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The Amazing Chart Showing What All The Debt Issued This Century Has Been Used For
Over the past three years, we have beaten the topic of soaring, record stock buybacks to a bloody pulp.
Starting in 2012, among countless other pieces on the topic, we wrote "How The Fed's Visible Hand Is Forcing Corporate Cash Mismanagement" and "Where The Levered Corporate "Cash On The Sidelines" Is Truly Going", i.e., buybacks", then in 2013 with "$500 Billion In 2013 Corporate Buybacks: Half Of QE", then again in 2014 in "Here Is The Mystery, And Completely Indiscriminate, Buyer Of Stocks In The First Quarter" and finally two days ago "It's Not The Record High Debt That Is The Biggest Risk, It's [the dropping cash flows]", we have constantly explained that the primary source of stock buying over the past several years have been corporate management teams repurchasing their own shares using ever greater amounts of debt as a source of funds, in the process boosting not only their stock price but their equity-linked compensation and bonus pools.
This couldn't go on for ever, and on Monday, Goldman which may or may not have read our prior piece "Why The Stock Buyback Spree Is Ending", issued its own loud warning when it finally noticed that corporate debt has doubled in the past several years and said "so, does this mean the levered re-cap is dead? In our view, the answer is yes for the broad market."
Today's market action seems to be confirming just this.
This progression of events had been both predicted and documented on these pages.
Yet one thing that is absolutely stunning, is something which SocGen's Andrew Lapthorne pointed out a few days ago, in a chart which compares the changes in net debt with net buyback activity.
The chart below shows something absolutely amazing: while there are clearly other fungible "sources and uses of funds", what all the leveraging activity of the current century boils down to is the following: virtually every single dollar raised through issuance of debt has been used for one thing - to buyback stock!
To be sure, other sources and uses of cash can be comparably tracked, and this is not to say that companies haven't used their own organic cash creation, declining as it may be, for other purposes such as spending on CapEx and M&A, but the chart does show that in isolation from all other sources and uses of funds, several trillion in fungible debt has had just one simple use - to boost stock prices, and to make management teams richer, while letting bondholders managing other people's money foot the bill for record high management bonuses and stock prices.
Behold - what all the debt issued in the 21st century (and really ever since 1990) has been used for:
Source: SocGen
* * *
And the punchline: buybacks are finally starting to drop... but debt just soared to new all time highs.
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Can I use buybacks to purchase my own debt?
Why don't you just sell your debt for the same amount and call AAA+++ debt and use that money to pay down your debt?
Coinhead reccomends you go into debt to buh Bitcoin.
"virtually every single dollar raised through issuance of debt has been used for one thing - to buyback stock!"
Just as virtually every single dollar raised through TAXES has been used for one thing - paying the INTEREST on that debt!
I can't tell anymore if all this shit is like watching a train wreck in slow motion or in fast motion. I guess it's like watching 10,000 train wrecks all at once at all different speeds?
fuck it...keep stackin' that phyzz, folks...shit's still on sale for as long as you can get it!
Doesn't anybody put scales on graphs anymore?
Even half a million per month is not much.
I will assume "USD1000/month" but hate making asses of us all.
What's most worrying is the last part of the plot, where buybacks are falling, but debt is increasing. It seems the paradigm is shifting as we speak.
If you don't make a real profit, you still need to pay your employees.
so how could they get rid of their employees...
War
Buyback stock in... Lockheed Martin, Northrup Grumman, Raytheon, & the AIPAC IPO.
There ~ Fixed it!
Just likie 1929 when 40% of new debt was for stawks.
Your dimness, is only outshined by your ignorance coinhead.
can the US use debt to buy bitcoin, and then switch to a bitcoin backed dollar, er, Fiat. I want to call the new currency Fiats. Yo, how much they paying you an hour? Bruh, they be slaving me @ 5 trillion fiats.
Perhaps 5 trillion Obamas has a better ring to it...
"You lost this one, bro. Go home" -Obama thug at Mizzou
The US could make some trillion dollar bitcoins, then all problems are solved ....
I wish I would have seen this coming....I could have made hundreds of dollars being one of those stock market picker guys
" When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Chuckie Prince July, 2007
no...
here is ur amazing fucking chart..
i mean seriously - both take downs end at the same fucking PHONY paper price point....so fucking blantanly retarded and desperate....
i think we brokt it bad this time
Suck it, real economy!
get it?
https://www.youtube.com/watch?v=5-LeKkUsMpE
Loudon WainWright-The Sh*t Song
So all the CEOS owned stock in their respective companies.
