TrimTabs President & CEO Charles Biderman discusses how global financial markets are suffering from years of borrowing to pay entitlements to citizens, stock buybacks by corporations, and other topics in a short 2:16 video.
Biderman had predicted a collapse in equity markets but says stochttp://beta.blogger.com/img/blank.gifk buybacks by corporations have, for now, prevented that collapse.
“In 2009 with interest rates dirt cheap companies have sold around $3 trillion in bonds and about $800 billion in new shares. Companies are currently the only buyers of stocks as individuals remain net sellers. $2 billion a day of company buying can take the market higher. That is until companies stop buying and start selling lots of new shares.”
Here is a link if the video does not play: Biderman’s Daily Rant for 11/3/2011
For every buyer there is a seller and vice versa. Moreover, stocks can go up or down whether corporations are buying or selling. However, it is important to note that the frequently touted corporate “cash on the sidelines” is for the most part debt.
A handful of tech companies with huge piles of cash and little debt is the exception, not the rule.
If companies squander their “cash” on buybacks, they will once again be back in a situation of high debt and no cash when the market bottoms, because buybacks or not, the market is overvalued and eventually will get to where it’s going.
BTW, here is something I came across the other day: A link to all the videos I have used in this blog.
Mike “Mish” Shedlock
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