I have stated this previously in the ULVR thread, and will we repeat my views now. The reason why I find BBs of biggest detriment is that
they concentrate in the Financial Service Industry and in the pockets of rich execs. The FSI sees share buybacks as an interaction between an investment bank (e.g. UBS) and a firm (e.g. ULVR).
The sum paid by the firm will include
broker fees and a portion above the average share price as determined by the bid/offer spread. Since the initial buying of the stock came from the firm not regular investors, this activity was outside of general market activity, hence the fees/spreads derived were not part of natural investor sentiments for this particular firm.
Furthermore the FSI banks have close relationships with each other, attend events with one other, have mutually agreeable commision arrangements etc. And of course a portion of these fees, spreads will be recycled in the higher echelons in other asset purchases (some of high risk, possibly requiring a subsequent tax payer bail out when they crash, in the case of the GFC) and bonuses. Since the original bank (UBS in this case) may now be underweight in ULVR they will contact associate banks to top up their holdings, so the original purchase by ULVR generates several more fee/spread value extractions.
We all know that the execs of the firms benefit when EPS figures rise and they receive a large pay rise. So there's little pointing dwelling on this, except to mention that in paying their salaries, more of the firm's profit move to people who are already v rich, possibly for them spend on financial assets etc. etc.
Many believe that the circumstances resulting from the above are harmful to all since our societys' existing wealth gaps are exacerbated. This is bad not only for generating high levels of malcontent and internal disorder (Trumpism in the US and the Yellow Vest movement in France did not occur in a vacuum), it also result in less of the nations wealth
being held by poorer people, who are those who tend to spend on consumer goods (e.g. those produced by Next, Burberry, Unilever, Reckitts etc.), and hence the very firms in which we are invested in make less profits, and suffer from poor growth.
Matt
https://www.amazon.co.uk/Value-Everythi ... 0141980761