Good for Wall Street, Bad for Main Street

Good for Wall Street, Bad for Main Street

“American companies are repurchasing their shares at a record pace,” says The Wall Street Journal — “boosting their balance sheets and fueling the U.S. stock rally.”

So far in 2025, U.S. firms have announced $983.6 billion in stock buybacks — the strongest start to a year in data going back to 1982.

Leading the way are Magnificent 7 names like Apple and Google parent Alphabet — along with too-big-to-fail banks like JPMorgan Chase and Bank of America.

Recall that when companies buy back their shares, that has the effect of driving up earnings per share — which often translates to a higher share price.

Now let’s step back from the headline news and talk about what a company can do when it’s sitting on a boatload of cash.

Basically, the company has five choices…

• Raise the dividend: That is, pay a higher percentage of the profits to shareholders every quarter. Or institute a dividend that didn’t exist before

• Share buybacks: See above. Buybacks have the effect of shrinking the overall share count; thus, every shareholder winds up owning a slightly bigger chunk of the company

• Mergers and acquisitions: Self-explanatory

• Capital expenditures, or capex: Build new factories, buy new equipment

• Research and development: Also self-explanatory.

The last two of those choices are all about growing the business for the future and bringing new wealth into existence.

The first two — and to a lesser extent, the middle one — do not create new wealth.

They’re what a company does when management looks around for ways to invest in the future of their businesses — and doesn’t see anything worthwhile.

That’s good for Wall Street, not so good for Main Street.

Not that the Journal’s article puts it that bluntly. You have to read between the lines.

“The confusion around trade has stalled many businesses’ investment plans,” it says — “making buybacks a more appealing use of incoming cash.”

And then there’s the case of Apple. Recall that Apple promised Donald Trump six months ago to invest $500 billion in the United States over the next four years — a promise that Apple upped to $600 billion a few days ago.

But so far, those promises haven’t translated into actual groundbreakings for new factories, hirings of new engineering personnel, etc.

The more time that passes by, the more all of it seems like empty promises to placate the president.

On the other hand, the Journal tells us Apple has definitely set aside up to $100 billion for share buybacks.

About Those Inflation Numbers…

A “cooler than expected” inflation number is enough to propel the stock market to all-time highs today.

The Bureau of Labor Statistics regaled us this morning with the July consumer price index. The official inflation rate is running 2.7% year-over-year — a hair less than the 2.8% expected by the average Wall Street economist.

But “cooler than expected” belies the fact that inflation has been stuck in a range for over a year now — 2.4% on the low side, 3% on the high side.

As we like to warn you periodically, once inflation sails beyond 5% — as it did in 2022 — it typically takes a decade to get back to “normal” 2% inflation.

The current number would be worse were it not for food prices holding steady this summer — and a 2.2% month-over-month drop in gasoline prices.

➢ For the record: Trump has nominated Heritage Foundation economist E.J. Antoni as the new director of the Bureau of Labor Statistics. If approved by the Senate, he’d replace Erika McEntarfer, who Trump fired earlier this month after a weak job number for July. On the few occasions I’ve encountered Antoni’s posts on social media, he’s generally struck me as a straight shooter.

Anyway, with the inflation number running “cooler than expected,” Wall Street is rallying on the assumption the Federal Reserve will definitely cut short-term interest rates next month.

In the futures markets, traders are pricing in a 94% probability of a cut at the next Fed meeting… and a 50-50 shot at two more cuts before the end of the year.

With that, the S&P 500 has powered 0.9% higher on the day, easily vaulting into record territory at 6,431. The Dow and the Nasdaq are both up a little over 1%.

Gold is treading water after yesterday’s beatdown, the bid now $3,345. For the record, Trump said yesterday there would be no tariffs on gold imports after all — three days after gold tariffs were announced by U.S. Customs and Border Protection. Life comes at you fast…

Elsewhere, crude is down 1% to $63.28. Bitcoin’s latest run for a record has come up short; the flagship crypto is back below $120,000.

After we hit “send” on yesterday’s edition, Trump announced another 90-day pause on his tariff regime targeting China — buying still more time for trade negotiations. For the time being, U.S. imports from China will remain subject to a 30% levy while U.S. exports to China will be taxed by Beijing at 10%.

➢ This new executive order effectively fulfills the forecast that three of Paradigm’s top editors made last week during our All-In Summit — a reset to U.S.-China economic relations that will unleash phenomenal new profit opportunities.

If you’re a Paradigm Mastermind Group subscriber, you won’t want to miss a follow-up briefing tomorrow with Jim Rickards, James Altucher and Enrique Abeyta. For details, check your inbox for an email that should have arrived shortly after noon Eastern Time.

