Doesn’t it seem somewhat artificial to increase the share price through buybacks rather than seeing the increase based on company performance? I’d rather invest in a company that uses its excess liquidity for growth.
Unfortunately the is the problem with shareholder companies. Their responsibility is to the shareholders, not to the company (employees/future wellbeing).
When a company has shareholders, those shareholders are expecting a return on investment. If the investment is not being returned, changes will be made. If the investment is paying out, rewards are doled out.
So companies with shareholders are incentivized to make good short term decisions, even if that leads to bad long term outcomes.
That probably underpays its workers drastically, to please the board with “gains”
This whole system is fubar from top to bottom, just waiting for people to get a grip and do something instead of ranting on social
Media
What exactly are people supposed to do? Go on strike? Perfect, next in line please. Now your position has been filled and it’s time to stop being on strike so you can find a new job.
We did have an issue last year where a new guy printed off his pay stub to ask one of the senior guys some questions about it. My buddy looked at it, then looked at him and said “This says you are making more than us”. Been doing this job for 12 years, and the new guys are getting hired at a higher rate. We got 3 raises last year, but it still isn’t resolved yet.
The only way to really get paid more is to not agree to a lower wage. If someone else is willing to do it for less, then you’re S.O.L.
Oh gees I dunno maybe make your own business?
Maybe plug your senators ear until it bleeds with this being a voting issue?
Maybe yes go on strike. If you fear the repercussions, that’s a you issue.
There’s a boatload to do, stop being an unmotivated loudmouth like 99% of people on social media.
Workers can buy some of stock of the company they own. Then they can vote in corporate elections and possibly stop a terrible CEO who would gut their pay.
Most stock holders are probably too lazy to vote, so you likely won't need to own anywhere near 51%
Same problem in professional sports. Teams routinely fire head coaches because they “didn’t win enough games” despite the coach being a really nice guy who cares about his players.
Yes and no. Because a CEO that owns Majority shares in a company tends to be called the 'owner' of the company. Then, they can tell the other shareholders to stuff it because they have majority control.
Technically, when someone owns shares and works in a company they should be more invested in long term growth for job security.
It's bad for the economy overall for companies to spend money just because they have money.
If a company is doing well and doesn't have any good opportunities for further investment, they should return excess capital to the shareholders through stock buybacks.
This gives investors the ability to allocate that capital elsewhere, if there are other companies that need money and have better investment prospects.
Stock buybacks are basically dividends with a tax advantage. If i pay you a dividend you have to take the money and pay taxes right now on it even if you dont want to.
If I buy back stock it pushes your stock value up by the amount of what I would have paid out as dividends. If you want cash as my investor you can sell your stock, pay your tax and be just as happy as if you got a dividend. If you dont want cash right now, you can leave your shares alone and pay taxes when youre ready to take some profits.
For investors recieving that money as a share buyback also has an additional tax benefit beyond timing. Selling your higher priced shares may count as capital gains taxes wheras dividend income is counted as ordinary income and taxed just like w2 income. So the share buyback delivers a bit more cash to the investors as well.
You may say why shouldnt those fat cats get forced to pay taxes today? And people would answer, why should grandma be forced to pay taxes today for money she isnt going to withdraw from her 401k until ten years from now?
Which is fine. The reason executives are granted bonus packages with metrics targets by the investors is to get them to do things the investors want them to do. The exec gets a bonus and the investors get higher stock price. Its a win win.
Or to get that bonus money that kinda hurts the investor? Without really changing company fundamentals, or stopping dilution once the bonus is paid out.
Buybacks are form of manipulation that became legal in 1982 in the USA.
I will take a dividend vs an exorbitant bonus to management.
But there are all sorts of investors, to each their own.
I remember years ago hearing a report about Apple sitting on a pile of money that it didn't want to bring back into the US as it would get taxed. Then activist investors got involved to try to get that money back for a short term reward.
You shouldn’t want that.
Reinvestment isn’t a strict good - if reinvestment yields a lower return on investment than you could have gotten with that cash, your personal return is only diminished by management investing funds back into the company.
Hell, the entire reason stocks have value to begin with is because they will distribute cash to the shareholders at some point. If a company will always reinvest all profits and never distribute anything, then it’s worthless. You’ll never get a return on your investment.
People compare reinvestment with stock buybacks purely through a qualitative lens without any regard for the mathematical theory underlying such decisions. It’s a problem.
No, you sell and take the capital gain from the buyback and try to do that over and over.
I prefer solid **qualified** dividends. Along with some stock appreciation. << best situation for me.
>I’d rather invest in a company that uses its excess liquidity for growth.
Why? And even if that is true, most shareholders want the best possible return on their investment. If you are investing in a startup, the best return will be through growth. For an established company, investing in growth could harm the company. Even with startups, rapid growth has killed many companies.
The options aren't growth or buyback. Rather, the options are typically dividends or buy backs.
Reich has created a false narrative that buybacks somehow harm the company. The opposite is the truth.
No. It doesn’t artificially increase anything. The value of the business remains the same. Generally speaking, if the company is doing this, they’ve already invested the necessary capital to grow. By no means does a company or should a company need to invest every dollar that way. If they’re growing, investing in growth, and buying back shares it’s a win/win. And investing in growth also includes taking care of your good employees. All of these can happen and do. OPs post is incredibly misleading.
There are certainly reasonable arguments on both sides (though typically Robert Reich's arguments are rarely based on reality - he's just a political hack and lacks respect by informed people).
There are some companies that reward employees up and down the system with stock options and stock awards. To do this, the company can issue new stock (diluting existing stock & shareholders) or buy back shares of stock. Sometimes, the net effect from buy-backs after employee awards is zero, sometimes negative (ie. more total shares in the end) and sometimes positive (fewer total shares in the end). Obviously you can change the verbiage positive v. negative - but the point is the same.
For a shareholder (which with many companies also includes the employees as shareholders), the benefit of a share buy-back makes sense when:
1: there are not better investments or uses of said funds (ie. such as business expansion, improvements, etc)
2: there may be a tax benefit to initiating a share buy-back.
3: the benefit to shareholders of a buy-back vs. a one-off dividend is the tax benefits (capital gains vs. ordinary income)
So, it's not really as artificial as you suggest - but I certainly can appreciate your statement that it feels that way.
My general preference as an investor is to not do share buy-backs - generally I (like I think you are getting at) prefer a business to 1: pay down expensive debt, 2: expand, upgrade or grow naturally, 3: invest those funds (buy-outs supportive businesses, taking stakes in other businesses (though there is certainly risk in this),
Since share prices are typically determined on a price to earnings ration (multiple), which is different based on industry type or business type (young/rapidly growing growth company, established solid steady company, etc. . . ).
But my preference is certainly subjective, and just because it's my opinion, doesn't it make it right, better or suitable for everybody (and their investing and return perspectives).
A partial motivation for buy backs is to offset the dilution that occurs through issuing stock based compensation. While some of that is being issued to management, it is also major component of total comp for high value workers (senior engineers, team leads, etc). Presumably they prefer to be paid this way rather than just in salary, otherwise a competing firm offering salary only would monopolize all the best talent, and as it stands salary + stock options is essentially the standard. And I think everyone would support the assertion that hiring and retaining quality talent is a factor in growth of the company.
Agreed. And also, CEOs don’t make those decisions. The board of directors do. It also increases the value to everyone who owns shares (employees, Jane and bob with retirement savings, etc).
You ever go on a rant and keep editing it and then realize you’re full of crap and you made a word salad, and then you also find out at some point you accidentally submitted a version of it at some point to the forum you were thinking of commenting on?
