patrick.net

Blurtman says

Price inflation of what exactly? Equities? RE?

i'll have to dig up the you tube- he was talking about price inflation of consumer goods- he has already created price inflation for RE and the stock market- he stated that was an objective of QE

smaulgld says

Blurtman says

Price inflation of what exactly? Equities? RE?

i'll have to dig up the you tube- he was talking about price inflation of consumer goods- he has already created price inflation for RE and the stock market- he stated that was an objective of QE

Yes, quite true. But the helicopter cash is not making it into the hands of the consumers, and so from that perspective, will not cause a classic too much cash chasing too few goods inflation. Wages are not rising and fewer and fewer people are working. StagAssFlation. You heard it here first.

Bubbabear says

Strategist says

smaulgld says

Strategist says

The country just hits an all time high in the S&P 500, and you guys think the country is collapsing.

Sick sick sick.

the "country" hit an all time high-that is like saying casino profits are up so the country is doing well- there is a severe disconnect between the health of the economy and the stock market

The stock market is forward thinking. It generally precedes the state of the economy 9 months in advance. What the stock market is telling us today is that good times are ahead.

Corporation buybacks, Ya Boy we're really cooking!

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter! Each quarter since 2008 companies within their same index bought back their own stocks.... Yet they call that business sense.

Bubbabear says

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter!

and that prevents companies from hiring employees as they get a greater return on investment from buying their own shares back either with their cash on hand or by borrowing it at the artificially low interest rates
http://smaulgld.com/the-dark-side-of-artificially-low-interest-rates/

smaulgld says

Bubbabear says

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter!

and that prevents companies from hiring employees as they get a greater return on investment from buying their own shares back either with their cash on hand or by borrowing it at the artificially low interest rates

http://smaulgld.com/the-dark-side-of-artificially-low-interest-rates/

Only one problem , it creates a set point to keep innovation at all time lows

Bubbabear says

the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock

A lot of this is cash they earned. See Apple.

In other words, unused cash that was stuck in accumulation points, is returning to share-holders, from where it can start again circulating again in the economy (as these share-holders spend it or invest it).

This process by-itself means accumulation points are diminishing, cash is flowing again, and the economy is healing.

Bubbabear says

The stock market is forward thinking. It generally precedes the state of the economy 9 months in advance. What the stock market is telling us today is that good times are ahead.

Corporation buybacks, Ya Boy we're really cooking!

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter! Each quarter since 2008 companies within their same index bought back their own stocks.... Yet they call that business sense.

When companies start buying their own shares it indicates their stock is undervalued. When they all start doing it, it indicates the market is undervalued.

Heraclitusstudent says

from where it can start again circulating again in the economy (as these share-holders spend it or invest it).

Cash used to buy back shares does not reenter the economy. All it does is remove shares from the public float raising the stock price so that the executives' stock options are worth more and they get bigger bonuses. The performance of the company, however lags the performance of the stock price as dollars are invested in the stock price rather than the company.

Stock buybacks are a sign that the company does not have more productive uses of its cash or worse when they borrow money to buy back their own shares to drive the price higher.

Strategist says

When companies start buying their own shares it indicates their stock is undervalued. When they all start doing it, it indicates the market is undervalued.

Perhaps in a normal market where interest rates are not manipulated lower artificially. The low interest rates creates a distortion whereby the companies are encouraged to speculate on their own shares

smaulgld says

Cash used to buy back shares does not reenter the economy. All it does is remove shares from the public float raising the stock price so that the executives' stock options are worth more and they get bigger bonuses. The performance of the company, however lags the performance of the stock price as dollars are invested in the stock price rather than the company.

I have 2 questions for you:
- Who do companies buy the shares from?
- What do these people selling the shares do with the money?
I think you'll find it is likely to reenter the economy.

Whether or not it makes the stock rise faster than actual company growth is irrelevant.

smaulgld says

Strategist says

When companies start buying their own shares it indicates their stock is undervalued. When they all start doing it, it indicates the market is undervalued.

Perhaps in a normal market where interest rates are not manipulated lower artificially. The low interest rates creates a distortion whereby the companies are encouraged to speculate on their own shares

Stocks are undervalued because companies expect a good economic rebound, pushing the value of their stocks even higher. Apple is the best example, a pathetically low stock price compared to its potential.

smaulgld says

Stock buybacks are a sign that the company does not have more productive uses of its cash

If all companies collectively decide to keep all cash they earn and not invest, then there is no productive use for it for the simple reason that the rest of the economy is starved.

If they return cash to shareholders, and the cash returns in the economy, as spending or investment, then productive use will appear.

Heraclitusstudent says

I have 2 questions for you:

- Who do companies buy the shares from?

- What do these people selling the shares do with the money?

I think you'll find it is likely to reenter the economy.

Unless they plan on tucking it under their mattress, it will reenter the economy.

Heraclitusstudent says

I have 2 questions for you:

- Who do companies buy the shares from?

- What do these people selling the shares do with the money?

I think you'll find it is likely to reenter the economy.

Whether or not it makes the stock rise faster than actual company growth is irrelevant.

The companies buy the shares from existing shareholders many of whom are institutional holders who can sell large blocks to the companies buying back their shares.

Institutional investors selling their shares buy other shares as they roll over their profits-a lot of it stays in the stock market

It is relevant if the stock rises faster than the performance of the company as it indicates the stock price is over valued and artificially so because it does not reflect the performance.

Strategist says

Unless they plan on tucking it under their mattress, it will reenter the economy.

or reinvesting it in the casino, I mean stock market.

smaulgld says

Strategist says

Unless they plan on tucking it under their mattress, it will reenter the economy.

or reinvesting it in the casino, I mean stock market.

