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Here Is The Mystery, And Completely Indiscriminate, Buyer Of Stocks In The First Quarter
With the Fed having tapered its liquidity injections into the stock market from $85 billion to "only" $45 billion per month, retail investors getting burned by the recent high beta and momentum stock flame out and "greatly unrotating" into the renewed safety of bonds, not to mention a churning market that until last week was unchanged for the year, and hedge funds ever shorter into this latest ramp, many are asking themselves: who is buying?
Here is the answer.
According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter!
Should the Q1 pace of buybacks persist into Q2 which has just one month left before it too enters the history books, the LTM period as of June 30, 2014 will be the greatest annual buyback tally in market history.
And now for the twist.
Unlike traditional investors who at least pretend to try to buy low and sell high, companies, who are simply buying back their own stock to reduce their outstanding stock float, have virtually zero cost considerations: if the corner office knows sales and Net Income (not EPS) will be weak in the quarter, they will tell their favorite broker to purchase $X billion of their shares with no regard for price: the only prerogative is to reduce the amount of shares outstanding and make the S in EPS lower, thus boosting the overall fraction in order to beat estimates for one more quarter.
Compounding this indiscriminate buying frenzy is that ever more companies (coughaaplecough... and IBM of course) are forced to issue debt in order to fund their repurchases. So since the cash flow statement merely acts as a pass-through vehicle and under ZIRP companies with Crap balance sheets are in fact rewarded (as even Bloomberg noted earlier) the actual risk of the company mispricing its stock buyback entry point is borne by the bond buyer who in chasing yield (with other people's money) serves as the funding source for these buybacks.
In short, corporate CEOs and CFOs couldn't care less if your friendly Wall Street broker uses the repurchase allocation to buyback the stock at all time highs.
In fact, since a vast majority of executive compensation agreements are tied to company stock "performance" C-suites are perversely happy if their own corporate cash is used to buy the stock near or at all time highs: after all management year end bonus will simply benefit that much more, while keeping activist investors delighted (and away from the embarrassing public spotlight).
So the next time someone asks who keeps on buying stock despite all the negative newsflow, despite the bond yield sliding ever lower despite relentless broken-record pleas that a "recovery is just around the corner", and with vol near all time lows confirming peak complacency... now you know.
* * *
Want more data? Here is buyback activity by year. While the 2007 S&P500 buyback record of just over $560 billion is safe for a few more weeks, should companies buyback as much stock in Q2 as they did in Q1 2014, then the Q2 2014 LTM buyback total will rise an all time high:
Don't forget: there is no such thing as a free lunch, bought with stock buybacks or otherwise. Contrary to all the lies you may have heard, corporate debt - both total and net - is now at an all time high!
Finally, these are the companies that are the most aggressive repurchasers of their own stock, or said otherwise, the companies that have no organic use for the cash and have zero ideas how to grow their top and bottom line or what capital projects to invest their excess capital, they only have stock buybacks as an option to give the impression of "growth."
Source: CapIQ
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True. The compensation and tax avoidance scheme of choice .... stock options. However most of the salaries that are claimed to be > 10 million INCLUDE the annual gift of millions in stock options taxed at a 15% capital gains rate. The actual paycheck type compensation is usually $300k to $1.5 mil range depending on how much blow and hookers the exective needs annually while waiting to cash out his options at some peak.
Belgium!!!
do I win second place at least?
That was my first thought too.....
First time poster here at ZH. Long Time Lurker. Hat tips to many of my favorite posters - Too Many to List!
And even some of those who always brightened our days here and brought many a smile and a shake of the head: MDB and Francis S.
That said: Take stock of your/ our surroundings and remember: "The game ain't over until the Fiat Lady Sings."
AC
Love the screen name
MDB is insane; a composite of liberal idiocy and someone stuck in a blender.
Francis is back in treatment. Restrained. Has to use dial up to get on the net, and he's restricted to Net Nanny.
