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Negative interest rates and company stock buy backs might be able to allow markets to keep going for a while. Negative rates cause investors and sovereign weal
by lujim 10y ago
Negative interest rates and company stock buy backs might be able to allow markets to keep going for a while. Negative rates cause investors and sovereign wealth funds to pour money into equities. The Bank of Japan owns 50% of the ETFs in Japan. That should scare people.
Stock buy backs artificially inflate reported company earnings. Companies take on cheap debt to buy back shares of their own company (at historically high valuations) to keep investors happy and beat earnings estimates.
This game of musical chairs can run for a while.
- aminorex 10y agoThe demographic cycle compels a bottom in person ratios around 2024, but markets are front-running machines, so, no, not much longer.
- shostack 10y agoAnd analysts aren't wise to this practice? Wouldn't the market have priced in that charade already?
- lujim 10y agoEveryone knows it's happening, the real question is whether it is a charade or not. Buy backs are a legitimate practice for companies that want to reward shareholders and gain a bigger chunk of their own business. Nothing sketchy there. The question is why would a company like Nike want to buy back it's own stock at historically expensive valuations rather than use that money on new products or to expand their market share? Are they doing it to gain a bigger piece of their own business, or are they doing it to juice earnings because top line sales are decreasing and they need to beat earnings expectations to keep the share price up? The jury is still out.