The rich get richer as stock buybacks surge

[Zorkorist]

Someone can educate America, yet.

Death is horrific. There, I said it before the Baby Boomers died. They will be requiring all sorts of life saving health interventions, in order not to die.

I forget the famous man who said it, but, OK, I will die! I've had my life, and I do not need or want extraordinary measures, or expense on my behalf.

It won't be any less horrific, but it sure will be an honorable death.

-John

 

[Matt1970]

Did you even read what you copied and pasted you headless chicken?

I'll quote it again, buffoon.



Consumers demanded cheaper items. They could have continued to buy from Avon and support their fellow American but they chose not to.

Fuck Americans, this country will be relegated to the history books, because it's full of ignorant buffoons like you.

OINK OINK OINK I'M GOING TO PUT THIS SOFTWARE ON EVERY COMPUTER MY EMPLOYER OWNS BECAUSE I DESERVE TO USE THEIR ELECTRICITY OINK OINK OINK

Yep, just as soon as McOwned makes a decent post he falls right back onto the fail train. Avon should be employing Americans no matter how much they lose just to be patriotic even though those same Americans would just as soon buy something made in China rather than save an American job. Remember the slogan "Save a job, it just might be your own"?

 

[LegendKiller]

This is one area where I'll agree with Mc0wned Stock buybacks are nothing more than a tax arbitrage by the wealthy that gives marginal benefits to everybody else while cutting taxable income by 20%+. It's a scam bought and paid for by the wealthy, through Congress, for the wealthy (and Congress). Is it legal? Sure, if you consider complete control of the legislative process to vote in your own tax cuts legal. Is it fair? Absolutely not. It is a scam.

 

[Doc Savage Fan]

Obama is doing a great job fixing wealth disparity. I'm so glad we elected him to fix this. /s

 

[Doc Savage Fan]

This is one area where I'll agree with Mc0wned Stock buybacks are nothing more than a tax arbitrage by the wealthy that gives marginal benefits to everybody else while cutting taxable income by 20%+. It's a scam bought and paid for by the wealthy, through Congress, for the wealthy (and Congress). Is it legal? Sure, if you consider complete control of the legislative process to vote in your own tax cuts legal. Is it fair? Absolutely not. It is a scam.

They're buying back because they feel their stock is undervalued. Hitting the bong again?

 

[LegendKiller]

They're buying back because they feel their stock is undervalued. Hitting the bong again?

ROFL.

Dude, my dick hair that fell off onto the urinal today forgot more about finance in the 2seconds it took to fall than you'll ever know in your life.



It has nothing to do with being "undervalued". You'd have to be a complete fucking moron to think that.

 

[Engineer]

ROFL.

Dude, my dick hair that fell off onto the urinal today forgot more about finance in the 2seconds it took to fall than you'll ever know in your life.



It has nothing to do with being "undervalued". You'd have to be a complete fucking moron to think that.

I'm not getting in this fight but damn, that was the funniest thing I've read in a long time. I literally laughed my ass off....my wife thinks I'm losing it! :biggrin:

If it wasn't so damn graphic, it would be sig. worthy (still might be)! :biggrin:

 

[Doc Savage Fan]

ROFL.

Dude, my dick hair that fell off onto the urinal today forgot more about finance in the 2seconds it took to fall than you'll ever know in your life.



It has nothing to do with being "undervalued". You'd have to be a complete fucking moron to think that.

Then please tell me why are they buying back.

 

[LegendKiller]

Then please tell me why are they buying back.

Here's many good reasons.


1. Everybody says companies have tons of cash, right? Sure, in a way, they do. However, on a net debt basis, they don't Companies, overall, are levering up. This is increasing the risk behind the companies, even when they are borrowing at historically cheap rates. Because the cash is being taken out without investment in the company they will have less of a cushion in the future, furthermore, as rates go up, they will need to roll the debt into higher yielding instruments, thus increasing leverage more, unless they issue more stock (or use earnings) but they could be at a time when they need capital, so then they raise more debt (again).

2. Everybody knows that companies are suppressing capital investment while not recruiting heavily.

Thus, they are levering both the capital structure of the company *AND* people for what???

