Layoff --> increase short term valuation --> increase value per share --> owner of shares happy during buyback.
After, it's true that having a lot of middle management can slow things down. On the other side, they could have indeed created new entities, new projects, re-qualify employees,...
From the company perspective, performing buyback when market is high is just throwing cash by the windows to over-priced shares. If they wanted to distribute cash, they could just use dividends
1. From the perspective of shareholders, and for the moment ignoring taxes, buybacks and dividends are exactly economically equivalent. If a dividend happens, you get some cash. If a buyback happens, the value of your shares goes up. Crucially, the amount by which each share's price goes up is equal to what the per-share dividend would have been. It's a useful exercise to work this out and convince yourself that it's true.
2. Now let's stop ignoring taxes. If a dividend happens, you get taxed that year. If the value of your shares goes up, you don't get taxed that year. Instead, you get taxed whenever you sell, which might be later when you retire and are in a lower tax bracket, or after a period of some years when you get a lower capital gains tax rate.
3. Now let's think about the effect of dividends vs buybacks on the allocation of your portfolio as a shareholder. Neither changes the total value of your portfolio -- that was point number 1, plus just plain old conservation of dollars, modulo taxes -- but a dividend increases the proportion of your investment that's in cash, while a buyback keeps it constant. Let's say you auto-invest all dividends in the S&P 500 or equivalent index fund. Then dividends reduce your ownership stake in the company, while buybacks keep it constant.
For these reasons, most investors prefer (or ought to prefer) buybacks: they have the same economic effect as dividends but allow you to defer taxes to whenever is optimal for you. Also, and this is a smaller point, if a company does a dividend then you have to actively do something (that is, buy stock) in order to maintain the same proportion of your portfolio in that company. In other words, if you want 10% of your savings to be in X, and they do a dividend, then you have to take the cash and buy shares of X. The reason this is a smaller point is that at least in theory you can get your brokerage to do this for you automatically.
There are some nuances where point number 1 fails to hold: signaling, bad execution of the buybacks, and principal-agent conflicts. The big example of that final point is executive compensation tied to specific share prices. I'm not an expert in this area so I don't know, off the top of my head, if there's real evidence either way that this effect is very large, but it's one that people will bring up so everyone who thinks about this ought to know about it.
This is not quite correct. If a dividend happens, the market capitalisation drops by the amount of the dividend, the number of shares remains constant, so the share price dips by the amount of the dividend per share. All investors get the dividend.
If a buyback happens, the market capitalisation drops by the amount of the buyback, and the number of shares drops by the same ratio, keeping the share price initially constant. The money goes to the investors who sell.
Buybacks are nevertheless good for investors who hold. They now have shares in a company whose market cap is 100% growing enterprise, instead of 90% enterprise and 10% bag of money. That means that if the company keeps doing well, the share price will increase faster than it would have done otherwise (it will also drop faster - it's no longer anchored to an inert pile of cash).
The investors who sell are wealthier by amount $X because now they have fewer shares and more dollars.
The investors who don't sell are wealthier by the same amount $X because the shares they kept are worth more, because prices go up.
> keeping the share price initially constant.
This statement is definitely incorrect, unless you're being very technicaly and pedantic about "initially". You can think about it theoretically or you can look at empirical evidence. It is well-supported empirically that share prices go up after buybacks, and in fact they do so quantitatively by exactly the amount necessary for the equation implied above to hold.
No, this is incorrect. Investors like buybacks, so when the buyback is announced, share prices may rise, but certainly not by the amount of the buyback. They don't go up when the buyback gets executed, unlike dividends, which decrease the share price at the moment when they get distributed.
The equations are:
nr_shares * share_price = cash_of_company + value_of_company_excluding_cash.
In a buyback, cash_of_company decreases by the buyback, and nr_shares decreases by buyback / share_price.
Consider the extreme case, a lemonade stand with a bank account with $1M. 1000 shares outstanding, share price $1000. After a buyback of $900K is announced, 900 shares are sold for $1000. $100K remains in the company's bank account, 100 shares remain outstanding, at ... $1000 per share.
