stock buybacks

This Could Be Our Future: A Manifesto for a More Generous World
by Yancey Strickler
Published 29 Oct 2019

“What you’d like to do as an investor is hook them up to a machine and run a polygraph to see whether it’s true.” Buffett said that’s what a stock buyback effectively did. The use of buybacks took off. Aggregate stock buybacks by US firms, 1980–1990 SOURCE: ASWATH DAMODARAN, COMPUSAT Since 1982, the practice has grown considerably. In 2018, companies paid out more than $1 trillion in buybacks, the most in history. Aggregate stock buybacks by US firms, 1980–2018 SOURCE: ASWATH DAMODARAN, COMPUSAT And since the buyback phenomenon began, the stock market’s performance has directly reflected how much cash companies have distributed to investors through buybacks and dividends.

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see what’s happened: Data on outstanding credit in America comes from the “Federal Reserve’s Consumer Credit Outstanding (Levels) 1943–2018” and the US Census Bureau’s Households by Type data. tends to go up: Background on stock buybacks comes from economist William Lazonick’s 2010 Brookings Institution paper “Stock Buybacks: From Retain-and-Reinvest to Downsize-and-Distribute,” and his 2011 paper “From Innovation to Financialization: How Shareholder Value Ideology Is Destroying the US Economy” (published in the Oxford University Press collection The Handbook of the Political Economy of Financial Crises). Additional background came from “Stock Buybacks: Misunderstood, Misanalyzed, and Misdiagnosed” by Aswath Damodaran for the American Association of Individual Investors, and data from a research report by Goldman Sachs analyst Stuart Kaiser.

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The goal is to maximize returns for shareholders. In recent years, many American companies have invested less in R&D than they’ve spent on stock buybacks. Net share buybacks and net capital formation as a share of net operation surplus for nonfinancial corporations SOURCE: DELOITTE, BUREAU OF ECONOMIC ANALYSIS This isn’t something companies do everywhere. The Financial Times reports that, “Between 2015 and 2017, the five biggest US tech groups (especially Apple and Microsoft) spent $228 billion on stock buybacks and dividends, Bloomberg data shows. During the same period, the top five Chinese tech companies spent just $10.7 billion and ploughed the rest of their excess cash into investments that broaden their footprint and influence.”

The Raging 2020s: Companies, Countries, People - and the Fight for Our Future
by Alec Ross
Published 13 Sep 2021

Such price manipulation is legal: Lenore Palladino, “The $1 Trillion Question: New Approaches to Regulating Stock Buybacks,” Yale Journal on Regulation, November 8, 2019, https://www.yalejreg.com/bulletin/the-1-trillion-question-new-approaches-to-regulating-stock-buybacks-2/. $4.3 trillion on stock buybacks: William Lazonick, Mustafa Erdem Sakinç, and Matt Hopkins, “Why Stock Buybacks Are Dangerous for the Economy,” Harvard Business Review, January 7, 2020, https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy. more than $49 billion in free cash flow: van Doorn, “Opinion: Airlines and Boeing Want a Bailout,” https://www.marketwatch.com/story/airlines-and-boeing-want-a-bailout-but-look-how-much-theyve-spent-on-stock-buybacks-2020-03-18.

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And since the 1990s, buybacks have become all but ubiquitous. Stock buybacks are Exhibit A demonstrating that if share price is all that matters in shareholder capitalism, then it creates major incentives not to invest capital toward productive uses. A buyback is as productive to society as a bonfire of banknotes. When people scratch their heads and wonder how it can be that the stock market is booming and executive compensation is at an all-time high but the overall economy is less dynamic and workers are not benefiting, look no further than the trillions of dollars in stock buybacks. S&P 500 companies spent $4.3 trillion on stock buybacks over the last decade.

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INTRODUCTION government-funded university research: “6. Bar Codes—Nifty 50,” National Science Foundation, April 2000, https://www.nsf.gov/about/history/nifty50/barcodes.jsp. $49 billion on stock buybacks: Philip van Doorn, “Opinion: Airlines and Boeing Want a Bailout—but Look How Much They’ve Spent on Stock Buybacks,” Marketwatch, March 22, 2020, https://www.marketwatch.com/story/airlines-and-boeing-want-a-bailout-but-look-how-much-theyve-spent-on-stock-buybacks-2020-03-18. nearly 75 percent of Americans worked on farms: Stanley Lebergott, “Labor Force and Employment, 1800–1960,” in Output, Employment, and Productivity in the United States after 1800, ed.

100 Baggers: Stocks That Return 100-To-1 and How to Find Them
by Christopher W Mayer
Published 21 May 2018

And more than a few 100-baggers greedily bought back their own shares when the market let them do so cheaply. Stock Buybacks: Modern Tontines Stock buybacks deserve a separate chapter in a book on 100-baggers because they can act as an accelerant when done properly. A buyback is when a company buys back its own stock. As a company buys back shares, its future earnings, dividends and assets concentrate in the hands of an ever-shrinking shareholder base. Many companies are doing buybacks these days. In a slow- to no-growth economy, this tactic is becoming a more important driver of earnings-pershare growth. But you have to actually shrink the number of shares outstanding. STOCK BUYBACKS: ACCELERATE RETURNS 117 Since 1998, the 500 largest US companies have bought back about one-quarter of their shares in dollar value, yet the actual shares outstanding grew.

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The competitive nature of corporate acquisition activity almost guarantees the payment of a full—frequently more than full price—when a company buys the entire ownership of another enterprise. But the auction nature of security markets often allows STOCK BUYBACKS: ACCELERATE RETURNS 119 finely-run companies the opportunity to purchase portions of their own businesses at a price under 50% of that needed to acquire the same earning power through the negotiated acquisition of another enterprise. (emphasis added) When done right, buybacks can accelerate the compounding of returns. Stock buybacks have only become more common in the last couple of decades. Therefore, in my study of 100-baggers—which spans 1962 to 2014—it was not a common tactic.

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Paul Street, Baltimore, Maryland www.lfb.org Cover and Layout Design: Andre Cawley CONTENTS Chapter 1: Introducing 100-Baggers..............................................................................1 Chapter 2: Anybody Can Do This: True Stories....................................................... 11 Chapter 3: The Coffee-Can Portfolio........................................................................... 15 Chapter 4: 4 Studies of 100-Baggers......................................................................... 31 Chapter 5: The 100-Baggers of the Last 50 Years................................................43 Chapter 6: The Key to 100-Baggers........................................................................... 75 Chapter 7: Owner-Operators: Skin in the Game....................................................83 Chapter 8: The Outsiders: The Best CEOs...............................................................93 Chapter 9: Secrets of an 18,000-Bagger................................................................ 103 Chapter 10: Kelly’s Heroes: Bet Big..............................................................................111 Chapter 11: Stock Buybacks: Accelerate Returns..................................................115 Chapter 12: Keep Competitors Out.............................................................................121 Chapter 13: Miscellaneous Mentation on 100-Baggers....................................... 129 Chapter 14: In Case of the Next Great Depression..............................................155 Chapter 15: 100-Baggers Distilled: Essential Principles.................................... 169 Appendix The 100-Baggers (1962–2014)................................................................ 191 CHAPTER 1: INTRODUCING 100-BAGGERS This book is about 100-baggers.

The Taking of Getty Oil: Pennzoil, Texaco, and the Takeover Battle That Made History
by Steve Coll
Published 12 Jun 2017

And with a fence in place to protect the family trust, the deal was untouchable. “The directors last Friday did favor a stock buy-back plan, however,” Winokur went on, without pausing long to explain his dismissal of the LBO. “In fact, the company and Goldman, Sachs have been giving further thought to that idea. Geoff is here because he’s an expert not only on mergers but on stock buy-back programs, and I think he could be a help to all of us.” Winokur and Boisi then began to outline in detail a proposal for a dramatic 16-million-share stock buy-back. If implemented, they said, the company would purchase from public stockholders, in the near future, some 15 percent of Getty Oil’s outstanding stock.

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He continued to believe, as he had told Gordon the previous week, that a negotiated stock buy-back plan was preferable to a joint takeover with the museum. For the first time, all of the advisors faced an imminent, concrete deadline. If there was no deal by Tuesday, Gordon would go his own way. He would make an offer to Harold Williams. Thus, a new, urgent atmosphere of cooperation and compromise pervaded in the basement conference room that evening. There was no time to moralize or play games. They had to make a deal. Winokur and Lasky began by drawing up a list of some ten points where there was disagreement between the company and the trust on a stock buy-back plan. Systematically, methodically, they attacked that list, giving some here, taking some there, searching for the middle ground.

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Petersen told the Lasky lawyers that only a handful of Getty Oil’s top executives would be involved—mainly Steadman Garber, a former investment banker now in charge of planning, and Duane Bland, the chief financial officer. Gordon would have to keep his lips sealed. Also, Petersen said, the company would have to suspend its stock buy-back program, the one Gordon had urged Petersen to pursue at the Texas board meeting in July. The company could not legally purchase its own shares in the market while contemplating a major royalty trust restructuring that would affect the price of company stock—such purchases would surely invite a shareholder lawsuit against management alleging insider trading.

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It
by Steven Brill
Published 28 May 2018

There was little reporting about it at the time in the general press or on broadcast news. Yet to see how America got where it is today, it is important to understand the pivotal decision to allow what Wall Street called stock buybacks. As part of a broader deregulatory agenda, President Ronald Reagan’s Securities and Exchange Commission chairman, John Shad, pushed through a rule setting out liberal guidelines for corporations to repurchase their stock on the open market. Such stock buybacks had long been frowned on by regulators, who feared that companies could profit unfairly at the expense of their own shareholders by buying stock just before they knew good news about the company was to become public.

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We will also see that regulatory measures, such as the Dodd-Frank financial reform law passed in 2010, have not done enough to curb the short-termism and gambling mania that brought the Great Recession. Similarly, the obsession with quarterly stock prices—and with it, cutbacks in research and development, outsourcing of jobs, and stock buybacks forced by “activist” raiders—has not abated. In 2016, the value of stock buybacks and dividends returned to shareholders from the S&P 500 companies exceeded all of their operating profits. That does not mean that people like Judith Samuelson at the Aspen think tank or takeover defense lawyer Martin Lipton are not still trying to persuade corporations to take the longer view.

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At the same time, as the consequences of short-termism—its effect on investments in good jobs for the middle class, its role in widening the pay gap between the bosses and those who work for them, and what it has done generally to weaken the economy by limiting investment—have become more visible, short-termism’s profile as a political issue has sharpened. In the 2016 American presidential election, the impact of stock buybacks as a damaging disinvestment tool was raised for the first time by one of the major nominees. “All too often,” declared Hillary Clinton during the campaign, “the additional corporate revenue is going to stock buybacks and executive bonuses instead of benefiting consumers, employees, and the economy as a whole.” * * * — Although it is lately more in vogue, the idea that corporations should be worrying about consumers, employees, and the “economy as a whole”—often called the “stakeholder model”—is as old as the corporation itself.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy
by Christopher Leonard
Published 11 Jan 2022

This tactic was something called a stock repurchase, or stock buyback. This was a strategy that Rexnord began to pursue, along with the rest of corporate America. Stock buybacks were made legal in 1982, and they are exactly what they sound like. A company uses cash to buy shares of its own stock. The basic appeal of a buyback was obvious for the people who already owned the company’s stock. When shares are purchased, they get taken off the market, which decreases the total amount of shares in existence. This can boost the price of remaining shares because there are less of them to buy. Stock buybacks also help juice an important metric by which many CEOs get paid, called “earnings per share,” which measures how much profit a company earns per share of stock.

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Stock buybacks also help juice an important metric by which many CEOs get paid, called “earnings per share,” which measures how much profit a company earns per share of stock. Take away more shares, and the earnings per share go higher. In this way, stock buybacks are a great way to meet the earnings-per-share target without doing things like winning new customers, innovating new products, or improving operations. Also, maybe most obviously, the share buybacks give money to people who already own the stock, which can include the company’s executive team. In spite of all these benefits to executives and shareholders, stock buybacks remained relatively rare through much of the 1990s. There were compelling reasons to avoid them. Buybacks almost always increase a company’s indebtedness, which weakens it.I This tendency was only amplified when companies borrowed cash to make a buyback.

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McDonald’s, for example, borrowed $21 billion in bonds and notes, according to an extensive investigation in Forbes magazine, between 2014 and 2019. The company used the cash to help finance $35 billion in stock buybacks. It also paid out $19 billion in dividend payments, directly to its owners, giving the owners more than $50 billion during a period when the company earned only $31 billion in profit. Yum! Brands, the fast-food conglomerate that operates chains like Taco Bell and KFC, borrowed $5.2 billion to help pay for $7.2 billion in stock buybacks and dividend payments. The buybacks made these companies more vulnerable to an economic downturn by increasing their debt loads and reducing their equity.

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
by William Thorndike
Published 14 Sep 2012

Outside of the steady, year-in, year-out pattern of debt service, internal capital expenditures, and (minimal) dividends, Stiritz’s two primary uses of cash were share repurchases and acquisitions. His approach to both was opportunistic in the extreme. Stiritz was the pioneer in the consumer packaged goods business when it came to stock buybacks. In the early 1980s, when he started to repurchase stock, buybacks were still unusual and controversial; as one of Ralston’s directors said at the time, “Why would you want to shrink the company. Aren’t there any worthwhile growth initiatives?” Stiritz, in contrast, believed that repurchases were the highest-probability investments he could make, and after convincing his board to support him, he became an active repurchaser.

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This single-minded cash focus was the foundation of their iconoclasm, and it invariably led to a laser-like focus on a few select variables that shaped each firm’s strategy, usually in entirely different directions from those of industry peers. For Henry Singleton in the 1970s and 1980s, it was stock buybacks; for John Malone, it was the relentless pursuit of cable subscribers; for Bill Anders, it was divesting noncore businesses; for Warren Buffett, it was the generation and deployment of insurance float. At the core of their shared worldview was the belief that the primary goal for any CEO was to optimize long-term value per share, not organizational growth.

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To say Singleton was a pioneer in the field of share repurchases is to dramatically understate the case. It is perhaps more accurate to describe him as the Babe Ruth of repurchases, the towering, Olympian figure from the early history of this branch of corporate finance. Prior to the early 1970s, stock buybacks were uncommon and controversial. The conventional wisdom was that repurchases signaled a lack of internal investment opportunity, and they were thus regarded by Wall Street as a sign of weakness. Singleton ignored this orthodoxy, and between 1972 and 1984, in eight separate tender offers, he bought back an astonishing 90 percent of Teledyne’s outstanding shares.

The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
by David Gelles
Published 30 May 2022

Young, 23 see also executive compensation Chipotle, 170 Chouinard, Yvon, 213 Chrysler, 9, 71, 77, 110–11, 216, 229 Citicorp, 119–20 Clausewitz, Carl von, 34 Clayton, Joseph, 130 Clifford, Michael, 134 Clinton, Bill, 7, 90, 93, 157, 158 Clinton, Hillary, 159–60, 196 Clinton Foundation, 12, 159–60 “clopening,” 170–71 CNBC, 11, 116, 196 JW as commentator, 131, 146–47 launch of, 56–57 Ailes made head of, 53 CNN, 90–91, 158, 196 Coca-Cola, 67–68, 229 Coffin, Charles, 74–75 Cold War, 35, 39 Collins, Jim, 89–90, 178 Comcast, 175, 223 Comstock, Beth, 50, 61 Conaty, William, 78 Condit, Phil, 87–90, 102 Conseco, 77, 106, 111 Cooper, Anderson, 158 Cooper Industries, 81 Cote, Dave, 84 Council of Economic Advisers, 158 Couric, Katy, 117 Covid-19 pandemic, 191, 221–26 Crotonville Management Development Institute / GE University, 9, 74–77, 133, 191, 192 CSR (corporate social responsibility), 151 Culp, Larry, 166, 224–26 Curry, Ann, 135 Danaher, 166 Danone, 212 dealmaking (generally): at Albertson’s, 104–5 at AlliedSignal, 79–80 at Amgen, 106 at AT&T, 175–76, 177, 221 at Boeing, 86–90, 101–2 challenges of resisting, 217–18 at Conseco, 106 corporate raiders and, 57, 70, 95, 162 at Fiat SpA, 83 Friedman doctrine and, 38–39 GE impact on broader economy, 57, 66–68, 176–77, 185, see also dealmaking at GE at Kraft Heinz, 206–7 loosening of antitrust enforcement, 38–39, 51, 79 market concentration and, 79–80, 176–78, 219 at McDonnell Douglas, 87–90 negative externalities of, 175–85 private equity firms in, 2, 51, 54, 57, 70, 105, 110–11, 142, 175–82, 185, 213–14 at RJR Nabisco, 70 at Scott Paper, 71 at 3G Capital, 177–82, 206–7 at Tyco International, 124–25 dealmaking at GE, 5–6, 10, 50–57 Alstom acquisition, 161, 163 American Mortgage Insurance acquisition, 58 Boeing Business Jet project, 102 critique of, 115–16 diversification away from manufacturing, 56, 58, 115–16, 136–40, 160–62, 164 Employers Reinsurance Corporation acquisition, 58 final breakup, 8, 11, 226 financial crisis of 2008 and, 8, 137–38, 141–45, 148–49 to hit financial targets, 61–62, 63–64, 103–4, 136–37, 138 Honeywell takeover attempt, 79–80 impact on broader economy, 57, 66–68, 176–77, 185 joint venture with Yokogawa Medical Systems (Japan), 18–19 Kidder Peabody acquisition, 54–56, 58, 143, 152 Lake acquisition, 143 Lockheed Martin acquisition, 61 Montgomery Ward closing, 61 “Pac-Man model” of, 50 PaineWebber sale, 61 RCA / NBC takeover, 51–54, 56, 57, 95, 152, 175, 176 RCA sell-off, 51–52, 152 as role model for other companies, 123–26, 178–79 taxation and, 51, 61, 62–63 Thomson swap, 52, 82–83 Tungsram takeover, 83 Vivendi acquisition, 136 Western Asset Mortgage Capital (WMC) acquisition, 137, 142–43, 165, 225 “deaths of despair” (Case and Deaton), 183 Deaton, Angus, 183 Del Rio, Frank, 223 Delta Air Lines, 215 Democratic Party, 12, 93–94, 156–60, 196–200 DeNunzio, Ralph, 55 DeVos, Betsy, 198 Dignan, Aaron, 138–39 Diller, Barry, 221 Dimon, Jamie, 199, 221 DirectTV, 175 Discovery Communications, 77, 175–76, 221 Disney, 175 dividend payments, see financialization (generally); financialization at GE dot-com bubble, 7, 95, 165 Douglas, Michael, 57 Dow Chemical, 28 Dow Jones Industrial Average (DJIA): GE in, 46, 93, 163 GE removal from, 8, 163, 165, 166 JW acolytes / protégés and, 77–78 downsizing (generally), 69–73 at Albertson’s, 104–5 at Allied Signal, 78 at American Express, 168–69 at AT&T, 71, 175, 223 at Boeing, 88–90, 127–30, 224 “campaign against loyalty” in, 49–50, 70, 88, 94, 108, 128, 168–74 at Chrysler, 71 cost cutting, 80, 81–82, 88, 90, 106, 108, 112, 124–25, 127–30, 179, 181 Covid-19 pandemic and, 221–24 at Fiat SpA, 83 at Ford Motor Company, 72–73 at GE, see downsizing at GE at Home Depot, 108–10 at Honeywell, 80 at IBM, 70 impact of GE on, 49–50, 69–73 at Kraft Heinz, 181 mass layoffs, 70–71, 78, 80, 82, 83, 105, 168–69, 175, 178, 180, 181, 222, 223–24, 229 at McDonnell Douglas, 87 negative externalities of, 168–74 offshoring, 80, 81, 169, 200 outsourcing, 81, 88, 129–30, 169–70, 179 at Scott Paper, 71 at Sprint, 169 stack ranking, 112, 171–74, 179 at Stanley Works, 80–82 at Sunbeam Products, 71–72 by 3G Capital, 178, 179–80, 181 at 3M, 111–13 at Tyco International, 124–25 downsizing at GE: “Campaign Against Loyalty” in, 4, 5, 43–50, 70, 92, 168, 185, 227 cost cutting, 10, 41–42, 53, 94, 100 impact in Erie, Pennsylvania, 46, 183, 227 impact in Louisville, Kentucky, 30–31, 42–43, 137 impact in Schenectady, New York, 42–43, 92, 100–101, 183, 197–98 impact on employee morale, 47–49, 94 under JW, 41–50, 70–71, 76, 96–97 mass layoffs, 4, 11, 30–31, 41–45, 51, 55, 61, 76, 92, 94, 100–101, 224–25 offshoring, 5, 46–47, 94, 137 outsourcing, 5, 10, 45–46, 94, 100, 101, 227 Vitality Curve / stack ranking, 4, 44–45, 96–97, 152, 171, 172, 174 Drucker, Peter, 34 Dukakis, Michael, 47 Dunlap, “Chainsaw” Al, 71–72 DuPont, 28 earnings management, see financialization (generally); financialization at GE Eastman Kodak, 59, 165 eBay, 207 Ebbers, Bernard, 125 Economics of Welfare, The (Pigou), 167–68 Economist, The, 91 Edison, Thomas, 3, 16, 19, 21, 139 Emotional Intelligence (Goleman), 131–32 employee compensation: decline of unions and, 46–47, 49–50 executive compensation vs., 11, 17, 24, 73, 85, 92, 94–95, 109, 183–85, 197–98, 219–20, 222–23 in the Golden Age of Capitalism, 22–26, 183 impact of downsizing on, 46–47, 49–50, 52, 73, 183, 227 impact of market concentration on, 177 impact of outsourcing on, 227 impact of stock buybacks and dividend payments, 66 of JW in early career, 28 labor as a cost under JW, 43–44, 46–47, 70–71, 210–11 market concentration and, 177 minimum wage and, 93, 183, 209, 215, 218, 223 net disposable income (NDI), 209–10 overtime work, 100, 170–71, 172, 200–201, 217 pay cuts at GE, 52 PayPal financial wellness program, 208–11, 215 at Polaris, 85 productivity—pay gap and, 25–26, 73, 94–95, 185 shareholder capitalism vs., 35 stagnation / decline in, 49–50 in stakeholder capitalism, 207–11, 215–16, 220 stock / stock option ownership, 210, 215–16 Employers Reinsurance Corporation, 58 Enron, 124, 126 Equifax, 77 ESG (environmental, social, and governance), 151 Ethiopian Airlines Flight 302 crash (2019), 187–90, 194 executive compensation: at Albertson’s, 105 at AlliedSignal, 78–79 at Amazon, 174, 184, 185, 222–23 at Amgen, 106 at AT&T, 175 at Boeing, 127–28, 153, 190, 192, 224 at Chrysler, 111, 216 at Conseco, 106 Covid-19 pandemic and, 223, 224 creative accounting and, 123–24 at Discovery, 176 employee compensation vs., 11, 17, 24, 73, 85, 92, 94–95, 109, 183–85, 197–98, 219–20, 222–23 financial performance of company and, 110, 127–28, 153 at GE, 7, 11, 17, 59–60, 91–92, 118–20, 163, 197–98, 225, 228 in the Golden Age of Capitalism, 184 growth in corporate America, 11 at Home Depot, 109, 110 at Honeywell, 120 impact of downsizing on, 73 impact of stock buybacks and dividend payments, 65–66, 153 at McDonnell Douglas, 87 at Polaris, 85 at Scott Paper, 71 at SPX, 105 in stakeholder capitalism, 217–18, 219–20 at Stanley Works, 80 at 3G Capital, 180 at Walmart, 184 wealth concentration and, 10–12, 183–85 Exxon, 18, 68 Facebook, 134 Falwell, Jerry, 134 Fannie Mae, 144 Federal Aviation Administration (FAA), 130, 155, 188, 190, 194 Federal Deposit Insurance Corporation (FDIC), 145 Fey, Tina, 139–40 Fiat SpA, 77, 82–84 financial crisis of 2008, 141–46, 195–96 activism following, 149–52 bailouts, 111, 144–45, 156–57, 160 employment rebound following, 156–60 subprime mortgage market and, 8, 137–38, 141–45, 148–49, 150, 165, 225 financial deregulation: critique of, 95 Friedman doctrine and, 38–39 of stock buybacks, 65 see also shareholder capitalism financialization (generally), 123–26 at AIG, 126 at Under Armour, 182 at AT&T, 175 at Boeing, 88, 90, 129, 153, 187, 190, 224 Covid-19 pandemic and, 224 creative accounting, 95–96, 123–24, 125, 126, 181–82, 227–28 dividend payments, 10, 65–68, 129, 153, 175, 184, 187, 190, 219, 224 at Enron, 124, 126 at Freddie Mac, 125, 144 at GE, see financialization at GE moving beyond, 205–6, 210–11 negative externalities of, 175–85 securities trading, 124 stock buybacks, 10, 65–68, 88, 90, 129, 153, 175, 184, 187, 190, 219, 224 tax minimization, see taxation at 3G Capital, 181–82 3M rejection of, 113 at Tyco International, 124–25 at Waste Management, 123–24 at WorldCom, 125 financialization at GE, 54–56, 58–66, 160–66 creative accounting, 6, 31–32, 33, 60–62, 67–68, 102–4, 103, 123, 136–40, 138, 144, 147–48, 163, 182, 225 dividend payments, 6, 65–68, 161 GE Capital in, 6, 58–64, 144–45, 160–62, 227–28, see also GE Capital SEC investigation / fraud accounting charges, 126, 147–48, 164–65, 225 stock buybacks, 6, 64–66, 161, 163 subprime mortgage market and, 8, 137–38, 141–45, 148–49, 150, 225 Financial Times, 147, 151–52 Fink, Larry, 213–14 Flannery, John, 164–66, 224 Forbes, 91, 152 Forbes 400, 7, 92 Ford, Bill, 72–73 Ford, Henry, 72–73 Ford Motor Company, 18, 72–73, 171 Forester de Rothschild, Lynn, 92 Fortune 500, 43, 57, 71, 80, 117 Fortune magazine, 67, 74–75, 91 JW as contributor, 11, 131, 158 JW as “Manager of the Century,” 7, 91–97, 114–15, 117, 118–19, 120, 146, 152, 159, 163, 198, 230 JW as “Toughest Boss in America,” 49 series on Clausewitz and Moltke, 34 Fox News, 54, 158–59, 195–96 Frazier, Ken, 199–200 Freddie Mac, 125, 144 free market economics, see shareholder capitalism Free to Choose (PBS miniseries about M.

