Stock Buybacks and the Wall Street Sharktank: “A Whole Lotta Stealin’ Goin’ On”
By Mike Whitney
Global Research
January 25, 2016
Let’s say you lend your brother-in-law, Pauli, 5,000-bucks so he can get his fledgling construction business off-the-ground. Then, you find out a week later that ‘good-old Pauli’ has shot the wad playing the horses at Long-acres and buying cocktails for his loafer-friends at Matt’s Mad Dog tavern? Would you feel like you’d been ripped off?
Sure you would. But when some slick corporate fraudster pulls the same scam, no one even raises an eyebrow.
What am I talking about?
I’m talking about the way that corporate bosses are allowed to take the hard-earned money from Mom and Pop investors and divide it among their freeloading shareholder friends via stock buybacks. You see, buybacks have been driving the market higher for the better part of six years, and every year the amount of cash diverted into this swindle gets bigger and bigger. According to Research Affiliates:
“In 2013, S&P 500 companies….spent $521 billion on buybacks. In 2014 that amount rose to $634 billion and moved higher still to $696 billion when total repurchases by all publicly traded companies in the U.S. market are included.” (“Are Buybacks an Oasis or a Mirage?“, Research Affiliates)
And, here’s more from an older article at the Wall Street Journal:
“Last year, the corporations in the Russell 3000, a broad U.S. stock index, repurchased $567.6 billion worth of their own shares—a 21% increase over 2012, calculates Rob Leiphart, an analyst at Birinyi Associates, a research firm in Westport, Conn. That brings total buybacks since the beginning of 2005 to $4.21 trillion—or nearly one-fifth of the total value of all U.S. stocks today.” (“Will Stock Buybacks Bite Back?“, Wall Street Journal)
The Rest…HERE