3. Because CEOs are getting paid based upon stock (options or RSUs) they need to be able to keep stock prices up. Why are they leaning so heavily on stock rather than salary? Because you get taxed at 15% vs 38%. Duh.

4. Buying stock while levering the company juices the returns more, pumping the stock price even higher, but it does so by avoiding taxes.

5. The buyback reduces dividend payout without having to actually reduce the dividend amount. Why do that? Because it saves on taxes, both from the company perspective *and* from the investor (read: 1% and executives) perspective.

6. P/E ratios are high, the economy is still largely stagnant, while debt is cheap, it's still leverage that makes bond analysts nervous for the aforementioned reasons. This is a shell game, everybody bond analyst knows it. It's a tax arbitrage, they all know that too. However, they are beholden to it because there's nothing else with yield out there.

I could think of many more reasons, but I bore of this.

Add to that the fact that interlocking boards allow such ridiculous pay packages, you get a situation where the 1% benefit massively from a situation that cuts their taxes by more than 50% while shafting the rest of the population.

 

[Engineer]

Here's many good reasons.


1. Everybody says companies have tons of cash, right? Sure, in a way, they do. However, on a net debt basis, they don't Companies, overall, are levering up. This is increasing the risk behind the companies, even when they are borrowing at historically cheap rates. Because the cash is being taken out without investment in the company they will have less of a cushion in the future, furthermore, as rates go up, they will need to roll the debt into higher yielding instruments, thus increasing leverage more, unless they issue more stock (or use earnings) but they could be at a time when they need capital, so then they raise more debt (again).

2. Everybody knows that companies are suppressing capital investment while not recruiting heavily.

Thus, they are levering both the capital structure of the company *AND* people for what???

3. Because CEOs are getting paid based upon stock (options or RSUs) they need to be able to keep stock prices up. Why are they leaning so heavily on stock rather than salary? Because you get taxed at 15% vs 38%. Duh.

4. Buying stock while levering the company juices the returns more, pumping the stock price even higher, but it does so by avoiding taxes.

5. The buyback reduces dividend payout without having to actually reduce the dividend amount. Why do that? Because it saves on taxes, both from the company perspective *and* from the investor (read: 1% and executives) perspective.

6. P/E ratios are high, the economy is still largely stagnant, while debt is cheap, it's still leverage that makes bond analysts nervous for the aforementioned reasons. This is a shell game, everybody bond analyst knows it. It's a tax arbitrage, they all know that too. However, they are beholden to it because there's nothing else with yield out there.

I could think of many more reasons, but I bore of this.

Add to that the fact that interlocking boards allow such ridiculous pay packages, you get a situation where the 1% benefit massively from a situation that cuts their taxes by more than 50% while shafting the rest of the population.

 

[Doc Savage Fan]

Here's many good reasons.


1. Everybody says companies have tons of cash, right? Sure, in a way, they do. However, on a net debt basis, they don't Companies, overall, are levering up. This is increasing the risk behind the companies, even when they are borrowing at historically cheap rates. Because the cash is being taken out without investment in the company they will have less of a cushion in the future, furthermore, as rates go up, they will need to roll the debt into higher yielding instruments, thus increasing leverage more, unless they issue more stock (or use earnings) but they could be at a time when they need capital, so then they raise more debt (again).

2. Everybody knows that companies are suppressing capital investment while not recruiting heavily.

Thus, they are levering both the capital structure of the company *AND* people for what???

3. Because CEOs are getting paid based upon stock (options or RSUs) they need to be able to keep stock prices up. Why are they leaning so heavily on stock rather than salary? Because you get taxed at 15% vs 38%. Duh.

4. Buying stock while levering the company juices the returns more, pumping the stock price even higher, but it does so by avoiding taxes.

5. The buyback reduces dividend payout without having to actually reduce the dividend amount. Why do that? Because it saves on taxes, both from the company perspective *and* from the investor (read: 1% and executives) perspective.