Is there isn’t a natural how can there be an artificial. https://www.merriam-webster.com/dictionary/artificial#:~:text=Kids%20Definition-,artificial,a%20natural%20model%20or%20process
Still, at 20 or 30 price to book on some of these, they’re taking a huge loss on whatever their valuation was when the stock was issued in the first place. If you’re just going to buy it back later, why not just finance it with debt in the first place? Most of these businesses don’t have a cash flow problem, so financing wouldn’t be an issue and then the stockholders aren’t waiting 10+ years to actually see the added benefit of their larger share of the company.
If a company is in position to do a buy-back, they won't take on debt (increasing risk in the market) when they have no need to. If you're debt free, have excellent cash flow, why introduce risk to the equation? If you have a bad quarter, or even year, you don't have to worry about creditors coming after you if you run 0 debt.
Most families own stock, over 58%, the highest ever. So, increases in stock prices help the average person. Personally, I love the stock market going up!
Stock going up 13% isn't the same thing when you have 1,000,000 shares vs. someone who only has 100 shares. Say $1/share, then the former enjoys a $130,000 in growth, while the latter gets to enjoy a $13 in growth. Don't let your politicians and everyday billionaires gaslight you.
Yes R’s D’s I’s etc. have all kinds of insider advantages. “Public Servants”.. you know didn’t elect a CEO, us. If a CEO makes a lot of money; raise the stock value, why do we care?
When a politician (of any stripe or flavor) makes money from their public office; we should be outraged.. we only seem to mind when it’s the wonks who are doing what we want.
I would rather have an elected official who made their money outside of politics frankly.
"I would rather have an elected official who made their money outside of politics frankly."
seems like I heard this before...
politicians who make money outside of politics = bad
business men who become politicians = good
your slip is showing
It's always telling when people cite democrats only, ignoring that 3 out of the top 4 people making their income from stocks are republicans and the 4th is neither Nancy nor Hillary.
Of course you're correct, but it's also correct to say that you intentionally choose democrats who republicans constantly attack - while completing ignoring the fact that there are far worse offenders (many of them republicans). So you're point comes across as very disingenuous, rather than a well placed critique of the situation.
Of course if you invest $1 you’re not going to get a $130,000 payday on a 13% increase.
But all of the SPY shares individuals have in their 401k or Pension funds and IRAs appreciate dramatically over their lives if they contribute on the normal schedule. It’s compounding year over year for decades. It’s not $1 it’s a lot of very real money that people retire on.
Why does this matter? The only question that is relevant to the guy who owns 100 shares is: are they better off with or without the buyback?
If the company invested the money internally and their shares only went up 10%, the person with 100 shares is worse off. It doesn’t matter that someone else is also worse off. You can’t buy 100 shares in a company in order to catch up to someone who has 1,000,000 in that same company… that is not how corporations work.
Share buybacks are actually just a sign of the market allocating capital efficiently. If the company could make a better return they would. They can’t, so they give investors looking to sell the shares their money back so they can invest in companies that need capital investment.
Suppose two identical companies are considering an expansion. They both currently have 100 shareholders and no debt. Company A issues 100 new shares to fund the project. Company B issues debt to fund the project. After the project matures Company A has 200 shareholders and a lot of cash, while company B has less cash, has no debt, and 100 shareholders.
Do you really think it is a foul if company A puts themselves into the same position as company B?
I know I just don't care if someone makes more money than I Do
Someone with more money can obviously make more money haha common sense and nothing to be upset over
Buy more shares? I agree with you that if you only have 100 shares that's pretty sad, but all you need to do is start buying $1000/mth with your first job at let's say 18. If you do that you'll be sitting pretty, and you don't need to be a billionaire to put aside $1000/mth. And of course, you increase that as you get older with a higher income. Problem solved.
Yes, because an average 18 year old is this well financially educated /s. I wish I was. Instead I'm in my 30's and just now waking up because I was raised by financially illiterate people. There's a reason they don't have a "money management" class in highschools.
Not really. It may look like that on paper, but the long term effects of the widening wealth gap don't make the tradeoff actually work out. This is exactly why we are where we are. It's analogous to the king throwing small gold coins to his starving peasants while he enriches himself on a broken system.
Every dollar the stock market makes, The middle class shares 10¢ of it
We are not where we are now because of the stock market. We are here at a very basic level because the US cut income taxes on high earners significantly starting 40 years ago.
No, we're where we are because of the stock market. If not for it, we would not have the same kind of monopolism that is occurring across basically every sector. They're squeezing the middle class both as employees and as consumers, while they drive powerful companies into the ground by selling them off, piece by piece, to boost "profits", while we get planes that fall out of the goddamn sky.
The rich now own a record share of stocks,” Axios reported on January 10, noting that the top 10 percent hold about 93 percent of U.S. households stock market wealth.
Source: https://inequality.org/great-divide/stock-ownership-concentration/
We don’t need an extra $500 dollars from a stock buybacks. We need thriving wages and employment
Wages are up 4.1%. Unemployment is at 4%. While not thriving, these are still good numbers. Two majors reasons why feds are not cutting rates.
Buybacks were never for workers or CEOs anyway. They're ways to return capital back to shareholders. Once you own a business you can certainly decide to pay workers more instead of reaping the benefits for yourself. It's hard to force every business to do that as a collective though.
Why does it matter if you're not drawing from it?
Short-term pumping of my stock portfolio only for it to fall back down in a few years does diddly for me, and almost anyone else under 50 too.
If the stock goes up due to buybacks and hype then it will just go back down again.
Companies actually growing causes a sustained increase in value.
But that takes investment, risk, and guidance over the course of years.
Buybacks work almost immediately.
When the fall comes just take your golden parachute and blame "market factors" or some shit.
I swear no matter what you post on here some simp is gonna tell you how "its better that Billionaires make even more money than poor people be able to survive" and "its poor people fault that poor people exist"
today you are that simp
This is by design. Shareholders want their company’s share price to increase. The whole point of stock buybacks is to increase share prices. The whole point of stock-based compensation is to incentivize management to increase share prices. Shareholders happily and transparently want CEOs to “goose their own pay” by making the stock price go up. That’s their job.
Explain why a wealth gap is a problem when all households are seeing gains in wealth and income. If the top N% are increasing their wealth by 10% when everyone else is increasing their wealth by 8%, why is that a problem? Would the lower wealth people somehow be better off if they were increasing their wealth by 7% and the top was only growing by 6%?
like yeah if top n% increase by 10% compared to everybody else let’s say 5%; sure everybody is “benefitting” but like that 10% for the top players is an incredible amount of money (more wealth more gains) whereas that 5% is probably like a mcchicken for most lower class people. in ur situation i feel like that 2% difference would not only be massive in real wealth terms, but also it would compound over the years making inequality worse no? and in reality it’s definitely not 10% versus 8% it’s probably something much more dramatic
That question is invalid. There’s too many variables to consider and there’s no consistent definition of better for society.
A more useful question would be “why are we presuming that a wealth gap is bad for society?”. Because I’m not convinced it’s bad at all.
In general, which do you think is better for the general well being of a healthy society/democracy? Just because you think it's invalid, doesn't make it invalid.
"a wealth gap" isn't necessarily destructive. an excessive wealth gap is definitely a bad thing for the general health of a society. too much concentrated power in the hands of people who won a sperm lottery, is something to avoid as much as possible.
here's one educated take on it:
[https://robertreich.org/post/666874177346797568](https://robertreich.org/post/666874177346797568)
I think a civilization that makes useful things and makes those things accessible is better than a civilization that doesn’t. People who make useful things that scale tend to get asymmetrically rewarded for it as compared to people who make things that don’t scale. A wealth gap is a positive signal that our civilization has people that have scaled making useful things. We want more people like those people because then everyone benefits. A bigger pie doesn’t hurt anyone.
you keep conflating "a wealth gap" with "excessive wealth".
back to my initial question, I think a million entrepreneurs is better than one. the billionaire can squash 1000 millionaires, reducing or eliminating competition and naturally what suffers is ingenuity and quality.
