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  1. #26
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    Reagan gets the blame for bad policy passed by Democrats, obviously.
    Clinton did sign off on 5 Repug long-term goals, and Hillary will do the same.

    Repugs (paid by VRWC, BigCorp, 1%) wrote the , and enough Dems, also corrupted by money, went along. That's why America is ed and un able.

    The VRWC got organized in the early '70s, worked hard and widely, got their diseased puppet and his team elected in 1980. Americans have been on the decline ever since, and it continues.

  2. #27
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    Market Capitalism is Broken: Why Adam Smith Would be Outraged by Modern Finance

    But only 15 percent of all the money flowing through financial ins utions today ends up in businesses. The rest of it is staying within the closed loop of the market itself. It’s being traded.

    What is the rest of the money — that 85 percent — actually doing?


    A lot of that money is going into the real estate market. Some of it is going to average people like you and me for mortgage loans, but the real money is in securitizing those loans.


    We heard about that during the financial crisis, the splice‑and‑dice CDOs that blew up. That’s still happening. The mortgage market essentially funds the purchase of old assets, houses. It doesn’t grow the economy. That’s one part of it.

    http://evonomics.com/makers-and-takers-adam-smith/


  3. #28
    ex Hornets78 Pelicans78's Avatar
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    Clinton did sign off on 5 Repug long-term goals, and Hillary will do the same.

    Repugs (paid by VRWC, BigCorp, 1%) wrote the , and enough Dems, also corrupted by money, went along. That's why America is ed and un able.

    The VRWC got organized in the early '70s, worked hard and widely, got their diseased puppet and his team elected in 1980. Americans have been on the decline ever since, and it continues.
    I seem to be doing ok so I'm not complaining.

    The government is no better at investing for the general public than the corporations.

  4. #29
    I am that guy RandomGuy's Avatar
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    Pretty over simplistic. Stock prices are at an all time high not because of buybacks but because central banks are keeping interest rates at an all time low. Investors have no other place to go and have to accept the increased risk in order to get any return.

    Most companies have adequate production facilities for the current market. With tepid worldwide GDP growth they don't need to invest in additional capacity they have no use for. This is the same reason there are a lot of current mergers and acquisitions. The cash is being used to grow market share and realize the reduced overhead of the combination.

    Stock buybacks are like putting money in the bank.Future profits can be retained and used internally instead of distributing them to the shareholders of the stock they retired. This will put them in a better position to react and grow when and if worldwide demand increases and they need to increase production.
    The Dumbest Business Idea Ever. The Myth of Maximizing Shareholder Value
    By the end of the 20th century, a broad consensus had emerged in the Anglo-American business world that corporations should be governed according to the philosophy often called shareholder primacy. Shareholder primacy theory taught that corporations were owned by their shareholders; that directors and executives should do what the company’s owners/shareholders wanted them to do; and that what shareholders generally wanted managers to do was to maximize “shareholder value,” measured by share price.

    Today this consensus is crumbling. As just one example, in the past year no fewer than three prominent New York Times columnists have published articles questioning shareholder value thinking.1 Shareholder primacy theory is suffering a crisis of confidence. This is happening in large part because it is becoming clear that shareholder value thinking doesn’t seem to work, even for most shareholders
    http://evonomics.com/maximizing-shar...-dumbest-idea/


    Public companies have become too focused on short-term.

  5. #30
    I am that guy RandomGuy's Avatar
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    buybacks offset dilution caused by stock compensation for CEOs -- a significant recurring cost for shareholders

    http://www.nytimes.com/2016/07/10/bu...ages.html?_r=0
    Pretty much.

    It sucks money out of existing shareholders' pockets, and puts it in that of management.

    Dividends FTW. If you want to give shareholders something, and put some money into the economy... pay ing dividends.

  6. #31
    dangerous floater Winehole23's Avatar
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    Robin Greenwood and David Scharfstein’s (2012) “The Growth of Modern Finance” provides a telling empirical illustration of the transfer (rather than income- generating) character of today’s financial sector. In addition to showing that the financial industry accounted for 7.9 percent of U.S. GDP in 2007 (up from 2.8 percent in 1950), they calculated that much of this took the form of fees and markups — the quintessential transfer payments. Such charges by asset managers of mutual funds, hedge funds, and private equity concerns now account for 36 percent of the growth in the financial sector’s share of the economy, as Gretchen Morgenson (2012) reports. Finance also accounts for some 40 percent of corporate profits. But our point is that financial “profits” in the classical scheme are largely rents, not profit. They are not the same thing as industrial earnings from tangible capital formation
    http://www.unz.com/article/finance-is-not-the-economy/

  7. #32
    dangerous floater Winehole23's Avatar
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    An economy based increasingly on rent extraction by the few and debt buildup by the many is, in essence, the feudal model applied in a sophisticated financial system. It is an economy where resources flow to the FIRE sector rather than to moderate-return fixed capital formation. Such economies polarize increasingly between property owners and industry/labor, creating financial tensions as imbalances build up. It ends in tears as debts overwhelm productive structures and household budgets. Asset prices fall, and land and houses are forfeited.


