As you very well know, many have been scratching their heads while trying to figure out what is pushing this highly speculative stock market ever higher. I have already illustrated a number of times that institutions are net sellers and while retail investors are buyers, the overall amount is not nearly enough to push the stock market to all time highs.
So, who is buying?
In-short, corporate buybacks are the most likely culprit in today’s stocks market rally. The rich get richer as stock buybacks surge.
Repurchases and buybacks soared nearly 60 percent in the first quarter, putting a floor under a market that struggled amid a brutal winter and an economy that contracted at least 1 percent. Companies have used bargain-basement interest rates to borrow money for stock purchases. In all, corporations increased buybacks by 59 percent to $159.3 billion, according to S&P Dow Jones Indices. That’s up strongly from the $100 billion for the same period in 2013 and a bit below the $172 billion high set in the third quarter of 2007, just before the financial crisis and market crash that sent indexes plunging 60 percent.
Nothing new here as corporations continue to act as Individual/Retail investors. AKA…..Stupid Money. What’s worst is that they are borrowing money to speculate in their own stocks on margin. Driving up stock bonuses and corporate payouts for their management teams. Yet, we all know how this story ends. Just take a look at 2007-2009.
