There Has Been Just One Buyer Of Stocks Since The Financial Crisis

Tyler Durden's picture

When discussing Blackrock's latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform."

While the intention behind the statement was obvious: to pitch Blackrock's juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs.

In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS' strategist Andrew Garthwaite writes, "one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap."

What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

Why this rush by companies to buyback their own stock, and in the process artificially boost their Eearning per Share? There is one very simple reason: as Reuters explained some time ago, "Stock buybacks enrich the bosses even when business sags."  And since bond investor are rushing over themselves to fund these buyback plans with "yielding" paper at a time when central banks have eliminated risk, who is to fault them. 

More concerning than the unprecedented coordinated buybacks, however, is not only the relentless selling by institutions, but the persistent unwillingness by "households" to put any new money into the market which suggests that the financial crisis has left an entire generation of investors scarred with "crash" PTSD, and no matter what the market does, they will simply not put any further capital at risk.

As to Fink's conclusion that "investors have begun to put more of their assets to work", we will wait until such time as central banks, who have pumped nearly $2 trillion into capital markets in 2017 alone, finally stop doing so before passing judgment.

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VinceFostersGhost's picture

 

 

 

If anything goes wrong....they should be executed.

 

Obama was all about destruction....any while he was doing that they just kept propping up the market.

philipat's picture

In fact, actually, the main buyer has been the "Fed/ESF/BIS/CB" Complex. But that, of course, is opaque other than the SNB, a/k/a the World's largest Hedge Fund.

new game's picture

this is yet another bubble created by uber low interest rates-stawks themselves a derivative of low interest rates.

janet the dumbest fuk since bernank doesn't see a fuking thng here, cept the results of her indirrect  "prosperity put". never mind that this prosperity flowed mainly to the top 10 percent and the pensions are dependant on this flow to remain solvent. interesting endgame coming, to say the least...

ATM's picture

The true buyer is the lender. And seeing that the Fed is the backstop to all bad debt it is the Fed itself that has undertaken this massive undertaking.

What is the real backdrop to this debt fueled mania is the dollar itself. The "store" of America's and much of the worlds wealth. When the debt crashes the wealth of the  world will have been transferred from us to them.

That is what the Fed was designed to do 104 years ago. It was to reinstitute feudalism where we are the serfs and they are not.

Now where is my pitchfork?? 

curbjob's picture

Ha, to paraphrase a Wharton alumni  guy I know;

"Stock buybacks are a prudent way of saving for a rainy day . 

During the next economic downturn ,  corporations can finance operations by selling stock instead of borrowing"  

 

What could go wrong ?

Osmium's picture

Sounds like a great plan.  Buy high sell low?

xrxs's picture

Buy high, sell low. Collect bonus. Rinse repeat.

Ghost of PartysOver's picture

Another way of looking at it is:

Corporate Buybacks reduce the supply of stocks.  Remember the Economic Law of Supply and Demand?   With smaller supply it does not take much demand to send the markets higher.  Does not matter where the demand comes from; CB's , Institutions, Mom and Pop, more corporate buybacks.....

philipat's picture

Which proves what a waste of fucking space these Business Schools are. In fact, when stocks are bought back they are taken into Treasury and retired, without which there would be no boost to EPS. If a Company wants to issue new equity, it must create NEW equity and go through the New Issue process, including a Prospectus etc. So what your Wharton friend told you is complete and utter BS.

GUS100CORRINA's picture

What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

My response: Just not sure how I see the "greatest debt-funded buyback spree in history" as a GOOD THING.

So companies are MORTGAGING THEIR FUTURE in order to make stock performance better in the short run and paper over current sagging business results. Should anyone be surprised by this behavior since this is exactly what our GOVERNMENT and CB are encouraging? 

