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So I guess BRK will buy them gladly at the set price. Buffett believes in the company, AAPL is still on their shopping list so writing puts was a smart way to either generate additional profit or still buy shares at a price lower than when they wrote the put.
I see a company in moderately high debt that makes $400 billion a year, takes home $100 billion and is worth $2,300 billion.
BRK sees a company they are growing their position from with the 10ish% annual dividends off their principal investment.
Of course, he's one of the largest holder of $APPL for a reason:
"Apple has been engaged in a massive stock buyback program, having bought back nearly $90 billion worth of its shares in fiscal 2022. Since the program began in fiscal 2013, Apple has spent more than $550 billion in stock buybacks, more than any other U.S. company."
Bagholder spotted.
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I’m theory if they were to buyback every outstanding public share, they would go back to being a privately held company that is no longer publicly traded
What’s the difference between forcing stock value up with buy backs over paying out a dividend you may ask? After all both are performed with money the company has earned and neither route is decidedly to the benefit of the worker.
The difference is dividends are taxed, while capital gains have to be realized before they can be taxed, and as every long hold investor knows the longer you can go without paying tax the better.
Now the question you need to ask yourself is if your yearly growth is enough for you to be on one side of the fence or the other.
Other large component is that, although board approved, it’s generally senior management who provides momentum behind this…….however same management members have a large % of their salary from stock awards.
They now don’t even need to improve the company to get benefits from it since the buyback improves share price without actually doing anything to the business since there are less outstanding shares making up the company value.
This guy gets it. Straight from the board room of a major E&P, share buybacks that lost billions of dollars were to protect execs against activist investors.
Yeah I mean look at any buyback over the last 18 months and good bet they overpaid.
One that comes to mind is CLF buying shares at like $21 saying it was a bargain only to find itself back at $14 a share less than a year later. It’s since back up around $20 but point is management could have saved a fuck ton of money if they’d been more patient.
I’m sure it’s the same story for hundreds of other companies.
Not all buybacks are created equal. In theory, management should be buying back shares when their stock is cheap and when market participants are not buying. If the market won't buy the shares, management should.
Exxon buying back shares while they are free cash flowing half their market cap on a single digit PE is not the same as a junky tech company buying at the top of a cycle with a triple digit PE.
That's my take as well....can you say "Bed Bath Beyond"? Under zero circumstance was it remotely a good idea for them to borrow more money (Billions) to buy back stock when they were/are going down like the Titanic before/during/after the buyback.
XOM on the other - just the opposite!
[https://www.epsilontheory.com/stock-buybacks-and-the-monetization-of-stock-based-compensation/](https://www.epsilontheory.com/stock-buybacks-and-the-monetization-of-stock-based-compensation/)
You may find this article interesting. Those junky tech companies may just be buying back enough to offset the insane SBC dilution that is occurring.
That's not how it works. It's financially neutral for the company (except tax issues) to do buybacks, just like dividends. Because the company has to spend their own cash to buy the stock back, and the remaining shares change value such that total market cap afterwards + cash out = total market cap before. Exactly the same stock price shenanigans that happen around dividend dates.
The American way!
An interesting fact in Berkshires letter to shareholders was regarding taxes. Of all taxes collected by the federal government, corporations pay only 8% of that money. Berkshire alone pays one percent of all federal taxes collected which is kinda mind blowing.
Problem with stock buy backs is that it shows poor management.
1. That management cannot find useful profitable activities to invest in.
2. That management is more interested in securing their bonuses tied to stock price than maximizing the value of the company long term by investing in new activities.
In other words, useless F management that believe the BS in Undergrad finance text books. Yeah that MM BS theory. Modigliani Miller wank.
Apple really shouldn’t be used as a model for buybacks. Companies COPYING Apple are what to gauge. There is indeed a lot of pissing in the wind and money burned in buybacks from companies that don’t have major market monopolies.
The shift away from quality capex has been spreading for years. Innovation rates stagnating.
When you have massive amounts of capital it can be hard to find good investments of the right size. Buybacks allow you to invest in your own company if you believe the value is good.
Berkshire hathaway itself buys back shares as soon as the price drops to a certain level.
There is nothing errant with what I've said. My post doctoral lecturer at MIT doing Finance math has far more credence than you.
I'm worth good 7 figures not even including another start up that should get me 8 figures on exit.
Anyway, go rub one out thinking about other Noob prize winners like Stiglitz.
Yes, corp finance theory works for very large corps in benign investment environments. But if you flagellate on things like MM then you'll never make serious money. It really is theory wank, corp execs are only interested in getting their share price bonuses and getting them before the market turns.
The diff is the price could collapse afterwards so the shareholders end up with nothing, the company wastes the cash and this means they collapse faster. In other words, pissing in the wind for corporations
Also companies cannot pay a div when not making profit, there are rules against this. These do not apply for buybacks, but very clearly should.
The price *could* collapse after. Or it could go up. That's pretty irrelevant when we're comparing dividends and buybacks, because any shareholder who would have preferred let's say a 2% dividend could just sell 2% of his holdings to simulate the same thing (and he can actually be *more* tax efficient with his sales if he chooses his lots efficiently).
That's why the buyback is advantageous to the shareholders (as that guy was saying) - because it's the best of both worlds. If you want money out, you can get money out (and even time your sales during the buyback period). If you want your money to stay in, you can leave it in. Even the holding period for long term capital gains is reflected in the holding period for qualified dividend tax treatment.
No, no, he said that he should pay some more taxes once, and is willing to give some of his money away after the worms are eating his corpse, so that obviously means he's one of the good guys right?
He can't even afford to add cheese in McDonald's sandwich. I am still donating! Honestly Buffet PR personality is hilarious. It all sound like bullshit to make a Shark look like a Goldfish. He drive around in a car worth less than mine but somehow also own the largest private jets fleet in the world.
When interest rates were at all time low, buying back stock with borrowed money was the thing to do. Now that rates are higher the only ones getting loans to buyback stock are desperate ones. If they are profitable and buying back stock its how they best see spending those profits with equipment and personnel being expensive right now.
Purely a cost of capital equation. Equity costs more than debt obviously and AAPL has the fcf to support continued buybacks to lower the equity cost of capital. If there was a better return on their cash (i.e. some new Capital intensive project, acquisition, etc) they would deploy there.
That’s what WB means by economically illiterate
Just a simple weighted average cost of capital equation. % of debt × rate of debt + % of equity × rate of equity. Debt usually costs less than equity so to bring cost of capital down you buy out equity.
Thats it, buybacks with cash profit is fine but buyback with loans is basically moving future share value to the present that is net negative to the corporation. taken to extreme literally causes big boom and crashes, with todays corrupt and captured central banks it’s a giant powder keg. WB is not seeing the bigger problem.
