Five days ago I wrote that stock buybacks would be big over the next 25 years.
I did not expect an example to pop up so quickly, but it did. Microsoft has announced a $40 billion dollar buyback — and the company will be increasing its dividend.
I don’t think this will be an isolated incident.
Will there be more buybacks next week? I have no idea. What I am expecting is that there will be a long, slow march over the next 25 years of lower PE ratios, higher dividends, and slow but steady stock buybacks.
This is primarily a demographically driven phenomenon. As the baby boomers retire, many of them will need to start selling off their investments. This will further fuel the increased concentration of wealth as wealthy individuals (and corporations) buy up all these financial assets that the baby boomers will be forced to sell. It won’t be the end of the world. It won’t be apocalyptic. It will actually be a return to a more historically normal state of of the world, where investments have higher yields and stocks are primarily owned by pension funds, insurance companies and wealthy individuals.