Something is very wrong with this thinking. We call this the OBAMA ECONOMIC PROGRAM designed by KEYNESIAN ECONOMISTS.

new game's picture

and that leads to the officiers, board of directors selling options and (of course) exercising new options.  yes, we are talking about billions of dollars of wealth right into their income, cycled into foundations, tax exempt vehicles, ect.  and as we all know the law makers have passed tax law for the rich. 

another travesty courtesy of the fed, by the rich for the rich, because they are special and doing gods work for the minions. any wonder people are pissed, and don't even know wtf is really going on? most, know they are be fuked, but don't understand this thread OR/and are willfully uneducated.

change is kinda hopeless, short anger boiling over when enough plebs just get pissed. do we really have to get to venzualla level? bernies say yes, and i truely believe he would be our prez if the cunt hadn't sethed bernie...

hope diminishes as one discovers the true workings of the fed circa 1913 and where we are today...

rado_watching's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobproplan.com

Md4's picture

As with the shack racket leading up to 2009, a LOT of ordinary folks are in this too.

Buybacks are possible because of relativity cheap money.

However...

...in a slo-mo train wreck of a now-hollowed out western economy, they are NECESSARY to keep all the 401k's (fogging up their monitors daily) quiet and relatively sanguine.

The REAL shit hits the fan when the fairy tale of portfolio values goes poof.

Chupacabra-322's picture

Personally, I don't know why I continue to waste my time posting here. Based on the following I posted quite sometime ago.

The vast majority of ZH's especially the veterans here understand fully that there are no more "Bear or Bullish" markets. There's only Fascism & Ponzi.

"If central banks purchase stocks in order to support equity prices, what is the point of having a stock market? The central bank’s ability to create money to support stock prices negates the price discovery function of the stock market."?-Dr. Paul Criag Roberts

"These questions came to mind when we learned that the central bank of Switzerland, the Swiss National Bank, purchased 3,300,000 shares of Apple stock in the first quarter of this year, adding 500,000 shares in the second quarter. Smart money would have been selling, not buying.

It turns out that the Swiss central bank, in addition to its Apple stock, holds very large equity positions, ranging from $250,000,000 to $637,000,000, in numerous US corporations — Exxon Mobil, Microsoft, Google, Johnson & Johnson, General Electric, Procter & Gamble, Verizon, AT&T, Pfizer, Chevron, Merck, Facebook, Pepsico, Coca Cola, Disney, Valeant, IBM, Gilead, Amazon."
-Dr. Paul Craig Roberts

http://www.zerohedge.com/news/2015-08-28/dollar-spikes-risk-slides-after...

Wonder what the 2017 figure are?

OpenThePodBayDoorHAL's picture

"if central banks purchase stocks"

You can stop right there.

You can no longer call it "money". And you can no longer call them "stocks".

What we have are Equity Participation Notes. Even worse than debt-based "money"

Lost My Shorts's picture

In Finance 101, they teach you that a company's capital structure consists of debt and equity; and that the appropriate ratio of debt to equity depends on interest rates.  If interest rates are high, you tend toward less debt and more equity.  When interest rates are low, the opposite.  As interest rates have plunged to historic lows and stayed there permanently, CFOs are simply following the formulas they learned in Finance 101.

If interest rates ever rose, it would be fugly.  But that won't happen ever again.

new game's picture

true, basic math. japan style finance. trillions of treasuries treated as credit is a fx game of thrones...

which nation looses first?

29.5's picture

Finance 101 should be renamed Finance lol

eclectic syncretist's picture

Sounds like the Fed is turning our capitalism into communism. What if the Federal Reserve is actually a Russian operative designed to eventually own all public companies in the US, converting us to centrally planned communism? 

Give Me Some Truth's picture

"Re: The Fed and communist plot?"

For all we know, this could be the case. It's the most secretive body in the world. Nobody was elected. All deliberations are in private. They report only what they want to report. No one knows what they are really doing. 

So some people at least want them to be audited. 

And every member of the "watch dog" press corps says, "No. Do Not Audit the Fed. We trust them. They must be allowed to do what they want in secret ... for the good of us all."

