Over three years ago, Zero Hedge first predicted [3] that not only is there not going to be a capex boom - a boom which every year one after another weatherman, pardon, economist "forecast" is just around the corner (because there can be no true recovery without companies spending confidently for the long-term) but at that any moment corporations would unleash a massive dividend and stock buyback spree to boost their share prices and to shower management with record equity-linked compensation.
They did just that and we were right. The weathermen were wrong.
And unfortunately, until three things change dramatically, there will never be a capex boom, corporate revenues will keep declining, and companies will continue artificially inflating their stock prices by diverting every last profitable dollar into instant gratification for "activist" shareholders (and option-compensated management) instead of investing into long-term growth.
The three things are:
- the disconnect of equity value from employment, and thus a market which no longer reward investment
- the global demographic change
- the all time high debt overhang which looms like a time bomb in every corner office, just waiting for rates to spike higher to be set off
But don't take our word for it. Here is Citigroup's:
[4]
Citi's tragic conclusion:
- These are not things you fix with liquidity
Unfortunately, liquidity is all the system has left. Which is also why, in the current system, there will never be a capex recovery, and instead all dollars will ultimately go to purchase every last share of stock until the market spontaneously combusts in a thought experiment supernova in which companies with zero employees have an infinite market cap, thus breaching the monetarist event horizon, and crossing the Keynesian streams.
