Stump thinking

But there is debt we do need to worry about.

There is the massive pile of corporate debt that has been very largely created to fund share buy backs and excessive dividend payments to drive share prices ever higher over the last decade, which has now left large numbers of companies deeply vulnerable to corporate failure, but made David’s job so much easier during that period. That debt is an absolute scandal.

This from the man who insists that the Green New Deal should not be funded by equity but only by debt in hte form of bonds.

12 thoughts on “Stump thinking”

  1. The Bank of England who, unlike Spudhead, actually look at the numbers before reaching conclusions, is not entirely in agreement with the Mighty Man from Ely. He seems strangely unaware that many largish corporates have been tapping the markets for equity issues over the last month, for one thing – so much for his contention that the debt has been used “very largely” for buybacks and dividends. The man is a halfwit

    https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2020/may-2020.pdf

    Chart C.12 doesn’t suggest that the corporate debt position is abnormally higher than over the last several years. The overall summary is interesting

    Some businesses will need to access additional sources of finance in order to maintain their
    productive capacity through the shock. The UK banking system, supported by policy
    measures such as government guarantee schemes now in place for new lending, the release
    of the UK countercyclical capital buffer, and the Bank of England’s Term Funding scheme,
    has an important role in providing credit to businesses to help them weather the economic
    disruption. This will minimise longer-term economic damage to output and employment.
    Given the unprecedented nature of the shock and the scale of the policy response, estimating
    the impact of the Covid-19 shock on the corporate sector carries a high degree of
    uncertainty. A ‘Technical annex’ published alongside this Report provides a detailed account
    of the data and assumptions underlying the analysis set out in this chapter.

    As usual Snippa is completely out of his depth

  2. As usual Snippa is completely out of his depth

    Herr Oberst Kartoffel would be out of his depth in a puddle of water.

  3. Dennis, He Who Wants You To Show Your Work

    But there is debt we do need to worry about. There is the massive pile of corporate debt that has been very largely created to fund share buy backs and excessive dividend payments to drive share prices ever higher over the last decade, which has now left large numbers of companies deeply vulnerable to corporate failure, but made David’s job so much easier during that period. That debt is an absolute scandal.

    Unproven assertions:
    1) There is a “massive pile of debt”.
    2) This debt was created to “fund share buy backs”.
    3) This debt was created to fund “dividend payments”.
    4) Those dividend payments were “excessive”.
    5) Those dividend payments were made to “drive share prices ever higher”
    6) This debt has left “large numbers” of companies “vulnerable to corporate failure” (whatever that is).
    7) The present level of corporate debt is an “absolute scandal”.

    Seven unproven assertions in three sentences. Not bad for a Tuesday.

  4. OT, but Tim or Richard, why is your site now showing Yahoo popunders?

    That’s rather antisocial!

  5. 5) Those dividend payments were made to “drive share prices ever higher”

    Really? How does he explain share price falling when it goes Ex Div?

    @Tim W

    Why nothing about Boris and Sunack madness?

    Furlough extended to end October, I H/Td ‘September’ yesterday

  6. Economics: Free Market and Marketing in CV-19 era

    French Drug Dealers Offer Free Masks and Hand Sanitiser to Lure Customers

    Meanwhile EU trundles along with same old stupidity
    The European Commission is set to present a plan in Brussels to remove border controls within the visa-free Schengen zone as well the introduction of Green New Deal-style stimulus package to promote so-called green businesses in the aftermath of the Chinese coronavirus pandemic

    As do Greens
    Extinction Rebellion has claimed allegedly man-made climate change is “100 times a greater threat to humanity” than the Chinese coronavirus while vowing to launch cyberattacks against the Labour Party for supporting a bailout of the beleaguered airline industry

    More

  7. Economy, Money, Govt and Business

    Bad News
    Next CV-19 $3Trillion relief bill is a ‘Pelosi-led pipe dream’ – fund ‘The Arts & Museums’, ‘Greens’, ‘Illegals’, ‘Dem States’……; if that is agreed what’s left could help employers & employees
    The Founders would be appalled by what we’re seeing in Congress
    https://www.youtube.com/watch?v=h18TW-J94_o
    https://www.youtube.com/watch?v=tCGEGEhX10M

    Good News
    Elon Musk does reopen Tesla – no arrests
    https://www.youtube.com/watch?v=zim3MOQdSb4

    Great News
    Shelley Luther, Texas salon owner says ‘business is booming’ after jail sentence
    https://www.youtube.com/watch?v=238QV4tCFXY

  8. Property market has “literally frozen”, according to an interview on talkradio. Is it cold to the touch? Must be because I would’ve thought it was invisible. Not a market like in say London Borough market, a physical one which is literally visible.

    Apparently I couldn’t invite my mother to my house but I could a potential buyer to see my property. For many people, this seems to be the most confusing aspect of government rules/advice. Some might think all these rules in place will over-lap in some aspects, I think this is where that “common sense” should be applied.

  9. Why would a company want to to “drive its share price ever higher”? It only makes sense if a company intends going to the equity market to raise fresh capital. And the amount of debt a company is carrying would end up being discounted in the offer price, so borrowing to enhance dividend is self cancelling.

  10. Bloke in North Dorset

    BiS,

    I can think of one, fairly minor reason to “drive” up share prices: the company has large debts with covenants that raise interest rates if the share price drops below a set level. I say minor because if that’s the cause it’s probably got bigger problems than debt interest.

    Another reason, that has largely been mitigated by changing executive compensation packages, is that managers are trying to flog their own shares or Take advantage of share options.

  11. Jussi–re yr mother–you surely don’t take the slightest notice of Blojo’s ordure?

    By all means assess for yourself your Mother’s likely safety. But don’t take any notice of their bullshit.

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