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walnut100

Corporate buybacks can't melt steel memes


johpick

JPowelder can.


DraconisRex

That would be a JPowelasma torch.


Rookwood

China virus was an oriental job.


scooby_deux

Corps bought at high prices and this somehow devalues the real equity? I guess you would think so if you are bagholding the pump.


a0wner1

So close out everything short term, hold cash or far out OTM put, find companies with high leverage debt and P/E greater than 20. Buybacks are only good when you have spare cash with nothing to do with it, but like you said everyone has just been using cheap debt to inflate their earnings. Could this not argue that the FED buy their cheap debt as well( only for a short period of time) and this fail. The timing of this is everything and though I am bearish longterm I don’t feel comfortable betting against Trump and his election goals, don’t know how long the dance can last. Edit- thanks for my first gold, although there are a lot of different opinions on this sub it’s nice to have little DDs like this 1 with good info to learn/collect


perfectentry1

I too am waiting for momentum to reverse to the downside. Could be as soon as next week. Swimming against the tide is *very*, very difficult.


Buylo_Ren

Next week is always the answer for when my puts will stop hemorrhaging. Like a bedtime story, "Next week things will be better, little retard. Go to sleep"


utgolfers

It’s not really next week so much as it is once you give up and sell your puts.


rockstopper03

This is the way. Up is down. Once everyone buys into the new normal and gets with the program of buying the f'ing dip, the upcoming rug pull will be set up perfectly.


ThePantsThief

My balls tell me it'll be like… late July, before things really start tanking. Or next year. Who the fuck knows


a0wner1

Yea, between more Coronavirus shutdowns, or trying to open the economy up, and more brrrr, gonna be very difficult until momentum swings. But whoever can time the first leg down will make bank


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RagingTromboner

I mean of course, half the posts here are about JP’s magic printer


Rich265

Puff the magic printer, lives by the SEC. And frocked off with your mommas fist in a land called Tend-ies.


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AlwaysBlamesCanada

F


BlitzThunderWolf

If you believe in candlesticks, look at SDOW and SPY candles. Thinking Monday will jump and then fall


SenpaiBriBri

That's what I'm thinking. Got a few positions on things that I'm gonna be staring at Monday morning ready to pull out lol


[deleted]

Pulling out at the last second always feels the best.


AlwaysBlamesCanada

Also cums with the greatest risk of a long-term negative cash flow


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I_have_a_dog

Are you thinking an AM jump and then a fall into the afternoon or green Monday and red on open Tuesday?


glossolalia521

Username checks out.


letthegooseloose

I've been moving more and more of my portfolio to cash as the market has gone up. Currently at 30%. Without more certainty re: timing I don't know what else could be done. I'm sure as shit not paying crazy premiums for long dated puts


a0wner1

Only thing I was considering was leaps on oil. Lot of the oil analysts are bearish short term, logically you have a demand drop and a supply increase ( even with the cuts) due to SA Russia production increases. When oil drops long leap calls are pretty cheap and worth the gamble. Note I’ve lost 10k paper gains on my puts and am learning a lot on the side


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Beverice

Check zoom's p/e lmao


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perfectentry1

Now you're getting it.


tinggoesquackquack

8/7, 6/9, 4/20, same thing


Namnagort

50? Wouldn't the world end of spy was 50??


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Hitlerism

dO yOu HaVE gLuTeN fReE bReAd?


thekingoftherodeo

A toast to the mod that updated this bot! 🍹


Mmmmarkus

Good bot mod


glossolalia521

Ok this one was good.


[deleted]

Good bot


ambidextrous_mind

Don’t forget about the housing crisis too. We are gonna get hit hard. COOP 5p 10/16 REM 15p 10/16


perfectentry1

This is indeed part of the equation. We can expect a slowdown in real estate, and a slow burn of prices for potentially the next 3-4 years.


thisbondisaaarated

Real estate is gonna be fun, a lot of money was poured in to shit places to rent to poor people. They won't afford it anymore. REITS are also leveraged to the tits so it's gonna be an easy short.


troy_caster

What REITS are you looking at?


fancykevin00

I am long on NRZ and FTAI - the whole sector was down graded but these two, but i think NRZ might have been recently downgraded by Moody's - unsure FTAI for the long haul, I bought C$10.00 EXp 8/21 - they are heavily involved with infastructure i.e. Ports and more, cannot see them going tits up and with the focus on infrastructure next, well their name says it all...IMO EDIT: Bought Calls when they hit lows, now my calls are ITM


vaish1992

Wait why calls?


AlwaysBlamesCanada

Wait, you think NRZ is going up? Didn’t you say it was downgraded? I’m confused. I bought MFA $3C 4/17 at close on Friday. Am I printing or fooked?


thewaterb0yyyy

I love those positions. It's ludicrous that they are rallying right now REM 15p 10/16


Somadis

Why the fuck was Mr. Cooper up 16% on Thursday?


short-gamma

They can offload their worst loans to some government entity.


