This is a great piece. Congrats on your new independence.
I am hoping you can go into more detail in a future piece about stock buy backs and how executives can get away with what appears to be an obvious grift.
The US doesn't export much that anyone really wants. Its financialized economy is kept going by printing money and dropping it on the owning class, at the cost of the growing national debt. As the government gets progressively more insolvent, sooner or later the holders of government bonds will give dump them. When will that happen and what will come next?
What comes next would seem to be collapse of the dollar relative to other currencies, leading to impossibility of importing anything, leading to collapse of most production, and also collapse of Financial Services industry. No more production means no more jobs and no more taxes, leading to collapse of US government. And what then? Does everybody starve to death, or do they figure out an alternative economy?
The US still has a manufacturing sector. We build a lot of cars and heavy machinery, for one.
The Dollar stays strong because the US Dollar is the world's Reserve Currency.
It is the Reserve Currency because of a deal FDR made on the way to or back from the Yalta Conference, where he assured Ibn Saud's family hold on the throne and Saud said the US would always have first bid on Saudi oil.
When OPEC was formed, power was apportioned based on "Proved Reserves", and Saudi had by far the largest reserves, so it had the most power.
Then came the Arab Oil Embargo, which violated the FDR-Saud agreement.
When that was over, the Nixon administration negotiated a new deal, whereby the US would continue to guarantee the Saud throne and Saudi Arabia would only accept US Dollars for its oil.
It has never been possible to buy any OPEC oil with any currency other than the USD.
Since that went into effect, there have been two OPEC rulers who indicated they might be open to selling in other currency - those two were Moammar Gadaffi and Saddam Hussein.
If they had a choice, no one would buy our overpriced arms, or our toxic crops, or our shoddy airplanes. Would you choose to buy a US car? So we are down to Caterpillar. It can be replaced.
You say it is OPEC Oil that holds the Dollar up. I didn't know that. But the European countries are losing big because of our Russia sanctions. They would do better if they went with Russian Iranian Iraqi oil, maybe paid for with Chinese money.
What if Iran and Iraq joined a military alliance with Russia and China? I don't think anyone wants a nuclear exchange. Most likely the two empires would agree to coexist, and maybe even merge. That would be nasty.
Or the USA could choose to merge with a China/Russia axis, if it could come about; don't think the Europeans don't fear that. They feared the USA making common cause with the Nazis in WWII.
Now it's time for the $trillions taken out of corporations through dividends and buybacks to be replaced by new equity, not loans and guarantees, Those companies with financial needs (like Boeing, for example) could be required to raise needed funds through shareholder equity rights offerings at whatever price is needed to raise those funds. If necessary these funds could be backstopped by the Feds, but the point is that there IS a price at which equity can be raised.
This approach used to be common.
For example, if Boeing needs $50 billion, then a rights offering to raise $50 billion may require the sale of, say, 10 billion shares at $5 or maybe just 5 billion shares at $10 with each current shareholder to participate or sell his "rights" to participate to others. No loans, no guarantees.
Buybacks is basically giving shareholder’s money to people who do not want to be shareholders.
How such an obviously crooked system ever got the purchase it did is a testimony to the dishonesty of it’s promoters, and the stupidity of the investing public.
You're not the person who's lost. The effect of a stock buyback, or, stock repurchase, is to reduce the number of outstanding shares on the market, which increases the ownership stake of the stakeholders, which benefits stockholders.
That's not what's happening. The shareholders own the company. Instead of directing directors to put the money on the balance sheet towards productive things like growth or expansion, they are telling the shareholders (owners) vote to take the money on the balance sheet and buy a portion of their shares back. They could have just dividended the money, but that would trigger a higher tax bracket, so instead they're turning dividends (income) into capital gains (share sales). It's feral because it's a tax dodge, and also it can suffocate the company (which should be using it's cash to be more competitive)
Corporate Officers and Executives run the companies for the benefit of corporate officers and executives.
When there is a large amount of cash in the corporate treasury, they often use that cash to buy back outstanding stock. The people (or more often entities) who sell their stock trade that portion of their ownership for cash.
This drives up stock prices, which makes the Officers and Executives' stock options more valuable.
This indeed does turn Ordinary Income into Capital Gains.
It does nothing to make the corporations more productive.
No. A stock that provides bo return is not an investment, it’s a trading sardine.
Why should a company give it’s shareholders money to people who do not wish to be shareholders? What loyalty does it owe them, giving them a higher exit price at the expense of existing shareholders, and at an extra cost to investors who wish to buy shares?
Not sure if this is clear. But shareholders own the company. When a company buys back shares, it's giving the owners some of the company's money back in their hands. There's no 'loyalty' test to being a shareholder. It's a for-profit exercise, and shares are bought and sold daily (hence the existence of the exchange).
