Buying back their own shares. Over the 12 month through June, $157 billion of buybacks were funded with debt, according to data by JPMorgan and Bloomberg. In June, the proportion of share buybacks funded with debt jumped to over 30% – the highest since 2001, the propitious year when the dotcom bubble imploded
Why borrow? Because operating cash flow doesn’t cover it. In Q2, companies generated $425 billion in operating cash flows. Only $151 billion was invested in fixed assets. The lack of investment is the bane of the US economy. And:
- $110 billion went into dividend payments.
- $61 billion was used for takeovers (OK, that’s down from last year)
- $137 billion was blown on financially engineering their earnings via share buybacks.
So operating cash flows were $35 billion short. That happened quarter after quarter. Hence debt ballooned to 32% of total assets at non-financial firms, the highest since 2008, another propitious year.
Since 2010, companies have blown nearly $3 trillion on share repurchases, according to FactSet data, in order to inflated their share price. But now a snag has appeared. Bloomberg:
Since peaking in February 2015, an S&P 500 index of companies repurchasing the most shares has lost 5.6%, compared with a 1.4% gain in the equal-weight index of the benchmark gauge.
So it doesn’t work anymore. Investors have lost part of their appetite for being fooled.
In case you missed it, like I did, the velocity of the M2 money supply is declining more quickly. That normally indicates that the economy has taken the turn toward an eventual contraction.
Erdogan’s responses on the real agenda were as far apart as ever. He put a stop to press hints that he is suspending his campaign to overthrow the Syrian president, Bashar Al-Assad. “We don’t want Syria’s disintegration, but the departure of Bashar Assad who is guilty for the deaths of 600,000 people. This is the condition for preventing this scenario. Syria’s unity cannot be kept with Assad. And we cannot support a murderer who has committed acts of state terror.”
He denied any role in the financing , oil trade, weapons and other supplies for ISIS forces in Syria and Iraq. He repeated Turkish backing for the Crimean tatars fighting Moscow with support from Kiev and Washington...
Not since his press conference in June 2013 with US President Barack Obama has Putin’s body language been as demonstratively hostile to his counterpart...
A Russian analyst asked quizzically. “No member of the General Staff and no intelligence officer can have given President Putin reason to expect any better of Erdogan, and the Tass interview proved it. What benefit Putin calculated he was gaining by playing along in the charade is not clear. Putin is playing for time, and if Erdogan runs out of it, the Russian side haven’t made up their minds to be sorry.”
Homeownership rate continues to decline as credit issues, student loans and high prices lead more to rent
Fiscal stimulus is on the horizon again in the U.S., U.K and Japan, but its impact on bond yields is yet to be found
Bonds are traditionally viewed as a haven, but the new world of bonds has never looked more risky
The thwarted acts of sabotage were planned and prepared by the official Kiev. The Ukrainian regime hardly decided to launch such attempt without authorization from the US State Department. The US mainstream military and diplomatic establishment were likely interested in an escalation in the Ukraine in order to strengthen the political attitude of its presidential candidate, Hillary Clinton. However, Russian security forces were able to repel the attempt and keep the situation under control. Despite this, the recent comments of Russian President and other officials demonstrate that Moscow has prepared a tough response to the Kiev regime and its supporters in NATO if acts of aggression are repeated.