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It's really bizarre to complain about how roads cost "too much" when we are now spending $1 Trillion per year on stock buybacks. A few executives and directors

It's really bizarre to complain about how roads cost "too much" when we are now spending $1 Trillion per year on stock buybacks. A few executives and directors (who are already the richest humans that have ever lived) are adding orders of magnitude to their hoards with these massive buybacks. Google just broke records by announcing an unprecedented $25B in buybacks for this quarter. Over the same time period they are spending $6.2B for all of research & development. Expect these buyback numbers to grow wildly in the coming years. How much does a bridge cost again?

navigatesol 7y ago
>A few executives and directors (who are already the richest humans that have ever lived) are adding orders of magnitude to their hoards with these massive buybacks. First of all, it isn't "we". This is not public money. It belongs to the shareholders, and buybacks are one way to return the money (tax efficiently). Why should it be horded by the company? If there is nowhere to invest, give it back to the owners to spend or invest as they see fit. Second, buybacks don't magically raise the share price. The number of shares outstanding decreases, but so does the cash on the balance sheet. There is plenty of literature on stock buybacks and how they work, you simply need to look beyond the populist headlines.
- ceejayoz 7y ago
  > First of all, it isn't "we". This is not public money. You could argue it should have been. https://www.bloomberg.com/news/articles/2019-01-16/here-s-how-u-s-businesses-actually-used-their-tax-cuts https://www.bloomberg.com/news/articles/2019-01-16/here-s-ho... > On Jan. 1, 2018, the biggest, most sweeping U.S. corporate tax cut ever enacted went into effect. A year later, we’re able to see how businesses used all that extra cash. > The short answer: to buy back shares.
  - cameronbrown 7y ago
    Trump's tax cut helped big business, that's true. But for each corporate buyback there were thousands of mom and pop shops that benefited and invested.
    - richardwhiuk 7y ago
      Citation needed.
  - navigatesol 7y ago
    >The short answer: to buy back shares. I don't understand the issue. Why should "you" have any say in how others decide to spend their money? The tax cuts are a separate argument. >year later, we’re able to see how businesses used all that extra cash. Post hoc, ergo propter hoc. Corporate cash balances have been inflated for a decade. The previous high was in 2007.
    - ceejayoz 7y ago
      > The tax cuts are a separate argument. Nah. > Why should "you" have any say in how others decide to spend their money? Because they're getting it by lobbying to saddle me with the exploding deficit their cushy tax cuts have grown dramatically.
dfilppi 7y ago
"We"? You must be a fortune 500 CEO.
maximente 7y ago
it's not about how much infra costs here - that's a straw man in your comment - it's about economic factors shifting behavior. stuff like this becomes a part of rational short term behavior for corps with low taxes, cheap debt, etc. why get 2% ROI on R&D when you can get 3% elsewhere? we know some solutions: higher taxes, nonfree debt. there just isn't political will to do it atm, for numerous reasons.
christophilus 7y ago
It's not just executives and directors who benefit from buybacks. It's shareholders. I've personally benefited, and I'm not in the 1%. Anyone who has an index fund or mutual fund in their 401k benefits from buybacks. So, you could make a case that buybacks (when used intelligently) benefit retirement accounts, which is a kind of public good. Now, the question is, how long do the benefits last? And are buybacks always beneficial? I think that's debatable. There's data on both sides of that argument, but I do think that most companies don't use buybacks judiciously. Berkshire Hathaway does-- buying back only when they have cash that can't be put to a better use, and only when their share price is below intrinsic value. But most companies are using leverage to fund buybacks, which is a short-term way to benefit shareholders at the cost of long-term deterioration of the balance sheet. I certainly hope we don't outlaw buybacks, but I think there's a case to be made that they shouldn't be done via leverage. Good luck trying to legislate that behavior, though. Money has a way of finding loopholes, and such legislation will almost certainly have negative, unintended consequences.
- gamblor956 7y ago
  Companies do buybacks instead of dividends because it benefits the company tax-wise, not because it benefits the stockholders. From an investor's perspective, they're taxed the same.
  - clairity 7y ago
    it also helps investors (who held the stock) in that share values go up a little bit, tax-deferred.
    - deleted 7y ago
      [deleted]
  - ummonk 7y ago
    Not really. As an investor you get more tax-flexibility with buybacks, since you can decide when you sell your stock. Lets you defer taxes, unlike dividends, which get taxed even when you reinvest them.
mathattack 7y ago
Buybacks are just money changing hands. A company has extra money that they can’t invest well, so they buy out some of theirs owners instead. The money doesn’t disappear. It goes to owners who can pay taxes with it, invest in bonds to make roads, invest in startups, buy cars. The idea that companies that can’t invest well should be forced to spend like drunken sailors is a bit silly.

