Why You Should Be Mad About Stock Buybacks
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- Опубліковано 2 тра 2023
- Companies spent over $1 trillion on stock buybacks last year. Here's why that's terrible for our economy and for you.
You’ve heard the term stock buybacks everywhere this year. In the airline and railroad industry, the oil and gas industry, in entertainment, and in food. But what you haven't heard is whether it''s good or bad -- and why.
#business #businessnews #stockmarket #explained #warrenbuffett
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Railroads: “we can’t afford to pay workers that much more”
Also railroads: *spend billions on buybacks over the past decade*
Can't afford to upgrade trains to be safer but can make record profits and afford to pay out millions each time a train derails.
Don't forget all the worker miss-treatment that's just accepted as "part of the job".
Why did your boy Brandon force them to sign a scumbag contract 🤡🤡🤡
@@mike6331 He's no one's boy at 24% of democrats wanting him to run again. Sad thing is 35% of republicans want Trump to run again and he's still going to get slaughtered by a cynile old man like Joe Brandon. Either way neither side is picking popular people that are actually wanted because corporations own the politicians. But yes, keep pointing fingers at democrats as your red states fail too. Who's more of a clown in this situation?
@@mike6331 It's truly a shame that Democrats are going to be functionally forced to vote for Biden in 2024 because nobody's willing to go against an incumbent president. Meanwhile, Republicans have two Fascistic Superpowers running for President: Trump the Petulant Child and Death-Santis the Gitmo Torturer
Whenever I hear "this wasn't the case before" I just know that Reagan is to blame
Or Carter but mostly Reagan.
Reagan is the single worst thing to happen to this planet.
Almost every problem we have in Modern-Day America can be traced back to one of Raegan's policies.
@@davidfuentes9957 That's quite an unusual thing to say. What exactly has Carter done that directly supported corporations?
@@davidfuentes9957
Carter is arguably the first Reaganite before Reagan is even a POTUS, but right, neoliberalism didn't come in full force in the US until Reagan administration.
And they blame working class people for having debts and not being able to get ahead...the deck is stacked in their favor!
Of course. Rich gotta rich. Poor gotta poor. Rich can do anything. Poor can only kill themselves slaving away for the rich, lol! 😂🤣😂
The system is working as intended. It's a system designed to exploit the working class, not elevate them. They don't care if you can't pay your rent or feed your kids, because "returns to shareholders". And once you're burnt out, there's always another desperate warm body to take your place pushing the buttons and pulling the levers. The fox has a vested interest in pillaging the hen-house, and he's not likely to stop just because he's asked nicely. These people will not cede an ounce of power unless they're forced to by regulation (or civil unrest), and they'll always find new and interesting ways to game the system for their own enrichment.
The Dave Ramseys of the world: if you can't pay rent, food, medical care, and many other necessities all with your paycheck, JUST TIGHTEN YOUR BELT and STFU about it. These people are evil.
Oh yeah the problem is forever and always somewhere else and not here
And stock buybacks are also a direct upwards transfer of wealth. Because they remove shares from the market that means the profits are not shared by as many people.
When I was 11 years old my dad brought home a stock investing game. I can’t remember the name of it but it was made by a big financial software company. It would take a snapshot of the stock market as it was at the moment you opened it, and then you could play forward with randomly generated future performance.
I was always frustrated playing this as a game because it didn’t have the right gameplay mechanisms, it got super boring doing responsible investing. Then I discovered hostile takeovers and found out I could pay myself dividends. But that would quickly lead to crashed companies and needing to pay bankruptcy debt. But if you instead did stock buybacks slowly, sold shares and used the money to buy other companies, slowly leaching value out, you could easily get out before the company crashes and you had to pay back all the debt.
Our world is essentially being run by 11 year old children.
Pawn Shop Capitalism
@@arthurwintersight7868
Widgets Inc: We are a name brand company whose products are proudly made in America and has been the historical financial life line of a well know bustling town since its inception over a century ago and our products are in use all over the American continent and other countries around the world.
Rick from Pawn Stars: I'll give you 30 cents on the dollar.
This world *is* being run by people who are essentially dumber that an 11 y old.
From politicians to CEOs.
I remember having that same realization when i was young playing Civilization and realizing that all of the frustrations and suffering people experience is down to rulers and leaders playing with people's lives like they're a kid playing a videogame.
Their priorities are all wrong, they have no long term perspective or awareness and they really don't care about the consequences of their actions.
@@ryanbauer3680 you know I got less for it than I wanted, but at least I'm leaving here with some money
Wtf? Are you the company or Investor? You can't do stock buybacks as the investor.
To call stock buybacks financial engineering is an insult to engineers. It's self-dealing. That's exactly what it is, and it should be forbidden.
Corporations do this, go bankrupt and ask for bailouts, keeping the profits for themselves and making the people pay to bail them out.
The shareholders lose 100% of their money in bankruptcy.