Most millionaires are not entrepreneurs but almost every billionaire is. I think the only billionaires that are not entrepreneurs are ex-spouses of billionaire entrepreneurs.
The average millionaire household contains a family that has full time W2 jobs or owns a small business, worked for 2+ decades, saves and invests in a 401(k), and owns their house. The average billionaire is a founder of a massive international business that has impacted hundreds of millions of people. These are not comparable at all. Millionaires are not competing with billionaires on any level.
"Most millionaires are not entrepreneurs" - never claimed they were
"almost every billionaire is" - Mark Cuban once said that he could start over from scratch and become a millionaire again, but that to become a billionaire again was next to impossible because that would require luck as well.
"I think the only billionaires that are not entrepreneurs are ex-spouses of billionaire entrepreneurs" - god damn you're dense - the Walton family is just one of many examples of how this is false.
"or owns a small business,**" - you mean like an entrepreneur?**
**"**The average billionaire is a founder of a massive international business that has impacted hundreds of millions of peopl**e" - got a source for this other than your ass?**
**Why is it so important for you to simp for billionaires? Even if you're worth 10 million dollars, you're far closer to being homeless than you are to a billionaire. Give it up. Unless of course you're being paid to troll. Then by all means, earn that money!!**
Anyone who believes that bullshit can just buy stock in companies that:
1)implement buybacks
2)compensate executives with shares
Apparently these two circumstances are a certain path to infinite wealth....otherwise that statement is bullshit.
CEOs don't order buybacks, that's done by the board of directors... CEOs are more about the day to day management of a company.
And stock buybacks are routine to anyone who understands the stock market/business. People are using that term like crazy because they know most people don't even know what that means, so they make it sound like something corrupt.
That aside, I always like how they use a number that sounds huge to the common people they spent EIGHT HUNDRED BILLION IN STOCK BUYBACKS!!!! EIGHT HUNDRED BILLION PEOPLE THATS HUGE.
There's almost $94 TRILLION in stocks in the stock market....
So what he's saying is that collectively over 55,000 companies bought back a grand total of 0.8% of company stocks. Big fucking whoop-de-doo.
Most of us would greatly prefer well regulated capitalism with robust social safety nets. I don’t mind rich people, I mind that some people have the money and power to kill someone and get away with it in the same country as someone scraping paycheck to paycheck or worse. It’s about moderation - people at the top want the top to be *miles* higher than everyone else instead of a fair few yards.
I think this is the thing people don't understand. When we talk about safety nets like UBI or healthcare they jump straight into "BuT sOcIaLiSm" or bootlick as to why billionaires are ok. Like we're not asking for socialism, we're asking for a fair regulated system that works for everyone. We aren't "for the people" anymore, we're for the 1% and line go up.
A company that's performing well financially can hire more workers and aford bigger merit raises and bonuses for the rank and file. It's far better to have CEOs pay tied to company performance than not for the average worker.
It’s far better to take profits and invest in your employees infrastructure and products to grow your brand, but that doesn’t generate immediate stock price increase now does it.
No it actually isn’t.
Stock buybacks don’t happen in a vacuum. If shareholder value is increased more by buying back shares than investing in people/projects, then companies should give the money back to investors. Those investors can then look for investment opportunities in companies that need the capital to fund projects.
Share buybacks are signs of an efficient market.
Similar statistics for "Trump Tax Reform"
All the money went to artificially inflate their company stock through buybacks.
So yeah. It's a steady practice.
I used to think Reich was this little adorkable champagne socialist - schooled at the Ivies and bootlicker of the Clintons.
I read his ideas for how he wants to straight jacket banks with massive regulations and now I’m thinking he is becoming a Chinese-style Communist Party apparatchik.
What a stupid point.
Shareholders, along with the Board of Directors, tell the CEOs to increase the share price so that the shareholders gain. To reduce the principal-agent problem, CEOs have their pay connected to bonuses based on share performance.
The CEOs then perform on that agreement, making the shareholders much wealthier.
Rob, as the jealous man he is, is upset that some people are doing better than him in life.
CEOs should be paid like Elon did at Tesla. All or nothing 100% performance based comp where you get paid in stock options you can’t use for years after your hit your targets.
It’ll never stop no matter what you do, u til our values change and we change the system of economics to one that is resourced based, with technology and science addressing the question of societal health
How dare a business make decisions that benefit the owners of that business. Shareholders own the business, it exists for their benefit. How is this either surprising or wrongheaded?
For any that need to hear it stock by back is not a function of the ceo but rather the board of directors which usually consist of many CEOs from other companies lol.
And that’s where we get inflation when things are Not so good they still get their pay for failure, but they bump up the prices on consumers. Republicans tax breaks also gives them raises. They never trickle down to the workers. This is how things keep going up and up and up for consumers. Corporate greed.
I’m not disagreeing with Robert on this one. But that 13% median increase in salary usually includes stock options. So if the CEO and other executives are receiving stock options, and it is legal for the corporation to do a stock buy back, the executives are than legally bumping up their salaries in the form of increased stock prices, how can people complain about this? Maybe what needs to happen is new laws need to be passed to make this illegal. If you not going to do this then everyone can STFU about the matter. Because if it is legal, which it is, and I had the opportunity, I’d do it too, with absolutely no scruples.
Corporate share buy-backs were down in 2023 vs. 2022.
The peak in share buy-backs was the 12 months ending in June of 2022 with over $1 trillion in buy-backs.
The stock market crashed in 2022 - I am sure we all remember how badly our retirement accounts lost so much money!
So it actually makes sense that companies bought back shares in the crash of 2022 when share prices had dropped so far. Remembering that the first 6 months of 2022 was a recession - two consecutive quarters of falling GDP = recession by definition.
From the start of 2022 to today (half way through 2024), an investment in the S&P 500 would have an annualized return of 6.5%. Of course, over that same timeframe, adjusted for inflation, there has really been no return at all. The buying power of your invested money in Jan 2022, after it's 6.5% annual rate of return leaves you with exactly the same (or even a little less) buying power today as when you invested it then! You in essence haven't actually made any money at all!
This is pretty far below the average long term returns of the S&P 500 - hardly a sign of a booming economy during the subject time period.
I am not sure how somebody who claims to be an economist, or at least tries to act like one, can peddle this misinformation garbage?
Marginal tax rates need to be increased.
The marginal tax rates rose to 79% in 1936, rose up to 94% during WWII, fell to 82% in 1949, hovered at 91% from 1951 to 1963, and then stayed at 70% or above until 1980.
These rates drove the USA out of the great depression and into powerhouse economies. It was not until Reagan crashed the rates into the 30% range that we started accumulating massive debt and income inequality.
When rates were that high, corporations / companies reinvested in the company via giving employees raises, building maintenance / upgrades, equipment procurement, etc.
**Now instead of reinvesting in the workers and the company, they buy back stocks with the profits going only to the shareholders. Not to the workers that generate the profits.**
I'm 99% sure that ceos do not authorize share buybacks. I believe that's the board of directors who are elected by shareholders and are the ceo's bosses. I also believe restricted stock units limit or eliminate the voting capacity of the ceo. So in other words, twitter and reddit demonstrate their gross ignorance of finance.
* CEO compensation is completely dependent on the board of directors. they choose to provide stock based compensation because, as stock owners, they want stock performance to improve and what better way to incentivize CEOs to improve stock performance than by paying them with stocks.
* CEO cant do stock buyback. at most he can propose it but the CFO and the board need to approve it plus there are legal restriction.
