Economics, Videos

Paul Tudor Jones: We Have A Mania Going On In Buybacks

CNBC’s Bob Pisani talks with Paul Tudor Jones, founder and CIO of Tudor Investment, about socially-responsible investing and the U.S. market.

mania going on in buybacks

Paul Tudor Jones: We Have A Mania Going On In Buybacks

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Transcript

Well you have to realize when Milton Friedman said that he was always a hero of mine that was in 1970 that top income tax rate had been 90 percent had just come to 70. Wealth inequality was one fifth of what it is today. So we were living. In that same socialist state at that point in time. And so he was the kind of counterbalance to that. Fast forward to where we are today and we now have the highest wealth inequality in the history of this country. We've got literally half the country that can't raise a thousand dollars for a family emergency. We've. Got. 35 percent of the wealth used to be owned by the 90 percent of the pot lowers bottom 9 percent the population nineteen eighty five today the bottom 9 percent the population owns 23 percent of the wealth. So they've lost a third. And that twelve percent's gone to the top 1 percent. So we've got we've got a system that I think we all would agree is on the wrong track.

You're going to share a slide with the people here that I think is fascinating you just capital firm you're very involved with you've helped Foundation Foundation excuse me you helped found. Right. It has very different principles and maximizing shareholder return. You went to the American public surveyed them and they had very different values about what a corporation should be doing than maximizing shareholder return. They said 25 percent of what a corporation should be doing is making sure workers get fair pay and benefits. Twenty percent say customer treatment of privacy are essential products should be socially beneficial. Fifteen percent say look at this. Good for the environment 30 percent. I want to put up the next one because only respondents felt that only about 9 percent of the real purpose of a company's 8 percent excuse me should be to maximize investor returns. That's the old Milton Friedman Friedman said a hundred percent. Your point is the American public is already socially responsible. But how do you get them to change the attitude how do you go to a boardroom and investors and tell them you know adopt this model don't adopt Friedman.

Well so here are the facts the facts are. Since 2000 a 90 percent of corporate profits have gone to shareholders. It's the exact photo negative of what the American public thinks a just company should do. So you've got this big disconnect between what the American public thinks and what corporate boardrooms the c suite are actually doing. The interesting thing is there is a way that we can bridge that gap where everyone wins. So what. Just capital found excuse me. Just capital does is we rank the Russell 1000 companies from one to a thousand every year according to those metrics not determined by us or an academic panel but by the American public we've polled over 100000 people over the past four years. So this is what the American public now. We rank those companies from one to a thousand. We created an ETF which is why I'm here. The tags. In the 33 industries that tracked the Russell 1000. It takes the top half the top performing of those 33 sectors. And we have an ETF that has half the names the Russell the best performing on those metrics according to the American public. They're important. That index on so many metrics. Outperforms the rest of the companies that informs stock stock price is better it outperforms the just index outperforms the Russell 1000 on average those companies create jobs at 27 percent faster Ray has a 3 percent higher return on equity recycles waste 9 times the average I can go on and on and that symbol is j u s t that ETF you're talking about.

You talk a lot about wealth inequality is there a connection here. Do you think if corporations address these issues and started adopting the kind of values you're espousing here that that would help address the wealth inequality problem. Is there a connection there?

There's clearly there's a connection. I think we've got a mania going on in buybacks and a mania going on in terms of shareholder primacy. It wasn't always this way. Right. If we just go back to when I was a youngster corporate pay CEOs made 20 times that. Of the average land worker. So things have been different and can be different again. And if they're not I'm really nervous about what the ultimate social consequences are on this control Senator Schumer and Sanders introduced a bill to limit buybacks recently did you.

Do you support that.

Well I've I've been talking with Senator Schumer on justice for over a year. I don't know if I want to see a legislative a legislative outcome for this. I'd love to see this happen organically. If I was an. I'm not if I was a director on a on a public company or a private company for profit companies two questions I would ask before I even thought about. Shareholder buybacks dividends or anything. The first question would be how many of my employees are not making a living wage. That's the first question that I would ask. The second one if I were director and I ask is. What are we doing. To help local communities. What percentage charitable contributions going to the most needy in the place where we have customers. What are we doing so in nineteen eighty five. Charitable contributions by companies were 2 percent of revenues today it's 1 percent.