What does a BIDEN Presidency look like?

[DGuller]

Speaking of the universally-applicable management magic of Apple senior management, I just remembered this example of how the Apple uber-manager fixed up a company in the dying industry: https://en.wikipedia.org/wiki/Ron_Johnson_(businessman).

[crazy canuck]

Yes I am aware of all that. I was just curious about the legalization of stock buy backs and why they were illegal in the first place specifically.

I thought I answered that, they were illegal because they are generally not in the best interests of shareholders or the general public.  They were and are properly viewed as a form of stock manipulation.

[The Larch]

So apparently during the Senate debate of the Covid relief bill some Republican senator from Wisconsin demanded that the entire 600 page bill be read out aloud in the chamber, just to delay the process and be an asshole about it. When the Senate clerks started to read it, which will take them around 10 hours, he just left the floor without paying any attention. Lovely human being all around.

[Valmy]

Yes I am aware of all that. I was just curious about the legalization of stock buy backs and why they were illegal in the first place specifically.

I thought I answered that, they were illegal because they are generally not in the best interests of shareholders or the general public.  They were and are properly viewed as a form of stock manipulation.

Ok gotcha.

[Admiral Yi]

So my point isn't that it's about the companies but about the economy. There may be lots of good reasons for individual companies to make this decision - looking at it from a macro/regulatory perspective do those decisions help or harm the economy in general and then we should try to create incentives for decisions that do and restrict decisions that don't or at least make them unattractive.

This is why my question to AR wasn't what are the benefits to a company for doing buybacks, but what are the benefits to the economy for buybacks because I think that's the frame that government should look at things.

Edit: Just as a tiny example - AR could be right that the companies using bonds to fund buybacks are actually just making a smart decision given the cost of debt right now. That may be true on an individual level but does it create credit risk looked at from a wider perspective - are there companies issuing speculative to fund this, is there concentration in specific markets, how much are companies already leveraged etc.

It is beneficial to the economy because idle cash is returned to the shareholders who can then seek more profitable ways to use these funds.

[crazy canuck]

So my point isn't that it's about the companies but about the economy. There may be lots of good reasons for individual companies to make this decision - looking at it from a macro/regulatory perspective do those decisions help or harm the economy in general and then we should try to create incentives for decisions that do and restrict decisions that don't or at least make them unattractive.

This is why my question to AR wasn't what are the benefits to a company for doing buybacks, but what are the benefits to the economy for buybacks because I think that's the frame that government should look at things.

Edit: Just as a tiny example - AR could be right that the companies using bonds to fund buybacks are actually just making a smart decision given the cost of debt right now. That may be true on an individual level but does it create credit risk looked at from a wider perspective - are there companies issuing speculative to fund this, is there concentration in specific markets, how much are companies already leveraged etc.

It is beneficial to the economy because idle cash is returned to the shareholders who can then seek more profitable ways to use these funds.

There is the untenable assumption that cash is "idle" and must be used immediately for short term purposes raising its ugly head again.

[Admiral Yi]

My understanding is that stock buybacks were illegal until the 1980s and have been controversial ever since. I usually hear that some company fired tons of people or got some big bailout and then used the money it saved to buy back stock.

So I guess my question is why was it originally illegal and why was the decision made it should be legal? What benefit does society actually get from it?

There used to be lots of strange regulations: fixed brokerage commissions, share prices quoted in sixths of a dollar ( ).

[Eddie Teach]

Won't money circulating rather than sitting idle increase inflation?

[Jacob]

Won't money circulating rather than sitting idle increase inflation?

I think the economy can handle a bit of inflation at the moment.

[crazy canuck]

Won't money circulating rather than sitting idle increase inflation?

In 2020 Microsoft was, on Yi's view of the world, sitting on over 100 billion in idle cash - did that cause inflation?

[Eddie Teach]

Other way around. If that money was getting spent instead of sitting idle, it would increase inflation, much like printing money does.

[grumbler]

Yes I am aware of all that. I was just curious about the legalization of stock buy backs and why they were illegal in the first place specifically.

They were never illegal, they just left mangers in the position whereby they could be accused of manipulating the value of their stocks.  So they were rare between 1934 (when price manipulation was made illegal in the wake of the 1929 crash) and 1982 when the rules were changed to allow low levels of stock buybacks without creating liability for charges of manipulation.

It isn't as simple as the black-and-white thinkers want you to believe.  I personally believe that the pre-1982 rules were better, but there are economists who would disagree with me, and have some reason on their side.

[crazy canuck]

Yes I am aware of all that. I was just curious about the legalization of stock buy backs and why they were illegal in the first place specifically.

They were never illegal, they just left mangers in the position whereby they could be accused of manipulating the value of their stocks.  So they were rare between 1934 (when price manipulation was made illegal in the wake of the 1929 crash) and 1982 when the rules were changed to allow low levels of stock buybacks without creating liability for charges of manipulation.

It isn't as simple as the black-and-white thinkers want you to believe.  I personally believe that the pre-1982 rules were better, but there are economists who would disagree with me, and have some reason on their side.

Very interesting, a regulatory offence is not illegal conduct.  What is it, just sort of outside the law? A minor deviation that is not quite legal and also not illegal?  Some other rabbit hole? 

[Sheilbh]

Other way around. If that money was getting spent instead of sitting idle, it would increase inflation, much like printing money does.

We've just been printing money for a decade with not much sign of inflation.

[crazy canuck]

Other way around. If that money was getting spent instead of sitting idle, it would increase inflation, much like printing money does.

I see, I apologize.  I misread your post.

Even if all corps who are cash rich injected all that cash into the economy, it would pale in comparison to all the money being pumped into the economy by governments through various methods - quantitative easy and just plain old printing of money.

The concern has been to create some inflation, not avoid it.