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Stock Buyback Shocker: Companies Using Secured Bank Loans To Repurchase Stock

Tyler Durden's picture


It took the mainstream media a few months to catch up to the theme first revealed here that in addition to the fading QE (even if supplanted by NIRP in Europe and Turbo QE in Japan), one of the primary driving forces of the market's outperformance in 2014 was a relentless buyback bid as corporations, lacking better uses for their cash, bought a record amount of their own shares in Q1 (and as will soon be proven) in Q2 attempting to increase the EPS by lowering the S.

It was only logical that it would take the MSM a while to follow up with the obvious connection: one which is so simple we described it back in 2012 when we showed "Where The Levered Corporate "Cash On The Sidelines" Is Truly Going" - namely, an unprecedented scramble to lever up and use the proceeds to buy back stocks, a decision which is great for existing shareholders and horrible for the economy (as it means much less spending on capital investment) for employees (as it means less cash available for wages and thus, for the all important wage inflation) and for the long-term viability of the buying back company (as it levers up the corporate balance sheet without a matching increase in revenues or cash flows, in fact, the opposite).

Which brings us to today, and specifically, an FT article titled "Bankers warn over rising US business lending" in which we read that "US lending to businesses is reaching record levels but banks are privately warning that the activity should not be seen as evidence of an economic recovery."

And the stunner: "Much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than to support companies’ organic growth."

What the FT is referring to is not only the record net unsecured debt plaguing corporate balance sheets, because as both we and Deutsche Bank showed, net debt is at the highest level ever while corporate cash has never been lower...

...but also the recent surge in bank loans and leases which finally, after years of virtually flatlining, have start increasing as shown in the chart below.


The highlighted increase in the Y/Y rate of issuance of loans and leases by US commercial banks is critical as it has been widely trumpeted as the main reason why the economy is once again starting to pick up, and for the first time since the launch of QE, there appears to be a substantial increase in demand for commercial and industrial loans by US corporations: easily the biggest missing link to confirm the so-called US "recovery."

Well, not so fast. Because if what the FT says below is true, one can promptly scrap the entire premise that "loans are increasing therefore the economy is on the mend." Here is what the FT had to say:

Total outstanding commercial and industrial (C & I) lending, which runs the gamut of loans to sectors from energy to healthcare and excludes consumer or real estate loans, rose to a record $1.7tn in May from a post-crisis trough of $1.2tn nearly four years ago, according to data from the Federal Reserve Bank of St Louis.


For the top 25 US commercial banks by assets, C & I lending grew by 10.5 per cent in the quarter to June 25 from the previous quarter, according to annualised weekly data from the Federal Reserve.


This type of lending is an important source of business for the largest US banks, representing about a fifth of all loans made by the likes of Bank of America, JPMorgan Chase and Wells Fargo, according to Citigroup research. While low interest rates have made business lending less lucrative, the relationships it forges open doors for the banks to sell other services such as treasury management, hedging and leasing.


A second corporate banking executive at a large regional lender said: “The larger part of the usage in the market right now are loan refinancings where companies are paying dividends back out.”

And the absolute shocker of a punchline:

He added: "They’re requesting increased loans or usage under a lien in order to pay a dividend or equity holders of a company. Traditionally banks have been very cautious of that."

The soundbite conclusion from the FT is self-explanatory:

Charles Peabody, a bank analyst at Portales Partners in New York, has warned that while it is hard to extrapolate what is driving commercial and industrial lending, if it is to fund acquisitions or share buybacks it may not indicate a strengthening economy. “It is loan growth, just not sustainable,” he said.

Actually, it is far, far worse.

What the FT is effectively saying is that unlike before when companies would issue unsecured debt (i.e. General Unsecured Investment Grade bonds) which would be used to find buybacks and dividends - something which is perfectly in the company's right to do as long as it has revealed the use of proceeds to yield chasing bond investors, what companies are doing now is taking on secured debt and using the proceeds to fund buyback their stock or fund dividends!

It is here that the hair of anyone who has ever underwritten any debt, secured or unsecured, should stand on end. Because this revelation shows that unlike the last bubble, when levered buybacks once again went through the roof, at least they were unsecured and the bank did not have a lien on any assets should the company ultimately file bankruptcy as a result of a debt issuance spree.

This time, however, in order for shareholders to cash out, existing bondholders will be primed by the bank when the rate cycle finally turns and all the companies that were scrambling to reward investors now and up going tits up. It also means that banks effectively become lienholders in companies without having any actual collateral backing their loans, because while tracking down the cash outflow to shareholders may be a fun way to spend a decade in court demanding a fraudulent conveyance case, it means virtually no recoveries when all is said and done.

