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The revival of [The Economy] (thread) and the potential for its coming collapse
Most of this is just instablity concerns due to the elections. If Democrats win strongly and send a strong, "Tariffs are done" signal, then the markets will go up. If Republicans win a little bit, they will go up a little bit. If Republicans win a LOT then they will fall.
Most of this is just instablity concerns due to the elections. If Democrats win strongly and send a strong, "Tariffs are done" signal, then the markets will go up. If Republicans win a little bit, they will go up a little bit. If Republicans win a LOT then they will fall.
democrats can't stop tariffs even if they win the house and the senate. they're being done through the executive because """""national security""""" afaik.
shit's stupid. there isn't an end goal for all this nonsense and it's so frustrating.
Most of this is just instablity concerns due to the elections. If Democrats win strongly and send a strong, "Tariffs are done" signal, then the markets will go up. If Republicans win a little bit, they will go up a little bit. If Republicans win a LOT then they will fall.
democrats can't stop tariffs even if they win the house and the senate. they're being done through the executive because """""national security""""" afaik.
shit's stupid. there isn't an end goal for all this nonsense and it's so frustrating.
I believe there's a bill to take that power back, even sponsored by Corker and stuff, but McConnell wouldn't let it come to the floor.
The idea that your vote is a moral statement about you or who you vote for is some backwards ass libertarian nonsense. Your vote is about society. Vote to protect the vulnerable.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
Things have to get really tight before wages start to take off. And even then you have to fight for every nickel.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
why would the investor class all collude to put off their gains for later. someone who could have gotten in early would have made far more money, and either way, huge market gains like we had since 2016 have little to no bearing on 90% of the population, and outside of retirement funds, 99+% of the population. doesn't make sense to me.
the gop won and the only law they managed to pass was a massive tax cut for corporations, those corporations have used the money to buy back stocks and post record profits, and thus, the stock market went up because it's being subsidized by the us government. dunno why there has to be a conspiracy.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
Except the S&P500 trendline has actually softened a bit compared to Obama's term. (Starting from the Recession's end rather than Jan 20)
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
why would the investor class all collude to put off their gains for later. someone who could have gotten in early would have made far more money, and either way, huge market gains like we had since 2016 have little to no bearing on 90% of the population, and outside of retirement funds, 99+% of the population. doesn't make sense to me.
the gop won and the only law they managed to pass was a massive tax cut for corporations, those corporations have used the money to buy back stocks and post record profits, and thus, the stock market went up because it's being subsidized by the us government. dunno why there has to be a conspiracy.
There were plenty of articles about investors doing just that. Turns out a lot of bankers and stock brokers are Republicans!
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
The market exploded upward right after the election because the market expected tax cuts and deregulation.
And they got it.
Then they also got shit on by tariffs and other unexpected things that have put a huge damper on profits and growth, hence the recent fall.
But really, again the market drops by 10+% frequently for no reason whatsoever so who the fuck knows. If you have to put a story to it, it's earnings season and the companies leading the decline are major ones that have missed revenue estimates and sold off on that news so that's as good a story as any.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it allows people to profit in the short-term on what are basically hollow stocks and can cause "corrections" that devalue the market as a whole.
Destroying economic value for your own personal gain should be illegal.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it allows people to profit in the short-term on what are basically hollow stocks and can cause "corrections" that devalue the market as a whole.
Destroying economic value for your own personal gain should be illegal.
Oh.
So the execs shouldn't be shareholders and have the conflict of interest then?
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it allows people to profit in the short-term on what are basically hollow stocks and can cause "corrections" that devalue the market as a whole.
Destroying economic value for your own personal gain should be illegal.
Oh.
So the execs shouldn't be shareholders and have the conflict of interest then?
Sure they can be shareholders.
But they have to buy shares without company money or as part of a compensation package from the company, not in ill-gotten tax-dodge profits that were kept in tax shelters overseas and brought back for the sole purpose of artificially inflating their corporate value.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it's price fixing, and price fixing that executives, as insiders, are in the unique position of being able to capitalize on personally. And do.
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it allows people to profit in the short-term on what are basically hollow stocks and can cause "corrections" that devalue the market as a whole.
Destroying economic value for your own personal gain should be illegal.
Oh.
So the execs shouldn't be shareholders and have the conflict of interest then?
Sure they can be shareholders.
But they have to buy shares without company money or as part of a compensation package from the company, not in ill-gotten tax-dodge profits that were kept in tax shelters overseas and brought back for the sole purpose of artificially inflating their corporate value.
