Show of hands: who’s surprised?
The “bad” news is, companies will be less inclined to buy back shares with the money they bring home because… well…
That’s ok, maybe we can just send a nice letter to the SNB and/or Norway’s sovereign wealth fund and politely ask them to fill the void.
“Buybacks may boost the market, but they do not obviously benefit those companies doing it.”
“Perhaps over-leveraged US companies have finally reached a limit.”
“Really though, we needn’t think too hard about this.”
“ETFs own almost 6% of the equity market, the highest ETF share on record. In contrast, mutual fund ownership fell to its lowest level since 2004 (24%).”
“Following years of prioritizing repurchases as a use of cash, corporations actually cut annual spending on buybacks by 11% in 2016 and executions YTD have plunged by 20% vs. last year. Meanwhile, authorizations YTD for new programs are proceeding at the slowest pace in five years.”
Castles in the sky?
It’s been no secret that the bid for equities in 2017 has been largely attributable to “mom and pop” coming late to the party and scrambling to catch the proverbial wave by piling into passive ETFs that track equity benchmarks. Here at HR, we call that the “Sharon” money. Of course there’s been another perpetual bid…
For anyone still holding out hope that there’s upside for our standard valuation metrics beyond the 100th percentile, there’s always the old corporate buyback bailout…
Better hope that repatriation holiday works out.
What does this do for the “silent majority”? Well, not much.
Earlier this month, I took a look back at Jamie Dimon’s decision to buy nearly $27 million worth of JPMorgan shares in February. As it turns out, Dimon literally called the bottom. He also made a fortune. His average purchase price: $53.18. The stock now trades north of $86. Dimon gets to add the fortune…