What does a BIDEN Presidency look like?

[Tamas]

Did Denver finally close down its smoking bar?  They had one when I flew through a while back.

Warsaw has wonderfully small glass cages situated in the middle of the walking corridors where maybe half a dozen people fit at a time, to be then visible to everyone as the addicts who just had to. Sufficiently humiliating for a disgusting habit.

[The Brain]

That's like, not cool man.

[Sheilbh]

Did Denver finally close down its smoking bar?  They had one when I flew through a while back.

Warsaw has wonderfully small glass cages situated in the middle of the walking corridors where maybe half a dozen people fit at a time, to be then visible to everyone as the addicts who just had to. Sufficiently humiliating for a disgusting habit.

I used to fly to Bosnia fairly often to see a friend which meant changing in Vienna airport. The bit that connects to London is a really sleek, ultra-modern recently constructed airport that (like the best transport infrastructure) looks like the setting for a near future dystopia. In that section there are or were smoking rooms/booths which basically have jet powered extractor fan air conditioning.

But for the flights to the Balkans you need to move to the older terminal which is just very 70s. There the smoking booth was in a coffee shop area and, instead of having, an extractor fan just had holes in the glass walls

[Admiral Yi]

Liz Warren is pushing her wealth tax again.

She also wants to ban stock buybacks.

[Caliga]

She also wants to ban stock buybacks.

[Sheilbh]

Liz Warren is pushing her wealth tax again.

She also wants to ban stock buybacks.

Both sound like very good ideas.

Taxing wealth is something we really need to work out how to do well.

[alfred russel]

Why do you want to ban stock buybacks?

[Sheilbh]

Why do you want to ban stock buybacks?

What's their benefit to the economy?

I'd also be open to not banning them but making them very unattractive through tax policy.

[alfred russel]

Why do you want to ban stock buybacks?

What's their benefit to the economy?

I'd also be open to not banning them but making them very unattractive through tax policy.

So you are a leader of a corporation with excess cash that you don't have a useful way to reinvest.

-You can keep the cash sitting idle in the business (unattractive, and not a good use of resources)
-You can make dumb investments anyway, or even better give the money to consultants you will tell you to use the rest on stupid M&A activity

You correctly resist the above two strategies as being stupid. You decide to return the cash to shareholders. You have a couple options:

-dividends
-stock buybacks

Absent taxes, $100 spent on dividends will give your shareholders $100. $100 spent on buybacks will result in stock appreciation of $100. Your shareholders should be more or less indifferent (again ignoring taxes). There are advantages in sometimes using a stock buyback versus a dividend: a one time / extraordinary dividend has administrative costs, and can increase the volatility of the stock by creating a "lottery event" of a windfall dividend payment - traders will want to own the stock on that date. There is a good argument to align taxation of capital gains and dividends.

Companies that pay dividends usually keep them consistent: this year we pay $1 a share, next year we pay $1.05 a share, etc. If they have an extraordinary year/build up excess cash, they use that for buybacks so that the dividend stays consistent.

Of course there are reasons as CEO you may prefer buybacks: your stock options become more valuable with a buyback, but less valuable with a dividend.

[Maladict]

Why do you want to ban stock buybacks?

What's their benefit to the economy?

I'd also be open to not banning them but making them very unattractive through tax policy.

So you are a leader of a corporation with excess cash that you don't have a useful way to reinvest.

-You can keep the cash sitting idle in the business (unattractive, and not a good use of resources)
-You can make dumb investments anyway, or even better give the money to consultants you will tell you to use the rest on stupid M&A activity

You correctly resist the above two strategies as being stupid. You decide to return the cash to shareholders. You have a couple options:

-dividends
-stock buybacks

Absent taxes, $100 spent on dividends will give your shareholders $100. $100 spent on buybacks will result in stock appreciation of $100. Your shareholders should be more or less indifferent (again ignoring taxes). There are advantages in sometimes using a stock buyback versus a dividend: a one time / extraordinary dividend has administrative costs, and can increase the volatility of the stock by creating a "lottery event" of a windfall dividend payment - traders will want to own the stock on that date. There is a good argument to align taxation of capital gains and dividends.

Companies that pay dividends usually keep them consistent: this year we pay $1 a share, next year we pay $1.05 a share, etc. If they have an extraordinary year/build up excess cash, they use that for buybacks so that the dividend stays consistent.

Of course there are reasons as CEO you may prefer buybacks: your stock options become more valuable with a buyback, but less valuable with a dividend.

What about investing it in the people who actually made all that money? You know, the employees?

[Threviel]

A company does not exist to make the employees more qualified, a company exists to make money for its owners. It would be extraordinarily irresponsible if Volvo sent all its employees on a knitting course for its owners money.

[The Brain]

And employees who have invested in the company get money as shareholders.

[Sheilbh]

I think the IMF has estimated that about a third of US stock buy-backs are funded by bonds, so it's not always just cash-rich companies making this decision. Given that a significant proportion is being funded by debt I'm not sure that it's companies lacking a way to usefully re-invest as much as a preference for buybacks which have hugely increased in the last 20 years. In addition from studies done by groups like the IMF it is a large drain on corporate treasury.

Also shareholders' reaction would depend on the type of shareholder - shareholders that are holding as long-term investment (often included as part of employee schemes) benefit more from dividends than a buyback. Shareholders that are looking to or able to sell (pension funds, institutional investors, senior leadership/management) benefit from buybacks more than dividends.

But all of those benefit (some) shareholders of the company which is fine for the company to care about, from a regulatory/government perspective though I think it should be looking at what is the benefit to the economy. It's not clear there is one - so banning might be a bit strong - but I'd certainly look at tax incentives to make buybacks very unattractive compared to dividends or re-investment.

[DGuller]

What about investing it in the people who actually made all that money? You know, the employees?

How much you should invest in employees shouldn't really be a function of how much excess cash you have on hand.  It's either a worthwhile investment or it isn't.  Whatever is a worthwhile investment in employees wouldn't be counted as excess cash anyway, excess cash is the money that you can't invest at the required return.

[Maladict]

A company does not exist to make the employees more qualified, a company exists to make money for its owners. It would be extraordinarily irresponsible if Volvo sent all its employees on a knitting course for its owners money.

If the company had a particularly good year they would be wise to share the rewards with the employees. So they don't have to deal with those employees taking their skills elsewhere, if nothing else. But we might well be talking about different things here.

How much you should invest in employees shouldn't really be a function of how much excess cash you have on hand.  It's either a worthwhile investment or it isn't.  Whatever is a worthwhile investment in employees wouldn't be counted as excess cash anyway, excess cash is the money that you can't invest at the required return.

Fair enough, if that's the definition.