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Stock buybacks are just a tax efficient way to give money back to shareholders in lieu of dividends. Also this sort of phenomenons are rarely top-bottom. The A
by GDC7 5y ago
Stock buybacks are just a tax efficient way to give money back to shareholders in lieu of dividends.
Also this sort of phenomenons are rarely top-bottom. The American consumer is less and less prone to consume and more and more keen to invest.
If you talk to people and look at discussions on the interwebz it seems to me that the goal is not so much making purchases today with the aim of enhancing quality of life, but accumulating potential spending capability in the form of paper net-worth which you have the option (but not the obligation) to spend on quality of life at a later date.
Just look at Tesla, Bitcoin, real estate, interest rates etc. Basically every financial indicator says that people are more and more rejecting the marsh-mallow today, hoping to have multiple marsh-mallows in the future, which they'd also reject in the hope of having hundreds of marsh-mallows, which they'd also reject and on and on and on.
The anticipation of pleasure and quality of life becomes the goal, and the anticipation is fed by people circlejerking over their net-worth number or their gains on their paper gains on the stock market.
When you signal to executives that the company's most successful product is the stock that they sell, then it's not that hard to imagine that executives will be very receptive in treating the stock as a product, that's because they already have incentives as it is, then on top of that you have the populace asking to do exactly that and elevating those who do so as some sort of technoutopian cult leader making them rich (every reference to Lord Musk is incidental)
- ItsMonkk 5y agoFrom 1945 to 1971 the value of assets was increasing faster than the value of gold mined, and dollars were directly connected to gold, so everyone wanted more dollars, so the stock value of companies was low even though they were growing at a much faster rate than companies are today. From 1971 to today, being off the gold-standrd, the count of dollars is increasing at a rate much faster than the value of assets created, so everyone wants more assets. If you don't want to encourage rent-seeking behavior, you need to ensure that the count of dollars increases at a rate equal to the value of the assets being created.
- rileymat2 5y agoDoes the count need to increase or simply the velocity of those dollars?
- ItsMonkk 5y agoOne of the goals of keeping the money supply equal to the value of assets is a stable velocity. The stable velocity might end up the more important aspect, but I don't yet have a perfect intuition on how that works.
- GDC7 5y ago> If you don't want to encourage rent-seeking behavior, you need to ensure that the count of dollars increases at a rate equal to the value of the assets being created. It's all textbook BS. Everybody is subject to this passion for accumulation vs. spending , hence government actions are baked into it as well.
- tm-guimaraes 5y agoIs it really rent seeking though? Without a peg like gold, the dollar keeps loosing value. Even if a company stays with the same "real value", with dollar actually being less valuable, it's fairly normally for people to park their savings in company ownership rather tan dollars. Are these people rent seeking? They simple want to keep their capital. > you need to ensure that the count of dollars increases at a rate equal to the value of the assets being created. How? You can't predict how business will do. If Apple/Tesla/Amazon/Microsoft will be much more efficient than yesterday or do a bad strategy decision. Money printing shouldn't be related whatsoever to how you think the big companies will fare. Whoever is trading stock simply must understand that Prices are in dollars, and dollars are deflating, so you can't compare the prices with old prices in a simple way.