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Corporate buybacks are 99% of NET stock purchases in 2016 so far


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2016 Mar 11, 11:40am   8,253 views  10 comments

by justme   ➕follow (1)   💰tip   ignore  

There is an article on Zerohedge(*) this week that refers to some (IMO) very significant data from BofA's brokerage division, previously known as Merrril Lynch (ML). Basically the data shows how net buying and selling is distributed among the various client groups of ML.

For example, in the table below, the only 2016 YTD net buyers of equities (stocks) are Pension Funds and Corporate Buybacks (CB) . The other customer categeories, namely Institutional, HedgeFund and Retail segments are all net sellers. Of the buyers, corporate buybacks are (*) 97.9% of the net buying total amount.

This type of data certainly gives me great pause as to the soundness of the current stock market valuations. I cannot possibly see how this can end "well", that being a "soft landing" or any kind of "permanently high plateau", to use some favorite terms of the serial-bubble-blowers.

Here is the table. The graph on top of the table is not that illustrative, the real dirt is in the table itself. I'll try to find some curves made directly from the table.

(*)REFERENCES:
% 8994/(8994+194)
0.978885502829778

http://www.zerohedge.com/news/2016-03-09/smart-money-quietly-getting-out-dodge-sells-sixth-straight-week-buybacks-soar#comment-7292635

Editorial: This thread is used to document the occurrence and effects of stock buybacks on the (US mostly) stock markets. The intent is to document the phenomenon for posterity with occasional posts, as new data becomes available. It is my hope that taking a longer term view in a thread, better information can be accumulated and not get lost in the daily squabbles of the many short-lived threads that get posted every day.

#buyback #recurring #justme

Comments 1 - 10 of 10        Search these comments

1   justme   2016 Mar 11, 11:56am  

I think more (and more recent) data may be behind a BofA/ML (BAML) customer wall or paywall. Perhaps someone who have a BAML account can take a closer look?

2   justme   2016 Mar 11, 4:06pm  

Here is a graph of cumulative net buys since 2007, but the graphs are not as up-to-date as the previously posted table.

I think the signficance of this data is Yuuuge. Looks like Wall St could not get the retail investors to bite in 2008-2015, so instead they have talked US Corporations into loading up on debt for stock buybacks. Basically the end game is to crash the market and then convert the debt into stock and wipe out the remaining stockholders with a very low valuation of their shares.

Via http://www.zerohedge.com/news/2016-03-01/someone-isnt-buying-rally-smart-money-sells-five-consecutive-weeks-buyback-soar

3   justme   2016 Mar 12, 1:51pm  

Calculations (from table) for full year 2015:

net purchases: Corporate Buybacks as fraction of total net buying among BAML customers:
% 40767/(40767+1764+58)
0.957219000211322

This means in 2015, 95.7% of all net stock purchases by BAML customers was corporate
buybacks. If this is not INSANE, I do not know what is.

net purchases total (BAML)
% 2434+26153+29728
58315 (58B)

net sales total (BAML)
% (40767+1764+58)
42589(43B)

4   justme   2016 Mar 14, 10:32am  

Corporate debt has been increasing sharply 2009-2016 and strongly matches the amounts spent on stock buybacks.

5   justme   2016 Mar 15, 12:22pm  

On the topic of corporations currently being pretty much the only net buyers for their own stock: The quarterly blackout period for buybacks is about to commence. What will happen this time when the only buyer disappears for 5 weeks?

http://www.zerohedge.com/news/2016-03-15/biggest-threat-sp-next-month-only-buyer-keeping-market-alive-stops-buying

QUOTE:

Indeed, over the past 4 quarters, the buyback blackout has without fail led to weakness across risky asset classes. So with the start imminent, how long is the lack of price indiscriminate buying expected to persist? At least until the first week of May when the buybacks resume (graph follows).

ENDQUOTE

According to Bloomberg, the 5 weeks leading up to an earnings release day is customarily blacked out as allowable dates for corporate stock buybacks. I do not know what the minimum required blackout period is.

6   justme   2016 Jun 23, 8:36pm  

Record stock buybacks sin Feb-April 2016 was behind the stock market rally.

http://wolfstreet.com/2016/06/23/share-buybacks-fuel-rally-in-stocks-since-february/

We have another post-Financial Crisis record on our hands!

Share buybacks by S&P 500 companies during the three-month period of February through April soared 15.1% from a year ago, to $166.3 billion, according to FactSet, the highest since Q3 2007, which had set an absolute record of $178.5 billion, just as the Financial Crisis was cracking the glossy veneer of the banks.

7   anonymous   2016 Jun 23, 8:50pm  

Your earlier chart makes me think we're on the brink of another 2008 crash. The similarities of 2008 and now are striking.

8   justme   2016 Sep 20, 4:28pm  

More stock buyback news:

After the close, Microsoft announced that its Board of Directors approved an incremental $40BN share repurchase program and confirmed that the company is on track to exhaust it's current $40BN authorization by the end of 2016. The buyback represents roughly 9% of Microsoft's outstanding shares. The company also announced a $0.03 (8%) increase in its quarterly dividend.

The news comes just a month after Microsoft completed its largest bond offering ever, selling $20BN of new notes with maturities ranging from 10 - 30 years and yields ranging from 2.42% - 3.75%.

http://www.zerohedge.com/news/2016-09-20/microsoft-announces-additional-40bn-buyback

NOTE the debt chart: MSFT currently is sitting on some 75B worth of debt. (75=55+20).

9   junkmail   2016 Sep 20, 5:56pm  

You can see this also in the slowdown of money...

10   justme   2016 Sep 20, 6:03pm  

Yes, the M2 velocity slowed down probably because M2 increased by a lot but total monetary transactions did NOT keep up proprtionally. FRB pushing on a string and all that.

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