6. P/E ratios are high, the economy is still largely stagnant, while debt is cheap, it's still leverage that makes bond analysts nervous for the aforementioned reasons. This is a shell game, everybody bond analyst knows it. It's a tax arbitrage, they all know that too. However, they are beholden to it because there's nothing else with yield out there.

I could think of many more reasons, but I bore of this.

Add to that the fact that interlocking boards allow such ridiculous pay packages, you get a situation where the 1% benefit massively from a situation that cuts their taxes by more than 50% while shafting the rest of the population.

Wow....I guess their stock being undervalued has nothing to do with this after all. It's all a scam and a conspiracy to boot!!! Those fuckers!

 

[LegendKiller]

I'm not getting in this fight but damn, that was the funniest thing I've read in a long time. I literally laughed my ass off....my wife thinks I'm losing it! :biggrin:

If it wasn't so damn graphic, it would be sig. worthy (still might be)! :biggrin:

Might have to use it for my campaign slogan

 

[LegendKiller]

Wow....I guess their stock being undervalued has nothing to do with this after all. It's all a scam and a conspiracy to boot!!! Those fuckers!

I work in the investment industry, I hear the corp bond analysts talk about it every week. They don't give a flying fuck through a rolling donut if the stock is cheap or expensive. Why do you think buybacks are *ACCELERATING* in the face of ever higher P/E multiples?

Everybody knows it is a shell game. Everybody knows the wealthy bought the cap gains tax down. Everybody knows executives get paid in the best means possible to reduce taxes. Everybody knows that corps do what they can to reduce taxes, including the inversion techniques. Heck, that stuff has been going on for decades and the loopholes haven't been closed - wonder why? Why is it that the STOCK act didn't even get noticed until the public started to howl about congressional insider trading.

Why is it that everybody sold the deregulation of banks and the offshoring of US jobs to China and Mexico as a good thing? Because it benefits the 1%. It all comes down to money, how much you can earn and how many votes you can buy to earn more.

Why do you think it's so legal to do "estate planning" for somebody like the Clintons. Where did those laws come from? Who bought them?

It isn't conspiracy, it is fact.

 

[s0me0nesmind1]

Walmart is seeing same store sales drop for the first time in their history other than recessions (and I'm not sure that they saw drops during recessions). That's the very reason that Walmart started the bring back manufacturing to the US campaign and promised to buy billions of dollars worth of USA made stuff again. They realize that their customers are losing wages and therefore, Walmart is losing sales.



http://www.fool.com/investing/general/2014/01/07/3-reasons-why-wal-mart-is-in-trouble-in-2014.aspx

It's pretty obvious...if your customers can't grow their wages (or have declines), they aren't going to spend as much....from the "DUH" department.

It could be a number of factors. The gravy train of food stamps ran out for most users - there is actually a *limit* to the amount of time one can stay sucking the government teet. The bill that allowed people to stay on the gravy train expired and the amount it gives went down. Hence revenue for Walmart goes down.

That has little to do with manufacturing in the US. Walmart still trumps all for where the lower class goes to buy required groceries/products. The lower class is growing, hence Walmart should be growing.

Walmart is losing to the likes of Dollar Tree, Dollar Store, 99 cent store, etc... people are getting even cheaper than cheap is cheap. They are willing to pay 50 cents less for something that lasts half as long.

 

[unokitty]

With the exception of giant China’s foreign reserve of US$3.7 trilion, U.S. companies’ combined US$1.64 trillion in cash is more than any major countries on Earth. The second wealthiest nation in the world, Japan, has only US$1.2 trillion in its piggybank. Even Eurozone, Saudi Arabia and Switzerland have only US$771.7 billion, US$725.6 billion and US$543.7 billion respectively.

Seems like a lot of cash to me.

Uno

 

[Zaap]

It has nothing to do with being "undervalued". You'd have to be a complete fucking moron to think that.

Why do you have to be such a dick about this?

There are multiple reasons- some of which you've outlined, but the perception of their stock being undervalued IS a well-documented reason as well.

http://www.zacks.com/education/articles.php?id=33

Such action can be an indication that management believes the stock price is undervalued. On the other hand, the company may be compelled to buy back its own shares for other reasons—reasons that are not entirely in the best interests of its stockholders.