Being a shareholder naturally leads the execs to make business moves that artificially inflate the price of shares up until they dump their own shares.
Conversely, if the execs have shares held in trust and can't sell them easily for some time, I don't see there being any harm in letting them use the company's money to buy back shares, as they would also be concerned about the long term value of their shares.
Basically, I see pump and dump mentality as the problem here, not the buy back itself.
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
And every other shareholder who continues to hold their shares receives the exact same benefit, in this case a 25% increase in their ownership interest of the business. It's not a problem, and is really no different from reinvesting an equivalent $ amount in dividends. (Actually that's not quite true - buybacks are more efficient than reinvesting dividends for a couple of reasons that aren't really important to the overall discussion.)
Yeah there was legislation passed by the new congress that eliminated the taxation of repatriating cash for corporations. As soon as that legislation was signed by the new republican president, those companies used their cash from outside the the country to buy back a shit ton of their own stock, thus driving up the stock prices and simultaneously making those quarterly reports look gooooooood.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it's price fixing, and price fixing that executives, as insiders, are in the unique position of being able to capitalize on personally. And do.
If this were actually a profit-maximizing strategy then why doesn't everyone just sell when the buyback is announced? Stocks tend to go up when a buyback is announced so just sell in the 6 day window after along with the execs. Easy, no?
Because you have to have shares in order to sell them. And executives get stock options as a part of their compensation. These options allow them to purchase shares at a set price which means that when buybacks occur they can exercise their options. Typically when options are exercised they're from company holdings... I.E. this decreases everyone's ownership in the same way that a buyback increases it. Except that the stock price goes up during a buyback due to how information propagates, private sales aren't as visible and are already running second fiddle to the buyback news. And if the company itself is setting the orders...
Additionally the majority of non-executive shareholders will already be long term diversified and so selling will have less value (in that they would have to time a purchase later, which is hard unless you're an insider). Additionally the majority of non-executive shareholders won't have a fast and easy way to sell the shares. In that even if they are paying attention to what is happening deciding how and when to adjust your holdings is a non-trivial action. Executives can easily be prepared for the announcement and so capitalize at the earliest possible time.
@discrider Stocks aren't debt. Buybacks are equity transactions
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
In your example, the company would spend revenues to buy back two hundred shares, giving the company a 20% ownership in itself (it's fine, it is what lets the board vote on company direction). CEO ownership doesn't go up, because the bought shares aren't lit on fire. They can be resold later.
If I recall correctly, part of the impetus for stock as a form of payment for executives was to discourage mindless mergers and acquisitions because being the executive of a larger company was one of the only ways for an executive to increase their pay back then.
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
But the company ISN'T worth a million dollars after the buyback.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
But the company ISN'T worth a million dollars after the buyback.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
But it now owns a bunch of shares that it can sell off later?
While racing light mechs, your Urbanmech comes in second place, but only because it ran out of ammo.
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
But the company ISN'T worth a million dollars after the buyback.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
Don’t forget that they are using money that has not been counted as part of the company portfolio and is being injected into the equation without being accounted for or taxed in the way it would have been previously.
You know what's weird trickle down definitely isn't a real thing but shit rolling down hill is. IE when the market tanks we all feel it but when it's doing spectacularly it doesn't feel much different than it doing fine.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
The market exploded upward right after the election because the market expected tax cuts and deregulation.
And they got it.
Then they also got shit on by tariffs and other unexpected things that have put a huge damper on profits and growth, hence the recent fall.
If you look at a trend of the S&P 500 from 2009 to mid 2016 you could do a linear fit of it. The market slowed during the election because investors fear uncertainty more than anything. Once it was over the market spiked because investors were making up for 5 months of inactivity.
I have no doubt the market in 2017 would have been the same without the tax cuts.
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
But the company ISN'T worth a million dollars after the buyback.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
But it now owns a bunch of shares that it can sell off later?
No. It doesn’t. Company held shares are immaterial. It’s like money supply. Companies can create shares out of thin air so company held stock is like money not in supply.
Don’t forget that they are using money that has not been counted as part of the company portfolio and is being injected into the equation without being accounted for or taxed in the way it would have been previously.
No. They are not. The repatriation will increase values somewhat, but only by the differential in the tax burden. The market otherwise accounts for held cash unrealized
The way it was explained to me, why stock buybacks are a problem, is as follows.
