The Republicans' new tax law is making it good to be a corporate investor as usual. Because, while some companies are paying out one-time bonuses to employees, or raising salaries, or building new factories, the main thing they're doing is plowing the money back into their companies by buying up their own shares. You know who that's helping.
Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price. […]
Almost 100 American corporations have trumpeted such plans in the past month. American companies have announced more than $178 billion in planned buybacks—the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.
Such purchases reduce a company's total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.
Cisco said this month that in response to the tax package, it would bring back to the United States $67 billion of overseas cash, using $25 billion to finance additional share repurchases. Alphabet, the parent company of Google, authorized up to $8.6 billion in stock purchases. PepsiCo announced a fresh $15 billion in planned buybacks. Chip gear maker Applied Materials disclosed plans for a $6 billion program to buy shares. Late last month, home improvement retailer Lowe’s unveiled plans for $5 billion in purchases.
There has been investment in more tangible things like factories and equipment in the past quarter—an increase of about 6.8 percent, which is the fastest growth rate since 2014. But it was dwarfed by record level stock buybacks, that $178 billion. It's a record that Howard Silverblatt, a senior index analyst with S.&P. Dow Jones Indices says he's "expecting" it will be broken this year. "And if I'm disappointed," he says "there's a lot of people with me."
The "lot of people" are the "richest 10 percent of American households, who own 84 percent of all stocks. The top 1 percent of households own about 40 percent of all stocks." Because that's how it works in America.