Stock buybacks: good management or manipulation?

For years, stock buybacks by large companies, especially financial institutions, have been the norm. These operations can bring legitimate strategic benefits, but they can also be used to disguise accounting results and manipulate stock prices.

For most of the 20th century, share buybacks were considered illegal because they were believed to be a way of manipulating the stock market. It was in the 1980s that neoliberal policies allowed share buybacks to become one of the most popular financial engineering tools.

What is a stock buyback?

A share or stock buyback is a financial transaction whereby a company buys back its shares and redeems or disposes of them. The company’s overall financial position does not change, but by reducing the number of outstanding shares, each shareholder’s stake in the company increases.

Companies often argue that they do this in order to give value to shareholders, since this activity can increase the share price. In some cases, share buybacks can be used to prevent a shareholder or group of shareholders from acquiring sufficient shares to take control of the company.

Another advantage of share buybacks for shareholders is that, unlike dividend remuneration, as it is an indirect remuneration to shareholders this transaction has no tax implications unless they choose to sell the shares, in which case they would be taxed if they realised a capital gain. On the other hand, while the dividend is a distribution of past profits, when a share buyback materialises, it is in anticipation of future profits.

Potential market manipulation

The problem arises when these buybacks are carried out not to genuinely improve the financial situation of the company, but to make the shares look more attractive to short-term investors or to reward the managers of these companies who have bonuses linked to share performance.

This practice has become widespread and has overtaken dividend payouts, especially in the United States, where many corporations have prioritised short-term returns to management and shareholders overinvestment in the company’s future. One of the clearest examples of the negative consequences this business strategy can have is the crisis facing the Boeing company, where in a recent US Senate hearing its executives were accused of ‘strip-mining’ the company for profit.

Financial institutions have been one of the sectors that have made the most use of this practice, especially after the 2008 financial crisis and after many of these institutions were bailed out with public money. Stock buybacks have been financed by using accumulated profits or, in some cases, by increasing debt. Often, these operations are carried out at the expense of access to credit for businesses and consumers, improved services to customers, higher salaries for employees or through job cuts.

Critics also point out that stock buybacks distort market reality. Under the pretext of increasing shareholder returns or attracting new shareholders, buybacks can be used to disguise companies’ accounting results and artificially increase share prices, which should reflect their real economic situation. The need for strong regulation and transparency to prevent malpractice is obvious, yet the process of extracting value from capital seems likely to remain focused on short-term profit and to the detriment of productive investment.

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The volatility of the markets in August 2024 has shown, once again, that reality is stubborn and the safe haven par excellence is gold. Bitcoin is the most well-known and safest cryptocurrency out there, and has generated huge gains in recent years, but when panic hits Bitcoin seems to follow the market trend while gold appreciates.

There are those who say that Bitcoin is digital gold. It’s a way of saying that Bitcoin is very secure, and it is. But the truth is that only gold is gold and, this August, it has become very clear. Last week, gold again broke another historical record, reaching 2,531 dollars per ounce, that is, around 80 euros per gram. Currently, the rise has corrected slightly, but everything indicates that it will continue to rise, and it has already done so by almost 17% so far this year. What is happening?

Bitcoin, digital gold?

Between the 4th and 5th of August, the international markets suffered a shock that caused immense losses in many assets. Bitcoin had, in those days, a behaviour similar to high-risk capital values, that is, it went down following the market. The World Gold Council has analysed the evolution of assets in those days, very specifically comparing gold and Bitcoin. And the conclusion is strong: it is very volatile. Therefore, nothing digital gold because Bitcoin does not (apparently) have one of the essential conditions to be considered a safe haven value: being able to withstand market turbulence. It’s a great asset for big gains, it’s been proven for a long time, but it doesn’t work as a safe haven.

In the same period, and throughout the month of August, gold has been revalued. Because, historically, gold gains value in difficult times. When everything is volatile, physical gold is always there. This is what the American financier Michael Burry, famous for having predicted the subprime mortgage crisis of 2008, must have thought. On August 4, seeing how the markets were evolving, Burry made a large purchase of gold. This fact put the whole market on alert and pushed the price up.

