Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

Max, I am afraid that the old yardstick of "corporate buy backs" is gone forever. Yes, they provided a source of last resort buying, but with the new tax law, there is no longer a major advantage in buying your own stock at multiples of book value. In the past, companies like MSFT, MRK etc. spent billions each year to buy back their stock, and that was in fact a tax free dividends to the stock holder. They will not do much of that now that dividends are taxed at a preferential rate. One of the "unintended" consequences of the new tax law is that corporations will buy much less of their own stock, that is taking out, I would guess at least $100B per year of buying pressure on stocks that is gone for good.

There are quite a number of other "unintended consequences, as I have elaborated on in the past, for instance, shifting the tax burden onto the retired population that gets dividends in retirement accounts, they pay taxes on those dividends of course. Come to think about it, maybe it was an intended consequence.

Zeev