Why companies buying their own stocks just makes things worse, I mean how does that accelerate the crash??
DOW Crashing
Chase Jones
Leo Smith
they literally can't afford not to buy back their own stocks even though it makes the situation worse
Angel Gonzalez
No, explain further.
Justin Cook
It's a way to make stock prices go up without making capital investments.
Also, people on the board of directors, who makes the decision to do this stock buybacks, usually own stock in the company. They're gaming the system to enrich themselves.
It's a bit of the two.
Evan Nelson
The stock market goes up because the price of stocks keep increasing. The price of stocks keep increasing because the Fed keeps doling out cash. The Fed keeps doling out cash because the stock market keeps going up. The stock market goes up because the price of stocks keep increasing…
Jackson Baker
Because diminishing returns; profits cannot continue indefinitely. It's a massive speculative bubble.
David Rivera
think of it like this: normally he stock of a company would go up because either there was an increase in the overall profitability of the company (and so investing in it is more sought after, increasing the value of the stocks) or there is the expectation of this happening in the near future (and this is how companies like Tesla, who never made a single dollar of profits, are making billions in capital investment).
Both of these require an investment in the company itself, be it to enlarge the marketshare or the production or R&D. What is happening however is that the rate of profit is so low now that there is no sure way to turn such an investment into a profitability increase. To put it simply there is little room left to grow.
This means of course that the only way capital can increase its reproduction is through financialization. Hence companies using their capital to inflate their stock value rather than investing in themselves, skipping the risky step.
This of course means that all of this capital is going to unfruitful processes. Do remember that only work, human work, can produce value. Capital cannot reproduce itself. The financial market may be less susceptible to the decreasing rate of profit that is destroying real economic growth, but it is ultimately a sterile environment by itself.
Imagine the situation as a greenhouse. Buying back your stocks is making some fruits growing on the plants bigger, which consequently brings the rest of the fruits to grow bigger as well.
The bigger fruits represent a bigger profit in the form of specutalive gains on stocks. Of course you could also use that money to buy another greenhouse or hire another farmer, but that's barely if at all profitable, so you keep pumping your fruits bigger and bigger, helped by the federal government that gives you "growth serum" pretty much for free (and these are the near zero interest rates).
Of course the issue is evident. You can only grow so much before your plants are no longer able to sustain your ever growing fruits, your farmers able to tend to the ever increasing amount of work, your greehouse able to house the ever growing forest. Not to mention the fact that you can keep this up only because you can grow your fruits almost for free, what happens if that is taken away from you?
Hudson Jones
Asia close. The Loch Ness monster visited Japan today.
James Rogers
So EU is closed today.
Tyler Turner
No it's not, it's live right now. Seems like it's doing well enough today.