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Rather than invest in new products and services, or their employees, companies could now use their profits to simply repurchase their own shares, driving their stock price up. It was morning in America, and a new era of stock market gamesmanship was dawning. Welch seized on this opportunity, and he would go on to announce what was at the time the largest stock buyback program in the history of American business—some $10 billion in share repurchases. It was his down payment on a strategy that would push GE shares ever higher. Using so much capital for buybacks—rather than research and development, capital improvements, or worker wages—was alien to many business titans of the day.

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Rather than investigate the crash’s cause and ensure that Boeing’s engineering was sound, the company’s executives turned their attention back to Wall Street. Less than two months after the crash, on December 17, citing “Boeing’s strong operational performance, financial health and positive future outlook,” Dennis Muilenburg, the Boeing CEO, announced that the company was increasing its dividend by 20 percent and would spend $20 billion on stock buybacks. It was the apex of two decades of unwavering devotion to investors that began in 1997, when Stonecipher joined the company, and it further clarified Muilenburg’s priorities. In the few years since he had taken over, Boeing had spent more than 90 percent of its operating cashflow on buybacks and dividends.

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by George R. Tyler
Published 15 Jul 2013

And law professor Lawrence Mitchell has produced a smoking gun, documenting how Reaganomics has shortchanged investment. In the three boom years preceding the credit crisis, the amount of stock buybacks by S&P 500 firms exceeded their investment in new production capacity.43 Even the very best do it: in September 2009, with shares slumping amid the recession, Microsoft raised dividends 18 percent and began a $40 billion, stock buyback program spread over five years.44 Short-Termism Has Hobbled Human Capital Investment With labor becoming a mere commodity under Reaganomics, American firms have evolved to be quite hierarchical, with top-down management structures that are unusual compared with the family capitalism countries, especially in northern Europe.

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Harvey, and Shiva Rajgopal, “The Economic Implications of Corporate Financial Reporting,” Journal of Accounting and Economics vol. 40, 1–3 Dec. 2005, 3–75. 39 See Nelson D. Schwartz, “As Layoffs Rise, Stock Buybacks Consume Cash,” New York Times, Nov. 22, 2011. 40 As quoted by Jia Lynn Yang, “Companies Spend Their Stash of Cash to Buy Back Stock,” Washington Post, Oct. 7, 2010. 41 Andrew Jack, “Drugs: Supply Running Low,” Financial Times, Feb. 9, 2011. 42 Nelson D. Schwartz, “As Layoffs Rise, Stock Buybacks Consume Cash.” 43 Lawrence Mitchell, “Protect Industry from Predatory Speculators,” Financial Times, July 8, 2009. 44 Richard Waters, “Microsoft Begins $40 Billion Share Buyback,” Financial Times, Sept. 22, 2008.

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Expectations by shareholders and board members during the golden age prevented most executive suites from plucking the plums prematurely and facilitated longer-term projects not necessarily adding to profits until years in the future. Visceral disdain by colleagues and competitors alike would have been the reaction to expedient steps such as cutting R&D, unwise mergers, or wasteful stock buybacks intended to temporarily spike share prices.* Here is how Sheila Bair, the former chief of the Federal Deposit Insurance Corporation, describes this new Reagan-era culture: “Business executives squeeze expenses of all types to meet their quarterly earnings targets, even cutting research and development that could create a competitive advantage down the road.

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
by Michael Jacobs and Mariana Mazzucato
Published 31 Jul 2016

Increasingly, moreover, US corporate executives look to the government to provide them with the new technologies that they need,34 even as these executives have turned toward enriching themselves by boosting their companies’ stock prices and with them their stock-based pay.35 Elsewhere I have analysed in detail the shift of US industrial corporations from a ‘retain-and-reinvest’ resource-allocation regime, under which corporate revenues and personnel are retained and re-invested in innovative capabilities, to a ‘downsize-and-distribute’ allocation regime in which these companies downsize their experienced labour forces and distribute corporate cash to shareholders in the name of ‘maximising shareholder value’. Over the decade 2004–2013, 454 companies in the S&P 500 Index publicly listed over the decade expended $3.4 trillion on stock buybacks, equivalent to 51 per cent of net income, with another 35 percent of net income going to dividends.36 Across this decade, about 9,000 US companies expended a total of $6.9 trillion on stock buybacks, equal to 43 percent of their combined net income, with dividends absorbing another 47 per cent.37 The theory of innovative enterprise provides an essential framework for understanding this dramatic change in the resource-allocation regime.

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Dore, eds., The Japanese Firm: The Sources of Competitive Strength, Oxford, Oxford University Press, 1994, pp. 178–208. 32 Lazonick, Sustainable Prosperity; ‘The new economy business model’; ‘Financialisation’; ‘Profits without prosperity’; Stock Buybacks: From Retain-and-Reinvest to Downsize-and-Distribute, Brookings Institution Center for Effective Public Management, April 2015, http://www.brookings.edu/research/papers/2015/04/17-stock-buybacks-lazonick (accessed 28 March 2016). 33 G. E. Moore, ‘Some personal perspectives on research in the semiconductor industry’, in R. Rosenbloom and W. Spencer, eds., Engines of Innovation: U.S. Industrial Research at the End of an Era, Boston, Harvard Business School Press, 1996, p. 171. 34 Hopkins and Lazonick, Who Invests. 35 W.

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Business Organization and High-Tech Employment in the United States (Upjohn Institute, 2009) won the 2010 Schumpeter Prize. His article, ‘Innovative Business Models and Varieties of Capitalism’ received the Henrietta Larson Award from Harvard Business School for best article in Business History Review in 2010. His article ‘Profits Without Prosperity: Stock Buybacks Manipulate the Market and Leave Most Americans Worse Off’ was awarded the HBR McKinsey Award for outstanding article in Harvard Business Review in 2014. He is currently completing a book, The Theory of Innovative Enterprise, to be published by Oxford University Press. Stephany Griffith-Jones is Financial Markets Director, Initiative Policy Dialogue, Columbia University; Emeritus Professor, Institute of Development Studies, Sussex University, where she was Professorial Fellow; and Research Associate, Overseas Development Institute.

WTF?: What's the Future and Why It's Up to Us
by Tim O'Reilly
Published 9 Oct 2017

But by elevating the single fitness function of increasing share price above all else, they hollowed out our overall economy. The preferred tool of choice has become stock buybacks, which, by reducing the number of shares outstanding, raise the earnings per share, and thus the stock price. As a means of returning cash to shareholders, stock buybacks are more tax-efficient than dividends, but they also send a very different message. Dividends traditionally signaled, “We have more cash than we need for the business, so we are returning it to you,” while stock buybacks signaled, “We believe our stock is undervalued by the market, which doesn’t understand the potential of our business as well as we do.”

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Gordon, The Rise and Fall of American Growth (Princeton, NJ: Princeton University Press, 2016). 244 half of all Americans are shareholders in any form: Justin McCarthy, “Little Change in Percentage of Americans Who Own Stocks,” Gallup, April 22, 2015, http://www.gallup.com/poll/182816/little-change-percentage-americans-invested-market.aspx. 244 outperforms both its publicly traded competitors and the entire S&P 500 retail index: Kyle Stock, “REI’s Crunchy Business Model Is Crushing Retail Competitors,” Bloomberg, March 27, 2015, https://www.bloomberg.com/news/articles/2015-03-27/rei-s-crunchy-business-model-is-crushing-retail-competitors. 244 from money managers to its customers: “Why Ownership Matters,” Vanguard, retrieved April 4, 2017, https://about. vanguard.com/what-sets-vanguard-apart/why-ownership-matters/. 245 an astonishing $3.4 trillion on stock buybacks: William Lazonick, “Stock Buybacks: From Retain-and-Reinvest to Downsize-and-Distribute,” Brookings Center for Effective Public Management, April 2015, https://www.brook ings.edu/wp-content/uploads/2016/06/lazonick.pdf. 245 “investment in productive assets”: Ibid., 4. 245 “distributes corporate cash to shareholders”: Ibid., 2. 246 “social rate of return” from innovation: Charles Jones and John Williams, “Measuring the Social Return to R&D,” Federal Reserve Board of Governors, February 1997, https://www.federalreserve. gov/pubs/feds/1997/199712/199712 pap.pdf. 246 “not the golden goose itself”: Ashish Arora, Sharon Belenzon, and Andrea Patacconi, “Killing the Golden Goose?

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Gordon’s magisterial history of the change in the US standard of living since the Civil War, makes a compelling case that after a century of extraordinary expansion, the growth of productivity in the US economy slowed substantially after 1970. Whether Gordon’s analysis that the productivity-enhancing technologies of the previous century gave the economy a historically anomalous surge, or whether Fink and others are right that we simply aren’t making the investments we need, it is clear that companies are using stock buybacks to create the illusion of growth where real growth is lagging. Stock prices are a map that should ideally describe the underlying prospects of companies; attempts to distort that map should be recognized for what they are. We need to add “fake growth” to “fake news” in our vocabulary to describe what is going on.

The Myth of Capitalism: Monopolies and the Death of Competition
by Jonathan Tepper
Published 20 Nov 2018

A share buyback is when companies use excess profits to buy back their own stocks. Buybacks reduce the shares available in the marketplace and drive up the share price. This process bumps the earnings per share, and these are numbers that Wall Street traders watch very closely. The stock that the company has bought back can either be kept, can be used to pay out executives, or they can simply be made to disappear, Houdini style. The company can “retire” the stocks, which means fewer are available on the market, and those that are have now gone up in value as a result. Stock buybacks used to be illegal following the 1929 crash.

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He said that being dragged down the aisle was more horrifying and harrowing than what he experienced when leaving Vietnam.”1 Years ago, such a public relations disaster would have caused United's stock to stumble, but it quickly recovered. Financial analysts agreed that it would have no effect on the airline. For all of 2016, the company reported full-year net income of $2.3 billion. The results were so good that in 2016 United's board approved a stock buyback of $2 billion, which is the financial equivalent of spraying yourself with champagne. Research analysts dismissed the incident, saying “consumers might not have much choice but to fly UAL due to airline consolidation, which has reduced competition over most routes.”2 Online news sites helpfully explained to readers what had happened with headlines like, “Airlines Can Treat You Like Garbage Because They Are an Oligopoly.”3 Once investors started focusing on United's dominant market position, the stock price in fact went up.

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But President Regan rescinded the law in 1982, giving companies the ability to send their cash back into their own pockets without shareholder approval.20 In 2018 the market is on track to set the all-time record for share buybacks (Figure 9.5). Companies have spent $5.1 trillion on them since the financial crisis. Again, this is cash that could be spent on wages, research and development, or capital expenditures. As Senator Elizabeth Warren of Massachusetts memorably put it, stock buybacks create a sugar high for already obese CEOs. Figure 9.5 Buybacks Zoom to Record Highs SOURCE: Variant Perception. Buybacks continue to explode because of the 2018 Trump tax cuts. According to Bloomberg, about 60% of profits from the tax cuts are going to shareholders, while only 15% of those profits are going to workers.21 Unfortunately for the economy, most people who own shares are generally rich and old and unlikely to spend any of the cash they get.

Flying Blind: The 737 MAX Tragedy and the Fall of Boeing
by Peter Robison
Published 29 Nov 2021

Cushman Jr., “Safety in the Sky: Where the Gaps Are—A Special Report; F.A.A. Staggers Under Task of Monitoring Airline Safety,” New York Times, February 13, 1990. The tax rate: David Wessel, “What We Learned from Reagan’s Tax Cuts,” Brookings, December 8, 2017. “stock buybacks have channeled”: William Lazonick, “The Curse of Stock Buybacks,” American Prospect, June 25, 2018. McNerney impressed him: Peter Robison and James Gunsalus, “Boeing Stock, Orders Soar as McNerney Fights Legacy of Missteps,” Bloomberg, May 26, 2006. “We’re taking a different”: O’Boyle, At Any Cost, 9. “GE screwed him up”: Author interview with anonymous recruitment consultant, September 2020.

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They called themselves “the Incredibles.” He rose through the ranks of a company that, instead, rewarded financial wizardry and aped GE’s tactics—right up to the point where both became cautionary tales. Rather than investing in new aircraft, Boeing’s leaders poured more than $30 billion of cash into stock buybacks during the MAX’s development, enriching shareholders and ultimately themselves. Muilenburg made more than $100 million as CEO, and he left with an additional $60 million golden parachute. What happened at Boeing reflects the same forces that have roiled corporate America since the Reagan revolution ushered in an era of imperial leaders like Welch, obsessively focused on stock market investors.

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The rule gave companies that purchased shares of their own stock in the open market “safe harbor” from charges of manipulation, as long as they didn’t exceed a limit of 25 percent of the daily trading volume. Over the subsequent decades, the University of Massachusetts economist William Lazonick wrote, “stock buybacks have channeled the productivity gains of U.S. business into the hands of the richest households, while the persistent gushers of corporate cash have played a major role in the rise of the financial sector over the once-dominant manufacturing sector.” From 1981 to 1983, he calculated, buybacks consumed only 4 percent of net income for the largest U.S. companies.

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors
by Wesley R. Gray and Tobias E. Carlisle
Published 29 Nov 2012

Eliminating Earnings Manipulators and Outright Frauds ACCRUALS AND THE ART OF EARNINGS MANIPULATION PREDICTING PROBMs NOTES Chapter 4: Measuring the Risk of Financial Distress: How to Avoid the Sick Men of the Stock Market A BRIEF HISTORY OF BANKRUPTCY PREDICTION IMPROVING BANKRUPTCY PREDICTION HOW WE CALCULATE THE RISK OF FINANCIAL DISTRESS SCRUBBING THE UNIVERSE NOTES Part 3: Quality—How to Find a Wonderful Business Chapter 5: Franchises—The Archetype of High Quality THE CHAIRMAN'S SECRET RECIPE HOW TO FIND A FRANCHISE NOTES Chapter 6: Financial Strength: Foundations Built on Rock THE PIOTROSKI FUNDAMENTAL SCORE (F_SCORE) OUR FINANCIAL STRENGTH SCORE (FS_SCORE) COMPARING THE PERFORMANCE OF PIOTROSKI'S F_SCORE AND OUR FS_SCORE CASE STUDY: LUBRIZOL CORPORATION NOTES Part 4: The Secret to Finding Bargain Prices Chapter 7: Price Ratios: A Horse Race THE HORSES IN THE RACE RULES OF THE RACE THE RACE CALL A PRICE RATIO FOR ALL SEASONS THE OFFICIAL WINNER NOTES Chapter 8: Alternative Price Measures—Normalized Earning Power and Composite Ratios NORMALIZED EARNING POWER COMPOUND PRICE RATIOS: IS THE WHOLE GREATER THAN THE SUM OF ITS PARTS? NOTES Part 5: Corroborative Signals Chapter 9: Blue Horseshoe Loves Anacott Steel: Follow the Signals from the Smart Money STOCK BUYBACKS, ISSUANCE, AND ANNOUNCEMENTS INSIDER TRADERS BEAT THE MARKET ACTIVISM AND CLONING SHORT MONEY IS SMART MONEY NOTES Part 6: Building and Testing the Model Chapter 10: Bangladeshi Butter Production Predicts the S&P 500 Close SUSTAINABLE ALPHA: A FRAMEWORK FOR ASSESSING PAST RESULTS WHAT'S THE BIG IDEA?

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We can simply include the information with our quality and price analyses, using the signals from other market participants to confirm our theory that a given stock is undervalued. Alternatively, we can use the signals as stand-alone indicators to identify candidates primed to deliver near-term market-beating returns. Investors might then use those candidates as the starting point for a full fundamental analysis. Either way, signals are very useful to investors. STOCK BUYBACKS, ISSUANCE, AND ANNOUNCEMENTS Many studies have found stock repurchases to be predictive of market-beating returns. The corollary is also true. Stocks issuing shares tend to underperform the market. There are two events to consider: (1) the announcement itself, and (2) the actual buyback or issuance.

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Available at http://ssrn.com/abstract=226564. 8. Alice A. Bonaime, “Repurchases, Reputation, and Returns.” Journal of Financial and Quantitative Analysis (JFQA), forthcoming. Available at http://ssrn.com/abstract=1361800 or http://dx.doi.org/10.2139/ssrn.1361800. 9. Jack Hough, “Buy Signals: How to Decipher Stock Buybacks.” Wall Street Journal, Upside, January 21, 2012. Available at http://online.wsj.com/article/SB10001424052970203750404577171231151712236.html. 10. James O'Shaughnessy, What Works on Wall Street: The Classic Guide to the Best-Performing Investment Strategies of All Time, 4th ed. (New York: McGraw-Hill, 2011). 11.

Makers and Takers: The Rise of Finance and the Fall of American Business
by Rana Foroohar
Published 16 May 2016

The fact that Apple, probably the best-known company in the world and surely one of the most admired, now spends a large amount of its time and effort thinking about how to make more money via financial engineering rather than by the old-fashioned kind, tells us how upside down our biggest corporation’s priorities have become, not to mention the politics behind a tax system that encourages it all. This little vignette also demonstrates how detached many of America’s biggest businesses have become from the needs and desires of their consumers—and from the hearts and minds of the country at large. Because make no mistake, Apple’s behavior is no aberration. Stock buybacks and dividend payments of the kind being made by Apple—moves that enrich mainly a firm’s top management and its largest shareholders but often stifle its capacity for innovation, depress job creation, and erode its competitive position over the longer haul—have become commonplace. The S&P 500 companies as a whole have spent more than $6 trillion on such payments between 2005 and 2014,2 bolstering share prices and the markets even as they were cutting jobs and investment.3 Corporate coffers like Apple’s are filled to overflowing, and America’s top companies will very likely hand back a record amount of cash to shareholders this year.

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The top twenty-five hedge fund managers in America make more than all the country’s kindergarten teachers combined, a statistic that, as much as any, reflects the skewed resource allocation that is part and parcel of financialization.53 This downward spiral accelerates as executives paid in stock make short-term business decisions that might undermine growth in their companies even as they raise the value of their own options. It’s no accident that corporate stock buybacks, which tend to bolster share prices but not underlying growth, and corporate pay have risen concurrently over the last four decades.54 There are any number of studies that illustrate this type of intersection between financialization and the wealth gap. One of the most striking was done by economists James Galbraith and Travis Hale, who showed how during the late 1990s, changing income inequality tracked the go-go NASDAQ stock index to a remarkable degree.55 The same thing happened during the stock boom of the last several years, underscoring the point that commentators like journalist Robert Frank have made, that wealth built on financial markets is “more abstracted from the real world” and thus more volatile, contributing to a cycle of booms and busts (which of course hurt the poor more than any other group).56 As Piketty’s work so clearly shows, in the absence of some change-making event, like a war or a severe depression that destroys financial asset value, financialization ensures that the rich really do get richer—a lot richer—while the rest become worse off.

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Maybe then we’ll be more able to have the kind of market system Adam Smith had hoped for, one in which “the interest of the consumer [must be] the ultimate end and object of all industry and commerce.”52 As we learned earlier, Apple, the world’s richest company, has employed truly mind-boggling financial maneuvers to stash nearly all of its $200 billion in cash in overseas bank accounts—all in order to avoid tax collectors in the United States. Remarkably, the firm did so while issuing debt on American markets to fund the stock buybacks and dividend payments that would line the pockets of some of the world’s wealthiest people. But that scenario is by no means the weirdest corporate tax contortion out there. In fact, recent years have seen a proliferation of a truly amazing kind of fiscal gymnastics known as tax inversions, which are essentially complicated schemes by which American companies avoid paying their fair share in taxes by buying foreign firms in cheaper overseas tax jurisdictions.

Ego Is the Enemy
by Ryan Holiday
Published 13 Jun 2016

At rock bottom those victories must have felt like a long way off, which is why you have to be able to see past and through. As Goethe once observed, the great failing is “to see yourself as more than you are and to value yourself at less than your true worth.” A good metaphor might be the kind of stock buybacks that Katharine Graham made in the late seventies and eighties. Stock buybacks are controversial—they usually come from a company that is stalled or whose growth is decelerating. With buybacks, a CEO is making a rather incredible statement. She’s saying: The market is wrong. It’s valuing our company so incorrectly, and clearly has so little idea where we are heading, that we’re going to spend the company’s precious cash on a bet that they’re wrong.

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(His small investments in her family’s company would one day be worth hundreds of millions.) She prevailed in negotiations with the union and the strike eventually ended. Her main competitor in Washington, the one that had refused to come to her aid, the Star, suddenly folded and was acquired by the Post. Her stock buybacks—made contrary not only to business wisdom, but the judgment of the market—made the company billions of dollars. It turns out that the long hard slog she endured, the mistakes she made, the repeated failures, crises, and attacks were all leading somewhere. If you’d invested $1 in the Post’s IPO in 1971, it would be worth $89 by the time Graham stepped down in 1993—compared to $14 for her industry and $5 for the S&P 500.

Evil Geniuses: The Unmaking of America: A Recent History
by Kurt Andersen
Published 14 Sep 2020

That’s what I’d mainly studied in college, but since then I’d mostly just read the news, skimmed along day to day and month to month like anybody whose job never required knowing a lot about deregulation, antitrust, tax codes, pensions, the healthcare industry, the legal fraternity, constitutional law, organized labor, executive compensation, lobbying, billionaires’ networks, the right wing, the dynamics of economic growth, stock buybacks, the financial industry and all its innovations—so many subjects of which I was mostly ignorant. My immersion was revelatory. Reading hundreds of books and scholarly papers and articles and having conversations with experts made me more or less fluent in those subjects and, more, taught me many small things and one important big thing: what happened around 1980 and afterward was larger and uglier and more multifaceted than I’d known.

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Buybacks effectively became obligatory in corporate America, done by 85 or 90 percent of big public companies. The cost lately has been around $1 trillion a year, three times what businesses spend on research and development. Even in a short-term financial sense for investors, it might be a waste. One study published in 2011 for chief financial officers concluded that stock buybacks “may not yield as much value as investing in a company’s business.” Company executives tend to buy back their shares when the price is excitingly high, and for three-quarters of the companies, the return on investment was subpar. During the period of the study, the stock market was down 19 percent, but the share prices for the 29 companies (out of 461) that didn’t do buybacks went up on average by 40 percent.

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This bizarre new normal is a vivid display and powerful underpinning of the de facto enslavement of the economy to Wall Street and to shareholder supremacy dogma. And speaking of dogma, if the stock market at large isn’t correctly valuing a company, thus requiring its CEO to step in and correct that mistake by spending billions on stock purchases, doesn’t that cast doubt on our absolute faith in the efficient free market? In this way, massive stock buybacks are like the capitalist version of Christians who shake and scream to prove that the holy spirit is real and inhabiting them. But if you sincerely think the market is undervaluing your stock because investors just don’t get your amazing company, then why not buy all of your shares back and go private?

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

Data cited by Chuck Schumer and Bernie Sanders, ‘Schumer and Sanders: Limit Corporate Stock Buybacks’, New York Times, 3 February 2019. An article in The Atlantic claimed that total stock buybacks over the previous decade totalled $6.9 trillion; see Nick Hanauer, ‘Stock Buybacks are Killing the American Economy’, The Atlantic, 8 February 2015. 41. Comment by Ed Yardeni, cited by Karen Brettell and Timothy Aeppel, ‘Buybacks Fueled by Cheap Credit Leave Workers Out of the Equation’, in ‘The Cannibalized Company (Part III)’, Reuters Special Report, 23 December 2015. 42. EPS growth relative to GDP and net profit growth. 43. Karen Brettell et al., ‘Stock Buybacks Enrich the Bosses Even When Business Sags’, in ‘The Cannibalized Company (Part II)’, Reuters Special Report, 10 December 2015.

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‘Both theory and empirical analysis,’ write Gehringer and Mayer, ‘suggest that the low interest rate policy of central banks has been ineffective in raising investment.’ 35. Rana Foroohar, Makers and Takers: How Wall Street Destroyed Main Street (New York, 2016), p. 11. 36. A study of 1,900 listed companies by Reuters (Karen Brettell et al., ‘As Stock Buybacks Reach Historic Levels, Signs that Corporate America is Undermining Itself’, in ‘The Cannibalized Company (Part I)’, Reuters Special Report, 16 November 2015) finds that since 2010, aggregate buybacks and dividends amounted to 113 per cent of capital spending. 37. J. W. Mason, ‘Disgorge the Cash: The Disconnect between Corporate Borrowing and Investment’, The Roosevelt Institute, 25 February 2015.

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See also Greta Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (London, 2011). 46. Jan Toporowski, Why the World Economy Needs a Financial Crash and Other Critical Essays on Finance and Financial Economics (London, 2010), p. 57. 47. Between 1986 and 2002, GM repurchased $20.4 billion worth of shares; https://www.cnbc.com/2018/12/11/investors-should-be-furious-3-stock-buybacks-that-went-horribly-wrong.html. 48. https://wolfstreet.com/2018/11/26/gm-after-14-bn-share-buybacks-prepares-for-carmageddon-shift-to-evs-cuts-workers-closes-8-plants/. 49. Jesse Newman and Bob Tita, ‘America’s Farmers Turn to Bank of John Deere’, Wall Street Journal, 18 July 2017. Deere’s financing operations, an agricultural economist told the Wall Street Journal, were ‘just prolonging the agony and potentially building up [farm] losses instead of cutting the pain, cauterizing the wound and staunching the flow of financial blood now’. 50.

Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US
by Rana Foroohar
Published 5 Nov 2019

The “Protection of Competition” Standard Practice, Competition Policy International, 2018, Columbia Public Law Research Paper, no. 14–608 (2018). Chapter 10: Too Fast to Fail 1. Robert Lenzner and Stephen S. Johnson, “Seeing Things as They Really Are,” Forbes, March 10, 1997. 2. For information concerning stock buybacks, see “$407 Billion in Corporate Stock Buybacks! How Are Businesses in Your State Spending the Trump Tax Cuts?” Americans for Tax Fairness press release, May 10, 2018, https://americansfortaxfairness.org/​wp-content/​uploads/​20180510-TTCT-Updates-Release.pdf. 3. Ibid. 4. “Risks Rising in Corporate Debt Market,” OECD Report, February 25, 2019. 5.

