stonebluff

Why You Should Short Companies Doing Share Buybacks

There is an elemental flaw in the concept of buybacks. They reward exshareholders, not shareholders. Buybacks may make sense for closed end funds selling at a discount, and for other companies whose assets for whatever reason are discounted in the share price.

Money is the capital of banks, brokers and insurance companies. When they buyback shares above tangible book they actually reduce their ability to do business. Otherwise they tend to be paying $2 for $1. I hope that the management of financial institutions that squandered their capital on buybacks and now are hustling capital on outrageous terms have learned their lesson. For banks and bank holding companies, at least, the regulators should enforce restraints on buybacks that may impair the business.

Some S & P guys recently did a study(so I read) that purported to demonstrate that buybacks rarely helped the price of a company's stock. I wish someone would do a study demonstrating the effect of buybacks on financial institutions during the current mess.

Buybacks are so generally treated as beneficial in the financial press that is seems almost heretical to call them into question. Sajaz' article is extremely timely because it makes one at least question the alleged benefits of buybacks.

Does anyone compile a list of companies like LUK and BRK that as a matter of principle do not do buybacks? I'd like to see it.

will remember that.Nobody except the management of the banks and insurance companies now trying to hustle new capital because they squandered their old capital on buybacks seems to believe that.