    This is the age-old pattern of classical debt crises. It occurred in Babylonia, Israel, and Rome. Yet, despite its relevance to the United States and Europe today, this experience is virtually unknown in today’s academic and policy circles.

  8. #33
    dangerous floater Winehole23's Avatar
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    financialization is a drain on productivity:

    Faced with the choice between the arduous long-term planning and marketing expense of real-sector investment with single digit returns, the quick (and lower-taxed) capital gains on financial and real estate products offering double-digit returns have lured investors. The main connection to tangible capital formation is negative by diverting new borrowing away from the real sector, as recent studies show (Chakraborty Goldstein and McKinlay 2014).


    Industrial companies were turned over to “financial engineers” whose business model was to take their returns in the form of capital gains from stock buyback programs, higher dividend pay-outs, and debt- financed asset takeovers (Hudson 2012, 2015a, 2015b). Charting the ensuing rise of interest and capital gains relative to dividends, and of portfolio income relative to normal cash flow in America’s nonfinancial businesses, Greta Krippner (2005, 182) concludes: “One indication of financialization is the extent to which non-financial firms derive revenues from financial investments as opposed to productive activities.”


    Much as real estate speculators grow rich on inflated land values rather than production, so financialization threatens to undermine long-term growth. Since the 1980s, the major OECD economies have seen rising capital gains divert bank credit and other financial investment away from industrial productivity growth. Engelbert Stockhammer (2004) shows a clear link between financialization and lower fixed capital formation rates.

  9. #34
    dangerous floater Winehole23's Avatar
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    “The stereotype of what finance is supposed to do is take the income of savers and channel that to productive investments,” Marshall Steinbaum, an economist at the Roosevelt Ins ute, told me. “That’s not what finance does now. A lot of finance goes in the opposite direction, where essentially they are taking money out of productive corporations and sending it back to investors.”

  10. #35
    I am that guy RandomGuy's Avatar
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    “The stereotype of what finance is supposed to do is take the income of savers and channel that to productive investments,” Marshall Steinbaum, an economist at the Roosevelt Ins ute, told me. “That’s not what finance does now. A lot of finance goes in the opposite direction, where essentially they are taking money out of productive corporations and sending it back to investors.”
    Capitalism is limping along. It is things like this that make me very unsympathetic to the crocodile tears of the investor class.

  11. #36
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    Capitalism is limping along.
    how so?

    inequality keeps increasing, the rich capitalists, BigCorp, rentier assholes always getting richer by looting the non-capitalists, while relentlessly killing or trying to kill any and all attempts at regulation.

  12. #37
    dangerous floater Winehole23's Avatar
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    SEC frets over buybacks. This sort of thing used to be considered illegal manipulation.

    A study by the SEC of 385 recent share-buyback announcements — this is when companies announce how much money they will spend in the future on buying back their own shares, but before they actually begin buying them — found:



    • Share-buyback announcements led to “abnormal returns” in the share price over the next 30 days.
    • Executives used this share price surge to cash out.


    “In fact, twice as many companies have insiders selling in the eight days after a buyback announcement as sell on an ordinary day. So right after the company tells the market that the stock is cheap, executives overwhelmingly decide to sell,” explained SEC Commissioner Robert Jackson Jr. – appointed by President Trump and sworn in earlier this year – in a speech today. He went on:

    And, in the process, executives take a lot of cash off the table. On average, in the days before a buyback announcement, executives trade in relatively small amounts—less than $100,000 worth. But during the eight days following a buyback announcement, executives on average sell more than $500,000 worth of stock each day—a fivefold increase. Thus, executives personally capture the benefit of the short-term stock-price pop created by the buyback announcement:
    https://wolfstreet.com/2018/06/11/se...l-engineering/

  13. #38
    dangerous floater Winehole23's Avatar
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    high water mark reached:

    In the first quarter, companies actually repurchased an all-time-record $178 billion of their own shares. In terms of announcements of future share buybacks, May set an all-time record of $174 billion – in just one month!