The part that's feral is these companies are being hollowed out and their long term prospects being zapped by these share buy-backs. This pushes the companies to the edge of bankruptcy, and then management argues they need a bailout.
The government should say 'go to shareholders for a bailout'
No. It is giving money to people who do Not want to be shareholders, who want no involvment in the company. Not to its owners who carry on holding shares.
Why should a company, the remaining shareholders, the owners, provide a better exit to people who want to sell?
its also stunning to me how quickly all this happens. the covid-19 rescue bill got hammered together at lightning speed... but that still left the horse's ass whisperers and the groin leeches more than enough time to bend and mold and reshape. wow.
The role of BlackRock in selling and buying corporate bonds is what struck me. That "quaint term from the 20th century," conflict of interest doesn't even begin to cover it.
Dear Matt. Yes dear, that's what Capitalism has always been, an unfair economy. It only worked as long as something 'trickled down'. As my grandmother always said, it will eventually have to devour itself. It's time to to envision a world after it does, one that also exists without ice in Greenland.
Buybacks are an absolute corrupt aspect of the stock market. I watch CNBC and it’s just constant ass kissing of all these dumb ass corporate CEOs who have gotten us into another recession as a result of their greed!
Well that’s your problem. You watch corporate media that’s also a mouthpiece for the Democratic Party. Stop wasting your time. Watch Lou Dobbs, Neil Cavuto, Charlie Paine instead, it’ll make you smarter.
You come across to me as a Socialist Democrat in the mold of Bernie Sanders and you're suffering from Trump Derangement Syndrome.
Leftists seldom carry on a conversation without accusing those who don't share your progressive viewpoint of being racist, misogynistic, Islamophobic, homophobic, and/or a bible thumper who hates women and poor people.
Lou Dobbs wasn't a Trump supporter at the beginning but realized the man was serious about his campaign promises, obviously loves our country, works his ass off every day, and has accomplished so much in spite of your party's disgusting efforts to sabotage the country and remove the rightfully elected President.
Lou Dobbs is old but at least he's able to carry on a coherent conversation, unlike Joe Biden, he's batshit crazy with very bad policy ideas.
Lastly, Lou Dobbs wasn't an early Trump supporter at all, he was very skeptical of Trump, like many of us were at the time. Nobody loves Trump, except his family and maybe some friends
Non-leftists and other rational people don't need to "love" their leaders in order to support them.
Trump gets things done, he's obviously looking out for our country's best interest, works his ass off, and, most importantly, he's delivering on his promises.
The real beef the left has with Trump are profound policy differences and his critics are using his out-of-the-ordinary personality traits (I thought leftists were all about freedom of expression and letting it all hang out) as a substitute for debating the issues.
Ha Trump works his ass off! That’s great, the man is literally the laziest man to ever grift into office. He plays more golf than any other President. I called Dobbs a racist because he is. You notice I didn’t call Cavuto a racist or Payne. You have Trump Derangement Syndrome in that you are part of his cult. Anyone rationally and unbiased looking at Trump and his positions understands the man cares only for himself. His policies haven’t enhanced Americans, we are in the midst of the worse economic crisis in the last 70 years as a result of incompetence led by Trump.
Another great story, Matt. Keep up the good work. I wish you the best of luck switching over to a subscription format. As a journalist myself, I'm very interested to see how it will turn out.
Your opinion of Trump are baseless and were formed using flawed data fed to you by the corrupt and partisan corporate media establishment. You are a useless idiot who’s promoting the factional interests of people who don’t have your best interest in mind. The more I run into people who think your way the more I’m convinced America is close to breaking apart into several separate countries. Your worldview is toxic and your party’s leadership is corrupt to the core. I have no respect for you. My only wish is to defeat and then destroy the Democrats this fall. Drop dead.
I loved the article but missed any talk of ideas that would solve these problems using alternative methods that are superior to what has been done in the past.
It's easy to point out problems, scapegoat the usual suspects (bankers, corporations, Wall Street, and the wealthiest 1%), and non-stop complaining than to find alternative solutions.
This may sound quaint to care about, but one of the virtues of the old mode was that it was relatively inexpensive to the end user. Of course quality is everything when it comes to information, the good stuff has always been more pricey, I suppose, and propaganda and fan-service news doesn't get any better because it's cheap.
And the subscription model was what much of the first media, the print media, was based on here in the beginning, in the Colonial period. From what I know nobody felt much obligated to "cover both sides" back then, either.
This is a great piece. Congrats on your new independence.
I am hoping you can go into more detail in a future piece about stock buy backs and how executives can get away with what appears to be an obvious grift.
Thanks for your work during this crisis!
The US doesn't export much that anyone really wants. Its financialized economy is kept going by printing money and dropping it on the owning class, at the cost of the growing national debt. As the government gets progressively more insolvent, sooner or later the holders of government bonds will give dump them. When will that happen and what will come next?