In simple terms: instead of indicating a recovery, any recovery, the only thing the recent surge in loans and leases indicates is that companies are increasingly more desperate to cash out their shareholders, and are completely oblivious of what form of debt they use to fund such shareholders friendly activities as stock buybacks and dividends.  It certainly means that instead of using the liened cash to invest in growth, or even maintenance, CapEx, so critical for the non-recovering economy, the only thing that is happening is that banks are effectively funding corporate shareholders with secured debt, in the process collateral-stripping the intermediary companies which with every such incremental deal have less and less recourse to unencumbered assets.

Welcome to the new normal capital structure, where everything is upside down and nothing makes sense.

Oh, and to all those pointing to the weekly increase in the H.8 statement and screaming "look at the recovery", our apologies: you are, as usual, wrong.


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Tue, 07/08/2014 - 16:29 | 4936766 redpill
redpill's picture

Why would you re-purchase your own stock when the market is at record highs?  Idiots.

Tue, 07/08/2014 - 16:30 | 4936770 Groundhog Day
Groundhog Day's picture

but what about all that cash on the sidelines

Tue, 07/08/2014 - 16:36 | 4936795 wallstreetapost...
wallstreetaposteriori's picture

Why would you purchase at record highs....?  Because exectuive bonuses are tied to stock prices... Can you say principal agent hazards?

Tue, 07/08/2014 - 16:41 | 4936814 NotApplicable
NotApplicable's picture

I'm still trying to wrap my head around annualizing weekly data in order to measure quarter over quarter change. I guess reality isn't as reliable of an indicator?

Tue, 07/08/2014 - 16:45 | 4936823 hedgeless_horseman
hedgeless_horseman's picture



Stock Buyback Shocker: Companies Using Secured Bank Loans To Repurchase Stock

With money so cheap, this is smart.  Treat equity like gold. 

Tue, 07/08/2014 - 16:46 | 4936832 Pladizow
Pladizow's picture

What? You mean US CEO's are doing what's best for their salary, bonus and stock options and not what's best for the company 10 years after they are gone???

Tue, 07/08/2014 - 16:56 | 4936838 hedgeless_horseman
hedgeless_horseman's picture



If/when inflation really gets going these management teams are going to look like geniuses.

Tue, 07/08/2014 - 16:56 | 4936867 CrazyCooter
CrazyCooter's picture

With the caveat we are heading into the maw of the most massive deflationary vortex in history ... which is what the Fed has been fighting (and losing) ... if they sacrifice their fiat on the altar of can kicking, they risk losing it all.

Something has to break soon, one way or the other, but I have been saying that for years ... so pay no attention to me!



Tue, 07/08/2014 - 17:00 | 4936879 hedgeless_horseman
hedgeless_horseman's picture



Yes we can!

Tue, 07/08/2014 - 17:02 | 4936885 Spitzer
Spitzer's picture

"You can't taper a ponzi scheme" - Max Keiser

Tue, 07/08/2014 - 17:08 | 4936917 JenkinsLane
JenkinsLane's picture

or "Separated at birth?"

Tue, 07/08/2014 - 17:56 | 4937088 RafterManFMJ
RafterManFMJ's picture

Q: What's the difference in the above picture?


A: The Negro on the right is honest about his intentions, and we know where he was born.

Tue, 07/08/2014 - 17:02 | 4936884 linniepar
linniepar's picture

Gold, a great store for your labor since 0.

Tue, 07/08/2014 - 16:58 | 4936874 Oracle 911
Oracle 911's picture

Just 2 silly questions:

From what source they get the payments for these loans?

And what will happen if the source is gone?

Tue, 07/08/2014 - 17:17 | 4936883 hedgeless_horseman
hedgeless_horseman's picture



From what source they get the payments for these loans?

Revenue.  Payments to the banks will be made ahead-of / instead-of payments to employees and shareholders.

....what will happen if the source is gone?

Haven't you been paying attention?

Bailouts, of course! 

Privatize gains, socialize losses.

Tue, 07/08/2014 - 17:47 | 4937051 Kirk2NCC1701
Kirk2NCC1701's picture

As I've commented a year ago, this is exactly how executives from all those Emerging Markets in Eastern Europe took over their companies that were formerly national assets.

Highly leveraged MBOs, with bankster funding.  Really good for execs, banksters, GS, the Fed, Neocons -- the 0.01%.  Really bad for everyone else.  The MO is the same for all Countries:  Create humongous national debt via socialist or militarist funding, then privatize all national assets, so that the 0.01% get to control and rule over all. 

Tue, 07/08/2014 - 18:22 | 4937181 NoDebt
NoDebt's picture

But the companies taking out these loans are already private companies.