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But unlike other assets, it doesn’t necessarily fuel job growth, but rather, profit growth. And those profits tend to be diverted directly into executives’ and shareholders’ wallets. A 2018 J.P. Morgan study found that most of the money brought back to the United States from overseas bank accounts following the Trump tax cuts went directly into stock buybacks that enrich the wealthiest people and companies.55 The top ten U.S. tech companies alone spent more than $169 billion purchasing their own stock in 2018, and the industry as a whole spent some $387 billion.56 While Big Tech has done the bulk of those buybacks, and has created vastly more wealth than any other set of companies in history, they’ve also created many fewer jobs relative to their market capitalization than any previous generation of business giants.

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(Summers’s own deputy chief of staff was Harvard grad Sheryl Sandberg, who, as we’ve already seen, would leverage the “market knows best” thinking to great effect later on at both Google and Facebook.) Those camps would eventually come into conflict over stock options—the paper money that had become the lifeblood of Silicon Valley and legal tender in the casino that the dot-com boom would end up being. More specifically, it was a debate that would center around the contentious issue of stock buybacks (when corporations bid up the price of their own shares by buying them back on the open market), which had been considered illegal market manipulation until the Reagan administration legalized it in 1982. But the practice didn’t really become a key part of a dysfunctional system of skyrocketing corporate pay and bad corporate decision making until the 1990s, when “new economy” tech firms began successfully lobbying the Clinton administration against efforts to introduce new accounting standards that would have forced them to mark down the value of stock options on their books.

Making It in America: The Almost Impossible Quest to Manufacture in the U.S.A. (And How It Got That Way)
by Rachel Slade
Published 9 Jan 2024

I was out of the country forty-eight weeks a year for three years.” Unfortunately, even with all that offshoring, Fruit struggled to pay off the debt Farley racked up while building an empire. It was about to come crashing down. Just before Fruit declared bankruptcy in 1998, Farley presided over a major stock buyback, a practice legalized in 1982.[*3] The company bought back a huge quantity of its own shares from the marketplace, jacking up the price long enough for Farley and other executives to cash out their stock. Then he was gone. And so was Marty. Longtime employees lost their nest egg when their stock options lost all value in the bankruptcy.

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*2 Now owned by South African Pulp and Paper Industries (SAPPI). *3 So much profit in American companies is now going to shareholders that it’s a wonder any industries can function. According to Emily Stewart in Vox: “From 2007 through 2016, S&P 500 companies distributed $4.2 trillion to shareholders through stock buybacks and an additional $2.8 trillion through dividends, totaling $7 trillion in shareholder payouts. From 2003 through 2012, S&P companies used 54 percent of their total earnings—$2.4 trillion—to buy back stock.” *4 A few months later, California would ban piece-rate pay for garment workers, effective January 1, 2022.

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W., 15 Bush, George W., 52, 62, 63, 91 Butler, Dave, 180, 221 Buy American Act of 1933, 129n Berry Amendment, 129n, 232n C Cambodia, 25, 38, 257 Cameron, David, 138 Campbellsville, Kentucky, 257–58 Amazon and, 268–69 Fruit of the Loom closure, 268 Carhartt, 27, 139 Carleton Woolen Mill, Winthrop, Maine, 45–48 Carnegie, Andrew, 180 Cartwright, Edmund, 8 Cascade Woolen Mill, Oakland, Maine, 40–41 Casco Bay Wool Works, Portland, Maine, 39–49, 100 closing of, 49 founding of, 40 income growth and employees, 44–45 loss of suppliers, 48–49 Maine Maid Outerwear, 39–40, 44 NAFTA and closing of, 45–46 CFTC (Commodity Futures Trading Commission), 156 Champion Mills, 135 bought out by Sara Lee (1989), 139 factory moved to China, 168 factory moved to North Carolina, 139 NAFTA and move to Mexico, 139 sweatshirt produced by, 135–36 Charney, Dov, 252, 264 Child Labor Amendment of 1924, 134 Chile, 72–73 China American apparel, percentage produced by, 231 American manufacturing sent to, 18 American mills that offshored to, 168–69 Biden administration and, 275 as biggest cotton buyer, 156 British East India Company and, 13–14 Champion Mills moved to, 168 as competitor for American-made goods, 143, 231 currency manipulation and, 212 development of Suzhou, 85–86 global manufacturing domination, 68 global cotton market and, 231–34, 235 hourly rate for labor in, 169 as market for western goods, 46–47 sanctions on, and retaliation, 233 subsidizing manufacturers, 68, 212 sweatshirt production, 29 textile and clothing production domination, 129, 257 as a threat to the U.S., 68 unfair trade practices, 68 U.S. tariffs and, 68 U.S. trade deficit to, 68 Uyghur oppression, 233–34 WHO and, 18, 68, 143 workforce in, 86 CHIPS-Plus Act of 2022, 296 Chouinard, Yvon, 110 CIA, 13, 15 in Chile, 72 in China, 246 in the Congo Republic, 246 Contras and, 15 in the DRC, 246 right-wing coups and, 15, 71 Operation Condor, 15 Cinderella Man (film), 100 Cleaves, Adam, 279 Coal Industry Retiree Health Benefit Act of 1992, 195–96 Coastal Enterprises, Inc., 119 Colbert, Stephen, 140 Cold War, 71–72 Common Threads, Portland, Maine, 122–23, 123n, 128 Congo, Democratic Republic of (DRC), 123–24 Congo Republic, 245–47 Congress of Industrial Organizations (CIO), 64 Conway, Thomas, 217 Coolidge, Calvin, 204, 205 Corbyn, Jeremy, 73 Cornered: The New Monopoly of Capitalism and the Economics of Destruction (Lynn), 259, 261 Corson, Holland, 293 cotton China and, 156, 231–34, 235 cotton gin and, 8–9, 155 environmental issues, 154 futures market and, 156 ginning co-ops, 155 Indian cotton, 154–55 Monsanto’s seed monopoly, 154 Noxubee harvest, 154–55 Pilchman’s American Fabrics and, 168, 231–32 price increases, 231–32 quality monitored by the USDA, 156 U.S. exports, 155–56 U.S. as major grower, 132, 152–56 Covid-19 pandemic, 200–201, 211–13, 227, 234, 242–43, 276, 285 American Roots and, 200–201, 209, 210, 213–19, 223–26, 239, 242–43, 276, 285 brands cancelling orders and, 24 companies closed by, 193, 276 dependency on imports and, 211 drug shortage during, 299, 300n hoarding and, 213–14 market uncertainty and, 232, 276 masks and PPE shortage, 211, 214 national divisiveness and, 222 raw goods shortages, 231 Sintex Industries bankruptcy, 156 vaccines, 231 Waxmans’ Washington Post op-ed, 218, 220 Crawford, Lucy, 5–6, 7 Crown family, 78, 79 Obama and, 78 Whirlpool plant shutdown, 78–80 cryptocurrencies, 14n CSIS (Center for Strategic and International Studies), 297 D Daitch, Mike, 239–40 Dana, Woodbury, 174–75 Dana Warp Mill, Westbrook, Maine, 172, 174–75 Dartmouth College, 102 Davis, Isaac, 201–2 Dawes Act of 1887, 203 de Kooning, Willem, 59n Dell, Michelle, 88–89 Delphi Automotive, Dayton, Ohio, 77 Delta Air Lines, 153 Democratic Party AFL-CIO and, 52–53, 70, 74 free trade, offshoring, and, 70 neoliberalism and, 70, 195 Department of Defense (DOD) prison labor used by, 129–30n required to purchase American-made goods, 129n, 130, 232 spending on textiles and apparel (2021), 129n Depp, Johnny, 119 Devlin, Patti, 193–97, 211, 274 American Roots investment, 196, 227 on bringing back American manufacturing, 196–98 Dexter, Maine, 189–90 Dexter Shoe Co. in, 189, 190, 191–93 Dickens, Charles, 9 Du Pont family, Winterthur museum, Delaware, 34 E Eastman Kodak, 83–85 Japan’s Fujifilm imports and, 84, 85 Eban, Katherine, Bottle of Lies: The Inside Story of the Generic Drug Boom, 299n Eddie Bauer, 110 Eisenhower, Dwight D., 63, 207 Enter the Wu-Tang (album), 137 environmental issues agricultural monoculture, 152–54 cotton and, 154 fabric dye disposal and, 22 GDP not inclusive of, 17 textile manufacturing and, 21–22 used clothing disposal, 22–23 WTO’s detrimental effects, 16 Esquire, 146 Trumka profile, 78–79 Evans, Walker, 59n Evil Geniuses: The Unmaking of America (Andersen), 11 F Factory Man (Macy), 68–69 Fair Labor Standards Act of 1938, 134 Fairness Doctrine, 191 Fall River, Massachusetts, 217, 243, 279 Merrow company in, 40, 244–45, 247 Fanatics, 289 Farley, William, 258–59, 260 Farmstead Magazine, 33 FDRA (Footwear Distributors & Retailers of America), xii Federal Prison Industries, 129–30n Feinbloom brothers, 135–36 Fetterman, John, 139, 139n Feuerstein, Aaron, 105–6, 109–11, 129, 130 Feuerstein, Raphael, 110 Feuerstein, Samuel, 105–6 Flowfold company, Maine, 213 Floyd, George, 220, 241 Ford, Henry, 203, 256 Frazier, Joe, 137n free trade/free market theory, 4–5, 11–15, 24, 33, 63, 71 American economy and, 19, 235 Chile and, 72–73 devastating effects of, 19, 20, 91 ethical or social agenda absent, 23 first American victims of, 18 IMF and, 71 NAFTA and, 15–16, 18–19 Reagan and, 185 USMCA and, 19 WTO and, 16, 22, 84 See also NAFTA Friedman, Milton and Rose, 11–12, 14, 72, 111 Friedman, Vanessa, 139 Frost, Robert, 106 Fruit of the Loom, 234, 252, 257–60, 268 bankruptcy of, 263, 264 Farley takeover, 258–59, 263–64 offshore production of, 262–63 stock buyback at, 263–64, 263n G General Dynamics, 79 George, Billy, 53, 59 Gildan Activewear SRL, 232 Gingrich, Newt, “Language: A Key Mechanism of Control,” 192 Glass-Steagall Act, 94 globalization, 18, 70 Buffett’s miscalculation about, 192 NAFTA, WTO, and, 192 U.N.

The Investment Checklist: The Art of In-Depth Research
by Michael Shearn
Published 8 Nov 2011

The lower the price it pays for the stock, the more value management will create for shareholders. The best way to determine if the management team is opportunistic in its stock repurchases is to examine its history. Western Union, for example, generates a lot of excess free-cash flow, so stock buybacks make sense. When Western Union was spun off from First Data Corporation in 2006, management announced it would invest $1 billion per year in stock buybacks. In 2008, when the stock was trading at more than $23 per share, Western Union repurchased $1.3 billion in stock. However, as the stock price declined to below $14 per share in 2009, management pulled back, saying the recession had limited its ability to repurchase shares, and that it would only repurchase $400 million in stock.

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You can create a table that includes the number of stock options issued in a given year compared to the number of shares bought back in order to understand what percentage of stock buybacks are used to offset options dilution. In the 10-K, there is a section titled Stock Plans, where you can find the total number of options that are issued by the business. Table 8.3 is an example for Microsoft. Table 8.3 Microsoft Option Issuance and Buybacks 64 As you can see from Table 8.3, the amount of stock buybacks to offset options dilution averages 25 percent, leaving 75 percent of repurchases to potentially add value. When evaluating how effectively management is using buybacks, use this percentage rather than all the repurchases.

Oil Panic and the Global Crisis: Predictions and Myths
by Steven M. Gorelick
Published 9 Dec 2009

Putting exploration investment in perspective, Chevron bought back $5 billion in stock in 2006, with exploration and capital spending of $17 billion and profits of $17 billion. Chevron increased its exploration and capital budget to $20 billion in 2007 and to $23 billion in both 2008 and 2009.113 The giant Exxon Mobil spent $20 billion per year on capital investment and exploration in 2006 and 2007, which is less than the nearly $30 billion it spent on annual stock buy-backs. Yet, the company managed back-to-back $40 billion annual profits. By 2009, Exxon Mobil slowed its buy-back program in favor of expanding its search for new oil and gas. It plans to spend $150 billion through 2014 on drilling rigs, platforms, and refineries, with $29 billion in capital expenses for nine new projects in 2009.

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“Exxon Mobil: A Great Big Buy,” June 3, 2008, www.businessweek.com/ investor/content/jun2008/pi2008063_252790.htm; Hargreaves, S. (2009). “Exxon 2008 profit: A record $45 billion,” CNNmoney.com, January 30, 2009; Gold, R. (2009). “Exxon Mobil to pump up cash reserves as profit falls,” Wall Street Journal, May 1, 2009. Note that Chevron ended its stock buy-back program in 2009: Carroll, J. (2009). “Exxon Targets Nine New Projects in 2009 Spending Plan,” Bloomberg.com, March 5, 2009. “World giant oil discoveries seem not to be at an end,” news item, Oil and Gas Journal, November 6, 2006: 33. Barkindo, M. and I. Sandrea (2007). “Undiscovered oil potential still large off West Africa,” Oil and Gas Journal, 105(2), January 8, 2007: 30–4.

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Index air quality, 206 Alaska, 65, 128 heavy oil, 166 oil sands, 168 Algeria, 23, 41 aluminum, 105–6, 107 alternatives, oil and energy, 115, 210–2, 214–9 Angola, 23, 142 anticlinal traps, 140 Arab–Israeli war (1973), 63, 115 Arctic region, oil and gas, 146 Association for the Study of Peak Oil, 88, 124 Athabasca sands, 168–9 available oil, 119 Azadegan oil field, 138 Bahrain, 23 Baker Hughes drill-rig count, 141–2 Baku, 160 barrels, origin as measure, 20 batteries, 108, 214–15, 228 battleships, 62 bbl, barrel, origin, 20, 52 bell-shaped curve see logistic curve Berman, Arthur, 144 bets, 103–4 biodiesel, 212–13 biofuels, 210–13 bitumen, 168 Bohai Bay oil field, 138–9 Bolivia, oil reserves, 144 booking of oil reserves, 125–6 BP coal endowment estimate, 180 oil price, 77–8, 115–6, 154 oil production, China and India, 76 oil production decline data, 65 oil reserves, 23, 126 Brazil oil reserves, 144 oil shale, 172 Brent Blend, 41 British Petroleum see BP Brookhart, Maurice, 174 Brown, Harrison, 106 Buffett, Warren, 215 Burgan Greater oil field, 71 CAFE standards, 197–9 effects, 199–205, 223–4 California gold, 156, 157 heavy oil, 166 oil sands, 168 California Energy Commission, 47 Campbell, Colin, 124 Canada oil reserves, 122, 132–3 oil sands, 27, 29, 122, 132, 136, 168–70 232 Index Canadian Association of Petroleum Producers, 169 Canadian Oil Sands Limited, 169 Cantarell Greater oil field, 71 carbon dioxide emissions, 209–10, 216 carrying capacity, 61 Carter, Jimmy, 64 Cathles, Larry, 128–9 cellular phones, 107, 108–9 central limit theorem (CLT), 94 Charpentier, Ronald, 93, 139–40 Chevron advertising, 16 capital spending, 141 oil discoveries, 139, 144 oil exploration, 22, 141 oil reserves, 23 stock buy-back, 141 China carbon dioxide emissions, 209–10, 217 coal, 180–1, 216, 217 discoveries, 138–9 economic growth, 152–3 GDP, 147 industrial growth, 74–5 liquid fuel from coal, 176–7 oil consumption, 74–6, 147–53 oil imports, 36 oil production, 75–6 oil shale, 172 oil-use intensity, 150–1 vehicle ownership, 204–6 Churchill, Winston, 62 CIA, 64 “clean” coal technology, 216–17 Club of Rome, 59–61 coal combustion in power plants, 216–17 conversion to liquid fuels, 173–4 formation, 180 synthetic fuel from, 176–7 coal reserve-to-production ratio, 180–1 coal resources, 180–1 Colorado, 170, 176 Columbia, oil reserves, 144 commodity prices trends, 103–7 volatility, 105 commodity scarcity, 98–103 communications systems, 109–10 ConocoPhillips, 22, 23 conservation of mass, 10 consumer price index (CPI), 56, 77–8, 83 cooking oil, 213 copper, 103–7 corn, 211–12 Corporate Average Fuel Economy (CAFE) standards, 197–9 effects, 199–205, 223–4 corruption, 217 “cracking”, 63, 174 CPI, see consumer price index crude oil, 18 finding and lifting/production costs, 23, 42–3, 133–4, 142 crushed stone, 105–6 cumulative production, 28 Cushing oil field, 62 Daimler, 214 Darwin, Charles, 1 Deffeyes, Kenneth, 93 Deming, David, 89–90, 95, 97 dental fillings, 108 developing nations, future oil demand, 146–54, 204–6 discoveries, 29–30, 66–7, 70, 72–4, 127–8, 138–40 Diesel, Rudolf, 175, 212 diesel composition, 19 energy density, 19 importance, 175 as preferred automobile fuel, 181 diesel cars, 175–6 DOE see US Department of Energy Index Drake, Edwin, 1, 160 drilling rigs, 141–3 drilling-to-discovery ratio, 90 dry gas, 18 economic petroleum reserve, 218–19 economic rebound, 199–200 Ecuador OPEC membership, 23 political stability, 217 efficiency and consumption, 199–204 gains, 196–9, 220 Egypt, 23, 112–13 Ehrlich, Paul, 103–4 EIA see Energy Information Administration El-Badri, Abdalla Salem, 25 electric cars, 213–15 Electric Vehicle Company, 213, 214 electricity, 213 endowment see oil endowment and natural gas endowment end-use services, 109, 213–15 energy density, 19 Energy Independence and Security Act of 2007, 199 Energy Information Administration (EIA) oil reserve estimates, 2, 134, 164–5 oil sands estimates, 169 oil statistics, 26 Energy Policy Act of 2005, 212 Energy Policy Conservation Act of 1975, 197 energy security, 199, 218, 221 enhanced oil recovery (EOR), 162 environment, 220 Estonia, 173 ethanol, 19, 38, 211–12, 214 Europe coal-fired power plants, 217 oil imports, 36 exploration constraints, 222 233 exploration expenditures, 140–1, 143 global distribution, 143 exploratory drilling, success rate, 131 Exxon Mobil advertising, 16 capital spending, 141 discoveries, 144 oil exploration, 141 oil reserves, 23 revenues, 21–2 stock, price and buy-back, 21, 141 field growth, 28, 127, 134–6 finding costs, 42–3, 133–4 Fischer, Franz, 173 Fischer-Tropsch process, 173–4, 176 Fisher, William L., 92 flaxseed, 99–100 Ford Model T, 62 fossil fuels combustion, 209–10 consumption, 3 conversion, 173–5 definition, 17 FRS, DOE Financial Reporting System, 21–2, 52–3, 56, 137, 141, 143, 182 fuel economy, 197–204, 223–4 fuel oils, 19, 167–8 fungible commodity, 36 GAO reports, 2, 12, 65 gas-to-liquid (GTL) process, 174–5 gasohol, 211 gasoline, 41–9 and carbon dioxide emissions, 209–10 composition, 18–19 consumption, 197–8 cost components, 41–3 cost percent of disposable income, 115 energy density, 19 petroleum product, 38 running out, 64 234 Index gasoline consumption, efficiency and, 199–204 gasoline price, 44–9, 51, 117, 201, 217 by country, 45 elasticity, 45–7 factors determining, 41–2 next delivery, 47, 51 oil price and, 44–5, 206, 217 price gouging, 48 spikes, 116 spot price, 47–8 subsidies, 45 tax, 45 trends, 115–17, 201 variability, 47–9 Gaussian distribution, 93–4 Germany, 173 Ghana, 139 Ghawar oil field, 71–2 giant oil fields numbers discovered, 70 oil volume in, 70–1, 138, 140 production decline, 72 gold depletion predicted, 106 in seawater, 159 gold reserves, 158, 192 gold resource pyramid, 156–60 gold rushes, 156 Goldman, Alan, 174 Göring, Hermann, 174 gouging, 48–9 Green River Formation, 170–1 Greene, David L., 208 gross world product (GWP), 148 GTL see gas-to-liquid process Gulf of Mexico, 22, 114, 128–9, 136, 139 Hamilton, James, 117–18 heavy oil, 165–8 global, 166–8 US, 165–6 Hirsch report, 2 Hitler, Adolf, 174 horses, 206–7, 209 “Hotelling” economic theory, 117 Hubbert, M.

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace
by Matthew C. Klein
Published 18 May 2020

Subpart F may have been rendered mostly useless by the Treasury’s mistake in 1996, but until the 2017 tax law changed things, the Revenue Act of 1962 still meant that American corporations could avoid paying U.S. taxes on those foreign profits only if they were reinvested abroad. Dividends and stock buybacks were not allowed. Almost anything else, however, was acceptable. The result was that subsidiaries of American multinationals located in corporate tax havens accumulated trillions of dollars of financial assets in the past two decades. From 1998 through 2017, American companies operating in the seven corporate tax havens “earned” and then “reinvested” more than $2.1 trillion of profits.

…

These arrangements distort the trade and investment data, especially when it comes to Ireland’s own exports and imports (and, increasingly, its domestic business investment). The passage of the 2017 U.S. corporate income tax changes meant that American companies could return as much of these offshore savings to shareholders through dividends and stock buybacks as they wished. So far, the impact has been relatively modest: American companies withdrew just $250 billion from their foreign subsidiaries in 2018. But the impact has been much larger in the corporate tax havens. There, withdrawals were worth $319 billion in 2018. The corollary was a $256 billion decline in the value of U.S. bonds held by residents of the major corporate tax havens between November 2017 and June 2018.40 Standard trade data are filled with misinformation for the untrained analyst.

…

The concentration of wealth has corresponded to an extreme concentration of capital income among the elite: about 70 percent of all earnings generated from owning assets now go to the richest 1 percent of Americans, up from 35 percent in the late 1970s. As in Germany, policy exacerbated these shifts. Dramatic reductions in top tax rates gave high earners a strong motive to push for more pay, while changes to the regulatory treatment of stock buybacks and leveraged buyouts enabled executives and financiers to earn outsized incomes. The effective tax rate on capital gains fell by more than 10 percentage points between the mid-1990s and the mid-2000s. Regressive payroll taxes effectively replaced taxes on corporate profits between the early 1950s and the end of the 1980s.

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff
by Christine S. Richard
Published 26 Apr 2010

These details didn’t dampen analysts’ enthusiasm for the company’s prospects. “We reiterate our ‘buy’ rating,” Bank of America analyst Tamara Kravec wrote, increasing her target for the share price to $85 from $78. “Let the Repurchases Begin,” Merrill Lynch analyst Rob Ryan headlined his report. With the investigation behind it, MBIA was clear to restart its stock buyback program, Ryan wrote. He reiterated his “buy” rating. “Settlement Finally Announced, Shares Benefiting from Short Squeeze,” JP Morgan told clients in a research note. “Shares have rallied about $4 since late Friday following the news alerts, which we believe has largely been driven by short covering.”

…

“We don’t expect any further enforcement action,” Chaplin, who had replaced Nick Ferreri, reassured listeners on the call. Geoffrey Dunn, the insurance analyst from Keefe Bruyette & Woods, asked the first question on the call. “Good morning and congratulations on getting past all that regulatory stuff,” he told Chaplin. It appeared the coast was clear. A few days later, MBIA’s board approved a $1 billion stock-buyback plan. The timing would depend on receiving approval from the New York State Insurance Department to take further dividends out of the insurance unit, MBIA said. In early February 2007, Ackman attended the funeral of longtime family friend James Williams. A Michigan attorney, Williams had invested early on with Ackman in Gotham and later served on the board of First Union Real Estate.

…

Of those, $5 billion were mezzanine CDOs backed by the securities that would get wiped out when losses broke through 9 percent, Ackman said. “How is MBIA preparing for the coming credit storm?” Ackman asked the audience. It took a $500 million dividend out of its insurance unit in December, got permission to take another $500 million dividend out in April, announced a $1 billion stock buyback, and had already spent at least $300 million of the money raised on buybacks. The next day, MBIA and Ambac shares fell. It was the beginning of a long slide. “Wrapper Stocks Down. Why? Pershing Square Is Back,” wrote Jordan Cahn, a credit-default-swap trader at Morgan Stanley in an e-mail message to clients.

Nerds on Wall Street: Math, Machines and Wired Markets
by David J. Leinweber
Published 31 Dec 2008

Certain stocks are more predictable than others by these methods. Quantitative analysis tries to bring a great deal of this information into one place, assess which ideas apply, and determine how to combine them most effectively. Simply adding up the individual effects observed from splits or stock buybacks and so on does not give a very accurate answer. Many of these signals are strongly related to each other. When combined in a simple fashion, they can overstate a stock’s prospects in a major way. For example, we may find that stocks that have unexpected earnings growth outperform the market by 1 percent per month.

…

Their trading and option activity is a matter of public record. Some trading by insiders is simply to pay tuition or buy boats, but when all the insiders sell all at once it may be a sign that something is awry. Like analysts, certain insiders may prove to be more reliable indicators of future stock returns than others. Secondary equity offerings and stock buybacks. These are the corporate equivalents of insider trading as indicators. When a company buys back its own stock, it sends the signal that it believes this is the best use for its own capital. When a company issues additional equity, it sends a different signal. Companies buying back stock outperform, in aggregate, relative to new issuers and companies taking no actions.

