(cracks knuckles)

You keep asking these "simple" questions that kind of underpin the basic function of finance. I'ma try and make this simple without making it overly simplistic. Wish me luck.

Everyone is thinking short term with investing and handling money because "shareholders" aren't just long-term, personally interested people who wish to profit from being a part of something greater than themselves. When I say "Ford," you think this:

But when I say "Ford", mk (for example) also thinks this.

Now - the mutual fund or hedge fund or accredited investor or university endowment manager or dude with an eTrade account doesn't not think Steve McQueen. But he also sees EBITDA, GATT earnings, P&L, amortization, revenue, and a whole bunch of other shit. I mean, none of this makes sense to 99.9% of people but to lots of people, it makes dollars.

Those numbers are related to money. Money moves those numbers.

And the dumb thing is that those numbers impact the value of the company, and the value of the company impacts the company's financing, and the financing of the company impacts its ability to operate, and it isn't that much of a leap of faith to discover that the perception of a company affects the reality of the company and when the perception that matters is the perception of traders, you do stuff that moves those numbers, not stuff that moves the company.

There are others that can explain this better than me, but if Ford invests 10% of its spare cash in a new factory, it takes a loss. It doesn't have an asset yet, it has a hole in the ground. It can amortize that loss over several years (based on a number of complex calculations that are governed by the SEC and the IRS) but it's still a loss. If Ford instead invests 10% of its spare cash into its own shares, all of a sudden its earnings per share go up by (purchased share number)/(old share number) percent.

Nothing is created, nothing is destroyed but the numbers move and that increases the attractiveness to investors. Or, the lazy ones. But not the ones that are knee-deep in Ford who think that investing in a new factory is a much better idea.

Here's how those pitches usually go.

So it's not like it's a settled thing. But for large, lazy, algorithm-driven ETFs and mutual funds and the like, looking over a dozen and one statistics an hour, that aren't neck-deep in the lore of Ford, the stock buyback looks like a better bet.