I can't believe nobody has gotten to the nub of why this is happening:  Execs are paid MASSIVELY higher portions of their compensation in company stock and stock options than ever before.  Their ONLY goal is raising the share price.  Even if it's alreay 800X book, they'll push it to 1000X book.

NOTHING has changed.  This is AGAIN a very few at the very top getting theirs, while they put even their own companies at SEVERE risk in the longer term.  They don't give a DAMN if the company goes under in a few years.  They are in the PERFECT position to see it coming in advance, cash out and head for greener pastures.  Leaving the rest of us (taxpayers, anyone who has to live with the effects of massive bailout money printing) to clean up the mess afterwards and deal with the consequences.  

Tue, 07/08/2014 - 16:46 | 4936831 El Oregonian
El Oregonian's picture

Whimpy: "I'll gladly pay you next Tuesday for a fiat loan today."

Tue, 07/08/2014 - 16:47 | 4936834 THX 1178
THX 1178's picture

If the companies buy back their own stock with debt, and then the currency is reset on july 20 2014 (like lagarde forewarned us) or somethime soon, the debt after the revaulation will seem microscopic in comparison and the stocks will have gone up byb a tremendous and amazing amount. And that is assuming the currency doesnt go to 0 which it might. If a debt jubilee is coming, might as well load up on debt.

Tue, 07/08/2014 - 16:52 | 4936852 tarsubil
tarsubil's picture

So what happens if this bubble bursts and plundering execs are blamed? Would people go after them? Haha, just like the banks in the last one, I'm sure. The plunder economy!

Tue, 07/08/2014 - 22:28 | 4936928 rainingFrogs
rainingFrogs's picture

earnings per share, baby
earnings per share
doesn't matter how you get there
its all just earnings per share

- the latest (s)hit single, "Baby, I'm Rich, Man (and you're not)", by Jamie and the Dimon Thieves

Tue, 07/08/2014 - 18:55 | 4937361 Whootie_who
Whootie_who's picture

Pump the price, redeam their options ... dump the options at the top ( buy some puts while up there) ... repeat... retire... move to the next "underperforming" company

Tue, 07/08/2014 - 16:40 | 4936806 Grande Tetons
Grande Tetons's picture

Cash on the sidelines equals a Brazilian sub going on to the field being down 5 goals. 

You can run like hell and maybe put one past...but you are still going to lose. 

Tue, 07/08/2014 - 17:24 | 4936967 ParkAveFlasher
ParkAveFlasher's picture

They blew their load running around like madmen chasing Colombia (which was a great game), or they are extremely hung over from partying with Colombia, or they are taking a dive. 

Tue, 07/08/2014 - 20:27 | 4937717 Grande Tetons
Grande Tetons's picture

Greg Louganis would have been proud of the effort...and the short shorts. 

Tue, 07/08/2014 - 16:41 | 4936815 AccreditedEYE
AccreditedEYE's picture

Start shorting the crap out of VIX / Vol again. They will never let this bitch drop.. Shorting Vol fastest way to profit.

Tue, 07/08/2014 - 16:31 | 4936775 Cognitive Dissonance
Cognitive Dissonance's picture

Because nothing else you can do during a declining economy can boost or maintain the sock price like share repurchases.

Tue, 07/08/2014 - 17:07 | 4936913 Winston Churchill
Winston Churchill's picture

They are eating their own extremities.

Hell of a way to commit suicide.

Tue, 07/08/2014 - 17:15 | 4936945 Jumbotron
Jumbotron's picture

"They are eating their own extremities.

Hell of a way to commit suicide."

Tue, 07/08/2014 - 17:21 | 4936961 Jumbotron
Jumbotron's picture

"They are eating their own extremities.

Hell of a way to commit suicide."


You might want to read this.

Tue, 07/08/2014 - 16:33 | 4936782 I Write Code
I Write Code's picture

Well, you end up buying less, of course.

And if a company is doing poorly and the stock price is down, that's an ever worse time to be buying your own stock, unless you know of some material change for the better coming up.

Tue, 07/08/2014 - 16:36 | 4936785 Cognitive Dissonance
Cognitive Dissonance's picture

Besides cheap money makes for stupid buying decisions. Just ask average Joe if he spends more when putting it on a credit card rather than using cash out of his pocket.

Tue, 07/08/2014 - 17:26 | 4936979 ParkAveFlasher
ParkAveFlasher's picture

Credit card debt is not easy money, unless you define "easy money" as 20% interest payable versus a scarred credit rating.  I would say that government largesse is the symptom of the easy money disease.

