The United States of Bed Bath & Beyond
epsilontheory.com
epsilontheory.com
This, however, wouldn't allow the author to tell a reactionary "just so" story about our feckless and greedy rulers. One wonders.
This has been happening non stop since the 70s and the current state of America shows the results of 50 years of breakneck capitalism
What you’re seeing is that at this point it’s so entrenched that people can look at it and shrug instead of being horrified that instead of being a rare situation it’s “Business as usual”
Everyone should be horrified
Corporate raiding is nothing new, and financialization does let it happen at a pace that it couldn't previously - but just saying "but that's capitalism!" is quitting
Worker owned collectives have the same problems, people want to acquire power and then use it to be ahead when strategies fail and someone has to take responsibility.
How do you prevent that looks different in a market economy than a planned one (planned ones having more widespread but also more small scale corruption issues like these) - but you still do need to do the work to prevent it.
I'm sure as the game continues you won't become one of them.
IMO the real problem is that maybe 5% of the population are amoral sociopaths, and being absolutely heartless and uncaring - often with a liking for outright abuse and violence - gives them a competitive edge in almost any political and social system you can imagine.
Normal people just can't imagine that another human might operate like this.
But worse - many people seem to have some kind of bizarre deferential herd instinct to follow these crazies off the suicide cliff.
It may not be a fixable problem. We're a flawed species. Perhaps it won't be long before evolution - the ultimate owner of the casino - shrugs and moves on.
Do you think it's worse to be in the bottom 10%?
It's definitely not worse to be in the top 10%.
So where are we failing? Because I don't think we're failing anywhere on any medium-term horizon.
If you think we're failing from a short time ago, there's always ups and downs - but not a big reason to think the trend is reversing.
It has been claimed that the move from hunter-gathering to agriculture brought a lot of misery while improving efficiency according to economic measures.
Do you have numbers to back that up?
That’s simply not true.
Absolutely. Bob Menendez's indictment is the definition of: this is a powerful, already wealthy individual selling out the US people to a foreign government for, frankly, not a lot of money. Why? He may spend the rest of his life in prison.
How can anyone but a sociopath think that's a good trade?
They don't need to imagine, they see it clearly first-hand every day and continue to be disgusted century after century.
That's one of the things that guides normal humanity to be the opposite of amoral sociopathic inhumanity.
How prevalent was it from the 1940s to the 1970s?
One of the larger issues that is causing problems is the misnomer of "maximizing shareholder value" which took hold in the late-1970s and especially the 1980s (unsurprisingly the same era as Reagan).
* https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-v...
When you start looking for quality material produced in a way that minimizes human suffering, no, capitalism doesn’t make this available to me in a few days or for cheaper.
People, completely as expected, chose lots of things made with shortcuts.
A gallon of locally sourced, ethically made milk is awesome. But so is a gallon of milk, a loaf of bread, a dozen eggs, and a pack of cheese slices for the same cost.
Make it clear at the point of purchase all the negative tradeoffs made to enable that Low, Low Price, and some significant percentage of people will choose to buy things that cost more.
Make sure that everyone—yes, everyone, no exceptions—has a decent amount of disposable income on a reliable basis, and that percentage will grow a lot more.
Software engineering is so well paid due to these dynamics.
It’s like capitalists completely forgot about the massively successful Great Society program (which is the only thing holding this all together still) that literally created from whole cloth most of the roads, sewers, electricity, social security, elderly healthcare, consumer protections, etc… that we all rely on everyday.
So no. That’s totally wrong, the world you live in much worse than it could have been for MOST people had generations of psychopaths not divested the public benefit aspect of organizing
Greed is NOT good
He just waves his hand at all that. He mentions Amazon once.
There doesn't seem to be any waving of hands.
And the primary target of the piece are low info gambling meme-stock bettors.
Honestly, kinda based.
Honestly, that one should be prosecuted under fraud regulations. And stock buybacks that leave the company with more debt than the company had before should be banned ASAP.
Where is the fraud?
I find it amusing that everyone has sympathy for the the shareholders (who were given an opportunity to get out), while no one seems to feel a bit of sympathy for the bond holders. If anyone was defrauded (and personally I don't believe anyone was) it was them.
But I would not buy stock only for the company to do buy-back programs for other shareholders, especially not if the company would be in a worse shape (i.e. less net worth of its assets and debts) afterwards.
A firm has assets and operations and those are funded with either debt or equity. Borrowing money to buy back stock is simply changing the capital structure of the firm.
The disconnect between the short squeeze amateurs and the reality of any market was painful to witness, myself working at a large stock broker. Stocks are worth their dividend over time: stock with no dividend and with only a speculative future value are always a trap. It's ok to be conservative and expect a regular payment related to performance, it's very risky to speculate on other market participants' behavior: they have agency too, and sometimes are competent.
The market in the last, what, 20 years, begs to disagree very hard.
A huge part of the "increases" in real estate and stock market values is backed by nothing more than fever dreams.
Absolutely it's worker wages.
Not helicopter QE.
Uh uh. That's just not how it works.
Capisce?
