FYI: Share buybacks are as American as mom, apple pie and hot dogs on the Fourth of July.
You’d never guess that given the many politicians on both the left and the right who say share repurchases are a newfangled, evil spawn of deregulation. Buybacks, argue their critics, barely existed before the Securities and Exchange Commission changed a rule in 1982 and unleashed a multi-trillion-dollar torrent—enriching fat-cat investors, starving workers and stunting the long-term prospects of the companies buying back all those shares.
Regards,
Ted
https://www.wsj.com/articles/the-fireworks-over-share-buybacks-are-duds-11562338801?mod=searchresults&page=1&pos=1
Comments
https://en.m.wikipedia.org/wiki/Apple_pie
Hot dogs or frankfurters are of German origin: https://en.m.wikipedia.org/wiki/Hot_dog
And last I heard, motherhood was not a uniquely American phenomenon.
As for buybacks, I do think they are harmful when compared to company reinvestment, new R&D and expansion which creates new products and jobs. Moreover, they amplify a company’s leverage as equity shrinks during a buyback relative to debt on the balance sheet. But a larger problem is a fundamental disconnect that has occurred in recent decades between capitalism and the general well-being of labor, consumers, the environment and society in general. Buybacks which produce no larger societal benefits—no new jobs or products or economic growth but a sleight of hand to increase on paper profitability—are part of that disconnection problem. They only benefit a sliver of shareholders and just temporarily.
And if companies have so much excess cash and would otherwise waste it as Zweig claims if they didn’t buy back shares, why on earth did the government just give them a big fat tax cut to “spur economic growth?” That’s like just giving them more money to buy back stock. I’ve got a better idea—tax companies appropriately to pay for new infrastructure—roads, bridges—which they exploit anyway and social services for all the people who’ve lost their jobs because companies now flush with cash for buybacks outsourced people’s jobs to other countries or replaced them with technology. That will get rid of all the excess cash they have lying around and make sure they don’t “waste it.”