And this is the real word, not satire. It's really a dark comedy.

nmewn's picture

It is very much the case, the Fed is by any definition socialist.

War & welfare my friend,  without all that pesky having to pay for any of it  ;-)

Creative_Destruct's picture

Yes, it is indeed a contradiction/cognitive dissonance that, for all the MSM's talk of "openness" and "transparency" they are strongly biased against calls to audit the Fed.

Reason: most likely it would expose these "wizards behind the curtain" as being the phonies they are, how they are obviously owned by the banking elite, reveal how desperate the financial situation truely is, and how state central planning is growing unabated, rushing headlong toward the far left end of socialism/communism political spectrum.

Liquid Courage's picture

Yes, while all the wealth rushes headlong in the opposite direction.

new game's picture

just think of all the CB s as the power structure of the world. they are running the world, as a cabel of highest order of control, currency creators which every modern day human lives and dies by...

craddle to birth they control the outcome, directly and indirectly.

every other member of this  elite club is subordinate getting their payday from the policies created by gov.org and corporate law. add in the criminal eliment and walla the cunt is formed...

cunt defined; all illegal activties, including their deep state operatives that break the exisitng laws to gain power(and access to the paydays) and get elected.

SeattleBruce's picture

Except for a few independent examples, and people themselves on the internet, the press is dead.  They are zombies, making every effort to kill off the truth., instead of seeking out and exposing the truth - which is their highest calling.  "Power corrupts, absolute power corrupts absolutely."  That has caused the death of the press, and American exceptionalism, inasmuch as it existed across the fruited plains.

NAV's picture

Good point. And chilling that America is now home of the USSR's radical left. The banker-owned media gives positive coverage to the radical left’s agenda, portraying this country “as a giant jobs fair populated by evil ‘white’ people”  who must be displaced by streams of third world socialists at the same time it denounces America’s free enterprise, supply and demand economy.

Multilingualism, multiculturalism, divisive ethnic tribalism, churches steeped in Liberation Theology (the teaching of Marxism, socialism and pacifism as morally good and supported by a perverted interpretation of holy scripture) and the Sanctuary Movement have and are being used by Saul Alinsky community organizers such as Obama and Caesar Chavez  to create a utopian socialist nation on America’s shores. Chavez, like Obama, was a “coat and tie” executive for Alinsky’s Community Service Organization before assuming the garb of the “poor campesino” to play the role of a martyr in the farm worker project.

And, yes, the Fed itself appears to be infiltrated by radical left operatives; else why the perversion of the stock market as a means of wealth redistribution to the international oligarchs and their multinational corporations with the intent to impoverish America’s middle class families. Dr. Carroll Quigley in his book Tragedy and Hope spilled the beans on this plot to destroy the United States.

Yog Soggoth's picture

And now we have Aldis and Trader joes (Europe) selling us groceries. This is part of the plan.

Southeastern Grocers - WikipediaDelhaize Group - Wikipedia

This corporation of America sucks. In Sarasota they have driven almost all the small restuarants out and replaced them with Jimmy Johns, Wawa, Culvers, Peaches, KFC, China 1, ect.  I feel better about eating out of a taco truck owned by an illegal immigrant, and that's just wrong. Have you noticed that if you go to 6 grocery stores they all pretty much have the same brands? The corporation was the answer to anti-monopoly laws. Of course I am focusing on a small part of a big deal, being our food source, and the point is that CEOs are running off with the money and selling out to non USA interests while the investors only care that they make a profit off the buyout or merger. Any other country, with the exception of Commie EU, would have enacted protectionary laws for the sake of currency stability and food supply. This is why Eastern European countries and India dont just let foreigners buy everything up. I really wonder how much of Florida and Hawaii is actually owned by the USA.

fishpoem's picture

Screw the commie downvoter. This little essay is right on the money. The mass of decent American citizens, cheated by the very government their taxes support, should read it. Truth these days is a rare and priceless commodity.

OpenThePodBayDoorHAL's picture

Divide and conquer, so long as people think in terms of "gay" or "female" or "black" then they don't unite under the banner that covers the entire 99%: class.

