Daily Traders Edge

How Wall Street Is Hacking The Stock Market – Forbes

March 24
15:08 2017

The stock market has a problem.

It has become dependent on new money from those companies buying back their own stock.

The amount of money coming into the market from this source is huge.

This year $700 billion will be spent by public companies on share buy-backs, according to a research report published earlier this month by Goldman Sachs. Last year the total for buybacks was almost as gigantic; $584 billion.

Buybacks by publicly traded companies reduce the number of shares outstanding and so help raise earnings per share.  Senator Elizabeth Warren has routinely lambasted the practice.

On their own, the buybacks aren’t necessarily a bad thing.

The problem is that such amounts dwarf currently all the other flows into and out of the market. The same Goldman report shows that without the corporate stock buying there would be an outflow from stocks totaling half a trillion dollars in 2017.

Buybacks to Mask Half-trillion Stock Sale

Or put another way, without the inflow of new money to the market from corporations we would see $500 billion worth of stocks sold into the market this year.

Continue Reading At Forbes

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