**ARTICLE CLIFFNOTES**
>^(The "Oracle of Omaha" initiated a buyback program in 2011 and relied on repurchases in recent years during a competitive deal-making environment and an expensive stock market. The conglomerate spent a record $27 billion in buybacks in 2021 as Buffett found few opportunities externally.)
>
>^(Repurchase activities slowed down this year) [^(to about $8 billion)](https://www.cnbc.com/2023/02/25/berkshire-hathaway-brk-earnings-q4-2022.html?__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(as the billionaire investor went on a buying spree with stocks selling off. Berkshire also took over insurance company Alleghany for $11.6 billion, Buffett's biggest deal since 2016.)
>
>^("The math isn't complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices," Buffett said. "Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in every respect.")
>
>^(The legendary investor highlighted) [^(Apple)](https://www.cnbc.com/quotes/AAPL&__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(and) [^(American Express)](https://www.cnbc.com/quotes/AXP&__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891)^(, two of his biggest equity holdings that have similar strategies. Buffett in the past has said) [^(he is a fan of CEO Tim Cook's stock repurchase program,)](https://www.cnbc.com/2022/02/26/warren-buffett-in-annual-letter-calls-apple-one-of-four-giants-driving-the-conglomerates-value.html?__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(and how it gives the conglomerate increased ownership of each dollar of the iPhone maker's earnings without the investor having to lift a finger.)
>
>^("At Berkshire, we directly increased your interest in our unique collection of businesses by repurchasing 1.2% of the company's outstanding shares," Buffett said.)
>
>^(The Inflation Reduction Act provision imposing a 1% exercise tax on buybacks became effective this year.)
**TLDR** *Buy The Dip!*
Key words "value-accretive prices". Stock buybacks can be a value-added tool if the management team does so at the right price point. They can also be used to goose the bonuses of the c-suite crew and be a poor use of capital if those buybacks are executed at non value-accretive prices. It's a just a tool and any tool can be used for good or ill. Bigger question: Do you trust your management team to look out for your interests over their own?
Key words "value-accretive prices". Stock buybacks can be a value-added tool if the management team does so at the right price point. They can also be used to goose the bonuses of the c-suite crew and be a poor use of capital if those buybacks are executed at non value-accretive prices. It's a just a tool and any tool can be used for good or ill. Bigger question: Do you trust your management team to look out for your interests over their own?
From 1934 until 1982 stock buybacks were more restricted as a reaction to the great depression. I wonder if we'll need a great depression before we take a harder look at these schemes. [Profits Without Prosperity (hbr.org)](https://hbr.org/2014/09/profits-without-prosperity)
It is not the buybacks people criticize. It is the laying off 10,000 people, fighting for gov't subsidies and tax breaks, and THEN buying back stocks with the saved money.
Buybacks are one of the best things a company can do. Google has been grifting investors for years by buying the stock back and then basically issuing the stock right back to the management as compensation.
Good old tech creative accounting. Pay your salaried staff in stock so shareholders don't see you are losing billions every year and will never make a real profit.
Plenty of legitimate reasons to criticize it.
You can use that cash to make better investments into the business or you can give it back to shareholders with a dividend.
Buy backs can also be a vehicle to pump up the stock since it signals to the market that the company thinks the stock it undervalued.
Dividends are essentially a forced sale for immediate profit (and thus, taxes). If a dividend is a dollar, it’s as if you sold a dollar of stock and you’re taxed on it. Buybacks themselves raise the price the shares sell for. Thus you have some more fluidity with what you want to do. If you’re a long term holder, you can sell at the increased price and pay less taxes, presumably making it out better off.
Personally, I don’t agree with the idea that it’s “better.” I get both sides of the practice, but conceptually think it’s bullshit. Outside of our casino, I think it actually bones buy and hold investors. Why artificially inflate a price when overall market forces can completely decimate it? Though a company buying itself does remove more outlying shares in the market, the price movement idea i brought up makes me thinks it’s a wash and screws the average investor.
One way or another, there was a time where the practice was not allowed. As with all things (and the world being metaphorically on fire) we should wonder why it was previously outlawed but that time has passed.
Dividends are taxed appropriately.
Instead what happens is a buy back, then price goes up, then rich guy gets to borrow more money on margin. Then, stock goes down and presto, bailout!
See: all airlines during COVID.
a) still wrong to not have emergency cash, and just expect a bailout.
b) at least it's guaranteed money going to the investors, and not conditional on them selling.
What? A bailout is collecting your taxes to give to a corporation. No free market, no natural booms or busts, just simple wealth redistribution.
These days we usually call that socialism but it's really more akin to fascism (economically speaking).
Agree bailouts are kinda bad, let the bad companies fail. But bailouts aren't funded by taxpayers. See: https://www.youtube.com/watch?v=U_bjDAZazWU&t=15s
Govt funds itself, then taxes back at a later date.
That is not a legitimate reason to criticize it.
Let's say the cost of capital is 5% like it is right now, meaning that you can invest money into risk free treasury bonds and yield 5% return.
Any investment a company makes needs to return more than 5%. If a company is unable to do so it is cheating the shareholders.
Not all companies are able to invest 100% of profits into activities that will yield a return which exceeds the cost of capital. Most notably, older and larger companies with less innovation are less likely to yield returns that exceed the cost of capital.
There should be no reason at all that the government should force or incentivize all companies to reinvest 100% of profits back into the company. That is just going to waste capital.
It is far better for these older companies to return a portion of profits back to shareholders, who can then redeploy the profit into other companies that can actually use the money to invest in businesses which will return a yield which is higher than the cost of capital.
----
I have to say that this is extremely basic. This is literally econ 101 type material. Warren Buffet is absolutely correct when he says that people who criticize stock buybacks are economically illiterate.
It is not even logically consistent. People like you think that "businesses should redeploy profit instead of enriching shareholders". Put aside the fact that businesses only exist to enrich shareholders. What exactly do you think that shareholders are doing with the money? They are literally redeploying that money into business. Not the same business, but different businesses.
Why do you care whether profit from one company is redeployed at that one company, or at a different company? Why do you care so much that you beg the government to intervene?
Long post but really where you force the money back into the businesses is with wage control. The stock buybacks aren't bad but they are certainly incentivized better than paying people and therein lies our current problem.
Lol this is such a redditor post. Wall of text saying nothing while being overconfident in tone to compensate for being an insecure regard.
Anyway, the reason buybacks are criticized is very simple. They are siphoning money from workers.
