Monday, March 28, 2016

The Hardest Landing: The Riskiest Time To Own U.S. Stocks. EVER.

When recession stocks are already 3x overvalued, the economy is already slowing, and Return on Equity is the lowest level ever, what do they buy next? Cash.

Central Banks
Momentum traders
Carry trades
Stock buybacks

Return on Equity lowest on record...
It's official: Bloomberg News just reported that the ratio of Cash Flow (EBITDA) to U.S. Non-Financial Equity, just fell to its lowest level ever. Lower than at the bottom in 2000 and 2008...

"It was a bad time for extreme greed"

This also just in...

"Share repurchases decreased 3.4 percent in the fourth quarter from the previous three-month period and are tracking at a 21-month low in March, according to respective data from S&P Dow Jones Indices and TrimTabs."

Taking into account record low ROE with the fact that corporate profits have been falling for four quarters and corporations are the biggest (last) buyers of stocks, then this is unambiguously the riskiest time to own stocks ever. 

Corporations have been propping up their stocks using their own imploding profits. What could go wrong?

The marginal buyer of stocks is running out of money aka. "profits"

Stock buyback "Achievers" Fund (stocks with largest buybacks):

Largest stock buyback program in human history aka. "Apple"