Tue, 07/08/2014 - 16:37 | 4936801 Groundhog Day
Groundhog Day's picture


Why would you re-purchase your own stock when the market is at record highs?

one word:


Tue, 07/08/2014 - 16:41 | 4936811 yogibear
yogibear's picture

Yep bonuses and options. Cash them in as the company is buying and boosting the price.

The board and CEO care about themselves, not the company.

Tue, 07/08/2014 - 16:54 | 4936862 hedgeless_horseman
hedgeless_horseman's picture



Why would you re-purchase your own stock when the market is at record highs?


Tue, 07/08/2014 - 16:42 | 4936818 Dr. Engali
Dr. Engali's picture

Stock options comes to mind as a good reason.

Tue, 07/08/2014 - 16:44 | 4936822 seek
seek's picture

You know, I've been pondering this and other unusual behavior the last few days, and I stumbled on an idea that made sense in a fucked up way, but scares me.

Thought experiment time. This can take several forms, but try this one:

What would you do if you had a credit card, say a 50K limit card, with no balance, and you were just fired from your job -- and then a friend that works at that card company tells you their accounting system is utterly fucked, and he knows for a fact that not only will the credit card company go under because of this, but also that they will not be able to have any kind of reliable, valid means of connecting charges to specific cards.

If you're immoral and/or don't give a shit, you're going to run that card until it stops working, that's what you're going to do.

Another take: we hear the words "debt jubilee" tossed about. What if you knew for certain there was actually going to be one in the next five years? That any loan, secured or not, would be forgiven, and the title to whatever you bought would remain yours?

Same deal, if you don't have any moral qualms about it, you take out every loan you can get, and buy shit.

I don't for a moment think either of these will happen for "normal" everyday Joes making house and car payments. But if you're a 0.01%er, or a large corporation, these buybacks are increasing your titled asset holdings, at the price of carrying loans at near 0% rates. Imagine you were an insider and knew the Fed actually was going to collapse, or that there would be some new financial crisis that would result in a new dollar, move to SDRs or some other currency, or basically anything that would make destroy-the-banking-system sized loans null and void, forgiven or forgotten. If you were in that situation, you'd be doing exactly what the ultra-wealthy and large multinationals are doing today.

Tue, 07/08/2014 - 16:53 | 4936843 TVP
TVP's picture

That may all be good and true, but no collapse or currency swap will be necessary.  It could work out that way, but who knows.


All of the same logic you just used applies equally to a scenario of currency devaluation. 


I think they're just waiting until people begin rioting and looting for their food, to do anything one way or another.  

Tue, 07/08/2014 - 17:06 | 4936908 BandGap
BandGap's picture

About five years ago I read exactly that same thing. When it gets close to inflation time -----> hyperinflation time, salaries will be boosted to match the inflation rate. Maybe they fall a bit behind, but look at the Weimar. You literally got paid in wheel barrows of cash.  Now, if you have a car loan, a mortgage or a credit card with a balance THOSE cannot be inflated, they are contractual.

The suggestion at that time was to borrow as much as possible because you'd be able to pay off your debt very quickly in the "new" dollar system. 

Just a thought.


Tue, 07/08/2014 - 16:58 | 4936875 LawsofPhysics
LawsofPhysics's picture

World war III will happen first.  Countries have gone to war over less, but they sure as hell will go to war when their productive capacity or real assets and/or control over energy resources is threatened.  hedge accordingly.

Tue, 07/08/2014 - 17:08 | 4936920 BandGap
BandGap's picture

The world is making Bible prophesies come true. Caliphate between the Tigris and Euphrates.  The bear and the dragon uniting. Dogs sleeping with cats.

I'm sitting this one out.


Tue, 07/08/2014 - 17:33 | 4937003 Four chan
Four chan's picture

im betting on gold silver and oil winning the religious retardo battle.

Tue, 07/08/2014 - 16:46 | 4936828 TVP
TVP's picture

Might have something to do with the fact that corporate profits are also at record highs.  


I'm not going to provide a link, anyone who cares can look it up, but a line graph of cratering labor force participation creates a perfect inverse of sky-rocketing corporate profits.  Less workers = less wages and benefits to pay out = more profits.


What to do with those profits, since there's no one to pay other than executive bonuses, already well into the millions?  




Tue, 07/08/2014 - 16:51 | 4936846 BadKiTTy
BadKiTTy's picture

I assume because corporate insiders are the stock holders and want to cash out at the top.  A big part of their pay is in shares and options. 


Tue, 07/08/2014 - 18:38 | 4937286 Nick Jihad
Nick Jihad's picture

The jokes on them, for exchanging valuable shares for worthless fiat! :-)

Tue, 07/08/2014 - 16:54 | 4936860 Jumbotron
Jumbotron's picture

Well of COURSE they use secured loans to buy back the stock nobody wants to buy at the price they are selling it at.