We shot that fat lady; she was annoying.
alexcojones
Keep coming back!
Here's a fun game. Go to Yahoo Finance and see how many stocks you need to check before you find one where insiders are net buyers of stocks.
Have done that before a number of times. Its kind of hilarious at times..... a 'director' or whomever willl buy 1500 shares periodically (or similar number) but their history has them selling 60,000 shares a few months prior.
The currency is on the ropes. And observers who are not indebted to the financial oligarchs are beginning to give us straight information.
Jim Rogers is interviewed on SophieCo today – with his opinion on “what does Moscow’s turn to Beijing mean for the future of the global economy?” It seems the dollar isn’t the only game in town anymore; in a free society the market produces money as it does all other goods and services; in a banker centered economy that can create money virtually out of nothing, the resulting paper tyranny eventually only makes its monopolistic producers richer and the money’s late receivers, the people, poorer.
Excerpt:
SS: But do you think the West has failed to isolate Russia politically and economically? Or is the West going to end up isolating Russia at the end?
JR: I don’t see that it has hurt Russia. Maybe there’s something I don’t know, but I don’t see that this has hurt Russia in any way at this point.
SS: What all of this means for the dollar? I mean, last week Russia’s economy minister told me that ruble and other national currencies will be used for trade to diversify risk. So where does that leave dollar?
JR: Again, I don’t particularly like saying this, because I’m an American citizen, and American taxpayer and American voter, but if you drive people away from the dollar… many people now must be saying “guys, if we have dollars, and the US decides that they don’t like us, they’ve going to put sanctions on us! ”So more and more people would say “maybe I shouldn’t use the US dollar, maybe I shouldn’t have my money in US dollars.” At the same time, as you know, Russia and China are now going to trade with each other in their own currencies instead of the US dollar. More and more people are doing the same thing; they’re starting to trade in other currencies besides US dollar. This is just a continuing long-term move away from the US dollar. And, I am afraid, that US is pushing people away from the US dollar with our actions.
SS: So, if you’re saying that other players will move away from the dollar eventually, where does that leave the American economy?
JR: The US has been the world’s reserve currency, has had the world’s medium of exchange and so far we’ve been able to do a lot of things because we can just print more US dollars. We have a huge balance of trade deficit; we have huge government deficits, because we can print more money. If there comes a time that we cannot print money, when the world will not just take US dollars because we say“here they are!” – then that cripples America in many-many ways. The Pentagon, the Defense Department of the US has already said that the deficit in the US is a major potential weakness from the military point of view. Just recently, the space people said “every country in the world has eventually collapsed” and the way America is going, we might collapse too. This is not me, this is the Defense Department of America, and this is the Space Agency of America saying these things. If you read history, Sophie, it’s true, it’s correct. When people do not have the money that they used to have – they’re limited in many ways. You cannot have as many soldiers, you cannot have as many airplanes, you cannot send ships all over the world, because somebody has to pay for it, and if you don’t have the money to pay for it anymore, you’re in trouble.”
Reprinted with permission from Russia Today.
http://www.lewrockwell.com/2014/05/russia-today/the-future-of-the-global-economy/
A little Canadian example:
http://thetyee.ca/Opinion/2014/05/27/Russia-China-Gas-Deal/
Russia-China Gas Deal a Train Wreck for BCPeru has a lot of natural gas too, more than they can use. Oh, well.
Good for Jim Rogers. I have always thought shitty trade and monetary policy has been an extremely important and dangerous national security issue. All that manufacturing of steel items, electronics, etcetra overseas will be turned used against us in a time of world confilict... the japanese zero was based on a US design.... the stupidity continues unabated...
ten years from now they'll be issuing stock to retire the bonds, with attendant bonuses of course
as an aside, poor glw. its pristine balance sheet is no moar. alas.
Before clicking the link, i half expected the answer to be "no one." Guess i was kinda correct.
