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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A is A's picture

Maybe before you start attacking the article and chart you should actually read what the chart is conveying. It's not supposed to add up to a hundred percent. Also, if you look at the source of the chart, it is from Credit Suisse not ZH so ZH didn't make anything up. Try and learn how to read charts and understand real investment research or go back to reading CNBC. 

The Real Tony's picture

As one can blatantly see we're still in a long term bear market dating back to the dot-com crash. 

Too-Big-to-Bail's picture

"Never show them the little old man hiding behind the curtain" -- The Great and All-Powerful Wizard of Oz

Give Me Some Truth's picture

My guess: The Great and Powerful Oz would not be for Audit the Fed.

Give Me Some Truth's picture

Toto, the world turns its lonely eyes to you.

novictim's picture

Hey!, it's a monetary economy.  Just add a zero.

GRDguy's picture

The interest on that debt is stolen from the wages of those companies' employees.

"We must make a profit to stay in business,"  those executives say.

Interest is deducted before profits can be stated.

That's why we can't give you raises, much less cost-of-living increases.

That's why I keep calling it lyin' and stealin'

adr's picture

You think a boss could pay himself $120 million out of what his company sells?

Not a chance in hell.

BUT THE STOCK MARKET CAN PAY HIM BILLIONS!!!!!!!

And that is why the stock market exists.

 

LawsofPhysics's picture

Who/what enables companies to do this?

 

It is THE FED you stupid fuck!

 

"Full Faith and Credit"

Rick Cerone's picture

When was the last successful IPO? Fraud has consequences.

803Mastiff's picture

Call them what they are IPOS

803Mastiff's picture

aka .... Circle Jerk aka bunch of monkeys attempting to hump a football. ....what about the 9 shares of stock traded for every single share of stock that actually exists

rosiescenario's picture

When you have corporate management rewarded with stock options and who can use the corporate assets as collateral, then obviously they will borrow money, buyback stock and enrich themselves while putting the corporation in future jeopardy due to its debt load.

More worrisome are the immense unfunded pension liabilities that still exist despite where the stock market now sits.

It appears that an advancing stock market has not covered these future debts to be paid to retirees. That leaves the currency debasement option as perhaps the only viable way to handle this problem, which is bullish for the PM's whose prices have been manipulated through the creation of "virtual paper PM's".

gm_general's picture

So basically you have a bunch of greedy thieves running and raping US companies for a big pay day - they will get money even if they screw up. They plot against their regular employees who do the actual work, who they fire in droves to hold up their precious stock. When is the lynch mob?

goldinpenguin's picture

Private pensions are underfunded and soc sec has 17 years left, medicare about the same.

Thank god we still have enough money to keep bombing and rebuilding Afgan, Iraq, Syria, Libya and parts of Arabian Peninsula not owned by the House of Saud. Fortunately we ignored the admonition of Washington to avoid foreign entanglements otherwise we wouldn't be having this much fun!

gm_general's picture

Hmmm.... so the Fed and most central banks are not buying US stocks, the only ones I could find were Israel and Austria. Those together cannot add up to more than a drop in the market bucket. These central bank entities are buying bonds mostly, from primary dealers, who I presume count as institutions in the chart. So they don't seem to be taking that cash from the bond sales and buying stocks. So it may be the mental patients running these companies are propping this up. So the big question is how long can they afford to do so?

VWAndy's picture

 Sideline money? If its in a bank it could be invested multiple times. Just saying.

VWAndy's picture

 Whats on the PPT books? That might be the real story?

Rick Cerone's picture

Fags at Blackrock aren't looking at the costs to raise a family of 4 in their queer society.

VWAndy's picture

 Without the PPT listed this might be farts in the wind.

geekz_rule's picture

PPT is there..they are just buying the junk corp debt, instead of equities? the new ninja?

geekz_rule's picture

fed buys bonds, which corp's use to fund buybacks. fed now owns the corps via debt, the corrupt c-suite cashes out while selling out the co., the employees, the pensions, etc.

what a lovely way for the fed to backdoor own the world, and enhance their monopoly of everything

just a new twist on the old expand>Expand>EXPAND--> Contract and crash.

P < P + I

BlauGloriole's picture

Ahem, here is that "money on the sidelines" again. Pray tell where does the money that is paid for the next share go? Back into the sidelines, right? Cash and securities are defined in number and can only change hands but do not disappear unless retired. The incremental transaction determines the price of a security but at present levels such valuation only creates ephemeral feel good numbers on brokerage statements. Beware!

Miskondukt's picture

Uuuummm...If the intent of that chart is to break down stock purchases by category, where's the rest? Those shares don't equal to 100%, unless the graph is depicting YoY changes to purchasing; however, the text before the graph appears to list it as share of total purchases. Soooo, what gives? 

silverserfer's picture

Just think of all the bailouts we wil see when they cant pay back all this cheap money they borrowed. 

theprofromdover's picture

When the dust settles, after all these Corporations go bust, all the shareholders will demand to know why nothing was done to stop their executives.

It's your responsibility, you are the owners.

Dilluminati's picture

Blessed be the crumb snatcher, he does not complain.

