of an outsized role the Fed now holds.
Among the overarching points of the U.S. Constitution is that people who wield vast power stand for election.
The Federal Reserve urinates all over this point.
Reforming the Federal Reserve is sine qua non IMO if there is to be any improvement.
Re: What if your entire worldview was just because of near-zero interest rates?
#28Earlier quoted context omitted.
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%.
Of course unrealized gains won't be taxable, but they can't be spent either. For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself. I don't think it is desirable to force realization just to increase tax revenue.
> For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself.
Why not tax all of that simultaneously? That's what the Dutch do.
> I don't think it is desirable to force realization just to increase tax revenue.
And yet various governments are doing or are planning exactly that.
Re: What if your entire worldview was just because of near-zero interest rates?
#29Earlier quoted context omitted.
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 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…
Nothing, except for well... many investors aren't rational, or at the very least, they operate on other rationale. And because of this, it's entirely possible the stock price doesn't actually double in your scenario. However, if didn't, it at least would work positively towards the value metrics of the stock.
Re: What if your entire worldview was just because of near-zero interest rates?
#30Earlier quoted context omitted.
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%.
Of course unrealized gains won't be taxable, but they can't be spent either. For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself. I don't think it is desirable to force realization just to increase tax revenue.
My understanding is that you can play tricks with stocks so that you don't really need to realize the gains to benefit from them. They can be used as collateral for loans, directly donated to charities (lowers down your tax bill w/o forcing you to realize the gain), there's also the step-up basis loophole (or was it already closed?). I may be missing some details (and other creative ways to do "tax optimization") though, I'm not a CPA.