Huge New Prop under the Stock Market is a One-Time Affair, by Wolf Richter

The biggest buyers in the stock market are corporations buying their own overvalued shares. From Wolf Richter at wolfstreet.com:

Crash insurance with an expiration date. But its working while it lasts.

In May, with great and perfectly orchestrated fanfare, US corporations announced plans to buy back $173.6 billion of their own shares sometime in the future. It was the largest monthly buyback announcement ever. And some of the announcements were expertly timed to overcome operational debacles.

The record amount of share repurchase announcements was due “in large part” to the changes in the corporate tax law, according to TrimTabs, which gathered the data.

This report was released when the digital ink was still drying on my musings about the FANGMAN stocks – Facebook, Amazon, Netflix, Google’s parent Alphabet, Microsoft, Apple, and Nvidia – that are so immensely overvalued that Goldman Sachs considered it necessary to come out with a note explaining that, based on fundamentals, they’re actually not in a bubble, which I had some fun pooh-pooing.

Some of the FANGMAN stocks are massive share buyback queens, such as Apple and Microsoft. Others are bottomless cash-sinkholes, such as junk-rated Netflix, which has to constantly raise new money, either by selling more shares or selling debt, so that it has more fuel to burn through, and it doesn’t have a dime to buy back its own shares.

That $173.6 billion in share repurchase plans includes the record-breaking mega-announcement from Apple that it would buy back $100 billion of its own shares. Here are the top five that account for $134.3 billion, or 77% of the total:

  • Apple: $100 billion
  • Micron: $10 billion
  • Qualcomm: $8.8 billion
  • Adobe: $8.0 billion
  • T-Mobile: $7.5 billion

To put that May total of $173.6 billion – these are just announcements of planned repurchases sometime in the future that may never fully transpire – into perspective: In Q1, total actual share buybacks reported by the S&P 500 companies amounted to $178 billion, an all-time record. That averages out to “only” $59.3 billion a month on average, compared to the announcements in May of $173.6 billion.

To continue reading: Huge New Prop under the Stock Market is a One-Time Affair

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