TPS Posted October 23, 2014 Share Posted October 23, 2014 Should I take the obligatory swipe about economists not understanding accounting and finance now, or later? Don't ignore M&A as an investment and growth strategy, which can be funded with the equity currency. Also, much of the internal investment decisions are made with a look to improving earnings growth which drive the PE multiples. That's why casually dismissing the relationship between equity price targets and internal investment decisions is foolish. Most M&A activity is driven by the urge to eliminate your competition and gain greater control over the market. In fact, I'd venture to say that investment in real assets probably declines after M&A activity which creates greater market concentration and less competition. While a single firm has "grown" via a merger, the industry has not. If the purpose of the capital gains tax is to promote economic growth through rewarding risk-taking by businesses, mergers that reduce competition certainly don't fuel economic growth. And, if the point is that lower cap gains taxes promotes higher stock prices, that certainly doesn't provide an incentive for M&A activity. Regarding your last point, that's what I said--stock prices are driven by profits/earnings. But Investment is driven by expectations of greater sales and earnings. No firm invests unless they think they can realize those higher earnings. Link to comment Share on other sites More sharing options...
GG Posted October 23, 2014 Share Posted October 23, 2014 Most M&A activity is driven by the urge to eliminate your competition and gain greater control over the market. In fact, I'd venture to say that investment in real assets probably declines after M&A activity which creates greater market concentration and less competition. While a single firm has "grown" via a merger, the industry has not. If the purpose of the capital gains tax is to promote economic growth through rewarding risk-taking by businesses, mergers that reduce competition certainly don't fuel economic growth. And, if the point is that lower cap gains taxes promotes higher stock prices, that certainly doesn't provide an incentive for M&A activity. Regarding your last point, that's what I said--stock prices are driven by profits/earnings. But Investment is driven by expectations of greater sales and earnings. No firm invests unless they think they can realize those higher earnings. What was I saying about economists and finance? No. most M&A is not to shrink the market. It is to expand operations and perhaps enter new markets. It's also a shortcut to building up the capacity yourself, if you think that the trade off between speed and cost is worth the purchase price. M&A can certainly stimulate economic growth, especially if a small company has a great product, but not the scale to take the product to the mass market. In that case, if it's sold to a larger company there would be faster economic growth if the acquirer expands that product's footprint faster than that company could on its own. Look at Android as an example. Would that operating system have the same horsepower and same economic effect if Google didn't buy it? Link to comment Share on other sites More sharing options...
birdog1960 Posted October 23, 2014 Share Posted October 23, 2014 (edited) Utter horse crap. Middle class growth in the US was due nearly entirely to economic growth and access to capital for a greater proportion of the population. hmmm….roubini vs gg? yellen vs gg? seems you believe that you "know what you're talking about" and these two don't. we can look up their credentials and accomplishments. how about yours? oh, and your question about economists and ceo's? i'll take "because they have a conscience" for $1000, alex. Edited October 23, 2014 by birdog1960 Link to comment Share on other sites More sharing options...
TakeYouToTasker Posted October 23, 2014 Share Posted October 23, 2014 (edited) hmmm….roubini vs gg? yellen vs gg? seems you believe that you "know what you're talking about" and these two don't. we can look up their credentials and accomplishments. how about yours? So... an appeal to a contested authority on the side that reports to your confirmation biases? Who ever would have guessed?!?! I'll leave it to you to explain why the standard of living is so much higher in America, and the middle class so much more robust, than in Europe, despite Europe's progressive bent. oh, and your question about economists and cep's? i'll take "because they have a conscience" for $1000, alex. The hate is strong in this one. Edited October 23, 2014 by TakeYouToTasker Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 We already do tax that. They're called "sin taxes". Also, your argument that you're unlikely to lose money investing in mutual funds might be the most obviously wrong thing you've ever said. Great! But how does that support your argument--the one I am arguing against--that capital gains taxes need to be lower than income taxes because of risk? Ok, sure, mutual funds can lose money, but they can also gain it back. Link to comment Share on other sites More sharing options...
KD in CA Posted October 23, 2014 Share Posted October 23, 2014 hmmm….roubini vs gg? yellen vs gg? seems you believe that you "know what you're talking about" and these two don't. we can look up their credentials and accomplishments. how about yours? oh, and your question about economists and cep's? i'll take "because they have a conscience" for $1000, alex. Perhaps you should have taken "People who are still too dense to understand politicians say things primarily for political benefit" for $200. Link to comment Share on other sites More sharing options...
Jauronimo Posted October 23, 2014 Share Posted October 23, 2014 Most M&A activity is driven by the urge to eliminate your competition and gain greater control over the market. In fact, I'd venture to say that investment in real assets probably declines after M&A activity which creates greater market concentration and less competition. While a single firm has "grown" via a merger, the industry has not. If the purpose of the capital gains tax is to promote economic growth through rewarding risk-taking by businesses, mergers that reduce competition certainly don't fuel economic growth. And, if the point is that lower cap gains taxes promotes higher stock prices, that certainly doesn't provide an incentive for M&A activity. Regarding your last point, that's what I said--stock prices are driven by profits/earnings. But Investment is driven by expectations of greater sales and earnings. No firm invests unless they think they can realize those higher earnings. Most of the M&A activity we've seen in the past few years has been a byproduct of tepid growth and strong cash balances. With fewer opportunities for internal investment we see firms try to expand their range of services/products. It seems like I've read that same narrative across every industry outlook over the past 4 years. Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 What was I saying about economists and finance? No. most M&A is not to shrink the market. It is to expand operations and perhaps enter new markets. It's also a shortcut to building up the capacity yourself, if you think that the trade off between speed and cost is worth the purchase price. M&A can certainly stimulate economic growth, especially if a small company has a great product, but not the scale to take the product to the mass market. In that case, if it's sold to a larger company there would be faster economic growth if the acquirer expands that product's footprint faster than that company could on its own. Look at Android as an example. Would that operating system have the same horsepower and same economic effect if Google didn't buy it? Or Google buying up all those robot companies. Link to comment Share on other sites More sharing options...