From a practical standpoint, there's little difference between these things. It's all more money in the pool. It's not like wages are tied to productivity.
My business savings account is paying 5.5%. That's a long way from 0% in your mattress.
Not 7%, but also way better than cash.
Meanwhile, those profiting from the bubble all the time have long since cashed out.
Berkshire Hathaway paid a dividend once. 50 years ago.
(buybacks are equivalent to dividends with a favourable tax treatment)
Source: If a company's executive takes a loan against their shares, it's disclosed in SEC filings.
Dividends are income.
You pay 50% less federal tax.
Any loans that the ultra-rich take out against their assets to fund their lifestyle, are going to have an associated interest rate, and a payment schedule. If they don't want to default, they'll need another source of funds to make those payments.
IF that source of funds for load servicing is a salary, they'll be paying income tax (income) + interest payments (loan).
IF that source of funds is dividends, then they may be cap-gains or income, depending on qualification status.
In either case: there is..
* A limit to how much can be borrowed, before the loan payments outstrip the loan-funding income or qualifying dividends
* In the case of income, they are still generating an income tax liability to service that loan, and also paying interest on top of it. Paying 124K/year for 10 years to pay off $1M at 4.5% means they fell into the 24% bracket for 10 years ($297.6K tax total) , rather than 37% in 1 year ($370K tax total). So while it does appear to create a tax savings -- even with the 4.5% loan interest -- funding life with loans is not the absolute "never have to pay income taxes" that my PP described it as.
Clarifications / corrections welcome.
A lot of people sell stock at capital gains, and get taxed at capital gains rates instead of income.
You're making it more complicated than it is.
I was replying to birdyrooster, who said
> borrow against the value of their inflated shares and never have to pay income taxes
... which is not about selling stock.
For someone to sell, someone else has to buy…
Of course it was the peak, you made it so most investors could no longer buy
I don't understand your point. The 1980s were over 40 years ago, this just happened. In fact, it's ongoing.
>"just so" story about our feckless and greedy rulers
Oh, that's your point. Yeah, your leaders trading stocks on insider info, politicians selling influence to foreign governments..it's always happened, so who cares?
So no, the point isn’t defeatism. It’s to observe that so many of these types of polemics come with a healthy dose of rose colored glass.
It's when the author drops into 'overwhelming debt ending in failure' that he drops the mask enough to show that he doesn't want any sort of government or public infrastructure. It's a libertarian, leaning anarcho-capitalist, viewpoint that explains the discontinuity in tone that permeates many of the articles I sampled from this author.
Weird to read how far some folks will go to defend Cohen, though - it reads like a sort of cognitive dissonance.
As for 'defend Cohen', He wrote a letter to the board specifically calling out the company’s executive compensation structure as noted in the article. They ignored him. He held through a 50% loss then when finally profitable filed his paperwork to sell. Any informed investor looking at the fundamentals would know the risk of this vs just reacting to noise on social media.
“Bust Out 3” seems pretty sleazy, selling stock in a failed company to retail investors. But hey, that’s what they said about Hertz, so maybe there’s some universe where this could have worked out OK?
I agree “Bust Out 2” was just a scam. Ryan Cohen is a grifter.
Not sure what standard for “proper” you are using, or how you expect it to be a norm in a basically-capitalist economy.
The board is fiscally responsible to the company and its future, not shareholders. It should not have approved a buyback program funded with debt because it is not in the best interest of the company. It was in the best interest of current shareholders.
Fiduciary responsibility is every board member’s responsibility and is legally binding (documents are signed stating as such when one becomes a board member). There are probably law suits pending against board members because they broke this responsibility.
Fiduciaries are entrusted by a third party. The third party, for corporate boards, is the shareholders.
Boards aren't obligated to maximize profits; that's a myth. But they do have a fiduciary responsibility to the shareholders. It's their company.
The board absolutely has to care about shareholders or shares would be entirely worthless... and therefore not a good avenue to finance the company at a lower cost than bonds.
It's a delicate balance but you cant blame a board for saving their shareholders, that's why we pay them as owners of the business.
I think the highlight here is that the buybacks were funded by debt. They're not "returning" anything.
Define "shareholder".
The day trader? The hedge fund who wants a position for a few weeks/months? The pension fund that would like regular cash flow? The person with a retirement account that is dollar cost averaging into the market over a period of decades?
See "investor heterogeneity".
It does make the company more vulnerable to economic downturns of course, since debt comes with mandatory payments that equity doesn't have. But making the tradeoff between larger profits and larger stability is what the investors hired managers for. If they don't like the tradeoffs being made, they should get different management or sell their stake in the poorly run business.
In general the US still has a surplus of retail space. There will probably be more major bankruptcies in the next few years, which is fine. Let them die and more innovative companies will take their place.
In some sense _the entire reason that companies exist_ is so that shareholders can at some point extract some money from the company and there's only two ways to do that -- either through dividends or growth. BB was (at best) clearly no longer a growth company, and stock buybacks are just dividends in disguise. They're a strong signal that you should be cashing out at least some of of your position as a stock holder while you can.
