They should be engaging in value creating opportunities, and with it demonstrating superior managerial skills. If anything, management of these firms are hurting shareholders by not redeploying that capital into assets that would in turn produce even greater free cash flows.

The share prices of these firms would have outperformed independent of its buyback policy had the cash remained on the balance sheet, just as it has with Apple. To give management of a firm which, by its nature, generates free cash flows, kudos because their stock has outperformed, is poor logic, as the outperformance was not a function of the buyback policy but its products and employees. What has it done for their shareholders, given the plaudits given by security analysts at the time of their announcements, both of which led to initial rallies in its stock. (MSFT) has had the largest buybacks ever at $80 billion combined. Why hasn't Steve Jobs forced the company into a share-repurchase program? On the other hand, (AAPL) has been generating billions of dollars in excess cash for years. We intend to live and die with the assets currently on the books.' By buying back shares, managers are in effect saying, 'We can't do that.

That is why executives are paid - to create ever increasing value for shareholders. Perhaps the second biggest flaw of the buyback-advocates argument is it fails to take into account how the superior manager could have made use of that cash. Later, MGIC was forced to increase their share count by 55% just to regain 73% of what they spent back! If they never bought back a share, its current share count would be 24% less.

When mortgage defaults hit, along with the value of their investment assets, so did their financial flexibility, a direct result of its $2.5 billion in share repurchases. (MTG), the insurer of home mortgages, and previously a AAA-rated credit, was giddy about buying back their stock. There are currently 112 active firms (excludes the failed firms) that both bought back and sold at least $250 million of their own shares over the past five years.

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