A counter to the idea that stock buybacks are good for the economy.

https://wordpress.com/read/blogs/75738194/posts/45158

I had posted this under Mr. Roberts’ thread from WSJ and the opinions by a couple of investment managers.

This is copied from the Harvard Business Review.

12 thoughts on “A counter to the idea that stock buybacks are good for the economy.

  1. Excellent and accurate assessment. I hope it serves as a primer for some of the silly comments I read on the prior “buyback” thread.

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  2. RE: “A counter to the idea that stock buybacks are good for the economy.”

    To be precise, no one has argued that stock buybacks are good for the economy. The claim the writers at WSJ made was that stock buybacks are neither good nor bad, but they are surely better than using the force of government to prevent them would be. Particularly in the current crisis, where the aim is to sustain employment, and the methods proposed wouldn’t be affected by any buybacks companies choose, on their own, to make.

    HBR does its usual nice job presenting an argument, describing, in this case, what’s wrong with buybacks. Its most compelling observation, in my view, is that buybacks do not contribute in any way to productivity.

    But I would ask, What business is it of mine how a company, or an individual uses money? There are, after all, a number of legitimate ways to use buybacks, and the buyer will face the consequences in any case.

    One legitimate use that HBR mentions is redistributing “boughtback” stocks to shareholders as an alternative to raising dividends. This can be preferable, because raising dividends today creates the risk of having to cut them in the future, one of the worst public relations signals a company can send to its investors.

    Another is using buybacks to fund management compensation as an alternative to creating permanent and expensive salary increases.

    So while HBR makes a fair case that buybacks can be bad for the economy, it doesn’t make a strong case that buybacks are always bad for the economy. That’s your typical ivy league arrogance talking.

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    1. “What business is it of mine how a company, or an individual uses money?”

      In this instance we are talking about PUBLIC money. When the government is providing DIRECTLY the money in question it is OUR business. Period.

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    2. Is this or is this not YOUR headline from YOUR post:

      WSJ: Worst Coronavirus Idea: A Ban on Share Buybacks

      Did you say this or not: “no one has argued that stock buybacks are good for the economy.”

      Seems like you contradicted yourself. Not surprising, but actually par for the course.

      Liked by 1 person

          1. RE: “Put a lot of words through his keyboard and deny he said what he said.”

            The only words I need: The headline is WSJ’s, not mine.

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        1. And there it is. Only 2 sentences, one for you and one for me.

          @Roberts
          By using the WSJ for YOUR post, you take ownership of the post – IMO. That is why I never use the headline provided.

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  3. “ivy league arrogance talking.“

    You say that like it’s a bad thing?

    And I must have missed where buybacks were described as “always” bad?

    Do you argue every point just hear the sound of your Keyboard?

    Liked by 1 person

    1. RE: “And I must have missed where buybacks were described as ‘always’ bad?”

      See the last paragraph, which ends by recommending stock buybacks should be banned.

      RE: “Do you argue every point just hear the sound of your Keyboard?”

      Do you ever have something even slightly substantive to say, or are you just too shallow?

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      1. The author only commented on banning “open-market repurchases” which is a Type of stock buyback (actually a program for doing so).

        I understand you are so “deep” you find all others “shallow”, but 2 minute google searches don’t make you expert in everything.

        I’ll stick with “sound of your keyboard” theory ….

        Liked by 1 person

        1. RE: “I’ll stick with ‘sound of your keyboard’ theory ….”

          And I’ll stick with mine that you have nothing useful to say.

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