With the Dow near 18,200, crude oil still below $50 and gold on the move, today a legend in the business sent King World News a powerful piece that covers everything from Nasdaq 5000 to stock buybacks and what could pull the rug out from under major markets.
From Art Cashin's notes: "Buyback Fever – Corporate repurchases continued at a blistering pace. Here's a bit from Bloomberg:
Stock buybacks, which along with dividends eat up sums of money equal to almost all the Standard & Poor’s 500’s earnings, vaulted to a record in February, with chief executive officers announcing $104.3 billion in planned repurchases. That’s the most since TrimTabs Investment Research began tracking the data in 1995 and almost twice the $55 billion bought a year earlier.
Even with 10-year Treasury yields holding below 2.1 percent, economic growth trailing forecasts and earnings estimates deteriorating, the stock market snapped back last month as companies announced an average of more than $5 billion in buybacks each day. That’s enough to cover about 2 percent of the value of shares traded on U.S. exchanges, data compiled by Bloomberg show.
Records show that companies have bought over $2 trillion of their own shares since the low of 2009. They are on a pace to spend about 95% of their earnings on buybacks and dividends. No wonder we're at new highs.
Reminiscences Of Things Past – The return of Nasdaq to the 5000 level saw the financial media scrambling to parade folks to "recall" what it was like 15 years ago. Some of the recollections were – shall we say – foggy.
Several folks claimed that the Fed had raised rates to tame the soaring stock market and in doing so had inverted the yield curve. Well, the yield curve was inverted alright but the Fed's action had little to do with taming the market. The Fed was acting to clean up a mess that they, in fact, had created.
In 1997, the currency of Thailand, the Thai Baht collapsed, spreading chaos to the other Asian Tigers of southeast Asia. The Fed, and other central banks, poured money into the system to calm things down.
Before they got a chance to drain that infusion out, the Russian ruble collapsed, causing another infusion. Before they were done with that Long Term Capital Management collapsed and the Fed added even more money.
Next came Y2K, when all the computers would fail and your bank records would evaporate. To offset the expected hording of money by the public, the Fed pumped up reserves even further. When Y2K came within hailing distance, and no hording had occurred, the Fed began to draw down the flood of reserves that they had created over two years. By March of 2000 that pulled the rug out from under the Nasdaq and just about everything else. All in hands of professionals.
Consensus – Stocks look to pull back a bit as markets around the globe move lower. Shanghai got clocked over 2%. Stick with the drill – stay wary, alert, and very, very nimble." ***ALSO JUST RELEASED: Richard Russell – The Shocking Truth Central Planners Are Hiding From The World CLICK HERE.
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