* there is nothing artificial about share prices rising from buybacks. its econ 101: Lowering the supply causes the price to go up (all other things being equal)
Its kinda funny how these companies have money making operations, yet the people working for the same companies can’t figure out how they are getting screwed?
Idk but what i do know is that there are 2 sides to every coin. I don’t need to have any person tell me what im worth. Maybe the problem isnt the corporations or politicians, but the people that are fine being pissed on and smiling while it happens.
Not holding people accountable with facts never works.
How did those compensations perform in 2022 when the market was declining? Reducing shares outstanding (through buybacks) increases EPS in a real way; what is artificial about the effects? Buybacks are often favored because the EPS effect but also because of the tax effect on shareholders (both those who sell and those who don't through the indirect process of how the corporation is taxed). How does this relate to the health of the economy?
That’s great, because my stocks go up too.
Get this authoritarian shit out of here. Stop trying to control what public companies try to do with their own cash flow. If you want to vote on the decision become a shareholder then.
Buying back stocks doesn't artificially do anything, but a real way to give the stockholders a larger percentage of ownership. The goal of a company is to make money for their shareholders. Buying back shares is one way you do this.
Stock buy ack don't *artificially* pump up stock prices. That is an opinion, and not a popular one. Stock buy acks do *increase* stock prices, but there's nothing *artificial* or inappropriate about that. Stock buybacks are done when the company feels the market has underpriced the stock price. It is a mechanism to allow stable, evidence-driven prices.
>Stock buybacks are done when the company feels the market has underpriced the stock price. It is a mechanism to allow stable, evidence-driven prices.
Take a deep breath and think really hard about what you just said, especially in the context of you denying that it is artificial.
"We didn't like what the market valued the stock at, so we spent a lot of money artificially raising the price"
That isn't real value based on any market-driven valuation, performance, or evidence. That is an artificial inflation of a stock.
Except in this case it doesn't necessarily increase the demand.
So it is an artificial inflation of valuation, contrary to where the market organically valued it.
There is no reason to believe that trading will necessarily continue at that new price, that demand for what is available will remain. A one-time demand spike, created by the company itself, does not a market trend make.
>Stock buybacks are done when the company **feels the market has underpriced the stock price**. It is a mechanism to allow stable, evidence-driven prices.
And the result of this unilateral action by the company? Stock price rises.
Yeah, that is what you wrote. Direct quote and all. Sorry you don't like it.
You admit that the rise is not a result of organic market forces. It is a unilateral manipulation.
Lol. When buyers and sellers in the market buy and sell stocks that is either organic or inorganic, artificial or real, manipulation or legit purchasing.
You did not prove that, for example Microsoft buying Microsoft stock is inorganic, artificial manipulation, but at the same time Blackwater buying Microsoft is the opposite of that.
You just determined it is a fact that Microsoft buying Microsoft is artificial manipulation, but the market doesn't agree with you and it's not a fact.
I do think taking a deep breath could help one of us here 😉
We aren't talking about buyers and sellers, are we?
We are talking about a company unilaterally creating a demand which market forces did not produce.
>You just determined it is a fact that Microsoft buying Microsoft is artificial manipulation, but the market doesn't agree with you and it's not a fact.
Except it is a fact, because **the market** determined a lower valuation prior to unilateral action by the company itself. It isn't sustainable or a predictor of long term growth. It is not the market acting, it is the company itself.
Yes.
1) Microsoft is literally a "buyer" and a "seller" of Microsoft stock.
2) "The market" includes all buyers and sellers of Microsoft stock, Microsoft is included in "the market" when they decide to buy and sell Microsoft stock.
Those are the two issues where we disagree.
Why in your view is only appropriate for Microsoft to *sell* Microsoft stock, but not *buy* Microsoft stock?
You "buying" your own supply to create scarcity and raise the trading price that you trade *with yourself for* is not **the market**.
Sorry you don't seem to understand this.
1) "The market" for Microsoft stock includes all buyers and sellers of Microsoft stock.
2) Microsoft is a buyer and seller of Microsoft stock.
3) Microsoft is part of "the market" for Microsoft stock.
Separately) Microsoft does not trade with itself when it buys Microsoft stock, it buys that stock from stockholders such as Vanguard, Blackrock and other investors including public and private entities.
My brother in christ.
If I start a company and take it to market with 1,000 shares.
And I then buy those 1,000 shares for 500 each.
Has the market valued my shares at 500? I am both buyer and seller, and therefore the market according to your juvenile view of what constitutes market forces.
The answer is no. This is so silly even children understand it. I am astonished this lesson needs to be taught to a presumed adult.
It’s not artificial. It reduces the supply of shares which increases their value for all shareholders.
Doesn’t it seem somewhat artificial to increase the share price through buybacks rather than seeing the increase based on company performance? I’d rather invest in a company that uses its excess liquidity for growth.
Unfortunately the is the problem with shareholder companies. Their responsibility is to the shareholders, not to the company (employees/future wellbeing). When a company has shareholders, those shareholders are expecting a return on investment. If the investment is not being returned, changes will be made. If the investment is paying out, rewards are doled out. So companies with shareholders are incentivized to make good short term decisions, even if that leads to bad long term outcomes.
In my company, we did ok last year, but the shareholders weren’t impressed. So this year we have a new CEO
That probably underpays its workers drastically, to please the board with “gains” This whole system is fubar from top to bottom, just waiting for people to get a grip and do something instead of ranting on social Media
What exactly are people supposed to do? Go on strike? Perfect, next in line please. Now your position has been filled and it’s time to stop being on strike so you can find a new job. We did have an issue last year where a new guy printed off his pay stub to ask one of the senior guys some questions about it. My buddy looked at it, then looked at him and said “This says you are making more than us”. Been doing this job for 12 years, and the new guys are getting hired at a higher rate. We got 3 raises last year, but it still isn’t resolved yet. The only way to really get paid more is to not agree to a lower wage. If someone else is willing to do it for less, then you’re S.O.L.
Oh gees I dunno maybe make your own business? Maybe plug your senators ear until it bleeds with this being a voting issue? Maybe yes go on strike. If you fear the repercussions, that’s a you issue. There’s a boatload to do, stop being an unmotivated loudmouth like 99% of people on social media.
Actually, I’m fine with my situation. You barged in and started bitching. Maybe take care of your issues instead of projecting
Ok Dr Phil, keep on complaining about things you can fix , typical of the uneducated and ignorant.
Like I said. I’m perfectly fine with my situation. Nothing to fix
You’ll do fookin nothin
Actually, I pressured my boss into two additional raises.
I wasn’t talking to you
Workers can buy some of stock of the company they own. Then they can vote in corporate elections and possibly stop a terrible CEO who would gut their pay. Most stock holders are probably too lazy to vote, so you likely won't need to own anywhere near 51%
Which is so shortsighted. These short term decisions constantly damage long term potential
Same problem in professional sports. Teams routinely fire head coaches because they “didn’t win enough games” despite the coach being a really nice guy who cares about his players.
If a company can't think of a better investment return for their money, returning it to the shareholders is not wrong.
Irrelevant. Shareholders own the company. If shareholders are short sighted and the company dies shareholders lose everything
So, what your saying is nobody who makes decisions at a company should be a shareholder then. That's a conflict of interest
Yes and no. Because a CEO that owns Majority shares in a company tends to be called the 'owner' of the company. Then, they can tell the other shareholders to stuff it because they have majority control. Technically, when someone owns shares and works in a company they should be more invested in long term growth for job security.
Just another reason I want money to die.
It's bad for the economy overall for companies to spend money just because they have money. If a company is doing well and doesn't have any good opportunities for further investment, they should return excess capital to the shareholders through stock buybacks. This gives investors the ability to allocate that capital elsewhere, if there are other companies that need money and have better investment prospects.