Attention all planets of the solar federation, we have assumed control,we have assumed control. 2112
Free Alex Lifeson!
Lean not upon your own understanding
Ignorance is well and truly blessed
Trust in Perfect Love and Perfect Planning
And everything will work out for the best - Clockwork Angels (live, 2012)
That 1eyed willy got mtgox and now he's buying Tbills on the dips. if u saw the Goonies u will know his real treasure is yellow coins. go willy, go...
Canibalism is a healthy diet.....that is, of course, until you run out of "food" to eat.
Heck - I thought the answer was gonna be the Fed.
The fact that most corporate executives have incentives based on relative stock performance has nothingto do with this, right?
Ouroboros of Incorporated Robberies!
Fundamentally fraudulent financial accounting systems manifest the super-condensed absurdities of government enforced frauds, operated by "private" companies, which "private" companies, if one examines the CAFRs ( http://cafr1.com/ ) actually are collectively owned almost totally by government mandated institutions. Not only are there levels of revolving doors between the people who work for corporations and governments, but also, institutions which were given public powers have gradually bought up the vast majority of the shares of "private" corporations.
The transcendental irony is that there is only ONE environment, within which are organized systems of lies, operating robberies, but that basic FACT is deliberately ignored and denied, as much as possible, by most of those actually doing that. During human history, there was a process whereby "God" was privatized, and then that segued into the privatization of the environment, which enabled level after level of absurd lies to have sliced and diced the world up, so that the runaway process of people making a killing has become killing the world.
All private property is based on backing up claims with coercion. Governments are the ways that the powers of everyone to be able to rob were collectivized as "We the People," and then those public powers were effectively privatized, in ways which then looped back again to become practically public property (although that is not acknowledged, as explained on http://cafr1.com/ ). Within that Ouroboros of Incorporated Robberies, where governments chartered corporations, that controlled the governments, while the collective governmental institutions in turn became the major owners of those corporations, OF COURSE, major buyers of corporate shares are the corporations themselves, which operate inside of systems of fundamentally fraudulent financial accounting, as allowed and enforced by governments, within which, on every level, are different systems of organized lies, operating robberies.
Through the processes of the Ouroboros of Incorporated Robberies spinning, all of the players are able to hide the basic facts that everything is based on backing up lies with violence, in which there is truly ONE environment, which is manifesting in the ways that collective governmental agencies now overwhelmingly own the shares of publicly traded corporations, whose higher level personnel tend to have careers which spin through revolving doors between the alleged "private" companies, and the supposedly "public" governments.
The entire economy is based on the principles and methods of organized crime (as the best fitting symbolic descriptions of how human energy systems actually operate), which manifest through the governments being the biggest forms of organized crime, that are controlled by the best organized gangs of criminals. I.e, the history of lies which privatized "God," then were used to privatize the public powers of the secular governments, as the collective powers of "We the People" were being directed by professional managers, whose duties were to apparently serve their own private interests, or those others whose private interests their personal interests most depend upon. Those professional managers, within the context of their culture, almost universally regard everything backwards, because they see the negative as positive, and vice versa.
There is still ONE environment, in which there is truly no such thing as "private property," outside of the systems of public violence, which enforce claims to parts of that ONE environment with coercions, (where both those claims and coercions are parts of that ONE environment.) However, along the way, while those developments happened, as directed by the history of warfare based on deceits, and finance based on frauds, due to "successful" warfare based on deceits, and "successful" finance based on frauds, becoming GREATER, we ended up living more and more in a Bizarro Mirror World, where everything was backwards, which was expressed as negating the negations.
ALL private property is based on SUBTRACTING parts from the whole of the One Environment, which subtractions, across the relative boundaries of those parts, manifest through claims backed by coercions, or as processes which TAKE energy and matter, as ROBBERIES. However, that basic concept of SUBTRACTION is presented thoroughly backwards in our civilization, as being a positive thing, rather than a negative thing. After thousands of years of the development of social systems of lies backed by violence, and especially after the last few Centuries of exponential growth of those systems during the industrial revolution, it is practically impossible to exaggerate the degrees of social insanities those have enabled, since almost everything is being perceived and discussed in ways which are as maximally backwards as possible for human history to have made and maintained.