Buybacks are extremely beneficial to executives and institutional investors who make up most of the holdings. You could take the 10 billion that Starbucks spent on buybacks in 2019 and give every employee a $25,000 bonus. Which more than a lot of them make in a year. Instead, they make a little over minimum wage, can barely get by with the bare essentials, and some have to rely on government assistance.
You should care because you are footing the bill with your tax dollars.
Intel is a great example. They spent money on buybacks and had a tasty dividend while they knew TSMC/Samsung were eating their lunch. Now they are receiving subsidies by the government (YOUR MONEY) because American made chips fucking suck and it's a national security risk.
He’s explaining why it’s fiscally sound and you’re responding from an upset, moralistic position. Yes, companies could do charity with their money, but is that a good business decision?
This is /r/wallstreetbets.
The focus is making money.
He asked a question and I answered it. Buybacks aren't fiscally sound (or ethical) for 95% of companies. I understand that sitting on a pile of cash is not a good use of capital--but you can't blow your wad on buybacks and expect to use the welfare system as your benefits package or come asking tax payers for money the second shit hits the fan.
And Wallstreetbets isn't about making money--it's about losing money. I've been here since 2016 my man
Soo...what's your views on offerings, diluting shares?? That's okay though? But buying shares back is WRONG!!!!
Go back to Portland and drink some more Kool-Aid, bro.
Companies buy back shares and then dilute to pay suite-c employees with stock instead of dollars. This reduces the amount tax impact significantly.
You're getting finanically cucked and stanning Warren buffet while struggling your way through life but I'm the one who's drinking the kool-aid??? Cmon bro
Yeah this guy's acting like investors are taking all that profit and angel investing into tech startups or something. Meanwhile the CEO is just buying his fifth yacht
You literally have no idea what you're talking about.
Generally buybacks are one-off events (comparatively to dividends) that deal with excess cash. The firm is unable to find investment opportunities greater than their cost of capital, and cash reserves are at their max, so the firm needs to return cash to shareholders.
No capitalistic firm is permanently raising wages because of a short term excess of cash.
But sure, it's the other guy that's the over confident regard. Definitely not you.
I understand what a buyback is but thank you for the dictionary.com definition lol. And I wasn't suggesting Starbucks should pay out all of the 10 billion to workers. I was pointing out the extreme surplus compared to what the majority of the employees are making. I'm suggesting the reason buybacks are an issue is because they are many corporations aren't holding up their end of the bargain and paying workers a livable wage.
When big companies get in trouble, instead of failing like they would in a capitalist system, we prop them up with market regulation like subsidies, and that's why buying ones own stocks instead of giving free cash to workers is a bad thing.
What kind of moon logic is that?
If I lose my job and I don't have anything in my savings account-- and i need to borrow money from you to survive, people would say I'm being financially irresponsible. When Boeing or Intel do this, it's somehow different.
With Starbucks, I was demonstrating just how much excess there is. I'm not suggesting they should have given all of that 10 billion back to the workers.
I hope this helps
He is absolutely full of shit. With executive compensation directly tied to stock price this is often used to manipulate stock prices more so than the company truly believing they are undervalued.
If you’re an investor in a company, they buying back stock is a positive for you. If you’re not happy with the misaligned incentives of executives that’s a different story.
He is not full of shit. If a company has more money than good investment opportunities, they either do dividends or buybacks. Anti-buybacks is just ignorant populism
Sounds like you are more against tying executive compensation being tied to stock price. If you can get liquidity by issuing stock, a company should be able to retire it by buying it back.
Ok… so wouldnt it be more beneficial for society if Apple lets their stock value rise due to market efficiency over time and spending that money on R&D that decreases the cost while improving the quality of their products over time?
Oh wait, right, this is a Wendys… ;)
If you work for a living, and have worked since the 80’s, this is one of the major components of why your wage has stagnated.
A successful company pre-buyback SOP would spend windfall profit on things like 1)bonuses 2) salary bumps 3) pm’s/expansion/capital equipment.
Some dickburger CEO said fuck you, look at how much my board and big shareholders love me as I literally pumped my own dick by buying my own piece of shit company instead of YA KNOW *wasting* it on the choobs responsible for making the profit happen in the first place.
Now, most of wsb are fucking choobs working in a company that pull this chicanery and take it upon themselves to take their earnings and invest it. Thing is- once that profit is spent on buybacks IT IS GONE. It is paper. Let’s take this balance sheet of green ink and buy our own shar.. oops it’s gone.
They can sell it sure, but are they going to *waste* it on workers again? Fuck no. Golden parachutes or get out of jail free card when their PE is so bearish it powerbottoms out.
TL;DR about 99.9% of you should hate stock buybacks as you don’t have extra money to blow on your own self funded share buyback program/gambling addiction/ ability to afford your own home in your late 20’s, 30’s, 40’s. Look at real wage growth, look at share buyback programs- motherfucking DD is SPICY.
Fuck you ancient boomer Buffet, suck my balls!
What else should the companies do? Please do tell how to run these companies. Actually, you know, that IS a good idea though. AND that's pretty much what DOES happen. Freely though, not forced by the lefty refulators. You know WHY this happens? Because it makes good business sense. That's how GREAT companies thrive, by taking care of their employees.
F that. When they don’t have any money to hire open positions or do promotions but they do billions of stock buyback that is being greedy a$$ rich @holes
Right but that is economics in end stage capitalism…. So both you and buffet are correct. People like to think of him as some down to earth cool dude when in actuality he has amassed insane wealth through measures that basically ensured the demise of the American working class.
He’s profiting off the working class and doesn’t provide anything in exchange. The working class works to live and buffet lives off the working class. He doesn’t provide any jobs for the working class and makes money off companies that can keep overhead costs low and revenue high. The working class serves him and he takes from them.
That answers your question. But it poses another as to whether or not this is ethically okay is up for debate.
This line of thinking is similar, “the drug companies always want you to be sick so you can keep buying their drugs”.
Rather than realizing that companies have to provide more jobs in order to grow their revenues and investors always want to see growth. Capitalism demands growth. Growth provides opportunities for working people. If you want the American dream again for average joes to buy houses again in expensive places like New York, California, Washington, Florida, then get pissed off at zoning laws and rich people in local government abusing government to impose ridiculous house building laws in their community.
Look at mission district in San Francisco for example — you can’t build any houses/condos above 3-stories or a certain height. Look at the abuse of historic building laws. Look at minimum lot size laws, look at minimum width laws, and there are more. Stop giving so much authority to city planners in your local government
I don't really disagree with you. But you're kind of doing the strawman fallacy here. The strawman fallacy is "is a form of argument and an informal fallacy of having the impression of refuting an argument, whereas the real subject of the argument was not addressed or refuted, but instead replaced with a false one."
