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The real story behind the market ‘boom’

Stock buybacks were over 60x higher than actual insider buying during the first quarter. Some of the buyback money came from profits. However, in some cases, the buyback money came from taking on debt. Last quarter, according to the Fed, corporate debt surged to the highest levels on record. US nonfinancial corporates now have debt equal to 50% of their net worth, compared to debt of 40% net worth in 2006. Nonfinancial corporates were $7.3 trillion in debt by March 31, an increase of over $100 billion since the year began. Ilene 

The real story behind the market ‘boom’

sonic boomBy Brett Arends’ ROI – MarketWatch

So who was driving up the market? What was creating this boom?

Turns out it was the companies themselves. TrimTabs says companies spent a thumping $124 billion in the first three months of the year trying to boost their share prices by buying up stock.

That works out at about $2 billion for every day the market opened.

Meanwhile, according to Trim Tabs, guess who avoided buying stock during the first quarter? Company executives. The “insiders.”

These are the guys whose stock purchases tend to strongly signal bull markets and genuine booms. They were spending investors’ money buying their stock, but weren’t spending their own.

TrimTabs says insiders’ stock purchases came to less than $2 billion for the entire quarter, a comparatively low level.

“We’ve never seen such a sharp contrast between what insiders are doing with their own money and what they’re doing with the money of the companies they manage,” TrimTabs Chief Executive Charles Biderman wrote in a note. Stock buybacks outnumbered executive stock purchases by the highest ratio TrimTabs has seen since it started tracking the numbers back in 2004.

More via The real story behind the market ‘boom’ Brett Arends’ ROI – MarketWatch.


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