Blessed be the crumb snatcher, he pays his fucking bills.

Blessed be the crumb snatcher, he pays his damn taxes.

Blessed be the crumb snatcher, he was out of this market when the gettin was good.

 

Lebronn Jakens's picture

If the crumb catcher is following the premature bearish rant on ZH he is BROKE!

Dilluminati's picture

Not broke, the fucking system is broke.  I bought a new car and I'm old school.  So I call Hyundai after getting their poorly worded invitation to provide a legal release for them to store my information digitally at an insecure website, and I call and go round and round in fucking circles on their automated poor service system, no zero option, everybody must enroll and after oh about 10 times giving all zeros for all the answers finally get a voice, and I'm thinking: no wonder I'm the crumbsnatcher because of souless dumb ass corporations such as thee.. and I make a promise to myself to pay all but one payment plus 10 dollars and to do that by US mail and then hound them dumb fucks for me title... because I'm da fucking crumb snatcher and I'm not paying their interest!

Let me tell you how the crumbsnatcher works.. I lend these souless corporations money so they can turn around and lend it to worthless eaters with bad credit, and I don't do no stinking interest!

I grab the delta and interest, each time, every time, all the time.   been doing that from way back when I first understood the evils of interest and borrowing.   That's just the way my ebenezer scrooge ass works. To quote him: "It's enough for a man to understand his own business, and not to interfere with other people's. Mine occupies me constantly. Good afternoon, gentlemen!" 

Da cocksuckers!!!

Lebronn Jakens's picture

Funny article.   More reasons to be bearishy the markets according to zerohedge and they keep going to new highs.

only analyst to call the markets correct is Shepwave.      It is getting pathetic here. 

Jack Oliver's picture

" Getting pathetic here " !!

You have only been here 8 weeks 4 days !!!

Bernie Madolf's picture

Wasn't this always part of the fed plan?

When you can substantially lower your WACC with 0% bond issuance, you're not going to hold back.

They knew buybacks would be rampant

pitz's picture

At least the private sector ls legitimately buying stocks.  What about the government bond market?  Hasn't that been nationalized by the Federal Reserve? 

Jack Oliver's picture

It's the ONLY part of Sun Tzu philosophy that they understand !

" Look STRONG when you are actually WEAK "

Perceptions of market strength are the ONLY 'tool' they have left !!

84000 bombs have been dropped on the ME since 2014 !!

And that folks - IS the FUCKING economy !!

Honest Sam's picture

...errrr....uuuhh.....The Rec and Med Cannabis economy is also thriving, with growth rates that make the stock market look negative. 

sinbad2's picture

They legalized booze last time the US economy crashed, and this time pot.

The only thing more important than controlling others lives for American Puritans, is money.

 

“Puritanism: The haunting fear that someone, somewhere, may be happy.” (HL Mencken)

Pity they don't make Americans like Mencken anymore.

zerocash's picture

Don't buy Bitcoin even though it has gone up 100 times since 2013.

Buy all the stocks recommended by former Lehman and current Goldman Sachs traders.

And buy gold because Peter Schiff says that it is a really good investment even though gold went nowhere in the past 5 years.

And take the advice of the FED!

Federer that is, not the Federal Reserve.

 

Rick Cerone's picture

Who wants to join the Anarchists Club? I promise it's more exciting than watching Janet Yellen suck air. You have to buy at least 1 Bitcoin.

innertrader's picture

Well..... that "one buyer" has done a lot better than me in the stock market!!!

SETH RICH!!!

EBERWEIN!!!

How many more hundreds are the Clintons going to kill before they die??  WE HAVE ZERO JUSTICE WITHIN THE USA!!!

 

TRIUMPH with TRUMP!!!

dark pools of soros's picture

(((They))) will send out the psy-ops when it is time to bring the sheep to slaughter..  it will be a full on blitz of paid shills pushing stock buying in new creative ways... trendy songs and celebs gushing about ways to protect on inflation by holding stocks..  a few movies & TV shows pushing it hard than Cramer on a 4 day bender

 

The sheep will be slaughtered as bag holders as always

 

Knave Dave's picture

Looks like the sheep are the smart ones, mostly staying out of the market, along with the institutional investors. Let's hope they stay smart and stay out. That will leave the companies that did their own buybacks and the central banks holding the bag because they can't find any dopes to pedal it off to, other than themselves. That realization that THEY are the last round of investors in the Ponzi scheme would put a chill to their bones. 

 

It would be ha ha if the sheep turned out not to be as dumb as anyone thinks and the "dumb" money doesn't jump in at the end.

Knave Dave's picture

I don't think household investors or institutional investors have stayed out of the market because of PTSD from the crash. I think they recognize the market is rigged by the Fed and don't trust it.

dark pools of soros's picture

Most are broke or instead of being retail investors, they have their money in some 401k they barely know about via their job...  the thing is, any crash doesn't hurt Trump supporters. It fucks over a lot of the anti-trump establishment types though and them losing wealth makes it harder to suck money out for donations, etc..   That's why they just cry everyday hating Trump.. if they could do anything they would of by now