Companies Use Borrowed Billions to Buy Back Stock, Not to Invest
Capital has been cheap for some time now, since the economic crash in 2008. It has only been since ~2016 that the Federal Funds Rate has lifted above half a percent [0]. And although the rates have recently been increased (Rate recently fell 1&#x2F;4 of a percent but is still just above 2%), we are still seeing very low rates. Because capital has been relatively easy to acquire for this time I wonder if this is a more a consequence of the obvious but high cost investments already drying up.<p>Executives have always wanted to drive up metrics as it allows them to move forward in their work, so I would find it doubtful that they wouldn&#x27;t want to build out their business further if they are able to (More sales is a sure way to make more profits in most cases). If the capital is there, and we know it is, then these business must not see enough demand to expand.<p>Many would say that buy-backs are a result of a company having excess capital and no sure investments [1]. With the us inflation rate hovering between 1.5 and 3 percent [2], a loan at ~2.25 percent is close to free money.<p>I personally worry for the economy because of buy-backs. Not because I believe there is anything wrong with the practice, but because I think it indicates that business is general not going well enough to invest back into it.<p>-0, <a href="https:&#x2F;&#x2F;tradingeconomics.com&#x2F;united-states&#x2F;interest-rate" rel="nofollow">https:&#x2F;&#x2F;tradingeconomics.com&#x2F;united-states&#x2F;interest-rate</a><p>-1, <a href="https:&#x2F;&#x2F;www.investopedia.com&#x2F;ask&#x2F;answers&#x2F;040815&#x2F;what-situations-does-it-benefit-company-buy-back-outstanding-shares.asp" rel="nofollow">https:&#x2F;&#x2F;www.investopedia.com&#x2F;ask&#x2F;answers&#x2F;040815&#x2F;what-situati...</a><p>-2, <a href="https:&#x2F;&#x2F;www.usinflationcalculator.com&#x2F;inflation&#x2F;current-inflation-rates&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.usinflationcalculator.com&#x2F;inflation&#x2F;current-infl...</a>