Sovereign wealth fund

[Michchamp]

I like the idea that any companies that get bailed out, the people should all own their shares. seems like more people are talking about this and it's getting some traction.

The alternative is bankruptcy and liquidation, the existing shareholders are going to be screwed/wiped out anyway. OOPS! you made a bad investment! bear the consequences. capitalism, baby.

Dividends paid by the fund can go to everyone once a year, like Alaska's sovereign wealth fund, or alternatively, you get them upon retirement or something. This doesn't change how companies are being run, it's not "socialism" in the scary sense of the word; the companies will still operate to maximize profits, or the management will get booted.

This should absolutely be done to any companies that squandered all their cash to prop up their shares using share buy-backs over the last few years. That was simply bad, imprudent management.

 

[tomdalton22]

Why stop there. Maybe recoup some of the money spent on welfare recipients too. A single mom that is on welfare for 8 years...the people own her ass. When she dies, any and all assets up to the amount she collected goes to the people first, then her estate gets what is left over.

 

[Michchamp]

Why stop there. Maybe recoup some of the money spent on welfare recipients too. A single mom that is on welfare for 8 years...the people own her ass. When she dies, any and all assets up to the amount she collected goes to the people first, then her estate gets what is left over.

smart. the avg. net worth of people on welfare probably doesn't amount to much, if it's even positive at all.

spend thousands of dollars to repossess some worthless used TVs, cars, household appliances after a single mom on welfare dies.

fuckin' brilliant. and totally the same thing as taking ownership of a poorly managed mega-corporation asking for a multi-billion dollar handout, so they can keep paying their C-level execs's seven figure salaries and bonuses.

 

[tomdalton22]

smart. the avg. net worth of people on welfare probably doesn't amount to much, if it's even positive at all.

spend thousands of dollars to repossess some worthless used TVs, cars, household appliances after a single mom on welfare dies.

fuckin' brilliant. and totally the same thing as taking ownership of a poorly managed mega-corporation asking for a multi-billion dollar handout, so they can keep paying their C-level execs's seven figure salaries and bonuses.

I know...I just thought this was a thread you started that was supposed to be full of bad ideas.:lmao:

 

[Michchamp]

I know...I just thought this was a thread you started that was supposed to be full of bad ideas.:lmao:

ah...

:no:

 

[turok]

Why stop there. Maybe recoup some of the money spent on welfare recipients too. A single mom that is on welfare for 8 years...the people own her ass. When she dies, any and all assets up to the amount she collected goes to the people first, then her estate gets what is left over.

Your fed tax $$ get sucked into that massive RED maw of federal debt. soon to be $$$24T after the Trump admin spends $$800B+ on coronavirus fallout.

And most RED states are/have historically been net federal tax recipients, receiving much more in fiat $$$ than was paid in annually.

 

[Spartanmack]

I like the idea that any companies that get bailed out, the people should all own their shares. seems like more people are talking about this and it's getting some traction.

This is effectively what happened in 2009, the government granted loans and/or bought preferred shares, etc in companies. The companies paid interest/dividends to the federal government and paid back most of the loans, on net the government made out with the banks and lost about 9 of the $90B given to bailout the auto makers. Personally, I don't think the government should have bailed them out but since they did, they should have profited more from it and made them pay back all of the loans. But, and this is a big BUT, they completely trampled all over the constitution and screwed over the automakers' bondholders in the process - it was complete tyranny and theft.

The alternative is bankruptcy and liquidation, the existing shareholders are going to be screwed/wiped out anyway. OOPS! you made a bad investment! bear the consequences. capitalism, baby.

I'm totally fine with this - I was against the bailout in 2009. I thought we should have taken on the recession, trim the fat rather than kick the can down the road.

Dividends paid by the fund can go to everyone once a year, like Alaska's sovereign wealth fund, or alternatively, you get them upon retirement or something. This doesn't change how companies are being run, it's not "socialism" in the scary sense of the word; the companies will still operate to maximize profits, or the management will get booted.

They can't go to everyone - that's socialism. If they're to be distributed, they should only go to people who pay taxes.

This should absolutely be done to any companies that squandered all their cash to prop up their shares using share buy-backs over the last few years. That was simply bad, imprudent management.

No it's not bad management and saying it is is just dumb and shows a lack of understanding of basic economics and corporate finance. Companies shouldn't be forced to hoard all their earnings, particularly cash in excess of their "rainy day needs." They should use their capital in the most efficient way. If they don't have business opportunities, they should distribute the funds to shareholders. Unfortunately, we have this stupid tax code designed by idiots who think how you tax companies doesn't matter. It does, and as a result, we have these perverse incentives for companies to hoard capital or distribute it in less efficient ways, like through buy backs, which are effectively like dividends except they don't result in the double taxation of that money like distributing dividends does.

 

[Spartanmack]

Your fed tax $$ get sucked into that massive RED maw of federal debt. soon to be $$$24T after the Trump admin spends $$800B+ on coronavirus fallout.

