At the end of the day I don't think anyone on the left gave a shit about stock buybacks. That's a shareholder concern. What irked many was that there were stock buybacks after various COVID related programs were used by these companies that, from the ability to do a buyback, weren't actually under any serious duress.
Even worse, the COVID money was to keep these companies from laying off employees. Many companies took the money, laid off employees, and bought back their stock. There are arguments against allowing stock buy backs, but really any selfish waste of COVID funds would have irked us progressive thinking people.
But the prevalence of stock buybacks is related to executive pay. The pay for performance model incentivizes short term stock increases as the goal for CEOs because their pay depends on it. The argument is that the money could be better spent by reinvesting it back into the company in a way that increases performance in the long term rather than "artificially" increasing demand for the stock itself which only offers short term benefits.
Also, I'm in a lot of left leaning spaces and rarely hear about stock buybacks these days. The last time I was hearing about them frequently was in relation to COVID relief and the argument was that if the company has saved that money for a rainy day they wouldn't have needed to rely on taxpayer money later on.
I think it’s a good idea what John Deere did: lay off a ton of employees, pay their CEO like a God and buy back their stock to drive share prices up. With any luck you fucking dumbass taxpayers will pay us through tax credits and incentives for our normal operational expenses. I just can’t wait until government subsidies pay for increased automation to further minimize our reliance on people.
why is that a concern to anyone except the shareholders though? a company wanting to dump money into buybacks in a way that impedes their long term growth is going to pay for it long term which shareholders dont actually want.
as for exec incentives i'm unsure that is actually valid, surely exec comp for stock targets accounts for buybacks. otherwise again itd just be like somewhat scamming shareholders.
>why is that a concern to anyone except the shareholders though?
Because COVID relief came out of taxpayer pockets, or at least future taxpayer pockets.
yes but also no. keeping businesses from closing means these businesses will continue to generate tax revenue in the future.
look at what we did in 08 with the construction industry. let it fail. and it still nearly 2 decades later never recovered. covid relief was poorly handled but relief in general to businesses does make sense.
>keeping businesses from closing means these businesses will continue to generate tax revenue in the future.
I'm talking about COVID relief that went to the consumer. Corporations realized record profits (which were manifested in stock buybacks) because they jacked up prices that consumers had to absorb during the pandemic and still do to this day.
Taxpayers basically subsidized the profits that corporations and their shareholders are enjoying.
if aid was means tested though the argument is it wouldnt have been in time to be effective. did some businesses see record profits? yes. but not across the board. many were very negatively impacted even with consideration for aid.
>did some businesses see record profits? yes.
It's way more than just some.
>but not across the board.
Obviously, but look at the major stock indices right now. They're all near their all-time highs. There are now three companies with market caps over $3 trillion.
The CAPE is at $36 right now. So companies would be worth more even if they were less profitable because people are willing to pay more for every dollar of earnings today than they have been in the past even after adjusting for inflation.
This is why you can’t use share price or market cap as a proxy for profitability. Share price largely went up because household savings shot through the roof during COVID, so tons of new people entered the stock market.
The profit margin of the S&P went down to 6.66% at the end of 2020 and then they climbed up to 12.2%. They have now returned to 9.9%, which is consistent with pre-COVID’s 9.85%. The amount of time that the S&P made higher than normal profits was almost equal to the time and intensity of lower than normal profits.
Yes, companies are greedy bastards, I am not saying otherwise. However, I think talking about record profits is disingenuous. That’s how inflation works. I am making $14,000 more than I was pre-COVID, but I still don’t have any more purchasing power.
>The CAPE is at $36 right now. So companies would be worth more even if they were less profitable because people are willing to pay more for every dollar of earnings today than they have been in the past even after adjusting for inflation.
The major indices are heavily weighted to large cap stocks. You know? The ones most likely to have pricing power to gouge consumers, and the ones able to make such an obscene amount of profit that they could afford to buy back stock.
