We’re literally on the precipice of making America great again and even long term bearshitting strategist from Goldman, David Kostin, knows it.
He’s using the Bush repatriation holiday of 2004 as a reference point, when share buybacks surged 84% to $300b effectively marking the market’s bottom, suggesting that this repatriation holiday could do similar wonders — boosting buybacks by 30%.
Goldman writes:
“A significant portion of returning funds will be directed to buybacks based on the pattern of the tax holiday in 2004,” the team, led by Chief U.S. Equity Strategist David Kostin, write. They estimate that $150 billion (or 20 percent of total buybacks) will be driven by repatriated overseas cash. They predict buybacks 30 percent higher than last year, compared to just 5 percent higher without the repatriation impact.
Morgan Stanley offers a wet towel on an otherwise hot topic.
“The often cited $2.5 trillion statistic [of cash for repatriation] represents accumulated foreign earnings that companies have declared permanently reinvested abroad for GAAP accounting purposes,” they write. “We estimate that only 40 percent of this amount, or roughly $1 trillion, is available in the form of cash and marketable securities. Thus, the other $1.5 trillion has been reinvested to support foreign operations and exists in the form of other operating assets, such as inventory, property, equipment, intangibles and goodwill.” The note did not provide more detail on how much of that available cash the analysts expect to be used for buying back stock.
Either way, there’s no denying that financial engineering is what keeps this fucker of a market ripping to new highs. Having another 2.5t at the disposal of the market riggers might do great things for the indices — paving the way for a most hedonistic and elaborately ornate market wonderstorm.
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are you still Zerohedge bearish?
pre 1982 law, buybacks were considered stock manipulation and hence illegal. why? because all buybacks do is goose eps w/out creating anything…
the “market”……
a giant ponzi…
fiat…..
QE ushered in an era of stock buybacks… which if I recall didn’t do much for anybody except shareholders and the top. Now that QE is done, the new game is tax reparation day so it’s a new era of buybacks?
Same game. Different name.
You are right.. that would rip the market higher with an influx of new money.
it’s actually not the same game; the end result is similar, but very different cause. why? Trump claims to want to drain the swamp, so if he allows buybacks esp off of this tax repatriation he is net adding to the miasma sludge table levels whereas The Fed is the swamp pump spigot allowing for the whole ponzi to continue.
it’s all a giant con and Trump will keep adding to it, while jacking budgets = debt off of zirp/nir, but hey, unlike obammy, he’ll have some roads and bridges to show for it.
only way to fix econ is to destroy wall st.
I’m not convinced that buybacks are good. I would rather take it in dividends if the company has nothing better to do with the cash. Buybacks seem to be mostly mistimed and the cash goes to waste. It may also be a way for a company to attempt to mask poor performance by retiring shares that boosts EPS. Please tell me I have it wrong.
Buybacks are more tax efficient than dividends. This matters a lot more to a taxable investor than perceived mistiming of purchases.