And most RED states are/have historically been net federal tax recipients, receiving much more in fiat $$$ than was paid in annually.

most red states have lower (many even no) state tax rates and thus lower deductions on their federal income tax returns. So they pay in a disproportionally high percentage of their income to the federal government than high tax blue states. The 2018 tax reform reduced that by limiting SALT deductions to $10k but those high tax states are still paying in less than they should.

 

[tinselwolverine]

I know...I just thought this was a thread you started that was supposed to be full of bad ideas.:lmao:

Oh, okay...I got one...let?s close gyms for healthy people, but allow everyone else to spend hours crammed up against each other in a supermarket hoarding toilet paper to stem the spreading of a pandemic.

 

[Michchamp]

Oh, okay...I got one...let?s close gyms for healthy people, but allow everyone else to spend hours crammed up against each other in a supermarket hoarding toilet paper to stem the spreading of a pandemic.

Well, we finally are getting test kits in sufficient numbers (from Italy, a country with a supposedly more dysfunctional health system than ours) so hopefully we can start doing what they're doing: widespread testing & only isolating people who actually test positive, thereby stopping the epidemic

 

[tomdalton22]

Well, we finally are getting test kits in sufficient numbers (from Italy, a country with a supposedly more dysfunctional health system than ours) so hopefully we can start doing what they're doing: widespread testing & only isolating people who actually test positive, thereby stopping the epidemic

so we want to emulate Italy, the country that just surpassed China in reported deaths from the virus? (FWIW, I don't believe that China only has 3400 deaths)

BTW...Italy's reported cases are still rising, so it doesn't appear that they have stopped anything.

https://www.worldometers.info/coronavirus/country/italy/

 

[Michchamp]

so we want to emulate Italy, the country that just surpassed China in reported deaths from the virus? (FWIW, I don't believe that China only has 3400 deaths)

BTW...Italy's reported cases are still rising, so it doesn't appear that they have stopped anything.

https://www.worldometers.info/coronavirus/country/italy/

ours are too. we're just like a week or two behind Italy.

our numbers are underreported too.

I've heard this from a number of friends who are doctors.

 

[tomdalton22]

ours are too. we're just like a week or two behind Italy.

our numbers are underreported too.

I've heard this from a number of friends who are doctors.

agree. I have a friend who is a director of the largest health care provider in our city. Only one case has been reported but he says there are likely thousands already infected but showing little or no symptoms. This is where I think maybe we are overreacting.

Who knows.

 

[Spartanmack]

and when we start testing more broadly and reported numbers go up, that's going to drive the mortality rate down, unless those are massively underreported numbers too like with cops murdering black people.

 

[Michchamp]

...

No it's not bad management and saying it is is just dumb and shows a lack of understanding of basic economics and corporate finance. Companies shouldn't be forced to hoard all their earnings, particularly cash in excess of their "rainy day needs." They should use their capital in the most efficient way. If they don't have business opportunities, they should distribute the funds to shareholders. Unfortunately, we have this stupid tax code designed by idiots who think how you tax companies doesn't matter. It does, and as a result, we have these perverse incentives for companies to hoard capital or distribute it in less efficient ways, like through buy backs, which are effectively like dividends except they don't result in the double taxation of that money like distributing dividends does.

This is so wrong, I don't know how you can say this and have a career in finance.


A dividend distributes cash to shareholders; buybacks don't. Buybacks only benefit any shareholders who happened to have bought shares before the buybacks started, and sold them before the share prices reverted to normal.



Any Boeing shareholders who didn't sell during the time their share price was artificially propped up by the buybacks got hosed. I'm sure the executives who planned them and knew they were coming did quite well.

 

[tomdalton22]

I'm no financial expert but this is my take on it. A company sells stock to raise money for any number of things, but most often to expand. If the expansion (or whatever venture they used the money for) is successful, the company makes more money. When they have "extra money" they purchase the stock back. Maybe the stock went up (there's the interest on the loan) or maybe they buy when it's down, but either way, it's a way to get capital back so they have it down the road.

Basically, they are investing in themselves.

 

[Spartanmack]

This is so wrong, I don't know how you can say this and have a career in finance.


A dividend distributes cash to shareholders; buybacks don't. Buybacks only benefit any shareholders who happened to have bought shares before the buybacks started, and sold them before the share prices reverted to normal.



Any Boeing shareholders who didn't sell during the time their share price was artificially propped up by the buybacks got hosed. I'm sure the executives who planned them and knew they were coming did quite well.

If I hadn't read your drivel for the past 6+ years, I'd be shocked by how stupid this post is. But since I know you, I'm not at all surprised by this. First, if you take cash and buy your own shares, who do you think gets that cash? Shareholders, so yeah dummy, they do distribute cash to shareholders. And if they held the stock for a year+, those people pay capital gains rates on their profits.