Nothing is BASICALLY different than it ever was, when human beings lived as robbers in their environment, hunting and gathering other living things to kill and consume. Human beings always operated as entropic pumps, and still necessarily do so. However, civilization has been able to assemble and channel greater and greater manifestations of those those processes, which, since the industrial revolution, have been amplified to astronomical SIZES.
Political economies are STILL inside the human ecologies, and the human ecologies (including even the emerging industrial ecologies) are STILL inside the natural world. There are STILL nested systems of toroidal vortices, or entropic pumps within systems of entropic pumps, through which flows the same energy, which may relatively be conserved through non-linear flows. However, the basic attitudes of Privatized God, Privatized Environment, and Privatized Governmental Powers, or negated negations, prevent most people from generally perceiving THAT, although a few of them may well notice the apparent absurdities of corporations becoming the major buyers their own shares.
SINCE THERE IS ONE ENVIRONMENT, ALL OF THE ORGANIZED LIES ACTUALLY CONTINUE OPERATING ONE OUROBOROS OF INCORPORATED ROBBERY, WHICH MAINTAINS THE MAXIMUM POSSIBLE EVIL DELIBERATE IGNORANCE TOWARDS ITSELF!
In a world where "money" is made out of nothing as debts by private banks, which frauds are enforced by governments, OF COURSE "capitalism" is negated, and "free markets" neutralized, since "money-as-debt" is actually the opposite of "capital," while those who have the power to make "money" out of nothing can rig interest rates, to become ZIRP and NIRP. Thus, there were evolved the evolutionary ecologies of the overall Ouroboros of Incorporated Robberies, which are basically the same as the natural ecologies which always existed, but which have been channeled through the history of civilizations to become based on the maximum possible deceits and frauds, so that absurd phenomena like this article describes manifest more and more, as the worm turns, or the snake eats its tail.
Indeed, as the Ouroboros of Incorporated Robberies spin and spin, in more and more super-concentrated, tightly coiled loops of self-referential absurdities, OF COURSE, "capital" is NOT primarily being invested in "capitalist" corporations, which operate in "free markets." Instead, corporations buy back their own shares, in order to keep the unacknowledged and deliberately ignored Ouroboros of Incorporated Robberies spinning ...
Comments like this are what makes ZH. You aint gonna see that from MSM. They dont teach that in school.
holy shitsnacks!
Good Shit T......Good piece
makes complete sense.
Okay--simple question. What happens when this scheme blows up and the markets tank. I don't mean 10 or 15 % correction, I mean 50+%. Everybody will see their potfolio/stocks or whatever are insufficient to live on. All hell breaks loose and internal war breaks out for survival. How about a nice game of tic-tac-toe?
It's a bird, it's a plane, it's Super Ponzi!
Good to know I only transact minimal business with a few of the scumbag companies on there, 3 to be exact. Everyone should be doing their best to minimize their money with the multinationals.
"Everyone should be doing their best to minimize their money with the multinationals" I already have some time ago, I stopped buying aircraft from Boeing and earth moving equipment from Caterpillar just in protest of the goings on .... /snark
is this bullish, like everything else is?
:) It's spilling over in markets where there are no buy backs at all, too. And of course if you look at large original owners, they are all bailing out right now. The rest are all enjoying "the ride" and are all planning to sell when they feel "it's over" That's when you should be short, because there will be zero on the buy side, zero.
This article reminds me of this:
"My guillotine can 'auto-cut'."
The script should be clear by now, record high government and corporate debt show the way: THERE WILL BE INFLATION, VERY HIGH INFLATION. Those with debt will cash in big time, savers.....not so much.