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See keep it simple, stupid strategy language model eAnalyst, 56–58, 214–215 predicting the market, 57–59 tag cloud, xl LeBaron, Blake, 48 Lewis, Kevin, xxi–xxiii Li, Feng, 218–219 Lichstein, Henry, 154, 155, 189 LISP, 152 language, xxviii, 159–160, 179 LISP based machines, xxvi–xxvii, 162–163 LISP based trading systems, xxvii–xxviii, 160–161 Macsyma, 159–160 LISP Machines, xxvi–xxvii, 153 Lo, Andrew, 82 maximizing predictability, 131 Optimal Control of Execution Costs, 74 on profits, 97 load duration curve, 329–330 London Stock Exchange, 7, 33, 72 long portfolio, 120–123 Long Term Capital Management, 197, 280, 323 LSE See London Stock Exchange machine translation, 55, 85 Macsyma, 159–160 Malkiel, Burton, 89, 109 Map of the Market, 46–47, 246 marked to market, 284, 301 market data graphics, 33, 34–35 market impact, 111, 129, 203 modeling, 74–76 market inefficiency, 124–128 “common factor” analysis, 127 earnings forecast, 126 earnings surprises, 126–127 insider trading, 127 mergers and acquisitions, 127 secondary equity offerings, 127 sector analysis, 127 stock buyback, 127 stock split, 124–126 market maker, 29, 67, 166, 237 and market manipulation, 255 and message activity, 56, 237–239 automated, 67–68, 101 See also ATD market manipulation bluffing, 258–259 cyber-manipulations, 261–270 elements of success, 260–261 message boards, 239, 254–255, 256–58, 261–269 painting the tape, 256 using communication technology, 259–260 market neutral investing, 120–124 Index market neutral portfolio, 120–124 market transparency, 61, 281–287 lack of, 298 NMS, 41,49 MarketMind data feeds and databases, 173 hardware, 161, 175 information flows and displays, 168–173 intelligent editor, assistant, 167 QuantEx, 175–176 rule language, 169, 176 top-level design, 164 virtual charting, 166–167 Marketocracy, 232–233 MarkeTrac, 45 maximizing predictability, 190–191 MBS.

The Decline and Fall of IBM: End of an American Icon?
by Robert X. Cringely
Published 1 Jun 2014

For example, that borrowed $101 billion ($8 billion in the first quarter of 2014 alone), is a heck of a lot of money. What if IBM didn’t buy back shares at all, wouldn’t that $101 billion or $8 billion flow through as profit, or at least the interest paid (or not paid, in this case) would, right? Nope. “Money spent on a stock buy-back is not an expense on the P&L at all, ever, never,” said Ray. “Not having repurchased shares would not increase net income. Capital transactions do not flow through the income statement.” So what looks like a smoking gun might be smoking, but it isn’t a gun. “They seem to spend their net income each year buying back shares (plus or minus, but within a margin),” Ray continued.

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Otherwise corporations have over scaled influence on the political process, which allows for distorted public policy. And by the way, the benefits of such distortions aren’t evenly distributed throughout the corporate world: think tax breaks and subsidies embedded in targeted earmarks that go to a few –- sometimes a single — entity. Robb Allan / August 25, 2009 / 10:07 pm The price of stock buy-back The stock price is everything, but the motivation isn’t for the investors. The executives and the board get most of their compensation through options. This is why IBM borrowed more than $30 billion to buy back stock. It reduced supply and increased demand. Similarly, IBM contracted services has cut staffing so severely that basic commitments can’t be met.

Tech Titans of China: How China's Tech Sector Is Challenging the World by Innovating Faster, Working Harder, and Going Global
by Rebecca Fannin
Published 2 Sep 2019

For China’s top tech companies, it’s about “broadening their footprint and influence” by ploughing excess cash back into investments and building “vast constellations of satellites,” notes Sequoia Capital partner Mike Moritz. This acquisition-heavy approach differs from the largest US tech companies, which spend far more on stock buybacks and dividends, he points out. “Uber, Airbnb, and SpaceX may be hogging the limelight, but the undisputed gold medal leaders are the Chinese,” opines Moritz, noting the scale and acquisitiveness of China’s tech titans.1 The BAT’s Buying Binges For several years, China’s big three tech giants have been on a US buying binge, going after the gems.

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Chapter Two 1. Mike Moritz, “China Is Winning the Global Tech Race,” Financial Times, June 17, 2018; can be accessed through subscription at: ft.com/content/3530f178-6e50-11e8-8863-a9bb262c5f53. “Between 2015 and 2017, the five biggest US tech groups (especially Apple and Microsoft) spent $228 billion on stock buybacks and dividends. During the same period, the top five Chinese tech companies spent just $10.7 billion and ploughed the rest of their excess cash into investments that broaden their footprint and influence.” 2. Data from S&P Global Market Intelligence, customized research, accessed January 14, 2019; spglobal.com/marketintelligence/en/client-segments/investment-banking-private-equity. 3.

Bureaucracy
by David Graeber
Published 3 Feb 2015

After the changes in the seventies and eighties described in the introduction, all this changed. Corporate taxes were slashed. Executives, whose compensation now increasingly took the form of stock options, began not just paying the profits to investors in dividends, but using money that would otherwise be directed towards raises, hiring, or research budgets on stock buybacks, raising the values of the executives’ portfolios but doing nothing to further productivity. In other words, tax cuts and financial reforms had almost precisely the opposite effect as their proponents claimed they would. At the same time, the U.S. government never did abandon gigantic state-controlled schemes of technological development.

…

A Marxian approach to the same class realignment can be found in Gérard Duménil and Dominique Lévy’s Capital Resurgent: The Roots of the Neoliberal Revolution (Cambridge, MA: Harvard University Press, 2004), and The Crisis of Neoliberalism (Cambridge, MA: Harvard University Press, 2013). Effectively, the investor and executive classes became the same—they intermarried—and careers spanning the financial and corporate management worlds became commonplace. Economically, according to Lazonick, the most pernicious effect was the practice of stock buybacks. Back in the fifties and sixties, a corporation spending millions of dollars to purchase its own stock so as to raise that stock’s market value would have likely been considered illegal market manipulation. Since the eighties, as executives’ have increasingly been paid in stock, it has become standard practice, and literally trillions of dollars in corporate revenue that would in an earlier age have been sunk into expanding operations, hiring workers, or research, have instead been redirected to Wall Street. 21.

Lab Rats: How Silicon Valley Made Work Miserable for the Rest of Us
by Dan Lyons
Published 22 Oct 2018

Equal Employment Opportunity Commission had launched an investigation. The thing is, from 2012 to 2017, when IBM was firing all those American workers, the company was turning hefty profits and in fact generated $92 billion in cash. Where did the money go? IBM delivered most of the loot—about 80 percent—to investors, via dividends and stock buybacks, according to Toni Sacconaghi, an analyst at Sanford Bernstein, a Wall Street firm. Sacconaghi said IBM could have used that money to acquire other companies. IBM also might have launched new products and business lines. Instead IBM used the money to prop up its stock price. By buying back its own stock, IBM reduced the number of shares outstanding.

…

In effect, IBM used their wages to buy back shares and pump up the stock price. Why do that? Because the executives’ own compensation is tied to the stock. The trick didn’t really work; IBM stock has shed a third of its value from 2013 to 2018, plunging from $213 to $141. But who knows how much worse things could have been without the stock buybacks? As for management, the ploy worked out great. In 2017, the board awarded Rometty, the CEO, with a pay package worth $50 million, according to Institutional Shareholder Services, which advises big investors. This wasn’t the first time. “IBM’s CEO writes a new chapter on how to turn failure into wealth” was how Michael Hiltzik in the Los Angeles Times put it in January 2016 when Rometty raked in a $4.5 million bonus.

Lessons From Private Equity Any Company Can Use
by Orit Gadiesh and Hugh MacArthur
Published 14 Aug 2008

Samuel Johnson once observed, “The prospect of being hanged focuses the mind wonderfully.” Scarce cash forces managers to aggressively manage working capital and allocate capital expenditures with great discipline. Case in point: in August 2007, Nestlé surprised the market on the heels of stellar earnings by announcing an SF 25 billion stock buyback. Scarce cash also forces managers to work the rest of the balance sheet harder, using it as a dynamic tool for growth rather than a static indicator of performance. This means eliminating unproductive or underperforming capital, often by cutting pieces out of the business. It also may mean finding new ways to convert traditionally fixed assets into sources of financing.

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

As this last notes, ‘local authorities in the top 20 per cent for rates of health deprivation and disability have had their spending power cut by an average of £205 per head, 12 times the average reduction faced by those in the bottom 20 per cent’. 14. The Lazonick quotes come mostly from my Skype interview with him on 7 June 2017. See also Bill Lazonick, ‘Stock buybacks: From retain-and-reinvest to downsize-and-distribute’, Brookings Center for Effective Management, April 2015; and ‘The functions of the Stock Market and the Fallacies of Shareholder Value’, Brookings Center for Effective Management, 3 June 2017. Over the period 2004–2013, he said, 454 companies in the S&P 500 Index did $3.4 trillion in stock buybacks, representing 51 per cent of net income. These companies expended an additional 35 per cent of net income on dividends.

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Across the Atlantic, a study of 298 companies in the S&P Europe 350 share index found that they had spent a similar amount, a total of $3.28 trillion, on buying back their own stock and paying dividends to shareholders from 2000 to 2015. In 2015 they spent €350 billion – equivalent to 110 per cent of their net income – on shareholder dividends and stock buybacks. The comparable figure for the UK was 150 per cent. This is what Bank of England economist Andrew Haldane meant when he said firms were ‘eating themselves’.14 Given that much if not most corporate investment and employment happens in the UK’s regions, where the customers are, whereas the large majority of profits are realised in the London nexus, this generates the same overall pattern.

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity
by Douglas Rushkoff
Published 1 Mar 2016

“I would like to be wrong,” a flummoxed McAfee explained to MIT Technology Review, “but when all these science-fiction technologies are deployed, what will we need all the people for?”46 When technology increases productivity, a company has a new excuse to eliminate jobs and use the savings to reward its shareholders with dividends and stock buybacks. What would have been lost to wages is instead turned back into capital. So the middle class hollows out, and the only ones left making money are those depending on the passive returns from their investments. Digital technology merely accelerates this process to the point where we can all see it occurring.

…

Rewrite the Employee-Company Contract: Share Productivity Gains What’s most important, even more important than the increased worker efficiency enjoyed by companies with shorter weeks, is the improvement in the health, well-being, and satisfaction of the human beings these companies were built to serve. While passive investors should enjoy the benefits of increasing productivity, so, too, should those who invested sweat equity. Most companies still use increased productivity as an excuse to cut jobs and then pay the savings back to the shareholders as dividends or stock buybacks. It’s Corporatism 101, but ultimately a flawed, short-term approach—especially when productivity gains are spread across so many industries at once. Companies are amputating their human resources while also spoiling their own and everyone else’s customer base by taking away their jobs. And all the while, digital productivity gets blamed for the obsolete business model it’s accelerating.

The Impulse Society: America in the Age of Instant Gratification
by Paul Roberts
Published 1 Sep 2014

Wait, What” Washington Post, Dec. 30, 2013, http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/30/britains-chamber-of-commerce-says-corporations-should-share-their-new-prosperity-with-line-workers-wait-what/. 47. Eliezer Yudkowsky, “The Robots, AI, Unemployment Anti-FAQ,” LessWrong (blog), July 25, 2013, http://lesswrong.com/lw/hh4/the_robots_ai_and_unem ployment_antifaq/. 48. King, Ian and Beth Jinks, “Icahn seeks $150 million Apple stock buyback,” San Francisco Chronicle, October 1, 2013. http://www.sfgate.com/business/article/Icahn-seeks-150-million-Apple-stock-buyback-4860812.php. Chapter 7: In Sickness and in Wealth 1. “Benefits, Costs, and Policy Considerations of Proton Therapy,” Asco Daily News, June 1, 2013, http://am.asco.org/benefits-cost-and-policy-considerations-proton-therapy. 2. Dani Fankhauser, “Google Wants You to Live 170 Years,” Oct. 24, 2013, Mashable.com, http://mashable.com/2013/10/24/google-calico/; and Harry McCracken and Lev Grossman, “Google vs.

The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us
by Robert H. Frank, Philip J. Cook
Published 2 May 2011

We have argued that the explosion of CEO pay has resulted not from any imperfections in competitive forces, but rather from their in­ creasing intensity. The high cost of capital during the 1 980s led corpo- 70 The Winner-Take-AII Society rations to restructure themselves through leveraged buyouts and stock buyback programs. The corporate debt used to finance these pro­ grams was attractive because it could be serviced with before-tax dol­ lars (unlike profits on equity). Debt also removed much of the slack in corporate finances, forcing managers to focus on enhancing net worth rather than pursuing other goals.

…

J., 199, 206 Smith, Adam, 53, 54, 103-104, 1 19, 1 80, 1 8 1 , 201 Smith, Roger, 69 Soapbox derbies, 125-126 Social comparison process, 58-59, 7 1-72 Social norms, as positional arms control agreements, 172-177 Social Security Act, 1 82 Soros, George, 105 Sperber, Murray, 135 Spielberg, Steven, 61, 193 Spies, Richard, 155 Sports, 16, 17, 29-3 1 , 59, 88 anabolic steroid use, 10, 133-13 baseball, 8, 56, 80-8 1, 168, 1 69 basketball, 79, 8 1 , 1 04, 135, 137, 168, 169, 1 85 boxing, 25, 26, 1 1 5 college, 134-138, 170-17 1, 178 football, 6, 10, 137, 168171 gymnastics, 13 1-133 handball, 25, 26 Olympic Games, 17, 29, 56, 133, 134 positional arms control agreements in, 1 68- 1 7 1 runaway top incomes, 65--66, 79-82 on television, 6, 66, 79 tennis, 2-3 , 24, 38, 39, 56, 65-66, 1 14, 1 15, 1 85 training regimes, 13 1-133, . 136 Stade, George, 1 90 Stanford University, 152-154 Starving-artist syndrome, 1 10 Star \%rs (film), 73 State and local governments, 28, 30 Status, 4 1-42, 58, 1 12-1 14, 149-153 Steel, Danielle, 6-7, 65 Stemple, Robert, 69 Stillman, Alan, 42 Stock buyback programs, 70 Stone, Oliver, 1 90 Straus, Roger, 64 Success, aura of, 144-145 Success-breeds-success feature, 1 8-19 Sullivan, Ed, 78 Supply and demand, 32, 1 1 1 Supply-side economics, 20, 123, 216 Susann, Jacqueline, 1 40 Sykes, Charles, 12-13 Symbolic analysts, 55 Tabloid journalism, 195-196 Talent, misallocation of, 7-1 1 Talk-show journalism, 1 97 Tariff costs, 46, 50, 53 Tattoos, 175 Taxation, 15, 20-2 1 , 58, 121-123, 1 82, 1 83 , 212-2 18, 223, 224, 23 1 Index Teachtng loads, reduced, 165 Technological competition, 26-27, 33-35 Telecommunications, 47-49 Telephones, 48, 52, 95 Television industry, 6, 52, 60, 66, 73, 76-77, 79, 139-140, 190-193, 195, 1 96, 1 9 8-200, 202-203 , 206, 208-209, 228 Teruils, 2-3, 24, 38, 39, 56, 65-66, 1 14, 1 15, 1 85 Terman, Lewis, 2 1 9 Texaco, 3 1 Texas A&M University, 79 Texas Christian University, 136 Thatcher-Major administrations, 5-6 Thorn Birds, The (McCullough), 64 Thurow, Lester, 2 1 4 Tobin, James, 2 1 1-2 12, 230 Tort litigation, 97-98 reform of, 2 19-220 Tournament pay schemes, 146 1facking, 12, 158-160 1fagedy of the commons, 108, 121 1fansistor, 120 1fansportation costs, 46, 50, 53 mckIe-down theory of economics, 2 1 -22 'frucking industry, 56 Trump, Donald, 1 92 Tucker, A.

Essential: How the Pandemic Transformed the Long Fight for Worker Justice
by Jamie K. McCallum
Published 15 Nov 2022

When she sold those stocks, ostensibly to avoid a conflict of interest, she failed to disclose the sales, in violation of the STOCK Act, which restricts insider trading by members of Congress. She also had previously served on the boards of both a for-profit healthcare company accused of overbilling Medicare and a home builder embroiled in the subprime mortgage crisis.69 Consequently, the federal government subsidized big business’s stock buybacks, dividends, and executive salaries, all while failing to ensure that these same companies didn’t fire their workers or force them to work in unsafe conditions. The CARES Act shenanigans seem easily assigned to the Trump administration, but a closer look reveals that these provisions were decidedly bipartisan and often designed by the architects of corporate bailouts of the recent past.70 Although, constitutionally, revenue measures must begin in the House of Representatives, where the Democrats had the majority, the opposition party instead chose to write the CARES Act in the Republican-led Senate, where the Democrats would not set the terms of discussion.71 When it came time to vote, the Senate passed the bill 96 to 0, and the House passed it through a voice vote.

…

In the finalized CARES Act, $32 billion was granted to the airline industry with the stipulation that it could not furlough workers until September 30. Almost all of the money would go toward keeping flight attendants on the payroll and connected to their health insurance. Additionally, the union made sure that the grants were tied to a cap in executive pay and a ban on corporate stock buybacks. It was one of the first times in history that such a sizable bailout package was brokered on such favorable terms for workers. The determination of her union’s members was critical to this win. “There was just a consciousness in our workplace that you don’t have this job without a union,” Nelson told me.

Sickening: How Big Pharma Broke American Health Care and How We Can Repair It
by John Abramson
Published 15 Dec 2022

(Those inclined to defend Big Pharma’s U.S. pricing might argue that this still doesn’t prove that U.S. prices are not fair; but, as will be shown, the drug companies are drowning in so much surplus revenue, beyond what is needed to fund R&D, that they are investing massive amounts of money in stock buybacks and dividends.) So it’s not true that the exorbitant drug prices in the United States are necessary to enable drug companies to continue to develop new drugs at the same pace. To be fair, responsibility for the pricing problem does not belong to the manufacturers alone. Drugs (like Nexium, discussed in the previous chapter) that are on patent but don’t offer meaningful advantage over much less expensive alternatives provide pharmaceutical benefits managers (PBMs, the middlemen between the manufacturers and consumer health plans) with the opportunity to extract large rebates from manufacturers.

…

PhRMA’s PR campaign against the bill to limit drug prices in the United States shows just how shameless drug companies are willing to be to protect their excess profits. The $456 billion that the bill would save over ten years — ostensibly causing a “nuclear winter” in drug innovation — was dwarfed by the $577 billion the drug industry had awarded its investors in the form of stock buybacks and dividends in just the five years between 2016 and 2020. To be clear, PhRMA was threatening the public with dire health consequences if legislation brought exorbitant drug prices back in line with prices in other wealthy countries, yet at the same time its companies were skimming off more than twice as much for their investors!

The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market
by Tobias E. Carlisle
Published 13 Oct 2017

Buffett bought the stock at a big discount to its value and sold when the market pushed the price up to the value. The workouts were stocks on a timetable. They did not wait on market action. Some other force put these stocks on a rocket sled. That force was a corporate action, a board-level decision that delivered a big return of capital or stock buyback, a liquidation, or a sale of the business. If a general—one of Buffett’s undervalued stocks—stayed undervalued for too long, it might become a control situation. Buffett would simply keep buying until he owned enough to control the company. Dempster started out as just another undervalued stock.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

On December 9, 2014, U.S. bank regulators used the provisions of Dodd-Frank to impose stricter capital requirements, called a “capital surcharge,” on the eight largest U.S. banks. Until big banks meet the capital surcharge requirement, they are prohibited from paying cash to stockholders in the form of dividends and stock buybacks. This prohibition is ice-nine applied to bank stockholders. The ice-nine in Cat’s Cradle threatened every water molecule on earth. The same is true for financial ice-nine. If regulators apply ice-nine to bank deposits, there will be a run on money market funds. If ice-nine is applied to money market funds also, the run will move to bond markets.

…

Yet Fisher, and the like-minded Charles Plosser of the Philadelphia Fed, had intuitive, even populist reasons for raising rates. These reasons had in part to do with the unfairness of not giving depositors a decent return on their money while Wall Street bankers used easy money to enrich themselves with leveraged stock buybacks. Stein was subtler. He saw inside the machine. Stein knew that asset swaps—an exchange of junk collateral for good collateral so the exchanging party could pledge good collateral in another deal—were adding hidden leverage. He understood that increased regulation was driving disintermediation—so-called shadow banking—making it worse than what collapsed in 2008.

Pandemic, Inc.: Chasing the Capitalists and Thieves Who Got Rich While We Got Sick
by J. David McSwane
Published 11 Apr 2022

The parent company of Ruth’s Chris Steak House, a high-end dining chain with 5,000 employees, was among the first to disclose that it received $20 million through Chase, just four days after the SBA launched the program. Ruth’s Hospitality Group Inc. had reported $42 million in profits the year before and distributed $41 million back to shareholders in stock buybacks and dividends. Potbelly Sandwich Shop got $10 million. Shake Shack, which had as much as $100 million in cash on hand, received $10 million. Large hotel companies, exploiting a loophole in the program, collected tens of millions in loans through subsidiaries and franchised properties. Following public scrutiny and warnings from lawmakers and the Treasury Department, many of the loans would be returned by companies, including Ruth’s Chris, Potbelly, and Shake Shack.

…

Because of COVID and enormous buy-in from the federal government, the company’s valuation ballooned from less than $6 billion in 2019 to nearly $129 billion by the fall of 2021. From the beginning of 2020 to the middle of August 2021, when it peaked at about $484 a share, Moderna’s stock price increased a whopping 2,419 percent. Just before the stock peaked, the company announced a $1 billion stock buyback program, cashing investors out at a stock price some analysts believed to be overhyped. This maneuver extracted cash almost entirely attributable to taxpayer money and rewarded it to company executives and shareholders. Moderna also benefited from other public investments besides the mRNA innovation, including from direct partnership with the National Institutes of Health.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

Even if a company pays very small dividends today and retains most (or even all) of its earnings to reinvest in the business, the investor implicitly assumes that such reinvestment will lead to a more rapidly growing stream of dividends in the future or alternatively to greater earnings that can be used by the company to buy back its stock. The discounted value of this stream of dividends (or funds returned to shareholders through stock buybacks) can be shown to produce a very simple formula for the long-run total return for either an individual stock or the market as a whole: Long-Run Equity Return= Initial Dividend Yield + Growth Rate. From 1926 until 2010, for example, common stocks provided an average annual rate of return of about 9.8 percent.

…

The shareholder benefit was created by tax laws. The tax rate on realized long-term capital gains has often been only a fraction of the maximum income tax rate on dividends. Firms that buy back stock tend to reduce the number of shares outstanding and therefore increase earnings per share and, thus, share prices. Hence, stock buybacks tend to create capital gains. Moreover, capital-gains taxes can be deferred until the stocks are sold, or even avoided completely if the shares are later bequeathed. Thus, managers acting in the interest of the shareholder will prefer to engage in buybacks rather than increasing dividends. The flip side of stock repurchases is more self-serving.

The Four Pillars of Investing: Lessons for Building a Winning Portfolio
by William J. Bernstein
Published 26 Apr 2002

When inflation is factored in, from 1950 to 1975, annualized earnings growth was 2.22%, and from 1975 to 2000 it was 1.90%. Clearly the rapidly accelerating trend of earnings and dividend growth frequently cited by today’s New Era enthusiasts is nowhere to be seen. This analysis also demolishes another one of the supposed props of current stock valuations: stock buybacks, which should also increase per-share stock dividends. This is what is actually plotted in Figure 2-4. Figure 2-4. Nominal earnings and dividends, S&P 500. (Source: Robert Shiller, Yale University). • Bogle’s speculative return—the growth of the dividend multiple—could continue to provide future stock price increases with further growth of the dividend multiple.