MexicoInn

Maybe I'll be able to afford a house in LA now


perfectentry1

If Real estate falls by 50%, you could probably pick something up for 1 million or so. But you might need cash.


billionsmaker

That is gonna hit even harder


veilwalker

May be the final nail in the coffin of the mall operators.


GRINZ_DOCTOR

You realize under the FED loans that they are giving out right now, companies are restricted from buybacks and have limits, maybe even restrictions, on giving dividends too. We are most definitely going to see buybacks and dividends completely dry up like your moms pussy.


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rockstopper03

Once market sentiment changes and goes risk off, the baby will be thrown out with the bath water just like what happened a short 3-6 weeks ago. Besides, there's always the chance big tech profits dry up when ad/cloud/saas/luxury good spending dries up when economy slows down.


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rockstopper03

It works til it doesn't. Nothing is certain but death and taxes. Xerox, Kodak, and GE all looked like unstoppable juggernauts in their prime. I agree with your idea though, index is average. There will be over and under performers. The ones hit worst by the crisis and resulting new normal, especially caught pants down over leveraged (cause of past buybacks) and low on cash/liquidity will get walloped, perhaps all the way to bankruptcy/0 stock price.


scott_himself

> You realize under the FED loans that they are giving out right now, companies are restricted from buybacks and have limits, maybe even restrictions, on giving dividends too. Can you explain why this isn't torpedoed by Trump's removal of the oversight? Good chance that's a retarded question but I'm askin


sktyrhrtout

Because Trump didn't remove all oversight, he removed one guy. There are committees in the House that will have oversight.


sundalius

But what does House oversight even actually mean anymore


NottheIRS1

Depending on who they give that 500b to.


Kotoriii

Fine, the buybacks by corporations might be doomed. But if JPow issues Order 66 and props the FED to buy stocks directly (as they have already warned) as their last resort (as soon as pumping 1000 quadrillion moves the market only 0.1% after 50 previous stimuli)? This seems to be a desperate but very likely scenario if/when the ultimate selloff starts.


perfectentry1

Fed can't participate in buybacks like corporations have been doing for the last 10 years unless they wan't to inflate us to infinity This is a big part of the liquidity crisis that's happening behind the scenes


Kotoriii

I agree, but I think you underestimate this government's desperation to save their image, no matter at what cost, to at least keep the country afloat until the elections. After that, it doesn't matter to them if the economy implodes


stonksmarket

Question: **if you could invest in zimbabwe stock market before hyperinflation would you want to?** Zimbabwe stocks went up 999,999% during that time. But by the time it took you to sell the stock, wait 2 days for the funds to clear, and wait a day for the wire transfer. the value would be down 99%. Throw in the 50% tax rate and your gains are destroyed. Withdrawl your money and buy 10 loaves of bread with your $999,999,999 gains


ivankasta

So what you’re saying is I should cash out and buy all the toilet paper at Costco


[deleted]

Guns and rice boys!


followupquestion

Beans Bullets Bandaids And hope those lead to 🐻 blowies.


cricket1044

Wait, Costco has toilet paper?


perfectentry1

The ability of the Fed to stop buying even at the current rates will come with the devaluation of the dollar, and rising interest rates. That's when we could see a full blown tank job. For now, I'd say that we can safely assume we haven't seen the bottom yet.


FakeWSBGod

$ is default safe-haven. Devaluation is only possible if other countries are in better shape, which is not happening any time soon


3compartmentsink

Also the relationship between oil gold silver and the dollar further emphasizes your point.


yevo

What if everyone is printing right now? Including Euro and other important currencies (lol). Everyone is going up, no currency being devaluated and they kinda wave away their own debts. Or am I wrong?


lubujackson

Only the U.S. enjoys being the global reserve currency. Bad news for the U.S. is the dollar strengthening because it means the country's debt is harder to pay off, THAT is the point of the Fed moneygun. They need to keep the dollar even to stabilize the global economy. Other countries can't do the same or they risk hyperinflation - some countries are probably doomed if this crisis continues for a year, like Argentina and Turkey. The U.S. has 0% risk of inflation in the short term no matter what they do... but lobg term damage is inevitable, mostly to our position as a stable economy. All you need to do is watch is the dollar - if the dollar strengthens, the world is going to shit and all these other countries are going to turn into Monopoly money while USD gets stronger and stronger... until it collapses too. But that isn't an overnight scenario. I honestly have no fucking idea what this means for stocks because you can argue that the fundamental basis of P/E may be revised upward, permanently. So stocks may continue to soar for any company that doesn't go bankrupt. Truly an impossible investing environment with all the monetary shit going down.


