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Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
  • foolish buybacks,
  • the rate cut, and
  • the game plan for this market.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.

Buybacks Tie the Hands of the Flush Companies

Originally published on Tuesday, Oct. 7, at 12:50 p.m. EDT

Wait a second, Exxon ( XOM) has bought back $218 billion in stock, more than the market cap of GE ( GE)?

I know that money's not totally wasted. The stock has almost tripled in the last ten years. That's much better than the S&P, which has done little or nothing. But oil's gone up huge, more than the stock!

Now, I wonder how it would have done if it has just paid a better dividend? Because that's just way too many shares bought vs. plowing it back into the business. Exxon could have bought pretty much every single independent oil and gas company in the business and increased reserves huge, and it would have provided tremendous growth, something the company sorely lacked.

We are in a moment where we really have to question the buybacks, because they are not creating any real value, and most are much more reckless than Exxon's. Many of these buybacks are arguably destroying value. We know that there is tremendous amount of money made from dividends, perhaps about half of the gains of owning stocks. But these buybacks are nothing but prop-ups, or attempts to juice short-term earnings.

Right now we are in a revaluation of everything has been done with the cash of the corporation. If the S&P 500 has done nothing in 10 years and all of this stock has been bought back, shouldn't we start thinking that acquisitions and diversifications and dividends might have been better?

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