Buyback Mountain (of Nonsense)

The exterior of the New York Stock Exchange. (Photo by Michael M. Santiago/Getty Images)

Dear Capitolisters,

Last week we hit on an issue—Buy American—with wide popular support but little substantive merit. In keeping with that theme, today we’ll examine stock buybacks, which were also a prominent part of President Biden’s recent State of the Union Address and also suffer from the same pervasive lack of understanding (if not moreso) in our current political moment. Indeed, if you spend more than a few minutes thumbing through political Twitter, you’re almost certain to see someone complaining about stock buybacks, tying them to the “current thing” (whatever that may be), and/or promising to tax, regulate, or ban them.

There’s only one small problem: These folks seem to have almost no idea what they’re talking about. Or, as Dartmouth finance professor Ken French once put it (h/t Allison Schrager): 

“Buybacks are divisive. They divide people who do understand finance from those who don’t.”

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