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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

#391

Post by ttcbj »

why_only_15 wrote: post #334
ttcbj wrote: post #215

Earlier quoted context omitted.

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?

Good question: for tax reasons!

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

#392

Post by Sohcahtoa82 »

SmartJerry wrote: post #374
Sohcahtoa82 wrote: post #309

Earlier quoted context omitted.

> 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?

There is a disconnect here that needs to be clarified but you are actually part correct. The 'corporation' owns the shares, but shareholder 1 owns the corporation and thus it is his now. Shareholder 1 now owns 100% of the company but the company is worth 50% less because it spent half it's money on buybacks. So shareholder 1's value of ownership did not increase at all, only shareholder 1's % of ownership. Stock buyb…

So...I know realistically, this isn't possible, but what if a corporation bought back every share except for one. Would that one lucky shareholder who probably bought his one share for $20 now own the entire corporation?

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

#393

Post by Sohcahtoa82 »

NovemberWhiskey wrote: post #340
Sohcahtoa82 wrote: post #309

Earlier quoted context omitted.

> 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 capit…

I looked up if a company can do the opposite - basically poof additional shares into existence and sell them - and found out they basically can and it's called stock dilution.

How is that legal? It doesn't make sense to me that if a share is worth x% of a company that said company can just decide "Nah, you actually now only own half of that" and sell more shares.

Fake edit: I googled "how is stock dilution legal" and found this [0] which explained it well and now it makes sense to me. The diluted stock might be a smaller % ownership, but since the company gained value because of money coming in, the dollar value of the shares stays the same.

[0] https://money.stackexchange.com/questions/58391/why-is-stock...

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

#395

Post by airstrike »

CharlesColeman wrote: post #389
airstrike wrote: post #292

Earlier quoted context omitted.

> In other cases, they just seem like financial engineering employed by CEOs and other interested parties to game their personal job performance metrics. They may seem like that from the outside looking in, but you'd be hard press to find a finance professional who agrees with that assessment. Just imagine how many incorrect notions laymen have about software and realize that the same is true in finance and any other…

I trust "finance professionals" on stuff like that about as much as I trust Mark Zuckerberg on internet privacy. Insiders may have expertise, but their insider-ness means one should be skeptical of their perspective for all kinds of reasons (including, but not limited to: self-interest, indoctrination, selection effects, acclimation to industry practice, etc.).

That's tantamount to distrusting experts by default, which doesn't really seem all that logical.

No single, monolithic set of interests exists in finance for all experts to be equally conflicted.

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

#396

Post by take_a_breath »

walshemj wrote: post #332
r_luna wrote: post #317

Earlier quoted context omitted.

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)

We can assume that the 650k people with $1 million in just their IRAs also have significant other assets. I’m not really sure what you are arguing here.

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

#397

Post by hippich »

Qworg wrote: post #372
hippich wrote: post #360

Earlier quoted context omitted.

Thank you for sharing this link. Not sure what to think about it tho... "In essence, Bain would value the special, riskier shares at pennies on the dollar. In one deal, employees invested about $23,000 in their IRAs. When the takeover target went public, those shares were worth about $14 million, and were worth about $23 million they finally sold the shares. That’s a 100,000% return." Meaning, someone was risking the…

One legal (AFAIK) method: The company had low/no valuation, and it was private. Those shares were sold to the employees (likely of the vehicle containing the company) at the stated valuation. Once they went public, there was a valuation event. Roughly, they snuck through the 409a before it had to be reported.

Something doesn't line up...

So if shares had a low valuation, employees buying these risked that they will worth nothing in the future. I.e. not really different from buying AMZN shares in IRA.

Unless, shares were valued low on purpose, and were offered to buy at that price as another form of compensation (so compensation was difference between "as valued" and "real value"). In that scenario, it appears that these employees had ordinary income, which was not declared as such... And of course, that smells "fraud"...

So the question is - was the original investment truly at risk?

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

#398

Post by SmartJerry »

Sohcahtoa82 wrote: post #392
SmartJerry wrote: post #374

Earlier quoted context omitted.

There is a disconnect here that needs to be clarified but you are actually part correct. The 'corporation' owns the shares, but shareholder 1 owns the corporation and thus it is his now. Shareholder 1 now owns 100% of the company but the company is worth 50% less because it spent half it's money on buybacks. So shareholder 1's value of ownership did not increase at all, only shareholder 1's % of ownership. Stock buyb…

So...I know realistically, this isn't possible, but what if a corporation bought back every share except for one . Would that one lucky shareholder who probably bought his one share for $20 now own the entire corporation?

yep

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

#399

Post by SlowRobotAhead »

metalgearsolid wrote: post #327
SlowRobotAhead wrote: post #318

Earlier quoted context omitted.

> 40k truck is still a huge luxury don't get me wrong) I don’t think you have priced trucks in awhile. You can buy a 60k Jeep truck, an 85k RAM 2500, a 95k GMC Sierra ATR4 (or whatever), a 65k Bison Colorado, etc etc. Trucks got expensive. I think you price new 40k trucks you’re going to be looking at Tacomas. 40k for a specialty electric truck is absolutely too good to be true, and I promise you it won’t happen like…

You're not wrong, but I'm considering it a luxury outside the real of automotive. I've been working full time as software developer for 3 years and I cannot afford a Cybertruck. Not even close lol.

You just need to do what everyone else does and stop doing the math, just go in to debt! (Don’t do that)

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

#400

Post by bsanr2 »

treis wrote: post #257
bsanr2 wrote: post #121

Earlier quoted context omitted.

What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses? I feel like this must be against the law somehow, but I don't quite understand where the line is.

It's pretty straightforward to determine where someone works. You are physically in the USA when you do the work so you're on the hook for income tax. What the companies do is set up a bunch of companies in different locations. Then they manipulate their books so that the low tax companies show profit while the high tax locations don't.

But you're not getting paid. Your company is getting paid, and then you're using credit against your company's assets to pay your expenses. You, for all intents and purposes, are volunteering.

Maybe your company has to sell something to be legit? Okay, you sell the people who are paying your company toothpicks. They pay your company for the toothpicks, the labor is just incidental.

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