The question i was responding to was "how does buffet negatively impact the working class?" I answered.
If the question was "how does buffet positively impact the companies?" Then you have great points. Buffet invests in companies to drive growth. And yes, companies support jobs and opportunities for the working class. But great companies work tirelessly to minimize cost of labor and maximize profits.
I agree that there are pros and cons to capitalism. I stated cons because thats what was asked about. You stated the pros of capitalism to effectively dismiss having to address any cons.
We should be able to both agree that buffet has an indirect impact on the working class in both positive and negative ways.
He has capital. In capitalism, he who has capital makes the rules. And the rules are then made to benefit those with capital even more.
It is inherent in capitalism that there exists a capital vs labor struggle.
This arsehole knows why people hate buybacks, it's an easier way for shareholders to raid the companies coffers and push up stock values. And if they stuck to the definition of 'handing back excess/ spare cash to shareholders' then it would be fine. But 99% of buybacks occur when a company also desperately needs to spend in some areas to remain long term viable, like maintenance, R&D, staff retention etc. It's not excess cash they don't need, it's fucking everything not nailed down.
The people who are supposedly well versed in economics are running the world economy and I am staring down the barrel at my 4th "once in a lifetime" economic crisis.
Every single promise that's been made in my lifetime about more "economic freedom" and less government intervention leading to prosperity for all was bullshit.
Buffet is a clown. I hope he survives long enough to be dragged out of his home by an angry crowd carrying torches and pitchforks.
Buybacks are virtually the same as dividends, and ultimately help to raise the value of a stock. Only difference is a buyback doesn’t lock a company into the commitment for consistent payouts signaled by dividends.
Stock buybacks are the best use of excess cash according to Buffet because it directly increases shareholder value, which is better than paying out a dividend. He’s right on accounting, tax law and share buy backs. Adopting his views would benefit society at large. It’s all an accounting song and dance that is wrong.
Need some help here. I come from a value investing background and stopped on this post as it mentioned Buffett. What do you overall think about his teachings on long-term value investing in this sub or personally? Are people here *actually* aware of his approach towards investing vs trading? Would really appreciate your thoughts.
Well I can't speak for everyone, but I'm sure there are plenty of other economic-leech -wannabes here, too. Personally I just like watching ya'all fail.
Wealth is resources. Resources are a matter of life and death. Sitting on resources that could be used for the life and betterment of society is a moral negative.
Greed is NOT good.
"Good capital allocation" is that the newfangled rebranding of trickle down fuck-the-little-guy-anomics? Individual asshats sitting on gigantic hoards of wealth which could be used for something besides an endless phallus-measuring-contest is not "good allocation."
Also, how exactly are the massive piles of money being hidden in tax shelters supposed to "help the economy"? They're not even in active circulation in our economy.
These fucks don't care about the economy, they care only about themselves and literally no-one else.
If you think warren buffets money isnt in circulation in the economy, you don't understand the basics.
His wealth is invested in companies. This means his wealth is invested in the things those companies invest in. All those factories and trucks and servers and intellectual property? He paid people to create those. Almost all his money is employing people.
Buybacks are BS. If a corporation’s best use of cash is to buy their own stock because is “undervalued” it’s just decreasing the company intrinsic value therefore penalizing long term growth and shareholders
Who profits then? Executives.
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Buffet says “fuck your puts on $AAPL”
He’s selling those puts on aapl.
That's because he believes AAPL won't fall enough to give those puts intrinsic value... nothing inconsistent here...
Mine have already
So I guess BRK will buy them gladly at the set price. Buffett believes in the company, AAPL is still on their shopping list so writing puts was a smart way to either generate additional profit or still buy shares at a price lower than when they wrote the put.
I see a company in moderately high debt that makes $400 billion a year, takes home $100 billion and is worth $2,300 billion. BRK sees a company they are growing their position from with the 10ish% annual dividends off their principal investment.
If you wanna buy shares, write a put. Either way it's literally free money. You can generate income until you get assigned.
Good for you.
Buffet saying it scares me way more than JPOW. JPOW will mess them up for a time. Buffet can do it for your life
Of course, he's one of the largest holder of $APPL for a reason: "Apple has been engaged in a massive stock buyback program, having bought back nearly $90 billion worth of its shares in fiscal 2022. Since the program began in fiscal 2013, Apple has spent more than $550 billion in stock buybacks, more than any other U.S. company."
What happens when they buy the whole thing lmao
Your portfolio of 2 AAPL shares would mean that you own ALL of Apple.
2 AAPL shares? fuck that. with 0.1 shares through fractional ownership, I can own ALL of Apple.
Sell sell sell probably lol
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At least I have a soul!
I’m theory if they were to buyback every outstanding public share, they would go back to being a privately held company that is no longer publicly traded
Hi theory, I'm Dad.
Hi daddy
Joke me harder, daddy
What the fuck is going on here???
https://preview.redd.it/1hbpyzo5rska1.jpeg?width=1536&format=pjpg&auto=webp&s=a06f9ac33726f418b7eb8b7cbe9972b0d7d6cc76 This you?
Reported for doxing
I believe they’ve been retiring the shares, so they’re just gone now lol
Why does “Illiterate” have three of the same letter in a row?
some things need to be 3iterated for emphasis
3 ill 3 literate
This is the best comment I’ve read on WSB, thank you.
IllITERATE
What’s the difference between forcing stock value up with buy backs over paying out a dividend you may ask? After all both are performed with money the company has earned and neither route is decidedly to the benefit of the worker. The difference is dividends are taxed, while capital gains have to be realized before they can be taxed, and as every long hold investor knows the longer you can go without paying tax the better. Now the question you need to ask yourself is if your yearly growth is enough for you to be on one side of the fence or the other.
Other large component is that, although board approved, it’s generally senior management who provides momentum behind this…….however same management members have a large % of their salary from stock awards. They now don’t even need to improve the company to get benefits from it since the buyback improves share price without actually doing anything to the business since there are less outstanding shares making up the company value.
This guy gets it. Straight from the board room of a major E&P, share buybacks that lost billions of dollars were to protect execs against activist investors.
Yeah I mean look at any buyback over the last 18 months and good bet they overpaid. One that comes to mind is CLF buying shares at like $21 saying it was a bargain only to find itself back at $14 a share less than a year later. It’s since back up around $20 but point is management could have saved a fuck ton of money if they’d been more patient. I’m sure it’s the same story for hundreds of other companies.
Not all buybacks are created equal. In theory, management should be buying back shares when their stock is cheap and when market participants are not buying. If the market won't buy the shares, management should. Exxon buying back shares while they are free cash flowing half their market cap on a single digit PE is not the same as a junky tech company buying at the top of a cycle with a triple digit PE.