@@kyleinpa5285 they first give themselves big bonuses
All we need to look at is the 2007-08 housing crisis where the big banks sold shares before the collapse and at the last minute went to the government screaming “help” so they all got bailouts and Americans in financial crisis lost their homes in foreclosure. Then the bankers bought back stocks at the fallen price and sold at a high price because their purchase increased the value. If you can’t see what’s wrong with this practice you’re blind.
It's called privatizing the profits, while socializing the losses 🤬‼️📣 All& everything that the USA government does is nothing except welfare for the rich, corporations, the wealthy& businesses, especially under the gargantuan lie of tax cuts& tax breaks for them because they are the job creators 🤥💸
Getting a bailout isn't something you get to choose. And it usually comes with punishment.
Like banks that got bailed out after the 2008 crisis, also became much more subject to the government.
Even though the crisis itself had been caused by the government by first forcing the offering of subprime mortgages, and then nuking them through The Fed raising interest rates - which increased the monthly payments on all those variable rate mortgages and naturally buried the poorer mortgage holders.
But, since the government is tied to MSM, blame didn't fall where it naturally should have.
Rules don't apply to those who can buy out governmental bodies and public servants.
You mean capitalists? Cuz I think you mean capitalists.
@@TheAmericanAmerican duh?! it's already implied that I'm talking about capitalists when this video is about how they manipulate stock markets for ill-gotten gains.
Correct, rules don't matter to the rich. Even if there are penalties, they just pay and move forward.
When breaking the law costs less in fines than following it... it's just an obvious way to profit! 😂🤣😂
They're literally the one writing the rules. It's less about "rich people buying the government" and more of "government are mostly made up of rich people." And the system actually allows that to happen by design, major stockholders can hold an office.
If we hunt them down the rules apply to them
Acquiring stocks is simple, but selecting the right ones without a proven strategy is daunting. With a $160K portfolio, I struggle with identifying optimal entry and exit points. Any advice would be invaluable.
Investors should exercise caution when it comes to their exposure and be sceptical of new purchases. Only with the guidance of a competent or trustworthy advisor are such high yields attainable.
No doubt, having the right plan is invaluable, my portfolio is well-matched for every season of the market and recently hit 100% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, tho this could take till Q3 this year.
I'm intrigued by this. I've searched for financial advisors online but it's kind of hard to get in touch with one. Okay if I ask you for a recommendation?
I appreciate this. After curiously searching her name online and reviewing her credentials, I'm quite impressed. I've contacted her as I could use all the help I can get. A call has been scheduled.
Biggest lesson i learnt in 2022 in the stock market is that nobody knows what is going to happen next, so practice some humility and follow a strategy with a long term edge.
Uncertainty... it took me 5 years to stop trying to predict what bout to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
@@TomD226 The one effective technique I'm confident nobody admits to using, is staying in touch with an Investment-Adviser. Based on firsthand encounter, I can say for certain their skillsets are topnotch, I've raised over $700k since 2017. Just bought my 3rd property for rental. Credit to Laurel Dell Sroufe my Investment-Adviser.
I love how i can play a guessing game about when a government regulation was undone and if i guess during the Reagan administration, im almost always right.
As-salamu alaykum, Ronnie!
Any person with critical thinking skills in the 1980s could see the future would be bad for the middle working class. We were right.
Reagan was the engaging face, once the soup was ready to be served in public. The program was elaborated and put into motion well before (like from when the initial robber barons got scotched by Roosevelt). It was exposed in 1971 in Lewis Powell's (in)famous memo which was a blueprint for corporate domination of American democracy.
Ray-Gun, the first manchurian candidate
The US may well have lasted longer than it would have otherwise because of the increased flexibility.
How to do insider trading without being convicted of insider trading: 1) issue lots of stock shares to drive the stock price down; 2) hand out lots of stock options to corporate executives; 3) buy back a lot of stock shares to drive share price up; 4) sell your stock options. Repeat forever.
Apple issued $11 billion in new shares during the same time period they were buying back $2.5 billion in stock. Why do that if you're not manipulating the share price?
It would be interesting to see a graph of stock shares issued, share bought back, stock options issued, and options sold to see the correlations.
This is exactly what is going on
I worked at Chevron for 35 years. The last 15+ raises were ~3% every year. And before someone says that was due to performance, I survived 3-4 lay-offs at least, I was a manager/supervisor, and I could go on. Young people, don't let these corporations take advantage of you!
Thanks, how can we stop them from taking advantage of us?
@@LIFEwithBAVANjob hop
"There is power in a union!"- Utah Phillips
CEOs benefitting from stock buybacks is basically encouraging ship captains to take an axe and hack off pieces of a ship to sell them for profit, while the ship is still sailing in the sea.
Its baffling how little people understand the point of buybacks. The proper analogy would be that the ship has too many masts right now and would be more efficient if we sold some of them.
@@Jupiter1423 Why is that more accurate? What does having a lot of shares in the market do that is bad? You speak so authoritatively on matters you don't understand.
