Monday, February 09, 2015

Lefty "Not Even Wrong" On Share Buybacks

I was quite prescient way back in the early days of the Lightworking Era in predicting that share buybacks would skyrocket.  And they have, and I've been keeping you, dear readers, apprised (somewhat).

As I would have expected, now comes along a lefty with a day-late-dollar-short lament.  Reading this screed against "corporate buybacks" I am reminded of Wolfgang Pauli's criticism of shoddy work being "not even wrong."

This guy seems to think that corporate profits 1) must, 2) aren't and 3) formerly automatically  "flowed through the broader economy in the form of higher wages or increased investments in plants and equipment."

This is so wrong, I don't know where to begin.  Perhaps, with a fundamental definition - a profit generated by a corporation is the newly created property of the owners of that corporation, called shareholders.  Every time a profit is generated - remember, it's newly created - shareholders have a decision to make as to what to do with that new capital.  Do they reinvest it to make future profits?  Do they spend it on consumption?  Do they do one or several of numerous other things with it?  Profits never flow automatically anywhere, they flow according to their owners preference at any specific time given prevailing conditions.  That they once were reinvested in new plants or higher wages is not reason to believe that they always will or should.  This is the fundamental flaw here, the typical leftist view that private sector profits are somehow all of society's property.

A further mistake here - one that doesn't make the important point I noted above - is this guy even gets the technical, economic aspects wrong.  When corporations buy back shares, they are not burying money in the ground, they are actually paying real dollars to shareholders for their shares.  This money is still there to do all the beneficent things that lefties feel it must do, it has merely been transferred from corporate coffers to individual coffers.  So, even though "corporations" (which is really just its owners) have taken a pass on reinvesting this money productively, the individual former (or now smaller) shareholders are now faced with the fresh choices that come with fresh money in the bank.  It seems that they too have taken a powder on recycling that money into the economy.

So the lament here is really that NOBODY seems confident enough in the investment landscape or the direction of the nation's economy to make investments - not just "corporations".  If that's the case you have to ask yourself why that is, but lefties generally don't do that, and in this case aren't asking because they are afraid of the answer.


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