navigatesol 7y ago

>A few executives and directors (who are already the richest humans that have ever lived) are adding orders of magnitude to their hoards with these massive buybacks. First of all, it isn't "we". This is not public money. It belongs to the shareholders, and buybacks are one way to return the money (tax efficiently). Why should it be horded by the company? If there is nowhere to invest, give it back to the owners to spend or invest as they see fit. Second, buybacks don't magically raise the share price. The number of shares outstanding decreases, but so does the cash on the balance sheet. There is plenty of literature on stock buybacks and how they work, you simply need to look beyond the populist headlines.

ceejayoz 7y ago
> First of all, it isn't "we". This is not public money. You could argue it should have been. https://www.bloomberg.com/news/articles/2019-01-16/here-s-how-u-s-businesses-actually-used-their-tax-cuts https://www.bloomberg.com/news/articles/2019-01-16/here-s-ho... > On Jan. 1, 2018, the biggest, most sweeping U.S. corporate tax cut ever enacted went into effect. A year later, we’re able to see how businesses used all that extra cash. > The short answer: to buy back shares.
- cameronbrown 7y ago
  Trump's tax cut helped big business, that's true. But for each corporate buyback there were thousands of mom and pop shops that benefited and invested.
  - richardwhiuk 7y ago
    Citation needed.
- navigatesol 7y ago
  >The short answer: to buy back shares. I don't understand the issue. Why should "you" have any say in how others decide to spend their money? The tax cuts are a separate argument. >year later, we’re able to see how businesses used all that extra cash. Post hoc, ergo propter hoc. Corporate cash balances have been inflated for a decade. The previous high was in 2007.
  - ceejayoz 7y ago
    > The tax cuts are a separate argument. Nah. > Why should "you" have any say in how others decide to spend their money? Because they're getting it by lobbying to saddle me with the exploding deficit their cushy tax cuts have grown dramatically.

dfilppi 7y ago

"We"? You must be a fortune 500 CEO.

maximente 7y ago

it's not about how much infra costs here - that's a straw man in your comment - it's about economic factors shifting behavior. stuff like this becomes a part of rational short term behavior for corps with low taxes, cheap debt, etc. why get 2% ROI on R&D when you can get 3% elsewhere? we know some solutions: higher taxes, nonfree debt. there just isn't political will to do it atm, for numerous reasons.

christophilus 7y ago

It's not just executives and directors who benefit from buybacks. It's shareholders. I've personally benefited, and I'm not in the 1%. Anyone who has an index fund or mutual fund in their 401k benefits from buybacks. So, you could make a case that buybacks (when used intelligently) benefit retirement accounts, which is a kind of public good. Now, the question is, how long do the benefits last? And are buybacks always beneficial? I think that's debatable. There's data on both sides of that argument, but I do think that most companies don't use buybacks judiciously. Berkshire Hathaway does-- buying back only when they have cash that can't be put to a better use, and only when their share price is below intrinsic value. But most companies are using leverage to fund buybacks, which is a short-term way to benefit shareholders at the cost of long-term deterioration of the balance sheet. I certainly hope we don't outlaw buybacks, but I think there's a case to be made that they shouldn't be done via leverage. Good luck trying to legislate that behavior, though. Money has a way of finding loopholes, and such legislation will almost certainly have negative, unintended consequences.

gamblor956 7y ago
Companies do buybacks instead of dividends because it benefits the company tax-wise, not because it benefits the stockholders. From an investor's perspective, they're taxed the same.
- clairity 7y ago
  it also helps investors (who held the stock) in that share values go up a little bit, tax-deferred.
  - deleted 7y ago
    [deleted]
- ummonk 7y ago
  Not really. As an investor you get more tax-flexibility with buybacks, since you can decide when you sell your stock. Lets you defer taxes, unlike dividends, which get taxed even when you reinvest them.

mathattack 7y ago

Buybacks are just money changing hands. A company has extra money that they can’t invest well, so they buy out some of theirs owners instead. The money doesn’t disappear. It goes to owners who can pay taxes with it, invest in bonds to make roads, invest in startups, buy cars. The idea that companies that can’t invest well should be forced to spend like drunken sailors is a bit silly.