@@TheModdedwarfare3 its not authority to know too much supply supresses prices its taught in any basic econ class
@@Jupiter1423 are you serious? supply suppresses price, having a lot of shares also allowed the company to grow, and in almost all cases nothing has changed about the company no more revenue etc. if this is the case why not just try to dwindle it down to 100 shares for a 500 billion dollar company.
@@marcusdunton1692 because it would be too levered at that point big boi
Businesses don't care about a good product, their customers, or their workers. Their only priority is please their investors.
You are their investors if you do 401k
@Counting Stars don’t be so dense. Obviously if you have a 401k you’re an investor but layoffs or raise freezes from greedy corporations hurt regular people waaay more than stock buybacks help them.
It's all they're legally obligated to do. The only way to force them to do better is to change the laws.
@@CountingStars333selling your sole to the devil I see. Obviously stocks create wealth, but if they don't physically create something then it's all just inflated property value speculation.
As long as politicians are bribed by corporations "nothing will fundamentally change."
Been like that since the inception of the U$.
Spitting facts, I figured this out at 17.
This why buybacks used to be called fraud.
If you allow people to cheat, some will cheat.
'Buybacks helped cause the Great Depression, so the government recognized the practice for what it was--Market manipulation'
- Eric Gardner | Business Reporter, More Perfect Union
It's crazy that we actually have the answers to address many of today's ills. Just not the political will to implement them.
That's actually not true. It was caused by fraud. The SEC was subsequently created.
IMO it was just massive speculation but acting like something mundane as buybacks caused the greatest economic depression known to this country is kinda just for shock value imo
@@uzah88 Shock value aka total BS.
Yeah this needed an explanation rather than just a blanket statement.
I made a comment earlier, but I have another solution,,, You can do stock buybacks only if 50% of your buyback goes directly as a split direct paycheck to all your non executive workforce. That rule would work better than a direct ban because it would make executives never even WANT to do it because of how much they hate paying non executive staff.
Financial reverse psychology. That's devious!
(insert maniacal laugh here)
It would work.
Companies learned they would be more profitable if they moved to a 36 hour, 4 day work week.
They refuse because that would be good for labor. It would be good for executives and shareholders also, but the fact it would help workers make it unacceptable.
Ban the buybacks and impose a retroactive tax on them.
Buybacks should at least be taxed at the same rate as the people pay as consumers.
Why dont you just invest in stocks so when buybacks occur you arent left blaming everyone but yourself?
@@Jupiter1423 Why don't you just start stealing yourself instead of blaming everyone but yourself?
@@Jupiter1423Why don’t you stop promoting greed?
@@Jupiter1423 How about I don't participate in the thing that is making our country worse? Also how is me making $100 on stock buybacks going to help me vs the CEOs getting hundreds of millions of dollars because of the shares they own?
@@TheModdedwarfare3 whyd you buy the stock in the first place if youre so upset about its ceo?
The stock markets dividends motivated me to start investing. What counts in my opinion is that you will be able to live off dividends without selling if you invest and make more money in addition to payouts. It suggests that you can give your children that advantage giving them a head start in life. I’ve invested more than $400k throughout the years in dividends stocks, I’m still buying more today and will keep doing so until the price drops even further.
It’s always inspiring to hear from a veteran investor who has weathered the storm and come out on top. When your portfolio turns from green to red, it might be unsettling, but if you have invested in great companies, you should just keep adding to them and stick with your plan.
I wholeheartedly agreed, which is why I appreciate giving an investment advisor the power of decision-making. Giving their specialized expertise and education, as well as the fact that each and every one of their skills is centered on harnessing risks for its asymmetrical potential and controlling it as a buffer against certain unfavorable developments, it’s practically impossible for them to underperform. I have made over 1.5million dollars working with an investment advisor name 'COURTNEY HEATH WILLIAMS' for more than three years.
@@-Fredrick Wow that’s stirring! Mind if i look up the manager that guides you? I don’t know what to do in this market, I’ve been losing about 400 dollars each day essentially in my mutual funds portfolio.
@@-Fredrick Thank you for this tip, it was easy to find your advisor. I conducted a thorough research on his credentials before messaging him. Base on his resume, he appears to possess a high level of proficiency and i am grateful for this opportunity! Thanks once again.
Yeah… unfortunately if to many of us begin to recognize this it will no longer work. People have to work/be poor in order for others to live off dividends.
Meanwhile, if the average worker has to withdraw from their 401k (retirement savings) for an emergency, it's taxed at around 50%.
What?… that’s just not true. The early withdrawal penalty for 401k is 10%, and you pay income tax on it, since the money that went in wasn’t taxed. If you have an emergency, you can take out a loan against your own 401k and setup a repayment plan, which avoids all the above.
@Francis Ge sorry to be the bearer of bad news, but I was speaking from my own personal experience. I know how much tax the state and federal government required me to pay. I also know what they required my sister to pay. Same for a bunch of people I know personally. You can only take a loan out against a 401k if you, 1. work at a company that allows you to do it, AND 2. you're currently working for said minority of companies.
