“Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.” “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. The buyback wave has gotten so big, in fact, that even shareholders-the presumed beneficiaries of all this corporate largesse-are getting worried. Harvard Business Review noted this in 2014. This helps CEOs keep their stock options in the good and benefits people who are already in the top 10% of the more-wealth-for-us, but no-soup-for-you class. Instead, we are seeing stock buy backs propping up share prices ( $1 trillion of them in 2023). If the FED raises rates, those businesses aren’t going to borrow new capital to support operations. If the Fed stops raising rates, or even backtracks on rates, the inflation spiral will destroy incentives to work since you keep getting less and less for your money.
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