Caterpillar, Texas, Annie Lowrey discussed on Slate Money

Slate Money


But my when you're talking about the decision voidance vase is like this scandal is always say, the scandal isn't what's legal scandal is what's legal. And I think this is the reason why buybacks. Illegal because like there's no reason not to just pay a high dividend, declare a special dividend or something like that. The only real reason to do it fire a buyback is is to do like these back-door pay to senior executives and to avoid Texas the stock price to get to a trillion dollar valuation. It's not actually pumping. Well, it does. No, no, no. Okay. This is actually gets really complicated. When you start to talk about the actual effect of stock buybacks on either. If you're talking about earnings per share or share to a certain extent, the math just seems very similar like, well, of course it's going to increase is going to increase that, but you aren't taking a million other things such as the fact that now you actually have less cash on your balance sheet. You've now if you've increase leverage, you've also increased risk of the company. There are a lot of things that go into this. It is not as simple as there's actually a tremendous amount of evidence that shows that this is not as simple as people state. And this again, I want to. I looked at the evidence and the evidence seems to show that if you spend the begin dollars, but by bags. You'll market cap does go down by billion dollars. It goes down by about eight hundred eighty million dollars and you've actually increased your Monka. Cat eventually increased the value crazy about twenty million dollars. So like you are increasing stock price to a certain extent often, yes. But part of the reason that the stock price is going to go up is because the shareholders are saying, well, you did not have anything more profitable to do with this cash. So instead of wasting the cash on empire, building activities wasting on raises fuel workers. So okay, I I wanna just and I'm not going to try to repeat myself here. I wanted to get this found it very telling. One company I think mentioned either by Annie Lowrey and her story in the Atlantic or in the report Caterpillar is planning a billion dollars in buybacks, and has his also laying off hundreds of workers. Caterpillar also hired a number of workers last year reason. Interesting. The reason that Caterpillar is doing that as caterpillars going through reorganizing of their company since about two thousand fifteen and what they're doing is there are a number of divisions that are kind of closing or they're moving to other plants. So it's not just as simple as or if we don't get to do committee Hines because that's that's the that's the three g you know, slashing ultra-capitalist, you know, Warren Buffett, Bank back resilience who coming in firing, a whole bunch of people and spending billions and billions of dollars on buybacks. And it's just it's, you cannot find a pure encapsulation of cap. Title benefiting the expensive labor tell. I actually had a relative who worked at Kraft Heinz during the three g. So I'm a little biased on this one. So I'm not a fan of what three g did not because theoretically, but in terms of what they actually did, I think that they're not making very wise decisions. And this is when you're talking about buybacks, it's not. That is always good. A buyback is good if that is just like any corporate finance decision, if that is the best way to use your company's capital. And when you're talking about the way wages are set, I know it sounds horrible, and it sounds like, well, I don't understand you have more money. Why can't you just increase wages? Because you're also going to be skewing the market in a lot of ways. Mocha you skewing. If you raise wages, your competitor kinda has three. Yeah, that's good and with WalMart and target just recently. So why would this all? I guess what we might be saying here is that this is the kind of queuing. Market that we could use a bit more of. Okay. So let's let's do a little thought experiment here. So I'm a company and I decided that I instead of using my cash in the way that might be most efficient. Instead, I'm going to give significant increases in wages. Now giving some increases in wages might make sense. I mean, give significant much higher than the prevailing market, which, so what's going to happen?.

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