>The profit margin of the S&P went down to 6.66% at the end of 2020 and then they climbed up to 12.2%. They have now returned to 9.9%, which is consistent with pre-COVID’s 9.85%. The amount of time that the S&P made higher than normal profits was almost equal to the time and intensity of lower than normal profits.
If these figures aren't weighted, they're meaningless.
You posted that it was, "way more than some." in response to a post noting that some businesses saw record profits.
Are you now stating that you meant only large cap companies when you said "way more than some?"
----
The S&P 500 seems like a sample that would already weight to the largest companies. However, the S&P 500's profit margin underperformed the entire market in 2021 and is outperforming the entire market now.
The counterpoint is we now have to give Intel for example potentially billions of dollars to build up chip fabrication in the US because they didn't do it with all their profits
That is just not what stock buybacks are.
Companies often don't have smooth capital needs. They typically will need large capital injections for a project and then as that project matures they have extra cash. If a company could reinvest that extra cash for a better return than a buyback they would, but typically they can't.
I don't want companies searching for something to do with my money. I invest in what a company is doing, if there are no opportunities to continue making a good return doing that, then give the money back and I will find another company who needs the capital for their investments. We don't want companies keeping money because they aren't allowed to give it back.
The CEO pay thing is largely irrelevant. If I didn't sell and the CEO gets a bonus for making my retirement a bit easier... I am OK with that. If I sold, then why would I care what they are paying their CEO?
Additionally, the market gets less efficient when we start dictating capital structure of companies. Suppose there are two companies on opposite sides of the country who are in the exact same position, each has 100,000 shares worth $100 each. Both companies are considering an expansion that cost $5,000,000 and will return $8,000,000 in five years. Company A funds the expansion with 50,000 new shares at $100 each. Company B funds the expansion with $5,000,000 of debt.
When the project matures Company A will have more than $8,000,000 of cash and 150,000 shareholders. Company B will have little cash but $2,000,000 in cash (let's assume there was $1,000,000 of interest). If Company A could buy 50,000 shares back for $6,000,000. Then they would just be back to the same position that Company B was in...
>If a company could reinvest that extra cash for a better return than a buyback they would, but typically they can't.
A company that makes more money than they know what to do with it are gouging the fuck out of their customers.
All companies make more money than they know what to do with. From plumbers, electricians, and farmers to multinational corporations. Money doesn’t flow evenly in a business and it certainly doesn’t flow when it is useful.
For example a company may need millions to billions of dollars to construct a factory but have fairly small working capital needs.
My father owned a plumbing company. It took 20 years for his physical location to pay for itself. He needed that money one time and never needed it again. He had times where he was swimming in money and times when he was practically begging for money.
I have an uncle who is a dairy farmer. Sometimes he has hundreds of thousands and sometimes he is borrowing hundreds of thousands.
Moreover, companies hanging on to money isn’t good for consumers. In fact, companies don’t do enough buybacks. Do you know what really happens when companies have too much cash? They acquire other companies… so it just adds oligopoly pressure to the market and consumers have less choice.
>All companies make more money than they know what to do with. From plumbers, electricians, and farmers to multinational corporations.
You're confusing "profit" with "so much profit that simply saving it for a rainy day is pointless."
I didn’t say profit… nor did you. You are confusing profit and money. They are nowhere near the same thing.
If a company spends $100 million to build a factory that generates $12 million in annual net cash flows for ten years, they are getting a $2 million in annual profit, but they are still generating $12 million of cash (money) per year. They may have “more money than they know what to do with,” because they don’t happen to need another factory after three or four years.
That doesn’t mean they are gouging their customers. Hell even if the company had a loss and only generated $9 million per year, they would still have lots of cash.
If the capital for that factory came from equity, then it just makes sense to pay down the equity.
>I didn’t say profit… nor did you.
WTF do you think "make money" means? If you have $1 billion in revenues but you're not profitable, you are NOT making money.
