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At the same time, nonfinancial companies debt soars....
hmmm interesting, isn´t it?
The Real Story Behind the Market 'Boom'
by Brett Arends
Wednesday, June 29, 2011
Commentary: Companies are buying stock, but insiders aren't
A new report from TrimTabs, the investment analysts, has blown the whistle on what really went on behind the stock-market "boom" we saw in the first quarter, when the S&P 500 Index rose more than 5%.
No wonder everyone turned bullish by the end of March — just before the market started tanking again.
So who was driving up the market? What was creating this boom?
Turns out it was the companies themselves. TrimTabs says companies spent a thumping $124 billion in the first three months of the year trying to boost their share prices by buying up stock.
That works out at about $2 billion for every day the market opened.
Meanwhile, according to Trim Tabs, guess who avoided buying stock during the first quarter? Company executives. The "insiders."
These are the guys whose stock purchases tend to strongly signal bull markets and genuine booms. They were spending investors' money buying their stock, but weren't spending their own.
TrimTabs says insiders' stock purchases came to less than $2 billion for the entire quarter, a comparatively low level.
"We've never seen such a sharp contrast between what insiders are doing with their own money and what they're doing with the money of the companies they manage," TrimTabs Chief Executive Charles Biderman wrote in a note. Stock buybacks outnumbered executive stock purchases by the highest ratio TrimTabs has seen since it started tracking the numbers back in 2004.
"While insiders are willing to use corporate cash to try to support the value of their stock-based compensation, they don't seem to think their stocks are attractively priced," Biderman said.
No kidding. When it comes to insiders, follow what they do, not what they say.
When company executives are spending their own money buying stock, it's a bullish sign. After all, who better knows their companies' prospects? But when they are sitting on their hands or cashing out, it's not so good.
As for companies buying up their own shares, this needn't be a bad thing. After all, if you drive up stock prices, all shareholders benefit.
hmmm interesting, isn´t it?
The Real Story Behind the Market 'Boom'
by Brett Arends
Wednesday, June 29, 2011
Commentary: Companies are buying stock, but insiders aren't
| More from MarketWatch.com: • The Most Important Point in Market History • Japan's Debt Crisis Moves in Slow Motion • Would a Greek Default Be Automatic Doom? |
No wonder everyone turned bullish by the end of March — just before the market started tanking again.
So who was driving up the market? What was creating this boom?
Turns out it was the companies themselves. TrimTabs says companies spent a thumping $124 billion in the first three months of the year trying to boost their share prices by buying up stock.
That works out at about $2 billion for every day the market opened.
Meanwhile, according to Trim Tabs, guess who avoided buying stock during the first quarter? Company executives. The "insiders."
These are the guys whose stock purchases tend to strongly signal bull markets and genuine booms. They were spending investors' money buying their stock, but weren't spending their own.
TrimTabs says insiders' stock purchases came to less than $2 billion for the entire quarter, a comparatively low level.
"We've never seen such a sharp contrast between what insiders are doing with their own money and what they're doing with the money of the companies they manage," TrimTabs Chief Executive Charles Biderman wrote in a note. Stock buybacks outnumbered executive stock purchases by the highest ratio TrimTabs has seen since it started tracking the numbers back in 2004.
"While insiders are willing to use corporate cash to try to support the value of their stock-based compensation, they don't seem to think their stocks are attractively priced," Biderman said.
No kidding. When it comes to insiders, follow what they do, not what they say.
When company executives are spending their own money buying stock, it's a bullish sign. After all, who better knows their companies' prospects? But when they are sitting on their hands or cashing out, it's not so good.
As for companies buying up their own shares, this needn't be a bad thing. After all, if you drive up stock prices, all shareholders benefit.
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