21 August 2019

This is Market Manipulation, not a "Pillar of Stock Market"

It appears that the stock market is running out of steam because companies are reducing their stock buybacks.

As I have noted before, until SEC Rule 10b-18 was adopted in 1983, stock buybacks were considered illegal market manipulation.

It's why the stock markets is showing insane PE ratios.

Senior executives buy back stock, boosting their own stock options, instead of investing in improvements in the business:
Corporate capital expenditures have slowed this year, adding to worries that economic growth is fading. Many executives have said the lingering trade tensions with China are giving them pause. The latest data from S&P Dow Jones Indices indicate capital expenditures picked up in the second quarter, improving 5.2% from the first three months of the year but still 7.8% below the boom seen at the end of last year.

The willingness among companies to buy back their shares has been among the biggest driving forces of the decadelong bull market. Since 2013, U.S. companies have poured $4.2 trillion into stock buybacks, according to Bank of America Merrill Lynch. Investors, though, haven’t shown the same enthusiasm for stocks. Mutual funds and exchange-traded funds tracking U.S. equities have posted $84 billion in outflows over the same period, according to the bank’s analysis of EPFR Global data.

Corporate buybacks boomed after the U.S. tax overhaul in December 2017, with every quarter in 2018 marking a new high for share repurchases. The recent easing in activity has some analysts and investors questioning whether the shift marks a return to the norm, or if companies are pulling back the reins for other reasons. 
This is not market fundamentals, this is corruption.


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