Unless of course your debt is for taxable property such as real estate. You might be able to pay your house off on the cheap but, the property taxes will eat your ass out and the high price of your home will make it a tough sell.
Its the tail end. When nothing else works, you start eating your own. That's how cannibalism was born. This works only in the US and maybe some European markets. It doesn't work in China or in Russia.
Cannibals may thrive for a while but in the end they will slowly but surely die off.
A country could be held hostage to the threat of dumping of massive amounts of UST.
Is this in any way related to the PM smack-down?
Well there is alot more to this than meets the eye. Did you know that a company can legaly disclose a buyback and not even buy 1 stinkin' share and still be with in the law. I would bet the companies that are listed here are but a fraction of the companies that have announced buybacks and have bought none or a very small part of their allocation. They can anounce right before their "marks" for their bonuses and take the market bump and then not buy them back. Much more common and legal than anybody ever expects. Also the other trick is to anounce to great fanfare, but not say how much is to just cover the option grants over the last years time. Most times the overall float is larger than a year ago after the buyback is terminated. Some companies make them super long duration and then buy the time it is over, they did not buy much and then anounce to great fanfare that they are buying back stock over the "next" three years. This is the one loophole in SEC rules that they can legaly lie and not be held accountable..... FYI.....
I am impressed.... I posted about stuff I know about as I am a trader and also teach some of the aspects about it at a university.... At least I get up arrows for that..
Better stick to this if I want up arrows... I post about putin's shenanigans and get huge down arrows and really i dont know shit about it...............
:)
FYI.... only one class and I am always introduced as a totally non-traditional instructor and run a very "untraditional" class"
This is how buybacks make sense.
McDonald's execs are mandated to use all the cash generated from buy backs to go on a strict McCrap diet to absorb the excess supply.
JCP execs have to wear layers upon layers of their store's clothing, no matter what the temperature.
GM execs and managers are required to crash at least one car and truck per day.
See, this is how it works.
Back to rainbow and unicorn programming.
The operative word for our current era must be "unsustainable". It applies in so many situations and institutions. Has there ever been a generation so devoid of any concept of future consequences? The analogy is one of a group of dead-drunks holding each other up - it works until one sneezes.
They're going to learn about future consequences suddenly and brutally.
To inflate asset prices it has been necessary to remove free market attributes from the economy. Like a living organism, in order to flourish, it must have a mechanism for elimination of waste. This is what corrections and bear markets do. An economy cannot and will not survive without this process. Expect an all at once reckoning. Count on it.
an etf playing these mechanisms ... TTFS.
http://advisorshares.com/price-history/TTFS
shrinking the float.
A lot of Dow Jones companies are buying back stock with the mistaken advice given to them by stupid so-called "market analysts." They feed the big companies this following BS line: Since the last major correction during the financial crisis the SEC has really cracked down on naked short selling and many new laws are in place now to prevent this.In any downturn now,the descent will be slower and likely of shorter duration because of this so called fact that naked short selling is tightly controlled.They then go on to tell the next part of the sad story which leads to telling them that buying back your stock is the best protection against short sellers because you are tightening your float.There's less shares to borrow.Along with this they are told that this is your best action against your share price dropping:your continuing share buyback program.Sorry to say though that it won't work when the time comes for the correction.It's just BS.
Free reserves in for bank dead weight
carrying, no investment return on
the dollar, economy benchmarked to
0 with principals on fixed debt set
to fall if/when rates rise.
Not many co. treasurers, unlike
many bank/broker retail customers,
are likely all that inclined to just
do what the banks want and buy
retail securities at ultra high
p/e's.
Buying back stock is one of the only
sensible things in sight to do.
Government, the ultimate in OPM gaming went on a major toot beginning in the mid 60's. They've been tilting the playing field in their direction, steadily gaining converts along the way. Funny how corruption works. Incidentally the Fed and bankers were relatively speaking, foot dragging conservatives in the 60s.
