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IPFS News Link • Business/ Commerce

Aaand Its Gone... The Biggest Support For Asset Prices

• https://www.zerohedge.com, by Lance Roberts

 I previously wrote that stock buybacks were setting records over the past couple of years. Jeffery Marcus of TP Analytics, recently confirmed the same:

"U.S. firms have been the biggest incremental buyer of stocks in each of the past four years, with their net purchases exceeding $2 trillion – Federal Reserve data on fund flows compiled by Goldman Sachs showed."

As John Authers previously noted:

"For much of the last decade, companies buying their own shares have accounted for all net purchases. The total amount of stock bought back by companies since the 2008 crisis even exceeds the Federal Reserve's spending on buying bonds over the same period as part of quantitative easing. Both pushed up asset prices."

In other words, between the Federal Reserve injecting a massive amount of liquidity into the financial markets, and corporations buying back their own shares, there have been effectively no other real buyers in the market. 

Of course, as a corporation, you can't spend all of your cash buying back shares, so with near-zero interest rates, debt became the most logical option. As shown below, much of the debt taken on by corporations was not used for mergers, acquisitions, or capital expenditures, but the funding of share repurchases and dividend issuance.


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