Because if they ever got together as a class the odds are 319,999,000 vs. 1,000

sgt_doom's picture

Russian???

I dunno, but David Wise --- in his book, the Tiger Trap --- made a good case for the FBI being deeply penetrated by the Chinese military intelligence quite some time back, and since those Chinese military hackers hacked into the Pentagon and those defense contractors and stole the plans to ALL of the major American weapons systems around 2012, and then hacked into the OPM and stole over 25 million (last and most accurate count) of government personnel records, and now all we hear about is Russians. . . .Russians. . . .Russians, I would tend to look towards China.

Raging Debate's picture

Eclectic - It is Mussolini Fascism or corporatism. The path to alter it is campaign reform and ending lobbying. Then ending or nationilizing the Fed becomes an afterthought. People have to be so pissed they abandon partisan politics and ream Congress over and over until this happens. We arent there yet. 

SeaMonkeys's picture

I agree with what you say. The thing that frustrates me is that people don't understand that the bad actors are the entire Too Big To Fail banking industry that works in coordination with the Fed and other global entities. The TBTF banks are the ones that carry out the ponzi scheme. I'm referring to the U.S. dollar being privately issued debt which are loans, created ex-nihilo, and lent into the economy as an investment for the bank, not an investment into productive enterprise that would create wealth for America. Our country has been taken hostage by the entire banking industry, not just the Federal Reserve. 

Bernanke's QE isn't the only thing that we should be looking at. It's just the medicine the Fed used to deal with the illness. The real issue is the illness. It isn't going away. 

It is this difference between what we do now, and what we should be doing that caused WW1. The 19th century German model of banking and finance was directed towards lending into the productive sectors of the economy. The Anglo banking and finance model of the same period was the same as it is now in America and the UK. Banks and money are privately owned and exist for the enrichment of these owners. Lending goes to the highest bidder, regardless of the consequences to the country.

This is the Anglo world of banking and it's treasonous to the citizens of not only our country, but to the world because it turns the world into a colony where productive activity only occurs where the boss wants it to occur. The citizens become ghetto-ized.

Historically, Anglo rules of banking means that banks are active players in the economy, not conduits, as people like Paul Krugman want us to believe. Banks lend primarily for speculation. This is true without bringing the Fed into the picture. That said, bringing the Fed into the picture just makes the case all the more damning.

phatfawzi's picture

Fool me once, shame on you. Fool me 10 time, man that market keeps going higher maybe I should buy some.

bigkahuna's picture

Thats the key - it is the fed. If not directly then indirectly with extremely low interest rates. The fed controls this so called market - just before the fed goes away - they are going to have to start closing out their longs and going short in order to recoup their fiat. What I am not entirely certain about is how much profit the fed will make. They are going to need a very nasty overshoot to the down side if they want to make some real money - but then, who is going to service the short? No bankster in their right mind would get in front of that.

I would like some ideas as to how this would go down. The fed cant get out of the market because joe retail investor got his nuts clipped in 2007-2008. There is no one left in the game of any circumstance who is not already in on it (IMO).

Anyone have any ideas how the fed gets out of this? Let us set aside the lamp posts for now. I believe an exit now would be at best neutral for them. I also believe that running the press is at best neutral for them - though not positive on this one. Thanks anyone.

Putrid_Scum's picture

You guys have read Zerohedge for years and years ... and still don't get the bigger picture. 

It amazes me----and is slightly frightening since it means there's no educational solution.

There are now only TWO System Level choices:

A) A VERY BIG WAR

B) Let The System Collapse---AKA---The Reset

God Help Us,

www.beforethecollapse.com/2017/05/23/the-reset/

all-priced-in's picture

You forgot macroprudential policies!

 

 

 

/s/

 

 

 

XBroker1's picture

History has shown these are the methods of reset. No argument, but there's big money in the fear porn and prepping business. You're saying collapse or war while promoting your .com. I'm just sayin'. I'm 58 and have been told the world will end and the sky is falling since I was smoking pot and shagging young ladys in the back of my van.

