"I'm calling it the tax distortion bill." It was just a free distribution for the rich who pay a lot of money to the lobbies, "told CNN Business Yusko, Morgan's founder and CEO. Creek Capital.
Instead of using its tax savings to accelerate the economy, Corporate America is simply buying up shares to boost their course, "Yusko said on the sidelines of the Alternative Investors Summit in Cayman.
Yusko noted that before 1982, share buybacks were banned by the SEC. "I think they should always be considered insider and illegal crimes," he said.
The repurchase of shares is a common practice in which companies buy back their own shares in order to return excess capital. Redemptions increase demand for shares and artificially inflate earnings per share.
According to TrimTabs Investment Research, US companies have announced stock repurchases of a record $ 1,000 billion in 2018, their first full year since the coming into force of the tax law.
After settling in the first quarter of 2018, business investments in job-creating items, such as factories and equipment, decelerated.
The Democrats in Congress have made redemptions a goal.
Former Goldman Sachs (GS) CEO Lloyd Blankfein used his first tweet in six months to defend the practice last week.
"The money does not go away, it's reinvested in high-growth companies that stimulate the economy and jobs. Is this serious?" Blankfein tweeted.
Yusko does not agree, saying the capital is not going to return to most people. "It's like rearranging the lounge chairs," he said.
And Yusko rejected the idea that redemptions equate to dividends.
"I think it's just a manipulation of stock prices," he said.
Rather than spending billions on stock buybacks, Yusko said companies would help the company by reinvesting in projects, building new plants and retraining workers.
"I find it absolutely staggering that a company like Apple could have $ 260 billion in cash," Yusko said. "Are you telling me that all these geniuses can not think of one smart thing to do with this capital?"
Apple (AAPL), which had $ 245 billion of cash on the balance sheet at the end of 2018, had spent close to $ 9 billion on redemptions in the last quarter. In the first three months of 2018, Apple spent $ 22.8 billion in redemptions, more than any other company in US history, according to the S & P Dow Jones Indices.
Last year, Apple announced plans to pay $ 38 billion in foreign cash, create 20,000 jobs, and invest $ 30 billion in cash. United States over the next five years.
Supporters of buyouts argue that this practice helps a lot of people. In the United States, more than half of households owned shares directly or indirectly through pension plans in 2016, according to the Federal Reserve.
Others say that buybacks disproportionately help the rich because they own the essentials of the stock market. Edward Wolff, professor of economics at the University of New York, held 84% of the highest ranked shares in 2016.
Yusko thinks the redemptions have contributed to the problem of wealth and income inequality in America.
"It's a self-sustaining loop that benefits a small group of people," Yusko said.
2. Reopening of markets in China: Mainland markets will resume trading Monday after a week – long shutdown for Lunar New Year holidays.
This could introduce more volatility after world markets clashed at the end of last week over concerns over trade. They fell immediately after Larry Kudlow, director of the National Economic Council of the White House, hinted that the United States and China were not close to a new trade pact.
"The president said that he was optimistic about a possible trade deal," Kudlow said Thursday. "But we have a long enough distance to go here."
3. Brexit uncertainty: British Prime Minister Theresa May failed to convince the European Union to reopen the UK withdrawal agreement during her visit to Brussels last week, although both sides have agreed to continue speaking.
This means that the unknowns of Brexit will be of great importance when the UK releases its GDP data from December on Monday. Most importantly, May is expected to inform Parliament of her progress on Wednesday. Legislators must hold a debate on Brexit Thursday.
4. Wars with soda: Coca-Cola and Pepsi fought at the Super Bowl. (Pepsi was a sponsor, while Coke's headquarters are in Atlanta, where he was hosted.) They are now on the verge of publishing their results on Thursday and Friday, respectively.
Investors will pay attention to the growth of various products. Coke, which has just launched a new flavor, has had success with Coca-Cola Zero Sugar. Pepsi, for its part, has grown with Bubly seltzer, its answer to LaCroix, and has a range of popular products such as Frito-Lay and Quakers.
5. Job offers: On Tuesday, the Bureau of Labor Statistics will release a report on job offers in the United States in December. The data will highlight the hiring at the time of the partial closure of the US government.
The US labor market has been strong despite growing concerns about economic growth. The economy added 304,000 jobs in January, marking the 100th consecutive month of job gains.
6. Coming this week:
On Monday – Monthly GDP of the United Kingdom; Closed Japanese markets
Tuesday – JOLTS report on job offers in the United States; Under protection (UA), Activision Blizzard (ATVI), Molson Coors (TAP), groupon (GRPN) declare earnings
Wednesday – US and UK inflation data; whitefish (CSCO), Hyatt (H), yap (yap), Heineken (Heiny), income report
Thursday – US retail holiday sales; Coca Cola (CCPS), CBS (CBS), Nvidia (NVDA) declare earnings
Friday – Newell Brands (NWL) and Pepsi (DYNAMISM) declare earnings
