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

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.

Comments

CPL VinceFostersGhost Jul 17, 2017 10:29 AM Permalink

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.

In reply to by VinceFostersGhost

GodHelpAmerica (not verified) Jul 17, 2017 8:12 AM Permalink

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 Jul 17, 2017 8:47 AM Permalink

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.

NoWayJose Jul 17, 2017 8:17 AM Permalink

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 NoWayJose Jul 17, 2017 8:59 AM Permalink

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.

In reply to by NoWayJose

The Real Tony CRM114 Jul 17, 2017 10:46 AM Permalink

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.

In reply to by CRM114

ThirteenthFloor NoWayJose Jul 17, 2017 9:02 AM Permalink

+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.

In reply to by NoWayJose

Five Star Jul 17, 2017 8:31 AM Permalink

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...http://thesoundingline.com/chart-of-the-day-who-has-bought-this-rally/

Vardaman Jul 17, 2017 8:28 AM Permalink

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..

lester1 Jul 17, 2017 8:31 AM Permalink

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. 

MrBoompi Jul 17, 2017 8:34 AM Permalink

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 MrBoompi Jul 17, 2017 9:44 AM Permalink

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.

In reply to by MrBoompi

MrBoompi el buitre Jul 17, 2017 12:06 PM Permalink

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.  

In reply to by el buitre