Will the recession come?

Gold has continued to rise due to the possible rate cut by the American Federal Reserve, which could put the world’s first economy into recession. It’s a long-announced recession that never seems to end. At the moment, gold continues to gain value, that is to say, big investors are preparing for the curves.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy the ultimate safe haven value at the best price: physical gold.

Gold remains the ultimate safe-haven asset for people who want to protect their savings from persistent inflation. However, as with any investment, it is important to know and consider the pros and cons of investing in this precious metal.

Gold’s ability to offer protection against inflation and maintaining or increasing its value in economic crises, makes it a must-buy if we want to diversify and make our savings profitable.

This fact has been confirmed since inflation began to rise in 2021, reaching its highest level (7.4%) in 30 years in March 2022, causing many households to suffer with resignation a drop in their purchasing power and the loss of a large part of their savings.

Although inflation has slowed down, it remains at 3.6% in Catalonia, according to the latest data issued by the National Statistics Institute (INE). This is a rate of inflation that neither the low yields of bank deposits nor the Treasury bills have been able to compensate for.

In contrast, over the last five years, gold has experienced a spectacular increase in value, doubling its price. As for 2024, during the first six months of the year, its value has risen by 12%, following the upward trend of 2023, outperforming most of the main investment assets and reaffirming itself as the most valuable asset on the market.

However, although buying gold can be a very good option to protect our savings and can help us obtain liquidity in case of need, it is crucial to evaluate the advantages and disadvantages of putting our money into this type of investment.

The good news

• Holds its value: Gold continues to be the ultimate safe-haven asset and an unparalleled store of value that tends to appreciate in the face of market uncertainty. 
• Protection against inflation: As explained above, gold has proven to be a good hedge against inflation and the devaluation of our savings.
• High liquidity: Thanks to its intrinsic value, it is a highly liquid asset that can be easily sold, making it easy to convert into cash in case of need.
• Investment diversification: The price of gold often moves inversely to the stock and money markets, acting as a hedge in periods of volatility and helping us to diversify our investment portfolio.

The not-so-good

• Barriers to entry: Investing in physical gold can require a significant initial outlay. Although there are alternatives such as investment funds, not everyone has easy access to these options. At 11Onze Preciosos we make collective purchases so that we can get the best deals for all members of our community.
• It does not generate passive income: Unlike other investments such as shares or bonds, gold is an asset that does not generate dividends or interest. This means that, as a rule, investors do not receive regular income from owning gold. However, there are products such as Gold Seed, which can generate regular, passive income from gold buying.
• Storage costs: Physical gold needs secure storage such as safes or professional storage services. A safekeeping service ensures that your gold is protected and insured, but this comes at a cost. In return, at 11Onze Preciosos, when the time comes, we take care of selling the gold of our clients who have contracted a safekeeping service with us at the best possible price.

Preciosos 11Onze makes it easy to buy gold, at the best price and with total security. Give us a call and speak to one of our agents without compromise to clarify any doubts you may have and protect yourself from economic crises with the ultimate safe-haven asset.

The unexpected appearance of DeepSeek’s open-source Chinese AI model is shaking up Silicon Valley and global markets. Launched on 20 January, it offers comparable performance to the OpenAI flagship at a fraction of the cost, using less advanced microchips.

The launch of DeepSeek’s new model, just as Donald Trump was sworn in as US president on January 20, was no coincidence. China was sending the message that, despite Washington’s restrictions on the export of next-generation microchips to curb the technological development and competitiveness of Chinese companies, Beijing can be the world leader in AI.

A day later, Masayoshi Son, CEO of SoftBank, Sam Altman, CEO of OpenAI, and Larry Ellison, chairman of Oracle joined the new Trump administration as it announced a private sector investment of up to $500 billion to fund infrastructure for artificial intelligence to outpace rival nations in this business-critical technology.

Impact on global stock markets

The White House announcement did not prevent the stock market plunge of companies such as Nvidia, one of the pillars of the technological revolution generated by AI and the main manufacturer of microchips in the supply of hardware for AI, which saw its shares fall by more than 15%, losing 589 billion dollars in a single day.