…

Financial Corporation, 83 CNBC, 219, 224 Coca-Cola, 166 Cohen, Abby Joseph, 169 Coke, 151 College, saving for, 240 Commercial paper, 260 Commissions brokers, 195–202 financial advisors, 293–294 impact on investment, 4, 5 mutual fund costs, 94–95 Common Sense on Mutual Funds (Bogle), 224 Common Stocks as Long Term Investments (Smith), 65 Company characteristics cyclical companies and risk, 64, 277-278 default and bankruptcy, 69–70 great company/great stock fallacy, 173–175 quality and returns, 34–38 size and returns, 32–34 stock buy-backs, 55, 60 Compound interest, 4 “Consols,” Bank of England, 14–16, 17, 19 Contrarian Market Strategy: The Psychology of Market Success (Dreman), 87 Cooley, Philip L., 231 Corporate bonds, high-quality, 260 Country club syndrome, 178–179, 187 Cowles, Alfred III, 76-78, 87 Cowles Foundation, 77 Crash, stock market, benefits of, 61–62, 62, 145–148, 160–161 Credit market, historical perspective, 6–7 Credit Mobilier scandal, 145 Credit risk, 13, 69–70 CRSP 9-10 Decile index, 248 CRSP (Center for Research in Security Prices), 88 Cubes ETF, 217, 254 Currency gold vs. paper, 16–18 volatility of, 71 Cyclical companies and risk, 64 DaimlerChrysler, 150 Dallas Morning News, 222 Danko, William, 239 DCA (dollar cost averaging), 282–283 “Death of Equities,” Business Week, 154–157 Death on (amortized) schedule, 230–231, 235 Default rate, companies, 69-70, 150n1 “Defined benefit” plan, 212 Defoe, Daniel, 135 Deutsche Bank, 210 Devil Take the Hindmost (Chancellor), 224 DFA (Dimensional Fund Advisors), 81, 103, 123, 216, 257 Digital Equipment, 151 Dimensional Fund Advisors (DFA), 81, 103, 123, 216, 257 Discount brokerage, 199 Discount rate (DR) and Dow Jones Industrial Average, 48-54 explained, 46–47 Gordon Equation, 53–62 vs. present value, 46–48 stock price, 62–63 “true value” of Dow, 51–53 Discounted dividend model (DDM) Dow Jones Industrial Average, 48–54, 49–50 explained, 43–48 real returns and, 68–69 Disney, 158, 166 Displacement, Minsky’s, 136, 140, 144, 145, 148, 149, 152 Diversification and rebalancing, 287–288 Diversified individual stock portfolio, 99-102 Dividend multiple, 57–58, 60–61 Dividends of Dow, 48-51 Gordon Equation, 54–55 growth and retained earnings, 59–60 and real returns, 67–72 stock market crash, as future possibility, 61–62 Diving engines, mania, 134–135 Dollar cost averaging (DCA), 282–283 Dot-com (See Internet/dot-com) Double dipping (broker), 196 Dow 36,000 (Glassman and Hassett), 53, 264 Dow Jones Industrial Average and discounted dividend model (DDM), 48–54, 49–50 DR [See Discount rate (DR)] Dreman, David, 87 Duke of Bridgewater, 141 Dulles, John Foster, 148 Dunn’s Law, 97–98, 102, 215 Durant, William Crapo, 148 Duration of returns, and retirement planning, 237–239 EAFE (Morgan Stanley Capital Index Europe, Australia, and Far East), 33, 109, 117–119 Earnings expectations of growth stocks, 173–175 retained, 59–60 without dividends, 55 East India Company, 142–143 Easy credit, and bubbles, 136 Econometric Society, 77 Econometrica, 77 Edison, Thomas, 132–133 Edison Electric, 133 Edleson, Michael, 283, 285 Education of brokers, 192, 194–195, 200–201 Efficient market hypothesis, 88 Efficient Solutions (software), 235 Ellis, Charles, 61, 96, 214, 225, 244 EMC Inc., 57 Emergencies, saving for, 240 Emerging markets, 31, 37, 38, 72, 94, 95, 124, 125, 156, 188, 255, 257, 268, 272, 274, 276, 283 England (See Britain) Enron, 161 Entertainment, investment as, 171–172, 183-184 Equities (See Stocks) ETFs (exchange-traded funds), 216, 217, 254, 255 eToys, 57 Euphoria, and bubbles, 136 European interest rates, historical perspective, 8–13 Exchange-traded funds (ETFs), 216, 217, 254, 255 Expected returns growth stocks, 173–175 long-term, 55, 70, 71 myopic risk aversion, 172-173, 184-185 overconfidence, 167–169, 181–183 vs. real returns, 68–69 Expense ratio (ER) in mutual fund costs, 94–95 Expenses (See Fees and expenses) Extraordinary Popular Delusions and the Madness of Crowds (Mackay), 151 Fair value of stock market, 47-53 Fama, Eugene, 37, 88-89, 120-121, 186, 257 Federal Reserve Bank, 146, 152, 159, 176 Fee-only financial advisors, 294 Fees and expenses, 401(k), 211–213 Fees and expenses, mutual funds differences in funds, 209–211 Forbes Honor Roll, 222 front load, 207 index funds, 245, 250, 254 load, 79, 203–205, 216 management fees, 206 no-load, 205–206, 215 Fidelity Capital Fund, 83 Fidelity Dividend Growth Fund, 207 Fidelity Magellan, 91–93, 97 Fidelity mutual funds, 205, 207–209, 210 Fidelity Select Technology Fund, 207–209 Fidelity Spartan funds, 216 Fiduciary responsibility of broker (lack of), 192 Financial Analysts Journal, 244 Financial calculator, 230, 237 Financial goals, 229, 239–240 First Quadrant, 88 Fisher, Irving, 43–48, 56, 229 Folios, 102 A Fool and His Money (Rothchild), 224 Forbes, Malcolm, 87–88 Forbes Honor Roll, 222 Forecasting Cowles and, 76-79, 87 investment newsletters and, 77, 78, 86, 87 Foreign stocks and returns asset allocation in portfolios, 116–120, 255–257, 256 growth vs. value stocks, 36–37 stability, societal, 29–32 tax efficiency of, 264 Fortune, 213, 221 Fouse, William, 95-97 French, Kenneth, 33–34, 35–37, 120 Fuller, Russell, 174 Galbraith, John Kenneth, 148 Gambling, 171–172 Garzarelli, Elaine, 169 GDP (gross domestic product) and technological diffusion, 132-133 GE (General Electric), 33, 244 General Electric (GE), 33, 244 General Motors, 65 Gibson, Roger, 225 Gillette, 151 Glass-Stegall Act, 193 Glassman, James, 53, 264 Global Investing (Brinson and Ibbotson), 225 Global stocks (See Foreign stocks) GNMA fund, Vanguard, 216 Go-Go years (1960-1970), 83, 148–151 Goetzmann, William, 30 Gold, (precious metals stocks), 123–124, 155 Gold mining, 69 Gold standard, 16–18, 145–146 Goldman Sachs Corporation, 147–148, 169 Goldman Sachs Trading Corporation, 148 Gordon Equation, 53–62, 192 Government securities, 259–260 Graham, Benjamin Depression-era mortgage bonds, 185 Hollerith Corporation, later IBM, 78 on income production, 44 on investor’s chief problem, 165 pre-1929 stock bubble, 57 Security Analysis, 157–158 Graham, John, 87 Grant, James, 224–225 Great company/great stock fallacy, 173–175, 185 Great Depression fear of short-term losses, 172–173 Fisher’s gaffe, 43 Graham on, 157–158 impact of, 5–6 manias, history of, 145–148 societal stability and DR, 64–65 Great Man theory, 95–96 Greenspan, Alan, 246 Gross domestic product (GDP) and technological diffusion, 132–134 Growth stocks (“good” companies) asset allocation, 247, 248–255, 251–253 earnings expectations of, 173–175 Graham on, 158 returns of, 34-38 “Gunning the Fund,” 207-209 Halley, Edmund, 138 Hammurabi, 7 Hard currency (gold), 16-20 Harrison, John, 142–143 Harvey, Campbell, 87 Hassett, Kevin, 53, 264 Hedge funds, 178–179 Herd mentality and overconfidence, 166-176, 181, 182 Hewlett-Packard, 158 High-quality corporate bonds, 260 High Yield bonds, 69–70 “Hindsight bias,” 8 History of investing and returns (Pillar 2), 127–162 about, xi, 296 ancient, 6–9 bonds, 13–22 European, middle ages to present, 9–13 on risk, 11-13, 22-29, 38-39 stocks investing in U.S., 4–6 outside U.S., 29–32 prior to twentieth century, 20 twentieth century, 20–22 summary on risk and return, 38-39 Treasury bills in twentieth century, 20–22, 23 Hollerith Inc., later IBM, 78 House, saving for, 240 Hubbard, Carl M., 231 IAI, 211 Ibbotson, Roger, 225 IBM (International Business Machines), 78, 83, 150, 151 Immediate past as predictive, behavioral economics, 170–171 “Impact cost,” mutual funds, 84, 85, 92, 94, 208, 211 Impatience, societal, and discounted dividend model (DDM), 46 “In-Between Ida,” asset allocation example, 269-271 Income production and discounted dividend model [discounted dividend model (DDM)], 43–73 Index fund advantages of, 95-105 bonds, 257–263, 258–259 defined, 97 exchange-traded funds (ETFs), 216, 217, 254, 255 performance and efficient market hypothesis, 95–98, 102–104 vs. performance of top 10% funds, 81 sectors in portfolio building, 122–124, 250, 251–253 tax efficient, 99 INEPT (investment entertainment pricing theory), 172 Inflation bond performance, 16-20 and gold standard, 16–18 government response to, 19–20 inflation risk, 13 and stocks, 20, 24 Inflation-adjusted returns earnings growth, 60 stocks, bonds and bills, 19, 20–22 young savers, 237–239 Inflation risk, 13 Information speed of transmission, 131 and stock prices, 89–90 Initial public offering (IPO), 134, 172 In Search of Excellence (Peters), 64 Instant gratification and discounted dividend model (DDM), 46 The Intelligent Asset Allocator (Bernstein, W.), vii, 110 Interest-rate risk, 13 Interest rates in ancient world, 6-8 annuity pricing, 10-12, 13 and bond yields, 10, 16-20 bonds and currency, changes from gold to paper (1900-2000), 17–19 as cultural stability barometer, 8–9 European, 8-13 Fisher’s discount rate (DR), 46–47 historic perspective on bills and bonds, 9-15 risk, 13 International Business Machines (IBM), 78, 83, 150, 151 Internet Capital Group, 152 Internet/dot-com as bubble, 151–152, 153, new investment paradigm, 56–58 Invesco mutual funds, 205 Investment vs. purchase, 45 vs. saving, 134, vs. speculation, 44, 157 Investment advisors (See Advisors, investment) Investment and Speculation (Chamberlain), 157 Investment Company Act of 1940, 161, 203, 213, 217 Investment entertainment pricing theory (INEPT), 172 Investment newsletters, 77, 78, 87 Ip, Greg, 167 IPO (initial public offering), 134, 172 iShares, 251-253, 257 Japan dominance in late 1970s, 66–67, 181–182 technical progress and diffusion, 132 Jensen, Michael, 78–80, 214 Johnson, Edward Crosby, II, 83, 91 Johnson, Edward Crosby, III (“Ned”), 194, 207, 208, 210 Jorion, Phillippe, 30 Journal of Finance, 80, 225 Journalist coverage, 219–225 JTS (junk-treasury spread), 70 Junk bonds, 69–70, 150n1, 260, 263, 283, 288-289 Junk-treasury spread (JTS), 70 Kahneman, Daniel, 166 Karr, Alphonse, 162 Kassen, Michael, 207, 219 Kelly, Walt, 179 Kemble, Fanny, 143 Kemper Annuities and Life, 205, 210 Kemper Gateway Incentive Variable Annuity, 205 Kennedy, Joseph P., Sr., 147 Keynes, John Maynard, 41-42, 18, 221 Kindleberger, Charles, 136–137 Kmart, 34–35 Ladies Home Journal, 65 Large company stocks asset allocation, 244–255, and Fidelity Magellan Fund, 92 rebalancing, 289–290 returns, 32-34, 38, 72 Law, John, 137–138 Leinweber, David, 88 Leveraged buyouts, 150n1 Leveraged trusts, 147–148 Lipper, Arthur, 83 Litton, 149–150 Load funds fees, mutual funds, 79, 196, 203–205, 216 Long Term Capital Management, 129, 179 Long-term credit (See Bonds) Long-term returns asset classes, 16-39 bonds, in asset allocation, 113–114 expected, in asset classes, 70, 71 Gordon Equation, 53–62, 192 stocks, 20-39 LTV Inc., 83 Lumpers vs. splitters in asset mix, 247, 248–255, 251–253 Lynch, Peter, 91–93 Mackay, Charles, 151 Malkiel, Burton, 55, 224 Management fees, mutual funds, 206, 209-211 Manhattan Fund, 83–84 Manias, 129–152 about, 129–130 bubbles (See Bubbles) identification, 153 Internet, 151–152, 153 Minsky’s theory of, 136, 140 new technology, impact of, 130–134 1960-1970 (Go-Go years), 148–151 railroads, 143-145, 158, 159–160 Roaring Twenties, 145–148, 153 space race, 149–150 Margin purchases, 147–148 Market bottom, 153–162 about, 153–154 as best time to invest, 66 buying at, 283 “Death of Equities,” 154–157 Graham on Great Depression, 157–161 panic, 161–162 Market capitalization, 33, 123, 245 Market impact, mutual fund costs, 82, 94–95, 208 Market strategists, 87, 169, 176, 186, 219 Market timing, 87–88, 108, 220 Market value formula, 52 McDonald’s, 150, 158 Mean reversion, 170 Mean variance optimizer (MVO), 108 Media, 219–225 Mellon Bank, 96 Mental accounting, 177, 186 Merrill, Charles Edward, 193–194, 213 Merrill Lynch, 88, 193–194, 200 Microsoft, 59, 166, 185 Miller, Merton, 7 “Millionaire,” origin of term, 138 The Millionaire Next Door (Stanley and Danko), 239 Minding Mr.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips
Published 31 Mar 2008

By such a strategy, “an economic policy that aims to achieve growth by wealth creation therefore does not attempt to increase the production of goods and services, except as a secondary objective.”43 Alan Greenspan, too, had wondered whether wealth still required any kind of manufacturing. Ten years later, most of the other major wealth strategies pursued in the financial sector also involved asset values and rearrangements: private equity and leveraged buyouts, corporate stock buybacks, and mergers and acquisitions. In contrast to the old corporate outlays that used to bestow major benefits on communities and workers, the new ones favored few but investors and shareholders. In addition to being major profit centers, these transactions also fed the upward momentum of the various national stock indexes, derivatives of which were another big business.

…

Ironically, these companies cannot defend themselves with the truth, which is that they are losing much of their former golden-age influence to the much-better-positioned state-run national oil companies. During 2007, support for this downbeat assessment came from such disparate sources as Bloomberg News and oilman T. Boone Pickens. The latter, a peak-oil believer, contended that the stock buybacks by ExxonMobil, Chevron, and other companies were “telling the market that we can’t grow.” Pretty soon, he said, “the reserves will be gone and they’re going to be refiners and processors.”28 Should Chevron keep buying back its stock at current rates, the company would be close to liquidation by 2023.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

Its proponents made big promises about soaring investment and wages, and also assured everyone that it would pay for itself; none of that has happened. Yet coverage actually hasn’t been negative enough. The story you mostly read runs something like this: the tax cut has caused corporations to bring some money home, but they’ve used it for stock buybacks rather than to raise wages, and the boost to growth has been modest. That doesn’t sound great, but it’s still better than the reality: no money has, in fact, been brought home, and the tax cut has probably reduced national income. Indeed, at least 90 percent of Americans will end up poorer thanks to that cut.

…

W., 306 Bush, George W., 276, 381 and election (2000), 387 on health care, 47 as movement conservative, 299, 301 and national security, 306 and taxes, 215–16, 229, 299 Bush, Jeb, 60, 381 Bush (W.) administration: authoritarianism of, 301 bait-and-switch tactics of, 378–79, 387 compared to that of Trump, 9, 13 corruption of, 343 disdain for rule of law, 301 dishonesty of, 9, 25, 26–27, 93, 343, 377–78, 389 functions outsourced by, 299–300 general incompetence of, 300 and income distribution, 271 and Iraq war, 13, 26, 27, 299, 343, 381 reliance on elite consensus, 14 on Social Security privatization, 14–15, 22–24, 25–27, 28–29, 32, 302, 306, 361, 377, 378 tax cuts by, 16–17, 20, 26, 50 torture authorized by, 300 voting rights curtailed by, 300 business decisions, 227–28 California: health care in, 77 housing bubble in, 84 taxes in, 216, 229 Canada: health care in, 36, 45, 47, 48–49 imports from, 253, 255 unions in, 290 Cantor, Eric, 302–4, 386 cap-and-trade system, 339 Capital Asset Pricing Model (CAPM), 135–36 capital gains: on houses, 87, 274 and income inequality, 273–74 inflation component of, 273 capitalism, voter confusion about, 320 capital market, 228 Capitol Hill Baby-Sitting Co-op, 137–38 carbon emissions, tax on, 339 Carter, Jimmy, 276 Cato Institute, 22, 23, 317, 320 caution, risk of, 104, 106, 107, 116–17 Cavuto, Neil, 44 Census data, 262–65, 263 capital gains omitted from, 264 Current Population Survey, 263, 264 and income distribution, 265–66, 266 top-coding, 264, 265 Center for a Responsible Federal Budget (CRFB), 193 central banks, 103–4, 124, 128, 133, 181, 182, 409–10 centrists, 308 belief in symmetry between left and right, 28, 29, 309 double standards of, 208–9 influence of, 28 and public opinion, 298, 306 Century Foundation, 22 CEOs, compensation for, 259, 262, 265 Chandler, Raymond, The Simple Art of Murder, 327 Charity Watch, 388 Chávez, Hugo, 324 Cheney, Dick, 300, 381 Chicago School, 131, 143–44 child care, proposals on, 210, 211, 212 Chile, retirement system in, 22, 23 China: economy of, 324 U.S. trade with, 252, 254, 255 cholera, 81 Civil Rights Act (1964), 53 civil rights movement, 346 classless society, myth of, 285 climate change, 327–28 and alternative energies, 340 and corruption, 337 deniers of, 329–31, 332–34, 335–37, 365 and fossil fuels, 333, 336 global temperatures in, 330 greenhouse gases as a cause of, 330, 335, 339–40 and Green New Deal, 328, 338–40 “hockey stick” graph on, 328, 336 politicization of, 4 positive incentives in, 340 transition industries in, 340 and tropical storms, 330 Climategate, 336 Clinton, Bill: Gingrich’s attacks on, 362 and health care (1993), 35, 37, 50, 378 and income inequality, 271 smear tactics against, 380 and taxes, 7, 215 Clinton, Hillary: and election (2016), 376, 388–89 and health care, 50, 51–52 and income inequality, 291 smear tactics against, 380 Trump vs., 336, 343 Clinton Foundation, 388 “Closing the Skills Gap” (Dimon and Seltzer), 166–68 Coal and Steel Community (1952), 175 coal-fired power plants, 331 coal mining, 289, 340 Cochrane, John H., 131, 138, 143 cockroach ideas, 329 Cohen, Michael, 359 Cohn, Jonathan, 300 coins: gold and silver, 411, 412 college graduates, earnings of, 282, 283 Collins, Susan, 360 Comey, James, 336, 343 Coming Apart: The State of White America, 1960–2010 (Murray), 285–86 Commission on Economic Security (1934), 26 Common Market (1959), 175 Commonwealth Fund, 48 competition: imperfect, 400 perfect, 402 “confidence fairy,” belief in, 158, 160, 161 Congressional Budget Office (CBO), 19, 29, 54, 59, 195–96 budget and economic outlook of, 115–16 Green Book of, 265 and income inequality, 265–66, 266, 272–74, 285 and Ryan plan, 201, 202 Conscience of a Conservative, The (Goldwater), 300 conservatism: ambition of practitioners, 151 bad faith of, 7, 8, 10, 75, 149–51, 332–33 and bipartisanship, 198 compassionate conservatism, 378 confusion about socialism in, 323 democracy rejected by, 369 disinterest in good government, 300 and income inequality, 261–62, 266, 271–75 and Keynesian economics, 124 moral and intellectual decline of, 262 movement conservatism, 8, 297–98, 299–301, 302–4, 307, 343, 368 Orwellian instincts in, 281 permanent rule by, 13 Republican, see Republican Party taking credit for growth, 275–76 uses and abuses of statistics by, 262 wing-nut welfare as safety net for, 303 conservative professional economists, 149–51 conspiracy theories, 150, 337, 343, 345–46, 365 Constitution, U.S., 301 containerization, 289 Cornyn, John, 346 corporate profits, 228, 232–33 corporate taxes: avoidance vs. evasion of, 349 cuts in, 201, 202, 218, 221, 222, 227, 229, 230, 231–33, 232, 351 and stock buybacks, 227, 230 corporations: “bringing money home,” 230 cooking their books, 228, 230–31, 231 global, 231–32 profits to foreign nationals, 232–33 and trade war, 371 unrestricted power for, 318 corruption: and Bush administration, 343 and climate change, 337 in Europe, 358 in financial services, 92, 93 in highly unequal societies, 283, 324, 349–50, 358 and Republican Party, 335–37, 338, 343, 358 in trade policy, 246, 247, 254, 255 of Trump administration, 70, 246, 331, 338, 343, 349, 350 “Cost of Bad Ideas, The” (Krugman), 123–25 Council of Economic Advisers, and CEA calculation, 271–72 Cox, Christopher, 93 credit, 89, 90, 104 “Cruelty Caucus, The” (Krugman), 65–66 Cruz, Ted, 57, 225 Cruz amendment, 69 cryptocurrencies, 411–14 Crystal, Graef, 265 In Search of Excess, 262 Cuccinelli, Ken, 336 currency, 412–14 fiat, 412, 414 optimum currency areas, 177 Customs and Border Protection, 371 debt: and austerity policies, 97–99, 163–65, 203–4, 207–8 fear of, 107, 116 and G.D.P., 154, 204–5, 205 interest rates on, 204, 211 magic threshold of, 158, 385 overrated as issue, 194, 206, 208 problematic, 153 and sustainable growth rate, 153–54, 204 and taxes, 154, 222–23, 224–26 tipping point of, 165 and total wealth, 154 Trump’s SOTU on, 207–9 winter of, 203–6 “debt scolds,” 204, 205, 206 “deficit scolds,” 194, 207, 209 deficit spending, 153, 218 deleveraging, 97 DeLong, Brad, 131, 143–44, 270, 316, 407 democracy: threats in Europe to, 188, 189, 344, 346, 358, 359 threats in U.S. to, 366, 367–69 Democratic Party: basic values of, 366 center-left position of, 28, 306, 310 and civil rights, 310 future plans for, 338 and Green New Deal, 338–40 and health care, 36, 55, 77, 78 House majority of, 338 impact in state governments, 77, 78 as loose coalition of interest groups, 297, 368 and midterm elections, 76, 194, 338, 344, 367 policy analysis by, 73 social democratic aspect of, 313–14, 321 and Social Security, 29, 30 subpoena power of, 338 De-Moralization of Society (Himmelfarb), 285–86 Denmark, economy of, 184, 239, 313, 317, 319–21, 323 deregulation, 370, 371, 409 derivatives, 135 “Developing a Positive Agenda” (Krugman), 35–37 Dew-Becker, Ian, 283 Diamond, Peter, 234–35, 236 diminishing marginal utility, 235 Dimon, Jamie, 166 dishonesty, power of, 324 “Dismal Science, The” (Krugman), 393–94 Dixit, Avinash K., 396–98, 405 dollar, international value of, 228 Donors Trust, 333 “Don’t Blame Robots for Low Wages” (Krugman), 260, 288–90 dot-com bubble, 90 double talk, political, 222, 225–26 Dow 36,000 (Gleason and Hassett), 84, 86 Draghi, Mario, 181–83 dumping, and tariffs, 252 Duncan, Greg, 277 economic analysis, importance of, 383–84, 386, 400 economic freedom, 317–18, 317 economic geography, 398–99, 400, 403 economic growth: (1982–1984), 215 long-term, 275–76 post–World War II, 219, 234 so-so, 315 taking credit for, 275–76 and taxes, 236–37, 236 economic models: Arrow-Debreu model, 402 CAPM, 135–36 Heckscher-Ohlin, 400–401, 403 importance of, 400 as metaphors, 400, 402 minimalist, 403 monopolistic competition models, 396–98 and neoclassical theory, 140 purposes of, 112 economic policy, failure of, 407 economics: behavioral, 146 easy questions in, 6 golden era of, 130–31 Keynesian, see Keynesian economics mathematics in, 131 monetary, 176 “neoclassical,” 132, 133, 139–40, 147 and politics, 149–51 “positive” vs.

Financial Statement Analysis: A Practitioner's Guide
by Martin S. Fridson and Fernando Alvarez
Published 31 May 2011

To obtain a true picture of the company's long-range financial condition, the analyst must somehow factor in the income statements for the fourth and fifth years of the construction project. These are far more difficult to forecast than first- or second-year results, which reflect cyclical peak borrowings and interest costs. Radical financial restructurings also necessitate multiyear projections. Examples include leveraged buyouts, megamergers, and massive stock buybacks. The short-term impact of these transactions is to increase financial risk sharply. Often, leverage rises to a level investors are comfortable with only if they believe the company will be able to reduce debt to more customary levels within a few years. Sources of debt repayment may include both cash flow and proceeds of planned asset sales.

…

The higher the portion retained, the more book value is accumulated per share and the higher can be the EPS growth rate. By this reasoning, the following formula is derived: As mentioned, the one remaining way to increase earnings per share, after exhausting the possibilities already discussed, is to reduce the number of shares outstanding. During the 1990s, a number of companies used stock buybacks to maintain EPS growth in the face of constrained opportunities for revenue growth. Between 1995 and 1999, International Business Machines spent $34.1 billion to repurchase shares, more than its cumulative net income for the period of $31.3 billion. By reducing its shareholders’ equity through stock purchases, IBM increased its leverage and, therefore, its financial risk.

The Intelligent Investor (Collins Business Essentials)
by Benjamin Graham and Jason Zweig
Published 1 Jan 1949

Better yet, unlike a dividend, a buyback is tax-free to investors who don’t sell their shares.15 Thus it increases the value of their stock without raising their tax bill. And if the shares are cheap, then spending spare cash to repurchase them is an excellent use of the company’s capital.16 All this is true in theory. Unfortunately, in the real world, stock buybacks have come to serve a purpose that can only be described as sinister. Now that grants of stock options have become such a large part of executive compensation, many companies—especially in high-tech industries—must issue hundreds of millions of shares to give to the managers who exercise those stock options.17 But that would jack up the number of shares outstanding and shrink earnings per share.

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Two surprising factors are at work: Companies get a tax break when executives and employees exercise stock options (which the IRS considers a “compensation expense” to the company).20 In its fiscal years from 2000 through 2002, for example, Oracle reaped $1.69 billion in tax benefits as insiders cashed in on options. Sprint Corp. pocketed $678 million in tax benefits as its executives and employees locked in $1.9 billion in options profits in 1999 and 2000. A senior executive heavily compensated with stock options has a vested interest in favoring stock buybacks over dividends. Why? For technical reasons, options increase in value as the price fluctuations of a stock grow more extreme. But dividends dampen the volatility of a stock’s price. So, if the managers increased the dividend, they would lower the value of their own stock options.21 No wonder CEOs would much rather buy back stock than pay dividends—regardless of how overvalued the shares may be or how drastically that may waste the resources of the outside shareholders.

…

Fenn and Nellie Liang, “Corporate Payout Policy and Managerial Stock Incentives,” Journal of Financial Economics, vol. 60, no. 1, April, 2001, pp. 45–72. Dividends make stocks less volatile by providing a stream of current income that cushions shareholders against fluctuations in market value. Several researchers have found that the average profitability of companies with stock-buyback programs (but no cash dividends) is at least twice as volatile as that of companies that pay dividends. Those more variable earnings will, in general, lead to bouncier share prices, making the managers’ stock options more valuable—by creating more opportunities when share prices will be temporarily high.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

Even if a company pays very small dividends today and retains most (or even all) of its earnings to reinvest in the business, the investor implicitly assumes that such reinvestment will lead to a more rapidly growing stream of dividends in the future or alternatively to greater earnings that can be used by the company to buy back its stock. The discounted value of this stream of dividends (or funds returned to shareholders through stock buybacks) can be shown to produce a very simple formula for the long-run total return for either an individual stock or the market as a whole: Long-run equity return = Initial dividend yield + growth rate. From 1926 until 2013, for example, common stocks provided an average annual rate of return of about 10 percent.

…

The shareholder benefit was created by tax laws. The tax rate on realized long-term capital gains has often been only a fraction of the maximum income tax rate on dividends. Firms that buy back stock tend to reduce the number of shares outstanding and therefore increase earnings per share and, thus, share prices. Hence, stock buybacks tend to create capital gains. Even when dividends and capital gains are taxed at the same rate, capital-gains taxes can be deferred until the stocks are sold, or even avoided completely if the shares are later bequeathed. Thus, managers acting in the interest of the shareholder will prefer to engage in buybacks rather than increasing dividends.

The Missing Billionaires: A Guide to Better Financial Decisions
by Victor Haghani and James White
Published 27 Aug 2023

We prefer earnings yield because it directly gives an estimate for the long‐term real return of the equity market, whereas all the other metrics need to be regressed against their historical averages in order to provide a return estimate. There is consensus that the basic cyclically adjusted earnings metric can be made more predictive by incorporating the effect of retained earnings and stock buybacks, at the cost of some added complexity. A survey‐based forecast of future earnings may be useful as an alternative or complement to using historical earnings, but it is hard to assess the value of this metric as such survey data don't go back very far into the past, nor do they forecast earnings far into the future.