Circle Jerk Ponzi = Modern Day Finances

Tue, 07/08/2014 - 16:56 | 4936868 NYPoke
NYPoke's picture

"Why would you re-purchase your own stock when the market is at record highs?  Idiots."

Because the people at the top, making the decisions, own stock.  They want to boost their own holdings.  Near the end, they can legally sell their holding & leave the company screwed over.


Or, they are just plain stupid.  Morelikely, they are greedy.

Tue, 07/08/2014 - 16:58 | 4936872 Jumbotron
Jumbotron's picture

"Why would you re-purchase your own stock when the market is at record highs?  Idiots."

1: Bonuses

2: Today's All Time High is the Low Price first thing the next morning.  Where in NIRPland are you going to get the potential for ANY kind of yield. 


Buy the High in the in the again in the morning.

EVERYBODY is a day trader now in NIRPland

Tue, 07/08/2014 - 17:10 | 4936926 CrashisOptimistic
CrashisOptimistic's picture

"And the stunner: "Much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than to support companies’ organic growth."


The buried part of that is the part that matters.

Shale is all funded by borrowed money.  Why is that?  It's been 3 or 4 years now this "boom" has been going on.  Why isn't cash funding drilling?

Tue, 07/08/2014 - 17:17 | 4936951 Jumbotron
Jumbotron's picture

Hey....we're number 1 in oil production didn't yu hear?

In fact....I'm going down to the local Exxon station to get my 99 cent / gallon gasoline RIGHT now !

Tue, 07/08/2014 - 17:41 | 4937019 Jumbotron
Jumbotron's picture

"Last month Bloomberg, the financial paper, reported that the debt carried by 61 shale gas drillers doubled to $163.6 billion over four years while revenue stagnated at 5.6 per cent.

"Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells," reported Bloomberg.

"At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can't afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin."

Red Queen Syndrome

Tue, 07/08/2014 - 20:47 | 4937781 caShOnlY
caShOnlY's picture

 it means virtually no recoveries when all is said and done.

maybe this is the plan:  Knowing dam well banks are toast anyway giving Corps. the greenlight to borrow all the FIAT they need to buy up shares of STAWKS that can and will be eventually sold into the "market" after, only after, the NEW currency is issued.  The BONUS (BONER) is shareholders (not you mr. 401(K) holder, the wealthy ones) get cashed out now at the top to buy up tangibles with all that FRESH FIAT.

Tue, 07/08/2014 - 21:57 | 4938070 laomei
laomei's picture

Why do you think the market is at record highs?  Taking out loans to buy your own stock, it's essentially the same as buying on margin.  Using leverage to purchase your own stock, then handing out options to the execs as bonus for boosting stock prices.  Employee stock options is a well-known scam that in and of itself can and is used to cook the books.

Options cost the company essentially nothing to issue.  Once exercised, the holder gets the difference in price as profit while the company gets to take a write-down for taxes on the full amount.  Creating "money" out of thin air for the books.  The company for public purposes can claim profit, while for accounting purposes can claim a "loss".  What this translates into is lower tax liabilities, which effectively means that the ultimate bagholder is the normal taxpayer.  In fact, doing it the right way, you can have a large company sustained entirely by this if you hype it enough.


Once the bubble starts popping however... is where it gets fun.  Cheap debts that have to be repaid and share prices that require more shares reissued than were repurchased, which announcing results in further share price falls... Once the issue is widely known to the public, it all starts falling apart.  

Tue, 07/08/2014 - 16:34 | 4936783 Kaiser Sousa
Kaiser Sousa's picture


Tue, 07/08/2014 - 19:54 | 4937578 viahj
viahj's picture

noise indeed.

i'm reminded of the "Three Little Pigs"

build your house out of paper or  brick [metal]? 

these shenanigans in the paper markets will continue until the end.  play if you want, play wisely and cash out into hard assets before it burns.  timing is a bitch of course. 

Tue, 07/08/2014 - 16:35 | 4936788 Otto Zitte
Otto Zitte's picture

Q: Why does a dog lick its balls?

A: Because it can...

Tue, 07/08/2014 - 16:34 | 4936789 IANAE
IANAE's picture

... another log to put on the fire.

Tue, 07/08/2014 - 16:36 | 4936792 strangeglove
strangeglove's picture

Strip mining fiat comes to mind.

Tue, 07/08/2014 - 16:36 | 4936793 Rainman
Rainman's picture

Smells like insider looting to me. Of course, the sheep are sheep and see no danger. Carry on .