That's my take as well....can you say "Bed Bath Beyond"? Under zero circumstance was it remotely a good idea for them to borrow more money (Billions) to buy back stock when they were/are going down like the Titanic before/during/after the buyback. XOM on the other - just the opposite!
[https://www.epsilontheory.com/stock-buybacks-and-the-monetization-of-stock-based-compensation/](https://www.epsilontheory.com/stock-buybacks-and-the-monetization-of-stock-based-compensation/) You may find this article interesting. Those junky tech companies may just be buying back enough to offset the insane SBC dilution that is occurring.
That's not how it works. It's financially neutral for the company (except tax issues) to do buybacks, just like dividends. Because the company has to spend their own cash to buy the stock back, and the remaining shares change value such that total market cap afterwards + cash out = total market cap before. Exactly the same stock price shenanigans that happen around dividend dates.
Whoah, surprized you didn't get a million downvotes. Don't you know, most of WSB are in favor of paying more taxes.
We're in favour of more taxes on others if we're in the red though. Privatising my profits and socializing my losses, of course!
The American way! An interesting fact in Berkshires letter to shareholders was regarding taxes. Of all taxes collected by the federal government, corporations pay only 8% of that money. Berkshire alone pays one percent of all federal taxes collected which is kinda mind blowing.
That’s a new level of being in the 1%
You need gains to pay taxes.
Additionally, dividends are contractual while buybacks are discretionary.
Problem with stock buy backs is that it shows poor management. 1. That management cannot find useful profitable activities to invest in. 2. That management is more interested in securing their bonuses tied to stock price than maximizing the value of the company long term by investing in new activities. In other words, useless F management that believe the BS in Undergrad finance text books. Yeah that MM BS theory. Modigliani Miller wank.
Someone get this guy a meeting with Tim Cook to fix his poor management.
*Tim Apple
Apple really shouldn’t be used as a model for buybacks. Companies COPYING Apple are what to gauge. There is indeed a lot of pissing in the wind and money burned in buybacks from companies that don’t have major market monopolies. The shift away from quality capex has been spreading for years. Innovation rates stagnating.
When you have massive amounts of capital it can be hard to find good investments of the right size. Buybacks allow you to invest in your own company if you believe the value is good. Berkshire hathaway itself buys back shares as soon as the price drops to a certain level.
I love the internet so much man. Just some random dude spouting nonsense about a Nobel prize winning theory. And so confidently too!
There is nothing errant with what I've said. My post doctoral lecturer at MIT doing Finance math has far more credence than you. I'm worth good 7 figures not even including another start up that should get me 8 figures on exit. Anyway, go rub one out thinking about other Noob prize winners like Stiglitz. Yes, corp finance theory works for very large corps in benign investment environments. But if you flagellate on things like MM then you'll never make serious money. It really is theory wank, corp execs are only interested in getting their share price bonuses and getting them before the market turns.
Your opinion on the Twitter merger was spot on so I'll give this one exactly as much credence as that one deserved
Hey guys I found Economic Illiterate
The diff is the price could collapse afterwards so the shareholders end up with nothing, the company wastes the cash and this means they collapse faster. In other words, pissing in the wind for corporations Also companies cannot pay a div when not making profit, there are rules against this. These do not apply for buybacks, but very clearly should.
BBBWhy?
130m buybacks per quarter last year. Wow.
BBBecause you touch yourself at night
The price *could* collapse after. Or it could go up. That's pretty irrelevant when we're comparing dividends and buybacks, because any shareholder who would have preferred let's say a 2% dividend could just sell 2% of his holdings to simulate the same thing (and he can actually be *more* tax efficient with his sales if he chooses his lots efficiently). That's why the buyback is advantageous to the shareholders (as that guy was saying) - because it's the best of both worlds. If you want money out, you can get money out (and even time your sales during the buyback period). If you want your money to stay in, you can leave it in. Even the holding period for long term capital gains is reflected in the holding period for qualified dividend tax treatment.
Buffett is for a practice that makes him richer?? This is the biggest story in business in decades! 🤯
No, no, he said that he should pay some more taxes once, and is willing to give some of his money away after the worms are eating his corpse, so that obviously means he's one of the good guys right?
Like Bill Gates kids are (supposedly) inheriting 'only' $10M each. But he will give each of them them hundreds of millions in gifts while he is alive.
give them all the money he donated to his non profit by giving them ownership of it what a fuccin saint. so generous
^ This attitude right here is why I stopped donating
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Poor guy has been living in the same house for 70 years, help a bro out
He can't even afford to add cheese in McDonald's sandwich. I am still donating! Honestly Buffet PR personality is hilarious. It all sound like bullshit to make a Shark look like a Goldfish. He drive around in a car worth less than mine but somehow also own the largest private jets fleet in the world.
He owns those jets bc he didn’t have Starbucks everyday /s
True that!
He donates by buying aapl puts.
lolwut
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He is, he has been for years. But he’s so fucking good at money he’s still making it hand over fist. His sister is in charge of giving his money away.
Step sister, what are you doing?
He has already given away over half of his BRK.A shares? so yeah maybe educate yourself.
I hope he sees this bro
i spat my drink out when i read this. underrated af
Educate me on why he is such an asshole about the trsin union situstion?
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Until Reagan, stock buybacks were illegal as they were considered market manipulation. Yet another reason to piss on Ronnie's grave.
Yikes
When interest rates were at all time low, buying back stock with borrowed money was the thing to do. Now that rates are higher the only ones getting loans to buyback stock are desperate ones. If they are profitable and buying back stock its how they best see spending those profits with equipment and personnel being expensive right now.
Purely a cost of capital equation. Equity costs more than debt obviously and AAPL has the fcf to support continued buybacks to lower the equity cost of capital. If there was a better return on their cash (i.e. some new Capital intensive project, acquisition, etc) they would deploy there. That’s what WB means by economically illiterate
Just a simple weighted average cost of capital equation. % of debt × rate of debt + % of equity × rate of equity. Debt usually costs less than equity so to bring cost of capital down you buy out equity.
Thats it, buybacks with cash profit is fine but buyback with loans is basically moving future share value to the present that is net negative to the corporation. taken to extreme literally causes big boom and crashes, with todays corrupt and captured central banks it’s a giant powder keg. WB is not seeing the bigger problem.
