Like everything else in the Idiocracy, this illusion has been propagated by every gimmick available: money printing, low volume HFT levitation, inflated profit margins, suppressed volatility, flight-to-safety rotation, unprecedented margin debt, and stock buybacks...
The Dow closed 1% off of its all time high today, but only three stocks out of 30 are within 1% of their all time highs. Excuse me?
The Dow is unique among indexes in that's it's price weighted versus market cap weighted, which makes no sense whatsoever. Clearly the price of a stock alone, without taking into account the number of shares outstanding, is no indicator of total value. Nevertheless, the average Dow stock is now down -6% from its all time highs. I also calculated the decline weighted by market capitalization, and by that measure, the total decline is -5.5% from all time highs in market cap.
Only a Russian PhD could figure out how to hold an index at all time highs using only 10% of the stocks at a time
Clearly HFT Bots have been programmed to game this little illusion by taking turns pumping and dumping the various Dow stocks to keep the index clinging to its all time highs. It's an Oscar-worthy performance indeed, and one that has kept Etrading Dow worshippers in thrall for five months straight, at all time highs.
The mere fact that the highest priced stock - IBM - is currently down the most of any Dow stock (-14%) tells us just to what extent the HFT bots have gamed the index. Aside from IBM, the other major losers are Goldman Sachs (-13%), JP Morgan (-12.7%) and Visa (-12%). I am seeing a trend here. It will be hard to continue to maintain this entire illusion when the financial alchemists are now leaving the party.
Other notables are Walmart which until very recently was near all time highs, but then missed its ever-lower earnings estimate and is now down -8%. And yes, Johnson & Johnson is one of the three stocks clinging to all time highs:
JnJ Always Peaks Last
Think the HFT Bots are working it?
Here is a 128 year old pharmaceutical company trading like a Chinese internet stock:
The stock buyback gimmick - boost share price while hiding revenue shortfalls
The concept of a stock buyback is to use the company's own profits to shrink the share base, hence boosting the share price. Overall, in any sane market, the company's valuation would stay the same since share count is going down and share price is going up, and overall profits are the same. However, of course, in this market, share buybacks have been a critical tool for gaming the overall market higher AND for masking the fact that revenue growth is stagnant. According to this article, revenue growth since 2009 has averaged 3.2% per year versus 16.2% for profit growth. In the latest quarter, revenue growth was 1% and S&P companies bought back $153 billion in stock - the second highest total ever, with Apple accounting for $18 billion of that amount.
Smoke and Mirrors
Apple's share price is 10% off the all time high, but due to buybacks its market cap (share price x shares outstanding) is now 20% lower:
JnJ Always Peaks Last
Think the HFT Bots are working it?
Here is a 128 year old pharmaceutical company trading like a Chinese internet stock:
The stock buyback gimmick - boost share price while hiding revenue shortfalls
The concept of a stock buyback is to use the company's own profits to shrink the share base, hence boosting the share price. Overall, in any sane market, the company's valuation would stay the same since share count is going down and share price is going up, and overall profits are the same. However, of course, in this market, share buybacks have been a critical tool for gaming the overall market higher AND for masking the fact that revenue growth is stagnant. According to this article, revenue growth since 2009 has averaged 3.2% per year versus 16.2% for profit growth. In the latest quarter, revenue growth was 1% and S&P companies bought back $153 billion in stock - the second highest total ever, with Apple accounting for $18 billion of that amount.
Smoke and Mirrors
Apple's share price is 10% off the all time high, but due to buybacks its market cap (share price x shares outstanding) is now 20% lower:
The fact that Russians have now taken over programming the entire U.S. stock market is the greatest irony of all in the sad and pathetic history of Ponzi Capitalism. American MBAs could describe their HFT frankenmonster, but the frat boys weren't *smart* enough to actually bring it to life. And no one is smart enough to keep it from going on a rampage:
"And near the end, *former* Communists were called in to save ponzi capitalism from itself. So they took payment up front, laid down about 50,000 tons of Trinitrotoluene (TNT), attached some cordite and blew the whole fucking shit show to smithereens. Putin laughed. The frat boys jumped off the nearest building. The End"
"And near the end, *former* Communists were called in to save ponzi capitalism from itself. So they took payment up front, laid down about 50,000 tons of Trinitrotoluene (TNT), attached some cordite and blew the whole fucking shit show to smithereens. Putin laughed. The frat boys jumped off the nearest building. The End"
Think it can't happen? It already is...
Decade low Volatility. 15 year low volume. All Time Highs.
And now the decay is spreading within the Dow itself...
Dow with Trading Volume (200 DMA)
