Big Business Starting to Spend Hoarded Cash…to Buy Back Own Stock, Not Create Jobs

[The Straight Story]

Big Business Starting to Spend Hoarded Cash…to Buy Back Own Stock, Not Create Jobs

Interested more in pleasing Wall Street than helping Main Street, some of the biggest American corporations are spending hundreds of billions of dollars to buy back their own stocks, rather than invest in new products or services that would mean hiring more people.

After sitting atop of more than $1 trillion in cash, much of it borrowed at near-zero interest rates from the Federal Reserve, big business is spending money on share buybacks, in order to satisfy investors. To date in 2010, companies have committed $273 billion towards purchasing their own stocks.

Last month, Microsoft borrowed $4.75 billion to buy back shares, while continuing to sit on nearly $37 billion in cash held in overseas operations. Hewlett-Packard plans to spend $10 billion buying its shares, and Pepsico intends to acquire $15 billion of its common stock over the next three years.

http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Big_Business_Starting_to_Spend_Hoarded_Cash__to_Buy_Back_Own_Stock_Not_Create_Jobs_101011

[DJ13]

1. Their large shareholders should make then stop those buybacks

Dollar for dollar stock buybacks are the least effective use of corporate money there is.

[dkf]

2. And hiring people for no discernible purpose is a better use?

Corporations aren't going to make big plans until they get 3 things cleared up...what are the costs of HCR, what are the implications of financial reform, and what are the tax rates going to be. Until then, we shouldn't expect much.

[DJ13]

3. No, Im saying the money is better accumulating than being wasted

Then if things improve they'll have the money to hire.

Spending it on buybacks only helps institutional investors and executives who get bonuses in stock.

[dkf]

4. True.

[Celebration]

5. I don't think that is it

They just don't have enough sales of product to need more workers. And that is because of all the cash strapped consumers. It's just a classic deflationary spiral, or would be, but for a central bank that is determined to inflate by making commodities cost a lot more. So, now we will have even less discretionary income. :(

[Celebration]

6. delete

[Rochester]

7. The government is being derelict in its duty to FORCE the businesses to hire American workers

Because if they aren't FORCED to, they will do almost anything in the world other than hire American workers. As we're seeing.

[dkf]

8. Why don't we force YOU to hire someone?

Even if you need no help at all. Does any government force private businesses or individuals to hire others?

[Rochester]

11. Because I'm not a business.

[dkf]

12. Businesses aka Corporations are persons too.

Just like you.

[Rochester]

13. Fuck that supreme court decision.

[Greyhound]

9. And if by some miracle we got an administration that started enforcing the Sherman Act those

stock prices would collapse and other companies could actually compete with these legislated monopolies.
:kick: & R

[melm00se]

10. borrowing @ near zero

rates? if things are stable (for the borrower) it makes financial sense.

it's like free money.

why spend your own when you can use someone else's?

they are betting that their stock will go up (and then can be converted to $$$ to be used for expansion and new products when the time comes); if the stock goes down, they have enough cash to pay off the loan.

minimal downside, strong upside