Broker Check

Stock Buybacks

December 02, 2019
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Artificially low interest rates for the last decade, as we have written repeatedly have been one of the driving forces of asset prices going higher. One of the mechanisms through which these low rates drive stock prices higher is corporate buybacks. Many of the S&P 500 companies have spent an aggregate of more than $5 trillion on buying their own stocks in the open market since the 2008 meltdown – and much of the money came from issuing bonds at these crazy low interest rates. This is buying is one of the true driving forces of the recent bull market…

Of course, many feel that the financial engineering going on at these firms to leverage up debt and manipulate the stock price higher is driven by the fact that many of these financial decision-makers have stock options. Naturally their compensation rockets higher when options are cashed in with higher stock prices. Some of this is obviously true – however, we don’t feel it is as nefarious as some financial commentary write. Here is a look at the total shares outstanding in the S&P 500 according to Yardeni Research…