…

More recently, investors in T‐bills from 2009 to the end of 2022 have lost 24% of the real value of their investment. Stock Markets As we discussed in Chapter 4, a stock market's cyclically adjusted earnings yield is a decent, though imperfect, estimate of the long‐term real return of the stock market. There are a number of variations on this metric, such as those that use dividends and stock‐buybacks plus broad economic growth, which are about as effective and logically sound as earnings yield, and investors may reasonably choose one metric over another or average them together. We caution that the assumptions that we think are reasonable for estimating the expected long‐term real return of broad stock markets are not appropriate for estimating expected returns of individual stocks, or even industry sectors, where forecasts of growth at the company or industry level are critical inputs.

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
by William D. Cohan
Published 15 Nov 2009

Because if you think about it, if you have all this nuclear waste on your balance sheet, what are you supposed to do? You're supposed to cut your dividends, you're supposed to raise equity, and you're supposed to shrink your balance sheet. And they did just the opposite. They took on more leverage. Lehman went from twenty-five to thirty-five times leveraged in one year. And then they announce a big stock buyback at $65 a share and they sell stock at $38 a share. I mean, they don't know what they're doing. And yet they get rewarded for doing that. It makes me sick.” Sedacca had witnessed firsthand a few blowups in his day. He worked at the investment bank Drexel Burnham Lambert—the former home of junk-bond king Michael Milken—when it was liquidated in 1990 and lost virtually overnight the stock he had in the firm as it plunged from $110 per share to zero (Drexel was a private company but the stock had been valued for internal purposes).

…

Attorney's Office in the Eastern District of New York into the collapse of Bear's hedge funds, Cayne found reason for optimism. He said he was “confident in our future and our business, and we see compelling value in our own stock.” Indeed, such was the optimism at the firm that, as part of the firm's third-quarter earnings announcement, the board authorized an increase to $2.5 billion in the firm's stock buyback program, from $2 billion. The optimism continued at the October 4 investor day. Schwartz, Molinaro, Marano, Jeff Mayer, and Jeff Lane spoke of the great opportunities that lay ahead for Bear Stearns. Schwartz spoke about the growth in Bear's international business and of the “dynamic growth in Europe and Asia”—where Bear Stearns had never before spent much time or money—and noted that the firm's overseas year-to-date revenues of $1.4 billion had already surpassed the 2006 annual total.

…

Spector, who by then was planning to resign. Mr. Cayne later returned, but the hundreds of listeners weren't told this, leaving them with the impression that the CEO had left the call altogether.” As previously noted, of course, Cayne was there, according to people in the room, but did not know how to answer the question asked about stock buybacks. “The following day, a Saturday, Mr. Cayne scored a respectable 88 at the Hollywood golf course,” Kelly reported. She concluded the article with the idea that Cayne was concerned about his legacy, and she quoted John Angelo, a former Bear professional turned hedge fund manager who was Cayne's frequent golf partner at Hollywood.

The System: Who Rigged It, How We Fix It
by Robert B. Reich
Published 24 Mar 2020

The largest banks and auto manufacturers get bailed out of a financial crisis, but homeowners in need of debt relief—disproportionately low-income minorities—do not. Contract laws are altered to require mandatory arbitration before private judges selected by big corporations. Securities laws are relaxed to allow insider trading of confidential information. CEOs use stock buybacks to boost share prices and cash in their stock options. Tax laws create loopholes for the partners of hedge funds and private equity funds. They also contain special favors for the oil and gas industry. Over time, top marginal income-tax rates are lowered, corporate taxes are reduced, and estate taxes on great wealth are eliminated.

Shutdown: How COVID Shook the World's Economy
by Adam Tooze
Published 15 Nov 2021

Several of America’s biggest banks would have failed, requiring gigantic and politically toxic bailouts.10 Mercifully, thanks to tough new regulations and the banks’ own efforts at self-preservation, their balance sheets on both sides of the Atlantic were far stronger in 2020 than in 2008. To ensure that they stayed that way, bank regulators around the world in March 2020 barred banks from paying out dividends or engaging in stock buybacks for the foreseeable future.11 The relative solidity of bank balance sheets was little comfort, however, if the risk had migrated elsewhere. Financial capitalism continuously expands and evolves. After 2008, regulators and financial analysts were preoccupied with new types of risk building up on the balance sheets of asset managers and in funds that specialized in repacking high-risk corporate debt, loans, and mortgages on commercial real estate.12 There was also concern about the stability of corporate borrowers in emerging markets around the world who had issued debt denominated in dollars.13 All of these were instances of what is known as market-based finance: financial relationships that are not based on the balance sheets of banks, but are mediated through markets in which loans and bonds, and the derivatives built on them, are bought, sold, rebought, and resold.

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The final draft of CARES included $17 billion for firms critical to America’s national security, but that money came with conditions.77 Publicly traded companies that took the national security funds were expected to give stock or stock warrants to the government as security. They also had to accept restrictions on stock buybacks, executive compensation, and layoffs.78 Boeing had lobbied hard for support, but it did not like the conditions. Instead, it turned to the bond market. Boeing had hoped to raise $15 billion, but found itself with buyers for $70 billion. The yields on offer were attractive and CARES had signaled to investors that Boeing had an implicit guarantee of survival.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History
by Diana B. Henriques
Published 18 Sep 2017

The power of the money that Salomon Brothers and Goldman Sachs started pumping into NYSE stocks (estimated by several sources at several hundred million dollars) would have been psychologically enhanced by the legendary status of both firms and their chief equity traders. If they were buying big, it would certainly have given heart to the NYSE specialists and to other shaky trading desks, as would have the proliferating announcements of corporate stock buybacks that day. And certainly, the MMI’s spike after Blair Hull’s buy orders would have helped stave off despair. If there was any “conspiracy,” it was an opportunistic one centered on the concealment of how widespread the trading halts were on the Big Board. The fact remains: While the market had fallen on Monday, it had almost fallen apart on Tuesday.

…

so perhaps that was finally kicking in: Brady Report, p. III-26: “Another force affecting the stock market at this time was the growing list of U.S. corporations announcing that they were willing to buy their stock from investors. On Monday and Tuesday, corporations announced approximately $6.2 billion in stock buybacks.” These purchases may not all have been made, but the announcements had a salutary effect, according to the Brady Commission, because they “may have led market participants to believe that the buybacks were going to maintain a solid floor price. Bargain hunters rushed in to buy[,] and sellers finally could unload large blocks of stock directly to corporate buyers.”

Design of Business: Why Design Thinking Is the Next Competitive Advantage
by Roger L. Martin
Published 15 Feb 2009

They’re discouraging the very activity—moving knowledge through the funnel faster than competitors, driving down costs of current activities, and freeing up time and capital to engage in new activities—that creates enduring competitive advantage. The public capital markets also discourage innovation by demanding that companies divert the savings generated by advancing across the funnel to shareholders. Of course, shareholders have legitimate claim on corporate cash, whether it takes the form of dividends or stock buybacks. But by demanding that they be served first, they work against their own long-term interests. Like the analysts, they prevent the company from achieving the competitive advantage gained from advancing knowledge faster than the competition. The private capital markets have the opposite effect on companies.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

. ^^ Far from turning to Wall Street for outside finance, nonfinancial firms have been stuffing Wall Street's pockets with money. But corporate America borrowed heavily in the 1980s; debt levels zoomed upward (see chart, p. 74), though they've come down quite a bit since, thanks to bankruptcies, debt reschedulings, and healthy profits. Why all the borrowing, if not to finance investment? To fund stock buybacks and takeovers. 80% 70% 60% 0% rentier share of corporate surplus, 1945-97 interest + dividends pretax prof its + interest ■ ■ ■' 1945 1952 1959 1966 1973 1980 1987 1994 Outside "investors" are laying claim to a far larger share of the corporate nnoney machine than 20 or 30 years ago.

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Wall Street, 83 Solomon, L.D., 297 soulful banker, 285; see also Rohatyn, Felix soulful corporation, 258, 263; see also social investing South Africa, 288, 309 and the gold market, 48 South Shore Bank, 311-312 space, 188 Spain, 235 specialists, stock superior returns of, 165 system (stocks), 18 speculation centrality of credit markets to, 118-121 Keynes on, 205-206 speculative structure (Minsky), 221-223 Spencer, Herbert, 256-257 Stack, James, 124 Standard & Poor's 500 index, 21 standardization, futures/options markets, 32-33 statistical discrepancy, 190 Stein, Jeremy, 284 Sterling, 131 Stevens, Wallace, 224 Stewart, James, 103 Stiglitz, Joseph, 172 ignorance of classic texts, 173 in the real world, 179 Stillman, James, 93 stock buybacks, 72, 74 stock markets, 11-22 active investors, 67 and allocation of capital, 162; see also efficient market theory appropriate underlying assets for, 247 bear market, lack of, 128 and business cycles, 148 capitalization, table, l6 and constitution of modem corporation, 254 and consumer spending, 144-145 countercyclical behavior, 124-125 and development of corporation, 14 distribution of ownership, 67 dividends, unexpected changes in, l69; see also dividends economic dodginess of Social Security privatization, 305-306 "emerging", 15 equity premium puzzle, 126 excess returns, and Social Security privatization, 305 failure to anticipate bank failures, 135 function, 3—4 funneling funds to rentiers, 73-74 and governance issues, 247; see also corporations, governance history, 12-15 indexes, 21-22 social investing, 310 inexplicabiliry of returns, 126 information asymmetry in, 173-174 initial public offerings, 76 international comparisons, 15-17 inexplicability of returns, 125 and investment spending, 144—148, 207 investment a misleading metric, 207 minimal source of funds, 11, 72-73, 76 kinds of stock, 12 new issues bad for prices, 169 connections and, 174 self-deception and, 173 unattractiveness of stock finance, 149 use of proceeds, l6l over-the-counter trading, 18-20 predicted by economy, 125-126 q ratios predict, 148 shares as ownership claim, 12 specialists, 18 superior returns of, 165 stub stock. 270 technical details, 17-24 NYSE specialist system, 18 Nasdaq,19-22 Third World, 110 trading costs, international comparisons, 317 valuation, 7, 119-120 Keynes on, 205-207 and LBOs, 283, 284 and returns, 167, 170 volatility, 176 volume, 14 see also corporations, governance; rentiers; shareholders stock prices and ideal debt level, 150 trends in, and efficient market theory, 164 stockholders.

Economic Dignity
by Gene Sperling
Published 14 Sep 2020

Nonetheless, only a significant increase in the minimum wage will help the workers in the much bigger pool of companies who would otherwise claim that an individual company alone raising its minimum wage would lead to competitive disadvantage. In addition, with the combination of short-termism and the advantageous tax treatment for stock buybacks, a company that chose long-term investment over joining the recent record-setting splurge of stock buybacks can end up being punished by short-term-focused investors. Again, to change the market rules related to corporate purpose and corporate behavior is not unprecedented government interference in markets; it is purely about how we the people want to structure our creation, the corporate entity, to better serve the economic dignity of the American people.

After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul
by Tripp Mickle
Published 2 May 2022

Scarred by Apple’s near bankruptcy in 1996, he had favored building a treasure chest that could help the company in an economic downturn and give it the firepower to reinvest in the business when needed. Cook was less dogmatic, but he lived in his predecessor’s shadow. In his first year as CEO, he had committed to $10 billion in stock buybacks. In 2013, Apple increased that to $60 billion. Icahn, who had bought about $2 billion of shares, demanded that Apple almost triple the commitment to $150 billion. Icahn’s campaign deviated from his usual playbook. He believed that Apple was well managed but undervalued by Wall Street. Buying back shares would increase its earnings per share and lift its stock price by a third, he estimated.

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under Anderson, 68 balance of art with engineering under Jobs, 371 Buffett and, 317–19 CEOs between Jobs’s tenures, 8–9 China and, 101–2, 319–21, 409 consumer demand for transformational devices, 337 early days, 8 Epic Games antitrust trial against, 387, 407–9 growth of, 234, 344 hardware versus services profits, 325 headquarters, 6, 42–43 integration of work of divisions, 314–15 inventory, 93–95, 96, 315–16 Jobs’s illness and future of, 88 Manus × Machina exhibit and, 299–303 market value of, 338, 357, 379–81, 404, 410 meeting of employees after death of Jobs, 18–20 memorial service for Jobs, 18–20 new headquarters, 177–78, 200, 201–2, 267, 270–72, 367–74 new manufacturing technique for lighter laptops, 103–4 NeXT and, 9, 68 pay packages, 363–65 principles central to identity of, 18, 358 production outsourced, 97–98 profits, 6, 74, 81 rehiring of former employees, 181–82 rejection of legitimate billings, 365–66 sales, 9, 66, 97–98, 108, 163, 182, 193–94, 295–96 under Sculley, 65–66 as services company, 337–38, 339–41, 383–91, 407–9 share price, 11, 59, 143, 144, 164–65 similarities to Walt Disney Company, 14 social causes and, 108–9 under Spindler, 66, 67 structure of, 14, 16–17, 130–31 as target takeover, 67–68 taxes, 153–54, 157–59, 347 television and, 350–54, 388–90 Trump and, 336, 342–43 work-hard, play-hard culture, 84–85 See also Cook, Timothy Donald, as CEO and specific products Apple Maps, 196–97, 387 Apple Music artists’ and labels’ compensation, 256, 258–61 Beats and, 197, 198–99, 204, 252–53 criticisms of, 264–65 development of, 254–56 introduction of, 257–58 Spotify as competitor, 199, 204, 255, 260, 350, 387 success of, 265, 310, 383 Tidal as competitor, 204 Apple News+, 387 Apple Park, 177–78, 200, 201–2, 267, 270–72, 367–74 Apple Pay, 35, 212 Apple TV+, 388–90 Apple University, 16 Apple Watch as Apple’s first new product category after Jobs’s death, 188 concerns about, 112–13, 243, 244 development of, 133–35, 138–42, 173–74, 175–77, 179–80, 181, 182–86, 190–91, 210 as fashion accessory, 186–87, 189–90, 219–21, 235, 237, 239–44, 245–46, 249–50, 277–78, 279, 373 introduction of, 211, 213–18 marketing, 186–90, 240–44, 279 production, 237–38 reintroduction of, 236 sales, 236–37, 244–45, 278, 310–11, 337, 411 Series 2, 311 Asai, Hiroki, 155, 156–57 Auburn University, 47, 52–54, 57 autonomous cars developmental problems, 297–98 Mansfield and, 318–19 Project Titan, 203–4, 251–52, 267–70, 298 Avolonte Health, 139, 182 Bailey, Christopher, 167, 306 Beats Music and Beats Electronics Cook and, 197, 198–99, 205, 206–9 Cue and, 197, 198 fusion with Apple team members, 252–53, 255–56 Bell, James, 273, 274 Berkshire Hathaway, 318–19 Blevins, Tony (the Blevinator), 200–201 Bloomberg Businessweek, 117, 224–26, 229, 230 “blue sky” projects, 34–36 board of directors, xvi, 274 Wagner, Susan, 273 Bolton, Andrew, 276–78, 299–300 Bono, 215–16, 218–19, 333–34 Borchetta, Scott, 259–60, 261 Browett, John, 127, 167, 199 Brown, Gordon, 91 Brunner, Robert Beats and, 198 departure from Apple, 67 design team under Spindler as CEO, 66 Ive promoted under, 67 Juggernaut project, 39–40 at Lunar Design, 37 Buffett, Warren, 316–19 Campbell, Bill, 273 Campbell, Naomi, 374–75 Carell, Steve, 353, 389 Chambers, Tony, 374–75 Chaudhri, Imran, xiv, 85, 179, 327–28, 366 China anti-democratic moves by, 409 Apple problems in, 319–21 dependency on Apple, 101–2 Foxconn, 97–98, 101, 103, 237–38, 378 as growth market, 192 importance of, to Apple, 336, 348 iPhones in, 194–96, 222, 251, 378 privacy and Apple in, 293 trade with U.S., 348, 349, 354–56 traveling Apple Stores in, 272, 381–82 Trump attacks on, 336, 343 China Mobile, 194–96 Christie, Greg, 85, 120, 132 Clow, Lee, 159 Coffey, Thomas, 59, 60 Cohen, Sacha Baron, 332 CollegeHumor, 313–14 Comey, James, 283–86, 293 Compaq, 60–61, 63, 65 computer-controlled (CNC) machines, 104 Cook, Donald Dozier (father of Tim), xvi, 43–46, 107 Cook, Gerald (brother of Tim), 44–45 Cook, Geraldine Majors (mother of Tim), xvi, 43, 44, 100, 107 Cook, Timothy Donald Alabama Academy of Honor, 223 appearance of, 2 at Auburn, 52–54 background, xvi, 43–46 basic Apple facts about, xiii, 2, 62–63, 92 boyhood of, 46–49 as CEO abilities of, 336–37, 344, 345–46 AirPods, 314 Apple as services company, 383–91, 407–9 Apple Music and, 254–55, 257, 260, 261 Apple Watch and, 134, 188–89, 213, 214–15, 216, 236, 244, 245–46, 249–50, 279 Apple’s move into television, 350–52, 353–54 Apple’s tax payments testimony of, 154, 157–59 basic Apple facts about, 405, 406 Beats Electronics and, 198–99, 205, 206–9 Berkshire Hathaway and, 319 board of directors appointments, 273 China and, 192–93, 320–21, 349, 381–82 clothes of, 235 compensation package, 410 concerns about, 112, 337 custom-made Leica camera and, 172 debut as Apple spokesman, 6–7, 9–11 Deneve and, 279 design team concerns about, 110 en masse resignation of senior engineers, 202–3 endurance of Apple after death of Jobs, 404–5 Epic Games antitrust trial and, 407–8 financial doctrine of, 199 focus of, 109 growth of Apple under, 2, 344 Icahn and, 165–66 Iovine and, 350–51 iPhone access for law enforcement and, 283–84, 287–92, 293, 294–95 iPhone mapping system failures, 124–27 iPhone X series and, 377–79 iPhones sales and Apple market value, 380–81 Ive and, 247–48, 274, 366 on jobs Apple created in U.S., 344 Jobs’s death and, 18–19, 42–43 Jobs’s elevation of, to, 6, 106–7 Maestri and, 199, 274 management changes, 127–28 marketing and, 186, 188–89 Media Arts and, 159–61, 162 new headquarters and, 200, 202, 369–70, 371 political influence and Apple, 342, 355, 356 privacy position of, 293 public announcement of sexual orientation, 224–27, 229–31 Samsung and, 147–48 Schiller and, 152 security detail for, 143–44 share price under, 144 similarities to Jeff Williams, 180–81 smart speakers and, 262 social causes and, 108–9 stage presence of, 6, 162, 212–13, 310 Steve Jobs Theater opening, 358–59, 361–62 stock buybacks, 165, 166 treatment of subordinates, 2 tribute to Jobs, 395 Trump and, 321, 346–47, 354–56, 357 Jeff Williams as consigliere of, 274 Jeff Williams as Cook’s number two, 99 Compaq and, 61, 63 glass iPhone screens, 105 health scare, 58 high school years, 49–52 homosexuality of, 51–52 house purchase by, 99 at IBM, 54, 56–57, 58–59 importance of making difference, 62 at Intelligent Electronics, 58–61 inventory and, 93–95, 96 Ive and, 101 Jobs’s death and, 13, 108 Jobs’s second leave and, 105–6 Ku Klux Klan and, 48–49 made COO, 102–3 manufacturing of lighter laptops, 104 Manus × Machina exhibit and, 302–3 Nike and, 103 operations team and, 93–95, 99–100, 101 outsourcing of production by, 97–98 on preparing for opportunities, 55 on purpose of life, 58 reckless driving by, 57–58 relationships with suppliers, 98, 101–2, 103 retention stock grants, 17 sexual orientation and gender identity laws and, 223–24, 228–29 2012 D: All Things Digital conference, 107–8 “Cook Doctrine,” 106 Cooper, Anderson, 224 Cooper, Lisa Straka, 49–50 Coster, Danny, xiv, 71, 326, 366, 400 Cotton, Katie, xiii, 155, 156–57, 195 Cramer, Jim, 234, 344 Creative Artists Agency (CAA), 352 creativity Cook on Jobs’s, 13 design dilemma of being functional while radically different, 36 of Ive, 27–28 Jobs and, 19–20 Polaroid and, 15 Sony and, 16 Walt Disney Company and, 15 “Crossing the Canyon” program, 93 Cue, Eddy Apple in television, 352, 353 Apple Music and, 253, 260, 261, 383 Apple Pay introduction, 212 basic Apple facts about, xiii Beats Electronics acquisition, 198 in charge of iCloud, iTunes, and Apple Maps, 196–97 Cook’s debut as Apple spokesman and, 11 on executive team, 196–97 Forstall and, 118 retention stock grants, 17 Curtis, Richard, 398–99 Darbyshire, Martin, 38, 40 Dauber, Jeff, 181–82, 183, 190–91, 214, 243 De Anza College (Flint Center for the Performing Arts), 72, 188, 211–16 De Iuliis, Daniele, 66–67, 84, 400 Deneve, Paul, 187–88, 219, 238–39, 243, 245–46, 279 Designed by Apple in California ad, 90 Dowling, Steve, xiii, 224, 288, 289, 290 Dre, Dr.

Security Analysis
by Benjamin Graham and David Dodd
Published 1 Jan 1962

Obviously, he was banking that the reorganization of Texaco would not wipe out the equity. It was a very good call. After conducting an unsuccessful proxy fight and making a play for the entire company, Icahn successfully negotiated for a special dividend of $8 per share to stockholders, for a total of $1.9 billion. In addition, Texaco announced a $500 million stock buyback. At the end, Icahn had made $1.1 billion, or a return of over 75%.9 Texaco’s unusual situation can be summarized in one sentence, often repeated by Graham and Dodd disciple Warren Buffett: A great investment opportunity occurs when a marvelous business encounters a onetime huge, but solvable, problem.

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Graham and Dodd referred to that excess cash as “earnings power” or “owner earnings.” That’s the amount of cash an owner can pocket after paying all expenses and making whatever investments are necessary to maintain the business. This free cash flow is the well from which all returns are drawn, whether they are dividends, stock buybacks, or investments capable of enhancing future returns. Graham and Dodd were among the first to apply careful financial analysis to common stocks. Until then, most serious investment analysis had focused on fixed income securities. Graham and Dodd argued that stocks, like bonds, have a well-defined value based on a stream of future returns.

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Leucadia and Berkshire Hathaway point to another important aspect of evaluating free cash flow: how management deploys cash and whether those decisions enhance shareholder value. As mentioned earlier, free cash flow can either be returned to shareholders via dividends or share repurchases, or it can be reinvested in the business. Graham and Dodd equated cash returns to shareholders with dividends. The tax advantages of stock buybacks were hardly considered in capital allocation decisions, and in fact, they are of little interest to the institutional investors who dominate today’s markets. Today, share buybacks at discounted prices are clearly preferable to dividends. The qualifying factor here is the price. If the company buys back undervalued stock, selling shareholders suffer while long-term shareholders benefit.

Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett's 3 Favorite Books)
by Stig Brodersen and Preston Pysh
Published 30 Apr 2014

If it was a negative number, that would mean the company bought back shares from the open market. Now, let’s talk about the important question—how do we know if this is a good thing or bad thing? Before we can answer that question, we first need to understand the basics of an additional stock issue. For simplicity, I’ll have a similar discussion in the next section (13) for stock buy-backs. A stock issue should be treated the same way as a perpetuity loan (or never-ending loan). Think of it like this: if you owned every share of the business, why would you be willing to give up a piece of that equity? For example, you own 100% equity of a business, but you give away 15% equity to raise money; what kind of return would you need to get on that new capital to make the deal worthwhile?

Who Stole the American Dream?
by Hedrick Smith
Published 10 Sep 2012

They also want to tie tax breaks to job creation at home to apply to companies repatriating profits from overseas. When U.S. multinationals were given a special 5.25 percent tax rate on repatriated profits in 2005, they said the money would create jobs, but economists tracked those funds and found out that 92 percent of that money went to investors and corporate executives through dividends and stock buybacks and only 8 percent went for job creation. This time, jobs advocates want ironclad provisions to make sure the multinationals actually create more jobs in the United States. Step #6: Push China to Live up to Fair Trade to Generate Four Million Jobs in the United States Step #6 is strong action by the United States and other countries to combat China’s unfair trade practices and to rebalance global trade.

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Alex Cukierman, Zvi Hercowirtz, and Leonardo Leiderman (Cambridge, MA: Massachusetts Institute of Technology Press, 1992). 39 Alan Greenspan was moved to comment Alan Greenspan, remarks, Council on Foreign Relations, March 15, 2011, http://​www.​cfr.​org; Greenspan, citing Federal Reserve data, in “Activism,” International Finance 14, no. 1 (October 2011): 165–82, http://​online​library.​wiley.​com. 40 Not business investment but consumer demand James Livingston, “It’s Consumer Spending, Stupid,” The New York Times, October 25, 2011. 41 Major banks to big pharmaceuticals Nelson D. Schwartz, “As Layoffs Rise, Stock Buybacks Consume Cash,” The New York Times, November 21, 2011. 42 “The 2000s saw the worst” Alan Krueger, “The Rise and Consequences of Inequality in the United States,” remarks, Center for American Progress, January 12, 2012, http://​www.​american​progress.​org. 43 By contrast, during Bill Clinton’s presidency David Leonhardt, “Were the Bush Tax Cuts Good for Growth?”

Internet for the People: The Fight for Our Digital Future
by Ben Tarnoff
Published 13 Jun 2022

The reason for the pitiful state of US broadband is that the high fees extracted from users aren’t being reinvested to build better infrastructure, but to enrich executives and investors. Comcast’s CEO earned $36.3 million in 2019, and the company, along with the other members of the broadband cartel, has spent billions of dollars on dividends and stock buybacks in order to line the pockets of its shareholders. The big ISPs are essentially slumlords. Their principal function is to fleece their customers and funnel the money upward. They charge exorbitant prices for the privilege of using their deteriorating infrastructure because people have no alternative.