Give Me Some Truth's picture

Re: "End game for the Fed"

I don't know how this will all end. My instinct, however, is to "short" the central planners. Or: Whatever they think they will achieve, I am certain the opposite will happen. History proves this with almost all centrally-planned major initiatives.

You make a good point about everyone who would be in the market is already in it. I focus a lot on the rigging of the monetary metals. I keep wondering how the prices can finally push through the never-ending "capping." I mean, who is going to place the "big buys" that make prices lift off? All the people (institutions/funds/nations) who could make these buys are the same people who want to keep sentiment for precious metals as low as possible. IN other words, these actors are all super fiat bugs. They hate gold and silver and if gold and silver "took off" their wealth and lifestyles would evaporate. The people who COULD change PM sentiment are the last people who would want to do that.

It would take tens of millions of "Joe Six Packs" - a genuine grassroots movement - buying as much as they could to move the markets. And this isn't going to happen because only one million or so people understand the concept of money. That is, 97 percent of the public cares nothing about precious metals. If they think about it today, they probably think those people who do believe in "pet rocks" are "kooks." The government's anti-precious metals propoganda campaign has been a tremendous success.

 

 

zebra77a's picture

The answer is easy. Path A or B or AB which one of the three gives the more incremental control?... The Feds or more aptly the families the own the feds (remember this is a PRIVATE corporation. If everyone in the world dropped the US dollar tomorrow the Feds couldnt organize a picnic. Thus a currencies only value is the trade that takes place under its sphere of influence. Because Russia and China are now delinking the US dollar only represents US gdp plus a portion of world oil trade. So expect war to resupress Chinese and Russian interests. 

Expect a UN dollar its coming..

bigkahuna's picture

Thanks All - I was sort of hoping someone would jump in with some whiz-bang theory of how it could work - I guess thats not gonna happen. If they ecide to take us to war - they are going to also have to blow the doors and wheels off of the economy. The military in service today has enough issues that the fed will have to rally "invest" in it and that includes a forced draft - which I am pretty sure would be the begining of a civil uprising.

If the fed went the war route - we'd eventually have a war, right here in our own front yards.

Yog Soggoth's picture

And for my next trick, watch me pull a rabbit out of this hat. Pulls squirrel out instead. Putrids right. It's reset, war, or kick the can till it disintegrates.

philipat's picture

Hey Vince, with the recent action it must be getting quite crowded up there? Has The Lord created a separate section for "Clinton despatchees" or similar?

VinceFostersGhost's picture

 

 

I don't know half these people.

GUS100CORRINA's picture

There Has Been Just One Buyer Of Stocks Since The Financial Crisis

My response: This artiicle confirms one point: DEBT (GOV'T, CORPORATE, PERSONAL, etc..) is the fastest growing metric, not the market. So the P/E measurements we are seeing published by everyone today are very understated to say the least and I am NOT talking about GAAP vs NON-GAAP accounting. The GAAP vs NON-GAAP accounting is more icing on the "P/E understatement" cake.

I believe D. STOCKMAN uses a CAGR (DEBT Growth vs. GDP Growth) measurement to make this point as well.

eclectic syncretist's picture

When debt grows and the value of the dollar diminishes (via inflation) the Fed oxymoronically states that the economy has grown.

hedgeless_horseman's picture

 

...and it has, in nominal terms.

http://www.zerohedge.com/news/2017-01-13/what-can-we-learn-looking-carni...

What is the con?  The con is that economic growth is both good and real.  It is most often neither.  The long con is nominal returns versus real returns. 

 

What keeps the con going?  Apart from greed?  Money printing.  

 

Please, understand that if the amount of money in a closed system doubles, the value of each monetary unit halves, and the price of everything, including stocks, increases 100%.

LawsofPhysics's picture

The average person is far too stupid to understand nominal versus real returns...