Yesterday was a very lacklustre day for global markets. South African and US markets both moved sideways, bobbing between red and green. Even news that Xi and Trump won't be meeting in March, as originally planned but in April instead, didn't move markets. As expected, the UK parliament voted to extend the Brexit deadline.
Yesterday the JSE All-share closed down 0.07%, the S&P 500 closed down 0.09%, and the Nasdaq closed down 0.16%.
Our 10c Worth
One thing, from Paul
I really love stock buybacks. The idea that the number of shares in issue of a big company that I own is going down fills me with joy. It's the permanence of the removal that I like - the idea that I will be amongst a reduced group of remaining shareholders at all of the future earnings updates when profits and dividends are being shared out.
Sadly for the capitalist stock-owning classes, stock buybacks are becoming a political hot potato in America. Old goats like Senators Chuck Schumer and Bernie Sanders are pushing proposals to require companies to pay all their workers at least $15 an hour before being able to buy back their stock. Employees would also need to have health benefits and 7 days of paid sick leave. I have my doubts that they will succeed in getting any such regulations enacted.
Buybacks are extremely popular in corporate America, which spent some $1 trillion on them last year. In fact, the benefit of corporate tax cuts in 2018 went largely to financing buybacks. The scale of the reduction in shares in issue has been quite amazing. Felix Salmon of Axios estimates that Apple (NASDAQ:AAPL)'s share count has fallen from 6.6 billion to 4.7 billion since late 2012. That's an incredible 28.4% reduction, which helps explain why the stock has done so well since then.
Another Vestact recommended company, Starbucks (NASDAQ:SBUX), has seen its share count drop by 22.8% since 2005. Yum Brands and McDonalds have almost halved their number shares in issue, albeit over a longer time horizon.
One point to note. Buybacks only have the desired effect if companies avoid issuing loads of new stock for compensation purposes and for acquisitions.
The JSE All-share is higher this morning. Later today there is CPI data from the EU and a job opening figure from the US. Knowing how many job openings there are, gives a good indication of the state of the jobs market in general. Next week there are numbers from Nike (NYSE:NKE), and the Fed has their next interest rate meeting.
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