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by fauigerzigerk
2529 days ago
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>Share buybacks are just a more efficient way of returning profits back to investors than dividends True, but the effect on share prices is very different. If you compare the S&P 500 with an index (a price index, not a total return index) comprising companies that use dividends instead of buybacks, you get a distorted picture of relative economic success. >Most companies are demand limited which limits their investment opportunities. How do you reconcile lack of demand with the historically tight labor market? >If a companies best investment opportunity gives a return of a measly 2% a year when the market is doing 7%, than you should not do it and instead return that money to investors so they can divert their investments to companies with higher returns. I do agree with that in principle (provided you account for risk as well), but I'm starting to wonder if there is a self reinforcing element at play that's driving buybacks right now. Shareholders see stock markets rise. They demand buybacks based on your (fundamentally sound) logic. Management feels pressured to buy back stocks, which makes markets rise even more... |
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Look at employment to population ratio, labor share of income, birth rates.
Not historically tight.