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Originally Posted by Dantilla
I disagree with an underlying assumpion- That the lower and middle classes are struggling.
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Call me a dumb redneck, but I didn't get that impression after reading the first few paragraphs. The rich are currently getting a bigger piece of the pie, for better or worse.
Gross' supposition is that "the rich" have been able to take advantage of mis-priced market risk (ie. package debt into securities with final price presuming no/little risk). Since risk is misjudged, the price for buying that income stream stays high. The market is encouraged to bring more debt. It goes on until it busts.
John, you could very well be right about stock buybacks. I briefly looked up HD. It has $2.0billion in cash. They recently announced a $22.5billion buyback. First, they will sell their HD Supply business for $10.3billion. The rest will be financed with notes issued, an estimated $12billion. This could very well be the exception, but HD is far from executing this buyback with cash on hand. In fact, based on the numbers above, HD will use virtually no cash to buy back stock. It will be interested to see how the market changes over the next six months.
I just noticed the buyback plan will remove nearly 30% of outstanding shares, so perhaps this is an extreme case.
Jurgen