Tue, 07/08/2014 - 16:41 | 4936810 TabakLover
TabakLover's picture

Curious how Tyler is just going to ignore Alcoa's earnings

Tue, 07/08/2014 - 16:43 | 4936820 astoriajoe
astoriajoe's picture

I'm sure he's just waiting to publish your summary.

Tue, 07/08/2014 - 16:45 | 4936827 NotApplicable
NotApplicable's picture

Yeah, cuz 41 minutes is an eternity.

Tue, 07/08/2014 - 17:12 | 4936937 TabakLover
TabakLover's picture

Sorry, but if AA earnings had blown chow..... ZH would have been on it like stink.   The truth, she hurt sometimes.

Tue, 07/08/2014 - 17:50 | 4937057 NotApplicable
NotApplicable's picture

Well, that's pure conjecture on your part. Also, I wonder how much of their earnings are due to the aluminum warehousing scam run by GS?

As always, I did not junk you. (I save down arrows for haters, not mere complainers)

Tue, 07/08/2014 - 16:47 | 4936837 Yen Cross
Yen Cross's picture

  I was just doing some checking. Alcoa top line revenue was flat for the quarter YoY.

Tue, 07/08/2014 - 19:31 | 4937498 Atomizer
Atomizer's picture

The Boeing train derailment debacle will allow melting down fuselage to recycle a variant of new 7000 series aluminum billet. 

/ winks 

Hope you're doing well. 

Tue, 07/08/2014 - 17:01 | 4936882 JenkinsLane
JenkinsLane's picture


Tue, 07/08/2014 - 17:11 | 4936931 CrashisOptimistic
CrashisOptimistic's picture

How did their GAAP earnings look?


Not interested in any other kind.

Tue, 07/08/2014 - 17:49 | 4937064 NotApplicable
NotApplicable's picture

GAAP? I don't think that's generally accepted any longer.

Tue, 07/08/2014 - 16:41 | 4936813 Chuck Knoblauch
Chuck Knoblauch's picture


Someone tell me how I can manipulate EPS?

Did you say reduce common stock outstanding?

You win a cheep cigar.


Tue, 07/08/2014 - 16:52 | 4936851 AccreditedEYE
AccreditedEYE's picture

Short Vol... Your easiest way to play this game. Take profits and buy gold.

Tue, 07/08/2014 - 16:56 | 4936866 Chuck Knoblauch
Chuck Knoblauch's picture

I'll buy PUTS too.

On all the indicies.

Tue, 07/08/2014 - 17:06 | 4936906 AccreditedEYE
AccreditedEYE's picture

They will roll over you like a bug.. Ask the old timers here.

Tue, 07/08/2014 - 17:13 | 4936939 CrashisOptimistic
CrashisOptimistic's picture


In a world of grinding oil scarcity, own farmland, at the bottom of a mountain that flows water to you without help.

Tue, 07/08/2014 - 16:42 | 4936816 John McCloy
John McCloy's picture

2008 is gonna look like a cake's all good...American taxpayers got this...everyone is too big too fail now aside from us peasants..

Tue, 07/08/2014 - 18:16 | 4937164 Slave
Slave's picture

Like the 30's + nukes!

Tue, 07/08/2014 - 16:43 | 4936819 101 years and c...
101 years and counting's picture

SHOCKER!  insiders/execs (ie, the top .1%) jacking up stock prices by any means possible to boost their own wealth.  what will they do next? send job to china???

Tue, 07/08/2014 - 16:44 | 4936824 dot_bust
dot_bust's picture

This is a Mafia-style bustout.

The top executives in these companies authorize stock buybacks and dividends while exercising stock options. They exercise options to buy at low prices and then sell after pumping their own stocks up.

It's a pump-and-dump scheme on a massive level. It's also insider trading taken to a new extreme.

Tue, 07/08/2014 - 18:11 | 4937139 Itchy and Scratchy
Itchy and Scratchy's picture

"Come and say hello to my little friend'

Tue, 07/08/2014 - 16:45 | 4936830 JaKst3r
JaKst3r's picture

Apart from Executive share price target awards, are they protecting their companies value in case of a catastrophic crash in share value - less shares in the market less risk?

Tue, 07/08/2014 - 16:48 | 4936839 Peter Pan
Peter Pan's picture

The day is approaching when big banks and other big corporations will in combination stand up for election as political parties. This will circumvent any limitations they presently face despite the support of the Supreme Court.

The banks already own the populace through debt and these loans for share buybacks s nothing more than a mop up operation.

Tue, 07/08/2014 - 16:50 | 4936842 buzzsaw99
buzzsaw99's picture

it is shocking how many very old and very large usa corporations have either mountains of debt or very little cash, sometimes both. the only difference between shareholders and secured bondholders in the end will be that bondholders should get at least something back (unless they get GMed or Corzined).

