3 ms·

> Stock buybacks were outlawed after the Great Depression and a widespread realization that buybacks are insider trading. And of course it was Ronald Reagan wh

> Stock buybacks were outlawed after the Great Depression and a widespread realization that buybacks are insider trading. And of course it was Ronald Reagan who began the regulatory capture of the SEC by appointing a Wall Street executive to head it. So much of what’s wrong can be traced back to Ronnie.

rsj_hn 4y ago
The post-depression panic about share buybacks was uninformed and lacked evidentiary basis, as there were only very unique situations in which a company could actually boost its market value this way -- namely if it was fighting some kind of short squeeze and was also thinly traded relative to the number of shares purchased. I wonder whether you think shorting shares is also stock market manipulation? And is the selling of new shares -- something that was also liberalized by the SEC -- also manipulation? Or is it only the buying back that is manipulation? The reason they were liberalized, despite all the sputtering about "Reagan", is that safe harbors were added that required the amount of issuance to not exceed a fraction of the average daily volume so that it couldn't be used to manipulate market caps. Merely the raising or lowering of the price per share is not manipulation if the market cap is unchanged: businesses are allowed to split and reverse-split shares as well -- or do you also view that as "manipulation"? Watching some people obsess about share buybacks is truly funny, because you have the worst possible set of bad takes happening on this one issue. Of all the things to worry about -- e.g. Fed puts, the fact that banks have lower funding costs and yet can compete against retail investors, the fact that we have this artificial distinction between long term and short term gains creating big write offs, lawmakers getting rich via trading, etc. So many areas of reform are needed, yet there is this maniacal focus on share buybacks by people who don't really understand what is wrong with them but they just know it's fishy. It's truly the issue that has launched 1000 angry Mother Jones editorials by people who've never set foot on a trading floor -- when fewer things are more harmless in our shark-infested capital markets than share buybacks.

rsj_hn 4y ago

The post-depression panic about share buybacks was uninformed and lacked evidentiary basis, as there were only very unique situations in which a company could actually boost its market value this way -- namely if it was fighting some kind of short squeeze and was also thinly traded relative to the number of shares purchased. I wonder whether you think shorting shares is also stock market manipulation? And is the selling of new shares -- something that was also liberalized by the SEC -- also manipulation? Or is it only the buying back that is manipulation? The reason they were liberalized, despite all the sputtering about "Reagan", is that safe harbors were added that required the amount of issuance to not exceed a fraction of the average daily volume so that it couldn't be used to manipulate market caps. Merely the raising or lowering of the price per share is not manipulation if the market cap is unchanged: businesses are allowed to split and reverse-split shares as well -- or do you also view that as "manipulation"? Watching some people obsess about share buybacks is truly funny, because you have the worst possible set of bad takes happening on this one issue. Of all the things to worry about -- e.g. Fed puts, the fact that banks have lower funding costs and yet can compete against retail investors, the fact that we have this artificial distinction between long term and short term gains creating big write offs, lawmakers getting rich via trading, etc. So many areas of reform are needed, yet there is this maniacal focus on share buybacks by people who don't really understand what is wrong with them but they just know it's fishy. It's truly the issue that has launched 1000 angry Mother Jones editorials by people who've never set foot on a trading floor -- when fewer things are more harmless in our shark-infested capital markets than share buybacks.