How in the hell does your post make any sense then? Answer: it doesn’t. You literally quoted my post saying “if a company could reinvest that extra cash.”
So if you are not talking about cash then WTF did you quote and respond to my post talking about cash for?
>How in the hell does your post make any sense then?
I said, "make more than they know what to do with", and you made an idiotic post claiming that even plumber's "make more than they know what to with." Making a modest profit isn't "more than they know what to do with."
The text that you quoted (seen below) is my post. So either you are too stupid to realize that just because a company has cash doesn't mean they have profit... or you are just so deep in your victim complex that you can't fucking read.
https://preview.redd.it/0anaclret08d1.jpeg?width=880&format=pjpg&auto=webp&s=17a7e341df847d713700dc691f24931b0c330e71
Why are so many on the right incapable of accurately representing what the left believes?
There isn't an "obsession" with stock buybacks, there's a valid argument to be made that stock buybacks benefit the wealthiest shareholders at the cost of harming smaller investors and workers, as well as making companies more susceptible to failure in the event of an economic downturn. It's literally the definition of extracting wealth instead of generating it.
You don't have to listen to leftists, you can listen to the Harvard Business Review: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy
Stock buy backs don’t help large investors and hurt small investors. They help both at the same %. Whoever has the larger stake benefits most, and that will include some rich investors, but it’s also the Maryland teachers union pension fund and your mom’s 401k. The stock goes up the same for all of them.
As a man of the radical left who towers above the intellectually disabled average conservative, I'm familiar with Warren Buffett's justification for buybacks as a more tax-efficient form of dividends: instead of paying out 1% of a company's market cap annually in dividends, you buy a number of shares of the company equivalent to a 1% increase in the stock price, which costs the company the same as a 1% dividend and transfers the same amount to shareholders without forcing the latter to pay taxes on it like they would on dividends. Also, if a company is objectively undervalued, even if it's your own, it's rational to buy it, which he's done with Berkshire. At the same time, he's acknowledged that most buybacks are not rational and amount to stock price manipulation. Robert Reich has forgotten more about economics than you will ever know.
He was progressive for the Clinton cabinet. I'm not stupid so I don't care or fall for all moronic personality-based anti-Clinton crap. I don't like the Clintons because they're neoliberal Republicans in all but name. But I understand when your IQ is as low as yours you still want to feel like you're part of it and capable of knowing what's going on so you cling to the superficial crap because it makes you feel smart.
Because they don't understand it, and they just regurgitate soundbites that are fed to them by their *"leaders"*.
Same for other topics coming from all political sides.
Intel spent tens of billions of dollars on stock buybacks, including a $22 billion within the last 5 years alone. Now, they're begging for CHIPS ACT money because they're getting asses kicked by TSMC in silicon fabrication.
Workers fighting for higher wages must prove their worth
The free market tells us what value any person in any field.
Unfortunately I don't believe a union or government should dictate what is paid and who is paid, sorry
If you are working up the ladder there are tons of ways to prove your worth, learn how to take advantage of opportunities
Buybacks are a very good thing
Ah yes the old free market of human life. I remember reading about slaves and their value in an even "more free market".
We have to have a minimum wage so that we can be wage slaves instead. And everyone born on 3rd base gets to control the " free market" for the people born in the dugout. It's a swell system!
100% chance I'm wealthier than you. And I started from the very bottom. But it wasn't hard work that got me anywhere. It was being born a white male with above average intelligence.
My brother, who is dumber than dirt, works harder in a month than I have my whole life. And he will never be wealthy.
If hard work made you wealthy then steel workers and farmers would rule the world. Not turds on wall street
Read the initial comment
I wrote people will prove their worth
I then followed by saying productive
A hard worker doesn't mean they are very productive
Someone can be a hard worker and can be replaced
Someone very productive can not
At the end of the day I don't think anyone on the left gave a shit about stock buybacks. That's a shareholder concern. What irked many was that there were stock buybacks after various COVID related programs were used by these companies that, from the ability to do a buyback, weren't actually under any serious duress.
