Perhaps I wasn't clear.
"Everybody's doing it" doesn't make stock buybacks smart. Quite the opposite. There's a growing consensus that the current level of stock buybacks are bad for the economy and bad for long-term growth of the companies that are doing it.
Please consider reading the following from the HBR:
Profits Without Prosperity
In part:
Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.
The buyback wave has gotten so big, in fact, that even shareholders—the presumed beneficiaries of all this corporate largesse—are getting worried. “It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,” Laurence Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, wrote in an open letter to corporate America in March. “Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.”
Why are such massive resources being devoted to stock repurchases? Corporate executives give several reasons, which I will discuss later. But none of them has close to the explanatory power of this simple truth: Stock-based instruments make up the majority of their pay, and in the short term buybacks drive up stock prices.
Ultimately, consumers make up the vast majority of the market and when consumers, in the form of pay, are not participating in the current boom, another bust is not far away.
I miss the days when senior executives had more vision than figuring ways to inflate the value of their stock options.
