Since there have been a lot of postings on empirical economics, I thought it was appropriate to post this snippet from today's WallStreet Journal:

"Thomas Schoewe, Wal-Mart's chief financial officer, told investors at its annual meeting here that the company would repurchase up to $15 billion in shares through an undefined period. It will fund the buybacks with new borrowings with savings from the fewer store openings."

Essentially, Wal-Mart-- and a slew of other companies, are using leverage (borrowing money) to buy back stock.

Reportedly:

• this pushes down the company's P/E and encourages people to buy what looks like a great deal;

• the insiders have an opportunity to sell and "become rich"

• the stock becomes worthless since more earnings are used to pay debt;

• a visit to bankruptcy court? a place where the stockholders' wealth is taken away (similar to eminent domain) and the stock is later "recapitolized" and makes a different set of "early investors" rich;

Anyway, Enron accounting seems to be alive, so, to the empiricists out there: "measure garbage, and you'll predict garbage!"

The more I think about this duplicity, the more I wonder: "will the next generation become the next sucker? or will it refuse-- knowing that stocks are really an IOU and not worth a dime?"

These are interesting times!