For a business it gets much muddier: do they "need" to take on debt if it makes them more competitive in the market? A company with a well optimized capital structure containing both debt and equity can be much more profitable than a company without, and can use those extra profits to out-compete companies that are less efficient.
All that debt went to stock buybacks so how is the company in this case being "funded" by the debt?
Effectively it’s a change in ownership from stock holders to bond holders. Indeed it’s a sensible move if you are in a non-growth industry with stable and predictable cashflows - this is often how utility companies were financed.
It’s arguable that that was the intent of Bust Out 1.
consider the passive investor who just Buys and Holds. three alternate timelines:
1) company pays dividends for 5 years and goes bust with a balance sheet of zero.
2) company sells off its assets over 5 years and dissolves.
3) company does share buybacks for five years and goes bust.
in 1) and 2) the passive investor receives the same value as any other shareholder. in 3) the passive investor receives $0 and the value accrues exclusively to those shareholders who sold before the end.
the combination or buyback + predictable bankruptcy makes sense only if you’re a shareholder close to the company seeking to maximize your own distribution. putting “right” and “wrong” aside, this pattern should at least make you more wary of being a passive investor, generally.
There's a book called Plunder that does a great job going into more detail on this model.
Indeed, with oftentimes massive cost to creditors (banks, employees, vendors, landlords, unemployment insurance schemes, taxpayers).
I wonder why such schemes haven't been banned yet, or what kind of catastrophe it needs to push regulators into action.
I don't think that's true. It didn't work for Louis XVI, it won't work for us. If you continually degrade the reasons to bother playing this game, eventually somebody will start playing a different one.
It was caused by outright cruelty.
Ireland had plenty of food at the time. It was just going to feed the English overlords. Potatoes were all that the Irish were allowed to keep, so when the blight hit, they starved.
Similar story: https://en.wikipedia.org/wiki/Bengal_famine_of_1943
in the 4 months since May 16, BBBY has lost another 50% and closed a $0.08 today.
> In the American context, my personal view is that Bill Clinton and George W. Bush presided over Bust Out 1, Barack Obama orchestrated Bust Out 2, and Donald Trump kicked off the lulz period, which we are now squarely in. I mean, how can you understand Trump and Biden as anything other than lulz?
Those BBY bust-outs were its leadership sucking the company dry. How did Clinton, Bush, Obama, and Trump suck the country dry? I'm not saying those leaders were effective but rather asking the more specific question about the connection between those administrations and the BBY serial vampire syndrome. The article seems to be saying that wealth/vitality was somehow sucked from the US into the leaders themselves or their cronies. If so, name names. Or at least offer a single example.
Instead, the article ends up with a much less interesting message. The US is going down the tubes and has been for a long time. That's a very old idea that may go back to the country's founding. It doesn't offer new insights. It doesn't open new perspectives. It just riles people up for a time. It's the kind of thing that politicians looking for new slogans to congeal a base of support turn to in campaign speeches so they can portray themselves as the only one who can drain the swamp.
What does "staking with" mean here? It sounds like "loaning", but I've never heard this phrase.
You might stake another player (loan them the money and collect interest/vigorish). In modern high-stakes poker, you might also “buy a piece” of a player where they put up half and you put up half and split the win/loss (or have another split).
It's still an ideological position, but it's got a more solid footing than the political one. Reasonable people can disagree on the effects or values of different monetary policies under different political environments, but nobody can arrive at the view that they're the same without being pretty ignorant on the subject. "This is the nature of capitalism" [1] can become a discussion between sane people, vs., "there's a 70-year-long grand conspiracy to loot society and it's because men aren't men anymore", for which no charitable interpretation exists.
Some people will be quick enough to point out that everything that happened in the BB&B case was completely legal, and maybe even right or correct to do under certain circumstances, that there shouldn't even be disagreement that this is the house capitalism builds. Under this system, some people can build a business (which may have some unfortunate side-effects in some communities or on the environment), and the same people or other people can come along and then loot the business for everything they can get away with, enriching themselves at the expense of everyone else. At the moment, there are lots and lots of businesses that have ripened on the tree of capitalism, and there are lots of people with the skills and greed required to loot them. Sure, it sucks for consumers and the public [2], but how many times in history have they really had a say in how society should be run?
[1]: Please don't misread this as an argument that other -isms are better. That's not an argument anyone can productively have on this website.
[2]: Arguably. There are plenty of people that will counter-argue that society is actually better off when this sort of thing happens because, I dunno, people got cheap toasters or something.
But the owners should, and do, get to decide what happens.
what actually are you looking for? you want the author to challenge unregulated capitalism? to convince citizens that we’re right to reign it in, because we’re right to defend ourselves against the rapacious scammers in both the economic and political realms?
because if so, just re-read the last 4 paragraphs. pay attention to the groups he calls out, and if you’re still not satisfied then explore the possible meanings of this part in particular — which he bolded — and recognize that the “weak men” here most probably includes you and i and 95% of the author’s audience.
> I am full of hope that weak men will choose to reclaim their autonomy of mind