A company has a thousand shares.
CEO owns a hundred shares.
A company is worth a million dollars.
Each share is worth a thousand dollars.
A company spends company revenue to buy back two hundred shares, with the CEO not selling theirs.
Company is still worth a million dollars
Therefore each share is now worth $1250.
And CEO has increased his ownership of the company from 10% to 12.5%, while doing nothing.
Obviously, there are other issues at play here, and that's a gross oversimplification. But it explains the reason why it can be a problem.
That the people making the decision to do the buyback are increasing the value of their own property, at the expense of the company revenue. Essentially using company resources to pay themselves bonuses, beyond what their power (10% ownership in the above example) should be.
But the company ISN'T worth a million dollars after the buyback.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
Except the stock price also spiked in response.
Stock price does but market cap does not. Market cap is the more relevant estimation of the value of a company.
If market cap doesn’t fall on a buy back then there is manipulation going on. The value of the company should be the same as if it had paid in dividends because the holdings of the company are the same as if it had*
* in reality it would be slightly higher because dividends get taxed as ordinary income and capital gains from the same of stock get taxed as capital gains. So buying back produces a more favorable tax incidence for holders and the market would remember
It's not a time to panic, not for a while. The market is likely still a bit overpriced, but 10% corrections are standard.
Not panic, no, but this isn't a good sign or portent for how things will go after Brexit, say.
Yeah, next April is going to suck, bad.
I don't foresee the UK facing as steep a cliff as the Nikkei crashing in 1989 and leading to the Lost Decade, but the FTSE is most likely going to go to shit for at least a year.
No matter where you go...there you are. ~ Buckaroo Banzai
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daveNYCWhy universe hate Waspinator?Registered Userregular
It's not a time to panic, not for a while. The market is likely still a bit overpriced, but 10% corrections are standard.
Not panic, no, but this isn't a good sign or portent for how things will go after Brexit, say.
Yeah, next April is going to suck, bad.
I don't foresee the UK facing as steep a cliff as the Nikkei crashing in 1989 and leading to the Lost Decade, but the FTSE is most likely going to go to shit for at least a year.
I think the UK will be lucky to only have a lost decade, the question is how big and long lasting the impact of Brexit will be on the global economy.
Shut up, Mr. Burton! You were not brought upon this world to get it!
Posts
The market will fluctuate.
I mean it certainly doesn't seem like a good thing.
democrats can't stop tariffs even if they win the house and the senate. they're being done through the executive because """""national security""""" afaik.
shit's stupid. there isn't an end goal for all this nonsense and it's so frustrating.
I believe there's a bill to take that power back, even sponsored by Corker and stuff, but McConnell wouldn't let it come to the floor.
Things have to get really tight before wages start to take off. And even then you have to fight for every nickel.
I still contend that the explosive growth we've seen since the end of 2016 was super artificial in that the growth could have happened earlier, but didn't simply because the rich didn't want it to happen under democratic reign. Like as soon as republicans had full control of the government the market fuckin exploded like people were just sitting there with fat stacks of capital ready and waiting to drop into the market. Unfortunately even though we've seen like multi thousand point gains in the indexes because of it realities of policy results are gonna start actually fuckin things up. I'll admit this is mostly just biased speculation against the investor class, but it really feels like something close to this is going on here.
why would the investor class all collude to put off their gains for later. someone who could have gotten in early would have made far more money, and either way, huge market gains like we had since 2016 have little to no bearing on 90% of the population, and outside of retirement funds, 99+% of the population. doesn't make sense to me.
the gop won and the only law they managed to pass was a massive tax cut for corporations, those corporations have used the money to buy back stocks and post record profits, and thus, the stock market went up because it's being subsidized by the us government. dunno why there has to be a conspiracy.
Except the S&P500 trendline has actually softened a bit compared to Obama's term. (Starting from the Recession's end rather than Jan 20)
There were plenty of articles about investors doing just that. Turns out a lot of bankers and stock brokers are Republicans!
The market exploded upward right after the election because the market expected tax cuts and deregulation.
And they got it.
Then they also got shit on by tariffs and other unexpected things that have put a huge damper on profits and growth, hence the recent fall.
Which itself should be pretty damn illegal, as all those executives then profit from spiking up the share price.
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It was. Then Reagan got elected.
I got an email from my work 401k company telling us not to panic and keep on saving.
I'm not sure why a company paying off its debt should be illegal.