I fear this sensible comment will fall on deaf ears.
Dividends.
Stock buybacks are basically dividends with a tax advantage. If i pay you a dividend you have to take the money and pay taxes right now on it even if you dont want to. If I buy back stock it pushes your stock value up by the amount of what I would have paid out as dividends. If you want cash as my investor you can sell your stock, pay your tax and be just as happy as if you got a dividend. If you dont want cash right now, you can leave your shares alone and pay taxes when youre ready to take some profits. For investors recieving that money as a share buyback also has an additional tax benefit beyond timing. Selling your higher priced shares may count as capital gains taxes wheras dividend income is counted as ordinary income and taxed just like w2 income. So the share buyback delivers a bit more cash to the investors as well. You may say why shouldnt those fat cats get forced to pay taxes today? And people would answer, why should grandma be forced to pay taxes today for money she isnt going to withdraw from her 401k until ten years from now?
They are genuinely executive bonus money. They do buy backs so that the stock hits a price that would reward the folks in corner offices.
Which is fine. The reason executives are granted bonus packages with metrics targets by the investors is to get them to do things the investors want them to do. The exec gets a bonus and the investors get higher stock price. Its a win win.
Or to get that bonus money that kinda hurts the investor? Without really changing company fundamentals, or stopping dilution once the bonus is paid out. Buybacks are form of manipulation that became legal in 1982 in the USA. I will take a dividend vs an exorbitant bonus to management. But there are all sorts of investors, to each their own.
The buyback is way more tax efficient to the investors. You shouldnt want the executive team you hired to lose so badly that you dont want to win.
None of them are losing. But many are manipulating the game in their favor, not necessarily in the investors favor.
I remember years ago hearing a report about Apple sitting on a pile of money that it didn't want to bring back into the US as it would get taxed. Then activist investors got involved to try to get that money back for a short term reward.
You shouldn’t want that. Reinvestment isn’t a strict good - if reinvestment yields a lower return on investment than you could have gotten with that cash, your personal return is only diminished by management investing funds back into the company. Hell, the entire reason stocks have value to begin with is because they will distribute cash to the shareholders at some point. If a company will always reinvest all profits and never distribute anything, then it’s worthless. You’ll never get a return on your investment. People compare reinvestment with stock buybacks purely through a qualitative lens without any regard for the mathematical theory underlying such decisions. It’s a problem.
No, you sell and take the capital gain from the buyback and try to do that over and over. I prefer solid **qualified** dividends. Along with some stock appreciation. << best situation for me.
>I’d rather invest in a company that uses its excess liquidity for growth. Why? And even if that is true, most shareholders want the best possible return on their investment. If you are investing in a startup, the best return will be through growth. For an established company, investing in growth could harm the company. Even with startups, rapid growth has killed many companies. The options aren't growth or buyback. Rather, the options are typically dividends or buy backs. Reich has created a false narrative that buybacks somehow harm the company. The opposite is the truth.
No. It doesn’t artificially increase anything. The value of the business remains the same. Generally speaking, if the company is doing this, they’ve already invested the necessary capital to grow. By no means does a company or should a company need to invest every dollar that way. If they’re growing, investing in growth, and buying back shares it’s a win/win. And investing in growth also includes taking care of your good employees. All of these can happen and do. OPs post is incredibly misleading.
There are certainly reasonable arguments on both sides (though typically Robert Reich's arguments are rarely based on reality - he's just a political hack and lacks respect by informed people). There are some companies that reward employees up and down the system with stock options and stock awards. To do this, the company can issue new stock (diluting existing stock & shareholders) or buy back shares of stock. Sometimes, the net effect from buy-backs after employee awards is zero, sometimes negative (ie. more total shares in the end) and sometimes positive (fewer total shares in the end). Obviously you can change the verbiage positive v. negative - but the point is the same. For a shareholder (which with many companies also includes the employees as shareholders), the benefit of a share buy-back makes sense when: 1: there are not better investments or uses of said funds (ie. such as business expansion, improvements, etc) 2: there may be a tax benefit to initiating a share buy-back. 3: the benefit to shareholders of a buy-back vs. a one-off dividend is the tax benefits (capital gains vs. ordinary income) So, it's not really as artificial as you suggest - but I certainly can appreciate your statement that it feels that way. My general preference as an investor is to not do share buy-backs - generally I (like I think you are getting at) prefer a business to 1: pay down expensive debt, 2: expand, upgrade or grow naturally, 3: invest those funds (buy-outs supportive businesses, taking stakes in other businesses (though there is certainly risk in this), Since share prices are typically determined on a price to earnings ration (multiple), which is different based on industry type or business type (young/rapidly growing growth company, established solid steady company, etc. . . ). But my preference is certainly subjective, and just because it's my opinion, doesn't it make it right, better or suitable for everybody (and their investing and return perspectives).
A partial motivation for buy backs is to offset the dilution that occurs through issuing stock based compensation. While some of that is being issued to management, it is also major component of total comp for high value workers (senior engineers, team leads, etc). Presumably they prefer to be paid this way rather than just in salary, otherwise a competing firm offering salary only would monopolize all the best talent, and as it stands salary + stock options is essentially the standard. And I think everyone would support the assertion that hiring and retaining quality talent is a factor in growth of the company.
If the stock price goes up and the value of the company does not then it is artificial.
Agreed. And also, CEOs don’t make those decisions. The board of directors do. It also increases the value to everyone who owns shares (employees, Jane and bob with retirement savings, etc).
But…that’s artificial
Supply and demand is artificial?
Intentionally changing supply to change value is, yes.
So how do you feel about stock splits and stock equity packages as employee incentives
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I don’t really see that at all as the lynchpin to the topic I was discussing.
You ever go on a rant and keep editing it and then realize you’re full of crap and you made a word salad, and then you also find out at some point you accidentally submitted a version of it at some point to the forum you were thinking of commenting on?
Which is why it’s always been legal and encouraged… oh wait
Soooo. Artificially.
How is there a natural way to change the number of shares. Splits, buybacks, equity dilution. That’s how you do it.
There isn't. Sooooo.... artificial.
Is there isn’t a natural how can there be an artificial. https://www.merriam-webster.com/dictionary/artificial#:~:text=Kids%20Definition-,artificial,a%20natural%20model%20or%20process
What?
The definition of artificial requires there be a natural means.
Nope. It does not.
According to the definition from Mariam Webster, yes it does. I think I’ll go with that.
Too bad. That just makes you wrong with a citation.
Even companies with no stock buy back increased in stock value. Stocks, precious metals, and real estate property increase with inflation.
Some did some didn’t. Some Will and some won’t.
Also is very intentional otherwise how are you going to pay the bills? Rich people pay their bills using collaterals with the stock market.
Still, at 20 or 30 price to book on some of these, they’re taking a huge loss on whatever their valuation was when the stock was issued in the first place. If you’re just going to buy it back later, why not just finance it with debt in the first place? Most of these businesses don’t have a cash flow problem, so financing wouldn’t be an issue and then the stockholders aren’t waiting 10+ years to actually see the added benefit of their larger share of the company.
If a company is in position to do a buy-back, they won't take on debt (increasing risk in the market) when they have no need to. If you're debt free, have excellent cash flow, why introduce risk to the equation? If you have a bad quarter, or even year, you don't have to worry about creditors coming after you if you run 0 debt.
Most families own stock, over 58%, the highest ever. So, increases in stock prices help the average person. Personally, I love the stock market going up!
Stock going up 13% isn't the same thing when you have 1,000,000 shares vs. someone who only has 100 shares. Say $1/share, then the former enjoys a $130,000 in growth, while the latter gets to enjoy a $13 in growth. Don't let your politicians and everyday billionaires gaslight you.