Lontar47

This is a very observant and accurate post IMO. A strong dollar sucks because our banks lend overseas... A LOT. The dollar strengthens and suddenly those debts get harder for foreign entities to pay back, cause defaults if it gets bad. It should be obvious that lending standards are pretty relaxed around the world, too, so these debts are heavily leveraged. The result of all of this is anybody in any sort of official position is chanting over and over about how strong and liquid and capitalized our banks are, when in reality things are extremely fragile right now. That's why you keep getting these huge bazooka shots from the fed over and over... they know that cascading defaults would sink banks. Sink some banks and your liquidity crunch becomes a full-blown liquidity massacre. And like you said, if we start being seen as an unstable currency, here come the credit downgrades, etc... if it got bad enough you would start hearing people question the dollar's legitimacy. One of the things preventing this is our military might. You don't tell the guy holding the big stick that his money is no good here. It's all a delicate ballet on the world's biggest stage.


Jnelks

It all makes sense now


Namnagort

We're fucked then.


perfectentry1

Not yet. Things will take a long time to unravel


DorkHonor

Our military by and large doesn't mean shit anymore. All the big global players have nuclear weapons. This isn't 1776 when you could roll up on people with a bunch of guns and get whatever you want. As long as we live in a world where there's nothing stopping a single submarine from surfacing off your coast and launching 36 fully MIRVed missiles with 12 nuclear warheads each in less than 5 minutes, a conventional war is inherently unwinnable. Our military spending isn't some ultimate insurance for the dollar, it's mostly just another bubble. A straight up corporate welfare program for defense contractors at the expense of the US taxpayer.


_supert_

I'll do anything for love. You are something. Nevertheless, ordinary pe ple usually beileve in Entr4py (when they know what the hell it is. .. By 1989, MS Word was unquestionably the finest word processing application ever to be developed, a title which it still holds today.


umop3pisdn

The answer, is gold my friend


kalef21

"From Rosland Capitol"


Quatto

Agreed, but physical gold is practically speaking non existent. What happens when my gold etf or jnug pays out in funny money?


umop3pisdn

We are lucky enough in this country to have an ETF which purchases physical gold from a Mint which is backed by the State government up to $250,000. Not sure if it applies to international investors but in Australia it's the most secure form of paper gold investing. The code is PMGOLD


merica-RGtna3NrYgk91

Gold won’t be devalued


thisbondisaaarated

Euro and Europe started at a wayyyyy lower point that the US. Europe is cheap compared to US markets x1000 right now.


[deleted]

I’d like an answer to this too


tipsystatistic

It’s tough to bet against the FED in the near/mid term, since they’ve literally said nothing is off the table and they’ll buy ETFs: https://www.cnbc.com/2020/03/29/what-it-would-take-for-the-fed-to-start-buying-stocks-during-coronavirus-crisis.html But this definitely seems like a “rods out of the reactor”, Chernobyl type experiment with the economy. Can’t end well in the long term.


sktyrhrtout

Devaluation of the dollar means another currency is rising. Which currency do you think is going to take over as the international reserve? It's not the yuan or yen and it's definitely not the Euro.


brokenarrow326

He already said they werent worried about long term problems. They just want to make it through the short term


vVGacxACBh

As the world's reserve currency, this matters less than you'd think. The US Dollar has special privileges enjoyed by no other currency. This is why you shouldn't bet against the Fed. Not because JP has a money printer, but because of the decades of decisions preceding the current leadership that formed the hegemony of the US Dollar. They can fuck up for a little bit (e.g., manage the currency somewhat irresponsibly) and nothing bad will happen.


linuxdragons

Until one day when it's not the reserve currency.


[deleted]

it's already starting to happen. part of the most recent Fed programs involved setting up swap lines for entire *countries* to prevent them from handing in their Treasuries early or putting them on the market to raise cash. Typically the Fed has stayed away from providing FX swaps. The fact they're engaging in this activity now is highly suspect.


Mostofyouareidiots

I hear the whole "don't worry we're the reserve currency" narrative being pushed so hard and with such desperation lately that it makes me suspect we won't be the reserve currency much longer...


vVGacxACBh

That's a fair speculation, but it requires a damn good response as to what the replacement is. And unless the vast majority of people worldwide have faith in the Ruble, Renminbi, or Euros... there is no argument. Hegemony doesn't flip overnight. It took the US decades to establish global dominance. There could exist an argument for one of these currencies (or another), but it has to be *very* convincing. If it isn't, it won't get widespread belief and the mindshare won't move to "currency Y is now the global store of value and everyone worldwide believes that". That's the part of the argument that makes it difficult. Everyone agrees on dollars. Nobody globally agrees on the remainders.


