Why Stocks Just Won’t Drop: “Companies Spend Almost All Profits On Buybacks”

–  Why Stocks Just Won’t Drop: “Companies Spend Almost All Profits On Buybacks” (ZeroHedge, Oct 6, 2014):

Back in May we revealed that the “Mystery, And Completely Indiscriminate, Buyer Of Stocks“, obviously a key player in a time when the Fed’s own indirect monetization of stocks was fading, was none other than corporations themselves, gorging on cheap debt and using the proceeds to buy back their own stock.  And while we explained that the vast majority of companies are using up as much leverage as they can to fund said buybacks, with both total and net corporate debt levels having risen to new all time highs refuting misperceptions that corporate debt is actually declining, something even more disturbing was revealed today, when Bloomberg reported that companies in the Standard & Poor’s 500 Index, are “poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings!”

4 thoughts on “Why Stocks Just Won’t Drop: “Companies Spend Almost All Profits On Buybacks””

  1. Trying to think this through.
    Eventually, as availability wanes, prices increase until they’ve bought back their entire stock.
    But what then? They must release it to prevent some rare uncorrupted regulator from proposing de-listing.
    Cue, bonuses in the form of shares, but share inactivity will already have been noticed.
    So, this is all just a delaying tactic pending the big one which is still just down the road.

  2. To add to Friend Stanley: At some point, they have bought back all their stock…..then what? As he points out, they have to release some of it to prevent de-listing.
    One more big game to keep the balls in the air as long as possible.
    If the last week means anything, it appears the US stock market is beginning to feel the pain from the European markets………it is the EU keeping the dollar afloat.
    If the EU starts hurting too badly, they are likely to be forced to do business with Putin……and it is more in each nation’s interest to be able to trade with his basket of currencies, instead of the archaic conversion to the dollar…..which most of the world no longer does……..
    When that day happens, and the EU is forced to dump the dollar (Switzerland already signed up with Putin), the dollar will collapse.
    I’d like to see how the stock market keeps the balls in the air then…..and we are down to months. Only 33% (including the EU) of all world nations use the dollar any longer. Technology has made any world reserve currency obsolete, and it is far more convenient to trade using your own currency without converting to the dollar.
    The US did it to itself. We had it all, world respect, sterling markets trusted around the world…..but the crooks, starting with Reagan, but the worst is Clinton….they got in and ruined everything.

  3. One other reason stocks have not been dropping before this last week: High frequency trading. A few individuals, controlling huge funds, jump in and buy and sell large amounts of securities in less time than one can blink an eye. The word here is sell, money is removed each time, and high frequency trade are over 85% of all trades. The number of securities involved make the market appear to be far more active than it really is…….it is just a few people working for the greedy guts in the buy, skim and sell game. It used to be illegal, but all bets are open in today’s corrupt market.
    Only 10-15% of all trades are from real investors.
    An interesting statistic for you, Stanley. Between 1929-1933, the market lost 90% of its value.
    Rather interesting in light of what is happening now, isn’t it?


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