Who’s right_ warren buffett or larry fink_

Are shortsighted managers underinvesting in the American economy because they want to line the pockets of investors through share buybacks?

Yes, says the world’s biggest fund manager: American capitalism needs to be fixed. Damson gin recipe delia smith No, says the world’s most successful investor, good projects aren’t dying for lack of financing.

Larry Fink, BlackRock Inc.’s chairman and chief executive, and Warren Buffett, Berkshire Hathaway Inc.’s chairman, personify a debate vital to investors and voters. Damson gin recipe waitrose If managers are ignoring profitable opportunities because of short-term shareholders or badly-designed incentives, a better approach could boost both share prices and economic growth. Sloe gin cocktail recipes uk Bringing back corporate cash trapped overseas, part of the aim of Donald Trump’s tax plans, could then support further investment.

If everything’s dandy with corporate management, the blame for slow growth lies elsewhere.


Sloe gin recipe waitrose Companies bringing cash home to the U.S. Damson gin recipe bbc won’t have new projects to invest in, so it’s likely to be spent on yet more buybacks.

Mr. Kilner sloe gin recipe card Fink warned against the “furious pace” of buybacks in his annual letter to CEOs earlier this year. Damson gin recipe uk “We believe companies must balance those practices with investment in future growth,” he said.

Mr. Recipe for making sloe gin Buffett shot back last weekend in his letter to shareholders, saying companies and investors are “awash” in cash and constantly scouting for opportunities. Sloe gin recipe 70cl bottle “I’m not aware of any enticing project that in recent years has died for lack of capital,” he wrote. Best recipe for sloe gin “Call us if you have a candidate.” In other words, capitalism and the market are doing their job of directing money to where it can best be used.

The issue of buybacks is really a puzzle about stock valuations and profits. Recipe for sloe gin Profit margins are high and stocks are worth far more than it would cost to replace all corporate assets.

So why don’t the high profits attract competitors to build new companies — or expand existing companies into new lines of business — for less than the cost of buying stock in existing companies? The problem is longstanding, according to research by German Gutierrez and Thomas Philippon at New York’s Stern School of Business. Sloe gin fizz recipe They show that the previous link between valuation and corporate investment weakened from the early 2000s, and as a result corporates have invested about 10% less than they otherwise would have done.

Investors who know their history might breathe a sigh of relief. Recipe sloe gin Disastrous capital spending driven by the egos of power-hungry chief executives has destroyed more shareholder wealth than almost anything else, and academics have established that lower investment tends to mean better share price performance.

Corporate governance issues are core to one group of explanations for low investment, on which Mr. Best sloe gin recipe Fink is focused. Recipe for sloe gin fizz Shareholders know that most investment is wasted, so giving them more say in the business ought to lower investment (although there are reasons to be skeptical of this, which I’ll come back to). Sloe gin recipe 70cl Managers are incentivized by short-term targets, and investors starved of yield in the bond market are pushing companies to pay out more of their profits.

“There has to be a balance between the short term and the long term,” says Sarah Williamson, CEO of FCLT Global, a nonprofit set up by BlackRock, management consulting firm McKinsey & Co. Sloe berry gin recipe and three other groups to push for longer-term thinking by investors and companies. Easy sloe gin recipe “People are giving up positive NPV [net present value, a measure of a justified investment] projects because of the way capital markets work.”

Another group of explanations depends instead on the reality of the economy. Sipsmith sloe gin recipe A thicket of red tape makes it harder to enter new businesses, protecting incumbents from competition. Recipe sloe gin fizz Disruptive new technologies have created many highly profitable winner-takes-all businesses reliant on networks which are harder to compete with once built (you want to be on the social network your friends are on).

Furthermore, new technologies are allowing capital to be used more intensively, reducing the need for investment. Best sloe gin fizz recipe Think Airbnb.

Shareholders clearly want more profits for less capital, and reward companies able to supply it with higher share prices. The best sloe gin recipe Robert Buckland, an equity strategist at Citigroup, shows that companies which invest a lot compared with the amount of cash they pay shareholders tend to trade on a lower valuation.

He points to Apple Inc.’s far higher profit margin and return on equity than Hon Hai Precision Industry Co. Gordons sloe gin recipe Ltd, its Taiwanese supplier better known as Foxconn. Simple sloe gin recipe Building iPhones is much less profitable than designing or marketing them, but also requires more factories and employees.

“The workers and the politicians probably get a better deal out of Hon Hai, but the shareholder gets a better deal out of Apple,” he says. Make sloe gin recipe Apple shareholders have to stump up less capital because Hon Hai shareholders are providing it on the cheap.

Some of this is because of corporate governance. Sloe gin recipe gordons Asian companies are typically less responsive to shareholders than firms in the U.S., and happier to plow money into lower-return projects. Dried sloe gin recipe Investment is higher, returns lower and shareholder activism rare. Kilner sloe gin recipe The Hon Hai-Apple relationship is mirrored at a high level, with Asian capital subsidizing America, but the subsidy goes to wealthy shareholders, not the wider population.

Finally, it is worth noting that shareholders don’t always push for less investment. Sloe gin fizz cocktail recipe When commodity prices were high, investors applauded as oil companies and miners poured money into holes in the ground. Sloe gin recipe sipsmith When prices tumbled, shareholders switched and applauded canceled projects.

If investors believe that Mr. Sloe gin recipe almond Trump’s promise to kick-start U.S. Sloe gin and tonic recipe growth will create more profitable opportunities to deploy capital, capital spending should come back into fashion. Quick sloe gin recipe Surveys of fund managers suggest a shift from preferring buybacks toward investment is under way. Sloe gin recipe uk If companies listen and corporate investment rises, Mr. Sloe gin recipe river cottage Fink should be delighted.

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