Book available from Amazon from strategist Ed Yardeni.
Summary from Amazon: “Several Progressive politicians have pounced on corporate share buybacks lately. They see buybacks as a major source of income and wealth inequality, subpar capital spending, and lackluster productivity. In their opinion, buybacks have contributed greatly to the stagnation of the standards of living of most Americans in recent years. So they want to limit buybacks or even ban them.”
Summary:
The book critiques the narrative surrounding corporate share buybacks, addressing both progressive politicians and stock-market bears.
Progressive politicians argue that buybacks exacerbate income inequality, reduce capital spending, and hinder productivity, contributing to stagnating living standards. Some even advocate for limiting or banning buybacks. Meanwhile, stock-market bears claim buybacks artificially inflate stock prices, financed by debt, which increases corporate leverage and makes companies vulnerable to recessions.
However, the study by Edward Yardeni and Joseph Abbott counters these views. It suggests that the primary reason for buybacks in S&P 500 companies is to offset dilution from stock-based employee compensation (e.g., stock options and grants), not to inflate stock prices using debt. The study argues that buybacks are more a response to rising stock prices—driven by earnings growth—than a cause of stock price inflation.
The authors also challenge the progressive view that buybacks have worsened income inequality, showing no direct link between buybacks and the stagnation of Americans’ living standards.
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