[concernedcitizen76]

In Stockman’s view, central bank “financial repression” — in the form of artificially low interest rates that have been orchestrated to provide a false prop to the economy — is responsible for fueling stock market bubbles that makes stock repurchases and other short-term financial engineering maneuvers profitable.

For 2015 to date, corporate bond issues total $241 billion — a giant $1.4 trillion annualized run rate, or nearly double the run rate prior to the 2008 financial meltdown, he noted. “Yet virtually all of this massive debt issuance has been cycled into after-burner fuel for the rocketing stock market. During the month of February alone, stock buybacks for the S&P 500 were a record $104 billion,” he added.

Stockman explained that the titanic splurge in corporate debt issuance conceals the fact that real net investment in the U.S. business sector shrank sharply from $400 billion annualized in the fourth quarter of 2007 to only $300 billion annualized in the fourth quarter of 2014.

[SaveFerris]

I’ve been saying this is the only thing keeping them afloat while people don’t have money to spend.

The musical chairs only work until the music stops.

[4rcane]

corporations are borrowing money at almost zero interest rate to artificially increase their stock price, thus increasing their bonuses

[RichInOC]

“That can’t possibly taste good.”

[Cronos]

I believe a lot of companies listed on the stock market are guilty of short-termism. Releasing your results every quarter leads to “let’s do anything to keep the stock up this quarter”, instead of longer-term planning. I believe the right approach should be yearly results and forecasts only.

[Oratam]

Bkmk

[grania]

Thanks for this post. It very clearly explains how stock prices can be in the stratosphere while the economy is struggling. I did not realize corporations could borrow money to buy back stock. It seems so wrong.

[Alberta's Child]

Stockman makes a good point here, but he’s overlooked something. Corporate borrowing in 2015 has likely driven by the understanding that the Fed will raise interest rates this year. As ridiculous as it sounds, it may be in a company’s best interest to borrow money at historically low interest rates even if it doesn’t need the money for anything related to its growth or operations ... hence, the stock buybacks.

[killermosquito]

The wealthy no longer invest in business, they invest in politicians.

[PGalt]

Interesting. Thanks for posting.

[SaraJohnson]

Corporations may be screwing up their businesses but they can be proud of successfully pushing anal sex (and it’s diseases and insanity) and gay “marriage” on the globe. They brought us Obama, too!