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How AI Spending Could Rob Stocks Of Their Biggest Buyer
This'll be a bit repetitive, but that's fine because it's important, and there's a tie-in with the A
So yet another dynamic artificially suppressing vol. What happens if they all get pulled at the same time. Thinking it is possible as they (the myriad dynamics artificially suppressing vol) are all part of the same house of cards? Volmageddon 2.0 or Volmageddon^2 (squared)?
Also, “financial engineering” typically relates to capital structure, but now, with all the circular deals in the AI space, they are financial engineering their P&Ls. What could possibly go wrong?
During our last bout with stagflation–the 1970s–many corporations were paying dividends of around 4.5%. Jack Bogle once said that back then, that’s where half your earnings came from. (Of course, rates were just higher back then in general.) You would think that a stable, well-run company paying close to 5% in dividends would be a sought after investment, but that apparently is just not the case anymore. Tech doesn’t work that way, and AI tech is the story. I invest in some dividend stock ETFs (as part of a retirement income stream), and in our current environment I am lucky to earn just under 4% with little to no price appreciation.
At some point, we should see companies becoming more profitable because they are benefitting from AI, and not just because they are the ones developing it. Maybe someday those companies will see fit to pay back investors through dividends, rather than buybacks and price appreciation (and additional bonuses for their chief officers all around.)
At the same time I am earning steady 7.8% pre-tax equivalent in cash from my insured muni bonds. In the good old days I was trying to build assets when stock prices were dead flat. Any dividend was better than nothing and discount T-bonds in a sharpy falling rate environment were better than everything.
Would expect to see some dispersion between those who have an authorization outstanding versus those who do not (and those whose share count is still growing due to comp).