Sunny Vibe In Small-Business America

The mood on Main Street is the best since February — judging by the Small Business Optimism index put out each month by the National Federation of Independent Business.

The July number clocks in at 100.3 — the first over-100 reading in five months and up meaningfully from 95.8 two months earlier.

“While uncertainty is still high,” says NFIB chief economist Bill Dunkelberg, “the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20% Small Business Deduction permanent and the final shape of trade policy.”

On the part of the survey asking small-business owners to identify their single-most important problem, “quality of labor” is back in first place; 21% of respondents say good help is hard to find.

After passage of the “Big Beautiful Bill,” taxes have retreated to 17%, with inflation and poor sales tied for third place at 11%.

The respectable headline number notwithstanding, it’s problematic that the “poor sales” figure keeps climbing — and is now the highest since February 2021.

Comic Relief

In light of today’s inflation numbers…

The following meme might be a commentary on the rise of “tech bros”... but it might also be a reminder that your dollars don’t go nearly as far these days as they used to…

Mailbag: Trump’s Silicon Valley Shakedown

After yesterday’s edition pulling apart the unprecedented arrangement between the Trump administration and chipmakers Nvidia and AMD, a reader writes…

“At first, my reaction was the same; that this is a shakedown by the U.S. government.

“Then I stepped back and had some questions: How much of their tech was paid for by the taxpayers in the first place, through research and development, etc.? Do these companies actually need to pay us back for that research?”

Dave responds: The CHIPS and Science Act of 2022 — pushed through by the Biden administration with bipartisan support — was a game-changer in that regard.

The law allocated $39 billion in subsidies for domestic semiconductor manufacturing and another $13 billion for semiconductor research and workforce training.

The biggest subsidy — nearly $8 billion — went to Intel, a fact that made Trump comfortable last week with demanding the resignation of Intel CEO Lip-Bu Tan. (Trump changed his tune yesterday after the two met at the White House: “His success and rise is an amazing story.”)

That said, as far as we can tell Nvidia and AMD are not among the companies that have collected these subsidies.

We haven’t had occasion to bring it up until now — but for a real in-your-face shakedown by the Trump administration, look no further than CBS.

I don’t really want to go to bat for a legacy media firm here; longtime readers know I got into financial publishing because I became disillusioned with traditional media. And for the sake of full disclosure, I spent about a year on CBS’ payroll during a two-decade career in broadcast news.

With those disclaimers out of the way…

As you might be aware, 60 Minutes ran an interview with Kamala Harris last fall — and Trump sued CBS.

Nico Perrino of the nonpartisan Foundation for Individual Rights and Expression sets the stage…

Bill Whitaker is interviewing her. Bill Whitaker asked her a question about Israel, and she gave a two–three-sentence answer. In its broadcast, 60 Minutes uses the first part of that answer and leaves out the second part. In a social [media] promotion, it uses the second part of the answer and leaves out the first part. But both parts of the answer essentially say the same thing, but it's Kamala Harris. She speaks often in word salads and 60 Minutes edited for length and clarity, as all news programs do.

But Trump’s people saw an opening to sue CBS in the state of Texas, alleging that the edits amounted to consumer fraud.

Here’s the thing: Speech is protected under the First Amendment “so long as you're not defaming anyone — and no one's alleging defamation here,” Perrino said in a recent interview with Glenn Greenwald.

“This is just another way to go after ‘misinformation’. [Our organization] opposed it when the Biden administration did it. Now we're opposing it when the Trump administration does it and calls it something else, whether it's consumer protection, consumer fraud or news distortion. These are all words for the same thing, and they're all protected by the First Amendment.”

Seen in that context, Trump’s suit would have been laughed out of court.

So why didn’t CBS parent Paramount Global fight it hammer and tong? Why did Paramount agree to settle last month for $16 million?

Because Paramount wanted to merge with a firm called Skydance Media. And because CBS owns a couple dozen local TV stations licensed by the Federal Communications Commission, Trump’s FCC had the authority to approve or reject the deal.

It’s this simple: If Paramount didn’t settle, the Trump administration would have nixed the merger.

Days after the suit was settled, the merger won FCC approval The deal was consummated last week.

Whatever your opinion of CBS, we’ve entered real banana-republic territory.

We give Perrino the final word today: “I'm not here to defend the media; all I'm here to do is to defend the First Amendment.

“If we are going to oppose using the tools of the federal government, or the most powerful person in the United States of America and the world, to prevent them from making an exception to the First Amendment for misinformation, then you need to stand against this, just like we needed to stand against it when the Biden administration alleged that social media companies were tweaking their algorithms to favor one thing or the other.

“I mean, this is something that you need to stand against, regardless of who's in power.”

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets