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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (1153)	1/19/1998 10:43:00 AM
From: Tommaso	Respond to of 9980

What is this 130% for taxation? If this has something to do with the combined corporate and individual income tax rate on dividends, then periods when the average dividend rate was 5% on the S&P would have to be adjusted, too. Also, if you are talking about the money disbursed by the company for the buyback--well, a lot of that is taxable, too. It doesn't raise the value of the remaining shares because the money is gone. The number of shares is reduced but so is the capital of the company. And if the company is buying its own shares at four or five times book value, or more, it hardly seems like a bargain for the remaining shareholders. It may temporarily prop up the market price of their shares. An intelligent share buyback would be that announced by Barrick, where they have a guaranteed high income from forward contracts for gold and very low-cost mines coming on line, and there is a clear perception that the shares are worth more than the market is valuing them at. IBM was simply joining the rest of the crowd in speculating on their own inflated stock. I suppose to do this might give insiders time to make plans of their own, but in general it just seems a misguided decision that cannot benefit the company. The salient fact is that the United States stock market is greatly overvalued. It remains to be seen if a recovery in Asian markets leads to rising interest rates and removal of enough capital from the U.S. to help deflate U.S. markets. Also, the pressure of the huge price-cuts implied by currency declines in Asian countries has not even begun to make itself felt in the United States.