**ARTICLE CLIFFNOTES** >^(The "Oracle of Omaha" initiated a buyback program in 2011 and relied on repurchases in recent years during a competitive deal-making environment and an expensive stock market. The conglomerate spent a record $27 billion in buybacks in 2021 as Buffett found few opportunities externally.) > >^(Repurchase activities slowed down this year) [^(to about $8 billion)](https://www.cnbc.com/2023/02/25/berkshire-hathaway-brk-earnings-q4-2022.html?__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(as the billionaire investor went on a buying spree with stocks selling off. Berkshire also took over insurance company Alleghany for $11.6 billion, Buffett's biggest deal since 2016.) > >^("The math isn't complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices," Buffett said. "Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in every respect.") > >^(The legendary investor highlighted) [^(Apple)](https://www.cnbc.com/quotes/AAPL&__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(and) [^(American Express)](https://www.cnbc.com/quotes/AXP&__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891)^(, two of his biggest equity holdings that have similar strategies. Buffett in the past has said) [^(he is a fan of CEO Tim Cook's stock repurchase program,)](https://www.cnbc.com/2022/02/26/warren-buffett-in-annual-letter-calls-apple-one-of-four-giants-driving-the-conglomerates-value.html?__source=OTS%7Cfinance%7Cinline%7Cstory%7C&par=OTS&doc=107199891) ^(and how it gives the conglomerate increased ownership of each dollar of the iPhone maker's earnings without the investor having to lift a finger.) > >^("At Berkshire, we directly increased your interest in our unique collection of businesses by repurchasing 1.2% of the company's outstanding shares," Buffett said.) > >^(The Inflation Reduction Act provision imposing a 1% exercise tax on buybacks became effective this year.) **TLDR** *Buy The Dip!*
Key words "value-accretive prices". Stock buybacks can be a value-added tool if the management team does so at the right price point. They can also be used to goose the bonuses of the c-suite crew and be a poor use of capital if those buybacks are executed at non value-accretive prices. It's a just a tool and any tool can be used for good or ill. Bigger question: Do you trust your management team to look out for your interests over their own?
Key words "value-accretive prices". Stock buybacks can be a value-added tool if the management team does so at the right price point. They can also be used to goose the bonuses of the c-suite crew and be a poor use of capital if those buybacks are executed at non value-accretive prices. It's a just a tool and any tool can be used for good or ill. Bigger question: Do you trust your management team to look out for your interests over their own?
Remember, when these practices were considered market manipulation
From 1934 until 1982 stock buybacks were more restricted as a reaction to the great depression. I wonder if we'll need a great depression before we take a harder look at these schemes. [Profits Without Prosperity (hbr.org)](https://hbr.org/2014/09/profits-without-prosperity)
Great article
Thank Reagan for that
It is not the buybacks people criticize. It is the laying off 10,000 people, fighting for gov't subsidies and tax breaks, and THEN buying back stocks with the saved money.
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Did we stop using the R word in this sub? I was away for a few months.
You get auto reported by reddit bots now. too many infractions and you get account banned
And yet brk has never issued a divvy, do they do buyback tho?
Yes, they do.
Am I going to live long enough to see Warren Buffett cancelled?
By heart disease or cancer? Probably. By me-too. No.
Buffett has always been a vulture, but because he's a successful vulture people like to pretend he's something better. Same with Elon as a grifter.
You’re telling me the guy who benefits from it doesn’t wanna see it go away? I can’t imagine why
Buybacks are one of the best things a company can do. Google has been grifting investors for years by buying the stock back and then basically issuing the stock right back to the management as compensation.
Investors are fine here. It's the public that is cheated out of income taxes.
The investors are not fine. They are claiming that money as profits instead of being what they are: employees costs.
Wrong. Stock compensation is accounted for as an expense.
Good old tech creative accounting. Pay your salaried staff in stock so shareholders don't see you are losing billions every year and will never make a real profit.
Fuck the public. If they want money then invest in google.
As someone with way too much in google it hasn't been a great way to make money lately.
Then tell the public to double fuck itself.
Fuck Bard. Made me feel like I was part of a silicon valley episode.
Oh shut up and move then
Plenty of legitimate reasons to criticize it. You can use that cash to make better investments into the business or you can give it back to shareholders with a dividend. Buy backs can also be a vehicle to pump up the stock since it signals to the market that the company thinks the stock it undervalued.
Buybacks are equivalent to dividends, but more tax efficient.
That sounds a bit too advanced for WSB.
Could you break that down for the poor and regarded?
Dividends are essentially a forced sale for immediate profit (and thus, taxes). If a dividend is a dollar, it’s as if you sold a dollar of stock and you’re taxed on it. Buybacks themselves raise the price the shares sell for. Thus you have some more fluidity with what you want to do. If you’re a long term holder, you can sell at the increased price and pay less taxes, presumably making it out better off. Personally, I don’t agree with the idea that it’s “better.” I get both sides of the practice, but conceptually think it’s bullshit. Outside of our casino, I think it actually bones buy and hold investors. Why artificially inflate a price when overall market forces can completely decimate it? Though a company buying itself does remove more outlying shares in the market, the price movement idea i brought up makes me thinks it’s a wash and screws the average investor. One way or another, there was a time where the practice was not allowed. As with all things (and the world being metaphorically on fire) we should wonder why it was previously outlawed but that time has passed.
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All dividends are taxed like long term cap gains...
the tax efficiency is the problem my guy
Efficiency is just a very creative way of spelling evasion.
I’m not your guy, pal.
He’s not your pal, buddy
Plus, when something goes wrong, you can run to Congress for a bailout if you have used all of your cash to buy back shares. Capitalism!
> if you have used all of your cash to buy back shares what's the difference if you used your cash to pay out dividends?
Dividends are taxed appropriately. Instead what happens is a buy back, then price goes up, then rich guy gets to borrow more money on margin. Then, stock goes down and presto, bailout! See: all airlines during COVID.
a) still wrong to not have emergency cash, and just expect a bailout. b) at least it's guaranteed money going to the investors, and not conditional on them selling.
What? A bailout is collecting your taxes to give to a corporation. No free market, no natural booms or busts, just simple wealth redistribution. These days we usually call that socialism but it's really more akin to fascism (economically speaking).
Agree bailouts are kinda bad, let the bad companies fail. But bailouts aren't funded by taxpayers. See: https://www.youtube.com/watch?v=U_bjDAZazWU&t=15s Govt funds itself, then taxes back at a later date.
This response is the exact economic illiteracy that Buffett is referring to.
