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Corporate America releases record $ 1 trillion in stock repurchase

US companies, led by Lowe (LOW) and AbbVie (ABBV), rewarded shareholders by revealing $ 34.4 billion in last week's buybacks, according to TrimTab's Investment Research. It raised the repurchases over $ 1 trillion for the first time ever, says TrimTabs, which exceeded the $ 781 billion record set in 2015.The repurchase boom has been driven by strong economic growth and corporate tax review, signed in law a year ago."It's no coincidence," says David Santschi, TrimTab's Director of Liquidity Research. "Many repurchases are due to tax legislation. Companies have more money to pump up the stock price." Not only did tax legislation go down, but it gave a big break to companies returning foreign profits. The companies have used a large part of this case to reward the shareholders. Purchase messages have spiked 64% so far this year, TrimTabs said. Buy (back) high? Wall Street loves repurchases because they artificially inflate winnings and backstrokes by providing a price sensitive buyer. But critics complain that companies often launch repurchases when prices are elevated, not necessarily when they discover a bargain. It seemed to play this year, which began with stock racing to all-time highs. US companies announced $ 113 billion repurchases per month during the first half of the year. However, the purchase rate fell to $ 54 billion a month over the past six months – even though stock prices fell. "Companies tend to buy high. When markets go down, repurchases are going on," says Santschi. "They make repurchases because they…

US companies, led by Lowe (LOW) and AbbVie (ABBV), rewarded shareholders by revealing $ 34.4 billion in last week’s buybacks, according to TrimTab’s Investment Research. It raised the repurchases over $ 1 trillion for the first time ever, says TrimTabs, which exceeded the $ 781 billion record set in 2015.

The repurchase boom has been driven by strong economic growth and corporate tax review, signed in law a year ago.

“It’s no coincidence,” says David Santschi, TrimTab’s Director of Liquidity Research. “Many repurchases are due to tax legislation. Companies have more money to pump up the stock price.”

Not only did tax legislation go down, but it gave a big break to companies returning foreign profits.

The companies have used a large part of this case to reward the shareholders. Purchase messages have spiked 64% so far this year, TrimTabs said.

Buy (back) high?

Wall Street loves repurchases because they artificially inflate winnings and backstrokes by providing a price sensitive buyer. But critics complain that companies often launch repurchases when prices are elevated, not necessarily when they discover a bargain. It seemed to play this year, which began with stock racing to all-time highs.

US companies announced $ 113 billion repurchases per month during the first half of the year. However, the purchase rate fell to $ 54 billion a month over the past six months – even though stock prices fell.

“Companies tend to buy high. When markets go down, repurchases are going on,” says Santschi. “They make repurchases because they feel safe and the deal is good. Most companies do not care what stock price or valuation is.”

Think about the repurchase of missadventures on two major American companies, now in decline: General Electric and Sears.

 Almost half of US finance directors fear a 2019 recession

Under former CEO Jeff Immelt, GE (GE) amounted to $ 24 billion on repurchase of shares 2016 and 2017 on what turned out to be extremely high prices. Now GE is grabbing a cash crisis that dried out 59% of its value this year.

Sears (SHLD) has spent $ 6 billion back its own shares since 2005. The company’s share price has fallen 99% since the top of 2007. Sears left bankruptcy in October.

Repurchase has been a hallmarks of the bull market, which began in March 2009. Corporate America has repurchased more than 4.3 trillion dollars of its own share since 2009, according to Yardeni Research.

Business Expenses Do Not Boom

The market seems to have become more dependent on repurchases, where stocks stumble when buybacks are abolished. In order to avoid stopping insider trading rules, companies usually avoid repurchases of shares during the two weeks prior to reporting the results. The so-called “blackout” periods coincide with multiple landmarks, including the one that began in early October.

Opposition opponents claim that companies would better serve the economy by sharing more earnings with employees and investing in the future.

While the companies invested heavily in repurchase after the tax legislation was adopted, investments in job-creating facilities and equipment have become more mixed. A measure of corporate expenses, real foreign fixed investment, increased by 11.5% in the first quarter of 2018 before it fell sharply. That measurement slowed to 2.5% in the third quarter, compared with 3.4% in the third quarter of 2017.

Florida GOP Senator Marco Rubio said on Twitter last week that the tax code would not encourage repurchase.

“When [a] companies use earnings for stock purchases, it decides that the repurchase capital of the shareholders is better for companies than investing in their products or workers,” says Rubio. “No surprise we have a working life like is unstable and low-paid. “

But others defend repurchases as a legitimate way to redistribute cash that would otherwise be caught in bank accounts. Shareholders can then redistribute the cash to the economy and invest in companies.

” It’s not like the money disappears, “JPMorgan Chase Jamie Dimon told reporters earlier this month during a conference call in the Business Round Table.” The idea that only shareholders and CEOs are going wrong is completely wrong. “

Although repurchase slowed down in recent months, they are expected to be a huge demand source in 2019. JPMorgan recently estimated $ 800 billion of repurchases next year on higher profits and y Further cash handling inspired by tax legislation.

It can of course be changed if companies grow more concerned about the prospects. Fear of lowering economic growth has put S & P 500 on track for its worst quarter since 2011.

And the chief financial officer, the executives responsible for spearhead decision making, becomes worried. Almost half of US chief financiers believe the US will be in recession by the end of next year, according to a Duke University survey released last week.

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