It was the biggest loss of value by a stock in the history of the stock market and relegated Nvidia to third place in the ranking, behind Apple and Microsoft.

Nvidia’s fall dragged down other technology giants and several companies linked to chips and semiconductors: Advanced Micro Devices (AMD -10.38%), Marvell (-19.11%), Broadcom (-17.40%) and Grail (-9.16%), Microsoft (-2.17). This turmoil also affected European stock markets, with significant falls in companies such as ASML (-8%), Schneider Electric (-10%) and Siemens (-5%).

Investors were concerned that DeepSeek’s innovative approach would lead to a collapse in demand for graphics processors and other components in data centres, which are essential for the development of AI.

A disruptive business model

One of the keys to the success of the Chinese AI model is the demonstration that the industry is capable of developing efficient and practical artificial intelligence without the need to rely on Nvidia’s advanced and expensive microchips. Thanks to Washington’s restrictions, the company was forced to use H800 model microchips, a less powerful version of those available to US companies.

In addition, DeepSeek claims that with its new technologies, it can reduce algorithm training costs by 75%, noting that it has invested only $7 million in developing its model, compared to the $50 million OpenAI has spent on ChatGPT. As a result, it can offer access to its interface for just $0.14 per million input tokens, far less than the $15 OpenAI charges for the same service.

The other pillar of DeepSeek’s success is its open-source approach, which allows any developer to modify and adapt the software to suit their needs. A business model that contrasts with the more restrictive uses that Western companies impose on their AI applications. It is therefore not surprising that, on Wednesday morning, DeepSeek became the most popular application overall, not just for AI, in the Apple and Google app shops.

DeepSeek’s breakthrough is proving that US technological hegemony in AI is no longer guaranteed. There is little doubt that sooner or later Washington will also impose bans and restrictions on this new Chinese competitor under the pretext of national security, as it has previously done with ZTE, Huawei and TikTok, but, ironically, the increasing aggressiveness of the US administration in the geopolitical framework to prevent the collapse of the empire is accelerating the development of technological, commercial and financial alternatives by other global players.

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Els ETF són uns productes financers que aquí es coneixen com a fons d’inversió cotitzats. Es tracta d’uns actius financers híbrids, entre els fons d’inversió tradicionals i les accions, que segueixen l’evolució d’un determinat índex de referència. 

ETF (de l’anglès exchange traded funds) o fons d’inversió cotitzats, són uns fons d’inversió que cotitzen en els mercats de valors. La característica principal d’aquests productes financers és que combinen la diversificació que ofereix una cartera d’un fons d’inversió amb la flexibilitat de la compravenda d’accions.

La seva política d’inversió consisteix a replicar un índex borsari: de renda fixa, de primeres matèries, d’un sector, etc., cosa que els fa molt atractius. D’aquesta manera són un producte molt utilitzat per invertir per tendències o temàtiques perquè, un cop agrupats els actius d’una tendència en un índex, els ETF en repliquen el comportament.

Operativa dels fons cotitzats

Quant a la seva operativa, és igual que la de les accions, ja que cotitzen durant tota la sessió borsària i tenen un valor liquidatiu que es publica al tancament de la sessió. És a dir, el seu valor real no es coneix fins al final de la jornada borsària.

Poden invertir en fons cotitzats tota mena d’inversors, tant institucionals com particulars, els quals poden comprar un ETF a temps real, al preu que fixi el mercat en cada moment. La cotització podrà variar al llarg d’una sessió borsària en funció de l’oferta i la demanda, com passa amb qualsevol altre valor cotitzat, cosa que facilita una gran transparència per als inversors. 