Tue, 07/08/2014 - 16:51 | 4936848 Drummond
Drummond's picture

Yellen gives a dead cat CPR. "c'mon bounce you motherfucker, bounce for Bernankesake" "Bounce you sonofabit.............fucking bounce why wont yer". 

Tue, 07/08/2014 - 16:53 | 4936854 Chuck Knoblauch
Chuck Knoblauch's picture


I'm still waiting for an answer.

Tue, 07/08/2014 - 16:56 | 4936869 buzzsaw99
buzzsaw99's picture

seriously? you can't think of a single reason why stock buybacks might increase share prices?

Tue, 07/08/2014 - 18:06 | 4937107 hedgeless_horseman
hedgeless_horseman's picture




Because way back in time, when P/E meant something, equity investors were buying and selling a stream of earnings, not just a bullshit narrative.   If earnings went up, then price would be expected to rise, too.

Tue, 07/08/2014 - 16:54 | 4936857 LawsofPhysics
LawsofPhysics's picture

Sounds like the last desparate moves of an addict.

Tue, 07/08/2014 - 16:54 | 4936858 Duc888
Duc888's picture



The best part about this whole scam is the sound of "Clickety-clickery-Click" on someones keyboard creating "wealth" and "Money" from debt / nothing.


Masters of the Universe.


Tue, 07/08/2014 - 16:54 | 4936861 LawsofPhysics
LawsofPhysics's picture

define "wealth"

Tue, 07/08/2014 - 18:20 | 4937187 Slave
Slave's picture

Obviously the answer is debt and cheap Chinese shit.

Tue, 07/08/2014 - 16:57 | 4936870 ToNYC
ToNYC's picture

Boo-Yah! juice, bring your jug.

Tue, 07/08/2014 - 16:59 | 4936877 joego1
joego1's picture

America- SOLD!

Tue, 07/08/2014 - 17:00 | 4936880 joego1
joego1's picture

It seems the American story told to the Sheeple at bed time seems to be quite different than what the  Wolves are talking about these days.

Tue, 07/08/2014 - 17:01 | 4936881 Bemused Observer
Bemused Observer's picture

Companies are being looted, pure and simple. These vultures will just strip the carcasses until there are just bleached bones left.

I wonder how many of these businesses will fail in the coming decade, they will have nothing left to take advantage of any recovery that might come.

Maybe it's a good time to think of starting a company...not now, but in the next few years. If we DO ever get out of this mess and start growing again, there may be opportunities for people to step in and take market share from some of these behemoths that are going to be pretty crippled after being stripped of all their money.

Tue, 07/08/2014 - 17:03 | 4936890 Bemused Observer
Bemused Observer's picture

Oh, and I should add, do NOT let your company 'go public'...keep it as far away from Wall Street as possible. NO professional CEO's...keep your business out of their clutches.

Tue, 07/08/2014 - 19:00 | 4937387 Ludwig Von
Ludwig Von's picture

Plus 50. And also, do not lend from any bank or financial entity.

Tue, 07/08/2014 - 17:44 | 4937039 nowhereman
nowhereman's picture

Makes you wonder how many times the company has been rehypothicated?

Tue, 07/08/2014 - 17:04 | 4936892 css1971
css1971's picture


increasingly more

Please don't.

Tue, 07/08/2014 - 17:06 | 4936909 Atomizer
Atomizer's picture

Global currency reset button nearing. Corporations are now using the balloon loan approach to kick the can. 

Tue, 07/08/2014 - 17:07 | 4936910 JenkinsLane
JenkinsLane's picture

In the land of the option, the buyback man is king.


Tue, 07/08/2014 - 17:07 | 4936911 SillySalesmanQu...
SillySalesmanQuestion's picture

"Lets face it, they're going to nail us anyway... so we might as well live it up, have a good time, toga, toga, toga..."

Tue, 07/08/2014 - 17:09 | 4936925 Nico Bellik
Nico Bellik's picture

OPM at it's finest!

Tue, 07/08/2014 - 17:19 | 4936955 ThisIsBob
ThisIsBob's picture

Anybody have a handle on the insider selling trend?

