Pretzel logic from Goldman Sachs – the market is too expensive to justify continued company buybacks (after a trillion bucks spent between 2013 and 2014 on repurchases). Instead, companies should buy the overvalued shares of other companies.
“We recognize activist investors often advocate for firms to return excess cash to shareholders via buybacks. Tactically, repurchases may lift share prices in the near term, but in our view it is a questionable use of cash at the current time when the P/E multiple of the market is so high. In our view, acquisitions – particularly in the form of stock deals – represent a more compelling strategic use of cash than buybacks given the current stretched valuation of US equities.”
After all, value destruction is much more palatable if it happens in service to a higher ideal than executive comp. If you’re going to blow up a few billion in shareholders’ equity, better to do so while taking a chance on something big.