What comes next would seem to be collapse of the dollar relative to other currencies, leading to impossibility of importing anything, leading to collapse of most production, and also collapse of Financial Services industry. No more production means no more jobs and no more taxes, leading to collapse of US government. And what then? Does everybody starve to death, or do they figure out an alternative economy?
The US still has a manufacturing sector. We build a lot of cars and heavy machinery, for one.
The Dollar stays strong because the US Dollar is the world's Reserve Currency.
It is the Reserve Currency because of a deal FDR made on the way to or back from the Yalta Conference, where he assured Ibn Saud's family hold on the throne and Saud said the US would always have first bid on Saudi oil.
When OPEC was formed, power was apportioned based on "Proved Reserves", and Saudi had by far the largest reserves, so it had the most power.
Then came the Arab Oil Embargo, which violated the FDR-Saud agreement.
When that was over, the Nixon administration negotiated a new deal, whereby the US would continue to guarantee the Saud throne and Saudi Arabia would only accept US Dollars for its oil.
It has never been possible to buy any OPEC oil with any currency other than the USD.
Since that went into effect, there have been two OPEC rulers who indicated they might be open to selling in other currency - those two were Moammar Gadaffi and Saddam Hussein.
Gee - what else do those two have in common?
If they had a choice, no one would buy our overpriced arms, or our toxic crops, or our shoddy airplanes. Would you choose to buy a US car? So we are down to Caterpillar. It can be replaced.
You say it is OPEC Oil that holds the Dollar up. I didn't know that. But the European countries are losing big because of our Russia sanctions. They would do better if they went with Russian Iranian Iraqi oil, maybe paid for with Chinese money.
Iran and Iraq are both OPEC countries.
Iraq already found out what happened when they suggested they might go off the Petrodollar.
What if Iran and Iraq joined a military alliance with Russia and China? I don't think anyone wants a nuclear exchange. Most likely the two empires would agree to coexist, and maybe even merge. That would be nasty.
Or the USA could choose to merge with a China/Russia axis, if it could come about; don't think the Europeans don't fear that. They feared the USA making common cause with the Nazis in WWII.
Now it's time for the $trillions taken out of corporations through dividends and buybacks to be replaced by new equity, not loans and guarantees, Those companies with financial needs (like Boeing, for example) could be required to raise needed funds through shareholder equity rights offerings at whatever price is needed to raise those funds. If necessary these funds could be backstopped by the Feds, but the point is that there IS a price at which equity can be raised.
This approach used to be common.
For example, if Boeing needs $50 billion, then a rights offering to raise $50 billion may require the sale of, say, 10 billion shares at $5 or maybe just 5 billion shares at $10 with each current shareholder to participate or sell his "rights" to participate to others. No loans, no guarantees.
Buybacks is basically giving shareholder’s money to people who do not want to be shareholders.
How such an obviously crooked system ever got the purchase it did is a testimony to the dishonesty of it’s promoters, and the stupidity of the investing public.
Possibly both.
You've lost me. Isn't it giving shareholder's money back to shareholders?
You're not the person who's lost. The effect of a stock buyback, or, stock repurchase, is to reduce the number of outstanding shares on the market, which increases the ownership stake of the stakeholders, which benefits stockholders.
You really believe that?
No - it is giving corporate money to people who wish to sell their shares of that corporation.
That's not what's happening. The shareholders own the company. Instead of directing directors to put the money on the balance sheet towards productive things like growth or expansion, they are telling the shareholders (owners) vote to take the money on the balance sheet and buy a portion of their shares back. They could have just dividended the money, but that would trigger a higher tax bracket, so instead they're turning dividends (income) into capital gains (share sales). It's feral because it's a tax dodge, and also it can suffocate the company (which should be using it's cash to be more competitive)
Corporate Officers and Executives run the companies for the benefit of corporate officers and executives.
When there is a large amount of cash in the corporate treasury, they often use that cash to buy back outstanding stock. The people (or more often entities) who sell their stock trade that portion of their ownership for cash.
This drives up stock prices, which makes the Officers and Executives' stock options more valuable.
This indeed does turn Ordinary Income into Capital Gains.
It does nothing to make the corporations more productive.
No. A stock that provides bo return is not an investment, it’s a trading sardine.
Why should a company give it’s shareholders money to people who do not wish to be shareholders? What loyalty does it owe them, giving them a higher exit price at the expense of existing shareholders, and at an extra cost to investors who wish to buy shares?
Not sure if this is clear. But shareholders own the company. When a company buys back shares, it's giving the owners some of the company's money back in their hands. There's no 'loyalty' test to being a shareholder. It's a for-profit exercise, and shares are bought and sold daily (hence the existence of the exchange).
