Stock buy-backs

E.S. Browning at the WSJ uses evidence that corporations are the biggest buyers of stock to suggest that corporate purchases of stock are the biggest driver of recent stock market success.  It is surely true that purchasing treasury stock (to use the accounting term) is likely to have a positive influence on a company’s share price because it increases Earnings Per Share (EPS) by reducing the denominator and also increases the demand for the company’s shares.  It is a way to tread water or perhaps do a little better.

MWG thinks there is a more important point here.  There are a large number corporations with cash to invest that are choosing to purchase treasury stock rather than invest in something new.  According to Mashable, 2013 was a slow year for tech start-ups.  Both are bad for the economy but not for the stock market because that is (almost entirely) established businesses.  Fewer start-up put less of a challenge on established businesses.  Treasury stock allows EPS to grow by shrinking the company.  Each share is more valuable but outcome on the value of the whole company is uncertain.  Since investors own share they are happy with the outcome.  It is a nice short-term solution.  Before long the economy will need to become serious about growth.  Right now all manner of investors are telling the government that there are limited opportunities.  We need to remove the restrictions.


Kevin Williamson put it nicely,

I myself don’t have a 2016 [presidential] candidate, but I’ll say this: I don’t want an exciting one. I don’t need to be inspired and don’t desire to be awed or ruled. I want what has been missing these past years: a responsible, sober, honest, predictable federal government, one that recognizes its own limits — constitutional and epistemic — and under which the president is not a hero but a steward.

I’m with him but we will both be disappointed because such a person is unlikely to be nominated by either party and if either party made such an error they would earn a resounding defeat in the general election.  As George Will didn’t put the Cochran victory exactly this way but voters like free stuff.  Coolidge is out of the question.  The best we can hope for is Harding,  

We can argue about the details but the critical issue is to move in the right direction economically.  Would you throw poor people out of work by raising the minimum wage in return for Keystone XL and and reining in the EPA?  What if IRS restrictions were added?  It is the Romney Realization.  You can’t win on every issue even if your cause is just.  MWG is a staunch opponent of raising the minimum wage but there are trade-offs to consider.  Much like candidates write-off states in the general election (without saying so), candidates must recognize (the Romney Realization) that there are some issues that are outside of their focus.

One Cheer

NRO has been discussing the “child credit” for federal income taxes.  Reihan Salam and Ramesh Ponnuru are on the yea side.  We lean towards the nay side but Stephen Moore’s weak argument on the nay side and our fear of comprehensive solutions to any government problem has moved us to consider such changes.  Juleanna Glover considers a number of such adjustments to appearl to women in Forbes.

  MWG has been a nay on such changes because we are reluctant to add any more complications to the tax code. The redistribution argument is not relevant.  Every tax code change will have an impact of redistribution.  The issue is to find the best available tax change where best available is primarily about the economy and secondarily about redistribution.  A change in tax accounting for children might be the best available choice.  The pro arguments include that it reduces taxes for a large group, it provides incentives to reduce the challenges of entitlements by encouraging children for productive adults, and it might happen.  The con argument is basically that there are better options.  There are much worse options like, to pick one at random, a wealth tax.  That leave us leaning towards supporting a useful option rather than a great choice like eliminating the corporate tax or an easy one like moving to a territorial tax system.



English Is Confusing

The phrase dialed-in means you are really focused.  The phrased phoned it in means you made much less that your best effort.  The source of the latter phrase is obvious while the former is more subtle.  Of course, for folk younger that MWG, dial has nothing to do with a phone but it does for us.  The Online Slang Dictionary is unsure of the etymology but thinks it has something to do with machine dials.  We are not making the argument an etymology of the phone but it still makes the two phrases seem confusing.

On alternative etymology was suggested to MWG.  The phrase might come from warfare with scopes and devises on rifles and big guns.  When they are hitting the target they are dialed-in.

Dionne is Right!

EJ Dionne has a column entitled An Election Campaign With Too Little Focus On Economic Concerns.  In it he says

Bread-and-butter concerns are the stuff of Democratic victories because the polls show that most voters still think of the GOP as more protective of the interests of the wealthy than of their own. The less we hear about economics, the better it is for Republicans.

He may well be right (this is not the one from the title) that economics are good for the Democrats.  Given the disaster that is the recovery (seriously, do you need a link here?  OK), the fault lies with the Republicans.  Here we are going on six years of awful economic stewardship and the opinion polls are lagging reality.  The current administration has similar ideas to Nixon’s Wage-Price controls back in 1971 that were applauded by the public.  

Sidebar: The 1972 undergraduate comprehensive exam question: Why were profits not controlled by Nixon’s Wage Price Controls?  MWG answer: if you control all of the income and expenses then you control profits too.  Looking back MWG did not have a sufficient understanding of the knowledge problem but only a few folks did.

End sidebar

EJ Dionne is right.  We need more discussions of economic well-being.  The Chimera of income inequality as a significant issue needs to be slain.  Growth beats the zero sum game of dividing the pie.  The administration’s disasters with the IRS, in Iraq, and elsewhere need to be addressed but the GOP should channel its inner Kudlow: Support economic policies that promote growth.  MWG knows that he wants King Dollar too but let’s focus.


There is a new movie, Ping Pong Summer that looks to have the typical misrepresentation of expertise.  It takes time to become expert in real life but not in the movies.  The Karate Kid (all versions) is the classic example.  The hero does poorly at something and then becomes so focused after the embarrassment that he becomes a champ in a few short weeks.  I don’t think it happens in karate, I’m sure it doesn’t happen in ping pong, and it sure as hell doesn’t happen in four-wall handball.  It doesn’t happen in accounting, law, or medicine either.  Our hero is going to go from ping pong dork to Ocean City Champion in a summer.  It. Can’t. Happen!

Ping pong and handball share one important characteristic: you must react to the spin of the ball.  It is hard to do.  That is why a fat, short old guy like me can beat the new players who are bigger, stronger, and faster.  The same thing happened to me when I started.  I remember thinking, “Why is the fat BLEEP just standing in the middle of the court and I’m running all around?” 

Still I’m going to the movie and I expect to like it.  Other than a brief cameo with Alan Ladd, I don’t know of any handball movies.  The WPH message board has a few more and, of course, the most interesting man in the world plays one-wall.  Ping Pong Playa was hardly an epic and the ping pong wasn’t that good.  Now if the hero was only a pencil holder!  I can tell by the paddle on the movie site that he is not but I can dream.


The reverend was in the locker room when I came down from my handball match this morning.  He is in his eighties and now reluctantly retired from handball into a life of racquetball.  As I knew would happen, after a greeting his first real conversation was, “Who won?”  As I had just earned a rare W versus the thirteen time city champ I was happy to continue the conversation.

The small cadre of handball players makes a self-selected intensely competitive group even more so because you play the same people all the time.  I played some doubles with the reverend and he would remind me who won last time.  Either, “We beat them last time and they will be out for bear” or “We lost last time and need to make up for it.”  Most of the time it is not Packers and Bears where you don’t like the opponent.  It is more of a long memory that baseball pitchers have when they say the hitter showed me up in ’07 so I hit him today.  We remember the great shots, the sloppy shots, the misses, and the slights.

Last century, I was trying out my new lob serve against a then city champ.  I made the first serve and the return hit me solidly in the back.  “Sorry.”  “No problem.”  The second lob serve led to the exact same sequence.  The third lob serve led to the same sequence except it was a little quieter.  The were no benches to empty so I moved on to a different serve.  My opponent has since retired from handball because of injury.  If he comes back I’ve improved my lob serve and I’ll try it again.