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Sunday, February 10, 2019

Start Prepping Now 🔴 Expect The Corporate Share Buyback Wave To Continue In 2019


Expect The Corporate Share Buyback Wave To Continue In 2019

Buybacks could become a very powerful force once again this year, and keep the stock market ball rolling a while longer. Nomi Prins explains why…A crucial theme from last year is continuing into this year — stock buybacks. Last year was a banner year for companies buying back their own shares. A month into 2019, it appears that Wall Street is set to continue that trend.
Last year, U.S. companies announced a whopping $1.1 trillion worth of buyback plans. Armed with extra cash from favorable corporate tax policy enacted in 2017, they enthusiastically bought back their own shares.
But as of mid-December, only about $800 billion of those buybacks had actually occurred. That means there could be another $300 billion of the total 2018 target still waiting to hit the market.
In fact, Wall Street is already gearing up for another banner buyback year. In a recent report, J.P. Morgan strategist Dubravko Lakos-Bujas wrote, “It’s expected that S&P 500 companies will execute some $800 billion in buybacks… in 2019.”
The Wall Street strategist also explained that the quality of 2018 buybacks were high. He revealed that companies were using their cash, rather than borrowed money, to fund buybacks. Using cash toward buybacks is expensive less than using debt.
But why did the wave of buybacks slow down late last year?
The first reason is that companies involved had already purchased stock at a very rapid rate through last September. That was one major reason we saw the market peak around that time, and in fact, hit new records.
The second was that despite trade war fears and uncertainty, companies felt confident enough to go ahead with their buybacks initially. That’s why we saw market players largely shrug off warning signs through the first three quarters of 2018.
But sentiment shifted dramatically during the last quarter of the year, culminating in essentially a bear market by late December. And more reports around the world began to point to slowing economic growth ahead.
A key factor cited for this slowdown was the impact of prolonged trade wars, which could curb real economic activity and create more uncertainty. In turn, growing volatility would keep businesses from planning expansions, or using the cash originally set aside for buybacks.
A third reason for the drop off in buybacks late last year was a record amount of public corporate and consumer debt that had to be repaid or at least serviced regularly. This overhang of debt was weighing on growth expectations. That debt load would become even more expensive if the Fed kept up with its forecasted rate hike activity in December and throughout 2019.
Some analysts even warned that the Fed might go ahead with another four rate hikes this year. That triggered fears on Wall Street that the central bank stimulus game could truly be over.
The reason for the concern is simple: The higher the interest rates, the more expensive it is to borrow and repay existing debt. For more highly leveraged corporations and emerging market countries, this would be an even greater threat. A higher dollar, resulting from more Fed tightening, could cause other currencies to depreciate against the dollar. That would make it harder to repay debt taken out in dollars.
Finally, there was heightened tension in the financial markets due to political uncertainty. With U.S. election results ensuring added battles between Congress (with Democrats taking the majority in the House of Representatives) and the White House, doubt set in over the functionality of the U.S. government going forward.
Those reservations were justified. The government shutdown that kicked off 2019 had a lot to do with shifts in the political balance in Washington.
Geopolitical tensions also rose at the end of 2018, including Brexit in the United Kingdom, street revolts in France, potential recession fears in Italy and growing unrest in South America.
All these factors combined ensured that markets were extremely volatile during the last quarter of 2018, and why it was the worst one for the markets since the Great Depression. It was not conducive to buybacks. Buybacks are supposed to raise the stock price. But strong market headwinds could have largely canceled their effects.
The prudent approach for companies facing such a negative environment was to wait out the problems until the new year.
But Jerome Powell subsequently gave into Wall Street and took a much more dovish position on both rate hikes and balance sheet reductions. That means the coast is clear again to resume the buybacks.
Back in December, some major players announced plans for 2019 buybacks. These include Boeing, which announced an $18 billion repurchase program. It also includes tech giant Facebook, which plans to buy back $9 billion of its own shares, in addition to an existing $15 billion share repurchase program started in 2017.
Also in on the buyback wave is Johnson & Johnson, which announced a $5 billion stock buyback. Others include Lowe’s and Pfizer, which both announced a $10 billion stock buyback program.
These plans are now much more likely to go forward.
Furthermore, many large corporations like Microsoft, Procter & Gamble, Home Depot and Walmart didn’t even announce buybacks in 2018.
They could well announce them for 2019. Companies that did announce big buybacks last year, like Apple, could also engage in more, adding a potential $100 billion share repurchases this year to match 2018.
Another indicator for a sizeable 2019 buyback wave is that stock prices are lower now than they were going into the fourth quarter of 2018. That means companies can buy back their shares at cheaper prices. They could buy at a discount, in other words, or at least what they hope will be a discount.
My old Wall Street firm, Goldman Sachs, has already forecast $940 billion worth of buybacks for 2019. They previously had predicted over a trillion dollars’ worth of buybacks for 2018. The number of buybacks for 2018 even exceeded their predictions.
By mid-January, of the S&P 500 companies that reported their fourth-quarter earnings, nearly 70% of them have exceeded Wall Street’s profit expectations. It’s a favorable environment for buybacks.
Yet, it may still take some time for companies to move forward with this year’s buybacks. That’s because we are still in the “black-out” period that the Securities and Exchange Commission (SEC) has created.
The period covers the time just before and after companies post earnings results. The sell-off in October coincided with the third quarter earnings season’s “blackout period.” The combination of negative environmental factors plus fewer buybacks drove markets even lower.
Now, once earnings season and the current blackout period is over, Wall Street will be unleashed to buy large blocks of stock for their major corporate clients.
If the Federal Reserve truly holds back on its former interest rate and quantitative tightening plans, as it seems likely to do, expect central bank stimulus to continue to fuel markets.
Of course, buybacks do not come without negative implications. That’s because companies are not using their cash for expansion or to pay workers more, which would generate more buying power in the overall economy. But in the short run at least, they tend to raise the stock price.
Even if Wall Street comes up against headwinds of volatility, slowing economic growth, political strife and trade wars, they can now expect the Fed and other central banks to have their backs.
Buybacks could become a very powerful force once again this year, and keep the ball rolling a while longer.

