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Thu Aug 22, 2019, 09:54 AM

Stock buybacks exploded after the tax cuts. Now they're slowing down

https://www.cnn.com/2019/08/22/investing/stock-buybacks-drop-tax-cuts/index.html

New York (CNN Business)Corporate America's epic buyback mania may finally be succumbing to gravity.

The 2017 corporate tax cut left US businesses flush with cash. S&P 500 companies responded by rewarding shareholders with record amounts of buybacks in 2018, with each quarter setting an all-time high.

However, that record-shattering pace appears to be slowing. S&P 500 companies executed $165.7 billion of buybacks during the second quarter of 2019, according to preliminary estimates by S&P Dow Jones Indices. Although that's still a stunning amount of repurchases, it marks a 13% decline from the same period a year ago.

The slowdown in buybacks, which have become a lightning rod for criticism among some in Washington and even on Wall Street, underlines the impact the tax law had last year as companies steered a sizable chunk of their windfall to investors.
"2018 was an adrenaline high," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. "Companies pounded their chest and rushed to show how much money they could return to shareholders via the new tax changes."

The pullback in buybacks may also reflect a desire by companies not to get stuck buying their own stock near record highs.
"A lot of these companies have seen their stock price go up a lot. Treasurers are thinking, 'Maybe I save some ammo in case anything crazy happens,'" said Ian Winer, advisory board member at Drexel Hamilton.


graph and video at the link

Watch the stable geniuses propose new tax cuts. At least Dems control the House this time.

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Reply Stock buybacks exploded after the tax cuts. Now they're slowing down (Original post)
IronLionZion Aug 2019 OP
Wounded Bear Aug 2019 #1
Botany Aug 2019 #2
Tech Aug 2019 #6
soryang Aug 2019 #3
no_hypocrisy Aug 2019 #4
IronLionZion Aug 2019 #5

Response to IronLionZion (Original post)

Thu Aug 22, 2019, 10:01 AM

1. So it slows down...

they sit on the cash. When the recession hits, stock prices tank, they buy back the rest of the stock.

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Response to IronLionZion (Original post)

Thu Aug 22, 2019, 10:07 AM

2. "They" told us the Trump/Ryan tax cut for the rich would create new jobs and get people raises but .

.... just like i read here on DU was that the CEOs would use it to buy back their company's stock.

And now that tax cut has exploded the deficit and will help to crater the economy too.

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Response to Botany (Reply #2)

Thu Aug 22, 2019, 10:27 AM

6. Ryan did get a new job and probably a pay raise. It seems to have worked for him.

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Response to IronLionZion (Original post)

Thu Aug 22, 2019, 10:13 AM

3. Lowering progressive tax rates results in hoarding and speculation not...

...capital investment.

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Response to IronLionZion (Original post)

Thu Aug 22, 2019, 10:14 AM

4. Wouldn't stock buybacks eventually be a problem?

If the stock value tanks, the investment is no longer appreciable.

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Response to no_hypocrisy (Reply #4)

Thu Aug 22, 2019, 10:18 AM

5. Buybacks make sense when stock prices are low and companies have excess cash

to reward their shareholders by boosting share prices.

It doesn't do much to create new jobs, grow the business, upgrade equipment, or help people who don't own stock. It's not the job creator that GOP claims it to be.

As liberals, we tend to believe putting money in the hands of the consumers who will spend it is what creates jobs and boosts our economy.

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