May Charts of Interest: Buybacks Are Rising

Barry from TX posted over 2 years ago:

Charles, I suspect you “curated” these data points into a theme, but I am not certain. I see a theme in the data points indicating markets are expected to continue rising in 2024. #1 “SPX Buybacks Highest since 2018” [WSJ] means prices will rise as shares are depleted. #2 “Traders Not Scared of the Big, Bad Bear” [VIX] means traders expect markets to rise ST. #3 50% of “AAIIers have >$2M Net Wealth” (is not AUM; homes and other assets could be 25%-50% of that figure and there is ALWAYS “self-reported” inflation whenever people are asked about their wealth, except at tax time) means AAIIers are VERY heavily invested. #4 Median value of consumer stock market investments reached $195,000 (comparative data for the magnitude of the difference in #3; AAIIers median is almost 10x above the population median.) This most likely reflects the same skew as average US household income statistics that show median is a weak measure of the shape of the overall distribution of US wealth. It also could indicate important marketing opportunities for AAII. If AAII “educated” AAII multi-millionaires achieve their wealth, they should be more willing to pay higher AAII fees. This factoid could support that the PRISM process works (there are Community threads that challenge this. And I question the demographics; younger and new members may be underrepresented in this sample. #5 “House Prices Are Up Across the Country” (data supporting analysis in #3). #5 A Weak Spot in the Labor Market” 2024 data below during past recessions indicates a stronger economy which helps markets. “#6 Insuring That Car Is How Much?!” (Besides the 5 factors you identified, a lurking factor here may be all the expensive cars all those AAII multi-millionaires are driving. #7 B-B Spread @17.6% is about 3x wider than HA @6.5% and there is very low movement (0.5%-0.6% ) this week. Are the AAII multi-millionaires all in on a rally when a famous investor advises “be fearful when others are greedy.” Charles, thanks for the gedankenexperiment opportunity.

John L from NJ posted over 2 years ago:

Inflation: Companies have more money for buyback, investors are wealthier, house prices are higher, and insurance is more expensive at least in nominal dollars. Throw in the unrelated VIX and minor uptick in permanent job losers and call it breaking news. None of this tells investors anything about the future. But it is interesting.

Barry from TX posted over 2 years ago:

Fidelity reported today 5/24/24 that "Average retirement account balances, meanwhile, hit their highest level since the end of 2021, rising to $125,900 for 401(k)s and $127,745 for IRAs." Does this indicate that there are not many AAII multi-millionaires invested at FIFO? ....or ... (see above.)

Michael CPA-retired from CA posted over 2 years ago:

Apple Inc.’s proposed record $110 billion buyback will reduce shares outstanding by approximately 4%. The remaining – and continuing – 96% of stockholders at the time of the buyback will then be the 100% owners of a minimal, or a deficit, Balance Sheet Equity. After the buyback the Balance Sheet Equity WILL ONLY BE POSITIVE as of the next quarter-end if, for that quarter, the cumulative net profits exceed $36 billion plus any dividends paid – per my calculations [since Balance Sheet Equity as of the Quarter ending 3/31/2024 is only $74,194,000 thousands (i.e., approx. $74.2 billion)].

Michael CPA-retired from CA posted over 2 years ago:

In my opinion Apple Inc.’s buyback represents a failure of management’s fiduciary duty to the current 96% of shareholders that won’t be participating in the buyback. Apple Inc.’s proposed record $110 billion buyback means its Cash, the most “real” of assets on its Balance Sheet, will decrease by that amount. Before the buyback that $110 billion of Cash is owned by all the shareholders and represents approximately $4.84 per share. Assuming $181.92 is paid per share in the buyback, $177.08 per share is Cash that was really owned by the continuing, non-participating in the buyback, shareholders. That $177.08 per share will total $107+ billion (previously owned by the continuing shareholders, not participating in the buyback) which is being paid to management for shares they received from stock option compensation, as well as to those large stockholders, chosen at managements sole discretion, who are allowed to participate in the buyback. None of that decrease in Cash will have paid down any Debt, nor interest on the Debt, nor will it have paid any costs of operations or purchased any assets, and very importantly it will no longer be available in reserve in case of an unforeseeable need.

Michael CPA-retired from CA posted over 2 years ago:

Apple Inc.’s management’s proposed $110 billion stock buyback has failed their fiduciary duty to the 96% of shareholders that won’t be participating in the buyback. This proposed transaction is an example of the error associated with any buyback where the Price paid per share is greater than the Book-value Equity per share (i.e., a Price/Book Ratio of greater than 1/1). This matter is relevant to almost every S&P 500 company’s stock buyback, because the S&P 500’s average Price/Book Ratio is approximately 4/1.