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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.
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/
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
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.
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.
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.
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
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.
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.
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.
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.
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.
Unless they plan on tucking it under their mattress, it will reenter the economy.
or reinvesting it in the casino, I mean stock market.
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.
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.
Institutional investors selling their shares buy other shares
From whom do they buy these other shares?
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.
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
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...
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.
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."
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.
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!
What do you fellers think of this possibility?
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.
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?
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.
The fed will protect its world reserve status.
What happens when the melt down starts?
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
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.
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.
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?
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.
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
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
"great" presidents were the ones that abused their powers the most
I was listening to something yesterday about Teddy Roosevelt, suffice to say Mark Twain said he was insane. He wanted to get the congressional medal of honor to make amends for his father who bought his service in the Civil War. I guess back then you could pay for a proxy. Anyway Clinton gave him the Congressional Medal of Honor posthumously. That asshole is such a hick he could shit on anything, said TR was his favorite president.
I will take a Clinton with zero integrity over an ideologue any day.
This guy has his PHD in history, is an Austrian, might be interesting to you regarding some of these "deities", you should hear what he has to say about Lincoln.
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.
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The United States is able to incur massive deficits funded in part by foreign purchases of U.S. debt and more recently and increasingly through the Federal Reserve’s (the Fed) purchases of T Bonds as part of their multi-year/multi trillion dollar quantitative easing (QE) program whereby they print dollars out of thin air to buy them.
As a result of QE more than a few nations, notably Iran, Russia, China and Brazil have become increasingly concerned that the value of their T Bond holdings are being diluted by the Fed’s massive money printing campaign and have made efforts to reduce their need to hold dollars for settling their trade accounts. Last October, China called for the world to “de-Americanize†because “the destinies of others are in the hands of a hypocritical nation that have to be terminatedâ€.
Such calls to “de-dollarize†have increased and been joined by Russia as the west battles Russia’s designs on Crimea and Ukraine with economic sanctions. Most recently, Russia and China signed a 30 year gas deal that supposedly does not involve dollars for payment.
What happens when the Fed and China stop buying and Belgium can't cover the shortfall?
Here is an analysis and list of the largest foreign holders of U.S. Treasuries as of March 2014 and of the top gold holding countries:
http://smaulgld.com/foreign-holdings-u-s-treasuries/
#investing