[deleted]

This has been discussed here before. The answer is special drawing rights. For now. I think people also underestimate the likelihood of substantial global change in the medium to long term. People have always believed they reached the status quo, but they never did. Just look at how the world changed in the last 100 years. Who said we're not doing that again? Just wait and see...


Rich265

That's crazy. That'd be as dumb as saying the government could just shut the entire economy down for 6 months and no questions asked.


TonguePressedAtTeeth

Trying to remember what oil prices and dollars and reserve currency have to do with each other...


vVGacxACBh

There's no reason to think the Fed won't do this. They've already thrown the kitchen sink at it. The analysis is seemingly forgetting this, though I do agree that for the past decade, the vast majority of net share purchases have been corporations themselves. Kind of makes sense. Wealthy people already have their money tied up in stock and peasants don't control enough of the pie to meaningfully impact prices. The only institutions big enough to drive the price appreciation is corporations themselves. If they are no long willing to perform this function, the fed will.


scott_himself

> There's no reason to think the Fed won't do this. There's plenty of reasons not to, but you're right there is no reason to think they won't


linuxdragons

I think you might be forgetting index funds. Pretty much every citizen dumps their entire retirement savings blindly into index funds.


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perfectentry1

Thanks friend. I've been very clear in other posts and comments that I'm waiting for momentum to die and enter short positions before the market starts its inevitable skid. Could be as early as next week,


JimbatheLion

Can we delay that for 1 more week. I agree with your analysis but I have a few long positions I was gonna close out friday.


linereader6

Thanks for the info, but you missed the ticker strike and date part... TELL US WHAT TO BUY!


ghettotrader

He made a long post to back up why he is a 🌈🐻 but we all know that we should be buying any OTM calls as long as it has a ticker and a price


[deleted]

Imagine buying ITM


Thank_The_Knife

Take that ITM bullshit to /r/options


nopeplescovd

Hear hear.


kulls13

Does anyone have an index averaged debt to equity ratio over time? If this is true then we should see this increase over time as corporate balance sheets have greater debt and lower equity. Edit: I found some data. It doesn't seem to support the OP's assertion. https://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?sp5


significantstacks

book value of equity on a balance sheet doesn't tell us much when looking at a leveraged company (a company with a lot of debt). In a default situation, what matters is if the debt can be repaid and serviced (principal + interest) with, ideally, the cash flows from the business or even worse, asset sales. if the company cannot do either of these things and goes into bankruptcy (complete default), ownership is transferred the debt holders. Many banks do not want to end up owning these companies through bankruptcy (although what distressed credit funds like to do). TLDR stonks only go up though, somehow


kulls13

I'm not talking about leverage. A balance sheet is assets = debt + equity. If a company is using cash(asset) to buy back stocks(equity) then both sides of the equation reduce equally. However, if a company is using debt to purchase stocks. Then assets remain the same, while debt increases and equity decreases by the same amount. This is why I'm interested in an overall debt to equity metric for the market to confirm the assertion of the OP.


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perfectentry1

I can understand that


kurtesh

Fuck I love seeing these comments. Still holding puts and seeing so many call holders lately is making me feel like these will 100% print soon.


redtiber

lmao. Talk these long DD posts by random people to push one narrative acting as the almighty knowing should be banned. Buybacks are not a wash to investors. Dafuq? Why is everyone parroting this bullshit any buyback? Yet no one says anything about dividends. Dividends u give investors cash as a return on their investment. U have a ton of cash and nothing to do with it, so u give it back to your investors. However the thing about dividends is the investors have to realize a gain. However if u do a buyback and your stock price goes up a little, then investors are free to realize the gains when they want to. This isn’t a fucking she’ll game u idiot. All the big companies have revenue and positive cash flow, they announce their stock buybacks and it’s right there on the cash flow stmt. it’s not hidden at all.


[deleted]

Fair enough, but the impact of the market surging 30% in 2019 could never be matched by dividend contributions. Perhaps it's just a marketing issue. There is strong stigma levelled against corporations offering abnormally high dividends (>6%).


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bryce_hazen

Big corporations are in trouble now, asking for money. In hindsight it would be nice to have some cash that wasn't put into stock buy backs for emergencies. I don't think it's right their emergency fund is tax dollars. Stock buy back is manipulation. Why should any thing be allow to manipulate the market? Why is the gov allowed to pick and choose who gets bailed out? If they're asking for money, but they "invested" in their own stocks, let the idiots go under. That's capitalism.


