“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).” — Warren Buffett, The Oracle of Omaha, Berkshire Hathaway Annual Investor Letter, February 25, 2023
“Corporations ought to do the right thing. That’s why I propose we quadruple the tax on corporate stock buybacks and encourage long-term investments. They’ll still make considerable profit.” — President Joe Biden, State of the Union Address, February 7, 2023
Silver-tongued demagogue? Nope. Economically illiterate? If the shoe fits …
How does POTUS know that publicly traded American corporations will make a “considerable profit?”
He has proudly proclaimed he doesn’t own stocks in US companies. He doesn’t even maintain a savings account. Can he read an income statement or a balance sheet? Can he forecast the future when it comes to the bottom line? Does Mr. President know where to find the bottom line on an income statement?
The so-called Inflation Reduction Act imposes a precedent setting 1 percent excise tax on stock repurchases. How applying new taxes on corporate share buybacks fights inflation is way beyond the pay grade of Almost DailyBrett.
If the increased revenues from these taxes were directed to reduce the nation’s unsustainable and untenable $31.58 trillion debt (120 percent of the nation’s annual productivity), financed by spending $537 billion in debt service, the leader of the free world would have an argument about inflation reduction.
Alas, all the money will be spent. All the money is always spent, and then some.
Maybe Corporations Should Apply For Student Loan Relief?
“The most terrifying words in the English language are: ‘I’m from the government and I’m here to help.” — President Ronald Reagan
Why do the economically illiterate/silver-tongued demagogues have a collective hard-on, when it comes to corporate buybacks?
Is it because it leads to profiteering (new Beltway verb)?
When somethings seems to be too good to be true, don’t you know that is indeed the case?
As a way to stimulate American semiconductor innovation and manufacturing, Congress passed the $52 billion bill (CHIPS Act) as an incentive for US microcircuits innovators.
Alas, Senator Elizabeth Warren and others of her ilk want to prevent microchip companies from using federal monies for capital expenditure and research and development (R&D), so they can in turn can free up corporate capital for — you guessed it — corporate buybacks.
As a former director of corporate public relations for a Silicon Valley based publicly traded semiconductor innovator (LSI Logic) for a decade, Almost DailyBrett understands why companies periodically buy back their own shares for the benefit of their employees and their shareholders.
When markets and stock prices are lower, a company can reduce the float, thus increasing the value of each remaining share. This practice does not come at the expense of employee compensation, capital expansion and/or research and development.
In fact, a large percentage of employees participate in Employee Stock Purchase Plans (ESPP) and/or stock options. Senator Warren and her flock somehow doesn’t think increasing the value of each share doesn’t help these workers fight inflation?
How about public employees in STRS (State Teachers Retirement System and PERS (Public Employees Retirement System)? Don’t these daddies and mommies benefit when their pension or 401k retirement systems increase in value? What about America’s Investor Class, the 56 percent of Americans who own company shares or stock-based mutual funds?
Think of it this way: Warren Buffett — even the pseudo-Andy Warhol version — has forgotten more about economics than Joe Biden and Elizabeth Warren will ever know.
The real question is what the hell is wrong with corporate buybacks? American publicly traded companies have been floating shares ever since the founding of the New York Stock Exchange (NYSE) in 1792. Investors bought pieces of companies, providing valuable seed money to hire, build and research.
It’s a beautiful thing. Government intervention is not required. Really.
Warren Buffett, 92, knows a thing-or-two about the vagaries of public markets. He also can identify “economic illiterate silver-tongued demagogues,” when he sees them.
Does the shoe fit?
https://www.cnbc.com/2023/02/25/warren-buffett-annual-letter-berkshire-hathaway-stock-buybacks.html
https://www.nyse.com/history-of-nyse
(Almost) DailyBrett 