The markets were not liquid so money was injected into the system so that the companies could afford to pay the CEOS and Board Members what they wanted for their shares.
Carving out the pumpkin, except the pumpkin and the knife dont belong to you, and you are in someone elses kitchen and you helped yourself to the pumpkin pie that someones grandmother baked for her grandchildren and ate the entire thing in one sitting.
Thats what debt was used for.
Seven years of " the recovery is at hand " and on the 8th year like all presidents before the "great one " it too will implode.
HAHAHAHAHAHAHAHAHAHAHAHA. Diocletian had nothing on these retards.
FUCK YOU, BUYBACK REACH-AROUNDERS!!!!!!!!! BASTARDS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
debt good ....more pay bad! Wall Street is going to be sorry when their vanities all burn in that bonfire....along with a few bankers
Did anybody know that Facebook has been convicted for spying on people who don't use facebook in Belgium?
They have to pay 250K per day that they break the conviction.
And as Brussels is the capitol of Europe, that may go for the rest of Europe.
And then there are the rest who will follow.
Binge, registers every keystroke you make, even if you don't use it.
McAfee scans you're entire computer and transfers the entire inventory daily to it's own servers.
...
...
Maybe the spying of non US citizens will someday stop... which is actually a act of war...
So soon, most of these big companies that lead the market, will need to use their money to pay for the fines!
LOL Europeans pretending they can stop the American web, spying and military machines. Bigger LOL Europeans pretending they care and are not completely in on the game. A few Dutch lady politicians who need to shave their underarms flapping their gums to make a few uppity ex-hippies feel justified while the backroom deals for permanent war, permanent financial repression, and permanent fascism roll on
LOL "act of war", as if most of US actions don't belong in that quaint old definition from a bygone age
I'm not saying I like any of it, just remarking that the game is done, finished. Get back in your Matrix pod for you will be harvested too.
Just read the sticker on your CPU correctly: "virus inside".
Miley Virus ?
my bad..i thought they said barebacks
Borrow at zero percent, buy stock, stock goes up 10%, before earnings report - sell stock and bonus off profits
Loudon Wainwright - Down Drinking At The Bar
https://www.youtube.com/watch?v=OedLAodBJ3k
Exceptional.
Oh, the new bondholders were in on the joke. They were mostly the same people who owned the stock in the first place.
Uncle Sugar still charges huge rates of corporate tax. Of course, only small fry without access to bond markets actually have to pay them, making it harder for them to grow big enough to be a threat to anybody important.
All the big boys had to do to avoid corporate tax was switch from equity financing to debt financing. Dividends are taxed; interest payments aren't. And their incentive to switch got bigger as interest rates dropped.
Management got higher prices for stock options; former shareholders, now bondholders, lost less of their profits to tax and if anything had more effective control over the firm than ever. Everybody who mattered won.
(Who needs voting rights when you can just threaten to stop rolling over a company's debt if the CEO turns out to be a moron and nobody on the board has the balls to throw him overboard? Works like a charm in Latin America.)
The proles wound up paying higher taxes on their already pisspoor wages, but who cared about that?
Go ahead Janet, make my day and raise those rates.
She's gonna be too busy buying up the S&P 500.
Does she feel lucky, ... does she?
Corporate executives need to jack up the share prices so their options are "in the money."
So what do you do when you reach peak buybacks, you look forward to peak selloff and then repeat.
#Back-buys Matter
So companies have loaded up on debt to buy back their stock, which is declining in value……
for WAR? IM SHOCKED!
There's nothing wrong with this. It's a transfer of money from dumb people who lend to smart people who cash out and loot corporations. Corporations should be poor.
Besides, later some corporations can buy back their own debt at a lower price.
< Hookers and blow
< Stock buybacks
The music stops for many companies, when they can no longer pay their debts.
That's when the culling climbs up the Corp ladder. Unlike the working stiffs, the big shots will have golden parachutes.
If that's not enough, then M&A's start: Big fat fish eat skinny and smaller fish.
I just photocopied some money I invented...who wants to borrow some?? Reasonable rates!
Corporate buy backs will only end up with that stock being released again. The issue is when the buy-back reaches controlling interest as defined by law, that is the 18.5% through 21% level, because at the level of required reporting and then being the largest voting block, the government gets to look at the corporation, the individuals that run that corporation, in a very different light and the court cases will start to fly, especially when a jury is convened. The won't be able to jump ship without liability.
Go figure.. maybe the Fed will start picking up stock in it's already established Fascist manner, Bank Trust Funds... court apointed.