@@SunnyAquamarine2
I went thru the same thing during the 2008 Great Financial Fiasco.
Considering that buy-backs were illegal until the late Eighties, yes, I'm a little pissed.
I blame the corporate boards of directors. They have a fiduciary responsibility to provide for the long term health of the corporation, not lining the pockets of shareholders in the short term.
If your capital ratio is 5:4 you can either borrow to get to 10:4 or buy stock back to get to 5:2 (theyre the same). Either way you still lever your position - it just turns out the buybacks have tax advantages and dont require interest payments. Why are you blaming corporations for maximizing their returns? What, if you owned a business youd just go for the loser strategy?
There actually is no such fiduciary responsibility to prioritize the long term growth of a company.
The board’s fiduciary responsibility is to maximize returns for existing shareholders, which is a completely separate question from whether the company should even continue to exist in the future, or even right now.
Sometimes the return maximizing option is to sell off all the assets and give everybody a last dividend (twitter going private). Sometimes, the play is to put everything into dividends and cash the checks on a successful business (think Coca Cola). And sometimes the play is to give no dividend at all and invest into growing the business (Amazon). It really comes down to the specifics of the business and the market.
Using stock buybacks to reduce capital ratio is still just market manipulation. Its fake value. So sad when the Stock market is being manipulated like the crypto markets
@@Jupiter1423 I’m curious, during the 50 years buybacks were banned, how did companies sustain their business?
If works like magic, it should be illegal.
"FINANCIAL ENGINEERING"
Stock buybacks were illegal for most of our history for a reason: corporations buying back their stock lead to market volatility.
What are your thoughts on central banks doing buybacks & selling of bonds to increase dollar value?
just like how a company performs stock buybacks to adjust its capital structure and return value to shareholders, the central bank buys or sells bonds to influence the money supply and interest rates in the economy. Here are some more similarities between stock buybacks and central bank actions:
Stock Buyback by Company:
Companies repurchase their own shares from the open market to reduce the number of outstanding shares.
This can boost the company's stock price by increasing earnings per share and signaling confidence to investors.
Central Bank's Bond Buying/Selling:
Central banks buy government bonds to inject money into the economy, increasing the money supply.
Conversely, central banks sell bonds to reduce the money supply and control inflation.
Impact on Share Prices and Interest Rates:
Stock buybacks can lead to an increase in share prices due to reduced supply and increased earnings per share.
Similarly, central bank bond buying can lower interest rates, stimulating borrowing and economic activity.
Objectives:
Companies conduct stock buybacks to optimize their capital structure and enhance shareholder value.
Central banks adjust the money supply through bond buying/selling to achieve economic goals like price stability and full employment.
Never put an accountant in charge of a company - they know the cost of everything and the value of nothing.
It’s market manipulation…period! These corporations are manipulating their own stock prices and all other stocks in the market are affected with every buyback purchase. CEOs mission is their own job performance and company stock prices. So they win by artificially increasing corp stock price by using company profits to buyback stocks. This increase makes it look like ceo is doing a good job managing the business, but he’s not because he’s not reinvesting in its product, it’s workers, it’s future. It’s a short-term decision for a CEOs self-interest. And since they bought a bunch a stock, it’s now increasing more so what do they do next, they sell the buybacks at a higher stock price and pocket the earnings so they use company profits to enrich themselves and shareholders.
We need stop BS and end this physically
They purchased billions of their own stock while telling you that they don't have enough money for raises!!
Wage labor is renting yourself via "self ownership". Employment is literally renting another human being as if they're property. The employer-employee relationship is a very insidious dynamic. Employment is a rental contract, like if you rented capital (say, a chainsaw from Home Depot), you pay rent for the "time preference" (basically the cost of time) for a piece of property. Capitalism is based on a principle of self ownership, which sounds empowering, until you realize that most people don't own capital goods other than themselves, and must rent out the authority over themselves as pieces of "human capital". This is a process of dehumanization where human beings are valued for their return on investment as capital goods. This is why, at the very least, capitalism needs unions and safety nets (or abolishment), or else the system won't value people for their human value. Importantly we must also think about our sick, elderly, and disabled people, as they can't provide competitive economic return for the investor class to value. We must figure out a way to change this economic system if we wish to value each other.
Exactly. 90% of humans are merely slaves. If you're not certain IF you're a slave... trust me: YOU ARE. 😂🤣😂 Might is right. Health is wealth. If you ain't rich, yer dah BEEEIIIOTCH! 💪😎✌️
It seems corporations long for the good old days when labor was free on the old plantation. All the talk about communism in the 1930s was a desperate attempt to stop union membership.
What if we do what they did in the French Revolution...
Of course US citizens wont do that unless you take their Netflix away from them. Hopefully with the WGA strike.
What are you talking about? Companies budget for labor and for future projects. If you arent operating at a profit you have to lay people off but you still have to maximize your equity. If there are no better returns on projects and your stock is undervalued than of course you should buy it. As a matter of fact if you have to lay people off it makes more sense to buy stock back considering youd likely have to pay higher interest on borrowing to achieve the same capital ratio. It really makes me smh to see people pretending like they understand this stuff.
