Stock Buybacks: "the Biggest Scam Bankrupting Business and the Middle Class?"

[georgephillip]

Shareholders are the owners of the company. They will determine what will be done with their profits.

Shareholders benefit today from stock buybacks because they bribed politicians in 1982 to gut regulations that made buybacks an illegal form of stock manipulation, hence the trillion dollar a year transfer today from the middle class to the 1% that kills consumer demand and business demand.

$hareholders aren't that special.

 

[Skull Pilot]

When you play the Race Card, you are admitting you are a Losing Loser Who Lost, bub.


thats racist by boedicca on US Message Board - Political Discussion Forum

Where do all the rich racists live, I wonder?

BAck to the finite pie argument huh?

 

[georgephillip]

BAck to the finite pie argument huh?

Every pie I've ever seen has been finite.
Are you still imagining ubiquitous perfect competition and fully complete markets?

"As economic power has shifted from workers to owners over the past 40 years, corporate profit’s take of the U.S. economy has doubled—from an average of 6 percent of GDP during America’s post-war economic heyday to more than 12 percent today. Yet despite this extra $1 trillion a year in corporate profits, job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs.

"A $3.6 trillion budget shortfall has left many roads, bridges, dams, and other public infrastructure in disrepair. Federal spending on economically crucial research and development has plummeted 40 percent, from 1.25 percent of GDP in 1977 to only 0.75 percent today. Adjusted for inflation, public university tuition—once mostly covered by the states—hasmore than doubled over the past 30 years, burying recent graduates under $1.2 trillion in student debt. Many public schools and our police and fire departments are dangerously underfunded.


Obama's Timid Budget

"Where did all this money go?"

Stock Buybacks Are Killing the American Economy The Atlantic

 

[georgephillip]

Where did all this money go?
Since 2004 $6.9 trillion of it went to stock buybacks as part of a forty year "game" of financial keep-away that's seen corporate profit's "fair share" of the US economy double from an average of 6% between the end of WWII and 1982 to more than 12% today.

What happened in '82?

"...Before 1982, when John Shad, a former Wall Street CEO in charge of the Securities and Exchange Commission loosened regulations that define stock manipulation, corporate managers avoided stock buybacks out of fear of prosecution.

"That rule change, combined with a shift toward stock-based compensation for top executives, has essentially created a gigantic game of financial 'keep away,' with CEOs and shareholders tossing a $700-billion ball back and forth over the heads of American workers, whose wages as a share of GDP have fallen in almost exact proportion to profit’s rise."

Stock Buybacks Are Killing the American Economy The Atlantic

 

[Toro]

Shareholders are the owners of the company. They will determine what will be done with their profits.

Shareholders benefit today from stock buybacks because they bribed politicians in 1982 to gut regulations that made buybacks an illegal form of stock manipulation, hence the trillion dollar a year transfer today from the middle class to the 1% that kills consumer demand and business demand.

Thanks for demonstrating that you are as clueless with your false dichotomies as Nader and Hanauer.

 

[georgephillip]

Thanks for demonstrating that you are as clueless with your false dichotomies as Nader and Hanauer.

What's your opinion of "The World's Dumbest Idea."???
" In a recent white paper titled 'The World’s Dumbest Idea,' GMO asset allocation manager James Montier strongly challenges the 40-year obsession with 'shareholder value maximization,' or SVM, documenting the many ways that stock buybacks and excessive dividends have reduced business investment and boosted inequality.

"Almost all investment carried out by firms is financed by retained earnings, Montier points out, so the diversion of cash flow to stock buybacks has inevitably resulted in lower rates of business investment..."

"Shareholders aren't providing capital to the corporate sector, they’re extracting it."

Stock Buybacks Are Killing the American Economy The Atlantic

 

[Toro]

Congratulations.

You've quoted an iconoclast and a dreamer.

And you've merely reiterated your false dichotomy that capital investments and wages would be higher without buybacks.

Do you understand the nuance of Montier's argument that managements do buybacks wrong as opposed to "buybacks are bad?"

 

[SwimExpert]

Companies buying back their own stock is bankrupting them?

And I don't even want to hear what cockamamie excuse there is to say it's bankrupting the middle class.

 

[Skull Pilot]

BAck to the finite pie argument huh?

Every pie I've ever seen has been finite.
Are you still imagining ubiquitous perfect competition and fully complete markets?

