Discussion in 'Wall St. News' started by Banjo, Feb 26, 2018.
Usually marks a top in the market, no?
Perhaps the answer lies in regulation of options and bonuses. Require options to have a 30 day, or less, expiration. So there is less chance of being able to bet on a horse after it's crossed the finish line. And make tying bonuses to stock price illegal. But of course that's all wishful thinking. Capitalism, as it is practiced though not necessarily in theory, is incompatible with "Business Ethics."
Rather than legislating every detail of executive compensation, simply refrain from buying shares in companies whose compensation policies you dislike. Problem solved.
As to capitalism's being incompatible with ethics -- presumably socialism is more ethical?
You don't see a conflict of interest when CEOs decide to allocate large amount of funds to buying back shares just to inflate the stock price and therefore their bonuses?
That's not an answer to my question.
But to answer yours: you misunderstand buybacks. They don't magically make a company more valuable, nor "inflate" the company's stock price. Buybacks aren't inherently good or bad. They're good when the stock is undervalued, bad when it's overvalued.
Buybacks are really a tax free dividend. It's a way to give money to shareholders without paying dividend related taxes.
If a CEO decides to use his company's cash to buy back stock, it generally means he has no better use for the cash. The stock price will go up, but in the long run only because the same $ earnings are spread over fewer shares.
It can be used for manipulation, but buybacks aren't inherently a bad thing.
For whom is it bad when it's "overvalued". The terms "overvalued" and "undervalued" are nonsensical as they are completely subjective.
Exactly, Who determines whether the stock is under or overvalued? History has shown them to buyback stocks at the top which is not a good thing unless your compensation is tied to stock price. We have seen countless gimmicks used to prop up value and they all end bad for the little guy. Just because it is allowed doesn’t justify that it’s the right thing to do either. Banks were allowed to give out shit loans is a perfect example, which is their right just don't come with the hand out for a bailout when it doesn't work. These loans were handed out to receive huge sums of compensation with no regard to the shareholders.
"presumably socialism is more ethical"
It would be a mistake, I think, to make a blanket assumption with regard to "socialism". The same as it would be to make a blanket assumption with regard to capitalism. That's why I qualified my remark to indicate that paying little attention to ethics is not a requirement of Capitalism. In the public sector of course, ethical concerns play a greater role. All the modern "capitalist" economies are mixed economies. They incorporate both socialist and capitalist elements. The economies of the more socialist, Scandinavian countries would also be examples of mixed economies, but with somewhat greater socialist elements; especially in comparison with the most capitalist county, the USA. Since the greater the socialist component, the more public sector involvement, I suppose it follows that one could expect greater attention paid to ethical concerns. Among other things, this might be reflected in uniform access to education and medical care regardless of one's circumstances or financial status. A reliable measure of the degree of socialism within a mixed economy would be wealth disparity. This correlates strongly with the degree of socialist elements present. Of course I am only considering democratic socialism and capitalism. As you know, other forms exist.
Right, I forgot. Capitalists are greedy bloodsuckers, whereas politicians are selfless public benefactors.
Separate names with a comma.