@@Jupiter1423 Yea he is saying its irresponsible that corporations as a whole only focus on maximizing equity and they are bound by law to do so. You statement makes complete rational sense if you say "ok the CEO has a right to be as rich as he can possibly be fuck everything else" and "The sole responsibility of a corporation is a make a profit, fuck however they make it" this is fine assuming that society has a strong government that says that corporations may not pollute so much it causes lung cancer and CEO's cannot pay people a wage on which they need to rely on govt support to survive. If you move out of that perspective the completely rational decision of the CEO, pay his/her workers as less as possible should horrify you as a member of society. what is the say that these workers due to their immense stress die early? the production process of the goods and services produces toxins that lead to shorter and less healthy lives? This is what people are angry about/ questioning.
Capitalism is all fine and dandy until you realize the stock buyback has made the whole thing a house of cards on cooked books....
Great overview! This video made the issue clearer to me than ever.
This is just dumb!!! And Back A$$ backwards. There should be laws regulating the dilution of shareholders value (Increases in # of shares) and Buybacks (reducing # of shares) should be encouraged as it increases shareholder value. Of course the government prefers the company use that cashflow to pay dividends so that they get to tax it twice.
Nothing matters but the math. And long-term, the math does not hold up. Period. Any other argument, is pure stupidity, or a grift.
Imagine if a government official spent billions of dollars of his agency's funding to enrich himself and a handful of other people. It would be egregious corruption! But when business leaders do it, it's normal and acceptable.
Company I work for just handed out notes on lowering our pay. They also just spent 200 million on buybacks so that’s cool.
Every company I worked for went to shit immediately after moving to Salesforce
One thing I wonder about buybacks is that, considering a company can apparently go from private to public by issuing stocks, if there were ever a drive to make it go from public to private, wouldn't buying back all their stock be a requirement for that?
Not sure if the public to private path is even possible, or if there are any other mechanisms to enable it, but it seems like the path should exist if a company hypothetically intended to move its goals away from "generating shareholder value" to something more constructive...
Taking a company from public to private is just a matter of an individual or a partnership of individuals buying up all the shares of the company (it may be possible to do with just a majority-but I’m not sure). That can be accomplished in one or both pf two ways: 1.) the individual(s) buy up every share of outstanding stock, which is what Elon Musk did to take Twitter private, or 2.) the company purchases all of the outstanding shares of stock except for the individual(s) taking control pf the company. When a corporation buys its own stock, it takes that stock out of circulation, reducing the total shares of stock in the company. Stock buybacks are a key tool that an executive, shareholder, or board can use to take complete control of a company. Without buybacks, someone would have to either accumulate the money to buy all the shares on their own, or they would have to go into debt to but the shares. The company can also go into debt to but its own shares when buybacks are allowed. Stock buybacks really rob the economy of reinvested capital, since corporations pursue higher profits at the expense of higher prices/worse products for customers, lower wages/more work/more unsafe conditions for workers, and more pollution/higher risk for unlucky neighbors of the business, just so they can buy back more stock. They also lobby heavily for lower taxes, which leave even more money for buybacks, disincentivizes lower prices/higher (but worthwhile) costs/higher wages, and takes away the public sector’s funding to support the underpaid workers (many large companies pay workers so little that they qualify for welfare programs like food stamps and earned income tax credit) or to mitigate or even regulate pollution, consumer, community or worker safety. Simply put, stock buybacks are one of the many tools of the devil lol.
things companies could do with their profits: invest in research, develop new products/services, expand into new territory, increase production, increase production quality, acquire other businesses, invest in a bigger marketing push to increase sales, strengthen their workforce, pay down debt. Instead, they pick buybacks. Something that doesn't do anything to benefit the business.
Capitalism is well past played out.
Jeah, this is the last hurrah
Stock prices are heavily impacted by supply and demand. The more shares of a given stock are purchased, the higher their price goes. When a lot of shares are being sold, the price goes down.
So stock buybacks are a way for a company to spend their own cash to buy lots of shares of their stock, thereby making the price go up. This makes all the shares already held by their shareholders more valuable, thereby making those shareholders' net worth go up.
But ya know who tend to own a TON of shares in these companies? The executives themselves. Their compensation packages typically allocate a big portion of executive's pay as stock options or RSU's (restricted stock units).
Which means that stock buybacks are a tool that allows executives to take the profits generated by the companies they manage, and directly enrich themselves with it. As in, they turn money generated by their company and employees into their own personal wealth.
Stock buy backs are something Boards should look at very carefully.
This can be very useful if there is no better place for the money to go. The Shareholders are the owners of the company. If there is a good use for the cash, the buyback does not benefit the shareholders.
I tend to side with dividends over stock buy-backs, but retaining earnings tends to produce less returns.