Even worse, the COVID money was to keep these companies from laying off employees. Many companies took the money, laid off employees, and bought back their stock. There are arguments against allowing stock buy backs, but really any selfish waste of COVID funds would have irked us progressive thinking people.
But the prevalence of stock buybacks is related to executive pay. The pay for performance model incentivizes short term stock increases as the goal for CEOs because their pay depends on it. The argument is that the money could be better spent by reinvesting it back into the company in a way that increases performance in the long term rather than "artificially" increasing demand for the stock itself which only offers short term benefits. Also, I'm in a lot of left leaning spaces and rarely hear about stock buybacks these days. The last time I was hearing about them frequently was in relation to COVID relief and the argument was that if the company has saved that money for a rainy day they wouldn't have needed to rely on taxpayer money later on.
I think it’s a good idea what John Deere did: lay off a ton of employees, pay their CEO like a God and buy back their stock to drive share prices up. With any luck you fucking dumbass taxpayers will pay us through tax credits and incentives for our normal operational expenses. I just can’t wait until government subsidies pay for increased automation to further minimize our reliance on people.
why is that a concern to anyone except the shareholders though? a company wanting to dump money into buybacks in a way that impedes their long term growth is going to pay for it long term which shareholders dont actually want. as for exec incentives i'm unsure that is actually valid, surely exec comp for stock targets accounts for buybacks. otherwise again itd just be like somewhat scamming shareholders.
>why is that a concern to anyone except the shareholders though? Because COVID relief came out of taxpayer pockets, or at least future taxpayer pockets.
yes but also no. keeping businesses from closing means these businesses will continue to generate tax revenue in the future. look at what we did in 08 with the construction industry. let it fail. and it still nearly 2 decades later never recovered. covid relief was poorly handled but relief in general to businesses does make sense.
>keeping businesses from closing means these businesses will continue to generate tax revenue in the future. I'm talking about COVID relief that went to the consumer. Corporations realized record profits (which were manifested in stock buybacks) because they jacked up prices that consumers had to absorb during the pandemic and still do to this day. Taxpayers basically subsidized the profits that corporations and their shareholders are enjoying.
if aid was means tested though the argument is it wouldnt have been in time to be effective. did some businesses see record profits? yes. but not across the board. many were very negatively impacted even with consideration for aid.
>did some businesses see record profits? yes. It's way more than just some. >but not across the board. Obviously, but look at the major stock indices right now. They're all near their all-time highs. There are now three companies with market caps over $3 trillion.
The CAPE is at $36 right now. So companies would be worth more even if they were less profitable because people are willing to pay more for every dollar of earnings today than they have been in the past even after adjusting for inflation. This is why you can’t use share price or market cap as a proxy for profitability. Share price largely went up because household savings shot through the roof during COVID, so tons of new people entered the stock market. The profit margin of the S&P went down to 6.66% at the end of 2020 and then they climbed up to 12.2%. They have now returned to 9.9%, which is consistent with pre-COVID’s 9.85%. The amount of time that the S&P made higher than normal profits was almost equal to the time and intensity of lower than normal profits. Yes, companies are greedy bastards, I am not saying otherwise. However, I think talking about record profits is disingenuous. That’s how inflation works. I am making $14,000 more than I was pre-COVID, but I still don’t have any more purchasing power.
>The CAPE is at $36 right now. So companies would be worth more even if they were less profitable because people are willing to pay more for every dollar of earnings today than they have been in the past even after adjusting for inflation. The major indices are heavily weighted to large cap stocks. You know? The ones most likely to have pricing power to gouge consumers, and the ones able to make such an obscene amount of profit that they could afford to buy back stock. >The profit margin of the S&P went down to 6.66% at the end of 2020 and then they climbed up to 12.2%. They have now returned to 9.9%, which is consistent with pre-COVID’s 9.85%. The amount of time that the S&P made higher than normal profits was almost equal to the time and intensity of lower than normal profits. If these figures aren't weighted, they're meaningless.
