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May 2018

Buybacks: The New Magic Beans

Synopsis: Stock buybacks increase corporate leverage. Investors err if they apply the old P/E ratio to the new, now higher EPS, which is solely due to the reduction of outstanding shares. Because leverage has increased, the P/E ratio should fall, as the company is now riskier. Theoretically, via the academic discipline of corporate finance, and used by most Wall Street analysts, management should prioritize its use of cash as follows: …Read More

Before Political Correctness, We Called This “Stagflation”

“Those that cannot remember the past are condemned to repeat it.” (George Santayana 1863-1952). This time, indeed, could be different. It certainly is in the realm of possibility. But, the odds are against it. One doesn’t get up on a particular morning and find an entry in the calendar on our smartphone, like “Cinco de Mayo” or “Mother’s Day,” that says “Start Day: National Recession.” In fact, the National Bureau …Read More