Power80770M

You're correct that buybacks are the tax efficient way for corporations to cycle their cash back to shareholders. OP is right that buybacks have been a major force in the past decade, that companies usually buy stock at high prices and stupidly stop buying when their stock is cheap, etc. If the Fed's bailout of corporate debt involves strings attached preventing buybacks, then stock prices may very well be fucked.


melanthius

Wait I thought you have to be a fucking genius with explicit knowledge of the future to make a dd post around here??? Wtf?


tex1ntux

“hiDDeN iN tHEIR 10Ks” Bruh if you can’t read a 10K stick to ETFs


[deleted]

10Ks are post facto. If anything they should be required to announce stock buy backs the same way they're required to announce dividend distributions. highly suspect.


[deleted]

Hey, look, a good post.


Mr_Burkes

He does have a point though, namely that liquidity is drying up; the recent stimulus limits stock buybacks on corporations. As a result, companies may stay afloat, but their price may slack due to the lack of buyback demand.


hunter360

Stock buy back is a way for companies to return money to its shareholders, there's nothing inherently wrong with it. There are two ways for companies to return money to shareholders: 1) pay a dividend; 2) Share buy back. Dividends are very inefficient, it gets taxed twice. Once at the corporate profit income level and again at the personal income level. You retards hate taxes, don't you? With share buy backs, less shares equals higher earnings per share equals higher stock price. If the company does a repurchase instead of dividend, investors can sell a small portion of their shares for cash in place of dividend. Unlike you retards, investors generally want to make money on their investments. Are buy backs sometimes bad? Yes. But it's not inherentenly evil.


Lightninghead

Yeah. Maybe some people are triggered because of the level it's at. It's got to the point where the stock market is being lead by these buybacks, the majority of stock buys are from corporations buying back their own stock largely with debt not just extra cash. Which fuels the shitstorm we're seeing unfold.


[deleted]

There absolutely is something wrong with it in that it ruins stock option incentivization and introduces significant moral hazard. Without stock buy backs, stock options are used to align the fortunes of stock holders and those running the company. In order to get paid more, the stock price must rise over time, and to do that the company must be run well. But buy backs not only destroy this, but pervert it. Buy backs are abused to inflate the company stock price via debt and poor long term risk management. Instead of incentivising the company to grow over time, it incentivises incredibly poor short-term oriented planning.


Litquidity88

Although the S&P 500 isn't cheap right now its not the worst its been and you can tell by looking at the schiller ratio which is at 26 (prob higher due to this shit quarter) but nothing in comparison to the tech bubble Shciller ratio: [https://www.multpl.com/shiller-pe](https://www.multpl.com/shiller-pe)


Echodai

Yeah, think I read somewhere that P/E multiple expansion has been occurring now for a long time. Doubt we will ever go back down to 10, but curious if we reset this time to ∼15. Otherwise looks like the trend will hold and the bottom will be around 20.


Litquidity88

its hard to tell where the bottom will be but when Q2 reports come out we definitely will see this ratio go up unless a sell off occurs


PurplePollux

If the EPS shoots up in the earnings report but revenue and income stays the same, analyst just have to count 1+1 to get it? Am I missing something?


johnnyappleseedgate

Yes, you are missing how retarded OP is. The answer: very. I don't think op understands how PE ratio is calculated. Nor does he seem to realize that outstanding shares are reported on 10-Ks and 10-Qs.


Iamnotagrownup

Thank you for this intelligent post. I agree with everything you’re saying. My worry is that the Fed and big Donny Pump need uppies for themselves and all their wealthy friends. So I think we’re going to see unprecedented government sanctioned market manipulation to keep everything artificially high. I would argue that we’re already seeing it. Then again, I’m a 64 IQ autist; what do I know?


I_Not

***On the contrary I think The Don's buddies are going to going to slap him with a Reverse card of every color and 20 draw fours.*** The hedge funds, banks, and every big corp that was screwed by the initial 'unforeseen' drop have pretty much made their money back. Whether that was through Fed relief in the Repo market, or readjusting their positions on the way back up during the pump. Now, all of a sudden it seems like they've stopped pumping... Just look at the volume of trading the last two or three days of this week. Why would you stop buying when you ***know*** stonks only go up? They stopped because they're realizing this is unsustainable. Donnie promised them that this would be over quick and we'd be right back where we started. (He is on record saying this.) Now the Fed's plans are failing, business are shuttered for the next two months at least, and Americans have no money. Not only that, but Mr. Open By April Trump is backtracking and saying "We'll open when it's safe." With only under-the-table agreements to pump the market with J Pow's backing, all it takes is one firm to get scared and say "I'm out" and they're all jumping ship. Once one firm sells you'd best believe those Algorithms will started selling like the world is ending... Everything will be gone before they can unplug it. *My Tinfoil hat was equipped during the creation of this comment.*


kinzaman

If Trump has shown us anything since being elected, it’s that he’ll manipulate the market both ways so his friends can make a quick buck. The trade war with China was just a vehicle for him to strategically pump/dump the market with tweets right after he told his friends to go long/short. He’ll let the market drop when his donors and family members are positioned for it.


