Shares Buy-Backs: The Horror Show of QE Cash Excesses is Back
2016 Mar 20, 4:50pm 1,217 views 4 comments
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1
mell
2016 Mar 20, 4:56pm
QE/ZIRP/NIRP are perfect tools to drive out and crush shorts. So upper management can sell into the frenzy. What would you do if you ran a publicly traded company with close-to-zero interest access to credit?
3
Done
2016 Mar 21, 8:53am
Done
2016 Mar 21, 8:53am
QE/ZIRP/NIRP are perfect tools to drive out and crush shorts. So upper management can sell into the frenzy. What would you do if you ran a publicly traded company with close-to-zero interest access to credit?
BUY BUY BUY!!! Kill them dirty bears....
4
indigenous
2016 Mar 21, 1:23pm
indigenous
2016 Mar 21, 1:23pm
BUY BUY BUY!!! Kill them dirty bears....
While you may take advantage of the situation, it surely is pernicious to the economy.
Remember the meme of the ‘recovery'?
The story of years of rising shares buy-backs by corporate desperate to do something / anything with all the debt they could get their hands on from the lending banks, whilst having no interest in investing any of these loans in real activity.
Well, back at the end of 2011 and the start of 2014, pumped up on hopium of the so-called imminent recovery in global demand, we witnessed two dips in shares buy-backs, with resulting volatility going the flat trend taking us through some 12 months before lifting off the whole circus to new highs.
Source: @soberlook
And as you can see, the same momentum is now back. Shares buy-backs are booming once again, almost reaching all time highs of 2007. Thus, the toxic scenario whereby companies use cheap credit (QE-funded) to leverage themselves only to fund shares buybacks and not to fund new investment - that vicious cycle of leverage risk and wealth destruction - is open us once again.
Note: I have been tracking the topic on this blog, covering few months back the link between buybacks and lack of corporate capex:
http://trueeconomics.blogspot.com/2016/03/19316-shares-buy-backs-horror-show-of.html