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JUST AS I WARNED-Companies Lose Billions on Stock Buybacks

http://finance.yahoo.com/news/companies-lose-billions-buying-back-181218493.html

This is the foolishness done by these companies while borrowing low interest rate funds flooding the market from the Federal Reserve Banking System for big borrowers. Now they will carry the cost of that debt and then a few years later will see expiration of original loans and have to refinance at higher rates of interest.

"The companies losing money on these bets are down a collective $126 billion over the past three years, a decline of 15 percent.

Many corporations would have been better off investing that cash in an index fund instead of their own stock. The overall market rose 39 percent over the same period. The companies could also have distributed that cash as dividends to shareholders, allowing them to spend what is, in the end, their money.

And it's not just a few big corporate losers accounting for all the pain. The group includes 229 companies in the Standard and Poor's 500 index, nearly half of the companies in the study prepared by FactSet for The Associated Press."


I'll try later to find the earlier posts I made on this and drop the links in this thread.
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Re: This is the foolishness done by these companies
This is the foolishness done by these companies while borrowing low interest rate funds

Your link makes no mention of "borrowing low interest rate funds".


It's increasingly important to differentiate productive stock buybacks from destructive ones.

What is a good share buyback program?
Buybacks are a mechanism to return capital to investors. When a company buys its own stock, the amount of shares outstanding is reduced, so each stock is theoretically worth more money, since it now represents a bigger percentage of the company's cash flows and earnings.

Warren Buffett is perhaps the most successful investor ever and one of the biggest world experts in capital allocation matters, so he knows how to differentiate between productive and destructive buybacks. In Warren Buffett's own words, from Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) annual report for 2011:

Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company's intrinsic business value, conservatively calculated.
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PS
How companies pay for those billion dollar stock buybacks

The question is: how much of this new cheap debt is being used to finance stock buybacks? Because that would mean the Fed has effectively enabled financial engineering that's enriching folks in the stock market.

It turns out not to be that much.

"Over the last 12 months, 27% of repurchases have been at least partially funded by issuing new debt," observed JPMorgan's Dubravko Lakos-Bujas. "While this portion is elevated, stock buybacks remain overwhelmingly funded with internally generated funds rather than debt (net debt as % of total assets is near record lows)."
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"It turns out not to be that much"

Of course it isn't.......the article quotes Lakos-Bujas by ONLY looking at the last 12 MONTHS.....it has to be obvious to anyone with a brain that the buybacks started in 2010-2011 (FIVE YEARS ago) when the Feds started dumping $85B a month into the market. If the companies were buying back their stock for four years on a regular basis, there wouldn't BE much stock left to repurchase by 2015. There was plenty of discussion from financial experts in 2011 about this issue and they ALL said that "The Fed has effectively enabled financial engineering that's enriching folks in the stock market", and that it was because of that $85B that was being printed/borrowed causing our National Debt to skyrocket to benefit the very wealthy. Why do you think the actual stats prove that they have all become so much more wealthy under BO's administration compared to other Presidents?

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RE:Why do you think the actual stats prove
Why do you think the actual stats prove that they have all become so much more wealthy under BO's administration compared to other Presidents?

Because Bush crashed the market then left the scene of the crime?

Above is a rhetorical question.

In case there is some confusion on your part.

A rhetorical question, is a figure of speech in the form of a question, that is asked to make a point rather than to elicit an answer.

YOU could be "one of those" and become so much more wealthy...IF you didn't keep all your money in your mattress.
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You can't prove that Bush crashed the market.....

but financial EXPERTS can prove that CLINTON by encouraging bad loans and the Dems by hiding the truth about how unstable the housing market and Social Security (via Dodd and Frank and the Treasury) DID. Or is that too much of an 'inconvenient truth' for you?

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RE:financial EXPERTS

Names?.....links?

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mattress money
"YOU could be "one of those" and become so much more wealthy...IF you didn't keep all your money in your mattress."

Mine is divided between cash and SDOW right now. I see Gold jumped some the other day, but that's "fool's gold" if a deflationary cycle is coming up. I don't see how deflation will be avoided unless our govt goes totally inflationary crazy and turn us into the Weimar Republic of America.
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Here's a link to Bush
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You're talking about TARP

that bailed out all the financial institutions, amongst other things.....the fall was started in the 1990's during Clinton's terms by lowering the standards of who qualified for loans, and when Geithner was head of Wall Street and ignored all the warnings that were staring him in the face, and then Barney Frank, who was head of the financial agencies dealing with Social Security and Freddie Mac/Fannie Mae (housing) telling everybody that everything's great..

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RE: started in the 1990's

and carried on/not stopped with/by Bush?

Bush quote...It's clearly a budget. It's got a lot of numbers in it.

Clinton was gone for 8 years.....Bush changed nothing....

Clinton President January 20, 1993 – January 20, 2001

President of the United States from 2001 to 2009,

The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008.

