Saturday, February 13, 2016

Stock Buybacks: You Can Fool Most of the People All of the Time

The companies that bought back the most stock are now down the most.
Why? Because they're the shittiest companies. Generation Madoff is about to learn that what some Central Bank, Corporate Treasurer, or other idiot paid for a stock yesterday has no bearing on how much it's worth today. Paying a trillion dollars for a bag of rocks doesn't make them worth a trillion dollars...

Feb. 9, 2016
Companies Blew $559 Billion On Stock Buybacks Through September, 2015
"That was just below the peak in 2007 -- the year before stocks began their deepest plunge since the Great Depression."

Companies often buy at the wrong time, experts say, because it's only after several years into an economic recovery that they have enough cash to feel comfortable spending big on buybacks. That's also when companies have made all the obvious moves -- and aren't sure what to do next to keep their stocks rising. For the average company, it gets harder to increase earnings per share, It leads them to do buybacks precisely when they should not be doing it."

$559 billion is now down -20%:
Stock buyback ETF:

Half a trillion hasn't kept earnings per share from collapsing:
Earnings Per share with S&P:

Profits are falling faster than stocks:
Earnings Yield (E/P):

Yes, it's that time again...