The Trump Economy

[donbb]

1 minute ago, Tiberius said:

Imagine if the business cycle was on the downward slope now? 

 

 

 

Cross your fingers it continues upward or stays level. As Trump's cronies continue to get MAGArrested Trump will become more and more unhinged, thus leading to more and more irrational behavior.

[Chef Jim]

2008 crash = Bush’s fault

2009-2016 Bull Market = Obama!!!

2017-2018 Economic Growth = Natural Business Cycle 

 

Did I get that right? 

[GG]

1 hour ago, KRC said:

 

That is one reason. C-suite execs also have a responsibility to shareholders to hit targets and to increase stock prices (that also applies to employees with stock options) without increasing their tax burden. Speaking of stock options, you can do repurchases to counter dilution from employees exercising their options. If a lot of employees are exercising their options, the company may need to counter this with repurchases.

 

Are the repurchased shares retired? Are they returned to treasury stock to be reissued? Is the company doing this to reduce cash on hand and increase stock price to stave off a takeover? Are they doing this to sell shares at a profit later to be used for investment?

 

My point is that they are not always done because execs are evil money-grubbing pigs. 

 

Cost of capital is frequently overlooked in the capital allocation discussions among the financial press, even though it's probably the biggest thing that occupies a CFO's mind.  So the knee jerk reaction to a company increasing its stock buyback program is that it' starving its own investment.  That is rarely the case in reality.  Companies have gone through a massive investment boom since Y2K both in traditional and IT infrastructure.  Yet not all of that investment shows up in the capital expenditures (PP&E) lines, which is what the critics are watching.  A company that outsources a lot of its infrastructure or IT will not have massive PP&E investments, but you'd be wrong to call it underinvested.  In this case, it's a lot more efficient to slough off that capital cost to an AWS or Azure, because they're better at it.

 

Cost of capital also plays a role in companies funding decisions, where CFOs don't only look at the stock price to decide when to buy stock (they should get fired if they do).  A lot of that decision rests on the cost of debt.  That's why 0% interest rates for nearly a decade had a lot more to do with buy back activity than anything else.  When raising debt is effectively free compared to your company's long term cost of capital, you should be fired for not borrowing and buying back stock.

 

[KRC]

9 minutes ago, GG said:

 

Cost of capital is frequently overlooked in the capital allocation discussions among the financial press, even though it's probably the biggest thing that occupies a CFO's mind.  So the knee jerk reaction to a company increasing its stock buyback program is that it' starving its own investment.  That is rarely the case in reality.  Companies have gone through a massive investment boom since Y2K both in traditional and IT infrastructure.  Yet not all of that investment shows up in the capital expenditures (PP&E) lines, which is what the critics are watching.  A company that outsources a lot of its infrastructure or IT will not have massive PP&E investments, but you'd be wrong to call it underinvested.  In this case, it's a lot more efficient to slough off that capital cost to an AWS or Azure, because they're better at it.

 

Cost of capital also plays a role in companies funding decisions, where CFOs don't only look at the stock price to decide when to buy stock (they should get fired if they do).  A lot of that decision rests on the cost of debt.  That's why 0% interest rates for nearly a decade had a lot more to do with buy back activity than anything else.  When raising debt is effectively free compared to your company's long term cost of capital, you should be fired for not borrowing and buying back stock.

 

 

Excellent points.

[Tiberius]

1 hour ago, Chef Jim said:

2008 crash = Bush’s fault

2009-2016 Bull Market = Obama!!!

2017-2018 Economic Growth = Natural Business Cycle 

 

Did I get that right? 

What did Obama do to make the stock market grow? 

[Buffalo_Gal]

4 hours ago, plenzmd1 said:

Just so's we clear..Republicans control the House and Senate now correct?

1

Yup. So get on those do-nothing's asses and call and solicit that you want the national debt addressed. 

[Chef Jim]

20 minutes ago, Tiberius said:

What did Obama do to make the stock market grow? 

Nothing.  

[Tiberius]

9 minutes ago, Chef Jim said:

Nothing.  

Business cycle? 

[GG]

13 minutes ago, Chef Jim said:

Nothing.  

The Fed under his tenure had zero interest rates.  That boosted stock prices. 

[plenzmd1]

2 hours ago, Foxx said:

my response was in direct correlation the posts immediately above it.

 

the truth is that we have created the quagmire we currently find ourselves in and as such, have no one to blame but ourselves. we have created a society with a certain segment of dependance. this has not helped the people it was targeted for. instead it has only made them more dependant. it needs to be walked back so that the damage done by teaching them how to fish is minimal.

 

i used to think deficits mattered as well but then... Quantative Easing came along....

Agree 100% entitlements hurt the very people they are designed to help...problem is until you change them they still need to fund. 

1 hour ago, Koko78 said:

 

Yeah, interesting how tax cuts work: The people who pay the taxes get the benefit. Mind blowing, for sure.

 

Tax cuts are still not "welfare", unless you subscribe to the asinine (and completely unamerican) theory that the government owns all labor and money.

 I am all for tax cuts..trust me I  probably pay as much or more of a percentage of our family income than 98% of Americans. Has always pissed me off, but that is another discussion. 

