1. Stock buybacks are not "zero sum" — is there some other way that "zero sum" is a relevant term to apply to the conversation here?
Stock buybacks are similar to QE at the Fed level. Because someone sells each stock purchased by the corporate entity there is a fulfilled contract at the end. While sellers may be advised to wait for the effect of the buyback to raise the price, they are evidently happy with the transaction or they wouldn't sell.
When companies buy back their own stock, it has the effect of creating upward pressure on the stock price.
A buyback is the opposite of a stock split. Neither creates net value for shareholders beyond perception. The company exchanges its liquid holdings for more concentrated ownership. Slicing a pie into fewer pieces means bigger pieces, not a bigger pie.
If benchmarking the "large number" $1T+ that will be spent on stock buybacks in 2022 against the "not as large" 2022 Defense spending of $768B has the effect of getting people's attention and outraging them, then I'll consider that a mission well accomplished.
Apples and oranges. Every dollar spent in deficit of taxation by our federal government creates a monetary asset for someone in the private sector.
To make an analogy in macro, a stock buyback is similar to our government purchasing or retiring a Treasury bond at zero interest. It simply swaps one form of money for another, reversing what transpired when the bond was purchased. Since it demands its own unit of account in that purchase it is assumed that there was sufficient spending/money creation to fund it.
Stocks are considerably more volitile than bonds, so the "perceived" value may be impacted by a number of factors, but the "real" value of a company is not affected by fluctuations in share price. Bear markets serve to drag perceptions back into line with that real value.
Anyone who wants to try justifying that should plan on bringing their A-game.....but I have yet to hear from anyone any reasons that would even remotely justify what is going on with stock buybacks at this point.
I did not intend to justify, or excuse, the practice. Shareholders will, however, be the ultimate jurists in that. It is an obvious move to enrich management, but it depends upon the desire of those shareholders to shed themselves of their ownership. I've never viewed that as a positive indicator. The simple fact that it works is evidence of how concentrated company ownership, and control, has become.
