by Michael Keane
In an earlier story (link here), our partner KeaneVCC documented how corporations used the tax cut to buyback their shares. The biggest beneficiaries of this process were the executives as bonuses are regularly tied to stock prices. We like to call this process the executive bonus protection plan based on the idea of higher stock prices equal higher bonuses.
Now that it is shown that the tax cuts didn't do enough for those outside the executive area, they are gunning for rate cuts.The lower cost of borrowing is needed to continue to buyback shares at a profitable level for corporations.
A cnbc.com article (here) on the topic from Jeff Cox addresses this exact issue. Bloomberg TV also spoke about this topic with David Levovitz from JP Morgan Asset Management.
This is a warning sign for the economy. Be careful out there.
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