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Stock Buybacks

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3/11/2015 5:42:36 PM
Posted: 3 years ago
At 3/11/2015 11:36:16 AM, s-anthony wrote:
Nick Hanauer in this article demonstrates artificially inflating stock has a detrimental impact on our economy:

From the article:

", trillions of dollars of windfall profits are being sucked out of the real economy and into a paper asset bubble..."

Ridiculous. That money is being collected by shareholders selling their stock back to the company. It is not being sucked out of the economy. There is little difference technically and in practice between a stock buyback and raising dividends. Both are signs of healthy companies.

Neither businesses nor shareholders know what to do with that profit. That's the real problem. The business environment is tepid, and no one knows what kind of opportunity is available that would justify capital spending. Case in point, when you look at traditional companies like GM, they aren't investing in operations. Why would they? The auto market is saturated. Just give the cash back to others that have a better use for it. That's exactly what both stock buybacks and raising dividends do.

IMHO a big reason for this lack of business opportunity might lie with the fact that much of the 1% didn't get their money through innovation or business acumen. Rather, their wealth was inherited, and most of these trust-fund-babies end up drawing, or golfing, or skiing, instead of doing what their parents and grandparents did, i.e. capital investment. That's what's potentially locking up capital.

Another issue is that what's considered innovative today is social media and other information technologies, and this technology is not particularly capital intensive. It's far less about how much money you have to invest and far more about whether or not your idea is profitable. Most high-tech companies have very, very high P/B and very low debt/equity ratios for this reason...there is simply no need for investment capital other than to weather a storm.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?