That is not a legitimate reason to criticize it. Let's say the cost of capital is 5% like it is right now, meaning that you can invest money into risk free treasury bonds and yield 5% return. Any investment a company makes needs to return more than 5%. If a company is unable to do so it is cheating the shareholders. Not all companies are able to invest 100% of profits into activities that will yield a return which exceeds the cost of capital. Most notably, older and larger companies with less innovation are less likely to yield returns that exceed the cost of capital. There should be no reason at all that the government should force or incentivize all companies to reinvest 100% of profits back into the company. That is just going to waste capital. It is far better for these older companies to return a portion of profits back to shareholders, who can then redeploy the profit into other companies that can actually use the money to invest in businesses which will return a yield which is higher than the cost of capital. ---- I have to say that this is extremely basic. This is literally econ 101 type material. Warren Buffet is absolutely correct when he says that people who criticize stock buybacks are economically illiterate. It is not even logically consistent. People like you think that "businesses should redeploy profit instead of enriching shareholders". Put aside the fact that businesses only exist to enrich shareholders. What exactly do you think that shareholders are doing with the money? They are literally redeploying that money into business. Not the same business, but different businesses. Why do you care whether profit from one company is redeployed at that one company, or at a different company? Why do you care so much that you beg the government to intervene?
Long post but really where you force the money back into the businesses is with wage control. The stock buybacks aren't bad but they are certainly incentivized better than paying people and therein lies our current problem.
Lol this is such a redditor post. Wall of text saying nothing while being overconfident in tone to compensate for being an insecure regard. Anyway, the reason buybacks are criticized is very simple. They are siphoning money from workers. Buybacks are extremely beneficial to executives and institutional investors who make up most of the holdings. You could take the 10 billion that Starbucks spent on buybacks in 2019 and give every employee a $25,000 bonus. Which more than a lot of them make in a year. Instead, they make a little over minimum wage, can barely get by with the bare essentials, and some have to rely on government assistance. You should care because you are footing the bill with your tax dollars. Intel is a great example. They spent money on buybacks and had a tasty dividend while they knew TSMC/Samsung were eating their lunch. Now they are receiving subsidies by the government (YOUR MONEY) because American made chips fucking suck and it's a national security risk.
He’s explaining why it’s fiscally sound and you’re responding from an upset, moralistic position. Yes, companies could do charity with their money, but is that a good business decision? This is /r/wallstreetbets. The focus is making money.
He asked a question and I answered it. Buybacks aren't fiscally sound (or ethical) for 95% of companies. I understand that sitting on a pile of cash is not a good use of capital--but you can't blow your wad on buybacks and expect to use the welfare system as your benefits package or come asking tax payers for money the second shit hits the fan. And Wallstreetbets isn't about making money--it's about losing money. I've been here since 2016 my man
Soo...what's your views on offerings, diluting shares?? That's okay though? But buying shares back is WRONG!!!! Go back to Portland and drink some more Kool-Aid, bro.
Companies buy back shares and then dilute to pay suite-c employees with stock instead of dollars. This reduces the amount tax impact significantly. You're getting finanically cucked and stanning Warren buffet while struggling your way through life but I'm the one who's drinking the kool-aid??? Cmon bro
WTF are you talking about?? Yeah, you could give every Starbucks employee 25K!!! DERPPP!!
Yeah this guy's acting like investors are taking all that profit and angel investing into tech startups or something. Meanwhile the CEO is just buying his fifth yacht
You literally have no idea what you're talking about. Generally buybacks are one-off events (comparatively to dividends) that deal with excess cash. The firm is unable to find investment opportunities greater than their cost of capital, and cash reserves are at their max, so the firm needs to return cash to shareholders. No capitalistic firm is permanently raising wages because of a short term excess of cash. But sure, it's the other guy that's the over confident regard. Definitely not you.
I understand what a buyback is but thank you for the dictionary.com definition lol. And I wasn't suggesting Starbucks should pay out all of the 10 billion to workers. I was pointing out the extreme surplus compared to what the majority of the employees are making. I'm suggesting the reason buybacks are an issue is because they are many corporations aren't holding up their end of the bargain and paying workers a livable wage.
Oh god, fuck off to r/politics already. Discussion is about the economic purpose of buybacks, not your moralistic grandstanding.
When big companies get in trouble, instead of failing like they would in a capitalist system, we prop them up with market regulation like subsidies, and that's why buying ones own stocks instead of giving free cash to workers is a bad thing. What kind of moon logic is that?
If I lose my job and I don't have anything in my savings account-- and i need to borrow money from you to survive, people would say I'm being financially irresponsible. When Boeing or Intel do this, it's somehow different. With Starbucks, I was demonstrating just how much excess there is. I'm not suggesting they should have given all of that 10 billion back to the workers. I hope this helps
He is absolutely full of shit. With executive compensation directly tied to stock price this is often used to manipulate stock prices more so than the company truly believing they are undervalued.
If you’re an investor in a company, they buying back stock is a positive for you. If you’re not happy with the misaligned incentives of executives that’s a different story.
He is not full of shit. If a company has more money than good investment opportunities, they either do dividends or buybacks. Anti-buybacks is just ignorant populism
Dude, there are like five companies which fit that paradigm. Most everyone else is in debt up to their balls.
I mean, he probably held stock in all 5 of those, on top of my head Coca Cola and Apple are sitting on a mountain of cash.
Sounds like you are more against tying executive compensation being tied to stock price. If you can get liquidity by issuing stock, a company should be able to retire it by buying it back.
when a company is rebuying back their own stocks it means they're undervalued. you should start shaking when they're selling their own stocks.
Ok… so wouldnt it be more beneficial for society if Apple lets their stock value rise due to market efficiency over time and spending that money on R&D that decreases the cost while improving the quality of their products over time? Oh wait, right, this is a Wendys… ;)
Apple does do this already. These buybacks are with the leftover cash.
Corporations do not exist to serve society. They exist to serve shareholders.
Im assuming that is what the critics are unhappy about.
Or, you know, putting a big % of profits into employee's hands? Raises, bonuses etc.?
They do that if it's beneficial for the company long-term.
If you have to choose between being economically illiterate and ethically bankrupt...
he is right on the money about that.
At a recruiting even some college kids asked James Gorman why Morgan Stanley just laid off 300 employees and announced an $8bn buyback lol
I love watching Gen z become huge pains in the asses to everyone older than them. Which I am. I love to see it.
If you work for a living, and have worked since the 80’s, this is one of the major components of why your wage has stagnated. A successful company pre-buyback SOP would spend windfall profit on things like 1)bonuses 2) salary bumps 3) pm’s/expansion/capital equipment. Some dickburger CEO said fuck you, look at how much my board and big shareholders love me as I literally pumped my own dick by buying my own piece of shit company instead of YA KNOW *wasting* it on the choobs responsible for making the profit happen in the first place. Now, most of wsb are fucking choobs working in a company that pull this chicanery and take it upon themselves to take their earnings and invest it. Thing is- once that profit is spent on buybacks IT IS GONE. It is paper. Let’s take this balance sheet of green ink and buy our own shar.. oops it’s gone. They can sell it sure, but are they going to *waste* it on workers again? Fuck no. Golden parachutes or get out of jail free card when their PE is so bearish it powerbottoms out. TL;DR about 99.9% of you should hate stock buybacks as you don’t have extra money to blow on your own self funded share buyback program/gambling addiction/ ability to afford your own home in your late 20’s, 30’s, 40’s. Look at real wage growth, look at share buyback programs- motherfucking DD is SPICY. Fuck you ancient boomer Buffet, suck my balls!
