Be Careful What You Hope For - Buy-Back Mountain

Tyler Durden's picture

We noted yesterday the apparent perfect (ill)-market-timing of increases in corporate buybacks and nowhere is this more evident than across Europe. The following chart might just make all those activist shareholder mom-and-pops, demanding CEOs 'use' their cash hordes, think twice... it appears the CEOs really don't have better crystal balls than the rest of us...



Chart: Goldman Sachs

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francis_sawyer's picture

Buy at the top CEO's... That's what you spent 4 years at Wharton learning how to do... [with 'minors' in beer pong & parachute jumping]...

BaBaBouy's picture

Ahhh... Nothin Like 2 Billionaires Having A Fiats Money Fight ...

Boris Alatovkrap's picture

Not as fun as 3 drunk Russians, but, okay.

AssFire's picture

Boris, I wait to hear your story of the meteorite? It was good no?

Boris Alatovkrap's picture

Meteorite good is for economy. Break many windows.

Silver Bug's picture

These guys are going to get hosed in the coming months.

dracos_ghost's picture

Except they probably are exercising warrants/options and THE COMPANIES are buying it for them at the top. CEO's are making out -- make no mistake. We're within 30 days of a top. They'll have to sell to the sheeple soon to bank profits.

TruthInSunshine's picture

The corporate shareholders are the ones getting stuck with the tab for the buybacks, while upper-level management that includes CEOs, CFOs, COOs, etc. of the stock-compensated kind can be dumping their vested shares, and en masse, at the same time (just ask Google's former CEO or RIM's current one).

WillyGroper's picture

Looked at the insider distribution of T yesterday. All that moolah coming out of the pension fund that was just funded with 9B in stock. Maybe I'm cynical, but I see an agenda there.  

Cognitive Dissonance's picture

The CEO's will do anything to remain in power. This includes burning down the ship if that allows them to remain at the wheel until the end or until they can exit with their 'just' rewards.

<There are always exceptions to this rule, but they are few and far between these days.>

Cdad's picture

Insiders dumping shares into the corporate buybacks is nothing short of looting the inherent value of the common stock.  This behavior should be considered criminal in nature.

As for Buyback Mountain, the "market" is perfectly efficient at pulling forward any and all perceived value...or said another way, a frontrunner's delight.

The moral rot and financial theft in this nation extends well beyond DC and Wall Street, and into corporate boardrooms all across the nation.


TruthInSunshine's picture

Wall Street's "equity markets" are one of the most clever institutions ever devised to obtain a license to literally steal money in the history of mankind, especially with the "bailout backstop" so many of their well-connected tickers have in relation to fractional fiat central banks/printshops (and the Treasury Departments given marching orders by them).

Dr Benway's picture

You are exactly right in what you say, Cdad. This is a calculated method to steal shareholder funds.

1. Corporate insiders grant themselves shares and options with various executive remuneration plans, using shareholder funds.

2. The insiders ramp the shares with buybacks and crossbuying, using shareholder funds

3. The insiders sell shares into the buyback, stealing shareholder funds.

4. The company then issues shares at the inflated price, attracting new sucker funds.

5. General mismanagement and crappy fundamentals eventually pop the share price. Go to step 1, rinse and repeat.

walküre's picture

They're using corporate loans at low rates to buy their own shares.

Lost Wages's picture

Psst. Hey. Anyone want to buy some insider information? It's about as useful as outsider information.

francis_sawyer's picture

I'm seriously thinking about becoming a Goldman Sachs client so I can fade their recommendations...

walküre's picture

you think there are more recos than what ZH is publishing?

francis_sawyer's picture

It's just part of the francis_sawyer comedy routine...

Midas's picture

Is THAT what you've been doing?

francis_sawyer's picture

For the sake of all ZH'ers... Please don't tell me you want to see the ALTERNATIVE...

Pairadimes's picture

Exactly. Buybacks prop up the price and create liquidity for insider sales. Is there any reason why we would expect the chart to look different?

WTF_247's picture

Here is the game:


1.  Corp insiders want to cash in on all the massive stock options they have been granted.  The board helps them out.  

2. The insiders fill out a selling plan.  

3.  Once in place, a few months later the board agrees to a buyback plan "at the request of shareholders".

4.  Since the insiders plan was already in place months prior, there is nothing improper.

4.  Corp uses funds to buyback stock which in turn makes it easier for the company to claim they are bullish all the while insiders dump (bearish).

5.  If the price later tanks, board will say "We were buyers of the stock and still are buyers of the stock" - removing any questioning of the insiders who sold.  They will always use the "diversification of assets" meme when selling.

This enables the insiders to use the corp funds to enrich themselves further.

Mercury's picture
Be Careful What You Hope For - Buy-Back Mountain

Indeed. You might not want to crawl into that particular tent head first...

Clowns on Acid's picture

Mercury - Are you suggesting to crawl "back into" the tent?

JR's picture

The proof keeps coming in that individual investors are afraid of betting on individual stocks, choosing instead to go with a broad Fed-financed equity market: sticking with target funds, index funds, and ETFs.

Howard Gold, writing today on The End of an Investing Era on MarketWatch, uses material from the WSJ and other sources to make this point, saying “With one big, bright red exception… individual stock investors may be a dying breed.”   

He cites a WSJ report from BetterInvesting (formerly the National Association of Investors Corp.) that has seen membership at investor clubs where people get together to pick stocks plummet from 400,000 at its peak in 1998 down now to a mere 39,000, a plunge of 90%.

“The problem, The Journal wrote: ‘Stocks aren’t fun anymore; they are scary.’”

Gold’s point substantiates conjecture that investors are betting on the Fed to keep the market up rather than trying to figure out what company has a good idea, what company has good product, what company is a market leader. It’s too dangerous.

These investment clubs lost a ton of money trying to figure out which stocks were going up. They got sandbagged. People now just say, heck, the market’s going up; I just need to buy the index.

The problem is that Bernanke is forsaking the economy for an illusion. When American businessmen no longer are able to realize which things work and which don’t, that’s the last chapter.  Not only has Bernanke destroyed sound money; he has destroyed the key incentives and market indicators for growth.

As Mises put it: Under pure socialism, economic calculations would be impossible.

dudebum's picture

Where's Charles Biderman when you need him?

Atomizer's picture

Invest in Broke Back Mountain!

Northeaster's picture


Meanwhile they jettison by the thousands, but never mentioned by MSM.

Clowns on Acid's picture

CEO - :"Hey feck it, it's just corporate cash". " Now sell my personal shares please".

dark pools of soros's picture

duh, they use the corp money to buy their shares as they dump them..  what is the problem here?

larz's picture

spoken like a true Goldmanite - well done dark pools

Just Ice's picture

Gasp!  The Rut is quarter point in the red...  Where's Boilermaker??!