Tue, 07/08/2014 - 17:21 | 4936959 JenkinsLane
JenkinsLane's picture

When I was in school this was known as the problem of corporate governance, derived from the

separation of ownship and control between management and shareholders, which was to be

solved by incentivizing management to act in a profit-maximizing manner through the use of



The reality now, as so shrewdly pointed out by Tyler, is that this practice, whilst beneficiial on

the surface, has now become corrupted like everything else. The fundamental problem is

people have no morals or ethics anymore. In an age of activist shareholders, aka hedge

funds, where the only thing that matter is the P&L that quarter, if a company's management

is not gaming the system they will be replaced by another who will; it's another race to the

bottom. Somewhat bizarrely, it's gotten to the stage where corporate managements are

already acting as if the company had been taken over by private equity firms. The only

difference between current corporate managements and private equity firms is the latter

can screw everyone else even more by structuring the company in such a way through

tax havens that next to no corporate tax is paid. Today's private equity firms are simply

the corporate raiders of the 1980's in drag.


Around 10 years ago a shrewd DC commentator said the prevailing attitude was "grab

whatever you can before everything falls apart."




Tue, 07/08/2014 - 18:07 | 4937118 kurt
kurt's picture

Remeber Kurt's Sign of Financial Collapse:

When you see or hear a story of people slamming on their brakes to grab cash blowing in the streets, that is the begining of the collapse. Why? The innermost will know it's coming down like the Trade center before anyone else. In their haste they will grab as much cash as they can and head for the airport or Mexican border. A few, inevitably, will leave a bundle on the roof of their car or unsecured in some other fashion. Hence the cash blowing in the street.  I'm 60 and have seen this "sign" actually happen on several times. You see, those who know how ponzied up everything is, with the quadrillion overhangs, and paper fraud, aren't able to know how far "down" is; hence the rush to get out of Dodge.

Tue, 07/08/2014 - 17:24 | 4936968 Son of Captain Nemo
Son of Captain Nemo's picture

Why we should even care at this point with everything else we are witnessing and have witnessed since the bank bailouts 5 years ago...

The only difference today is that if this had happened 30 years ago not only would you see them dissolved, but the CEOs would be going to a "pound 'em up the ass" prison along with the lawmakers that made it possible!

Now it's simply ignored. 

2008 really was our last chance to get it right and of course we failed the ultimate test and proved that we can tolerate just about anything that gets thrown our way from more wars of choice to illegal immigration with no holes barred and moar "False Flags"...!

Maybe President remus has it right.  We really are "exceptional" IN EVERYTHING WE DO!

Tue, 07/08/2014 - 17:35 | 4937007 hangemhigh77
hangemhigh77's picture

Can you say Ponzi on steroids? When this one blows it's gonna leave a massive crater. All the execs will be on some South Pacific island imagining the carnage they left behind.

Tue, 07/08/2014 - 17:47 | 4937045 Itchy and Scratchy
Itchy and Scratchy's picture

Amen brother! Can't believe the Net Cash vs Debt stat!

Tue, 07/08/2014 - 17:41 | 4937031 NOTaREALmerican
NOTaREALmerican's picture

Man,  ya gotta hand it to these smart-n-savvy people they sure know how to run a scam.

Tue, 07/08/2014 - 18:02 | 4937105 kchrisc
kchrisc's picture

I always wondered how the banksters were going to get that $2tril.+ in "excess reserves" out in the economy where it can be converted into a) claims on real property ("debt-fencing") and 2) finish destroying the sheeple with price inflation.

Now I know.


"Banksters without heads collect no debts."

Tue, 07/08/2014 - 18:05 | 4937110 orangegeek
orangegeek's picture

corps read like bagholders - buy at tops, sell at bottoms


or perhaps execs sell at tops whereby corps buy and then the corps go to hell, but the CEO's are just fine


it's a wonderful world

Tue, 07/08/2014 - 18:09 | 4937127 world_debt_slave
world_debt_slave's picture

dog eat dog world and the 99% are dogmeat

Tue, 07/08/2014 - 18:16 | 4937144 novictim
novictim's picture

We citizens are all the muppets.

File this story under the heading:  Privatizing Profit / Socializing Loss

If our democracy was ever going to stop this corruption it would have done so by now.  

Our Democracy is officially dead.  Ruin is inevitable.  What will come next to replace the current corporate Feudal State?

Tue, 07/08/2014 - 18:22 | 4937199 Itchy and Scratchy
Itchy and Scratchy's picture

Bernie is sitting in his cell shaking his head in disgust!

Tue, 07/08/2014 - 19:15 | 4937444 GooseShtepping Moron
GooseShtepping Moron's picture

Good analysis, Tyler. Pieces like this one are the reason I like this place. Thanks.

Tue, 07/08/2014 - 21:33 | 4937966 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

As a novice in the world of finance and economics one of the things I have noticed is that these type of problems take a lot longer to bubble up to the top.  I don't know exactly why things take so long to play out.

Tue, 07/08/2014 - 22:37 | 4938213 ms8172
ms8172's picture

I can't wait for this MF to POP!!!

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