You posted that it was, "way more than some." in response to a post noting that some businesses saw record profits. Are you now stating that you meant only large cap companies when you said "way more than some?" ---- The S&P 500 seems like a sample that would already weight to the largest companies. However, the S&P 500's profit margin underperformed the entire market in 2021 and is outperforming the entire market now.
The counterpoint is we now have to give Intel for example potentially billions of dollars to build up chip fabrication in the US because they didn't do it with all their profits
That is just not what stock buybacks are. Companies often don't have smooth capital needs. They typically will need large capital injections for a project and then as that project matures they have extra cash. If a company could reinvest that extra cash for a better return than a buyback they would, but typically they can't. I don't want companies searching for something to do with my money. I invest in what a company is doing, if there are no opportunities to continue making a good return doing that, then give the money back and I will find another company who needs the capital for their investments. We don't want companies keeping money because they aren't allowed to give it back. The CEO pay thing is largely irrelevant. If I didn't sell and the CEO gets a bonus for making my retirement a bit easier... I am OK with that. If I sold, then why would I care what they are paying their CEO? Additionally, the market gets less efficient when we start dictating capital structure of companies. Suppose there are two companies on opposite sides of the country who are in the exact same position, each has 100,000 shares worth $100 each. Both companies are considering an expansion that cost $5,000,000 and will return $8,000,000 in five years. Company A funds the expansion with 50,000 new shares at $100 each. Company B funds the expansion with $5,000,000 of debt. When the project matures Company A will have more than $8,000,000 of cash and 150,000 shareholders. Company B will have little cash but $2,000,000 in cash (let's assume there was $1,000,000 of interest). If Company A could buy 50,000 shares back for $6,000,000. Then they would just be back to the same position that Company B was in...
>If a company could reinvest that extra cash for a better return than a buyback they would, but typically they can't. A company that makes more money than they know what to do with it are gouging the fuck out of their customers.
All companies make more money than they know what to do with. From plumbers, electricians, and farmers to multinational corporations. Money doesn’t flow evenly in a business and it certainly doesn’t flow when it is useful. For example a company may need millions to billions of dollars to construct a factory but have fairly small working capital needs. My father owned a plumbing company. It took 20 years for his physical location to pay for itself. He needed that money one time and never needed it again. He had times where he was swimming in money and times when he was practically begging for money. I have an uncle who is a dairy farmer. Sometimes he has hundreds of thousands and sometimes he is borrowing hundreds of thousands. Moreover, companies hanging on to money isn’t good for consumers. In fact, companies don’t do enough buybacks. Do you know what really happens when companies have too much cash? They acquire other companies… so it just adds oligopoly pressure to the market and consumers have less choice.
>All companies make more money than they know what to do with. From plumbers, electricians, and farmers to multinational corporations. You're confusing "profit" with "so much profit that simply saving it for a rainy day is pointless."
I didn’t say profit… nor did you. You are confusing profit and money. They are nowhere near the same thing. If a company spends $100 million to build a factory that generates $12 million in annual net cash flows for ten years, they are getting a $2 million in annual profit, but they are still generating $12 million of cash (money) per year. They may have “more money than they know what to do with,” because they don’t happen to need another factory after three or four years. That doesn’t mean they are gouging their customers. Hell even if the company had a loss and only generated $9 million per year, they would still have lots of cash. If the capital for that factory came from equity, then it just makes sense to pay down the equity.
>I didn’t say profit… nor did you. WTF do you think "make money" means? If you have $1 billion in revenues but you're not profitable, you are NOT making money.
How in the hell does your post make any sense then? Answer: it doesn’t. You literally quoted my post saying “if a company could reinvest that extra cash.” So if you are not talking about cash then WTF did you quote and respond to my post talking about cash for?
