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Last week, senators Chuck Schumer (D-NY) and Bernie Sanders (D-VT) co-authored an opinion piece in the New York Times titled: "Limit Corporate Buybacks: Corporate self-indulgence has become an enormous problem for workers and for the long-term strength of the economy."
The senators said, "From the mid-20th century until the 1970s, American corporations shared a belief that they had a duty not only to their shareholders but to their workers, their communities, and the country."
I have to say the senators are right: Buybacks should be limited. They benefit too few people, who already have the advantage.
But the senators are dead wrong about buybacks' impact on workers and the wider economy.
That a bunch of D.C. insiders are wrong isn't news at all. But in this case, I'll show you the senators' prescription for fixing the problem is disingenuous at best, and a command-economy disaster at worst.
The good news is, the problem of buybacks is very fixable.
And my way to do it would not only benefit corporations and shareholders, but regular, middle-class workers and small investors, too.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
Most sensible tax regime I have heard in a while. On the face of it the velocity of money can increase as worker-shareholders get more cash to spend and reduce debt. Freeing up billions from the few to allocate to the many. Not bad Shah!
Excellent points. I'm glad you acknowledged the real problem, and didn't deny that the wrong people are benefiting from the current buy-back model. We need to address the income/wealth gap in this country, and you have some good ideas here. I hope they make their way to Washington, D.C.!