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Stock buybacks

Warren Buffett attacks buyback schemes

Warren Buffett

In the 2005 Berkshire-Hathaway annual report, Warren Buffet points to the unethical aspects of the buyback-option schemes so common in the US stock market. He noted that “Too often, executive compensation in the US. is ridiculously out of line with performance. … the deck is stacked against investors when it comes to the CEO’s pay. … CEOs understand … that every dime paid out in dividends reduces the value of all outstanding options”

Stock buybacks

WSJ mildly critical of stock buybacks

The mildest of reprimands

On June 12, 2006, the Wall Street Journal headlined, “Big companies put record sums into buybacks — repurchases aim to bolster shares but come at expense of investments in growth”. For capital flow analysts, this is hardly news, but for the WSJ to acknowledge or even suggest that the practice may have negative connotations is news!

Q1 2006

Stock buybacks financed by record borrowing

Corporate executives borrow to buyback company shares

Disbursement of corporate cash through dividends and stock buybacks totaled $1,073.5 billion in Q1 2006 (annualized). This massive distribution exceeded net profits after tax and was financed by selling bonds and mortgages. Reserves for depreciation were also used to finance buybacks and dividends.

These disbursements were double annualized net corporate profits after tax of $509.5

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Stock buybacks

Accelerating to a buyback-option blowout

By Q1 2006, stock buybacks had multiplied to five times the level of 2000. Buybacks grew by 25% in 2005, with corporate profits after taxes increasing only 5.5%. At these rates, buybacks will exceed after-tax profits by 2009.
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Securities Analysis

Efficient Market Hypothesis: No proof

The Efficient Market Hypothesis continues to impede understanding of how capital markets work. This hypothesis suggests that world capital markets are guided by crowds of rational, competing, profit-maximizers, each trying to predict future market values of individual securities. The Efficient Market Hypothesis has never been proven.
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US Politics

President Obama's Lincoln moment

In mid 2009, Barack Obama found that Lincoln's saying, "You can't fool all of the people all of the time," applied to his presidency. Profligate spending and unpopular health reform ended Obama's honeymoon. More ...

US equities

Stock values and cash dividends wither

Wall Street ballyhoo and flim-flam to the contrary, the year 2005 closed-out half a decade of misery and pain for the average investor in US equities. Average cash dividend yields never surpassed 3.8% during the period, and most of this was consumed by taxes and management expenses of the open-end mutual funds. More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2010-09-07 16:04