Friday, March 3, 2017

More links

1--Who’s Right: Warren Buffett or Larry Fink? -- A debate over whether managers are underinvesting in the U.S. economy because they want to line the pockets of investors through share buybacks

Are shortsighted managers underinvesting in the American economy because they want to line the pockets of investors through share buybacks?
Yes, says the world’s biggest fund manager: American capitalism needs to be fixed...

Mr. Fink warned against the “furious pace” of buybacks in his annual letter to CEOs earlier this year. “We believe companies must balance those practices with investment in future growth,” he said.

Mr. Buffett shot back last weekend in his letter to shareholders, saying companies and investors are “awash” in cash and constantly scouting for opportunities. “I’m not aware of any enticing project that in recent years has died for lack of capital,” he wrote. “Call us if you have a candidate.” In other words, capitalism and the market are doing their job of directing money to where it can best be used.
The issue of buybacks is really a puzzle about stock valuations and profits. Profit margins are high and stocks are worth far more than it would cost to replace all corporate assets....

Disastrous capital spending driven by the egos of power-hungry chief executives has destroyed more shareholder wealth than almost anything else, and academics have established that lower investment tends to mean better share price performance....

Shareholders clearly want more profits for less capital, and reward companies able to supply it with higher share prices. Robert Buckland, an equity strategist at Citigroup, shows that companies which invest a lot compared with the amount of cash they pay shareholders tend to trade on a lower valuation....

If investors believe that Mr. Trump’s promise to kick-start U.S. growth will create more profitable opportunities to deploy capital, capital spending should come back into fashion. Surveys of fund managers suggest a shift from preferring buybacks toward investment is under way.

2--Janet Yellen Says Fed Is Likely to Raise Interest Rates This Month

3--Banks Have Paid $321 Billion in Fines Since the Financial Crisis

4--Pre Trump-- IMF Sees Subdued Global Growth, Warns Economic Stagnation Could Fuel Protectionist Calls

5--A Warning From the B.I.S.: the Calm Before the Storm? (archive)

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