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Stocks Up $1T Since October

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Re: Stocks Up $1T Since October

#61

Post by chii »

JumpCrisscross wrote: post #37
pacyu wrote: post #12

>who is buying these stocks? It’s not individuals. It’s not even pension funds. It’s not the private sector. Almost all the stock purchases are being bought back by corporations in share buyback programs. In other words, companies are buying their own stocks in order to push up the price stocks keep going up while only a minority benefits and not much is returned into actual growth http://michael-hudson.com/2017/08/s…

> Almost all the stock purchases are being bought back by corporations in share buyback programs Buyback volume is comparable to dividend volume [1]. Both return cash to investors. From a macro perspective, focussing on one over the other is misleading. Buyback and dividend cash can be consumed or re-invested. Given corporate buybacks pale in comparison to broader funds flows, it looks like it's being reinvested. Eve…

> From a macro perspective, focussing on one over the other is misleading.

from a societal perspective, it's a tax "refund" for the wealthy to enable stock buybacks over dividends, since capital gains are taxed less, and can be tactically spread out by in time to minimize the effective rate. At the same time, a company's spending on stock buybacks are considered an expense (rather than a capital expenditure), therefore decreasing the tax bill on a company's balancesheet.

I think stock buybacks should cost the company the same as dividends - that is, they should be taxed at the same rate, and also not be considered an expense that they can offset taxes from.

Re: Stocks Up $1T Since October

#62

Post by manigandham »

throwaway2048 wrote: post #60
manigandham wrote: post #48

Earlier quoted context omitted.

What? The point is that lack of funds for investing is clearly not the problem if they're buying so many lotto tickets.

And they have televisions too, other money they spend that they could have spent on investing.

True. Nobody said they had to give up TVs though.

Re: Stocks Up $1T Since October

#63

Post by chii »

coliveira wrote: post #57
WalterBright wrote: post #11

Earlier quoted context omitted.

Much of the wealthy got that way by investing in stocks to begin with. If you don't invest in stocks, you won't benefit from a rising market. Why not do the obvious, and start investing yourself? Don't invest in lottery tickets, which are mathematically a losing game.

Nonsense, the stock market can (sometimes) help on retirement, but apart from professional traders, I haven't seen anyone who got rich simply by investing in stocks, and I know a lot of people who make good money. This is a myth propagated by the Wall Street.

there's empirical evidence that by using a broad, well diversified index fund, and consistently remained invested in the market, you can get an average return of about 6-7% per annum over the very long run (30+ yrs).

The problem is only when you don't have enough "spare" wealth to invest because the daily costs have all eaten up your paycheck. That's a problem i dont know how to solve.

Re: Stocks Up $1T Since October

#64

Post by Thorrez »

loeg wrote: post #41
Thorrez wrote: post #33

Earlier quoted context omitted.

Do buybacks actually increase stock price? If a company buys back $1M in stock, that means it has $1M less in its bank account (meaning the company is now worth $1M less), but also $1M less stock is in circulation. Mathematically I would expect the price to stay the same.

https://www.investopedia.com/ask/answers/042015/why-would-co...

Hmm, so the reasons given for the price going up seem to be:

1. It signals to investors that the company is confident and low risk. (Research and development is considered high risk.)

2. It makes the company more purely itself, it doesn't have shares backed by cash that drag back its price growth. If people expect future growth this means that growth per share will be higher, so they would start buying now to get some of that future higher growth. (Of course in addition to magnifying growth it also magnifies decline.)

An interesting thing is that this article says

> Stock buybacks can have a mildly positive effect on the economy overall.

Which seems to contradict what that previous article said. This article also says that stock buybacks will cause other companies to do more research and development.

Re: Stocks Up $1T Since October

#65

Post by chii »

WalterBright wrote: post #28
ekianjo wrote: post #22

Earlier quoted context omitted.

> increasing stock prices disproportionately benefit the wealthy and widen the gap between rich and poor. Everything including stock prices disproportionately benefit the wealthy and widen the gap between rich and poor. Not sure what kind of point you are trying to make. When you are much richer than anyone else, you are bound to keep growing your assets at a faster space than anyone else too. It's the nature of comp…

Percentage-wise, it grows at the same rate for each investor.

the wealthier you are, the more you are able to diversify, and also to "safely" leverage to gain more.

Re: Stocks Up $1T Since October

#66

Post by [deleted] »

pacyu wrote: post #12

>who is buying these stocks? It’s not individuals. It’s not even pension funds. It’s not the private sector. Almost all the stock purchases are being bought back by corporations in share buyback programs. In other words, companies are buying their own stocks in order to push up the price stocks keep going up while only a minority benefits and not much is returned into actual growth http://michael-hudson.com/2017/08/s…

[deleted]

Re: Stocks Up $1T Since October

#67

Post by Thorrez »

dwohnitmok wrote: post #59
Thorrez wrote: post #33

Earlier quoted context omitted.

Do buybacks actually increase stock price? If a company buys back $1M in stock, that means it has $1M less in its bank account (meaning the company is now worth $1M less), but also $1M less stock is in circulation. Mathematically I would expect the price to stay the same.

The price of a stock has only an indirect relationship to the abstract value of a company. The current price of a stock is simply the highest buy order that is not yet fulfilled by a sell order. So if a company just keeps offering to buy stock at a high enough price to match existing sell orders it'll push the price of a stock up. Whether that's sustainable in the long run is a different story, but there's no ironcla…

Yes, but investors who see that the company's coffers keep shrinking might sell exactly enough to counteract the buys. My question is whether there's any logical reason for investors not to exactly counter the buys with matching sells.

Re: Stocks Up $1T Since October

#68

Post by WalterBright »

chii wrote: post #65
WalterBright wrote: post #28

Earlier quoted context omitted.

Percentage-wise, it grows at the same rate for each investor.

the wealthier you are, the more you are able to diversify, and also to "safely" leverage to gain more.

Diversification lowers your rate of return to the mean. Hedging lowers your risk by lowering your rate of return.

Re: Stocks Up $1T Since October

#69

Post by manigandham »

JumpCrisscross wrote: post #56
manigandham wrote: post #53

Earlier quoted context omitted.

It's pretty clear 2008 was the inflection point and it went up for three years afterward. You'll find endless reasons to stay out of the market so I was offering at least one simple rule to follow.

> It's pretty clear 2008 was the inflection point It's clear now. But (a) there are lots of starts that stall and (b) it's impossible to differentiate them 3 years afterwards. At the end of the day, timing the market is incredibly difficult. When one decomposes returns of the world's top investors, timing is pretty much random.

Time in the market beats timing the market. You're describing all the rationalizations people use to stay out.

2008 was the bottom and it went up for 3 years. You would see that by 2012 so buy in. That's it. That's the entire rule/suggestion. There's no "timing the market" needed.

Re: Stocks Up $1T Since October

#70

Post by WalterBright »

coliveira wrote: post #57
WalterBright wrote: post #11

Earlier quoted context omitted.

Much of the wealthy got that way by investing in stocks to begin with. If you don't invest in stocks, you won't benefit from a rising market. Why not do the obvious, and start investing yourself? Don't invest in lottery tickets, which are mathematically a losing game.

Nonsense, the stock market can (sometimes) help on retirement, but apart from professional traders, I haven't seen anyone who got rich simply by investing in stocks, and I know a lot of people who make good money. This is a myth propagated by the Wall Street.

> I haven't seen anyone who got rich simply by investing in stocks

I know quite a few. You can read about more in the book "The Millionaire Next Door" by Stanley.

Heck, anyone who bought AMZN, MSFT, AAPL at the opening price, and held, is a wealthy person today.

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