The part that's feral is these companies are being hollowed out and their long term prospects being zapped by these share buy-backs. This pushes the companies to the edge of bankruptcy, and then management argues they need a bailout.
The government should say 'go to shareholders for a bailout'
No. It is giving money to people who do Not want to be shareholders, who want no involvment in the company. Not to its owners who carry on holding shares.
Why should a company, the remaining shareholders, the owners, provide a better exit to people who want to sell?
Edit: its’ shareholders money
its also stunning to me how quickly all this happens. the covid-19 rescue bill got hammered together at lightning speed... but that still left the horse's ass whisperers and the groin leeches more than enough time to bend and mold and reshape. wow.
Excellent. Keep up the great work.
The role of BlackRock in selling and buying corporate bonds is what struck me. That "quaint term from the 20th century," conflict of interest doesn't even begin to cover it.
Dear Matt. Yes dear, that's what Capitalism has always been, an unfair economy. It only worked as long as something 'trickled down'. As my grandmother always said, it will eventually have to devour itself. It's time to to envision a world after it does, one that also exists without ice in Greenland.
Buybacks are an absolute corrupt aspect of the stock market. I watch CNBC and it’s just constant ass kissing of all these dumb ass corporate CEOs who have gotten us into another recession as a result of their greed!
Well that’s your problem. You watch corporate media that’s also a mouthpiece for the Democratic Party. Stop wasting your time. Watch Lou Dobbs, Neil Cavuto, Charlie Paine instead, it’ll make you smarter.
Lou Dobbs! Are you kidding me the man is a senile old racist douchebag, incoherent and a mouthpiece for Trump. I can deal with Cavuto, but f—- Dobbs!
You come across to me as a Socialist Democrat in the mold of Bernie Sanders and you're suffering from Trump Derangement Syndrome.
Leftists seldom carry on a conversation without accusing those who don't share your progressive viewpoint of being racist, misogynistic, Islamophobic, homophobic, and/or a bible thumper who hates women and poor people.
Lou Dobbs wasn't a Trump supporter at the beginning but realized the man was serious about his campaign promises, obviously loves our country, works his ass off every day, and has accomplished so much in spite of your party's disgusting efforts to sabotage the country and remove the rightfully elected President.
Lou Dobbs is old but at least he's able to carry on a coherent conversation, unlike Joe Biden, he's batshit crazy with very bad policy ideas.
Lastly, Lou Dobbs wasn't an early Trump supporter at all, he was very skeptical of Trump, like many of us were at the time. Nobody loves Trump, except his family and maybe some friends
Non-leftists and other rational people don't need to "love" their leaders in order to support them.
Trump gets things done, he's obviously looking out for our country's best interest, works his ass off, and, most importantly, he's delivering on his promises.
The real beef the left has with Trump are profound policy differences and his critics are using his out-of-the-ordinary personality traits (I thought leftists were all about freedom of expression and letting it all hang out) as a substitute for debating the issues.
Ha Trump works his ass off! That’s great, the man is literally the laziest man to ever grift into office. He plays more golf than any other President. I called Dobbs a racist because he is. You notice I didn’t call Cavuto a racist or Payne. You have Trump Derangement Syndrome in that you are part of his cult. Anyone rationally and unbiased looking at Trump and his positions understands the man cares only for himself. His policies haven’t enhanced Americans, we are in the midst of the worse economic crisis in the last 70 years as a result of incompetence led by Trump.
Another great story, Matt. Keep up the good work. I wish you the best of luck switching over to a subscription format. As a journalist myself, I'm very interested to see how it will turn out.
Well if the bomb is continually being reset, it better be handled carefully lest it go off.
Your opinion of Trump are baseless and were formed using flawed data fed to you by the corrupt and partisan corporate media establishment. You are a useless idiot who’s promoting the factional interests of people who don’t have your best interest in mind. The more I run into people who think your way the more I’m convinced America is close to breaking apart into several separate countries. Your worldview is toxic and your party’s leadership is corrupt to the core. I have no respect for you. My only wish is to defeat and then destroy the Democrats this fall. Drop dead.
I loved the article but missed any talk of ideas that would solve these problems using alternative methods that are superior to what has been done in the past.
It's easy to point out problems, scapegoat the usual suspects (bankers, corporations, Wall Street, and the wealthiest 1%), and non-stop complaining than to find alternative solutions.
This may sound quaint to care about, but one of the virtues of the old mode was that it was relatively inexpensive to the end user. Of course quality is everything when it comes to information, the good stuff has always been more pricey, I suppose, and propaganda and fan-service news doesn't get any better because it's cheap.
And the subscription model was what much of the first media, the print media, was based on here in the beginning, in the Colonial period. From what I know nobody felt much obligated to "cover both sides" back then, either.
Amazing! Can't wait for more!
Congratulations on your new full-time job Matt!
I've signed up again as a paying subscriber. Love your work.