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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

#331

Post by duelingjello »

Sohcahtoa82 wrote: post #313
yummypaint wrote: post #212

Earlier quoted context omitted.

There have already been multiple mass extinctions in the past driven by global climate shift. There are currently 1 million species at risk of extinction right now, which is a significant fraction of known species. Full on ecological collapse has been happening on all fronts for years, and it still continues to accelerate. "society" isnt responsible for pollinating plants or turning co2 into o2, and it's scary how ea…

The difference is that humans are capable of manipulating their environment to fit the climate. We're the only species on the planet that lives in both 100+ degree deserts and frozen wastelands. As long as it's still possible to grow crops, humanity will survive.

Maybe most agriculture will have to happen indoors? Chile, Spain and many other year-round producers do it in greenhouses / hoop tunnels. Vertical farming/airoponics and so on to help scale food production.

I think the bigger problem is if we kill the ocean through sea level rise, warming, deoxygenation and acidification, then we kill 3/4 of oxygen production (but we would still have 100k-400k years supply) and 2%+ of the food supply.

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

#332

Post by walshemj »

r_luna wrote: post #317
walshemj wrote: post #310

Earlier quoted context omitted.

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

1 million dollars in a 401k is not the same as a 1 million dollars in a house. When the median american makes 65k per year and has 45k in disposable income it takes a lot of luck to put a million dollars into a 401K. There are 300 million+ americans, of which only 650k have a million or more in the 401k. How can we call the top 650K middle class?

You can not just count 401k which has stingy limits, I bet that are more than 650k with >1$m if you count other assets as well as the 401k

(excluding your home)

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

#334

Post by why_only_15 »

ttcbj wrote: post #215
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.

Most securities have a real intrinsic value that can be calculated the future cash flows to owners from that security. For bonds, the number of variables in this calculation makes this easier to understand: If you have a bond that will pay you $100 one time in one year, then the intrinsic value of that bond is slightly less than $100 (because there is risk you won't be repaid, there is inflation, and there is a cost…

Why didn't Rockwood & Co just sell the chocolate in bulk to someone else? I have to imagine the arbitrage traders were taking it at a discount because they're probably bad at selling chocolate, and they're probably reselling them too. Why didn't Rockwood & Co just do that instead?

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

#336

Post by tick_tock_tick »

jvanderbot wrote: post #19
nabla9 wrote: post #3

> drowning out real investment. The conclusion that buybacks are alternative for real investments is wrong. The aggregate change between R&D and capex versus buybacks and dividends is not just some arbitrary decision. ROI from R&D and investments is slowing down for various reasons. Instead of investing more without reason to do so, companies should give profits to owners or pay off excess debt. There is wrong and ri…

OK. You're probably right. I still hate it. There's not a viable explanation that doesn't make it seem shortsighted and greedy (personally, and possibly due to HN filter). Why is R&D not a good investment suddenly? Shortage of tech workers (blah blah) ...?

For the same reason acquisition are getting more common innovating in a large corporate environment is very hard.

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

#337

Post by Danieru »

aczerepinski wrote: post #104
crazygringo wrote: post #55

Earlier quoted context omitted.

That doesn't make any sense. The market is the most efficient capital allocator because shareholders are the market, not companies. 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 is equally true for both buybacks and dividends. This is because most companies have no wish to operate…

Buying back stock only creates value for shareholders if the stock is trading for less than its intrinsic value. Above that price buybacks destroy shareholder value. Executives are doing this to meet performance targets and get bonuses. Not to allocate capital efficiently.

Buybacks are not about creating value, they are about transferring value which already exists back to the legal owners.

Banning buybacks would leave money in the hands of the managers/administrators. Only suggest this if you feel CEOs are under paid and control too weak.

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

#338

Post by xt00 »

refurb wrote: post #115
xt00 wrote: post #95

Earlier quoted context omitted.

The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at th…

OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.

Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..

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

#339

Post by pmart123 »

jcfrei wrote: post #125
aczerepinski wrote: post #104

Earlier quoted context omitted.

Buying back stock only creates value for shareholders if the stock is trading for less than its intrinsic value. Above that price buybacks destroy shareholder value. Executives are doing this to meet performance targets and get bonuses. Not to allocate capital efficiently.

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.

Not really. Arbitrage opportunities typically occur when the risk and opportunity can be defined such as spread and liquidity across exchanges or contracts, euro denominated vs USD denominated assets, etc. intrinsic value is much more subjective. Yet, there are times where stocks might drift above or below their intrinsic value significantly. For instance, many CPG companies have become bond proxies due to rates, where the price only makes sense with a 3-4% discount rate.

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

#340

Post by NovemberWhiskey »

Sohcahtoa82 wrote: post #309
drelihan wrote: post #141

Earlier quoted context omitted.

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?

A stock buyback is not like the company is buying its own stock and holding it in a brokerage account.

Think about it like ... the opposite of an IPO. Instead of dividing up the firm into n shares and selling them to investors for cash; it's buying back n/m shares and effectively canceling them.

After the buy back, there are fewer shares of the company which are proportionately more valuable assuming the market capitalization has remained the same.

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