Businesses don't expand just because capital is cheap, they need some kind of demand to fill. That's the fundamental problem with "trickle down" economics, it assumes the economy is supply constrained when it is more commonly demand constrained. And worse, the polices that it produces tend to squeeze the lower and middle classes, further reducing demand.
I was of the understanding that most orthodox schools of economics fundamentally view demand as infinite. Supply-siders hope to meet demand by increasing supply, lowering prices, and making more goods available to those with fewer resources. Policy-wise, this is achieved through production subsidies, fewer regulations, and tax cuts.
Their opponents (demand-siders?) hope to increase access to goods by increasing the purchasing power of consumers. Policies like social safety nets, public education, and tax increases on the investor class promote this goal.
And share buybacks are just a tax-efficient version of dividends (since they don't trigger a taxable event for the investors that don't want to convert shares to cash yet).
It's easy to say 'you should be investing that capital into projects.'
But I think people don't realize how much money is actually generated by some of these companies.
I know AAPL is the strongest possible case for my argument, but bear with me.
Their operating cash flow net of CAPEX is ~$65B as of their 2018 year ending in September. I.e., after paying for all of the investments they want to make, they still have $65B in straight up cash left over.
I mean -- what are you supposed to do with all of that?
Therefore the issue isn't so much Apple not being able to find better opportunities than shareholders, but that it can't find better opportunities than Apple -- making those actually good investments would look bad for Apple because of how absurdly profitable it is. That's not a good reason to return capital, if you think about it carefully.
See Apple for an example of doing it right.
See Chipotle for an example of doing it wrong.
There is nothing artificial about it
CFO's are reacting rationally to the credit situation that they do not control.
Consider that labour markets are tight, and 'productive investments' are not easy to make. They are generally very risky.
IMO it’s a sign companies are doing the intelligent thing and are assuming investors are better investors than throwing money at random shit.
"instead of actually investing in things like capital expenditures, R&D, or higher salaries"
Specifically the last one. The pay gap is larger than ever. The efficiency gains over the last 20 years or more are systematically being funneled up the food chain to executives and shareholders. Even in tech there's a ton of wage stagnation compared to the real cost of living over this period.
I think this is the crux of the assertion if I'm not mistaken. It's broken that the share of increased prosperity isn't anywhere near equally distributed. I wouldn't call that throwing money at random shit.
Because a robot that does flips can also flip burgers, pick inventory, sneak up on people (i.e. military) and ultimately that stuff will be worth a lot.
One of their lesser goofy investments.
Google dumped the robots for strategic reasons, moreover, it's going to be a while before payoff.
They are making 'real' investments in late stage companies with actual business models, or things that have obvious potential upsides.
Softbank is basically where companies go for D and E rounds instead of going public. So there is some risk, but way less risk than left-field, early stage investments.
Their 'real estate' investment is in WeWork, which probably will make them a lot of money as long as interest rates don't flinch higher, and as long as there is no real-estate crash.
Sprint, ARM, Yahoo, Uber, Slack - these are not 'crazy' investments, especially depending on price. Yahoo might actually have some 'decent fundamentals' on some level, and be worth something at some price. They have a gigantic audience, and some small changes might make them be profitable at some level, and they could very well be worth something, at some price.
It's a cross between classic private equity and late stage venture capital, all of their investments make sense in that context.