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Mon Dec 4, 2017, 08:02 AM

The real reason Wall Street is euphoric over the tax plan (CNN) -

It's not really because investors think the proposed tax overhaul would unleash enormous growth by creating new jobs and stronger wages. Most established economists have thrown water on that theory.

That's because there's no guarantee companies would use their savings from lower corporate tax rates and repatriated foreign profits to create jobs. In fact, few CEOs have publicly made any such promise.

Markets are betting that companies would use their new spare cash to help investors: by purchasing boatloads of stock and beefing up their dividends. Both outcomes can help propel the soaring stock market to new heights, even if jobs and wages don't follow suit.

"The additional cash will definitely help buybacks," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Investors love stock buybacks because they're less risky than investments in new projects that may or may not work. Even better, buybacks make earnings per share, a key measure of profitability, instantly look better simply by reducing the number of shares in the ratio. Underlying profits don't even need to improve.


Just another day in Re-Branded Feudalist pair-a-dice.

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:09 AM

1. Crash the economy

take away healthcare, home and property deductions, no wage increase, must work more hours. What could go wrong?

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:09 AM

2. There's no reason at all a company would use their new pile of cash to hire American workers.

They might bring their corporate offices back to the U.S. to take advantage of the new tax policies, but they are unlikely to pay an American worker $15 an hour if they can hire a worker somewhere in the world for $15 a week. There's no penalty for outsourcing - companies can still deduct the cost of closing a plant to move production overseas.

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:12 AM

3. The value of my stocks will rise, because the after-tax net income of the underlying companies ...

will rise.

No competent CEO is going to raise wages because of the tax cuts. The only reason to raise wages is because market forces demand it. And it's still much easier to outsource labor to low wage countries rather than try and deal with overpriced (from the CEO point of view) U.S. workers.

Even if a corporation's labor pool is U.S. based, the potential ability to offshore those jobs will keep a lid on wages no matter how much after-tax money the corporation makes.

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:19 AM

4. How many times must we go through this before the Repubs figure it out?

It seems to me they have their financial education from another planet. They seem to have a problem figuring out how to circulate money. If it sits somewhere, it might as well be in a hole in the ground in the backyard. There is barely any interest being earned. The infrastructure of many companies has not been improved on in years, nor has the infrastructure across the country. Their main concern is keeping any benefits from the poor and disabled.

I was watching The Dicksenian, last night on PBS, and wondered how many of the rich would be Repubs, today?

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Response to Frustratedlady (Reply #4)

Mon Dec 4, 2017, 08:51 AM

6. The repubs have it figured out

They donít care that it doesnít work, they just use logic like this to promote the tax cuts.

Supply side fantasy rhetoric about making the economy grow is nonsense and they know it.

The goal is always to transfer wealth to the rich and the corporations.

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:48 AM

5. And all the talk about the tax cut helping the rich is overlooking...

the massive increase in wealth that will be generated for the rich who hold most of the stocks which will soar in value because of this cut in Corporate tax rate. Of course the corps will simply do whatever increases their stocks value, like buybacks and dividend payouts. If they had any new ideas for investments they would be doing it already with the funds already available at historically low interest rates. Paying higher wages would be way down on list of what to do with the windfall.

The new method of allowing companies to simply pay taxes to other countries where they are operating rather than to the USA will surely move more operations abroad. The 20% is still higher than many countries so why not continue paying taxes there and now move the profits home without additional taxes to pay out as dividends and to be used as buyback funds? Moving home the estimated 5 trillion in funds being held overseas will still involve paying a tax so why not leave those funds overseas as investments in countries that have cheap labor, good markets and yet lower tax rates? They can then bring the profits from those investments home, now (with new tax bill), without any additional taxes.

Not sure why people are not talking about this.

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Response to HughBeaumont (Original post)

Mon Dec 4, 2017, 08:57 AM

7. THEY NEVER HAVE !! Companies focus on shareholders not employees

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