Jauronimo Posted October 23, 2014 Share Posted October 23, 2014 Holy river of stupid, Batman. Gator going full "him" arguing about the only actual fair tax in the entire arsenal. Make $10 in the market? Tax is 15%. Make $10,000.000.00 in the market? Tax is 15%. Liberals love fairness, as long as they get to define what it is. Predictable. Is it worth bring up that the money for this hypothetical investment subject to dividend and capital gains tax was already taxed as income at a progressive rate? In the interest of fairness and equality, how many times should we be taxing that same dollar and at what rate? Link to comment Share on other sites More sharing options...
Chef Jim Posted October 23, 2014 Share Posted October 23, 2014 (edited) Is it worth bring up that the money for this hypothetical investment subject to dividend and capital gains tax was already taxed as income at a progressive rate? In the interest of fairness and equality, how many times should we be taxing that same dollar and at what rate? Well to be fair the principal amount invested is not taxed again only the gains. Now if you want to talk estate taxes then you have an argument. Great! But how does that support your argument--the one I am arguing against--that capital gains taxes need to be lower than income taxes because of risk? Ok, sure, mutual funds can lose money, but they can also gain it back. Sure they can gain it back but you never answered my question of how much money can you lose getting paid for work? Edited October 23, 2014 by Chef Jim Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 Sure they can gain it back but you never answered my question of how much money can you lose getting paid for work? You can lose a lot if, like most of us, you have a mortgage, car payment and other debt based upon the salary you are making Link to comment Share on other sites More sharing options...
Chef Jim Posted October 23, 2014 Share Posted October 23, 2014 You can lose a lot if, like most of us, you have a mortgage, car payment and other debt based upon the salary you are making So if your expenses are greater than your income you're losing money? Link to comment Share on other sites More sharing options...
Alaska Darin Posted October 23, 2014 Share Posted October 23, 2014 Is it worth bring up that the money for this hypothetical investment subject to dividend and capital gains tax was already taxed as income at a progressive rate? In the interest of fairness and equality, how many times should n be taxing that same dollar and at what rate? Another compelling point that liberals will never consider because it doesn't fit the "demonize people with money for political gain" that their bankrupt ideology depends on. Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 So if your expenses are greater than your income you're losing money? not what I said Is it worth bring up that the money for this hypothetical investment subject to dividend and capital gains tax was already taxed as income at a progressive rate? You could say same thing about a sale tax, so what? Link to comment Share on other sites More sharing options...
Chef Jim Posted October 23, 2014 Share Posted October 23, 2014 not what I said Then what did you say? Link to comment Share on other sites More sharing options...
Jauronimo Posted October 23, 2014 Share Posted October 23, 2014 not what I said You could say same thing about a sale tax, so what? Is anyone arguing that sales tax should be raised to 40% because rich people buy more stuff and equality and fairness? Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 Then what did you say? That people buying stuff on credit based on income level are taking a risk. If they lose their job they can lose their homes, car, etc. Welcome to the consumer economy Is anyone arguing that sales tax should be raised to 40% because rich people buy more stuff and equality and fairness? Actually I'm not arguing for raising the rate. No where in this discussion have I said that. Darin read what he wanted into my posts, but that's Darin. I'm just pointing out the folly of the argument of the rates being different for reasons of risk. I say its because of lobbying, money and influence Link to comment Share on other sites More sharing options...
Chef Jim Posted October 23, 2014 Share Posted October 23, 2014 (edited) That people buying stuff on credit based on income level are taking a risk. If they lose their job they can lose their homes, car, etc. Welcome to the consumer economy Being a dubmass is not a risk. And this is your argument as to why capital gains should be taxed as income? Edited October 23, 2014 by Chef Jim Link to comment Share on other sites More sharing options...
TPS Posted October 23, 2014 Share Posted October 23, 2014 Most of the M&A activity we've seen in the past few years has been a byproduct of tepid growth and strong cash balances. With fewer opportunities for internal investment we see firms try to expand their range of services/products. It seems like I've read that same narrative across every industry outlook over the past 4 years. The only disagreement (and it relates to GG's comment) is there are many reasons for the M&A activity. I am wrong to focus only on the competitive aspect, but I think we can all find examples of mergers that support our cases. One of the big headliners has been the tax motivation. To bring it back to the original point I made, the capital gains tax provides investors with a tax advantage over income, and it has very little impact on productive investment, even if you want to include M&A activity. There has been no change in the tax, yet M&A activity is going through the roof, which has more to do with your first comment. Link to comment Share on other sites More sharing options...
Tiberius Posted October 23, 2014 Author Share Posted October 23, 2014 Being a dubmass is not a risk. And this is your argument as to why capital gains should be taxed as income? Oh, dumb asses don't buy bad stocks? Works both ways pal. Don't slap your face too hard Link to comment Share on other sites More sharing options...
Recommended Posts