Perhaps shareholders shouldn't be able to sue executives for not making the shareholders money, if that's how that works currently in the US.
But yeah, using money to buy back your shares should be an option, but it is an open admission that you couldn't find a better return on the money elsewhere, and are consolidating power in the major shareholders.
So I would have expected it to be a sign of weakness in the company.
Because it allows people to profit in the short-term on what are basically hollow stocks and can cause "corrections" that devalue the market as a whole.
Destroying economic value for your own personal gain should be illegal.
Oh.
So the execs shouldn't be shareholders and have the conflict of interest then?
Do they know it will have the opposite effect?
Sure they can be shareholders.
But they have to buy shares without company money or as part of a compensation package from the company, not in ill-gotten tax-dodge profits that were kept in tax shelters overseas and brought back for the sole purpose of artificially inflating their corporate value.
Because it's price fixing, and price fixing that executives, as insiders, are in the unique position of being able to capitalize on personally. And do.
https://www.motherjones.com/kevin-drum/2018/08/stock-buybacks-are-just-another-way-for-insiders-to-make-money/
Being a shareholder naturally leads the execs to make business moves that artificially inflate the price of shares up until they dump their own shares.
Conversely, if the execs have shares held in trust and can't sell them easily for some time, I don't see there being any harm in letting them use the company's money to buy back shares, as they would also be concerned about the long term value of their shares.
Basically, I see pump and dump mentality as the problem here, not the buy back itself.
And every other shareholder who continues to hold their shares receives the exact same benefit, in this case a 25% increase in their ownership interest of the business. It's not a problem, and is really no different from reinvesting an equivalent $ amount in dividends. (Actually that's not quite true - buybacks are more efficient than reinvesting dividends for a couple of reasons that aren't really important to the overall discussion.)
If this were actually a profit-maximizing strategy then why doesn't everyone just sell when the buyback is announced? Stocks tend to go up when a buyback is announced so just sell in the 6 day window after along with the execs. Easy, no?
Additionally the majority of non-executive shareholders will already be long term diversified and so selling will have less value (in that they would have to time a purchase later, which is hard unless you're an insider). Additionally the majority of non-executive shareholders won't have a fast and easy way to sell the shares. In that even if they are paying attention to what is happening deciding how and when to adjust your holdings is a non-trivial action. Executives can easily be prepared for the announcement and so capitalize at the earliest possible time.
@discrider Stocks aren't debt. Buybacks are equity transactions
Actually yes. Fixed compensation tends to produce better work in non-rote fields. Exec's tend to not like the idea though.
In your example, the company would spend revenues to buy back two hundred shares, giving the company a 20% ownership in itself (it's fine, it is what lets the board vote on company direction). CEO ownership doesn't go up, because the bought shares aren't lit on fire. They can be resold later.
The change then caused very obvious problems.
The million dollar valuation included the $200k cash in the bank account - $200k that it no longer has because it bought back shares. The company now has a book value of $800k.
But it now owns a bunch of shares that it can sell off later?
Except the stock price also spiked in response.
*also true of any other economy type
If you look at a trend of the S&P 500 from 2009 to mid 2016 you could do a linear fit of it. The market slowed during the election because investors fear uncertainty more than anything. Once it was over the market spiked because investors were making up for 5 months of inactivity.
I have no doubt the market in 2017 would have been the same without the tax cuts.
No. It doesn’t. Company held shares are immaterial. It’s like money supply. Companies can create shares out of thin air so company held stock is like money not in supply.
No. They are not. The repatriation will increase values somewhat, but only by the differential in the tax burden. The market otherwise accounts for held cash unrealized
Stock price does but market cap does not. Market cap is the more relevant estimation of the value of a company.
If market cap doesn’t fall on a buy back then there is manipulation going on. The value of the company should be the same as if it had paid in dividends because the holdings of the company are the same as if it had*
* in reality it would be slightly higher because dividends get taxed as ordinary income and capital gains from the same of stock get taxed as capital gains. So buying back produces a more favorable tax incidence for holders and the market would remember
Not panic, no, but this isn't a good sign or portent for how things will go after Brexit, say.
Yeah, next April is going to suck, bad.
I don't foresee the UK facing as steep a cliff as the Nikkei crashing in 1989 and leading to the Lost Decade, but the FTSE is most likely going to go to shit for at least a year.
~ Buckaroo Banzai
I think the UK will be lucky to only have a lost decade, the question is how big and long lasting the impact of Brexit will be on the global economy.