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He makes a pretty compelling case for this - that corporate hurdle rates are too high and disconnected from the cost of capital. The stock market rewards firms
by JackFr 5y ago
He makes a pretty compelling case for this - that corporate hurdle rates are too high and disconnected from the cost of capital. The stock market rewards firms who return profits to shareholders rather than reinvesting them in (not necessarily) risky enterprises.
The mystery that remains is where does the money go? A share buyback just shifts the decision of reinvesting profits from the firm to the investor, so when Apple buys back shares where does that capital go?
(Also cheers to the author who refreshingly avoids sanctimonious moralizing about share buy backs.)
- jamesknelson 5y ago> The mystery that remains is where does the money go? A share buyback just shifts the decision of reinvesting profits from the firm to the investor, so when Apple buys back shares where does that capital go? This was my main question from the article too. After thinking it through for a bit though, I think the answer may be related to the large and increasing US trade deficit. In short, the money goes to the actually growing economies of East Asia and other parts of the world. If not in exports, then in ownership of future cashflows from American businesses. American workers send their money overseas in exchange for cheap goods, which foreign powers then use to purchase control of those workers' future labor via ownership of American companies. There's no such thing as a free lunch.
- nerdponx 5y agoIs it as simple as foreign companies purchasing control over American labor? Surely they have other things to do with that money.
- fxtentacle 5y agoBuying parts of London through offshore shell companies?
- maccolgan 5y agoMaybe investing in the Vancouver real estate market.
- nerdponx 5y agoHow hard is it to actually follow that money, from a data perspective? I know public companies have to publish some finances, but I assume there are ways of keeping the "secret sauce" out of the public eye.