What is exactly wrong with share buybacks? Clearly they have more capital than they can deploy effectively right now, so they plan for the future by putting some powder in their gun. Share buybacks serve three main purposes:
1) increase the share price (as you mentioned)
2) signal to investors that the company is bullish on it's future (they wouldn't buyback shares if they thought the shares would be lower in the future)
3) Give the company the option to sell the shares in the future in case the extra capital can be used for a prudent use.
It's really mystifying why people are so against share buybacks while no one talks about dividends. They share a lot of similarity, but buybacks provide more options and greater tax efficiency so they should be preferred over dividends in most cases.
> Do you think there is any downside to just transferring wealth to the (already rich) shareholders over and over and over again? Seems to be their top priority nowadays.
That's not what's really going on (see above). Also, I would hazard to guess that most people who have exposure to the stock market have direct market exposure to Apple. Moreover, about half of households have direct (non-pension) exposure to the stock market. So I don't think your claim about it only benefiting the "already rich" shareholders hold much water. Hell, I would bet that 90% of HN users have direct exposure to equity markets.
AOC presents a good argument against Buy Backs from Big Pharma which incentives CEO's who's compensation is tied to stock price, which as a result she attributes as the cause of rising costs of health insurance:
Although Big Pharma doesn't operate in a natural economy where products are priced at optimal demand / supply for max Revenue. Instead their cost is hidden from the end-user, absorbed by insurance companies and amortized across all plan holders with rising cost of health insurance.
In the long-term Buy Backs shouldn't increase a companies value as it's just trading one Asset for another, i.e. it's cash reserves for shares in their own stock, they'd choose to do this if they've maxed out their R&D budget (very healthy at $14B) and if they believe their share price is undervalued, which at a 17 P/E is significantly lower than all other FANG stocks.
They could try and follow in AMZN's footsteps and try to expand into all areas outside of their core competency, but it's not their style which is to do a few things and do them well. IMO it's due to protecting and not wanting to dilute the high appeal of their Brand and Products.
The result of which they've ended up with an excessive amount of capital and no effective place to invest it, although IMO they should've invested a lot more in content like Netflix a lot sooner than they have with Apple TV+.
> Are we taking AOC seriously on anything related to economics?
AOC has at least studied economics at Boston University and has made it a goal to go after corruption and corporate greed. Just because the source isn't coming from Wall St or Corporate America doesn't make it invalid.
It's not clear how much of the research behind her reasoning and arguments come from her or her team, either way if you have a counter argument that contradicts her points make them, you've added nothing of value with your prejudices in trying to disparage the source.
Parent was asking what's wrong with Buy Backs, to which she's presented a negative side-effect of them that you wouldn't hear from Wall St who stands to benefit from them.
> Another presidential candidate said he would “clear the swamp”. How did that work out?
She's never been a presidential candidate, but what do the words of a pathological liar have to do with anything? That no-one can be trusted and everyone will always do the opposite of what they say they'll do?
If you've followed the House meetings AOC has participated in you would've noticed that she's been committed to exposing corruption and corporate greed that she's brought to light. She's also taken a public pledge to refuse any corporate PAC money that she's highlighted (in another House Meeting) was a common cause of corruption.
So I'll take her word over a serial liar who's been favorable towards companies, lobbyists and foreign nationals that frequents his hotels and earned him more than $80M in revenues.
Regardless this thread has become unnecessarily political. Her point was about the negative consequences of Buy Backs.
Okay. Let’s make it a little less political. When good intentions meet reality where each house of representative member spends more time fundraising than working (https://www.termlimits.com/congress-fundraising-priority/) and since more states are Republican than Democrat - meaning that the Senate doesn’t represent the people in proportion to the population (every state has two Senators regardless of population), what are the chances that a Democratic President will get anything done?
Obama’s administration had almost no personal legal issues, was much more popular than the current administration and still couldn’t get much done after the first two years.
> Okay. Let’s make it a little less political... What are the chances that a Democratic President will get anything done?
This has instead segued into predicting the hypothetical effectiveness of a unknown future Democratic President...
I'm Australian so it's not going to affect me, but from the outside it looks like the U.S. has, with the assistance of a foreign adversary, unknowingly elected a corrupt, cheating, racist, inept pathological lying demagogue as its head of government. If he's elected again after showing his true colors, the rest of the world's going to think the majority of the US population is complicit and in-support of his views. Personally I'd say give a Democratic President a chance at restoring decorum to US politics.
In terms of effectiveness, IMO U.S. major problems with cost of Health Insurance, Gun Laws and frequent Massacres wont be resolved within my lifetime. They might have a chance with Health Insurance as Obama was able to implement ACA and it looks like its one of Sanders and Warren's major campaign promises to implement Medicare for all, but they should be able to make progress on their other campaign promise of reducing Wealth Inequality. Warren is especially motivated on reining in Wall Street [1].
They might have a chance with Health Insurance as Obama was able to implement ACA
Just barely, but it was still a half measure and while better than before, they couldn’t go all in even during the first two years because to keep the Democrats on board who were just as beholden to the insurance lobby as Republicans they had to work with private insurance companies. It is still slowly being eroded by both the President and red states that are trying to get it overturned by the judiciary.
They might have a chance with Health Insurance as Obama was able to implement ACA and it looks like its one of Sanders and Warren's major campaign promises to implement Medicare for all,
And no Republican in the Senate or House will go for it and many Democrats are afraid to stand up to the insurance lobby. Even if the Democrats keep control of the house and gain control of the senate, it’s unlikely they will have the 60 vote filibuster proof majority to pass anything. Even if they do, Republican states will fight it tooth and nails in the courts.
Inequality. Warren is especially motivated on reining in Wall Street [1].
She can be “motivated” all she wants, but both parties are in the pocket of Wall Street. She probably won’t even get Democratic support for it.
1) increase the share price (as you mentioned) 2) signal to investors that the company is bullish on it's future (they wouldn't buyback shares if they thought the shares would be lower in the future) 3) Give the company the option to sell the shares in the future in case the extra capital can be used for a prudent use.
It's really mystifying why people are so against share buybacks while no one talks about dividends. They share a lot of similarity, but buybacks provide more options and greater tax efficiency so they should be preferred over dividends in most cases.
> Do you think there is any downside to just transferring wealth to the (already rich) shareholders over and over and over again? Seems to be their top priority nowadays.
That's not what's really going on (see above). Also, I would hazard to guess that most people who have exposure to the stock market have direct market exposure to Apple. Moreover, about half of households have direct (non-pension) exposure to the stock market. So I don't think your claim about it only benefiting the "already rich" shareholders hold much water. Hell, I would bet that 90% of HN users have direct exposure to equity markets.
Also, I bet you do as well.