"As economic power has shifted from workers to owners over the past 40 years, corporate profit’s take of the U.S. economy has doubled—from an average of 6 percent of GDP during America’s post-war economic heyday to more than 12 percent today. Yet despite this extra $1 trillion a year in corporate profits, job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs.

"A $3.6 trillion budget shortfall has left many roads, bridges, dams, and other public infrastructure in disrepair. Federal spending on economically crucial research and development has plummeted 40 percent, from 1.25 percent of GDP in 1977 to only 0.75 percent today. Adjusted for inflation, public university tuition—once mostly covered by the states—hasmore than doubled over the past 30 years, burying recent graduates under $1.2 trillion in student debt. Many public schools and our police and fire departments are dangerously underfunded.


Obama's Timid Budget

"Where did all this money go?"

Stock Buybacks Are Killing the American Economy The Atlantic

Wealth isn't a pie and you can increase your wealth anytime you want

But it takes discipline and sacrifice and you people who whine about other people's wealth have neither discipline nor the will to sacrifice

 

[georgephillip]

Do you understand the nuance of Montier's argument that managements do buybacks wrong as opposed to "buybacks are bad?"

Do you find anything wrong in the following assessment of buybacks?
"This diversion of cash flows to shareholders has played a role in reducing investment.

"A little known fact is that almost all investment carried out by firms is financed by internal sources (i.e., retained earnings).

"Exhibit 13 shows the breakdown of the financing of gross investment by source in five-year blocks since the 1960s.

"The dominance of internal financing is clear to see (a fact first noted by Corbett and Jenkinson in 1997).

"From the mid 1980s onwards, equity issuance has been net negative as firms have bought back an enormous amount of their own equity (and geared themselves by issuing debt – a massive debt for equity swap).

"One of the most common raison d’êtres for stock markets that gets offered up is that they are providing vital capital to the corporate sector – the evidence suggests that this is nothing more than a fairy tale.

"Far from providing capital to the corporate sector,8 shareholders have been extracting it from corporates."
https://www.gmo.com/America/CMSAtta...v67VQg/NVUMWsYvi3A2/L+S28A7Pthjp7LmOfLYQfHMJc

 

[georgephillip]

And I don't even want to hear what cockamamie excuse there is to say it's bankrupting the middle class

Did you hear about Wal-Mart's $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million US "middle class" workers a $4,670 a year raise and save US (middle class) taxpayers an estimated $6.2 billion a year in food stamps, Medicaid, and housing subsidizes to Wal-Mart's "middle class" workers?
Billionaire Hanauer Hammers Stock Buybacks The Nader Page

 

[georgephillip]

Wealth isn't a pie and you can increase your wealth anytime you want

Which has exactly what to do with a thread about stock buybacks and their affects on the middle class?

 

[Toro]

Do you understand the nuance of Montier's argument that managements do buybacks wrong as opposed to "buybacks are bad?"

Do you find anything wrong in the following assessment of buybacks?
"This diversion of cash flows to shareholders has played a role in reducing investment.

"A little known fact is that almost all investment carried out by firms is financed by internal sources (i.e., retained earnings).

"Exhibit 13 shows the breakdown of the financing of gross investment by source in five-year blocks since the 1960s.

"The dominance of internal financing is clear to see (a fact first noted by Corbett and Jenkinson in 1997).

"From the mid 1980s onwards, equity issuance has been net negative as firms have bought back an enormous amount of their own equity (and geared themselves by issuing debt – a massive debt for equity swap).

"One of the most common raison d’êtres for stock markets that gets offered up is that they are providing vital capital to the corporate sector – the evidence suggests that this is nothing more than a fairy tale.

"Far from providing capital to the corporate sector,8 shareholders have been extracting it from corporates."
https://www.gmo.com/America/CMSAtta...v67VQg/NVUMWsYvi3A2/L+S28A7Pthjp7LmOfLYQfHMJc

False dichotomy.

If the money wasn't going to be used to buy back stock, it would have been used to increase dividends.

It's not the buyback that matters. That is just the mechanism. If buybacks were banned, then the cash would have been used to increase dividend payments.

What shareholders want is capital to be used efficiently or returned to them. Buybacks are a more tax efficient way of returning capital to shareholders. If it was a less tax efficient way, companies would have increased dividend payments.

Capital is used more efficiently than 20-30 years ago as evidenced by higher returns on equity.

