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>First, a lot of companies don't pay out dividends or buy back stock these days As I understand it, a good chunk of of the reason stock prices were originally
by loufe 6y ago
>First, a lot of companies don't pay out dividends or buy back stock these days
As I understand it, a good chunk of of the reason stock prices were originally so high before the crash 2 months ago was that stock bybacks were at an all time high (though of course this doesn't mean every company is doing them). Part of the reason companies are so vulnerable is that a large chunk profits were being used to undertake them - not being kept for reinvestment, debt repayment, or rainy-day funds.
- esoterica 6y agoWhy bother with a rainy-day fund? If your company has a long-term viable business you can borrow money to survive a temporary crisis. If your company's business model is permanently ruined then you are better off calling it quits and shutting the company down than setting your cash reserves on fire trying to rescue a dead company. During a credit crisis a viable business might have trouble raising money, but with the Fed indicating that they are willing to throw money out of the proverbial helicopters, maybe people don't consider that a real concern any more.
- loufe 6y agoThat's a fair point. In theory, or at least in my imagination of running a large business, I still think there is value in keeping a rainy-day fund - but you're certainly right that it doesn't seem like any large companies, aside from those flush with cash like Apple, practice