Functionally, PP&E are not really generating the returns they once did. Investing in worker training, has not produced major returns since the end of WWI, more than 100 years ago. R&D famously does not benefit Shareholders. The benefits tend to come from buying a smaller company's innovations.
Why tax buybacks? They are just gonna escape the tax anyway, just ban them outright.
Escape the Tax? No not immediately because that's not how Financial earnings declaration works. Will they get custom made loop holes to negate those taxes in a couple years? Absolutely!
Why tax anything? People are just gonna avoid it anyways (/s if it isn't obvious)
We just need a new system.
Go watch: _"Why You Should Be A Socialist In 2023"_
Getting mad about stock buybacks is like getting mad about dividends
IKR
this video seemed to miss the mark.
How else am I supposed to invest for retirement?
Clearly you didn't watch the video. Companies continue to spend more and more capital on buybacks and less and less on research, employees and society as a whole. If your net worth is anything less than 8 figures that should piss you off
@@Tendomcgoobin but that is essentially the same as saying "company x is spending too much money on paying dividends to shareholders instead of investing the money". Buypacks are an alternative for dividends
Just like everything that’s messed up in America today, it goes back to Reagan
Greed destroys everything.
repeal stock buy backs and tax all stock compensation at the time of issuance as ordinary income that would fix a lot of problems
The most important and insightful thing in this video is the observation that executives, due to the large percentage of their compensation in the form of stock options, have every incentive to favor stock buybacks over dividends as a means of returning value to shareholders; buybacks tend to result in increases to the stock price (which options are worthless without) and dividends tend to result in decreases.
Stock buybacks add value when they're executed when the price of a company's share is undervalued, and they destroy value when they're done when the company's share price is overvalued. And because the CEO position tends to attract the type of narcissistic personality that persistently believe that the company's stock is always undervalued during their tenure, they often destroy value by purchasing shares when they're trading at a premium to intrinsic value. And senior management doesn't object to this because so much of their compensation only grows in value if the stock price goes up, even if it destroys value in the long-term.
That's why I don't have a problem with buybacks; the people who lose the most from unwise buybacks are the shareholders who, by their choice to hire these managers, deserve their inferior returns anyway.
Stock Buybacks were once illegal, because the Board of Directors had (and have) stocks as part of their remuneration. They get them at a discount. Their shares would rise in value, compared to other shareholders who paid full price. Also. If the knowledge of the buyback is leaked to select people, they could buy cheap and sell (pump and dump) the stock for a guaranteed profit.
As a shareholder with lots of stocks, I love buy backs. As a person with a brain, they should certainly be much more heavily legislated. 5% tax and an inability to begin purchase of said shares until say a year of the public announcement would be a good start
A tax is weird because you already pay taxes on your gains. It's just bringing the capital gains to a later day. No need to tax as it's already done.
@@fanban2926 i mean a tax on when the company purchases the buyback, not sells it. so like, if they really want to dump 100 million (pennies for many companies) into buybacks, they pay 5 million and end up with 95million. not a huge deterrent as almost no buyback is bought to later sell by the same company and almost 100% to reward shareholders (many of whom are CEO's). its very rare for a company to every re-sell shares after initial IPO as that often tanks the stock since the market hates that idea. "uh oh company x is having to dilute its shares just to get by" is what they see. buy backs are the opposite, they've got cash to burn and say fug it, give it to the shareholders.
Question: Would you like to pay a 5% of gross fee whenever you buy a stock? Does that sound fair?
@@cobrapatrol no but im not a company who can sell of billions of their own stock, tank themselves, and buy back before they release a sick new product that sckyrockets their buyback.
Wasn't this considered market manipulation before the Reagan era?
Then, the big one! Profits from selling inflated priced shares after buybacks get taxes reduced and less tax money is being collected and the health & education systems suffer.
I knew about the f-ing buybacks already, but those charts about CEO/worker pay and reinvestment put things into even sharper contrast. There's no reason for this shit to exist.
Thank you for explaining that. I never understood why people thought it was bad. Shouldn't a company be allowed to buy its own stock back? I never understood the ramifications of it. Thank you again
It's what I keep saying to other people. We might end up in an economic depression if these kinds of activities are left unchecked and not taken action against.
A serious and imminent depression is the prediction in informed quarters . All the signs are there and worsening
I like the soup analogy. I personally like to call it the cake at a party analogy. You have a party. Invite 9 people. Bring out a cake big enough to serve 10 people, maybe even 15. You decide to kick 5 people out. 4 people remain. You divide the cake down the middle. You take 50% of the cake, while the remaining 4 people figure what to do with the second half. If I'm making sense.
Yep, they own 10% more of a company without spending money. To be more precise, they own 10% more of a company that just shrank by 10% without spending money. The companies outstanding shares decreased, increasing the remaining shareholders cut of the pie, but a few trillion dollars left the coffers to pay for those shares.
The overwhelming amount of stock buybacks over the past decade is the root cause of inflation.
