Our Weird New Math-Econ-Finance World
We live in a weird math-econ-finance world with so many years of low interest rates. Here is my take on dividend and share buy-backs.
In the article’s chart, cash returned, 2004-8 was from solid growth in sales-output-profits.
But cash returned, 2010-16 was due (how much?) to arbitraging the difference between the borrowing rate and the return on your own stock! For example Apple’s debt went from zero to 52 billion, 2012-2015, as it was buying back shares. And over at the Federal Reserve the banks are being paid not to lend their reserves!
We call it finance, but it’s just moving the money around as we idle our engines awaiting recovery of the real economy. We need corporate money coming in from product sales-output-profits to fuel the return of productively earned cash to shareholders.