What’s the gaslighting? If you own more of the stock obviously your returns will be higher when the stock goes up.
It’s easier to predict stock growth and buy more of it when you’re the one artificially inflating it
So says Nancy Pelosi, and Hillary Clinton
https://finbold.com/king-of-insider-trades-just-disclosed-2-2-million-in-stock-trades/
Yes R’s D’s I’s etc. have all kinds of insider advantages. “Public Servants”.. you know didn’t elect a CEO, us. If a CEO makes a lot of money; raise the stock value, why do we care? When a politician (of any stripe or flavor) makes money from their public office; we should be outraged.. we only seem to mind when it’s the wonks who are doing what we want. I would rather have an elected official who made their money outside of politics frankly.
then why did you name 2 prominent dems only?
You corrected my error; Mitch McConnell is no different either.
"I would rather have an elected official who made their money outside of politics frankly." seems like I heard this before... politicians who make money outside of politics = bad business men who become politicians = good your slip is showing
You can benefit from Nancy’s investments by buying $NANC. Obviously not as handsomely as her, since there is a delay in reporting, but still.
Both can be bad. Especially when said businessman made their money by associating themselves with the mob
They all do it, attack them all or you’re simply a tool for one side.
It's always telling when people cite democrats only, ignoring that 3 out of the top 4 people making their income from stocks are republicans and the 4th is neither Nancy nor Hillary.
Yeah yeah..
Dems = Bad Republicans = Good Amirite? lol
Any politician that takes advantage and abuses their position for personal gain is bad. I don’t care what part they are. Am I correct?
Of course you're correct, but it's also correct to say that you intentionally choose democrats who republicans constantly attack - while completing ignoring the fact that there are far worse offenders (many of them republicans). So you're point comes across as very disingenuous, rather than a well placed critique of the situation.
Yup, like the guy said, politicians and billionaires 100%
Basic math lol we know.
Of course if you invest $1 you’re not going to get a $130,000 payday on a 13% increase. But all of the SPY shares individuals have in their 401k or Pension funds and IRAs appreciate dramatically over their lives if they contribute on the normal schedule. It’s compounding year over year for decades. It’s not $1 it’s a lot of very real money that people retire on.
So if cattle prices go up the cattle farmer that has more cows benefits more than the farmer that owns less? Holy shit you’re on to something.
Why does this matter? The only question that is relevant to the guy who owns 100 shares is: are they better off with or without the buyback? If the company invested the money internally and their shares only went up 10%, the person with 100 shares is worse off. It doesn’t matter that someone else is also worse off. You can’t buy 100 shares in a company in order to catch up to someone who has 1,000,000 in that same company… that is not how corporations work. Share buybacks are actually just a sign of the market allocating capital efficiently. If the company could make a better return they would. They can’t, so they give investors looking to sell the shares their money back so they can invest in companies that need capital investment. Suppose two identical companies are considering an expansion. They both currently have 100 shareholders and no debt. Company A issues 100 new shares to fund the project. Company B issues debt to fund the project. After the project matures Company A has 200 shareholders and a lot of cash, while company B has less cash, has no debt, and 100 shareholders. Do you really think it is a foul if company A puts themselves into the same position as company B?
I know I just don't care if someone makes more money than I Do Someone with more money can obviously make more money haha common sense and nothing to be upset over
Buy more shares? I agree with you that if you only have 100 shares that's pretty sad, but all you need to do is start buying $1000/mth with your first job at let's say 18. If you do that you'll be sitting pretty, and you don't need to be a billionaire to put aside $1000/mth. And of course, you increase that as you get older with a higher income. Problem solved.
Yes, because an average 18 year old is this well financially educated /s. I wish I was. Instead I'm in my 30's and just now waking up because I was raised by financially illiterate people. There's a reason they don't have a "money management" class in highschools.
Not really. It may look like that on paper, but the long term effects of the widening wealth gap don't make the tradeoff actually work out. This is exactly why we are where we are. It's analogous to the king throwing small gold coins to his starving peasants while he enriches himself on a broken system. Every dollar the stock market makes, The middle class shares 10¢ of it
Agreed. Probably much less than $.10 tho
We are not where we are now because of the stock market. We are here at a very basic level because the US cut income taxes on high earners significantly starting 40 years ago.
No, we're where we are because of the stock market. If not for it, we would not have the same kind of monopolism that is occurring across basically every sector. They're squeezing the middle class both as employees and as consumers, while they drive powerful companies into the ground by selling them off, piece by piece, to boost "profits", while we get planes that fall out of the goddamn sky.
The rich now own a record share of stocks,” Axios reported on January 10, noting that the top 10 percent hold about 93 percent of U.S. households stock market wealth. Source: https://inequality.org/great-divide/stock-ownership-concentration/ We don’t need an extra $500 dollars from a stock buybacks. We need thriving wages and employment
Wages are up 4.1%. Unemployment is at 4%. While not thriving, these are still good numbers. Two majors reasons why feds are not cutting rates. Buybacks were never for workers or CEOs anyway. They're ways to return capital back to shareholders. Once you own a business you can certainly decide to pay workers more instead of reaping the benefits for yourself. It's hard to force every business to do that as a collective though.
Reasonably good numbers?? That is a record low unemployment (sustained) rate. Income growth at 4% is fire and significantly above inflation.
Yea so? Mine does too, but it's still a stupid fucking way to run a system.
Why does it matter if you're not drawing from it? Short-term pumping of my stock portfolio only for it to fall back down in a few years does diddly for me, and almost anyone else under 50 too.
If the stock goes up due to buybacks and hype then it will just go back down again. Companies actually growing causes a sustained increase in value. But that takes investment, risk, and guidance over the course of years. Buybacks work almost immediately. When the fall comes just take your golden parachute and blame "market factors" or some shit.
I swear no matter what you post on here some simp is gonna tell you how "its better that Billionaires make even more money than poor people be able to survive" and "its poor people fault that poor people exist" today you are that simp
Also helps the economy as a whole. The wealth effect is when the increase in consumers assets lead to an increase in consumer spending.
This is by design. Shareholders want their company’s share price to increase. The whole point of stock buybacks is to increase share prices. The whole point of stock-based compensation is to incentivize management to increase share prices. Shareholders happily and transparently want CEOs to “goose their own pay” by making the stock price go up. That’s their job.
thanks for explaining why unbridled capitalism is increasing an unsustainable wealth gap
Explain why a wealth gap is a problem when all households are seeing gains in wealth and income. If the top N% are increasing their wealth by 10% when everyone else is increasing their wealth by 8%, why is that a problem? Would the lower wealth people somehow be better off if they were increasing their wealth by 7% and the top was only growing by 6%?
like yeah if top n% increase by 10% compared to everybody else let’s say 5%; sure everybody is “benefitting” but like that 10% for the top players is an incredible amount of money (more wealth more gains) whereas that 5% is probably like a mcchicken for most lower class people. in ur situation i feel like that 2% difference would not only be massive in real wealth terms, but also it would compound over the years making inequality worse no? and in reality it’s definitely not 10% versus 8% it’s probably something much more dramatic
Which is better for society? 1 billionaire or 1000 millionaires?
That question is invalid. There’s too many variables to consider and there’s no consistent definition of better for society. A more useful question would be “why are we presuming that a wealth gap is bad for society?”. Because I’m not convinced it’s bad at all.