Tipus d’ETF

Encara que tots els ETF repliquen el comportament d’un índex de referència, això es pot portar a terme de diferents maneres: 

• ETF de renda fixa: es comporten de la mateixa manera que els títols o bons de deute, tant públics com privats.
• ETF d’actius monetaris: representen a actius de deute a curt termini i actius monetaris negociats en el mercat interbancari.
• ETF segons capitalització: pot ser petit, mitjà o gran segons la capitalització de les empreses que el conformen.
• ETF sectorial: repliquen índexs d’inversió d’un determinat sector.
• ETF segons l’estil de gestió: fons que inverteixen en empreses amb un cert valor o amb expectatives d’un bon creixement a mitjà o llarg termini. 
• ETF sobre divises: existeixen productes que repliquen l’evolució de les cotitzacions del mercat de Forex.

Els riscos que comporten els ETF

Tot i que hi ha ETF específics amb cobertura per minimitzar el risc de divisa, és important tenir en compte que els ETF no gaudeixen de cap garantia: com en el cas de qualsevol inversió en renda variable o fixa, hi ha un risc de pèrdua del capital invertit inicialment.

Invertir en ETF implica assumir un nivell de risc determinat que dependrà de la composició de l’ETF, de les fluctuacions del mercat i d’altres factors associats a la inversió en valors. Aquests actius d’inversió acostumen a ser fons de renda variable, excepte els que repliquen índexs de renda fixa, per la qual cosa, en general, presenten una volatilitat elevada. 

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The energy crisis and global economic uncertainty has boosted the purchase of precious metals such as gold and silver. The tax season starts on 6 April, so it is a good time to remember how precious metals are treated for tax purposes.

The central banks of several countries are increasing their gold reserves exponentially, but there has also been an increase in demand for this safe-haven asset from people who want to protect their savings in the face of an inflationary economic scenario that has no end in sight. Even so, more and more investors are including precious metals in their portfolios in order to diversify their returns.

However, before investing in gold or any other precious metal, it is important to consider what taxes are payable when buying or selling these highly valued commodities in times of crisis. Taxation can vary depending on whether you are buying physical gold or digital gold, the purity level of the metal, and other factors to consider when assessing the potential returns on your investments.

Investment gold bullion and gold coins

Firstly, we need to be clear that we are not talking about ordinary precious metals, such as those in jewellery or industrial sectors, but about precious metals of investment value. This distinction is important because according to the European Union decree 77/388/EEC, investment gold does not pay VAT either on purchase or sale.

The Tax Agency defines this special scheme for investment gold as “a compulsory scheme, without prejudice to the possibility of waiver for each transaction, applicable to transactions involving investment gold where such transactions are generally exempt from VAT, with partial limitation of the right to deduct”. In other words, the current VAT Law establishes certain requirements for it to be considered investment gold.

Therefore, investment gold will be exempt from paying VAT as long as it is physical gold, that is, gold bars or coins, such as the gold we offer through Preciosos 11Onze. In addition, this gold must meet minimum purity requirements: 99.5% in the case of bullion, and 80% in the case of coins. Bullion and coins that do not reach this purity will have to pay VAT at 21%, the same rate that applies to the purchase of other precious metals.

Income tax

Silver and other precious metals pay VAT like any other product, and each country applies its own tax rate, 21% in the case of Spain. Therefore, as investors, we have to bear in mind that these are different investments from gold, and often more speculative.

In terms of personal income tax (IRPF), any sale of gold, or any other precious metal by the taxpayer, has to be included in the tax return, and will be taxed according to the capital gains or losses generated by the operation, by the taxable savings base.

In this way, if a capital gain has been achieved with the operation, it will be necessary to reflect it taking into account the purchase price, including expenses, and the sale price, excluding expenses, with applicable rates depending on the amount.

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Throughout history, governments and their central banks have protected countries’ reserves by buying gold. Even so, in the face of economic uncertainty caused by the health crisis and runaway inflation, they have increased purchases in recent years.

Data published by the International Monetary Fund (IMF) confirms that central banks’ demand for gold recovered in 2021, with an 82% increase over 2020. Net purchases of gold by central banks amounted to 463 tonnes in 2021. This represents a significant pick-up in demand from this sector after a decade low of 255 tonnes in 2020, and the twelfth consecutive year of net purchases, during which central banks have bought a net total of 5,692 tonnes of gold.

