Okay, so I'm eager to get all y'alls opinion on the issue of stock buyback. I was reading this article by Morningstar that talks about the "buyback comeback", which states that U.S. firms have plans for $150 billion in stock repurchases this year -- way up from last year.
That may be a fraction of trillion $ balance sheet of non-financial companies, but allocating the money to buybacks means it won't go towards creating new biz, jobs, R&D, etc.
A rise in buybacks probably means many companies don't see a whole lot of growth opportunity on the horizon -- locally or in GDP forecasts -- and so without knowing the full impact of Obama's health care legislation, an armful of taxes, more being discussed with cap & trade, social security, etc., the risk-reward may not be favorable for hiring, expansion and so on.
And, sure, some of that "oh-no-no-growth-opportunities!" depends on whether or not individual companies are increasing or decreasing leverage, so is this a non-issue? Or, if companies don't start hiring, will that just scare the consumer and the boo-hoo market, sending earnings and stock into the tank?
I'd like to know. Buyback or hire?
In my personal opinion, I think corporations owe nothing to anyone except their shareholders. If they do charitable work in the community then good for them, but I do not feel it is their obligation. As far as hiring vs. buybacks a corporation must do what is best for their company and to return the greatest amount of value to their shareholders. If a CEO can increase earnings more by hiring rather than buying back stock then he should do that. If the opposite is true he should do that.
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