S&P 500 Buybacks Now Outpace All R&D Spending in the US (thesoundingline.com)

Article summary

The S&P 500 companies spent $806 billion on stock buybacks in 2018, surpassing the total US research and development (R&D) spending of $608 billion. This trend has been ongoing for the past five years, with buybacks totaling $2.978 trillion and R&D investment totaling $2.736 trillion from 2014 to 2018. The article suggests that this prioritization of buybacks over R&D investment may have negative consequences for the economy and financial markets. The high levels of corporate debt and focus on short-term gains are also highlighted as concerns.

Main themes

• stock buybacks
• R&D investment
• corporate debt
• short-termism
• financial markets
• innovation and growth

What commenters say

• Some argue that buybacks are a viable alternative to dividends when a company is not overvalued, allowing shareholders to realize gains without creating new money.
• Others contend that buybacks are drowning out real investment and prioritizing short-term gains over long-term growth and innovation.
• The use of debt to finance buybacks is seen as a problematic trend, potentially leading to a historic reckoning for financial markets if borrowing conditions tighten.
• A few commenters suggest that the S&P 500 may no longer be a good place for R&D investment, and that money is flowing out of these companies to be reinvested in smaller, more innovative firms.
• There is a debate about whether buybacks should be taxed similarly to dividends, with some arguing that it would be a way to address the issue of companies prioritizing buybacks over investment.
• Some commenters believe that the focus on buybacks is a symptom of a broader issue, such as regulatory capture or the decline of patience and attention span in the business world.
• Others see the trend as a form of wealth transfer, where companies are extracting value from their businesses to benefit shareholders, rather than investing in growth and innovation.