> If the value of your shares goes up, you don't get taxed that year. Instead, you get taxed whenever you sell, which might be later when you retire and are in a lower tax bracket, or after a period of some years when you get a lower capital gains tax rate.
This is actually not true in the Netherlands, which taxes unrealized gains on wealth. Quite unique. But NL also features a dividend tax, which politicians tried to get rid off but didn't succeed because it was such an unpopular plan.
> In other words, if you want 10% of your savings to be in X, and they do a dividend, then you have to take the cash and buy shares of X.
Wouldn't the inverse of this be true in buybacks though? If it's economically equivalent then buyback should increase the price and similarly increase the proportion of X in your portfolio - which would force you to rebalance (might have tax implications).
Dividends and capital gains have different treatment in a number of tax codes. In the UK for example when you have high income the dividend marginal tax is 39.35% but CGT only 24% with a higher tax free allowance (500 for dividends 3000 for cgt)
'Tax evasion' is when you are breaking the law. There are various other names, like 'tax optimisation' or 'tax avoidance' is when you do it legal. And the boundaries of what you can call 'tax avoidance' are fuzzy: when in Singapore, I eat out a lot more and pay someone else to clean my home. When in Germany, taxes on labour are too high, so I cook and clean myself. Is that 'tax avoidance' and refusing to 'pay my share'?
It's definitely a change in behaviour induced by taxation.
Another example in Germany both capital gains and dividends are taxed. Capital gains are (mostly) only taxed when you sell, dividends are taxed straight away. But each year you can get a small amount of dividends tax free. So it's tax efficient to structure your capital returns to first max out that tax free allowance, and take the rest as capital gains.
That's annoying and complicated.
Singapore is simpler and has lower taxes, so I don't bother optimising anything, and just let my decision be guided by whatever makes financial sense, without worrying about taxes. (In my case, I'm investing in accumulating funds that just never pay any dividends, but instead re-invest them straight away. That way I don't have to worry about re-investing dividends manually.)
Another example: when you have a carbon tax one of the intended consequences is for companies and people to change their affairs such that they emit less CO2, thus optimising their tax bill. The system only works when people 'avoid paying their share'.
So I don't think it's going to be executed at the absolute peak. But it does imply that the finance people in ASML believe that the stock is undervalued even if the market as a whole is at all time highs.
It felt indeed that what the paper said is just: "If you are using a tool in order to make hard-work feel more easy... then your brain is not working as much"
Yea, the title too is click bait, and based on the abstract, the whole study is click bait. "Ai = Bad". If I use an llm to do things, then it frees up time for me to use my brain in other ways, or if I outsource jobs to my llm, that should allow me to focus on higher-level tasks. It's just a lame experiment, unless there's more in the paper that I missed since I just read the abstract.
I feel the majority of junior job-hopping is due to the fact that they are often hired for really low, and then proposed just an incremental raise after two years. Instead, if they change company, then they got a big jump.
At least, that's what I saw happening here in Hong Kong for juniors I worked with, not sure for other areas.
It's nice as well for location that are banned to use private US models. Like here in Hong Kong, Google doesn't allow us to subscribe to Gemini Pro. (Same for OpenAI and Claude too actually).
I feel the issue is that now, what would be done by entire teams (networking team, storage team, database team), is now perform by only the same DevOps team.
We have way less time unfortunately to dig into each tech, business is pressing us like lemon on the other side to ship quickly.
It's mostly for AWS context, when you want to host for example your servers in a private subnet, but you want to allow access of small part: you can leverage a NAT Gateway to be the public entrypoint + some security groups as gatekeepers to filter the traffic.
However, the fees from AWS are atrocious on the NAT Gateway.
Layoff --> increase short term valuation --> increase value per share --> owner of shares happy during buyback.
After, it's true that having a lot of middle management can slow things down. On the other side, they could have indeed created new entities, new projects, re-qualify employees,...
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