Government(your) money is government (your) money...TARP or STIMULUS.

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Why would Bush change what was

being reported as working well? He believed the people doing the reporting and they were lying.....

TARP was considered to be an 'understandable' rescue and was actually pushed by the Dem controlled Congress (the same Dems who lied for over ten years about what was happening) and was signed by Bush one month before the new Presidential election.....STIMULUS was an AGENDA and signed by BO within a month of HIS swearing in.

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RE: Why would Bush change what was
Why would Bush change what was being reported as working well? He believed the people doing the reporting and they were lying.....

Right up until he was standing behind a microphone announcing TARP/a Stimulus Program?

They had to 'lie" to mislead Bush?

Bush quote...It's clearly a budget. It's got a lot of numbers in it.

Do you think Obama was smarter than Bush?...Obama "knew" what he was doing with his "superior intellect"?

Please explain why it makes a difference to the taxpayer if the money that the government spends is spent under TARP or Stimulus?...There is only one money pot.....What's in a name?

TARP was considered to be an 'understandable' rescue

Yet it went into law....Under Bush.
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Obviously YOU don't know the difference

TARP was supposed to be used to bail out the banks and auto industries in order to 'stabilize' the economy.....and it was pushed quickly by the Dems. STIMULUS was for BO's AGENDA exclusively.

It makes a huge difference to the taxpayer because they could actually understand saving the banks via TARP (although they raged over the fact that so many in charge were then given their bonuses for doing a lousy job in the first place.....but the REAL blame belongs on the shoulders of the government that was PUSHING those bad loans and no one has been held accountable for THAT).

NO ONE BUT THE DEMS AND BO BELIEVED IN STIMULUS....and NO ONE BUT THE DEMS AND BO BELIEVED IN THE $85B PER MONTH THAT THE FEDS/TREASURY WAS DIRECTED TO DUMP INTO WALL STREET TO PUMP UP THE DOW AND MAKE IT LOOK MUCH BETTER THAN IT WAS....AND IT WAS ALL PRINTED OR BORROWED PUTTING THE BURDEN OF PAYING IT ALL BACK ON FUTURE GENERATIONS. NONE OF STIMULUS OR THAT $85B FOR 7 YEARS WAS NECESSARY....IT WAS ALL EGO DRIVEN FOR AGENDAS THAT THE ACTUAL PEOPLE DIDN'T WANT, NEED, OR ASK FOR.

Evidently YOU think both of those 'ideas' were good.........remember that TARP cost the taxpayers $750B TOTAL......Add up the stimulus and the $85B over a seven year period of time, and you'll get an idea of why the people here are pissed off, and that doesn't count the fiasco called Obamacare or the fact that BO has directed FHA and the banks to AGAIN lower the eligibility standards for housing loans just like Clinton did. Can you spell 'crash' again in a few short years unless a Republican comes along and stops that in its tracks quickly?

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RE: unless a Republican
unless a Republican comes along and stops that in its tracks

Have you chosen your "horse in the race" yet?

Are you telling anyone?

RE:It makes a huge difference to the taxpayer because they could actually understand saving the banks via TARP

Are you the same Toni H that was railing against the banks a few weeks ago in Speakeasy? Something about withdrawing all your money from banks?
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I don't represent the majority of the people JP

Although I don't trust the banks, which are regulated heavily by the Federal government and new DODD/FRANK rules, that doesn't mean that I also can't understand the thinking that was going on during TARP.

Unfortunately, liberals don't know how to look at both sides....they only know THEIR side and most times, it's a pack of lies to keep getting what they want for their own agendas.

Many of those who agreed with TARP were older people who lived thru the bank failures during the depression years.......the youngest people didn't and still don't understand what happened because they aren't very well informed to begin with. It was the 'Tea Party' people who recognized what was really going on and rallied against it all and continue to do so.

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RE: that doesn't mean that I also can't understand
that doesn't mean that I also can't understand the thinking that was going on during TARP.

Unfortunately, liberals don't know how to look at both sides....they only know THEIR side


How do Liberals "know" that you've looked at both sides? Because YOU say so?

Could Liberals make the same claim?

Why not?

Would you accept their word?

Why not?

You can understand something and disagree and you're "right"...others understand something and disagree and they're "wrong"?
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what Toni noted and...
"S&P 500 companies have announced 238 new buyback authorizations since the beginning of the year, with a dollar volume of $553 billion. This puts buyback announcements on track for a record year run rate of $666 billion, the highest since the $690 billion level hit in 2007."


Remember, "debt issued" means "money borrowed".
Go here and look at 2007, the last time they had similar situation. Watch then the move down into Feb 2009.

from google;
"DEFINITION of 'Quantitative Easing' An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
When did QE start in US?

