US companies spent more than $500 billion in the past year on stock buybacks,

[Ichingcarpenter]

The extent of the parasitism at the centre of the US economy and financial system is indicated by recent figures on the level of corporate buybacks.
Rather than using profits to finance increased investment in equipment, as well as research and development, corporations are buying back their own shares in order to boost the price. No additional value is created but financial traders and speculators, including the corporate executives of the firms concerned, can reap large gains through share market trades.


An article by Financial Times columnist Edward Luce published earlier this week reported that, according to Barclays, US companies spent more than $500 billion in the past year on stock buybacks, “a multiple of what most are spending on research and development and other capital investments.” In the first six months of this year, buybacks totalled $338.3 billion, the biggest half-year amount since 2007.


Buyback operations have become one of the chief reasons for the escalation in the remuneration of corporate chiefs and other executives. In what amounts to a wholesale looting operation, a company buys up shares, reducing the number in the market and thereby increasing their price. The CEOs and management upper echelons, who took the decision on the buyback, then reward themselves with hefty salary packages on the basis that they have boosted shareholder value. Luce noted: “If you need an explanation for why the top 0.1 percent is doing so well, start with equity-based compensation.”

Research carried out by William Lazonick of the University of Massachusetts Lowell reveals that seven of the top 10 largest corporations carrying out share repurchases laid out more on buybacks and dividends than their entire net income between 2003 and 2012.

More:

http://www.wsws.org/en/articles/2014/09/26/shar-s26.html

[GitRDun]

1. The buyback phenomena should be viewed as corporate sloth.

These high flying management types are the same folks who ridicule the poor for not being able to find a job.

All the buybacks do is allow the company to increase earnings per share (the stock price follows) without increasing bottom line income, e.g., you can make the same $$ income every year with a shrinking number of shares outstanding so your earnings per share goes up. The stock price usually follows.

So these slovenly execs buyback shares rather than create the next great product to sell, find the next great efficiency project for raw materials usage, etc.

One of the great communication failings of the Democratic Party is they fail to communicate the similarity of the 1%'s actual behavior to the alleged behavior of the poor they continually eviscerate.

The minimum wage is another example of corporate welfare. Companies like Walmart are allowed to pay a subliving wage. The government subsidizes their corporate policy with SNAP, Medicaid, etc.

The rich are the real moochers. If only people could see that, maybe we could lose their enablers in the Republican party.

[Ichingcarpenter]

3. This is why the stock market now is

just fool's game for the normal american..And in the meantime the big boys play with their pension funds as a toy and then the normal american wonders why they get laid off and have no pension when they retire after creating the goods for the company.

[JeffHead]

2. Sam Seder had Lazonick on about a month ago talking about this

Good interview. Ends about 59:00

?t=5m42s

[Igel]

4. That's one thing it does.

Stock is essentially a loan at a fluctuating interest rate.

Repaying that reduces the amount of cash on hand, meaning that it reduces profits.

It also makes it easier in the future for IPOs to raise money when needed.

What else it does depends on the grade of stock being recalled.

Sadly, stock prices have also become unpegged from dividends and corporate valuation as they've moved to the realm of increasing speculation. Then again, much of America is strictly short-term by default preference. Take the entire pitch for a higher gas tax and the infrastructure that would build: The discussion that it might allow for increased efficiency or that not engaging in infrastructure repair is a recipe for long-term job loss is lost in the mantra that it would create more jobs. Most of those jobs would be short-term The short-term status of the job creation must be overlooked for this dogfight, but when there's the same sort of dogfight over the XL pipeline, the discussion must center on long-term job creation and not the short-term jobs.