So basically, you both can be right, since there isn't just one reason/answer for it.

I know, I know, it's more fun to be a smug dick, entertaining the usual illiterates.

 

[Zebo]

Yep, just as soon as McOwned makes a decent post he falls right back onto the fail train. Avon should be employing Americans no matter how much they lose just to be patriotic even though those same Americans would just as soon buy something made in China rather than save an American job. Remember the slogan "Save a job, it just might be your own"?

One company can't do anything but die acting that. Alone. Avons competitors making in China will eat them for breakfast with virtually slave labors and no regulation. Well unless company have no competition or limited competition. (e.g. intel which still has tones of fabs here, a lot of pharmaceuticals etc) Has to be national policy.

 

[Zebo]

Everybody knows it is a shell game.

Everybody in your high finance world maybe. 99%+ of Americans don't understand it. Even this article tries to obfuscate whats really going on (paying capital gain on income like the hedge fund manager exemption). It's way too complicated for avg working people to understand thus does not change since no uproar.

 

[dmcowen674]

This is one area where I'll agree with Mc0wned Stock buybacks are nothing more than a tax arbitrage by the wealthy that gives marginal benefits to everybody else while cutting taxable income by 20%+. It's a scam bought and paid for by the wealthy, through Congress, for the wealthy (and Congress). Is it legal? Sure, if you consider complete control of the legislative process to vote in your own tax cuts legal. Is it fair? Absolutely not. It is a scam.

LK never agrees with me on anything. I nearly fell over out of my chair.

 

[BoberFett]

One company can't do anything but die acting that. Alone. Avons competitors making in China will eat them for breakfast with virtually slave labors and no regulation. Well unless company have no competition or limited competition. (e.g. intel which still has tones of fabs here, a lot of pharmaceuticals etc) Has to be national policy.

It would be easy for a company acting alone and keeping jobs in the US to do so if the American consumer would pull their heads out of their asses. Until that happens, nothing in the world will stop the slide.

 

[bshole]

It would be easy for a company acting alone and keeping jobs in the US to do so if the American consumer would pull their heads out of their asses. Until that happens, nothing in the world will stop the slide.

Another pearl of wisdom from the great one. Yes it is always the poor and middle class to blame, the rich are innocent as the driven the snow..... hell they are the victim!!

 

[KB]

Here's many good reasons.
....

Wow....I guess their stock being undervalued has nothing to do with this after all. It's all a scam and a conspiracy to boot!!! Those fuckers!

A well run company i.e Berkshire Hathaway will typically only buy back their stock when its undervalued or at least will increase buybacks when the stock is undervalued. Some companies like GE, AAPL and PFE just have so much money that steadily buying some shares back no matter what makes sense. A lot of companies like AT&T and Lorilliard are doing what Legend Killer is saying. They are buyng stock back just to increase the price and inflate CEO bonuses. These companies will see huge problems when interest rates rise as leverage will be quite high.

 

[BoberFett]

Another pearl of wisdom from the great one. Yes it is always the poor and middle class to blame, the rich are innocent as the driven the snow..... hell they are the victim!!

Who's buying the stuff made in China, dipshit?

 

[Engineer]

Who's buying the stuff made in China, dipshit?

For many things, do we have a choice?

 

[Cozarkian]

3. Because CEOs are getting paid based upon stock (options or RSUs) they need to be able to keep stock prices up. Why are they leaning so heavily on stock rather than salary? Because you get taxed at 15% vs 38%. Duh.

That is something I would be in favor of fixing. The difference between the FMV of the stock at time of purchase and the option price should be treated as ordinary income with the basis being increased to the FMV at purchase.

So, for example, let's say a CEO has an option to buy stock for $1 million which is currently valued at $3 million. If the option meets certain rules, the CEO can take the stock at $1 million and sell it in the future for $3 million, paying 15% on the gain. The rule should be that the CEO has to report $2 million as ordinary income, paying 38% tax, but gets an adjusted basis of $3 million, so if the CEO turns around and sells the stock at $3 million, there is no additional capital gains tax.