Share buybacks lifting the major stock averages
I came across this Barron’s article over the weekend. I saved a copy of it for you to read as we need a subscription to access it. It is a discussion of corporate share buybacks.
Buybacks usually support stock prices by reducing share counts and boosting earnings per share. And companies that make announcements of big buybacks—like Apple’s (ticker: AAPL) stunning, new, $100 billion program—tend to be brimming with confidence in their C-suites.
Standard & Poor’s 500 companies are on track to announce $650 billion worth of buybacks this year, according to a Goldman Sachs estimate, smashing the previous record of $589 billion set in 2007.
Buybacks offer investors an effective “yield” of about 3%, calculated by dividing repurchases by the $23 trillion market value of the Standard & Poor’s 500 index. Combine that with the 1.9% current dividend yield and investors should get a nearly 5% combined yield this year.
If we are to wonder why stocks continue to be supported here in the light of continued uncertainty, we have share buybacks to partially thank.
Warren Buffett may be a globalist shill, but he has a point
As a perpetual stock promoter and a large beneficiary of the bailouts from last decade, most in the alt-financial media proclaim that Warren Buffett is just a shill for the globalists; and in most respects they are correct. But, if we consider the amount of money being spent on stock buybacks, he has reason to be optimistic. Taking share buybacks into account the combined yield of the S&P 500 is as high as 5%. So, as long as bond yields stay at a reasonably low level asset price inflation can continue. Stocks will yield more than bonds.
Of course, this is just essentially financial engineering, but these buyback programs can last years and can help the stock averages to move higher, even if the companies themselves are impacted by economic and political uncertainty.
Despite all the gloom and doom emanating out of the alt-financial media, especially from Zerohedge, asset prices continue to perform well. As long as the longer-dated bond yields stay at these levels or only move slightly higher things should hold up.
The reason why Warren Buffett and many traditional investors do not like bitcoin is because it does not generate income. I agree with this line of reasoning, but that does not mean it will be a terrible investment. However, if we are to survive we need to concentrate on acquiring assets that generate income. The catastrophe talk in the alt-media is designed from the top and is there to disenfranchise us from financial success.
The rich invest in income-producing assets
I came across this blog post from Martin Armstrong this past weekend and he illustrates this point clearly. The rich own assets that generate income, the poor work for a salary. While he blames government for the disparity of income, you and I know it is much larger than the governments.
You simply believe the propaganda of governments. The rich get richer by INVESTING in assets. They list Bill Gates among the top in the world. Do you really think one gets rich by making more per hour than the next guy? Wealth is created through assets – not wages.
Martin Armstrong – How the Rich Get Richer! (May 13th)
I know this financial system is satanic and rigged against the average person, but we cannot bank on it collapsing anytime soon. It can be propped up for much longer than we can imagine. All we need is another economic bust and the US Fed can conjure up another program that will help those who own assets. It seems that the wage slaves always get stuck with the short end of the stick. The Internal Revenue Code and the government programs ALWAYS help the asset owners, even if it’s in the guise of helping the poor.