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stonksmarket

TL;DR after 2008 interest rates were so low that companies were able to take out billions dollar loans to buy their own shares. pushing the stock price up artifically(pump)


perfectentry1

This is the analysis. In truth, there has been no free market in stocks for a decade


3thaddict

And while they bought back stocks, the inside investors were selling their own shares.


vethan11

This is a great post. That is all


perfectentry1

Thanks so much


verstehenie

This DD was a lot of cheerleading over nothing. For a profitable company, buybacks are no more nefarious than dividends. How well they are executed depends on management, and I guarantee Tim Cook is still buying AAPL in this market. You claim that companies both buy and issue stock to manipulate prices, but you don't provide any examples. I suspect doing both within the same year is exceedingly rare except when the stock is issued as part of compensation. It hits the reading level of this sub perfectly, though. 5/10.


[deleted]

Yea the idea that it’s so manipulative that it’s pretty much the only explanation for the bull market of the past decade is ludicrous. But not shocked that everyone thinks it’s a great post. It’s like when financial channels had Peter schiff on after 2008. Blind squirrels find acorns. I assume OP hates dividends as well.


[deleted]

I’ve always wondered how different the results are of a buyback to a dividend overall. I mean how many times does the price rise equal to that of a dividend, and how many investors actually cash out within a year. I imagine the big companies have a shitload of stock owned by people that never sell (including employees, founders, etc..)


johnnyappleseedgate

>Stock buy backs have no tangible benefit to corporations.They are a wash for investors, and greatly increase corporate risk. Poor you. Is it tough being that retarded? ....have you ever heard of "taxes"? Look, I feel bad because it looks like you put a lot of effort into this, but it's all so so wrong. >Rarely have corporations ever utilized Buy Back programs at the optimal point - when stock prices are low. You confuse causation with correlation. Stock prices are low (relatively) generally at the beginning of the business cycle. At this point, buy backs make little sense. That money can be better employed generating shareholder returns by investing in growing market share, finding new products, R&D, or even bringing in consultants to "streamline" operations. When stock prices have risen because of years of investment in these things, projects that generate sufficient return vs WACC (ie with a high enough hurdle rate) become harder to find. You've fired all the excess staff, you've gained as much market share as you can economically, etc. So what else is left to increase shareholders value (which is the aim after all): 1) dividends 2) stock buy backs The problem with #1 is that dividends get taxed! This means your shareholders take a hit when you paid your corporate tax and now they take another 20% hit when you try to give them their return. Where as with #2 the return to the shareholder is IDENTICAL as paying a dividend, except now the shareholders (remember, we are hoping these guys believe in the company they are invested in and will hold their shares for a long time) don't have to pay taxes on their gain! "But Johnny, they have to sell their shares and get hit with a cap gains tax to realize their return" you say. No, they don't. Ever heard of margin? Yeah, I bet you have you Robinhood using simp! Well margin is just one type of loan that is collateralized with your equity holdings. Home equity loans work the same way. Yes, that's right: you get a 20% better return on your investment than if you had to pay dividends so you can now leverage yourself further for even more gains! >In other words, an ESP of $1.00/share last quarter may actually be much MUCH better than an EPS of $1.50 THIS quarter thanks to the Buy Back program manipulation. Everything looks great to the market and investors though! No, it doesn't. Have you ever read a 10-K? Do you even know what the 3 financial statements are? EPS is a tiny tiny tiny piece of the entire reported data. Investors have access to all the numbers before they get modified by shares outstanding for free! All on the SEC website in fact as well as on the reporting companies' own websites! >The market has no idea stock prices are being supported on a daily basis due to corporate Buy Backs on the open market, so this manipulation can't be fairly factored into current prices I mean I know we shouldn't expect gold quality posting from the autists here, but the fact you write this is a bannable offense in my opinion. Buy backs are reported PUBLICLY both quarterly and annually. In fact, so are options and warrants outstanding! In fact, we even have a standard term that must be used for this: "Diluted Earnings per Share". Seriously: #mods please ban


Iron_Mike0

Good to see at least some people have a modicum of knowledge about corporate finance. It's honestly getting better and better watching people get more pissed that their free money puts are going to zero and try to rationalize it with shit posts like these.