Ha ha.
In a casino the odds are against you. In the stock market the odds are with you.
In 1950 the S&P was 19 points. Today 1900+.
Stocks and real estate are the best investments anyone can ever make.

smaulgld says

It is relevant if the stock rises faster than the performance of the company as it indicates the stock price is over valued and artificially so because it does not reflect the performance.

No. The value of shares is dependent on their number. Less of them means they are more valuable. Just because they are worth more, doesn't mean shares are overvalued. This has nothing to do with performance.

smaulgld says

Institutional investors selling their shares buy other shares

From whom do they buy these other shares?

Heraclitusstudent says

If all companies collectively decide to keep all cash they earn and not invest, then there is no productive use for it for the simple reason that the rest of the economy is starved.

If they return cash to shareholders, and the cash returns in the economy, as spending or investment, then productive use will appear.

That is all true. I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.
Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands.

Heraclitusstudent says

Institutional investors selling their shares buy other shares

From whom do they buy these other shares?

other institutional shareholders- or actually high frequency bots run by institutional shareholders

Heraclitusstudent says

No. The value of shares is dependent on their number. Less of them means they are more valuable. Just because they are worth more, doesn't mean shares are overvalued. This has nothing to do with performance.

right the value of the shares is dependent on their number- fewer makes them worth more per share.

But that does make them overvalued as the earnings per share (one method of valuing shares) is artificially boosted by the removal of a certain amount of shares via the company buying back their shares and driving the price higher even though the company didn't earn more nominal dollars, but rather had more earnings per (reduced number) of shares.

hat Happens when The Fed and China Stop Buying U.S. Treasuries?

Presumably interest rates go up...

smaulgld says

From whom do they buy these other shares?

other institutional shareholders- or actually high frequency bots run by institutional shareholders

Yes but at any given time, there a fixed amount of shares on the market. If someone buys them from cash, at the other end of the "buy from" chain there is someone selling and not buying.

- either with an investor taking money out of the market to finance whatever they are doing
- or maybe with an IPO, or a company selling new shares to raise cash. Meaning this is an investment in a new company, i.e. in the economy.

Heraclitusstudent says

I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.

Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands.

All true, again as I wrote above
"I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.
Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands."

smaulgld says

Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands."

On that front, share buyback are a step in the right direction. Like people buying home cash. This is part of the healing process. The new cash is used to plug old holes.

Heraclitusstudent says

This is part of the healing process

arguably there are better ways for the economy to heal than for the Fed to print $4 trillion to lower interest rates so companies can buy back their shares to boost the stock market

The Fed will never stop buying. If they run out of space in their SQL tables (digital money), making them bigger is not a problem. I've done it a number of time professionally. And I'm not even a DBA!

jvolstad says

The Fed will never stop buying.

Print until they can print no more

What do you fellers think of this possibility?

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indigenous says

What do you fellers think of this possibility?

/?p=1243305

I think you about hope for the best and prepare for the worst

Rickards says
The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse.

Bubbabear says

it’s just waiting to collapse.

The guys I listen to say cash is king. This guy is saying that cash is going to be replaced by SDRs (world money put out by the IMF) He says the new reserve currency.

He indicates that Buffet is investing in hard assets like the Burlington RR and dumping cash. I thought I heard a while back that Buffet was heavy with cash?

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

indigenous says

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

IMF won't because the fed will protect it's interests just as Japan will. The one screwed is the EU central bank. When the EU breaks, each country's central bank comes back and the fed will protect its world reserve status.

Bubbabear says

The fed will protect its world reserve status.

What happens when the melt down starts?

indigenous says

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

The only way SDRs makes sense is the Fed gets too over extended (possible) and the IMF has SDRs with a clean balance sheet to bail out the dollar.
Cash would make no sense if the Fed and treasuries crumble-stocks and tangible assets would be the way to go then

Bubbabear says

Rickards says

The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse.

You cant just print $4 trillion, buy trillions worth of useless mortgage back securities from otherwise bankrupt banks, fund 90% of the US government deficit spending and expect everything to be fine.

Call it Crazy says

That's the part that makes me wonder.... When does the curtain get pulled back and people see this "recovery" for what it really is??? All this artificial propping up has to blow up at some point, doesn't it??

To this day people think that FDR was a great president who saved the US. It amazes me how people can be brainwashed. Especially when they deify the president. At least half of Mt Rushmore is literally laughable.

smaulgld says

The only way SDRs makes sense is the Fed gets too over extended (possible) and the IMF has SDRs with a clean balance sheet to bail out the dollar.

Rickards was saying that the IMF is leveraged 3 to 1 where as the FED is leveraged 80 to 1.

Kind of absurd, I wonder how they arrive at that conclusion, what is a derivative worth. He also said derivatives for the most part should be banned. Seems to me that Darwins law would fix that if no bailouts. Certainly with GS or MS

A different reason to own gold?

indigenous says

Kind of absurd, I wonder how they arrive at that conclusion, what is a derivative worth. He also said derivatives for the most part should be banned. Seems to me that Darwins law would fix that if no bailouts. Certainly with GS or MS

A different reason to own gold?

The advantage of gold or any asset that you own outright is that it is not someone else's liability.

indigenous says

To this day people think that FDR was a great president who saved the US. It amazes me how people can be brainwashed. Especially when they deify the president. At least half of Mt Rushmore is literally laughable.

I am writing a book on the Presidents from the point of view that "great" presidents were the ones that abused their powers the most

Call it Crazy says

That's the part that makes me wonder.... When does the curtain get pulled back and people see this "recovery" for what it really is??? All this artificial propping up has to blow up at some point, doesn't it??

Eventually that is the concept of kicking the can down the road for as long as you can then turning over the tables when you can kick no longer