"But! But! Money printer went brrrr and now we have inflation!" -some economist somewhere
Stock buybacks are an integral part of returning investor value and are equivalent to dividends
4th option: end capitalism
We've been stuck in the capitalists' boom-bust cycle for CENTURIES. It's not a bug in the system... it's a feature.
You got that right. Ending capitalism would require workers to organize into socialist industrial unions. Current trade unions just tell you there is a brotherhood between capitalists and workers when in fact there is nothing in common between them. Socialist industrial unions means all trades under one umbrella with the goal of collective ownership of the means of production and distribution.
Unions should operate more like mafia so that corporations are more afraid of them. And they did when Jimmy Hoffa was alive. It was no coincidence that the middle thrived when Jimmy Hoffa ran the Teamsters. Jimmy was a working class hero.
@@GenerationX1984 I do not agree. We need unions to go beyond collective bargaining and become revolutionary unions as I mentioned in my previous comment that we need to bring back the Socialist Industrial Union Program of Daniel De Leon. A real union backed by actual socialist political parties for collective ownership of the means of production and distribution. the capitalist class and the working class has nothing in common and we have the right to socialize production and distribution.
@@JohnT.4321 I've never heard of that socialist union program. I'll have to look into it.
@@GenerationX1984 I hope you do. The writings of Daniel De Leon can be found at the Marxist Internet Archive.
Corporations: we spent money on ourselves therefore we have more money.
>refuses to elaborate further
Ancaps be like: Government (regulation) is the problem (except they don't call it regulation, they just keep it nebulous at "government").
Companies when no regulation:
Still, this won't solve a fundamental issue when it comes to capitalism and that is that money keeps flowing to the top at the expense of workers.
Ancaps live in a fantasy world where capitalist have free reign without regulations and they would love to see the end to all collective bargaining. Never met an employer who honored a contract.
Anarcho capitalism is an oxymoron lmfao. Capitalism requires a state...
@@cdvideodump You better believe it does. The current government, as it is, bends over backwards for capitalists interests and not workers. Too bad most people don't see it.
@@cdvideodump requires a state, not necessarily a form of government
That's one way to look at it, but it's not a black and white issue... you don't just "switch" all Monetary policy to say, Socialism, and suddenly rid ourselves of all of that same exact Corruptions from all of the same likeminded "Officials" who thrive in EITHER government. China has had to expel hundreds of corrupt officials from its own PRC party and that ONLY happened since the Xi chapter and since they're like Cockroaches, for every 100 that got full attention, there's a 1000 more who flew under their radar too.
What a great and concise vid! Shared on fb. Hope more people watch.
Crazy this is what killed Marriott during 2020, they were doing this for years and the brand was worthless.
The wealthy benefit from buybacks! The wealthy own politicians in both parties! Politicians voted to allow buybacks! The circle is complete!
Wonderful and informative video! Some concepts were a bit difficult to wrap my head around, but I got it eventually.
Why is it all the economic crap we are going through can be directly connected to the Regan administration?
He was the puppet face of it (remember, he was completely incapacited at the end and that made no difference: obviously it wasn't him in charge). This was the capitalist class's program elaborated well before thru him and others.
This is the root cause of 90% of the country’s problems.
Starting to understand why my last job would rather give us shares (with a long vesting schedule!) instead of cash bonuses...just to open up a liquidity window at random times for us to be able to even sell our shares (private company)
I'm in the ban buybacks camp.
Congress should treat stock buybacks as dividends for tax purposes or make them illegal.
Here's why I like stock buybacks. In a Roth IRA, Traditional IRA, 401k, etc. neither stock buybacks nor dividends have any real advantage over the other, but in a regular brokerage (always taxable) account they have an advantage. I like buybacks because the share price goes up, and I don't have to pay taxes on the gain immediately. I only pay when I sell the stock and realize the gain, ideally many years down the road when I'm in retirement and in a lower tax bracket. I'll pay the taxes, I just want to decide when to do it. With a dividend, I pay taxes the same year the dividend is paid. I'm a long-term investor, and dividends create a leaky tax bucket. With dividends, it doesn't matter if I'm holding the asset for a long time, I'm paying taxes every year a dividend is paid, and if I'm in my peak earning years, I'm paying in the highest bracket I'll ever be in. Again, I'll pay the taxes, but I think I should have control over when I do it, especially because I'm a long-term investor and not a speculator.
One of the reasons executives take stock in exchange for pay is taxation on stock about half of payroll tax.
I'd like to see more small and independent businesses, faceless corporations will always cheat us. But the people want easy money from stock investing, and others want the cheapest possible goods and not need to think about which business they buy from. So nothing will change.
First thing we need to do is have some new, hard rules put in place on politicians. We need to know about their backers, investments, and demand disclosure on any and all "gifts" they receive. Some of the lobbying crap needs to stop.
I'm not a fan of Biden, but I do agree with upping the amount to 4%. To be blunt about the matter, I think we need to up it to 7.5% if not 10%. That 10% tax needs to be allocated to things that will be difficult for greedy politicians to touch/"re-allocate" to help out friends.
