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What Record Stock Buybacks Say About Economic Growth
For all the obfuscation surrounding the topic of stock buybacks and corporations returning record amounts of cash to their shareholders, the bottom line is as simple as it gets.
This is what you are taught in CFO 101 class:
- if you see organic growth opportunities for your business, or if you want to maintain the quality of your cash-flow generating assets, you invest in (either maintenance or growth) capex.
- if there are no such opportunities, you return cash to investors (or, maybe spend a little on M&A unless you are Valeant in which case you spend everything and then much more).
That's it.
Well, based on this shocking chart from the FT's John Authers, does it seem that America's corporations - who are returning over a record 90% of Net Income to shareholders - are seeing (m)any growth opportunities?
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"What Record Stock Buybacks Say About Economic Growth"
They say the entire market is one big example of FAB...
Inflated to the extreme and destined to fall 98.5%!
I'm going to post this in a few places:
Has anyone noticed that the price of call options on some inverse ETFs have been rising a lot even while the ETF has been falling significantly? I know that can happen for a short time but this has been going on for quite a bit...
Suggestion:
Don't buy inverse ETF's, or options on them.
Remember it's a rigged game and the house odds are very much in their favor.
You cannot win.
"That's it."
sometimes it is just that simple
i would add, however, a bit of $$s needed to buy off regulators/politicians to keep the cartel/cronyism thriving
Says nominal interest rates are less than growth - or even inflation - that companies see coming. It can be nothing but an opportunity for profiteering, doesn't necessarily say anything about growth other than growth is never unlimited.
Of course in this case it is *also* true that opportunities for real growth are modest.
Says to me the companies that have invested in actual plant and equipment in this incredible bull market for both equity AND debt are going to KILL the companies that only know how to invest in bonuses for themselves and their Wall Street butt buddies.
Now put that on CNBC you worthless media phucks.
If the price of a Tesla Model S drops to 50 grand the need for gasoline period will pretty much be eliminated.
At least as far as the USA is concerned. Of course who uses gasoline anymore...
Except they'll be losing $50K on every Tesla they sell
It tells me that there are a lot of shares taken off the street that will be dumped back onto the street (at pennies on the dollar the company paid to buy them back) during the next downturn when those companies need cash.
Gasoline for the fire.
It's not even when they need cash, it's when they have to pay back the short-term, variable-rate money they used to buy the stock, because rates have finally shot back up.
Slightly smarter companies have used the opportunity to sell their own debt at long, fixed (but callable just in case) rates, so they won't get stuck as easily.
Lame chart. The little red line doesn't go far enough back for me to read the chicken bones.
What is wealth? How's it defined? With that definition, what percentage of the population are wealth creators?
This video on Vice entitled you dont' know shit https://www.youtube.com/watch?v=QV9x79_WYbk says that us city dwellers poop is sold to farmers as bio solids - and farmers grow food they sell for money - see we're all wealth creators now! LOLZ
Very enlightening? It is true that manure is likely the key to human prosperity in the not too distant future once the modern agriculture paradigm of converting oil to food passes away.
Let's get together for a couple of weeks and see if we can find any.
BTFD
If we had growth and we're paying down our national debt. I would be feeling better about the financial engineering going on in this market. Only the Fed can create bubbles that devastate retire's like me. Have read that Greed and Debt are the two criteria's for an empire topping out. A strong dollar and deflation are factors that don't coincide with a with a bullish future.
What is going to happen to all that debt companies are piling up to buy back stock?
That's easy. They borrow more money at near zero interest rates, and donate it to politicians to make sure interest rates stay at or near zero.
oops.
A business doesn't have to grow to make its owners rich.
I'm a top 20 mba finance program person and I remember what Tyler was saying but someone refresh my memory. Why is it better that they do stock buybacks rather than one time dividends? Some tax thing? Somehow a stock buyback doesn't feel as useful to me as a dividend.
When a business uses retained earnings to repurchase its shares, the company increases your percentage ownership. Instead of repurchasing stock, a business could pay those funds to you in dividends, which you could then use to purchase more shares.
That would be a less efficient scenario: Because of taxes you would pay on dividend income, you would not be able to increase your proportionate ownership to the degree that the business can with share repurchases, acting for you.
So, how are you doing in that program?
Boosting the stock price with a buyback presumably allows you to cash out as a long-term gain, while dividends are generally taxed at higher income levels.
Dividends are for sissy companies. - Warren Buffett
Charles Munger, the billionaire vice chairman of Berkshire Hathaway Inc., defended the U.S. financial-company rescues of 2008 and told students that people in economic distress should "suck it in and cope." "You should thank God" for bank bailouts, Munger said in a discussion at the University of Michigan on Sept. 14, 2010, according to a video posted on the Internet. "Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies."
Well, if you in a top 20 finance mba program and you dont know the answer, fire your fucking proffessor and get the hell out of the top 20 program and start using common sense. top 20??? According to who?? If you notice, right after the buyback is announced, the next trumpet to the news media is that EPS is up!!!! Surprise Surprise (basic math - duh). Then, take a look at the number of recent officers retiring from the company as the stock price gets a nice bump while they are packing their office heading for Maui to retire. Its a scam. Quit you finance mba program and get a plumbers licence. A turd is always a turd and there is no end in sight to the amout of shit being produced.
Stock buy backs serve only one purpose.
To enrich company insiders. Period. Case closed.
Here's what Apple did with the stock they bought back. Pretty good payday for all concerned. That is if you were among the chosen few to benefit from the stock buy back.
Consider these amounts the next time you get the urge to plurge on an iPhone or iAnything for that matter.
https://drive.google.com/file/d/0B51-74tGswAXeVQ1RXNYM3ZYUEU/view?usp=sh...
Because of a lack of demand companies have little to invest in.
Money has become so cheap to borrow that many people are now arguing that you must take it even if you don't know what to do with it. It is hard to imagine how much this is distorting the economy, markets, and reality in general. A total disconnect between life on main street and the financial world is occurring and it is putting the economy in a very dangerous place.
It is often hard to determine what is true, but a report on Bloomberg that 32 Trillion dollars in funds were held in offshore accounts around the world made me shutter. How safe is this money, and what exactly is it doing? Can you say Cyprus? More on this subject in the article below.
http://brucewilds.blogspot.com/2013/05/cheap-money-more-and-more-and-mor...
What you said reminded me of Floy Lilley's podcast of Jaguar Inflation. What is Jaguar Inflation? Listen:
http://mises.org/library/jaguar-inflation
This is your 20th repeat of this advertisement, Bruce.
http://www.zerohedge.com/search/apachesolr_search/%22Money%20has%20become%20so%20cheap%20to%20borrow%20that%20many%20people%20are%20now%20arguing%22
Pay dividends hell know it's all about exercising stock options
The reality is that the markets are a complet joke and bear no resemblance to reality. If you want to have financial security, you need to have a valuable skill or trade, buy land, cattle and.....bullets. Who cares what the market does when you do not participate. When they print money to pump up markets, they are devaluing the very thing you are watching appreciate. The gubment gets first crack as spending the new digits while by the time we in rube land get a piece of it it is worth 70% of the value. We need to go back to the basics. Wall Street is run by the mob........er the Feds.....
This is my impression of the average poster on this site:
Chase the splits when the bottom softens while the charts show that on the margin the real players are betting a move in the VIX will net out a positive for the long players betting that China is about to start dumping on Japan with a buyback in the...bla bla bla.
Its all crap. Most of you are full of shit and probably not over the age of 22. Dumbasses.