What Wall Street Looked Like Before Buybacks

Summary

Charley Ellis recounts the origins of his groundbreaking 1970s book on share repurchases and the rise of buybacks as a dominant corporate finance tool. He and host Meb Faber discuss the global expansion of buybacks and Ellis's view that buybacks are superior to dividends for long-term investors. The conversation highlights the evolution from under-leveraged balance sheets to today's trillion-dollar buyback culture.

• Charley Ellis wrote one of the first books on share repurchases nearly 50 years ago.
• Post-WWII, US companies were over-debted, then became under-leveraged by the 1960s, creating the rationale for buybacks.
• Goldman Sachs used the book as a legitimizer to pitch stock buyback services to corporations.
• Buybacks have grown to over $1 trillion annually and are now a standard part of corporate finance.
• Buybacks are spreading globally, notably in the UK, Japan, Korea, and China.
• Ellis personally prefers buybacks over dividends for long-term investors due to accretion of value and tax efficiency.
• He views most corporate management capital allocation as sensible and disciplined.