Investor Jeremy Grantham warns stock buybacks slowing growth | Reuters

Low interest rates and a play-it-safe mentality among executives have fueled a stock buyback boom that is slowing economic growth, storied contrarian investor Jeremy Grantham said on Wednesday.

Grantham, well-known for his dour views about the U.S. Federal Reserve’s economic growth efforts and his concerns about the environment, said corporate leaders find it too easy to spend money buying back their stock instead of investing in uncertain capital projects like new factories.

“For a senior management person to use the cash flow of the corporation to buy stock back is much less dangerous than building a new plant,” Grantham said, speaking to an audience of thousands at the Morningstar Investment Conference.

That reduced capital spending is a drag on economic growth, even as labor markets remain slack, the co-founder and chief investment strategist for Boston-based GMO LLC, said.

via Investor Jeremy Grantham warns stock buybacks slowing growth | Reuters.

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