After the New Economy: The Binge . . . And the Hangover That Won't Go Away
by Doug Henwood
Published 9 May 2005

It wasn't until the late 1990s that investor exuberance crossed from rational to irrational—about the time that profits were peaking and the American masses were plunging into the market for the first time. But the profit surge was its own undoing. Some of the profit increase found its way back into the markets—not in the form of dividends, but mainly through takeovers and stock buybacks—because firms had no more profitable outlet for them in their underlying businesses. But profits were nice enough that firms could invest passionately too, especially in computers and telecommunications gear. Overinvestment led to falling profit rates and unused capacity, and when the financial bubble burst, so did the high-tech equipment boom.

Getting a Job in Hedge Funds: An Inside Look at How Funds Hire
by Adam Zoia and Aaron Finkel
Published 8 Feb 2008

Selected projects and transactions: • • • • • • • $1.1 billion sale of pharmaceutical comapany Acquisition of selected manufacturing and sales distribution assets of major automotive company Sale of industrial company $2.1 billion sale of pharmaceutical company Divestiture efforts of plastic packaging division by major consumer packaging company $125 million mandatory convertible notes offering for shipping company $250 million senior subordinated notes offering and $550 million senior secured credit facilities arrangement for packaging company EDUCATION IVY LEAGUE UNIVERSITY • Bachelor of Science in Economics with concentration in Finance and Information Systems, May 2000 • Graduated Magna Cum Laude • Cumulative GPA: 3.64/4.00 Finance GPA: 3.80/4.00 SAT: 780 (Math), 670 (Verbal) ADDITIONAL • Proficient in Korean • Computer skills in Microsoft Excel, Word, PowerPoint, and several financial and informational databases 166 bapp02.indd 166 1/10/08 10:59:52 AM Resume E Profile Pre-MBA: Swapping the Sell Side for a Long/Short Fund (see CASE STUDY 7) Recruiter’ s Perspect ive • Perfect G RE scores • Solid GPA • Worked with a vari ety of product s • Strong co mputer sk ills and langu age abiliti es EXPERIENCE: • BULGE-BRACKET INVESTMENT BANK, July 2004 – January 2006 EQUITY-LINKED ORIGINATION, STRUCTURED PRODUCTS - Priced and structured convertible bonds, options, option spreads, forwards, and futures. - Structured stock buyback and issuances, and other corporate derivatives. - Explained products and ideas to investment bankers and clients. - Analyzed market trends and case studies. - Prepared presentation materials and other documents. IN-HOUSE OPTIONS TRADING GROUP - Priced and traded listed and OTC options and structured products. - Performed statistical analysis. - Performed portfolio and single-position risk management. - Worked on strategy formation regarding structured products and volatility/asset management.

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
by Ben Horowitz
Published 4 Mar 2014

After the off-site gathering, the first thing I had to do was increase the stock price. The NASDAQ had sent me a curt letter stating that if we failed to get our stock price over a dollar, they would “delist” us from the exchange and send us to the purgatory known as penny stocks. The board debated the best way to do this—reverse-split the stock, a stock buyback, or other options—but I felt we just needed to tell our story. The story was simple. We had a great team, $60 million in the bank, a $20 million a year contract with EDS, and some serious intellectual property. Unless I was the worst CEO of all time, we should be worth more than $30 million. The story took hold, and the stock climbed above $1 a share.

Sleeping Giant: How the New Working Class Will Transform America
by Tamara Draut
Published 4 Apr 2016

Now let’s say that instead of buying back its stock, it redirected those profits to its employees in the form of a raise: Walmart could have provided its 825,000 lowest-paid workers a raise of $5.83 an hour, providing them with the dignity of decent pay and at the same time no longer outsourcing the shortfall of their low wages to American taxpayers.38 Walmart announced in 2015 that it plans $20 billion in stock buybacks over the next two years. “This share repurchase program, combined with our annual dividends, reinforces our continued commitment to delivering increased value to shareholders,” said Charles Holley, Walmart’s executive vice president and chief financial officer, in a statement on the approved buybacks.39 As numerous studies have revealed how often corporations outsource the costs of low wages and benefits to us as taxpayers, conservatives are once again turning up the heat on the issue.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
by Tim Lee , Jamie Lee and Kevin Coldiron
Published 13 Dec 2019

See quantitative easing QE3, 101, 103 quantitative easing (QE), 101, 105, 127, 136, 196, 209, 219 BOJ and, 31 real economic activity, measures of, 56 real estate booms, currency carry trades contributing to, 13 228 realized volatility, 90, 164, 167–168 anti-carry regime and, 172 implied volatility relationship to, 158 recessions, carry and consequences of, 6 recipient currencies, 10–11, 13, 65 crashes in, 23 volatility in, 215 regulatory capture, 176 rent-seeking carry as, 175–177 defining, 175 reporting horizons, 70–71 reserve balances, 109–110 resource allocation, carry regime and, 114–115 return, risk and, 99 risk carry trade profit explanations and, 48 of carry trades, 3, 5 of CDOs, 36–37 currency, 12 exchange rate, 12–13 market, 99 mispricing of, 21, 35–37, 132, 134–140, 142 return and, 99 ruin, 65, 72 selling optionality and, 153 socialization of, 136 spreading, 35 risk controls, 65 risk premium, 148, 152 portfolio volatility and, 159 roll yield, 91 rubisco, 189 ruin risk, 65, 72 sawtooth patterns, 96–97, 97f shadow banks, 137 Shin, Hyun Song, 22, 80–81 short squeezes on liquidity, 165 short-term reporting horizons, 70–71 social hierarchies, 187 social networks, 187 social realities, 184 socialization of risk, 136 South Africa, 55n6 sovereign bonds, 162 equity indexes correlation to, 161 Sovereign Wealth Fund Institute, 75 INDEX sovereign wealth funds, 75–76 growth of, 83 S&P 500, 53–55, 55n6, 56, 95 carry regime importance of, 86–87, 87f as carry trade, 160–162 equity risk trade correlation with, 99 gamma for, 154, 154f liquidity premiums for, 161 market corrections and, 79 mean reversion of, 154f, 155 quantitative easing and, 103 selling volatility on, 98 volatility of, as global volatility risk factor, 99 volatility selling in, 89–92 volatility trading on, 85, 86 S&P 500 front e-mini future, 159 stagflation, 217 stochastic discount factor, 99 stock buybacks, 82, 83f stock market crashes, of 1987, 155 stock markets carry and structures of, 7 emerging currency stability compared with, 55 performance of, 1 recessions and crashes in, 6 volatility bets in, 89 stocks, put options against, 34 stopped out, 94 structured finance, 135 subprime mortgages, 36 superstar effects, 186 Swiss franc, 29, 31, 33, 34 taxi licensing, 175 Thai baht, 25 Thailand, balance of payments current account deficit, 25 Theron, Charlize, 185 trading frequency, 74 tulip bulbs, 133 Turkey, 19, 20, 23, 39, 202 balance of payments, 45 carry bubble and bust, 42–46 consumer price index, 44 credit and claims data for, 43, 43f GDP growth, 45 interest rates, 12–13 INDEX Turkish lira, 11, 13, 20, 21, 23, 44, 55n6 carry crash of 2018 in, 45, 65 Twitter, 186 uncovered interest rate parity (UIP), 47, 48 United States capital flows into, 18 carry trade funding and, 17–20 current account deficit, 17 personal net worth in, 137, 138f savings rates, 18, 19 US Federal Reserve, 14, 26 balance sheet of, 101–102 carry crashes limited by, 127 carry regimes and, 107, 208 carry trades by, 103 creation of, 218 interest rates and, 14, 137, 208 liquidity swaps by, 104–105, 196–198 quantitative easing and, 101, 105 US household financial assets, 117–120, 117f–120f valuation metrics, 204 vanishing point, 116, 195, 209–210 variance, 94 VIX, 85, 95, 99 forward curve average, 92, 92f money value and, 100, 122 shorting, 96 spikes in, 98 VIX futures, 90–92 selling volatility using, 156, 158 shorting, 148, 157 VIX futures rolldown, 59, 96 VIX index, 53n5 volatility, 3 currency, 62 currency carry trade collapse signs from, 215 direct bets on, 89 equilibrium structure of premiums for, 156–160, 157f equity, 59 financial crises and spikes in, 52 in funding currencies, 215 global, 99, 101 implied, 57, 90 market making as premium for, 158–159 229 negatively priced liquidity and, 166 optionality and, 93–95 options and, 146–148 portfolio, 159 realized, 90 in recipient currencies, 215 selling, as short position, 156 selling, by receiving implied and paying realized, 148–150 selling, by receiving realized and paying realized, 151–156 short, 4 signs of carry regime ending and, 214–218 spikes in, 98 time horizons of, 152, 153f, 154, 154f value of money and, 98–101, 122 of volatility, 90 volatility carry, 86 volatility selling, 86, 96 central banks and, 101–105 in S&P 500, 89–92 volatility shock, 161 volatility-selling trades, 33–35, 57, 69 Volcker Rule, 77 Volmageddon, 98, 161 VXO index, 53, 53n5, 54, 55n6, 90n2 VXX, 92 wealth distribution, carry and, 2 wealth inequality, central bank stabilization actions and, 6 “What Explains the Persistence of Global Imbalances?”

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader
by Colin Lancaster
Published 3 May 2021

And that just counts the money we’ve spent. I’m not even counting the unfunded amounts. You know, stuff like pensions and medical care.” He goes on. “In the US, business investment remains particularly sluggish. Companies aren’t spending or investing. They’re just buying back their own stock. They’re funding those stock buy-backs by issuing more debt.” “Do you think this improves? Will companies start to invest and set the stage for real growth?” I ask. “I don’t. They’ve already pulled forward whatever capital expenses (CAPEX) they had in the pipeline in order to qualify for Trump’s tax incentives. Meanwhile, it costs next to nothing to issue debt; credit spreads are at record tights as every pension fund in America desperately grabs for yield.

The Essays of Warren Buffett: Lessons for Corporate America
by Warren E. Buffett and Lawrence A. Cunningham
Published 2 Jan 1997

Obviously, if a stock is selling in the market at half its intrinsic value, the company can buy $2 in value by paying $1 in cash. There would rarely be better uses of capital than that. Yet many more undervalued shares are paid to effect value-destroying stock acquisitions than are repurchased in value-enhancing stock buy-backs. In contrast to sensible repurchases of undervalued stock, which serve owner interests, Buffett condemns management repurchases from individuals at premium prices to fend off unwanted acquisition overtures. Buffett forcibly shows that this practice of greenmail is simply another form of corporate robbery.

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds
by Maneet Ahuja , Myron Scholes and Mohamed El-Erian
Published 29 May 2012

“Not too good, and Moody’s is just a little better, at B—. We actually think it’s kind of a solid single B.” Weinstein then consults the credit spread, which at 230 basis points for CDS is more typical of a better-rated BB company. “We think a leveraged company with activist shareholders and an aggressive stock buyback program should not be trading at 230 basis points,” says Weinstein. And actually it was as low as 150 basis points in 2010 when we put the trade on. But we’re keeping it. And we own the stock.” Meanwhile, Weinstein keeps other developments in mind. “The restaurant sector has seen more than its share of LBOs, with Burger King as the most important example.

Dogfight: How Apple and Google Went to War and Started a Revolution
by Fred Vogelstein
Published 12 Nov 2013

But investors who bought Apple shares in the fall of 2012—believing, as many did, that its stock was headed to $1,000 a share—watched their investment lose 40 percent of its value while the rest of the stock market was up around 15 percent. Jobs never discussed Apple’s stock price with investors. He rarely even met with them. But by early 2013 the shareholders refused to be ignored, forcing CEO Tim Cook to pledge more than $100 billion in dividends and stock buybacks. Indeed, when Page made his remarks, the innovation gap between Apple and Google for dominance of the mobile Internet looked downright stark. In the fall of 2012, Apple had released the iPhone 5, its bestselling phone to date, and the iPad mini, which was also a success despite its smaller profit margins.

Mythology of Work: How Capitalism Persists Despite Itself
by Peter Fleming
Published 14 Jun 2015

However, the US-inspired HRM supervisor has very little interest in seeing our desires aligned with his or hers, or the firm’s, and would prefer that we felt nothing at all. Positive sentiment towards the organization, as many managers have learnt, can so easily be used against them when they make controversial decisions (such as a merger, restructuring, stock buyback, investments in unethical industries, etc.). Just look at what happened with the Massachusetts-based supermarket chain Market Basket in August 2014. The firm is immensely admired by its employees. So when the CEO was replaced by someone they did not trust, employees revolted, almost destroying the enterprise before the decision was reversed and the old CEO reinstated: ‘To have an internal uprising of just about everyone, without a union, is very unusual in American industry,’ said David Lewin, professor of management at the University of California Los Angeles.

The New Class Conflict
by Joel Kotkin
Published 31 Aug 2014

Often they have regarded productive industries—notably in energy or manufacturing—as hampering short-term financial gains, and they have repeatedly led companies to strip their industrial assets, typically moving them overseas. The “financialization” of the economy, notes one scholar, at least in part explains why companies have tended to be slow to reinvest their profits in new products and innovations, preferring instead to engage in mergers or “stock buybacks” that raise share prices but do little for the overall economy of the middle orders. Instead, notes economist William Lazonick, they “greatly exacerbate the problem of the eroding middle class as U.S. business corporations neglect the need to invest for the future.” The fact that tax laws also encouraged companies to maintain much of their funds overseas, roughly $1.4 trillion in 2011, he adds, further discouraged vital new investment in the domestic economy.53 The political regime under both parties, however, has tended to favor major financial institutions over grassroots businesses.

Radicalized
by Cory Doctorow
Published 19 Mar 2019

The twin collapse of Disher and Boulangism did have a shared cause, Salima discovered. Both companies were publicly traded and both had seen more than 20 percent of their shares acquired by Summerstream Funds Management, the largest hedge fund on earth, with $184 billion under management. Summerstream was an “activist shareholder” and it was very big on stock buybacks. Once it had a seat on each company’s board—both occupied by Galt Baumgardner, a junior partner at the firm, but from a very good Kansas family—they both hired the same expert consultant from Deloitte to examine the company’s accounts and recommend a buyback program that would see the shareholders getting their due return from the firms, without gouging so deep into the companies’ operating capital as to endanger them.

The Enablers: How the West Supports Kleptocrats and Corruption - Endangering Our Democracy
by Frank Vogl
Published 14 Jul 2021

In early 2021, for example, Credit Suisse announced that it was taking a loss of Swiss Francs 4.4 billion (about $4.7 billion)14 related to its investments with a finance company called Archegos Capital Management, which followed major other losses running into further billions of dollars related to the collapse of another finance company called Greensill Capital. The cumulative losses were so large that it said it would cut its dividend by two-thirds, suspend a planned stock buyback program, and cut senior executive bonuses; moreover, both the chief risk and compliance officer and the head of investment banking, as well as five other senior staff, would leave this major Swiss bank. Other leading banks, such as Goldman Sachs and Morgan Stanley, also faced challenging situations as Archegos Capital got into trouble.

The Last Tycoons: The Secret History of Lazard Frères & Co.
by William D. Cohan
Published 25 Dec 2015

The fund's next investment came six weeks later--$300 million of preferred stock, convertible into a 7.7 percent stake of Polaroid. This was more like it. Polaroid had been under attack from Shamrock Partners, Roy E. Disney's investment fund, which was trying to get control of the instant-film company. The combination of the investment by Corporate Partners, the sale of another chunk of stock to an employee fund, a stock buyback program, and a favorable court ruling led to Polaroid's successful rebuff of Shamrock. But it was a Pyrrhic victory, for Polaroid shareholders would have been better off with the Shamrock cash: Polaroid filed for bankruptcy in 2001 after the advent of digital photography made its business untenable.

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Golub agreed with Tashjian and said the firm's capital markets effort, while small, was critical to the M&A effort because, among other things, it allowed the bankers intelligently to provide clients with a sense of how the market would react to their deals. He then reported that Pfizer--one of Golub's and the firm's most important clients--very much appreciated Lazard's ability to do stock buybacks for the company. Jacobs agreed and cited both Microsoft and Amazon as two more clients that appreciated the firm's capital markets work. "Fundamentally, if you shut down Capital Markets, you will have a meltdown of banking in New York," Jacobs said. Loomis and Jacobs started to argue. At one point, Jacobs, speaking in a voice Evans described as a "menacing monotone," said, "To be perfectly frank, certain steps we take will drive away some of our best people and this is one.

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Ten days later, it was all over. By themselves, in the days following February 7, Icahn and Parsons reached a face-saving compromise. Icahn knew he was beaten, at least at this juncture. Time Warner would remain a conglomerate with Parsons as its leader. The company acceded to Icahn's desire for a timely $20 billion stock buyback and an additional $500 million cost-reduction program. Icahn would also be able to consult with Parsons on the appointment of two new independent directors but not be able to appoint any himself. The initial news of the settlement sent the Time Warner stock up to just over $18 a share, but then fell to less than $16 a share.

Winning Now, Winning Later
by David M. Cote
Published 17 Apr 2020

Communicate to your employees that you are all in this together, and do what you can to ensure that you really are—but again not at the expense of your long-term growth. A fourth way to take control of the downturn is to maximize the cash available to you. Cash is always a good friend to have, especially during the tough times. While I wish I hadn’t done the stock buyback right before the recession hit, we were still in a very good cash position at that time, and we did a great job of generating cash during the recession. This in turn afforded us a lot of flexibility, including the ability to make acquisitions. We had no issues with debt, bankers, or creditors because we had been conservative in our cash/debt planning.

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris
by Richard Kluger
Published 1 Jan 1996

For Philip Morris to pay off all debts, slowly contract its business, and raise dividends at a still faster rate than the 20 to 25 percent annual hikes PM was already managing would not really have been a service to its stockholders, Maxwell contended, since they would then have to pay higher income taxes on their dividends, which already reflected the government’s corporate income tax bite. Better to build investors’ equity by retaining earnings and acquiring strong new assets, even if the added operations posted lower margins than the tobacco business—as almost every other form of enterprise did. Stock buybacks, instead of further diversification, also brought with them a serious problem: the smaller the stockholder base—that is, the more tightly the company was held and the more nearly it resembled a private operation—the more of a target for carping do-gooders and critics it would become. Finally, for Philip Morris to plunge its surplus cash into a capital-intensive business, particularly in the technologically exotic fields, was exceedingly chancy, as RJR’s misadventures in the shipping business had shown.

…

While the company waited to learn if these collective measures would correct its tailspin, management made a number of economy moves in anticipation of the expected drop in net from the deep cigarette price cut. Some 14,000 jobs were to be slashed, about an 8 percent reduction in the payroll, and forty food plants closed. A stock buyback program aimed at enhancing per-share equity value was suspended as well, and, most shockingly, for the first time in twenty-five years there was to be no increase in the dividend during 1993. The stock price, accordingly, stayed in the doldrums. III No subject more thoroughly arrested the attention of the tobacco manufacturers than the trend to sharply higher cigarette taxes, with their dampening effect on sales.

…

And when New York City considered adopting the severest smoking restrictions in the nation, PM hinted that it might have to abandon the metropolis that had always been its American home if the antitobacco environment grew too oppressive—and did not discourage the cultural institutions it had funded from leaning on city officials with pointed reminders of just how vital Philip Morris was to the artistic life of the Big Apple. Wall Street was relieved that an unabashed tobaccoman was back at the helm, and felt still better later, when, based on the steadily improving results in its domestic cigarette business, PM boosted its dividend rate nearly 27 percent and announced a two-year, $6 billion resumption of its stock buyback plan. By year’s end, the company’s per-share earnings had made up the ground lost during the 1992–93 tumble in cigarette market share and the profit squeeze from the resulting price cuts; PM-USA’s market share was at a record 47 percent, Marlboro had nearly 30 percent of the total, and Philip Morris was selling four out of every five full-priced cigarettes bought by Americans.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

A few illustrations:• Many stock-market-timers use the dividend discount model to assess prospective equity returns. Even when two investors agree that long-term market returns reflect the sum of starting yield and growth prospect, their estimates can diverge widely. One debate is whether to use dividend yields or broader payout yields that include stock buybacks and issuance. The disagreement on growth prospects is even worse. Anyone using analysts’ earnings growth forecasts inherits the extreme optimism typical of analysts who often predict double-digit real growth over long horizons. Historical experience has been much more modest. Many investors can hardly believe that long-run real growth rates for earnings per share and dividends per share are between 0% and 2%, clearly lagging the trend growth rate for real GDP

…

Having ranged between 3% and 6% for 40 years, the D/P of the S&P 500 fell for the first time ever below 3% in 1993 and then below 2% in 1997, remaining there for the next decade. Thus, D/P gave a bearish signal through the whole 1990s’ equity rally, denting its record as a market-timing signal. The trend decline in D/P in the 1980s and 1990s partly reflected a structural change: many firms replaced dividends with repurchases (i.e., stock buybacks), which were more tax efficient, more flexible, and had a more positive impact on share price. If top executives are compensated based on share price, they naturally prefer buybacks over dividend payments as a means of distributing cash to investors. The obvious improvement for measuring equity market carry is to include share buybacks, which became much more prevalent starting in the early 1980s.

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite
by Daniel Markovits
Published 14 Sep 2019

All in all, publicly traded firms today retain only a small share of their earnings and fund less than a quarter of major new expenditures from past profits. This change requires firms now to devote profits to repaying creditors, on a fixed schedule. Indeed, part of the point of debt financing (especially combined with stock buybacks) is to bind managers to produce the revenues needed to pay creditors and to prefer owners over other stakeholders. Top managers lost the discretion that a large stock and steady flow of retained earnings supports and faced new pressures to promote their firms’ bottom lines, including in particular by squeezing payrolls for everyone below them.

…

from past profits: They retain just about 12 percent of earnings and fund only 60 percent of their new expenditures and only 27 percent of “major” expenditures from past profits, a share that falls to just 15 percent when acquisitions are included. The retained earnings figure reflects retained earnings over net income. Data are for the S&P 500 for the period between 2005 and 2014. William Lazonick, “How Stock Buybacks Make Americans Vulnerable to Globalization,” Institute for New Economic Thinking, Working Paper 8 (March 1, 2016). Prior eras of intensive financialization produced similar patterns, so that, for example, U.S. firms reinvested only 30 percent of their profits in 1929. See Fraser, Every Man a Speculator, 488.

The Power Surge: Energy, Opportunity, and the Battle for America's Future
by Michael Levi
Published 28 Apr 2013

Instead, she spends what she has: if you put a dollar in her pocket, she’ll spend a dollar more. Rising oil prices, though, create a windfall that flows disproportionately to corporate treasuries. They normally either spend it slowly (it takes time to develop plans for large capital outlays) or distribute it to typically wealthier shareholders (through stock buybacks and dividends) and to executives (through bonuses), who are less likely to quickly spend the extra dollars in their pockets; they already have substantially more money and are more inclined to save the extra cash. Pinning down exact numbers for this dynamic is thornier than you might imagine; the question of how individual and corporate spending differ in their economic impacts is far from being settled.

All About Asset Allocation, Second Edition
by Richard Ferri
Published 11 Jul 2010

So, while 3 percent real GDP growth may be difficult to accomplish, a 3 percent real earnings growth may still happen, and that is the important number for stock price valuation. DIVIDENDS AND MARKET VALUATION The percentage of corporate earnings paid out in the form of cash dividends is less than 30 percent, although the number has risen slightly in recent years. Cash dividend payments can vary depending on current earnings, general economic outlook, stock buybacks, investment opportunities, tax law changes, and a variety of other factors. Over the long term, dividend payouts should grow in line CHAPTER 11 236 FIGURE 11-9 S&P 500 Earnings and Dividend Growth 100 1,000 10 10 1 1 S&P 500 reported earnings S&P 500 cash dividends 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 0 2009 with earnings growth.

Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism
by Jeff Gramm
Published 23 Feb 2016

He apologized to Goldin and embarked on a twenty-two-meeting road show to explain to investors how GM had gotten religion. Smith shared statistics and projections with investment analysts, and discussed cost-cutting opportunities in detail. After his meetings, GM announced a $10 billion cost reduction program and a stock repurchase plan that Smith called “the largest stock buyback ever by a U.S. corporation.”59 He also applied pressure behind the scenes to weaken some of GM’s louder critics. Corporate governance gurus Robert Monks and Nell Minow write in several of their books that Smith got SWIB to withdraw support for its shareholder resolution by calling Wisconsin’s governor and threatening to cancel planned GM capital spending in the state.60 At GM’s annual meeting, the shareholder motion to rescind the Perot transaction received 20% of the vote.

The Alternative: How to Build a Just Economy
by Nick Romeo
Published 15 Jan 2024

Just before the pandemic, the CEOs of 180 major corporations announced a “fundamental commitment to all of our stakeholders” and promised to ensure that workers are “compensated fairly.”2 Despite these grand promises, a 2022 study that analyzed twenty-two major American companies—including Chipotle, McDonald’s, Walmart, and Starbucks—found that during the pandemic they spent five times more on stock buybacks and dividends than on additional compensation for workers.3 They did well by not doing good. Only five of the twenty-two companies pay a living wage to at least half of their workers. And the study’s estimate of a living wage was insufficient to cover basic things: a reasonably varied diet, a safe place to live, some savings, and occasional vacations and leisure activities.4 For Seyedian, this is not a reason to despair: “I mean, there are always gonna be bullshitters and people who are trying to skirt things.

The Clash of the Cultures
by John C. Bogle
Published 30 Jun 2012

Given the directional momentum of public policy in the United States and Europe, the inflow of funds from forced capitalists to these intermediaries is likely to continue to increase. . . . “[But] the standard play for these institutional investors is to encourage the public company to deliver some form of immediate value to its stockholders, through increased dividends or, even better from a hedge fund’s perspective, a hefty stock buy-back program. Often, the target must take on greater leverage or decrease its capital expenditures to fund these initiatives. The impact of such initiatives upon short-term and long-term investors can be very different, as the benefits are immediate and the risks come to roost down the road. . . .

Phishing for Phools: The Economics of Manipulation and Deception
by George A. Akerlof , Robert J. Shiller and Stanley B Resor Professor Of Economics Robert J Shiller
Published 21 Sep 2015

The plain-vanilla economics of finance presents conclusions that simply are not true. The fundamental proposition is that stocks are priced at their “fundamental value.” That means that the price of stocks is equal to the appropriately discounted expected future payouts (from sources such as dividends and stock buybacks). But this cannot be true. There is much too much volatility in stock prices for this to be so.14 And then there are all kinds of other strange happenings in financial markets relative to the plain-vanilla story. Why is the volume of trade so high? Why do stock traders on average keep their stocks for such short times?