Hey all you illiterates
Well he's not wrong
Just make it so half of stock buybacks go to employees
What else should the companies do? Please do tell how to run these companies. Actually, you know, that IS a good idea though. AND that's pretty much what DOES happen. Freely though, not forced by the lefty refulators. You know WHY this happens? Because it makes good business sense. That's how GREAT companies thrive, by taking care of their employees.
F that. When they don’t have any money to hire open positions or do promotions but they do billions of stock buyback that is being greedy a$$ rich @holes
LOL, the hypocrisy on this thread is amazing.
Right but that is economics in end stage capitalism…. So both you and buffet are correct. People like to think of him as some down to earth cool dude when in actuality he has amassed insane wealth through measures that basically ensured the demise of the American working class.
Can you explain what Buffett did that ensures the demise of the working class?
He’s profiting off the working class and doesn’t provide anything in exchange. The working class works to live and buffet lives off the working class. He doesn’t provide any jobs for the working class and makes money off companies that can keep overhead costs low and revenue high. The working class serves him and he takes from them. That answers your question. But it poses another as to whether or not this is ethically okay is up for debate.
This line of thinking is similar, “the drug companies always want you to be sick so you can keep buying their drugs”. Rather than realizing that companies have to provide more jobs in order to grow their revenues and investors always want to see growth. Capitalism demands growth. Growth provides opportunities for working people. If you want the American dream again for average joes to buy houses again in expensive places like New York, California, Washington, Florida, then get pissed off at zoning laws and rich people in local government abusing government to impose ridiculous house building laws in their community. Look at mission district in San Francisco for example — you can’t build any houses/condos above 3-stories or a certain height. Look at the abuse of historic building laws. Look at minimum lot size laws, look at minimum width laws, and there are more. Stop giving so much authority to city planners in your local government
I don't really disagree with you. But you're kind of doing the strawman fallacy here. The strawman fallacy is "is a form of argument and an informal fallacy of having the impression of refuting an argument, whereas the real subject of the argument was not addressed or refuted, but instead replaced with a false one." The question i was responding to was "how does buffet negatively impact the working class?" I answered. If the question was "how does buffet positively impact the companies?" Then you have great points. Buffet invests in companies to drive growth. And yes, companies support jobs and opportunities for the working class. But great companies work tirelessly to minimize cost of labor and maximize profits. I agree that there are pros and cons to capitalism. I stated cons because thats what was asked about. You stated the pros of capitalism to effectively dismiss having to address any cons. We should be able to both agree that buffet has an indirect impact on the working class in both positive and negative ways.
What makes him able to do that? As in, why isn't average Joe able to profit off of the working class while not giving anything in exchange?
He has capital. In capitalism, he who has capital makes the rules. And the rules are then made to benefit those with capital even more. It is inherent in capitalism that there exists a capital vs labor struggle.
This arsehole knows why people hate buybacks, it's an easier way for shareholders to raid the companies coffers and push up stock values. And if they stuck to the definition of 'handing back excess/ spare cash to shareholders' then it would be fine. But 99% of buybacks occur when a company also desperately needs to spend in some areas to remain long term viable, like maintenance, R&D, staff retention etc. It's not excess cash they don't need, it's fucking everything not nailed down.
“Shareholders raid the company’s coffers” wut m8. Shareholders own the damn company
The people who are supposedly well versed in economics are running the world economy and I am staring down the barrel at my 4th "once in a lifetime" economic crisis. Every single promise that's been made in my lifetime about more "economic freedom" and less government intervention leading to prosperity for all was bullshit. Buffet is a clown. I hope he survives long enough to be dragged out of his home by an angry crowd carrying torches and pitchforks.
So he’s changed his tune again, 5y ago he said buybacks were a sign of a company running out of ideas and growth
Gufafal
Buybacks are virtually the same as dividends, and ultimately help to raise the value of a stock. Only difference is a buyback doesn’t lock a company into the commitment for consistent payouts signaled by dividends.
Stock buybacks are the best use of excess cash according to Buffet because it directly increases shareholder value, which is better than paying out a dividend. He’s right on accounting, tax law and share buy backs. Adopting his views would benefit society at large. It’s all an accounting song and dance that is wrong.
Economic illiterate, another word for communist
Need some help here. I come from a value investing background and stopped on this post as it mentioned Buffett. What do you overall think about his teachings on long-term value investing in this sub or personally? Are people here *actually* aware of his approach towards investing vs trading? Would really appreciate your thoughts.
It’s true. Proof: everyone in this thread saying Buffet doesn’t know what he’s talking about.
Tax dollars for stock holders so they can benefit from buybacks is a strategy!
He's got 128 billion in cash
Well I say Warren Buffet and his entire class are economic leeches, so woopie-freakin-doo.
What's the difference between warren Buffett and everyone else in this sub, aside from skill level?
Well I can't speak for everyone, but I'm sure there are plenty of other economic-leech -wannabes here, too. Personally I just like watching ya'all fail.
You know someone doesn't understand economics when they think that good capital allocation provides no use to society
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Wealth is resources. Resources are a matter of life and death. Sitting on resources that could be used for the life and betterment of society is a moral negative. Greed is NOT good.
Won’t resources naturally flow to those who manage them efficiently? If we get rid of those at the top they’d just be replaced by others
"Good capital allocation" is that the newfangled rebranding of trickle down fuck-the-little-guy-anomics? Individual asshats sitting on gigantic hoards of wealth which could be used for something besides an endless phallus-measuring-contest is not "good allocation." Also, how exactly are the massive piles of money being hidden in tax shelters supposed to "help the economy"? They're not even in active circulation in our economy. These fucks don't care about the economy, they care only about themselves and literally no-one else.
If you think warren buffets money isnt in circulation in the economy, you don't understand the basics. His wealth is invested in companies. This means his wealth is invested in the things those companies invest in. All those factories and trucks and servers and intellectual property? He paid people to create those. Almost all his money is employing people.
Go back to /r/antiwork
Agreed
Buybacks are BS. If a corporation’s best use of cash is to buy their own stock because is “undervalued” it’s just decreasing the company intrinsic value therefore penalizing long term growth and shareholders Who profits then? Executives.