  14. #39
    dangerous floater Winehole23's Avatar
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    SEC commissioner slams the short-termism and extractive nature of buybacks:

    On too many occasions, companies doing buybacks have failed to make the long-term investments in innovation or their workforce that our economy so badly needs.

    And, because we at the SEC have not reviewed our rules governing stock buybacks in over a decade, I worry whether these rules can protect investors, workers, and communities from the torrent of corporate trading dominating today’s markets.
    Executives often claim that a buyback is the right long-term strategy for the company, and they’re not always wrong. But if that’s the case, they should want to hold the stock over the long run, not cash it out once a buyback is announced. If corporate managers believe that buybacks are best for the company, its workers, and its community, they should put their money where their mouth is..
    https://wolfstreet.com/2018/06/11/se...l-engineering/

  15. #40
    dangerous floater Winehole23's Avatar
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    “in the years leading up to the financial crisis, top executives at Bear Stearns and Lehman Brothers personally cashed out $2.4 billion in stock before the firms collapsed.”


    Tying executive pay to the growth of the company, he said, “only works when executives are required to hold the stock over the long term.”

  16. #41
    dangerous floater Winehole23's Avatar
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    recommends denying safe harbor:

    [B]uybacks give executives an opportunity to take significant cash off the table, breaking the pay-performance link. SEC rules do nothing to discourage executives from using buybacks in this way. It’s time for that to change.
    He proposed, among other suggestions, that “SEC rules should encourage executives to keep their skin in the game for the long term. That’s why our rules should be updated, at a minimum, to deny the safe harbor to companies that choose to allow executives to cash out during a buyback.”

  17. #42
    i hunt fenced animals clambake's Avatar
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    no pain, all gain

  18. #43
    dangerous floater Winehole23's Avatar
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    strong words, is SEC commissioner Jackson a voice in the wilderness?

    The increasingly rapid cycling of capital at American public companies has had real costs for American workers and families. We need our corporations to create the kind of long-term, sustainable value that leads to the stable jobs American families count on to build their futures. Corporate boards and executives should be working on those investments, not cashing in on short-term financial engineering.


    Investors deserve to know when corporate insiders who are claiming to be creating value with a buyback are, in fact, cashing in.

  19. #44
    dangerous floater Winehole23's Avatar
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    I mean, if this were a Michael Hudson article, some superpatriot here would probably call me a commie, but this is Trump's SEC commissioner, basically echoing what Michael Hudson's been saying for the last ten years.

  20. #45
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    "We need our corporations to create the kind of long-term, sustainable value that leads to the stable jobs"

    how un-charmingly naive.

    stable, well-paid, long-term jobs for Labor is in direct opposition to the short-term, rapid amassing of Capital.

    Capital vs Labor: ancient zero-sum game.


    Financial precarity is the norm for the USA's lower 4 quintiles.

  21. #46
    dangerous floater Winehole23's Avatar
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    we'll see. the rules changed in 1982. they could change again.

  22. #47
    I am that guy RandomGuy's Avatar
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    SEC commissioner slams the short-termism and extractive nature of buybacks:



    https://wolfstreet.com/2018/06/11/se...l-engineering/
    A wider picture take:

    Buying back stock shares slowly shrinks the number of shares overall being traded. The money paid to the owners, generally also hyper-wealthy, then turns around and looks for more assets, i.e. fewer shares.

    What this does is make large share price swings more likely. We are gearing up for another crash at some point, aided by trading algorithms and automated trading, IMO.

    With the recent move towards an inverted yield curve (precursor to recessions), and trade wars, the next bump will be pretty nasty if I am right about that.

  23. #48
    dangerous floater Winehole23's Avatar
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  24. #49
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    A wider picture take:

    Buying back stock shares slowly shrinks the number of shares overall being traded. The money paid to the owners, generally also hyper-wealthy, then turns around and looks for more assets, i.e. fewer shares.

    What this does is make large share price swings more likely. We are gearing up for another crash at some point, aided by trading algorithms and automated trading, IMO.

    With the recent move towards an inverted yield curve (precursor to recessions), and trade wars, the next bump will be pretty nasty if I am right about that.
    Well, then, you should cash out, wait for that crash and buy cheap (if you are right).

  25. #50
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    We are gearing up for another crash at some point
    RG going out on a limb

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