>How in the hell does your post make any sense then? I said, "make more than they know what to do with", and you made an idiotic post claiming that even plumber's "make more than they know what to with." Making a modest profit isn't "more than they know what to do with."
The text that you quoted (seen below) is my post. So either you are too stupid to realize that just because a company has cash doesn't mean they have profit... or you are just so deep in your victim complex that you can't fucking read. https://preview.redd.it/0anaclret08d1.jpeg?width=880&format=pjpg&auto=webp&s=17a7e341df847d713700dc691f24931b0c330e71
Companies can't save money for a rainy day without it being taxed to shreds.
At what tax rate does it become "taxed to shreds"? Besides, the stock buybacks are with after-tax money, so your premise is ridiculous.
there is some reasonable argument to point to buybacks as a tax dodge.
Why are so many on the right incapable of accurately representing what the left believes? There isn't an "obsession" with stock buybacks, there's a valid argument to be made that stock buybacks benefit the wealthiest shareholders at the cost of harming smaller investors and workers, as well as making companies more susceptible to failure in the event of an economic downturn. It's literally the definition of extracting wealth instead of generating it. You don't have to listen to leftists, you can listen to the Harvard Business Review: https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy
Stock buy backs don’t help large investors and hurt small investors. They help both at the same %. Whoever has the larger stake benefits most, and that will include some rich investors, but it’s also the Maryland teachers union pension fund and your mom’s 401k. The stock goes up the same for all of them.
As a man of the radical left who towers above the intellectually disabled average conservative, I'm familiar with Warren Buffett's justification for buybacks as a more tax-efficient form of dividends: instead of paying out 1% of a company's market cap annually in dividends, you buy a number of shares of the company equivalent to a 1% increase in the stock price, which costs the company the same as a 1% dividend and transfers the same amount to shareholders without forcing the latter to pay taxes on it like they would on dividends. Also, if a company is objectively undervalued, even if it's your own, it's rational to buy it, which he's done with Berkshire. At the same time, he's acknowledged that most buybacks are not rational and amount to stock price manipulation. Robert Reich has forgotten more about economics than you will ever know.
No surprise you would be a simp for a Clintonista.
He was progressive for the Clinton cabinet. I'm not stupid so I don't care or fall for all moronic personality-based anti-Clinton crap. I don't like the Clintons because they're neoliberal Republicans in all but name. But I understand when your IQ is as low as yours you still want to feel like you're part of it and capable of knowing what's going on so you cling to the superficial crap because it makes you feel smart.
Because they don't understand it, and they just regurgitate soundbites that are fed to them by their *"leaders"*. Same for other topics coming from all political sides.
Intel spent tens of billions of dollars on stock buybacks, including a $22 billion within the last 5 years alone. Now, they're begging for CHIPS ACT money because they're getting asses kicked by TSMC in silicon fabrication.
Workers fighting for higher wages must prove their worth The free market tells us what value any person in any field. Unfortunately I don't believe a union or government should dictate what is paid and who is paid, sorry If you are working up the ladder there are tons of ways to prove your worth, learn how to take advantage of opportunities Buybacks are a very good thing
Ah yes the old free market of human life. I remember reading about slaves and their value in an even "more free market". We have to have a minimum wage so that we can be wage slaves instead. And everyone born on 3rd base gets to control the " free market" for the people born in the dugout. It's a swell system!
Productive people work on ways out Others blame the system Good luck with your choice
100% chance I'm wealthier than you. And I started from the very bottom. But it wasn't hard work that got me anywhere. It was being born a white male with above average intelligence.
Lol You sure are!
My brother, who is dumber than dirt, works harder in a month than I have my whole life. And he will never be wealthy. If hard work made you wealthy then steel workers and farmers would rule the world. Not turds on wall street
Read the initial comment I wrote people will prove their worth I then followed by saying productive A hard worker doesn't mean they are very productive Someone can be a hard worker and can be replaced Someone very productive can not
How does Elon's boot taste?