"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 48 mins Japan Scrambles To Dodge Trump’s Trade War
  • 16 hours Big Banks Double Down On Crypto Ambitions
  • 17 hours Investor Debt Outpaces S&P 500 Growth
  • 18 hours Will Bitcoin Ever Dethrone Gold?
  • 19 hours China's Orwellian Social Media Machine
  • 20 hours What Sparked Russia’s Gold Buying Spree?
  • 22 hours The War For "White Petroleum"
  • 23 hours Stock Market Bulls Are Running Out Of Steam
  • 1 day Crypto Stocks Poised To Bounce Back
  • 2 days The Five Biggest Bubbles In Stock Market History
  • 2 days Was Finland’s Universal Basic Income Program A Failure?
  • 2 days China Goes Long On Gold
  • 2 days Is It Wise To Trade The Trump Effect?
  • 2 days The Tech That Telecom Giants Fear Most
  • 2 days China’s EV Industry Is Booming
  • 2 days How Will Gold React As North Korean Tensions Cool?
  • 2 days Is This The Biggest Mining Opportunity Of 2018?
  • 3 days China’s $33 Trillion Finance Industry Opens To Foreign Investment
  • 3 days Is Bitcoin Cash Overbought?
  • 3 days Financial Sector Reports Record Profits
Stock Market Bulls Are Running Out Of Steam

Stock Market Bulls Are Running Out Of Steam

Despite a recent correction in…

The FANG Stock Investors Should Avoid

The FANG Stock Investors Should Avoid

Thanks to a private data…

Market Distortations: Buybacks and Dividends

Market Distortations: Buybacks and Dividends

With Lance Roberts & Gordon T Long

23 Minutes, 31 Slides

Corporate stock buybacks and dividends are great strategies to drive up stock prices and rewards shareholders, but there is a dangerous downside when this is primarily the result of temporary cheap money and 'manufactured earnings' from creative accounting magic.

Lance Roberts and Gordon T Long with the aid of 31 charts highlight why this is happening, how reported earnings are disconnected from the underlying economy and the risk to investors that has emerged as a consequence. Lance categorizes this period as the biggest 'reverse Robin Hood effect' in history with wealth over the last 5 years being transferred from the middle class to the upper wealthy class.

Stagnate sales growth in the top line is a direct result of low levels of corporate capital. The capital investments being made are primarily targeted at cost reductions in labor. With labor at historic lows, as a percentage of record profits, corporations may be ill prepared to maintain current levels of earnings, dividends and buybacks.

In this wide ranging conversation on the future of buybacks and dividends, the subjects explored include:

  • Productivity and exploding automation advances in the service sector,
  • A slowing rate of global aggregate demand growth,
  • Shrinking real disposable income levels,
  • Current corporate cash flow levels but falling EBITDA flows,
  • Off balance sheet borrowing for buybacks and dividends,
  • Asset to Debt levels showing the degree of growth in leverage to manufacture earnings.

Consumption doesn't create a strong economy. Wealth doesn't come from consumerism.

Wealth is created as a result of capital spending which has plummeted!

Both Lance and Gord believe strongly that more deflation is still ahead before broad based inflation takes hold. Money velocity continues to fall with wage inflation frozen and commodity price inflation showing only in pockets.

The global economic slowdown we are presently seeing will put pressure on corporate earnings and their ability to maintain current buyback and dividend levels.

Lance warns of risk and how important and little appreciated "Loss of Capital" and "Loss of Time" is to most individual investors.

NOTE: 24 hours after this show was taped, Trim Tabs announced that new stock buybacks in Q1 2014 fell to $134.4B from $214.4B in Q4 and were the lowest in 5 quarters.

"Corporate actions have turned less supportive of stock prices. The decline in the volume of buybacks is a cautionary sign, as buyback volume and the S&P 500 have a high positive correlation."

Trim Tabs Chief Executive David Santschi


For more detail signup for your FREE copy of the GordonTLong 2014 THESIS PAPER

Signup for notification of the next MACRO INSIGHTS

Request your FREE TWO MONTH TRIAL subscription of the
Global Macro Tipping Points (GMTP) Report
No Obligations. No Credit Card.


Back to homepage

Leave a comment

Leave a comment