Trump's sweetheart tax deal for economically useless financial engineering triggers a stock buyback bonanza


#1

Originally published at: https://boingboing.net/2018/04/16/euthanize-rentiers-2.html


#2

OK, now, everyone who is surprised by this, please raise your hands.

What a depressing age we are living in. It seems as if the looters are going to get away with it again.


#3

The illusion of a strong market built on a foundation of sand.

“Look at how high our stock prices are, we’re doing great!”


#4

More evidence that the economy is demand limited . Borrowing money is really cheap, pay is low, but many companies face a lack of demand for their products rather than a lack of ability to produce them. So instead of hiring more people or building new factories, they use the cheap money that the fed is making available to buy back stock. So the prolonged low interest rate environment has simply boosted the value of stock and increased the wealth of the people that own it rather than improve productivity or raise wages and inflation.


#5

Some don’t even have to buy back anything at all.

Annnnnd the rich get richer.

Anybody feeling that trickle yet?


#6

A buyback is founded on the idea that the company knows that investors have undervalued the stock. There are two ways this happens. Most often the stock isn’t actually undervalued but the company just wants to make investors think they know its worth more in order to increase the price.

The theoretically better reason is that the company has insider info that the stock actually is undervalued and is taking advantage of the lack of price efficiency that comes from insider knowledge not being shared with investors.

Neither of these scenarios is good for investors much less customers or citizens. The only ones who benefit are insiders. Stock buybacks should be outlawed.


#7

I prefer to work for companies that aren’t traded public. They have short term goals. Private companies tend to think long term. That’s my personal experience anyway.


#8


#9

The article is more accurate than the headline. This is not a Trump tax deal. This is a GOP tax deal. Trump had nothing to doing with writing it, passing it in Congress, and he would have signed whatever they sent him.

It’s like crediting an umpire with winning a baseball game. The game isn’t over until the ump says so, but he didn’t score any runs or get anyone out.


#10

Typically it is up to the President to dictate priorities for the tax bill and to review it before signing. Trump doesn’t get to pass the buck here, he’s just as much a part of the problem as Congress is.


#11

So, you’re saying he signed it.

He didn’t veto it.

He’s tweeted about it many times, how it’s the best thing ever.

Good or bad or whatever it ends up in the long run. It was passed into law under his watch, with his approval. It’s his.


#12

I’m not saying it’s not his responsibility. I’m saying that I didn’t design and build my car. It’s mine, sure, but all I did was buy it. I’m responsible for what it does on the road, but I didn’t design it. I’m not qualified to design cars, any more than Trump is qualified to write a tax bill.

Do the hundreds of GOP Congressmen who wrote and passed the bill have any responsibility at all? There are many bills we call by the names of the Congressmen who wrote and sponsored them. Why is this bill different from those?


#13

Yes. But “typical” and “Trump” really don’t belong in the same sentence. He has the reputation of being SINGULARLY uninterested in the details of any legislation put in front of him.


#14

Exactly. And it’s not uncommon to call a law by its sponsors. The McCain-Feingold bill isn’t known as the “Bush Act”. “Dodd-Frank” isn’t known as the “Obama Act”. Consistency is all I’m asking for.


#15

Yeah, but it smells like pee…


#16

But, he did have input into the Tax cut. Even wanting to name it the “Cut, Cut, Cut Act”. Along with talking about it’s success at multiple speeches and tweets since then. So, it’s his as much as Congress. You don’t see anyone in Congress trying to name it for themselves.

Not to mention, all the Real Estate carve outs are clearly to benefit his businesses.


#17

To be fair, he talks about everything he is even remotely associated with as being yuuuge successes.

To go back to my car analogy, when someone asks me what car I drive, I don’t tell them it’s a “Jim Camry”. It’s a “Toyota Camry”. It doesn’t matter how much I like it or how great I think it is and tell my friends it is.


#18

How far can stock buybacks actually go? One company I’m familiar with has had such a program in place for many, many years, and I presume they’ve been buying back stock for all those years.

If I take it to the extreme, they would eventually buy up all their shares. Then what, they are no longer a publicly traded company? Or if they buy all shares but one, does that make the one outstanding share worth something like the entire market cap of the company?


#19

Yes, a company can buy all of the shares and become a privately traded company again. This happens from time to time. Being a private company means you don’t have nearly as many people providing oversight on your business, making it easier to get things done. It also means you can more easily do long term planning without having the shareholders revolt because you’re not maximizing this quarter’s returns.


#20

Paywall. :frowning: