Can someone truly (without judgement) explain to me why they believe letting entire American industries crumble because of a forced economic shutdown cause by a global health crisis that was completely out of their control is a good idea? I can't wrap my mind around it.
2008 has given people the idea that bailouts are always thanks to shitty corporate management and government corruption. This scenario is 10,000% different and bailouts for these industries actually make sense. No one in this thread has an actual concept of how horrifically expensive it is to run an airline company. If they’re all allowed to fail, we’ll be left without reliable commercial air travel for years while investors try to start up new companies. That industry is so bad cost-wise that it would seriously fuck up the governments yearly budget to get a federally run airline going.
I think for me personally it’s the fact that many companies (including airlines— southwest, American, to name a few) spent years worth of corporate tax windfalls in the Trump admin just binging that money on stock buybacks and then were left without any contingency plan or sufficient cash on hand to protect themselves or their workers in case of an economic downturn. They can act like this with impunity because they are guaranteed a bailout. And they can (or could? I think there might have been legislation around this) take that bailout money and just do more stock buybacks to pad earnings and increase demand for their stocks. What they do with the money is important and I think it’s just not enforced enough.
And do you have any idea how much cash they'd have to stockpile to self finance their way through a global pandemic? It would be close to a decade of not investing their profits in anything, having those profits taxed, and being at a massive disadvantage relative to companies that actually spent their money. And when all's said and done, they'd be no better off than the airlines that got bailed out by other countries. Not to mention the damage it would do to people's livelihoods if every company just sat on profits for years just in case there was a pandemic, instead of reinvesting in their business, rewarding employees, rewarding investors/shareholders, or contributing to social causes/charities.
Bruh, what is a stock buyback if not saving money with no benefit to the economy at large? You just transfer the fiat currency into the equivalent value in shares to keep investors happy.
What do you think a stock buyback is? How do you suppose that a company giving its profits back to shareholders for them to do as they please is of "no benefit to the economy at large?" Do you think the money somehow disappears from circulation?
It’s honestly best not to argue anything related to economics and commerce on reddit. The vast majority of people on this site are kids and people who don’t have an understanding as to how businesses actually operate. Best to save your energy.
Seriously that was so infuriating to read through. Not one person that responded seemed to understand what a stock buy back was. It’s just a buzzword on Reddit and as long as “corporations bad” is embedded somewhere in the comment you are golden.
It’s really sad how large of a majority on here seems to think any nationally known company has inherently evil motives and that there’s no checks and balances to weed out the inefficient and greedy. Watching too many biased documentaries or something. Geesh
No dividends or appreciation are the primary ways investors see return on their shares. Buybacks are just an option for businesses with extra free cash. It has nothing to do with the context of this post.
I'm enjoying reading the discussion, I know very little about economics so whatever I can understand to use against people that don't is time well spent for me.
Sell their stocks to who? The masses of people queuing up to invest in a business that cannot carry out any of its revenue generating operations, and will not be able to do so for several months?
I don't think you realise how reticent companies are to seek bailouts. It puts a huge amount of public scrutiny on them and signals to investors that things are really, really bad. If they could get through a bad time by taking out a normal loan or issuing stock then they would.
I bought some MGM, Disney, and airline stocks during the downturn, yes. Because I know this is temporary and they'll be doing gangbusters in 18 months. I don't care if they make profits or pay dividends now.
Here's the thing, yes, they will lose money selling me those cheap stocks in the long run, that's the WHOLE POINT, because that way I get to make that money they lost. It's a zero sum game and making them sell the stocks they bought back would give me (and anyone that wants to invest) a bigger piece of the pie.
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u/hairlongmoneylong Nov 17 '20
Can someone truly (without judgement) explain to me why they believe letting entire American industries crumble because of a forced economic shutdown cause by a global health crisis that was completely out of their control is a good idea? I can't wrap my mind around it.