We have a choice: buybacks or bailouts. Buybacks are just a tax efficient method of transferring money from companies to their shareholders. That’s the reason why companies exist, to allow their shareholders to profit. The problem with buybacks is that they are easily gamed by
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company CEOs who issue stock options and have compliant boards. Shareholders, don’t understand this, do and hate it, or do and are okay with it because it increases their prices of their holdings. To do a buyback, the company needs to sacrifice cash or take on debt.
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Both increase the risk of bankruptcy by making the company more susceptible to crises where a strong balance sheet and lots of cash allow the company to survive and thrive. This is brings us to the bailout. If we consistently and regularly bailout the companies which engage in
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Replying to @Molson_Hart
https://johnhcochrane.blogspot.com/2020/03/airline-bailouts-and-capital-regulation.html … makes this point as well
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Cool, but don’t know him. Independently reached this conclusion.
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