Remaining shareholders benefit because it increases their percentage ownership of a company, not because it artificially increases their share price.If you have a company with a $1B market cap and you have 10mm people own 1 share each at $100 per share then if the company buys back 10% of the shares, that $1B company is now owned by 9mm people and there shares are worth $111.11. The price per share goes up because the company is still worth $1B, but there are fewer shares outstanding. So now the remaining shareholders have an unrealized and therefore, untaxed capital gain of 11.11% and when they sell, if it's long term, it will be taxed at the lowest possible rate. Depending on your holding period, ordinary dividends can be taxed as ordinary income, which of course is double taxation because they come out of the after tax earnings of the company paying them.

Companies do this when they don't have a better use for the cash and they think their shares are cheap. It's a more tax efficient way to distribute value to shareholders. Also, they don't buy stock when they think the company is overvalued. Just like when their shares are cheap and they need to raise money, they go to the debt markets, when they think the shares are trading rich, they issue equity.

The Boeing shareholders aren't any worse off because there was a buyback before this correction, in fact they're better off - using the numbers in the above example if the stock lost 30% they now have a share worth 77.77, if there had never been a buyback, that same share would be worth $70. Boeing has it's problems with the 737 Max and reduced orders due to a possible recession, that will be why existing shareholders lose money, not because of the buyback.

 

[tomdalton22]

If I hadn't read your drivel for the past 6+ years, I'd be shocked by how stupid this post is. But since I know you, I'm not at all surprised by this. First, if you take cash and buy your own shares, who do you think gets that cash? Shareholders, so yeah dummy, they do distribute cash to shareholders. And if they held the stock for a year+, those people pay capital gains rates on their profits.

Remaining shareholders benefit because it increases their percentage ownership of a company, not because it artificially increases their share price.If you have a company with a $1B market cap and you have 10mm people own 1 share each at $100 per share then if the company buys back 10% of the shares, that $1B company is now owned by 9mm people and there shares are worth $111.11. The price per share goes up because the company is still worth $1B, but there are fewer shares outstanding. So now the remaining shareholders have an unrealized and therefore, untaxed capital gain of 11.11% and when they sell, if it's long term, it will be taxed at the lowest possible rate. Depending on your holding period, ordinary dividends can be taxed as ordinary income, which of course is double taxation because they come out of the after tax earnings of the company paying them.

Companies do this when they don't have a better use for the cash and they think their shares are cheap. It's a more tax efficient way to distribute value to shareholders. Also, they don't buy stock when they think the company is overvalued. Just like when their shares are cheap and they need to raise money, they go to the debt markets, when they think the shares are trading rich, they issue equity.

The Boeing shareholders aren't any worse off because there was a buyback before this correction, in fact they're better off - using the numbers in the above example if the stock lost 30% they now have a share worth 77.77, if there had never been a buyback, that same share would be worth $70. Boeing has it's problems with the 737 Max and reduced orders due to a possible recession, that will be why existing shareholders lose money, not because of the buyback.

I don't know much about this...but if the company buys back 100,000 of the 1,000,000 shares, there are still 1,000,000 shares...right? The company owns 100,000 and the shareholders own 900,000.

That's the way I always thought it worked. I'm probably wrong though...like I said, I don't know too much about it.

 

[Spartanmack]

I don't know much about this...but if the company buys back 100,000 of the 1,000,000 shares, there are still 1,000,000 shares...right? The company owns 100,000 and the shareholders own 900,000.

That's the way I always thought it worked. I'm probably wrong though...like I said, I don't know too much about it.

In shareholder's equity or in the footnotes to the financial statements you see a breakdown of total shares. Total shares issued is the sum of shares outstanding and treasury shares.

When a company buys its own shares they become treasury shares, they are not outstanding shares, they don't represent ownership in the company, the company doesn't have voting rights and they don't pay themselves dividends for those shares. The market cap of a company is determined by the multiplying the price per share by the number of outstanding shares.

The company can sell them and they then become outstanding shares again. Again, when a company sells it's own shares, it's a signal to the market that management thinks it's shares are overvalued. When they're buying, it's a signal that they're cheap, or fairly valued and management wants to do the right thing by shareholders with it's excess cash.

If the company retires the treasury shares (not very common practice), the total shares issued would decrease. Treasury shares, obviously are different from shares owned by insiders (officers, directors, employees, affiliated companies, etc).

 

[tomdalton22]

In shareholder's equity or in the footnotes to the financial statements you see a breakdown of total shares. Total shares issued is the sum of shares outstanding and treasury shares.

When a company buys its own shares they become treasury shares, they are not outstanding shares, they don't represent ownership in the company, the company doesn't have voting rights and they don't pay themselves dividends for those shares. The market cap of a company is determined by the multiplying the price per share by the number of outstanding shares.

The company can sell them and they then become outstanding shares again. Again, when a company sells it's own shares, it's a signal to the market that management thinks it's shares are overvalued. When they're buying, it's a signal that they're cheap, or fairly valued and management wants to do the right thing by shareholders with it's excess cash.

If the company retires the treasury shares (not very common practice), the total shares issued would decrease. Treasury shares, obviously are different from shares owned by insiders (officers, directors, employees, affiliated companies, etc).

I learn something almost every day.