We could do profit sharing but most corporations would never go for it.
We could have a government make it mandatory, or at least enticing, like they've done in many other countries. You know, when you have a government with some forethought and concern for its constituants.
They basically just a pump and dump for the share price, without actually investing anything into the company, and therefore the workforce or the economy
How could the stock value be higher than the company's value? How can they issue infinite stock? The rich use a whole other economic system.
I have no idea why the algorithm brought me here but I think I wandered into the wrong room.
Instead of taxing the buybacks, which can actually make money for me as a small shareholder if the stock is undervalued, what you need to do is that make executive compensation contingent on increasing the market cap (assuming dividend reinvested) of a company rather than its stock price. Then you can split the stock or buyback as much as you like, or pay a dividend, but you will not see any boost to executive compensation unless you deliver real growth.
calling buybacks 'investments' is already a load of bull. That money does not increase production, it's just dividends without taxes.
This is a good thing to know especially when people try to tell you CEOs make so much money because of how hard they work, initial investment, blah blah blah. It is true, to an extent, but that doesnt mean everything they do to make money is ok.
I don't understand how the average shareholder can be so stupid and short-sighted. It really is "ooga booga number go up" thinking. I remember reading that kids who pass tests that show they can conceptualize delayed gratification were more likely to be successful in life. But patience and careful planning don't mean anything when a bunch of wealthy morons are willing to burn the whole thing down just so _number goes up_ for another quarter.
We're not talking about ordinary old average stockholders. They often get burned as much as everyone else in this game except top management and the big stockholders with all the power.
They used to be against the law, and still should be.
I agree. So did prescription drug ads but here we are.
Very clear and concise; much appreciated.
Buybacks are not always bad, for example buybacks can help protect a corporation from a hostile takeover. Maybe regulations should be in place to insensitive paying employees more rather than buybacks. Maybe offer corporations tax breaks based on average employee salary growth excluding executive salaries or something?
Holy crap, Berkshire Hathaway is my insurance company.
Stock buybacks are an excellent way to reward all shareholders (including Mr and Mrs middle class) because it boosts the stock price and keeps greedy elected officials out of the picture by eliminating the double taxation that occurs when dividends are paid out. It also helps shareholder by giving the company a tool to fight "investment" banker shorting schemes for profit.
Taxation on buybacks is so dumb. Now we have to if someone else decidecs to buy shares
So... What's wrong with stock buynacks? I still don't see the problem.
Excellent presentation. Thanks for your work.
If 10 friends own a restaurant together and one friend wants to be bought out, how is it immoral that after they buyout that one friend, their ownership of the business goes from 10% to 11.11%? That’s the same as a buyback
Yeah! Somebody with a brain that hasn't been distorted by the Socialist Education that is prevalent in America.
The big 3 CEO’s brought me here smh
Stock buy backs and cash dividends are the ways shareholders can share in the profits of a public stock company. This ties the stock price to the company's profits. They are the basically the reverse of stock offerings. Also, managing the number of shares actively trading could help the company reduce highly volatile stock prices. For example buying all the stocks that a major shareholder is dumping on the open market to maintain the price of the stock.
I began my investment journey at the age of 38, primarily through hard work and dedication. Now at the age of 42, I am thrilled to share that my passive income exceeded $100k in a single month for the first time. This success reinforces the importance of the advice mentioned earlier. It is not about achieving quick wealth, but rather ensuring long-term financial prosperity
Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional or trusted advisor in order to navigate this recession and achieve potential high yields.
This is superb! Information, as a noob it gets quite difficult to handle all of this and staying informed is a major cause, how do you go about this are you a pro investor?
Through closely monitoring the performance of my portfolio, I have witnessed a remarkable growth of $483k in just the past two quarters. This experience has shed light on why experienced traders are able to generate substantial returns even in lesser-known markets. It is safe to say that this bold decision has been one of the most impactful choices I have made recently.
Wow, that’s stirring! Do you mind connecting me to your advisor please. I desperately need one to diversified my portfolio.
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
The more I watch these videos the more I realized people have no idea how the world works nor capitalism. Stock buy backs increase the attractiveness of the stock, wages are a liability but stockholders are assets (they give money to the company to profit later). Companies who prioritize profit usually make it at the end. They are not non-Profits.
Yes stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.
It all depends on how long you're willing to hold for and your strategies, stocks might likely tank further, but making serious gains in this downtrend shouldn't be a problem if you're a pro
I noticed, a lot of folks are making huge 6figure killings in this downtrend, only just that such technques are mostly successfully executed by folks with indepth mrkt knowledge.
Thats true, I've been getting assisted by a coach for almost a year now, I started out with less than $120K and I'm just $19,000 short of half a million in profit.
Impressive! can you share more info?
Credits goes to "Carol Vivian Constable” one of the finest portfolio managers in the field. She's widely recognized; you should take a look at her work.
Thank You.
5:45 okay but the comparison is not the same here because they can resell the stock so its not really a loss as it would by giving raises or funding research etc.