Quantitative Easing 1 (QE1, December 2008 to March 2010)[edit] "On November 25, 2008, the Federal Reserve announced that it would purchase up to $600 billion in agency mortgage-backed securities (MBS) and agency debt.
"


http://www.bloombergview.com/quicktake/federal-reserve-quantitative-easing-tape

"The Fed’s usual method of fighting recessions is to push down the interest rates banks charge each other for overnight loans, which allows banks to offer cheaper loans to businesses. But the Fed cut that rate almost to zero during the financial crisis five years ago, and more was clearly needed. So the Fed began buying bonds in hopes of driving down long-term rates that are usually outside its control. It wasn’t a new idea, but it had never been tried on such a massive scale. In the months after the crisis, the Fed bought $1.75 trillion in bonds. In 2010, with the recovery flagging, it bought $600 billion more in what was called QE2. In September 2012, with joblessness stubbornly high, the bank began snapping up $85 billion a month in Treasuries and mortgage-backed securities — QE3. Unlike earlier rounds, the Fed’s purchase plan was described as open-ended, with officials saying it would continue until the labor market “improved substantially.” "

So, if still looking at the DJI for the last 10 years, you can clearly see the effect of the Fed's actions on the stock market. While inflation was the worry, since instead the money all stayed at the top and no "trickle down" which would and should have occurred by more in dividends, which would benefit those holding stock and pension plans, et al. Instead increasing buyback of shares began in order to maintain "earnings" because when you take gross earnings and divide them by numer of stocks outstanding that gives you the earnings per share, an important figure to investors. If earnings drop, but outstanding shares are also reduced, then the earnings per share can still look the same or even better. The problem is companies buying back their stocks when high, then watching the stock price drop, the money which could have been distributed in dividends to the people, aka the economy is gone. Nobody got it, it just disappeared due to stock value loss. It has become "air" for all intents and purposes, but the debt to purchase it remains.

Flow of money is what makes an economy, but we've had it all stagnate at the top, and what should have been returned to investors was instead used foolishly in over priced company stock buybacks. It's like the old game of musical chairs, and the music has stopped playing, too few chairs, too many players, and eventually will come the hurt.

Two paths remain. Deflation or Inflation.

Deflation is the rich and everyone else pulling money out of banks, and the decreased money supply devalues goods, increases buying power of the money. Anyone in debt for purchasing large items such as homes, cars, farm equipment, and so forth when prices were high, default eventually.

Inflation is the govt trying to overcome the deflation, which already has occurred but by pumping the stock market in idea the money sent out would trickle down and reinvigorate the actual economy. It didn't.

I think a big economic reset is coming. I also expect once again it will get dumped into the lap and blamed on Republicans, which is what Trump was alluding to the other day when talking about the coming bubble being popped, and him hoping it was BEFORE a new president and not after.
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either you failed to read it

Or more likely failed to comprehend it. The very first link obviously shows exactly what I had said at the time, even if not in the EXACT phrase you seem obsessed with. That is your personal failing, becoming obsessed in minutiae and expressions, unable then to comprehend the equal duality of expression of what I wrote.

Need I to spoon feed it to you, like as to a child? OK.

"Bernanke gives huge amounts of funny money at free interest to banks who then only lend it at very low rates to the richest and biggest organizations,..... This country is rotting at the economic foundation while Bernanke, the banks, the stock market has a giant party on money we all will have to pay back in higher taxes one day, or face the "secret" taxation of inflation, eventually. We have a "Tulip" stock market right now, but it won't last and then it will all start to fall apart.....Just look at what Bernanke's money has been doing for the bubbles forming in the stock market and the money balance of banks and large business lately.....It's all the enablement by the Federal Reserve's easy money policy that is driving this current false rally. I say "false" not because a higher priced stock market doesn't exist right now but because it's driven not by investors, but by easy federal money pouring into the stock market. "

There, condensation from all three links, and those are just three I quickly found, I'm sure there are others. I would ask what part you failed to understand, but I'm afraid I might have to explain the periods on the end of sentences, or have you blather on about proper placement of commas or some other such trivial and inane thing.

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RE:The very first link obviously shows exactly
The very first link obviously shows exactly what I had said at the time

RE-read MY post...I said

Your link makes no mention of "borrowing low interest rate funds".

I was referring to THIS link in your very first post. THIS post
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RE:either you failed to read it
either you failed to read it Or more likely failed to comprehend it.

Another possibility is YOU didn't realize I was referring to THIS POST

and there is NO very first link ...there is only ONE link...which is This "link"

I was NOT referring to the post where you had 3 links to posts made by you...I was referring to the SINGLE link in the very first post in this thread.
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Companies Lose Billions on Stock Buybacks

It was the 'Tea Party' people who recognized what was really going on and rallied against it all and continue to do so.

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Yes, they did

And this merely further illustrated how they are mostly a bunch of loons.

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(NT) 'Loons'? Because they've been proved RIGHT?????

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