Taking on debt to finance stock buybacks is bad management -- no revenue-generating investments are made that will fund debt repayment

We're in the longest 

economic expansion 

since World War II.

Soaring corporate 

debt is a problem.

Especially new debt 

spent on open-market 

stock repurchases 

— aka “stock buybacks” — 

since the financial crisis 

a decade ago. 

In 2018, 

S&P 500 Index 

companies did 

$806 billion 

in buybacks, 

about $200 billion 

more than the 

previous record 

set in 2007. 

$370 billion 

of repurchases 

in the first half 

of 2019 is close to 

the 2018 rate.

The percentage 

of buybacks 

funded by 

corporate 

bonds

reached 

as high as 30% 

in both 2016 

and 2017.

Buybacks are not 

corporate investments 

in productive capabilities, 

that may eventually yield 

product revenues and

corporate profits. 

The 465 companies 

in the S&P 500 Index 

in January 2019 

that were publicly 

listed between 2009 

and 2018 spent, 

over that decade, 

$4.3 trillion 

on buybacks, 

equal to 52% 

of net income, 

and another 

$3.3 trillion 

on dividends, 

an additional 

39% of net income. 

In 2018, buybacks 

by S&P 500 companies 

reached an astounding 

68% of net income, with 

dividends absorbing 

another 41%.

Why have 

U.S. companies 

done these 

massive buybacks?

Most executive 

compensation 

comes from 

stock options

and 

stock awards --

so stock 

repurchases 

can boost

their companies’ 

stock prices !

Buybacks have dominated 

distributions to shareholders 

since 1997, especially when 

the stock market is booming.

Strangely, 

companies 

have repurchased 

stock at high prices

in a competition 

to boost their 

share prices 

even more. 

In general, the percentage 

of buybacks that have been 

funded by borrowed money 

has been far higher in 

stock-market booms, 

than in busts.

Corporate tax breaks 

contained in the Tax Cuts 

and Jobs Act of 2017 

provided the corporate 

cash for the vastly 

increased level 

of buybacks in 2018. 

In 2018, compared 

with 2017, corporate 

tax revenues 

declined to $205 billion 

from $297 billion, 

a decline of $92 billion.

So U.S.-based corporations 

paying less income taxes,

had "an extra $92 billion"

more for buybacks in 2018,

without taking on any debt.