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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XBroker1's picture

So we have built in growth? Winning! lol

CPL's picture

They will be at DOW 36000.  Just sit, wait and watch the bumble fucks race towards their own end.  Remember no one will even notice the 0.001% missing or remember since this has been done before with other 'bloodlines' we've needed to get rid of before.  History does repeat afterall and this is for the best for everyone to get it through their thick skulls that once the livestock is fed, then they are eaten.

The Real Tony's picture

The DOW should fall into the 3,500 to 5,000 range first.

Putrid_Scum's picture

Our System has been collapsing since 1914, with a brief respite mid century.

The collapse is now in its final phase. No one is to blame. It's a System problem.


The Real Tony's picture

Once the bank bail-ins start in all the G20 nations it's over.

new game's picture

with the sherrif  on the payroll.

HRClinton's picture

As long as the corporate buy-backs result in the shares getting donated to the employees, it amounts to ownership shifting to employees, rather than Joe Public.

GodHelpAmerica's picture

We --the informed and educated masses--knew this since 09. But here we are 8 years later and the destruction of the economy through this method continues.

Arnold's picture

It would cost me a fortune to buy back all the Article Shares I've made, just from this site.

Good thing I don't Teat or Faceplant.

yogibear's picture

Central banks cannot and will not allow price discovery.

PUNCHY's picture

Demographics and reality will show them otherwise Bearperson.

Give Me Some Truth's picture

"Central banks cannot and will not allow price discovery."

True. The puzzler is why the "watch dog" press does not care about this. 

The truth - the "real news" - is that markets and prices are rigged. The job of the "fake news" press is to conceal this real news.


new game's picture

not even sure the truth maters anymoar....


HRClinton's picture

"Central banks cannot and will not allow price discovery."

Nor will the Plunge Protection Team (PTT), which might as well be the Fed.

NoWayJose's picture

Cash on the sidelines is a fantasy. Exactly 'where' is this cash? Sitting in a savings account paying 0.05%? Or a nice one year CD earning 0.45%?

Nah... more likely cash on the sidelines has been spent on healthcare, food, marijuana, debt, etc

CRM114's picture

I have cash on the sidelines.

It's earning 1.0% to 1.6%

Still a lot better than being in a rigged market.

The reason households are not in stocks is not because of Crash PTSD, it's because fundamentals are out the window. The markets are all rigged, and whilst we don't know exactly how, it's damned obvious that they are. It's also obvious that there will be another crash soon. This guarantee of uncertainty means people are saving more - those that can, that is. I'm sure you are right that many have been forced to spend a lot more.

CRM114's picture

Wing Attack Plan R,

but whilst independent action is the only way to go, I don't think "nuclear combat toe-to-toe with the Rooskies" should be a part of that Plan.

The Real Tony's picture

Ponzi's only work in your favour when you get in at the very start. Win or lose only someone with a strong dislike for money would be putting money into stocks today or recently. It's to the point for me that I'd never buy a gold stock unless the major market indexes fall at least 75 percent. So I put it all into gold bars.

ThirteenthFloor's picture

+1. "Cash on the sidelines" is one of those classic propaganda lines designed to tell the masses... there is 'a hope' in the future. Central banks have done everything to discourage cash on the sidelines.

"All the chips are in" is more appropriate. To the guy that has the cash on the sides you are in the tiny minority...look around at the masses.

The Real Tony's picture

It's to the point where there's been no new buyers of stock for years and all that's is happening is the central bankers are trading shares back and forth with each other to push share prices higher. The central bankers should all be locked up for life with the keys thrown away.

hola dos cola's picture

Invest in your local community.



2_legs_bahhhhhd's picture

The cash on the sidelines bullshit is the fiat they haven't printed yet, much like the argument of gold in deep storage has yet to be mined, or that borrowed currency has yet to be earned.

The sheep have borrowed 30-50 years into the future to maintain their ever decreasing standard of living.

max_leering's picture

Nothing to see here... move along peasants

Bank_sters's picture

When stawks go down- the 401k/Pension crowd get's fucked.   And good.   And hard.  

Iconoclast421's picture

Only need one. Apparently.

GodHelpAmerica's picture

Trickle up economics.

TheRunningMan's picture

Financial masturbation...

Boris Badenov's picture

They ought to be doing the opposite: Sell equity to redeem debt.

hola dos cola's picture

You are right. Today's market won't have it though.

Ban KKiller's picture

Cheap debt is classic"tar baby." Ha ha ha ha. Add two pinches of leverage and.....bam, it blows up. Naturally the bosses are well out of the house.

Five Star's picture

Ain't we forgetting something? Where are the ETF's? 

ETFs have purchased over $4 trillion net in corporate equities since 2009. For better or worse, investors increasingly perfer to hold their stocks in the form of ETFs so while household ownership of stocks is down, their ownership of ETFs is through the roof. So no... corporations are not the only significant buyers since the financial crisis...

Vardaman's picture

The companies should be the major buyers, as their stock is trash.  The institutions should be the major sellers, as they are mismanaged to hell and back and need cash.  So endeth the lesson..

The Real Tony's picture

But the companies are paying a 4 to 500 percent premium over and above the fair market value of their shares today. The major stock market indexes are all about 4 to 500 percent overvalued.

lester1's picture

It's not a Ponzi scheme since the unaudited Federal Reserve's PPT are able to create endless electronic money to prop up the stock and  bond markets. 

Lebronn Jakens's picture

everything in the united states is unauditid except the citizens.  companies get buy with anything. 

MrBoompi's picture

Sorry, but there is only one owner of ALL stock.  Cede and Co, a wholly owned subsidiary of the DTCC.  What the rest of us "own", from the lowly mutual fund investor to the public corporations themselves, are derivatives of the actual stocks.  The investors are granted certain contractual rights, but are not the actual owners.  The contractual rights shift from investor to investor via trades, but real ownership never changes.  

el buitre's picture

And the ownership of DTCC is a closely guarded secret, but most probably the Rothschild cabal.  It is amazing how few of the self-anointed ZH commentariat are aware of this yuuuge fact.  Thanks for posting.  The Cede company name is a typically ironic word play  Illuminati piece of slightly hidden control.  One has ceded one's rights to actual ownership of stocks.  They think they have avoided karmic repercussions by giving the Sheeple these hints and thus the muppets have accepted their swindle with their free will.  I understand that all the paper records were "accidentally" destroyed in a flood of the Cede vault during Hurricane Sandy.  Interesting that they forgot to make the highest security depository vault waterproof.  Oooops.

If the Dow goes to 100,000 and a cup of coffee cost $500, how far ahead are you?  Ask former investors in the Zim stock market.  The PPT probably can stop a nominal collapse of the rigged equities market, but it can't stop hyperinflation when the time comes.

MrBoompi's picture

Thank you for the post.  The cabal makes money from each transaction, so they needed a way to increase the number of transactions without cumbersome "paperwork". You know, like actually sending stock certificates to owners.  Under the old system HFT would have been impossible.  It reminds me of why they created MERS for avoidance of cumbersome paperwork for mortgages.  But putting the paperwork aspects aside, the real benefit is the actual ownership of the stock.  You buy 10,000 shares of Facebook, but you don't actually own it.  People don't realize this.  

Putrid_Scum's picture

If my memory serves, they call it a "System of collaboration for the common good." The "it" is the economy.

They never mention who owns it !!! hahshahshaha

And if you were really smart, or have read The Reset, you'd know. It's amazing how stupid humans are.... they actively support a system that screws them.


brain_glitch's picture

I didn't know about Cede and Co. Damn.

There are rabbit holes in the rabbit holes.