Although central bank demand is often driven by policy rather than market demands, and therefore may be less predictable than other sources of gold demand, an upward trend is confirmed. A phenomenon that is nothing new if we are talking about emerging countries or countries not aligned with Western geopolitical interests, but to which a whole series of central bank buyers from developed markets were added in 2021.

For example, the Monetary Authority of Singapore (MAS) increased its gold holdings by just over 26 tonnes, a 20% increase, the first increase in at least 21 years. “The change in gold holdings is a result of MAS’s ongoing and continuous efforts to ensure that the Foreign Official Reserves portfolio remains highly diversified and resilient across economic and market conditions,” a MAS spokesman said.

Russia and China boost gold purchases

Economic sanctions imposed on Russia have prompted the Russian central bank to announce it will suspend gold purchases from banks to meet rising household demand for the precious metal and weather the storm in Russian markets. The abolition of value-added tax on these transactions, coupled with the rouble’s plunge to record lows, is spurring gold purchases by a population that wants to protect its savings.

However, both Russia and China have been increasing their gold reserves significantly for years. China almost certainly owns far more gold than anyone else, including the United States. We have seen many examples in recent decades of the latter country exploiting and abusing the dollar’s status as the world’s reserve currency to punish other countries contrary to its economic interests, thus accelerating the process of de-dollarisation and the creation of alternative gold-based monetary systems.

A process that is accelerating thanks to the conflict in Ukraine, and to the collaboration between Russia and China, not only to counteract the sanctions of the United States and the European Union, but also to ensure that the days of the hegemony of the Western monetary system are numbered in a multipolar world in which the Asian continent has more and more weight in the global economic balance.

In short, the wide range of purchases in 2021 has shown that there continues to be a significant demand for gold as a safe-haven asset, and the upside performance of this metal during periods of crisis has become the main reason for central banks to hold gold. A financial protection resource that is not exclusive to central banks, but is also available to everyone.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price, the refuge value par excellence: physical gold.

Having a deposit in a Spanish bank nowadays means not only getting a low return on our savings, given the low-interest rates, but also being covered by the Deposit Guarantee Fund (FGD). Currently, the FGD has about 4.2 billion euros at its disposal, against the 958.9 billion euros that customers have on deposit.

In 2021, according to data provided by the Bank of Spain, the accumulated level of deposits reached 958.9 billion euros at the end of 2021, a new all-time high. Even so, it should be noted that the level of financial resources accumulated by the Deposit Guarantee Fund, and available in the deposit guarantee systems, amounted to 4,191 million euros in 2020, which represents 0.5% of guaranteed deposits to this date.

Clearly, therefore, the DGF is not in a position to cope with bank failures. The monstrous disproportion between money deposited and guarantee is pushing many savers to look for safer options. Even more so when the benefit obtained by having money in a Spanish bank is negligible, as we analyse in this article. Theoretically, the Deposit Guarantee Fund would have to guarantee up to 100,000 euros per individual or legal entity, but it is mathematically impossible for them to do so because the money reserves are exactly half of what they should be. For this reason, given the context of inflation that bites into savings and seeing the low profitability and security offered by traditional banks, it is necessary to look for safer options for our money.

Guaranteed Funds guarantee 100% of capital

Guaranteed investment funds can be a good option if we want to diversify our savings and, at the same time, ensure a certain return. As the name suggests, they guarantee all or part of the capital invested, as well as a predetermined return for a certain period of time. Normally, these are funds that have insurance that guarantees the totality of the money regardless of the amount.

Therefore, the question to ask yourself is: is there any fund that generates high returns and guarantees 100% of the investment and returns? If you want to find out about superior options for making your money profitable, go to Guaranteed Funds. From 11Onze Recommends we propose the best options.

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Són 17 metalls, de la família dels lantànids, i estan sent cabdals en la fabricació de noves tecnologies. Se’ls coneix com a terres rares. I perquè són un bé difícil d’extraure de la natura, el seu valor no ha deixat de créixer. Per això, són productes susceptibles de convertir-se en la nova tendència d’inversió. Ens ho explica l’agent 11Onze Sergi Colell.