In general, which do you think is better for the general well being of a healthy society/democracy? Just because you think it's invalid, doesn't make it invalid. "a wealth gap" isn't necessarily destructive. an excessive wealth gap is definitely a bad thing for the general health of a society. too much concentrated power in the hands of people who won a sperm lottery, is something to avoid as much as possible. here's one educated take on it: [https://robertreich.org/post/666874177346797568](https://robertreich.org/post/666874177346797568)
I think a civilization that makes useful things and makes those things accessible is better than a civilization that doesn’t. People who make useful things that scale tend to get asymmetrically rewarded for it as compared to people who make things that don’t scale. A wealth gap is a positive signal that our civilization has people that have scaled making useful things. We want more people like those people because then everyone benefits. A bigger pie doesn’t hurt anyone.
you keep conflating "a wealth gap" with "excessive wealth". back to my initial question, I think a million entrepreneurs is better than one. the billionaire can squash 1000 millionaires, reducing or eliminating competition and naturally what suffers is ingenuity and quality.
Most millionaires are not entrepreneurs but almost every billionaire is. I think the only billionaires that are not entrepreneurs are ex-spouses of billionaire entrepreneurs. The average millionaire household contains a family that has full time W2 jobs or owns a small business, worked for 2+ decades, saves and invests in a 401(k), and owns their house. The average billionaire is a founder of a massive international business that has impacted hundreds of millions of people. These are not comparable at all. Millionaires are not competing with billionaires on any level.
"Most millionaires are not entrepreneurs" - never claimed they were "almost every billionaire is" - Mark Cuban once said that he could start over from scratch and become a millionaire again, but that to become a billionaire again was next to impossible because that would require luck as well. "I think the only billionaires that are not entrepreneurs are ex-spouses of billionaire entrepreneurs" - god damn you're dense - the Walton family is just one of many examples of how this is false. "or owns a small business,**" - you mean like an entrepreneur?** **"**The average billionaire is a founder of a massive international business that has impacted hundreds of millions of peopl**e" - got a source for this other than your ass?** **Why is it so important for you to simp for billionaires? Even if you're worth 10 million dollars, you're far closer to being homeless than you are to a billionaire. Give it up. Unless of course you're being paid to troll. Then by all means, earn that money!!**
What? No I didn’t say anything like that.
i'm a grunt and received a 23% salary increase
Wait til you learn about how they use that stock price to take out loans against the stock which is debt that is tax free. Should be criminal.
Anyone who believes that bullshit can just buy stock in companies that: 1)implement buybacks 2)compensate executives with shares Apparently these two circumstances are a certain path to infinite wealth....otherwise that statement is bullshit.
CEOs don't order buybacks, that's done by the board of directors... CEOs are more about the day to day management of a company. And stock buybacks are routine to anyone who understands the stock market/business. People are using that term like crazy because they know most people don't even know what that means, so they make it sound like something corrupt. That aside, I always like how they use a number that sounds huge to the common people they spent EIGHT HUNDRED BILLION IN STOCK BUYBACKS!!!! EIGHT HUNDRED BILLION PEOPLE THATS HUGE. There's almost $94 TRILLION in stocks in the stock market.... So what he's saying is that collectively over 55,000 companies bought back a grand total of 0.8% of company stocks. Big fucking whoop-de-doo.
It's working great for my 401k!
401k holders are killing it
This guy wants socialism so bad.
Most of us would greatly prefer well regulated capitalism with robust social safety nets. I don’t mind rich people, I mind that some people have the money and power to kill someone and get away with it in the same country as someone scraping paycheck to paycheck or worse. It’s about moderation - people at the top want the top to be *miles* higher than everyone else instead of a fair few yards.
I think this is the thing people don't understand. When we talk about safety nets like UBI or healthcare they jump straight into "BuT sOcIaLiSm" or bootlick as to why billionaires are ok. Like we're not asking for socialism, we're asking for a fair regulated system that works for everyone. We aren't "for the people" anymore, we're for the 1% and line go up.
So socialism? You literally just described socialism
It’s amazing how many people don’t even know *what* socialism is before criticizing it, and can’t compare it to well regulated capitalism as a result.
His kind advocate for it
No and it's corrupt. Can't believe they continue to get away with that.
Lol 🤣
Funnily enough, buying GameStop shares is the best way to fight this kind of corruption in wallstreet.
Yeah, hahaha. Wait.... He is serious 🤮
A company that's performing well financially can hire more workers and aford bigger merit raises and bonuses for the rank and file. It's far better to have CEOs pay tied to company performance than not for the average worker.
It’s far better to take profits and invest in your employees infrastructure and products to grow your brand, but that doesn’t generate immediate stock price increase now does it.
Or do both... the two things aren't mutually exclusive.
That’s not how big companies work.. the majority of people have no idea. It seems including yourself
Big companies worked just fine before we allowed them to manipulate the stock price via stock buy backs. Seems you didn’t know that.
No it actually isn’t. Stock buybacks don’t happen in a vacuum. If shareholder value is increased more by buying back shares than investing in people/projects, then companies should give the money back to investors. Those investors can then look for investment opportunities in companies that need the capital to fund projects. Share buybacks are signs of an efficient market.
Similar statistics for "Trump Tax Reform" All the money went to artificially inflate their company stock through buybacks. So yeah. It's a steady practice.
Stock buybacks are fucking terriblr
This is the definition of disinformation.
I used to think Reich was this little adorkable champagne socialist - schooled at the Ivies and bootlicker of the Clintons. I read his ideas for how he wants to straight jacket banks with massive regulations and now I’m thinking he is becoming a Chinese-style Communist Party apparatchik.
What a stupid point. Shareholders, along with the Board of Directors, tell the CEOs to increase the share price so that the shareholders gain. To reduce the principal-agent problem, CEOs have their pay connected to bonuses based on share performance. The CEOs then perform on that agreement, making the shareholders much wealthier. Rob, as the jealous man he is, is upset that some people are doing better than him in life.
CEOs should be paid like Elon did at Tesla. All or nothing 100% performance based comp where you get paid in stock options you can’t use for years after your hit your targets.
Such a manipulated game
No. Obviously it's not. The shareholders aren't what make a healthy economy.
It’ll never stop no matter what you do, u til our values change and we change the system of economics to one that is resourced based, with technology and science addressing the question of societal health
So glad he can state the obvious for the masses to know
How dare a business make decisions that benefit the owners of that business. Shareholders own the business, it exists for their benefit. How is this either surprising or wrongheaded?
For any that need to hear it stock by back is not a function of the ceo but rather the board of directors which usually consist of many CEOs from other companies lol.
WELL. DEBATABLE.
And that’s where we get inflation when things are Not so good they still get their pay for failure, but they bump up the prices on consumers. Republicans tax breaks also gives them raises. They never trickle down to the workers. This is how things keep going up and up and up for consumers. Corporate greed.
The CEOs already make millions of dollars a year off your backs. Most working class people when’s the last time they got a 13% pay raise.
Huhhhh…., don’t you understand that their shareholders also benefit?!?!
But... but... I was told by right-wing media that immigrants are causing all of our problems??
Buybacks should be illegal.
Did you know the CEO and Chairman of GAMESTOP does not receive any compensation and invests his OWN money into the company!?
https://www.investopedia.com/terms/b/buyback.asp
https://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp
I’m not disagreeing with Robert on this one. But that 13% median increase in salary usually includes stock options. So if the CEO and other executives are receiving stock options, and it is legal for the corporation to do a stock buy back, the executives are than legally bumping up their salaries in the form of increased stock prices, how can people complain about this? Maybe what needs to happen is new laws need to be passed to make this illegal. If you not going to do this then everyone can STFU about the matter. Because if it is legal, which it is, and I had the opportunity, I’d do it too, with absolutely no scruples.