Bad Blood: Secrets and Lies in a Silicon Valley Startup
by John Carreyrou
Published 20 May 2018

The supermarket chain had just announced a 6 percent drop in its profits for the last three months of 2011, a disappointing performance its longtime CEO Steve Burd was struggling to explain to the dozen analysts who had dialed in to the company’s quarterly earnings call. One of them, Ed Kelly from the Swiss bank Credit Suisse, was gently needling Burd for using stock buybacks to mask the bad results. By reducing the number of shares it had outstanding, buybacks could artificially raise a company’s earnings per share—the headline number investors focused on—even if its actual earnings fell. It was an old trick that astute Wall Street analysts versed in corporate sleights of hand saw right through.

The Great Reversal: How America Gave Up on Free Markets
by Thomas Philippon
Published 29 Oct 2019

These are delicate empirical questions, and we will need to look at a broad set of economic indicators. You guessed it: we need data, more data! In Chapters 3, 4, and 5 we will review the broad trends in the US economy over the past twenty years, looking at entry and exit of businesses, market shares, mergers, profits, stock buybacks, and investment. * * * a  Olivier Blanchard (2003) explains in his discussion of Basu et al. (2003), “fully one-third of the increase in TFP [total factor productivity] growth from the first to the second half of the 1990s in the United States came from the retail trade sector.” A study by the McKinsey Global Institute (Lewis et al., 2001) focused on the factors behind US TFP growth in the 1990s.

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America
by Danielle Dimartino Booth
Published 14 Feb 2017

Nathan, 174 Shelby, Richard, 195 Shiller, Robert, 21, 50, 176–77, 232 short sellers/short selling, 107, 143 Silverblatt, Howard, 31, 207 silver market, 216 60 Minutes (TV show), 171–72, 214 Smith, Adam, 125–26 Sneider, Amanda, 207 Sociéte Générale, 103 S&P, 27, 120 Spiegel, Der, 88 Squawk Box (TV show), 26 St. Louis Fed, 63 Stearns, Cliff, 145 Stein, Jeremy, 243–44 Stein, Mark, 132 Stewart, James B., 109 Stiglitz, Joseph, 199, 260 stock buybacks, 7 Stockman, David, 196 stock market Bernanke’s “additional stimulus” speech in August 2010 and, 193 Black Monday, 64–65 end of QE2 and, 217–18 flash crash, 189–90 low conviction rallies, 2010, 185, 188 9/11 terrorist attacks impact on, 223–24 percentage of U.S. adults invested in, 8–9 rally of, in April–May 2009, 174 reaction to bad news, late 2009, 181, 184 record lows, in March 2009, 171 TARP bailout bill and, 143 VIX and, 187, 188 Stockton, David, 194 Stress Test (Geithner), 52 stress tests, 170–71 Strong, Benjamin, 53 structured investment vehicles (SIVs), 123–24 subprime mortgages, 21, 22, 27, 28 Summers, Larry, 15–17, 53, 95, 234–35 Supervisory Capital Assessment Program (SCAP), 171 synthetic collateralized debt obligations, 124 systemic risk, 26, 28, 252 System Open Market Account (SOMA), 29, 52 taper tantrum, 233 Tarullo, Daniel, 43, 211, 258–59 Taylor, John, 82, 198 Term Asset-Backed Securities Loan Facility (TALF), 167, 168 Term at the Fed, A (Meyer), 153 Term Auction Facility (TAF), 168 Term Securities Lending Facility (TSLF), 154 Tett, Gillian, 192 Thain, John, 135, 136, 146 Tice, David, 21 Time, 15, 182 Tishman Speyer, 133 Tobin, James, 85–86 Toyota, 241 tri-party repo agreements, 127 troubled asset relief program (TARP), 142–43 Trump, Donald, 9 Tyco, 107 UBS, 120, 168 unemployment, 171, 192, 195, 210 Vasiliauskas, Vitas, 261 Verizon, 169 Vitner, Mark, 40 VIX, 187, 188 Volcker, Paul, 48, 53, 60, 62, 93, 187–88, 219–20, 238 Volcker Rule, 226 Von Mises, Ludwig, 88 Wachovia, 121 Waldman, Maryanne, 222 Wall Street Journal, 106, 119, 167, 175, 177, 217 Warren, Elizabeth, 246, 258 Warsh, Kevin, 113, 181, 193, 197–98, 211, 234 Washington Mutual, 121, 143 wealth effect, 6–7 Wealth of Nations, The (Smith), 125–26 Weill, Sanford, 29, 110 Weintraub, Robert E., 60 Wells Fargo, 178 “When Does Narcissistic Leadership Become Problematic?”

Chokepoint Capitalism
by Rebecca Giblin and Cory Doctorow
Published 26 Sep 2022

One 2018 analysis estimated a full guarantee for US workers would cost $543 billion per year, or 3 percent of GDP.28 In exchange, we’d have everyone who wanted a job but couldn’t otherwise get one working to make society better, adding to community stability and purpose. To put that into context, US government spending in response to just the first few months of the coronavirus pandemic in 2020 is estimated at over $6 trillion,29 about twelve times as much, of which substantial portions are going straight into billionaires’ pockets via stock buybacks, special dividends, executive bonuses, and service on debt that’s held by the company’s investors, who borrowed from the company to pay themselves dividends that will worsen inequality at the public’s expense. Even if it cost more than that, we could afford it. One potential revenue source that’s increasingly popular with voters is a wealth tax on the richest individuals and corporations.

The Wrecking Crew: How Conservatives Rule
by Thomas Frank
Published 5 Aug 2008

Schemes to return the corporation to the free-market paths of righteousness and profitability have danced through the conservative imagination ever since. The list of innovations designed to discipline the corporation—to force managers to concern themselves solely with profit—is long and getting longer every day: leveraged buyouts, stock options for senior management, shareholder revolts, stock buybacks, mergers, spinoffs, downsizing, outsourcing, and offshoring, to name a few.15 Lobbying could be a valuable weapon in the war for profit, but conservatives had apparently lost sight of its potential. Although it seems inconceivable today, conservatives in the seventies and eighties routinely attacked lobbying on the grounds that, by pleading for bailouts and special favors, K Street had both softened capitalism’s competitive edge and encouraged government to grow big.

Brazillionaires: The Godfathers of Modern Brazil
by Alex Cuadros
Published 1 Jun 2016

At the time, Berkshire Hathaway was valued at around $340 billion, Facebook at $300 billion, and Exxon at $350 billion. 211“lasting greatness.” According to Jim Collins, in his preface to Sonho Grande, 8. 211spent less on research and development. Karen Brettell, David Gaffen, and David Rohde, “As stock buybacks reach historic levels, signs that corporate America is undermining itself,” Reuters, November 16, 2015. An argument in favor of corporate buybacks is that shareholders will spend the money more wisely than corporations with excess profits. But actual productive investment has declined in recent years.

Panderer to Power
by Frederick Sheehan
Published 21 Oct 2009

They are subsidizing our transactions and are allowing us to make deals that wouldn’t have made sense.”21 15 Peter Smith, “Blackstone Quickens Pace with $15.6bn Fund,” Financial Times, July 12, 2006. 16Stella Dawson, “Bubbles Caused by Cheap Cash Menace World Economy,” Reuters, July 24, 2006. 17“The LBO Gang Storms the Valley,” BusinessWeek, September 11, 2006. 18 Wall Street Journal, “Behind Executive Pay, Decades of Failed Restraints,” October 12, 2006. 19Andrew Smithers, “Why Balance Sheets Are Not in Good Shape,” Financial Times, August 30, 2007. Since 1984, stock buybacks and dividend payouts have exceeded profit retention. Equity of U.S. corporations has fallen more than 3 percent annually. A 3-percent-per-year decrease over 20 years is significant. Why would banks take such risks? Lloyd Greif, an investment banker in Los Angeles, was quoted in the July 7, 2006, edition of American Banker: “The greed factor has kicked in as lenders see they can collect fees not just once or twice, but sometimes several times from refinancing leveraged buyout deals over and over again.”22 No one stopped the money machinery.

The Job: The Future of Work in the Modern Era
by Ellen Ruppel Shell
Published 22 Oct 2018

At the same time, a cult of personality in the business community has led to the rise of towering corporate leaders, some of whom have become public icons. Like the Wizard of Oz who hid behind his curtain, these “wizards” of business obscure the reality of the enterprises they represent. Many of these companies rely for their profits on financial machinations—mergers, stock buybacks, acquisitions, secondary offerings—rather than on their avowed function of delivering real value. And the collateral damage of corporate decision making—for example, pollution and underemployment—is borne by society. Workers go largely unheard, their concerns and needs overlooked or disregarded until election time brings politicians bearing promises of “more and better jobs.”

Red-Blooded Risk: The Secret History of Wall Street
by Aaron Brown and Eric Kim
Published 10 Oct 2011

While it cannot be denied that this strategy has been a winner for investors, delivering average returns at very low cost, it’s not very satisfying. IGT CAPM is anticyclical. When there is good news about a company, its current investors do not want to hold more. Therefore, the business has to pay out its good fortune in cash dividends or stock buybacks. These are much harder to fake than earnings. If the company wants to grow, it has to recruit new investors. It cannot grow passively by having its stock price go up and thereby be a larger part of the market, so index fund investors will allocate more of their portfolio to it. MPT CAPM is neutral to growth.

The Coke Machine: The Dirty Truth Behind the World's Favorite Soft Drink
by Michael Blanding
Published 14 Jun 2010

But the philosophy was articulated most famously by Jack Welch, the CEO of General Electric, who declared in 1981 that plodding growth of “blue chip” companies was no longer good enough for him. Instead, he pushed GE’s earnings into high gear by cutting waste and inefficiency wherever he found it—including downsizing through massive layoffs. He set the tone for other companies, who rushed to please Wall Street by any means necessary—including accounting tricks, stock buybacks, and rampant ac­ quisitions of other companies. Flush with stock options, CEOs profited handsomely, even as they sometimes hurt the long-term success of their companies through an emphasis on short-term growth. Outside of Jack Welch, no CEO was associated with the “shareholder value movement” more than Roberto Goizueta, who became a darling of Wall Street in the 1980s.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies
by Jeremy J. Siegel
Published 18 Dec 2007

Those who used trend-line analysis and who failed to analyze stock prices in real, instead of nominal, terms would have sold in 1955 and never reentered the market.4 But there is now another justification why the channel may be penetrated on the upside. Stock indexes record only capital appreciation, and they therefore understate total returns, which must include dividends. But firms have been paying an ever-lower fraction of their earnings as dividends. More of the return is being pushed into capital gains through stock buybacks and reinvestment of earnings. Since the average dividend yield on stocks has fallen 2.88 percentage points since 1980, a new channel has been drawn in Figure 3-1 with a 2.88 percentage point higher slope to represent increased capital gains. By that measure the Dow level at the end of 2006, although at a peak, was within 1 standard deviation of the mean.

A Man for All Markets
by Edward O. Thorp
Published 15 Nov 2016

the EMH explained Malkiel, Burton G., A Random Walk Down Wall Street, Norton & Co., New York, 2007. The New York Times New York Times, March 3, 2000, page A1, “Offspring Upstages Parent In Palm Inc.’s Initial Trading.” academic literature documents It often takes weeks or months for the stock price to fully adjust after announcements of unexpected earnings, stock buybacks, and spin-offs. CHAPTER 27 already been counted Mutual fund management companies and hedge fund general partnership interests have a separate and often considerable market value but they have already been counted as part of the private equity subcategory. between asset classes For a highly mathematical discussion of this effect, sometimes called “volatility pumping,” see The Kelly Capital Growth Investment Criterion: Theory and Practice, editors Leonard C.

Super Pumped: The Battle for Uber
by Mike Isaac
Published 2 Sep 2019

Chapter 28: THE SYNDICATE 284 “we have hit a dead end”: Mitch and Freada Kapor, “An Open Letter to The Uber Board and Investors,” Medium, February 23, 2017, https://medium.com/kapor-the-bridge/an-open-letter-to-the-uber-board-and-investors-2dc0c48c3a7. 285 Lake was sexually harassed: Dan Primack, “How Lightspeed Responded to Caldbeck’s Alleged Behavior,” Axios, June 27, 2017, https://www.axios.com/how-lightspeed-responded-to-caldbecks-alleged-behavior-1513303291-797b3d44-6b7d-4cd1-89ef-7e35782a32e6.html. 287 through an internal repurchase program: Katie Benner, “How Uber’s Chief Is Gaining Even More Clout in the Company,” New York Times, June 12, 2017 https://www.nytimes.com/2017/06/12/technology/uber-chief-travis-kalanick-stock-buyback.html. 288 the two rarely spoke afterwards: Alex Konrad, “How Super Angel Chris Sacca Made Billions, Burned Bridges and Crafted the Best Seed Portfolio Ever,” Forbes, April 13, 2015, https://www.forbes.com/sites/alexkonrad/2015/03/25/how-venture-cowboy-chris-sacca-made-billions/#17b4e9866597.

The Controlled Demolition of the American Empire
by Jeff Berwick and Charlie Robinson
Published 14 Apr 2020

Morgan believes that a gargantuan financial crisis is right around the corner, and when it hits, the solution that the controllers propose will seem like nothing short of a rigged and criminally orchestrated fraud, as the Federal Reserve, for the first time ever, enters the market to purchase stocks. So who owns the majority of the stocks in the United States? The 1% does. And what type of stocks make up a chunk of their portfolios? Banking stocks, of course.185 When the stock market collapses due to being built on a foundation of fraud, disinformation, collusion, and the stock buyback programs fueled by free money from the Fed, the banks will be pulling the ripcords on their golden parachutes while the Federal Reserve cranks up their magic printing press again to create more fiat dollars and silently inflate the money supply in order to buy the stock of Goldman Sachs and Citigroup so that they are assured of not becoming worthless.

Unscripted: The Epic Battle for a Media Empire and the Redstone Family Legacy
by James B Stewart and Rachel Abrams
Published 14 Feb 2023

After being rejected by Peters and Herzer, and still in negotiations over his divorce from Phyllis, Sumner found himself living alone in luxury hotels and searching for women to date. His mood swings and erratic romantic behavior became more pronounced. Steven Sweetwood, Sumner’s stepnephew and a stockbroker who handled Viacom’s stock buybacks, decided the answer might be a woman from an entirely different milieu than Hollywood. Sweetwood set Sumner up on a blind date with an elementary school teacher in Manhattan named Paula Fortunato, a friend of a colleague of his at Bear Stearns. Fortunato, age thirty-eight, was living in a one-bedroom apartment on the Upper East Side.

Becoming Steve Jobs: The Evolution of a Reckless Upstart Into a Visionary Leader
by Brent Schlender and Rick Tetzeli
Published 24 Mar 2015

By the time the Disney board meetings came around, Steve had usually been fully briefed by Iger. “We saw eye to eye on most things,” says Iger. “It wasn’t anything preplanned, but when Steve opined, the board generally listened.” That wasn’t true on everything, but Steve voiced his disagreements in a forceful but civil fashion. Steve hated stock buybacks, when companies purchase their own shares on the public market—a move that is supposed to be both a good investment for the company and a signal of its confidence to big investors. He made a strong case against it at one board meeting, but the company proceeded nonetheless. On the other hand, when Disney was about to enter a joint venture with Carnival Cruise Lines because Iger didn’t think he could get the board’s support to build two new, billion-dollar cruise ships, Steve passionately urged him, and eventually the board, to have Disney build the ships itself.

The Price Is Wrong: Why Capitalism Won't Save the Planet
by Brett Christophers
Published 12 Mar 2024

Under growing pressure not to invest where, on profitability grounds, they would like (that is, in new oil and gas fields), and disinclined, on the selfsame profitability grounds, to invest where others want them to (namely in clean energy), Exxon and its peers have instead been returning profits en masse to shareholders via dividends and stock buybacks. They have, in short, been giving the finance sector far more cash than they take from it.28 Companies in the business of renewable electricity generation generally find themselves in very different financial circumstances. It is very rare for them, in contrast, to have at hand anything like the amount of capital needed to build a new solar or wind farm.

All the Devils Are Here
by Bethany McLean
Published 19 Oct 2010

It would soon report 2006 revenues of $24.4 billion, up nearly $6 billion from 2005. Profits hit an all-time high of nearly $2.7 billion. Its ranking on the Fortune 500 rose from 122 to 91. So seemingly confident was the company in its financial strength that instead of conserving capital it announced a $2.5 billion stock buyback. In February 2007, Countrywide’s stock hit an all-time high of over $45 a share. What few at Countrywide seemed to understand was that it wasn’t just Countrywide’s customers who were assuming a great deal of risk. So was the company itself. Like other mortgage originators, Countrywide kept the riskiest piece of a securitization, the residuals, on its own balance sheet.

The Price of Inequality: How Today's Divided Society Endangers Our Future
by Joseph E. Stiglitz
Published 10 Jun 2012

At $191 billion in 2010, corporation tax was equal to 1.3 percent of the nation’s GDP; internationally corporate income tax revenues in OECD countries averaged 2.8 percent of GDP in 2009, the latest year for which statistics were published. See OECD (2011), Revenue Statistics 2011, OECD Publishing, available at http://dx.doi.org/10.1787/rev_stats-2011-en-fr (accessed March 2, 2012). 66. See “Microsoft Outlines Quarterly Dividend, Four-Year Stock Buyback Plan, and Special Dividend to Shareholders,” Microsoft press release, July 20, 2004, available at http://www.microsoft.com/presspass/press/2004/jul04/07-20boardpr.mspx (accessed March 2, 2012). 67. According to an IRS study in 2008, during 2004–05, 843 corporations brought into the United States almost $362 billion of their overseas profits, at the special 5.25 percent tax rate, a savings (over the normal tax they would have had to pay) of more than $100 billion.

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

“Nannygate II: A Women’s Backlash?” Newsweek, 14 Feb. 1993, www.newsweek.com/nannygate-ii-womens-backlash-195214. 22. The CEA provides a good overview of market concentration and its effects. Council of Economic Advisors. CEA. “Benefits of Competition and Indicators of Market Power.” Apr. 2016. 23. Trainer, David. “How Stock Buybacks Destroy Shareholder Value.” Forbes, 24 Feb. 2016; see also Lazonick, William. “Profits Without Prosperity.” Harvard Business Review, Sept. 2014. 24. Rosenbaum, Aliza, and Rob Cox. “Big Money: Is Big Beer Begging for an Anti-Trust Probe?” The Washington Post, 6 Sept. 2009, www.washingtonpost.com/wp-dyn/content/article/2009/09/04/AR2009090404236.html.

Bill Marriott: Success Is Never Final--His Life and the Decisions That Built a Hotel Empire
by Dale van Atta
Published 14 Aug 2019

He had good employees and a superior management team, but in the first two weeks of that fateful August 1985, he lost three important players upon whom he’d come to depend—his father, his brother, and Gary Wilson. Technically, Wilson was the CFO until September 3, but he had already moved to Los Angeles, having been hired by Michael Eisner as Disney’s new CFO. Wilson and Al Checchi (who had left three years earlier) had been the financial wizards who—through inventive limited partnerships, stock buybacks, and other creative maneuvers—had been critical to Marriott’s growth. J.W. never fully trusted Gary’s financial wizardry, which hadn’t made Gary appreciative of the obstreperous Chairman. The funeral, however, changed Wilson’s view of the formerly fearsome man. In a note to Bill, he said, “Unfortunately for me, I saw The Chairman principally from an adversarial business vantage point and not as the wonderful family man that he obviously was.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

Alan Greenspan, chairman of the Federal Reserve, supported the rush to debt: “Rising leverage appears to be the result of massive improvements in technology and infrastructure...experience...has made me reluctant to underestimate the ability of most households and companies to manage their financial affairs.”13 Companies used cash flow from operations or new borrowings to repurchase their own shares to boost their stock price. Alan Greenspan put the practice down to a slowdown in innovation and excess capital.14 Stock buybacks left the company with more debt and a weaker financial position.15 In 1987 Standard Oil of Ohio (Sohio), once part of the grand dame of oil companies but now owned by Britain’s BP, advertised in leading financial magazines—“Standard Oil not standard thinking.”16 An arty graphic depicted a drop of oil in which a reflection of an oil well was visible.

Stress Test: Reflections on Financial Crises
by Timothy F. Geithner
Published 11 May 2014

And I believe the council has served a valuable coordination function, providing a forum for regulators to work together, even though it was partly designed to protect their independent fiefdoms. Dodd-Frank also mandated rigorous annual stress tests, making one of our crisis innovations a standing feature of U.S. banking supervision. It will require systemically important firms to prove they have enough capital to survive a severe crisis in order to get approval for dividend payouts, stock buybacks, and other actions that could erode their capital buffers in good times. The Fed’s stress tests are now more exacting and conservative than the original exercise that helped calm the crisis. Its 2013 scenario included loss estimates based on a recession with unemployment rising above 12 percent and GDP plunging at a 6 percent annual rate.

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

Although their high profit levels since the mid 1980s meant that they did not need to rely on issuing new shares for investment funds, they remained major players in stock markets via buybacks. Following a supportive SEC ruling in 1982, net stock issuance was negative in twenty-one of the twenty-four years between 1984 and 2007 (the years 1991–93 were the exceptions), with net stock buybacks over that period totaling $3.2 trillion.61 And even while paying out high dividends, they were also major borrowers, raising some $3.1 trillion in the corporate bond markets over this period (60 percent of this in the last ten years), and meeting short-term expenses using commercial paper while simultaneously putting surplus funds into money markets.

The Enlightened Capitalists
by James O'Toole
Published 29 Dec 2018

Stack is both.”19 Kleiner also praises Stack for having created a system that “solved some of the most entrenched problems of entrepreneurial capitalism, such as the perennial need to raise ‘exit money’ so key shareholders won’t bankrupt the company when they leave and cash in their shares.”20 One of the several ways in which that is done is to stretch out the stock buyback process over ten years. At the close of SpringfieldRe’s first decade of business, the company’s stock, worth ten cents a share at the time of its founding, was valued at more than $18, and seven hundred new shareowners had been added to the payroll in a rust-belt city where most other manufacturers were downsizing or going out of business.

IBM and the Holocaust
by Edwin Black
Published 30 Jun 2001

“I would have to burden my properties with a mortgage or to change my standard of life.”101 Heidinger offered IBM an ultimatum: either declare a bona fide profit and pay a dividend for prior years that would net him RM 250,000—or he would exercise an option requiring IBM to buy back his shares in the company. For now, he was offering just one of his ten shares. He would still retain 9 percent. “Find out which . . . Mr. Watson would prefer,” Heidinger asked.102 Alarms went off in Geneva, Paris, and New York. IBM had no objection to a stock buy-back. But everyone understood that if Heidinger reduced his holdings below 10 percent that might cause Nazi authorities to re-examine the Aryan nature of Dehomag. The company could lose the ability to use “Deutsche” in its name, and might even be taken over by kommissars.103 Moreover, in Germany’s current state of war preparedness, punch card technology overseers in the Ministry of War could even decree a takeover.

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

T H E L O N G - T E R M E N E RG Y S O U E E Z E ventories and assets have mounted.* But their opportunities to invest profitably in exploration and development are modest. And with access to the OPEC reservoirs curtailed, the international companies have few alternatives but to return much of their cash flows to shareholders through stock buybacks and dividends. With the exception of Saudi Aramco, none of the OPEC national oil monopolies has professed a desire to contain oil-price increases by expanding crude-oil capacity. On the contrary, they seem most concerned that excess capacity will bring down prices and the huge revenues on which they have come to depend for domestic political purposes.

Palo Alto: A History of California, Capitalism, and the World
by Malcolm Harris
Published 14 Feb 2023

The financially experienced Amazon management team sold more than $600 million in bonds to European investors right before the crash, a move redolent of Huntington’s international railroad security shenanigans. The bonds insulated Amazon just enough from the explosion of a number of its big web retail investments.33 Instead of bribing the market into investing with dividends and stock buybacks, Bezos redirected revenue into growth through acquisition and expansion. To books he added e-books (developing Kindle) and audiobooks (purchasing Audible), coming to dominate both categories. Amazon also bought Zappos, the internet’s favorite shoe store, as well as the self-explanatory Diapers.com.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

John Gutfreund, the head of Salomon Brothers, reportedly said that if the president wanted him to buy, he would buy, even though he feared that the crash might have cost his firm $1 billion by late morning on Tuesday. 52. Norris, “The Crash of 1987.” 53. The dominant account of the crash credits corporate stock buybacks with helping to spark the rally that began around 12:30 p.m. (See Presidential Task Force on Market Mechanisms, Report of the Presidential Task Force on Market Mechanisms, 4, sec. III, 26.) However, rules governing buybacks forbid companies from bidding up their own stock prices. Presuming these rules were observed, buybacks could have helped the market by absorbing selling pressure on the way down; and the announcement of buybacks would have encouraged other investors to act as buyers.

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance
by Ron Chernow
Published 1 Jan 1990

That was the big script difference from 1929—the absence of a bankers’ rescue. President Reagan, eager to echo Hoover, said, “the underlying economy remains sound.”16 John Phelan, the New York Stock Exchange chairman, played the Richard Whitney role, debating with advisers about whether to close the Exchange. There were again stock buybacks and early Exchange closings to deal with paperwork. But no bankers marched up the steps of 23 Wall. Phelan consulted mostly with William Schreyer of Merrill Lynch and John Gutfreund of Salomon Brothers—not with Morgan Stanley—reflecting the new importance of trading and retail houses, rank outsiders to the club in 1929.

The Prize: The Epic Quest for Oil, Money & Power
by Daniel Yergin
Published 23 Dec 2008

Many companies had taken the huge cash flows that poured out of the two oil shocks and put them right back into exploration in the United States, seeking secure alternatives to OPEC. The results were very disappointing; reserves were still declining. The expenditure of so much money had proved to be inefficient and wasteful. Rather than continue spending at so helter-skelter a rate, why not give more of the money back to the shareholders through higher dividends or stock buy-backs, and let them decide how to invest it? Or, perhaps even better, why not acquire or merge with other companies of known value and so get reserves on the cheap? Thus, the value gap, like a geological fault, facilitated a great upheaval throughout the oil industry. The result was a series of great corporate battles, pitting company against company, with a variety of Wall Street warriors mixed in and sometimes in command.