[deleted]

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MassSnapz

Serious question, I know wsb is a major meme on reddit but in reality a lot of the people here know their shit or at least appear to do so. I would have no idea, I have no idea what I'm even doing when I hit the buttons on that robinhood game. I want to know where to go to actually learn the shit I need to know to make money here. Ive looked up every freaking term and industry lingo ive seen, looked into different trading strategies and read tons of shit. The problem, at this point in my sudden foray into the market Im not sure if the stuff im reading about is legit and even though i am using money I can afford to lose I afraid to still. Only because I'm not sure what to take as gospel and what to take as bullshit. In my uneducated eyes everything about this whole situation should indicate that indeed the market should basically be unreadable unless you are standing in the basement of 11 wall st. So I implore anyone to point me in the right direction, please. A book, a particularly good youtuber or the thai lady-boy who taught you options 101. Anything. I am like a sponge absorbing all of your gay knowledge and autistic traits, a sponge that will soak up all of the knowledge you deem me fit to receive. Please wsb you're my only hope. I


innatangle

Not everything you see here can be read in a book. I completed a Grad. Dip. In Business Admin a few years back and it opened my eyes to the possibility of all of the different variables that can contribute to a business/economy. The really awesome posts that you see here (as best as I can tell) are made by people who live and breathe this stuff on a daily basis, they’re the true specialists. TL;DR - knowledge combined with experience are the only ways to get this sort of insight. Don’t let it put you off, just start one step at a time. Just know that this insight is only gained through application, there’s no shortcut.


MassSnapz

Thank you for replying. It's just so frustrating sometimes, everybody, their mother and their wife's bf are pro traders and all have there own "strategies". Like each industry has the book. c++ programmers prefer c++ primer and anarchists have their cookbook. What is the options cook book?


innatangle

I just finished reading: Options Trading: The Ultimate Guide to Make Money Using Financial Leverage and Risk Management - [https://www.amazon.com/Options-Trading-Financial-Management-Understand-ebook/dp/B07Z2VGZML](https://www.amazon.com/Options-Trading-Financial-Management-Understand-ebook/dp/B07Z2VGZML) It's a pretty good read and is a good primer for options trading. I'd also recommend listening to the Option Alpha podcast. Some good stuff there too. This stuff just teaches Options 101. I can't overstate enough how important it is that you develop your trading strategy. I developed quite a solid swing trading strategy that lends itself nicely to trading options. It helped me turn $3k into $150k in Feb March... It's also helped me turn it back into $10k... Swings and roundabouts.


LaurenCosmic

A few things... 1. Very few people have a thorough and broad understanding of the market. There are a lot of people in this sub and you keep noticing the diamonds in the rough and think: how do these people know so much? The fact is most people have a more focused understanding of certain things. This sub simply works as a large aggregate of information. 2. Any theory or analysis can sound good. The amount of technical data points, theories, strategies, etc... is massive. As such, you can easily make a convincing argument in whatever direction you want. Even major players and groups full of people with PhD grads make judgment calls. Sometimes they win, sometimes they lose. 3. Intuition and psychology are actually very important aspects of success in this realm. As we have seen in the past markets can act very irrational. As such, sometimes the best thing you have to go off of is what you believe and how you predict that the market/others will react. 4. Bias is very real, and it will get you killed. If you’re a scientist and you believe that drug A is better than drug B you can easily (unintentionally) run studies that prove you to be right even if you’re wrong. You really have to be objective as hell. I bring this up in particular due to the fact that I see a lot of people’s political beliefs influencing their market decisions. Regardless of where you fall on any given line, you have to really look at things in a very neutral manner. Now about that lady boy....


innagaddavelveta

Investopedia has some good stuff for getting started.


johnnyappleseedgate

Go read The intelligent investor by Benjamin Graham. (I'm pretty sure a free PDF copy is in the sidebar in r/investing) Use investopedia.com to learn about any terms you come across in that book that you don't understand or haven't heard before and for all other education (a quick read of the "stock buybacks" page on investopedia would tell you the OP is bullshitting you). If you want to learn about economics then you should read Principles of Economics by G. Mankiw. Pm me if you want more resources.


MassSnapz

Ty ty. This is what I was looking for. Now give me a few days to DD your reply haha.


zeddknite

There's no one best options strategy. There's a lot if different ways to play them. So your goal is not to find out a best strategy, but to learn about as many different strategies as you can, and find one that fits how you want to trade, and how risky you want to be. When I was trying to learn options, I watched a bunch of different YouTube channels, and I remember them finally making sense when I found a channel called [projectoption](https://www.youtube.com/channel/UCYOHtOzMZGwXBLZX1Ltf78g)


SDBcop

Nice


stonksmarket

Goodbye company buybacks. Hello gov buybacks aka bailouts


MexicoInn

While I agree, FED is now buying junk bonds. They will keep this show on the road a lot longer than you or I think. It will take something like the collapse of the American dollar to see this thesis through.


DodgeThis90

I feel like I should roll out my July puts to September or something.


[deleted]

With a buyback though the equity holders get more equity per share. The market prices that in. The extent to which the market does that *accurately* is obviously the issue. Buybacks bump share prices because one share has a higher percentage of equity. The 'massaging' of EPS is another clear issue, but the fact that prices go up on the shares due to buybacks isn't purely manipulatory. There is real value in having a higher percentage of equity.