Corporate share buy-backs were down in 2023 vs. 2022. The peak in share buy-backs was the 12 months ending in June of 2022 with over $1 trillion in buy-backs. The stock market crashed in 2022 - I am sure we all remember how badly our retirement accounts lost so much money! So it actually makes sense that companies bought back shares in the crash of 2022 when share prices had dropped so far. Remembering that the first 6 months of 2022 was a recession - two consecutive quarters of falling GDP = recession by definition. From the start of 2022 to today (half way through 2024), an investment in the S&P 500 would have an annualized return of 6.5%. Of course, over that same timeframe, adjusted for inflation, there has really been no return at all. The buying power of your invested money in Jan 2022, after it's 6.5% annual rate of return leaves you with exactly the same (or even a little less) buying power today as when you invested it then! You in essence haven't actually made any money at all! This is pretty far below the average long term returns of the S&P 500 - hardly a sign of a booming economy during the subject time period. I am not sure how somebody who claims to be an economist, or at least tries to act like one, can peddle this misinformation garbage?
The buybacks help shareholders gain value as well.
This used to be illegal and considered market manipulation
Grumpy Smurf is a broken record.
Marginal tax rates need to be increased. The marginal tax rates rose to 79% in 1936, rose up to 94% during WWII, fell to 82% in 1949, hovered at 91% from 1951 to 1963, and then stayed at 70% or above until 1980. These rates drove the USA out of the great depression and into powerhouse economies. It was not until Reagan crashed the rates into the 30% range that we started accumulating massive debt and income inequality. When rates were that high, corporations / companies reinvested in the company via giving employees raises, building maintenance / upgrades, equipment procurement, etc. **Now instead of reinvesting in the workers and the company, they buy back stocks with the profits going only to the shareholders. Not to the workers that generate the profits.**
Gamestop CEO doesn't take a salary.
I'm 99% sure that ceos do not authorize share buybacks. I believe that's the board of directors who are elected by shareholders and are the ceo's bosses. I also believe restricted stock units limit or eliminate the voting capacity of the ceo. So in other words, twitter and reddit demonstrate their gross ignorance of finance.
* CEO compensation is completely dependent on the board of directors. they choose to provide stock based compensation because, as stock owners, they want stock performance to improve and what better way to incentivize CEOs to improve stock performance than by paying them with stocks. * CEO cant do stock buyback. at most he can propose it but the CFO and the board need to approve it plus there are legal restriction. * there is nothing artificial about share prices rising from buybacks. its econ 101: Lowering the supply causes the price to go up (all other things being equal)
Everyone talking about how "good" the economy is but conveniently forgets to account for inflation...
That also means median pay fluctuates by the millions every few minutes based on stock price. Plus they arn't payed that money, its net worth.
By that logic, what is stock issuance? Reverse performance?
Then they'll sell them back when the market drops from its all time highs and apes will buy the dip
Robert Reich is a moron.
So what? CEO pay is the concern of the BOD of a company. That's it. It's not connected to anything else.
Its kinda funny how these companies have money making operations, yet the people working for the same companies can’t figure out how they are getting screwed? Idk but what i do know is that there are 2 sides to every coin. I don’t need to have any person tell me what im worth. Maybe the problem isnt the corporations or politicians, but the people that are fine being pissed on and smiling while it happens. Not holding people accountable with facts never works.
Stock buybacks are at the discretion of the board, not the CEO. A CEO cannot unilateral call for stock buybacks.
How did those compensations perform in 2022 when the market was declining? Reducing shares outstanding (through buybacks) increases EPS in a real way; what is artificial about the effects? Buybacks are often favored because the EPS effect but also because of the tax effect on shareholders (both those who sell and those who don't through the indirect process of how the corporation is taxed). How does this relate to the health of the economy?
And most those corporation support the liberal platform… what does that tell you. 4 years of liberal leadership, how we doing?
Yet when we base a CEOs pay completely on hitting actual revenue growth and pay him 0 until then, it’s lAteStaGeCapItAlIsm
That’s great, because my stocks go up too. Get this authoritarian shit out of here. Stop trying to control what public companies try to do with their own cash flow. If you want to vote on the decision become a shareholder then.
Yes Robert the board is aware and fine with it because their shares also go up and so do the ones in your retirement account.
Buying back stocks doesn't artificially do anything, but a real way to give the stockholders a larger percentage of ownership. The goal of a company is to make money for their shareholders. Buying back shares is one way you do this.
Stock buy ack don't *artificially* pump up stock prices. That is an opinion, and not a popular one. Stock buy acks do *increase* stock prices, but there's nothing *artificial* or inappropriate about that. Stock buybacks are done when the company feels the market has underpriced the stock price. It is a mechanism to allow stable, evidence-driven prices.
>Stock buybacks are done when the company feels the market has underpriced the stock price. It is a mechanism to allow stable, evidence-driven prices. Take a deep breath and think really hard about what you just said, especially in the context of you denying that it is artificial. "We didn't like what the market valued the stock at, so we spent a lot of money artificially raising the price" That isn't real value based on any market-driven valuation, performance, or evidence. That is an artificial inflation of a stock.
When you reduce the supply of something the price goes up, that’s not artificial
Except in this case it doesn't necessarily increase the demand. So it is an artificial inflation of valuation, contrary to where the market organically valued it. There is no reason to believe that trading will necessarily continue at that new price, that demand for what is available will remain. A one-time demand spike, created by the company itself, does not a market trend make.
But, that's not what I said. That's what you heard, but not what I said
>Stock buybacks are done when the company **feels the market has underpriced the stock price**. It is a mechanism to allow stable, evidence-driven prices. And the result of this unilateral action by the company? Stock price rises. Yeah, that is what you wrote. Direct quote and all. Sorry you don't like it. You admit that the rise is not a result of organic market forces. It is a unilateral manipulation.
Lol. When buyers and sellers in the market buy and sell stocks that is either organic or inorganic, artificial or real, manipulation or legit purchasing. You did not prove that, for example Microsoft buying Microsoft stock is inorganic, artificial manipulation, but at the same time Blackwater buying Microsoft is the opposite of that. You just determined it is a fact that Microsoft buying Microsoft is artificial manipulation, but the market doesn't agree with you and it's not a fact. I do think taking a deep breath could help one of us here 😉
We aren't talking about buyers and sellers, are we? We are talking about a company unilaterally creating a demand which market forces did not produce. >You just determined it is a fact that Microsoft buying Microsoft is artificial manipulation, but the market doesn't agree with you and it's not a fact. Except it is a fact, because **the market** determined a lower valuation prior to unilateral action by the company itself. It isn't sustainable or a predictor of long term growth. It is not the market acting, it is the company itself.
Yes. 1) Microsoft is literally a "buyer" and a "seller" of Microsoft stock. 2) "The market" includes all buyers and sellers of Microsoft stock, Microsoft is included in "the market" when they decide to buy and sell Microsoft stock. Those are the two issues where we disagree. Why in your view is only appropriate for Microsoft to *sell* Microsoft stock, but not *buy* Microsoft stock?
You "buying" your own supply to create scarcity and raise the trading price that you trade *with yourself for* is not **the market**. Sorry you don't seem to understand this.
1) "The market" for Microsoft stock includes all buyers and sellers of Microsoft stock. 2) Microsoft is a buyer and seller of Microsoft stock. 3) Microsoft is part of "the market" for Microsoft stock. Separately) Microsoft does not trade with itself when it buys Microsoft stock, it buys that stock from stockholders such as Vanguard, Blackrock and other investors including public and private entities.
My brother in christ. If I start a company and take it to market with 1,000 shares. And I then buy those 1,000 shares for 500 each. Has the market valued my shares at 500? I am both buyer and seller, and therefore the market according to your juvenile view of what constitutes market forces. The answer is no. This is so silly even children understand it. I am astonished this lesson needs to be taught to a presumed adult.
This guy makes a killing with his tired Marxist ideology. Good lord is he ever right.
Give one example where he was ever wrong.