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It is drowning out real investment, this conclusion is correct because the companies themselves are saying so in their statements. Some companies are taking on

It is drowning out real investment, this conclusion is correct because the companies themselves are saying so in their statements. Some companies are taking on huge debt to keep up in the buyback races despite having bad products that are losing market share. Oracle is probably the biggest example of this buyback insanity via debt, but there are many other companies doing the same thing. https://www.cnbc.com/2019/12/05/oracle-shows-buybacks-can-go-too-far.html https://www.cnbc.com/2019/12/05/oracle-shows-buybacks-can-go... Other companies have committed in their financial statements to "returning 100% of free cash flow to investors via buybacks and dividends", so they are actually committing to not invest in the company at all regardless of how much money they make. Chevron and Texas Instruments are two big examples of this, there are dozens of other companies with similar buyback first strategies.

whatshisface 7y ago
That's very interesting because that is what you would do if you wanted to liquidate a company and shut it down (on a leisurely timescale). Exactly how much of the US economy is being wound down? Maybe this is a great opportunity for new businesses with an appetite for R&D risk, maybe this is the US laying down so that China will replace it faster.
- stopads 7y ago
  Absolutely. What we are witnessing is people extracting as much money as possible from healthy and unhealthy companies just because they can. This has been going on in the private equity/hedge fund world for decades, buybacks are the mechanism that is now being used on the public markets in similar, unethical ways. Oracle is betting on not having a future, they are extracting as much money as possible from the vehicle before it goes off a cliff.
  - whatshisface 7y ago
    Based on what I know about Oracle's software quality to customer inertia ratio, they're probably betting right. I wonder if the future is as legitimately bleak for all of the other buyback companies.
  - gzu 7y ago
    Take a look at balance sheets. Price to Book ratio has been growing on major company names. Book value is the equity remaining after assets - liabilities. Assets are dwindling/remaining constant and liabilities are growing due to debt funded buybacks. There will be no equity left many big names in the public markets due to the debt load. It’s all a big wealth transfer game. The entire world is along for the ride hooked on index funds owning enormous stakes in these large companies and will be left with the bag in any downturn. No downturn can ever happen now and everyone knows it, especially the Fed. The current system can never correct otherwise it would implode. CEOs are exploiting this fact to full potential and will be gone/dead before any consequences arise.

whatshisface 7y ago

That's very interesting because that is what you would do if you wanted to liquidate a company and shut it down (on a leisurely timescale). Exactly how much of the US economy is being wound down? Maybe this is a great opportunity for new businesses with an appetite for R&D risk, maybe this is the US laying down so that China will replace it faster.

stopads 7y ago
Absolutely. What we are witnessing is people extracting as much money as possible from healthy and unhealthy companies just because they can. This has been going on in the private equity/hedge fund world for decades, buybacks are the mechanism that is now being used on the public markets in similar, unethical ways. Oracle is betting on not having a future, they are extracting as much money as possible from the vehicle before it goes off a cliff.
- whatshisface 7y ago
  Based on what I know about Oracle's software quality to customer inertia ratio, they're probably betting right. I wonder if the future is as legitimately bleak for all of the other buyback companies.
- gzu 7y ago
  Take a look at balance sheets. Price to Book ratio has been growing on major company names. Book value is the equity remaining after assets - liabilities. Assets are dwindling/remaining constant and liabilities are growing due to debt funded buybacks. There will be no equity left many big names in the public markets due to the debt load. It’s all a big wealth transfer game. The entire world is along for the ride hooked on index funds owning enormous stakes in these large companies and will be left with the bag in any downturn. No downturn can ever happen now and everyone knows it, especially the Fed. The current system can never correct otherwise it would implode. CEOs are exploiting this fact to full potential and will be gone/dead before any consequences arise.