Segons l’Agència Internacional de l’Energia, es preveu que la demanda de terres rares augmenti un 7,3% el seu volum l’any 2040. “Les terres rares no són difícils de trobar a la natura, però sí que ho és la seva extracció. Quan es troba un jaciment d’un d’aquests metalls, el material només hi és present en el 2% del conglomerat. I, per tant, costa molts diners extraure’l de la roca”, il·lustra Colell.

L’agent explica que, si són tan importants aquests 17 metalls, és perquè s’estan fent servir per a la fabricació de noves tecnologies d’economia verda. “Per exemple, el neodimi es fa servir en la construcció d’imants per als cotxes elèctrics que estan sortint darrerament al mercat. També el tuli, que es fa servir en aerogeneradors i plaques fotovoltaiques. O l’europi, que és imprescindible per a la tecnologia led i la indústria armamentística”, relata Colell. 

La majoria d’aquests materials, concretament el 75%, es troben a la Xina, país que també controla la cadena de subministraments. Al darrere, com sempre, hi ha interessos geopolítics. Com ha acabat la Xina controlant aquests metalls tan necessaris per al desenvolupament del món tal com el coneixem? Acaba de veure el vídeo de sota i descobreix-ho de la mà de l’agent Sergi Colell!

Si vols descobrir la millor opció per protegir els teus estalvis, entra a Preciosos 11Onze. T’ajudarem a comprar al millor preu el valor refugi per excel·lència: l’or físic.

How can you preserve the value of your investments when everything seems to be falling apart? Gold is an indispensable ingredient in any diversified investment portfolio because of its long-term performance and liquidity.

Gold is the precious metal par excellence. Scarce and highly prized, it has been used for thousands of years to preserve wealth. And this has not changed in the 21st century, as it has appreciated in 16 of the last 20 years, according to Statista.

Three key characteristics make it an attractive asset for any investment portfolio: long-term profitability, as the data is positive if we analyse its appreciation over the last decades; its role in diversifying and reducing the overall risk of our investments; and its liquidity, as it can be easily bought and sold, even when conditions in other markets are difficult.

A shield against inflation

Gold generates relatively strong returns in all economic cycles. As the World Gold Council points out, over the past 50 years the price of gold has risen by almost 11% per annum on average. This is comparable to US equities and considerably better than US bonds.

Gold offers a good return in good times, when demand for gold in jewellery and technology increases. But its attractiveness grows especially in times of difficulty as it is seen as a safe-haven asset.

The World Gold Council points out that gold has appreciated by more than 20 % on average in periods with inflation above 5 %. According to data from this organisation, almost half (47 %) of the demand for gold in 2021 was for investment and more than 7 % went into the vaults of central banks.

The need to diversify

A golden rule, no pun intended, for any investor is not to put all your eggs in one basket. In other words, putting all your savings into a single asset class is very risky because it exposes you to the ups and downs of a single market. This is why it is recommended to diversify investments and include various types of assets in investment portfolios so that gains in some assets can offset unexpected losses in others.

Hence, gold’s great attractiveness as a complement to other assets, especially at times when equities and other riskier investments are under pressure. Portfolios that include gold are less likely to experience extreme ups and downs.

On the other hand, if we compare the evolution of the gold price with the US dollar and other currencies that have been used as safe havens, we find that in the 21st century the major currencies have depreciated by more than 90% against gold. And if we look further, we see that in the last 100 years the major currencies have lost 99% of their value compared to gold. 

No liquidity problems

The third advantage of gold is that it is a very liquid asset. The value of gold bullion is closely linked to the world market price for unrefined metals, which is updated 24 hours a day and is accessible to buyers and sellers at all times.

Investors can buy and sell gold whenever they wish, even during periods of extreme stress in the financial markets. This is obviously not the case for other assets as art or antiques, for example.

Given all these factors, it is not surprising that the World Gold Council’s analysis has concluded that adding 6-10% of gold to the average US investor’s portfolio will tangibly improve their performance, with good long-term returns.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.