Also, net issuance of stock was positive up until about 2000, not the 1980s as the author states.

 

[Skull Pilot]

Wealth isn't a pie and you can increase your wealth anytime you want

Which has exactly what to do with a thread about stock buybacks and their affects on the middle class?

Stock buy backs do not affect the middle class.

 

[SwimExpert]

And I don't even want to hear what cockamamie excuse there is to say it's bankrupting the middle class

Did you hear about Wal-Mart's $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million US "middle class" workers a $4,670 a year raise and save US (middle class) taxpayers an estimated $6.2 billion a year in food stamps, Medicaid, and housing subsidizes to Wal-Mart's "middle class" workers?
Billionaire Hanauer Hammers Stock Buybacks The Nader Page

Listen kid, I will be the first person to say that Walmart is a lousy company. I can't stand them, personally. But you're absolutely retarded if you think that making buybacks illegal would have convinced Walmart to instead spend the money on employee raises. If they wanted to give people raises, they would have. They didn't want to. Simple as that. They just did not want to give their employees raises. And there's nothing you can do to force them.

So it's very simple....if you don't like Walmart, don't work there and don't shop there. That strategy has been working great for me! And nobody is bankrupting me in the meantime either!

 

[georgephillip]

Stock buy backs do not affect the middle class

In the same way Wal-Mart does not affect the middle class
"Wal-Mart has spent [over ten years] more than$65.4 billion on stock buybacks — about 47 percent of its profits. That’s an average of more than $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million U.S. workers a $4,670-a-year raise.

"It is also, coincidentally, an amount roughly equivalent to the estimated $6.2 billion Wal-Mart costs U.S. taxpayers every year in food stamps, Medicaid, subsidized housing, and other public assistance to its many impoverished employees. In this context, how can stock buybacks be either morally or economically justified?”
Billionaire Hanauer Hammers Stock Buybacks The Nader Page

 

[Skull Pilot]

Stock buy backs do not affect the middle class

In the same way Wal-Mart does not affect the middle class
"Wal-Mart has spent [over ten years] more than$65.4 billion on stock buybacks — about 47 percent of its profits. That’s an average of more than $6.5 billion a year in stock buybacks, enough to give each of its 1.4 million U.S. workers a $4,670-a-year raise.

"It is also, coincidentally, an amount roughly equivalent to the estimated $6.2 billion Wal-Mart costs U.S. taxpayers every year in food stamps, Medicaid, subsidized housing, and other public assistance to its many impoverished employees. In this context, how can stock buybacks be either morally or economically justified?”
Billionaire Hanauer Hammers Stock Buybacks The Nader Page

I think you need to define who you classify as middle class.

And it's not Walmart who is costing us that t is the people who choose to work part time MW wage jobs and then use too easy to get government subsidies to make up the difference

 

[EdwardBaiamonte]

Listen kid, I will be the first person to say that Walmart is a lousy company.

yes, its so lousy to save poor people $trillions with those low prices! We should make any business that has lower prices illegal anda reward those with the highest prices.

See why we are positive that liberalism is based in pure ignorance??

 

[georgephillip]

Listen kid, I will be the first person to say that Walmart is a lousy company. I can't stand them, personally. But you're absolutely retarded if you think that making buybacks illegal would have convinced Walmart to instead spend the money on employee raises

Did you notice raising the wages of Wal-Mart workers wasn't the only option for alternative ways to spend the $6.5 billion a year Wal-Mart currently spends on stock buybacks?

For example, the federal government could take from the shareholders through taxation and pay the $6.2 billion a year going to Wal-Mart workers' food stamps, Medicaid, and housing assistance.

See...it's even simpler than you thought, and, unless you're a Wal-Mart shareholder, you still won't have to worry about bankruptcy.

 

[georgephillip]

I think you need to define who you classify as middle class.

"One helpful yardstick to judge whether you're middle class: Median household income was $51,017 in 2012, according to the most recent U.S. census data. Robert Reich, a professor of Public Policy at the University of California-Berkeley and former Secretary of Labor, has suggested the middle class be defined as households making 50 percent higher and lower than the median, which would mean the average middle class annual income is $25,500 to $76,500.

"If you're in the middle of the middle, however – not lower or upper-middle class – that would be an income range between $39,764 and $64,582, says Aaron Pacitti, an assistant professor of economics at Siena College in Loudonville, N.Y."

What It Means to Be Middle Class Today - US News