So that didn't answer. So buyback . So in that second period, the last dozen years when he bought in 90% of his shares, he had an approach to that that is wildly different than the way most public companies repurchase shares today.
mochas didn't just do showmanship he combined the mime based traffic intervention with more traditional interventions like gun buyback programs to try to get guns off the streets and out of the hands of criminals he had mass firings of corrupt traffic cops who were known for taking bribes all the time downtown and he did some other
I want to maybe pause on Singleton for a second before we move on because you said that he was not just a pioneer in stock buybacks , he was much more than that because he sort of built a framework in thinking about them.
A lot of acquisitions have happened when the price to book ratio was two or above. And the few buybacks that have happened, have happened at lower valuations. So the question is, these outsider CEOs, they're all sort of following the similar framework of doing buybacks or issuing stock managers,
There's hundreds of other ones. Is it going to go to stock buyback ?
In the final process, I try to figure out how much this marvelous company should be worth and try to buy it in the market at half of what I believe it should But with some margin expansion and some buyback of shares, I think they can obtain that 15% growth in earnings per share.
and they exceeded the record that was set before, in October of 2007. So the absolute trough for buyback volume by corporate America was in the first quarter of 2009. So corporate America, as a group, has a perfect record of buying high and effectively selling low.
You have cheap money still available. You have a lot of buybacks -- some from companies that have cash, and some from companies that have received cash-- but nonetheless. And then you also have cracks in the system from both the rumors that are in the market as to whether or not this can stop.
And not surprisingly, the returns aren't great. And if you look at the way buybacks are typically implemented in public companies in the US, it's not surprising. So the typical way that works is the board will authorize an amount of capital that can be deployed for repurchasing shares.
So of course they're going to say that. I mean, the share buyback is a classic example.
Another thing that-- I love this quote-- another thing that successful active managers don't pay The only one that actually makes a ton of money are buybacks and dividends, returning capital to the shareholder.
and therefore repaying the debt was so low-- but the debt payments will get higher, and also money coming out of the stock market to make debt payments-- and then separately, buybacks , which keep the level of the market up. So you have these two competing forces of capital that are creating more volatility now.
As I said, four engineers, two MBAs. They did their own analytical work around major corporate decisions, including acquisitions and buybacks . They did not rely on an internal finance team or external advisers, bankers, and consultants.
Another thing that-- I love this quote-- another thing that successful active managers don't pay So, here, shareholder yield-- I won't spend a lot of time on this, but shareholder yield means you buy the stocks that have the highest buyback rate and the highest
in thinking about them. And later on, in your book, you also mention the straw buyback approach versus sucking hose buyback approach. Can you share more on that with us?
One way would have been to let one or two extra banks collapse. It's gone into inflating the value of stock, because it's been an artificial source of money that's been used not just for stock buybacks ,
And then on a Tuesday morning, think about an environment-- let's say, 2011. You look at leverage ratios, you look at their ability to do pretty much anything they want and return capital to shareholders-- big dividends, big buybacks --
Corporate America, as a group, is a completely ineffective repurchaser of its shares. So last year, 2014, corporate America set the record for most capital allocated to share buybacks and they exceeded the record that was set before, in October of 2007.
And the few buybacks that have happened, have happened at lower valuations. So the question is, these outsider CEOs, they're all sort of following the similar framework of doing buybacks or issuing stock managers, increasing the intrinsic value for their shareholders.
So of course they're going to say that. So in the two years before the financial meltdown, the 500 companies on the S&P 500 were spending 70% of their profits on share buybacks .
So of course they're going to say that. But they haven't. So that last year, we spent $600 billion in share buybacks .