I asked "Why can't the company buy back stock to increase value ?". He was shocked at the question and explained in detail why doing that is bad. It was something about doing that does not create real value.
So now we are living in that environment with no care about the impact of buy backs.
I'd love to know!
> It was something about doing that does not create real value.
No, it does not create value. Neither destroys it. Stock buybacks are net neutral as long as the shares are priced fairly.
That guy really planted the seeds of all the issues we are having now.
As opposed to paying dividends, which does create value? Buybacks and dividends are both ways of returning money to investors.
Either you misunderstood your professor or your professor was very misinformed.
Stock buybacks and stock dividends are two ways for companies to return value to shareholders. They’re not actually as different as non-Econ people think. They both have the same effect of returning value to shareholders.
> So now we are living in that environment with no care about the impact of buy backs.
I’m old enough to remember people hand-wringing about stocks that did not have dividends or buybacks. The complaint was that they weren’t sharing profits with shareholders which was somehow evil.
Ironic that people are now angry that companies are sharing profits with shareholders.
I think the bottom line is that people like to get outraged over anything companies do.