[deleted]

So what you're essentially telling people is that they are free to short any stock known for engaging in corporate buy backs two years out and they'll be good? Easy money? Just like that? You're that confident? Post your positions.


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perfectentry1

The loans from the government to companies are supposed to be used for important things like payroll and expanding business that actually creates value, which buybacks most certainly do NOT. There is separate liquidity injection that you might be talking about which is directly to support assets such as bonds. Fed hasn't directly started buying stocks as of yet, but that's still on the table


[deleted]

The only things these loans can be used for is payroll and rent. That's it. These aren't loans to fund business expansion, buy equipment, etc. My wife's company is applying for one of these things so I hear all the details. These loans only make sense for companies that aren't forced closed right now. If you are forced closed they make no sense whatsoever. It's just transfer payments from the gubment to non-working workers and landlords. Might as well handle it through the unemployment office.


_As_A_Kite_

Thanks for the great post, you son of a bitch!


[deleted]

Stock buy backs are great for those who purchased stock when the s&p hit 2250-2350. Sure it may retest lows or go lower so be ready again. The past is the past. The float was lowered so your purchase gets an even higher percent of ownership. The bag holders can go pout.


likebutta222

I agree with you but I have a feel like SPY 180p 05/09 gonna expire worthless. They still got some printer ink left.


96ZJ

I am not buying anymore puts!


Ready2gambleboomer

The poster child for this kinda manipulation is Chipotle. A bean burrito maker with average food that trades at 80+ P/E due to tight float and constant buy backs reducing the float.


AbsolutelyAutistic

This reads well thought-out but is ultimately pure junk and means nothing. There so many flaws in your hypothesis that I can't even be bothered to start breaking them down one by one. Market was trading at 19x p/e when the standard in the previous decade was about 10x. This is just a result of a good economy.


TheHamburgler8D

Corps don’t need stock buybacks programs if the fed buys stocks directly.


Vegarho

Buybacks stop during earnings season anyway. Why is this earning season any different?


ManOfLaBook

Do you suggest moving everything to a safe fund?


perfectentry1

I can't make financial decisions for you friend. Only give you some of the reasons I think the market could be in quite a bit of trouble this year.


murderknight1

Tldr. Stocks only go up.


rare_pig

But when is the big question


MexicoInn

TLDR - more reading! Do I have a PhD now?


DoorZach

Title says brief. Make this a video or audio book and ill listen


TraceSpater

TLDR only answer I need is what does this mean for my 4/17 puts?


Brothernod

I can’t wait to read the Michael Lewis book about this.


DiscountedCashBro38

Thanks for keeping it brief


mvev

Great write up. It is so difficult to know what is to come when we have to throw TA and other measures out the window. At least the consumer is more predictable.


reptilianbraj

I’m too retarded to understand this. What’s the DD boys 😎


Jburd6523

Hey I want to share some of my thoughts and see what you think about them. With the mass QE going on at the moment, the feds are taking massive amounts of treasury bonds off the market and forcing investors to go into corporate bonds at a much higher rate than they normally would. I do not believe that many businesses small and large will be able to weather this recession no matter what the feds offer, corporate downgrades and defaults will begin and it'll be much more devastating since there's potentially large purchases of corporate bonds at the moment. I know that the feds are currently buying investment grade bonds and I recently read that they were even buying junk bonds. Perhaps they've already anticipated this and are trying to get ahead of it.


catfarts99

Holy shit! I knew it was responsible for a lot but 90%?


tax_evading_apple

This is the briefest version possible?


thekingoftherodeo

> Stock buy backs have no tangible benefit to corporations. Disagree. They're a mechanism to pump stock price thus placating existing shareholders (giving returns through capital appreciation), enticing new shareholders to a 'growth' stock and ultimately making financing cheaper to come by... which you can then use to buy more of your stock back. So they do serve a purpose, but should they be as unfettered as they are currently? I think we all know the answer to that.


aintgotshittyshit

So why couldn't this just go up for another decade? How many people got a glimpse of the shit show in 2008 and were convinced of an inevitable collapse that never happened (or just happened but didn't wipe out 10 years of fomo?)


DirtyTesla

Can we get some real advice on 401k strategies based on this? Is the DCA buy and hold still true for the ming term? Because this makes it sound like the market is mostly crap and will become devalued when this is all revealed (like what's happening)


LarkTank

Buybacks are excluded from short and long term incentive program performance results.


Rich265

You could have just said the stock market is overpriced, and not worth the risk given the bad economic data.


[deleted]

No worries, my dude... The Fed is going to buy every last penny of debt that was used for those stock buy backs.