10/7/2014 – A big down day with the Dow Jones down 272 points (-1.6%) and the Nasdaq down 70 points (-1.56%).
We have discussed this before, but it is an important point worth revisiting. S&P 500 Companies Spend 95% of Profits on Buybacks, Payouts
Most people assume that corporate buybacks represent the smart money. After all, it only makes sense that the money flows back to shareholders when underlying stocks are deemed undervalued. Right? Nothing could be further from the truth.
First, you have to understand what had happened behind the scenes. When the FED cut interest rates to zero and introduced QE to “rescue the US Economy from depression” that money simply flowed thought our economy and onto corporate balance sheets. Unfortunately, due to low interest rates and no CAPEX needs, many companies didn’t know what to do with their cash. The only reasonable option was to buy back their stocks, driving the stock market into today’s bubble territory.
Second, corporate money is dumb money, not smart. And you don’t have to look further than 2007 top and 2009 bottom for clarification. At 2007 top most corporations were buying shares hand over fist. Obviously at extreme valuation levels and just as they are doing today. Yet, no one was buying when stocks were being given away at 2009 bottom. I rest my case.
When you put the factors above together, it is yet another confirmation that the stock market is in for a massive correction.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE
(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. October 6th, 2014 InvestWithAlex.com
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What You Ought To Know About Corporations Setting This Market Up For A Crash Google