Publicly traded corporations have one foot in making real products and real services and one foot in the OPM game. Now that the OPM mafias have completely taken over, ZeroHeroes are noticing something odd. It's almost like incentives have changed.
Nah, it's probably just some one off thing due to the inherent evil of corporations. They refuse to be your mommy, they refuse to be your daddy, they refuse to be your church, they refuse to be a paramilitary revolutionary organization.
But there's a mystery. Exactly who have the political class been pandering to? Who have they been corrupting?
Super low interest rates have fed the equity bubble via higher PEs, via higher earnings due to lower interest costs and via higher eps with stock buybacks. In other words, low interest rates have been discounted in stock prices several times over at this point.
Over me head. Please answer your query.
DEATHFLATION:
A deadly and irreversible economic condition that inevitably arises as too much currency chases too many goods in a grossly over-leveraged economy, after it has been artificially reflated in a desperate, misguided and unrealizable attempt by the monetary authorities which have prevented it from seeking the healthy normalization and natural balance of free market forces.
Also known as; selling your soul to the devil, robbing Peter to pay Paul, and wishful thinking...........
http://rt.com/news/161848-china-ibm-servers-banks/
Iunno, I don't know if the qe has saturated the buyers market. Perhaps speculation, but odds are there will be a future...
The game of stock is always unpredictable sometimes it rises and sometimes falls down. The up and down is always an interesting part of the game. Food Technology Coursework
So greedy managers are using 'their' companies to get rid of their shares and boost eps forcing them to become the greater fools? Sounds like a good plan. What could go wrong?
So when the collapse comes does this mean that all the largest corporations become insolvent at once? I think it is not a good idea that corporations do this.
A few weeks ago I sent the link to a Zero Hedge article about IBM and how it was into stock buybabcks to a friend's daughter who works for IBM.
Her response was that she knew about it and that her supervisor was ecstatic about what the share price was doing.
I just wonder how ecstatic she will be when her job ceases to exist.
Theoretically, a company could buy out ALL of its stock and in conjunction with the Supreme Court decision giving the rights and status of individuals to corporations we may well see everything owned by corporations and nothing by individuals. Given that corporations do not need to expend money for personal reasons, they can keep investing until there is nothing left in the hands of individuals.
It's a ruderless world.
If we enter a state of high or hyper-inflation, which is most likely outcome of the current degeneration in fiat money, surely the debt becomes more lighweight, while the equity still represents control of real assets, plant, equipment, brand name and therefore has real value.
The higher the market, the more ZH sees conspiracy.
You say conspiracy.
ZH infers insanity.
Charts only show the reality of past action. There is no organic growth, only the appearance of growth due to the facts shown in charts above.
In other words; your all wet dude.
then stay tuned in to financial Tv and you should be just fine... there's no 'conspiracy' there ... just honest reporting
Don't you just hate it when you print all this money so all the large companies can buy back their stock with bennie bucks to prop up a failing stock market that would implode if not for the money print and because of the same group of greedy shits that started the real estate bubble in the first place. Circular money, the new financial phenomenon. Damn, we printed all this money for us and they're still not buying shit. I hate it when that happens.
The chart from this post was referenced in last Curmudgeon/Victor Sperandeo column: US Economy Stuck in the Muck and Profits are Declining: http://www.fiendbear.com/Curmudgeon84.htm
In the first quarter of 2014, S&P 500 companies spent a record $160 billion on stock buybacks [Chart 2007-2014]. Despite that massive amount of capital, 1st Quarter 2014 total earnings for 463 S&P 500 member companies were up just 1.3% over one year ago on a miniscule 0.9% increase in revenues, according to Zack's Q1 Scorecard - dated May 15th, 2014. We think that total earnings would be higher if the money used for stock buybacks was invested in R&D and/or capital spending directed at real economic growth projects.
So much for the profits party! Profits are declining and have been artificially boosted by financial engineering and accounting shenanigans.