 

The problem here is if you are going to cut taxes, there needs to be a corresponding cut in expenditures. And unfortunately, the Republican crew we have in office now does not have the stones to make the corresponding cuts. 

[Foxx]

8 minutes ago, GG said:

The Fed under his tenure had zero interest rates. ...

because the economy was so anemic.

[TPS]

2 hours ago, GG said:

 

Cost of capital is frequently overlooked in the capital allocation discussions among the financial press, even though it's probably the biggest thing that occupies a CFO's mind.  So the knee jerk reaction to a company increasing its stock buyback program is that it' starving its own investment.  That is rarely the case in reality.  Companies have gone through a massive investment boom since Y2K both in traditional and IT infrastructure.  Yet not all of that investment shows up in the capital expenditures (PP&E) lines, which is what the critics are watching.  A company that outsources a lot of its infrastructure or IT will not have massive PP&E investments, but you'd be wrong to call it underinvested.  In this case, it's a lot more efficient to slough off that capital cost to an AWS or Azure, because they're better at it.

 

Cost of capital also plays a role in companies funding decisions, where CFOs don't only look at the stock price to decide when to buy stock (they should get fired if they do).  A lot of that decision rests on the cost of debt.  That's why 0% interest rates for nearly a decade had a lot more to do with buy back activity than anything else.  When raising debt is effectively free compared to your company's long term cost of capital, you should be fired for not borrowing and buying back stock.

 

You make a good point about outsourcing IT, however the issue concerns the tax cut for the one-time repatriation of profits which was touted as a boon for investment in American companies and workers by the current resident of the White House.  You provide reasons why it was never going to materially impact current PP&E--they've been doing it for a long time (does that mean it was under Obama...? ?). It has, however, materially impacted stock re-purchases to-date.

 

On a side note, I recently realized that my activity on PPP is directly related to the level of insanity on TSW....

[KRC]

17 minutes ago, TPS said:

On a side note, I recently realized that my activity on PPP is directly related to the level of insanity on TSW....

 

So, you will be spending a lot more time here over the next few months? ?

[boyst]

On 9/10/2018 at 9:02 PM, B-Man said:

 

..............." Must everything be about SKIN"

 

.

That's just Lenny behind Evelyn. whats your point?

[Koko78]

1 hour ago, plenzmd1 said:

The problem here is if you are going to cut taxes, there needs to be a corresponding cut in expenditures. And unfortunately, the Republican crew we have in office now does not have the stones to make the corresponding cuts. 

 

I would absolutely agree with this. In fact, I would in favor of a Constitutional Amendment requiring that the budget be balanced every X number of years, and that any deficits in between be within Y% of actual money taken in, absent an actual emergency (natural disaster, plague, famine, war, etc. - not an emergency based on spending stupidly.)

[Tiberius]

14 minutes ago, Koko78 said:

 

I would absolutely agree with this. In fact, I would in favor of a Constitutional Amendment requiring that the budget be balanced every X number of years, and that any deficits in between be within Y% of actual money taken in, absent an actual emergency (natural disaster, plague, famine, war, etc. - not an emergency based on spending stupidly.)

So you are saying you would kill the bond market? Why? What's the point of that? 

[Foxx]

if we stopped spending $756 for hammers and $621 for toilet seats, we could probably balance the budget in short order.

[Koko78]

8 minutes ago, Foxx said:

if we stopped spending $756 for hammers and $621 for toilet seats, we could probably balance the budget in short order.

 

No expense must be spared when it comes to the comfort of government employees taking a crap while on the job!

[Taro T]

43 minutes ago, Koko78 said:

 

I would absolutely agree with this. In fact, I would in favor of a Constitutional Amendment requiring that the budget be balanced every X number of years, and that any deficits in between be within Y% of actual money taken in, absent an actual emergency (natural disaster, plague, famine, war, etc. - not an emergency based on spending stupidly.)

 

Provided there was a requirement that the budget couldn't go over 18% of GDP during non-emergency conditions, I could possibly go along with that.  Problem is, I doubt we'd ever be out of "emergency" conditions.  There also would likely be other myriad ways for our Congress critters to further game the system.

 

But a straight "balanced budget" amendment pretty much gives tacit approval to spending 25% of GDP & bringing the correspondingly crushing taxes that would "pay" for that spending.

[Koko78]

14 minutes ago, Taro T said:

 

Provided there was a requirement that the budget couldn't go over 18% of GDP during non-emergency conditions, I could possibly go along with that.  Problem is, I doubt we'd ever be out of "emergency" conditions.  There also would likely be other myriad ways for our Congress critters to further game the system.

 

But a straight "balanced budget" amendment pretty much gives tacit approval to spending 25% of GDP & bringing the correspondingly crushing taxes that would "pay" for that spending.

 

That's why I would want to see the requirement that the budget be balanced every so often, so they cannot get too far out of whack without having to make the politically painful cuts.

 

As for emergencies, they may have to be spelled out. "We can't afford Social Security this year because we spent too much" is not an emergency. Hurricanes flattening Puerto Rico and flooding Houston are.