35 Mind-Blowing Facts About America That Previous Generations Would Have Never Believed

Imagine what it would be like for a group of average Americans from 1919 to suddenly be transported to our time, and then hit with these 35 facts…The only thing that seems to be constant in our society is change, and today America is changing at a pace that is more rapid than we have ever seen before.  But is that a good thing or a bad thing?  For a moment, I would like for you to imagine what it would be like for a group of average Americans from 1919 to suddenly be transported to our time.  How do you think that they would feel about what we have become?  Certainly they would be absolutely amazed by our advanced technology, but beyond that they would almost certainly have very strong opinions about the current state of our society.  Similarly, if any of us were suddenly transported 100 years into the future, I am sure that we would be completely and utterly shocked by how things had changed.  The decisions that we make today are going to echo long into the future, and if we make very bad decisions there might not be a future for our country at all.
The following are 35 mind blowing facts about America that previous generations of Americans never would have believed…
#1 Approximately one-fourth of the entire global prison population is in the United States.
#2 By the time an American child reaches the age of 18, that child will have seen approximately 40,000 murders on television.
#4 Approximately 96 percent of all Americans use the Internet.
#5 According to the American Road and Transportation Builders Association, nearly 56,000 bridges in the United States are currently “structurally deficient”.  What makes that number even more chilling is the fact that vehicles cross those bridges a total of 185 million times a day.
#6 In more than half of all U.S. states, the highest paid public employee in the state is a football coach.
#7 The Pentagon has more square footage of office space than any other office building in the entire world.
#8 The state of Alaska is 429 times larger than the state of Rhode Island.  But Rhode Island has a significantly larger population than Alaska does.
#9 Alaska has a longer coastline than all of the other 49 U.S. states put together.
#10 The city of Juneau, Alaska is about 3,000 square miles in size. It is actually larger than the entire state of Delaware.
#11 The average age of America’s dams is now 52 years.
#12 The average supermarket in the United States wastes about 3,000 pounds of food each year.
#13 There are more than 75 million dogs in the United States, and that number is constantly growing.
#14 Montana has three times as many cows as it does people.
#15 The grizzly bear is the official state animal of California. But no grizzly bears have been seen in the state since 1922.
#16 The only place in the United States where coffee is grown commercially is in Hawaii.
#17 More than 2 million Americans work for Wal-Mart.
#18 Half of all American workers make less than $30,533 a year.
#19 According to one recent survey, 37 percent of all Americans eat fast food every 24 hours.
#20 One study found that one-third of all American teenagers haven’t read a single book in the past year.
#21 Almost one-third of all Millennials are still living with their parents.
#22 The suicide rate in the United States has risen by 33 percent since 1999.
#23 Women have earned at least 57 percent of all bachelor’s degrees in the United States for 18 years in a row.
#24 If the U.S. health care system was a country, it would have the fifth largest GDPon the entire planet.
#25 America does not have a single airport that is considered to be in the top 25 in the world.
#26 Today, a million Americans are living in their RVS, and that number is rising with each passing year.
#27 More than 100 churches in the United States are dying every single week.
#28 The original name of the city of Atlanta was “Terminus“.
#29 There are three towns in the United States that have the name “Santa Claus“.
#30 There is actually a town in Michigan called “Hell“, and during the recent polar vortex it actually froze over.
#31 Almost one-third of all land in the United States is owned by the federal government.
#32 More than 27 million acres of U.S. farmland is owned by foreigners.
#33 Congestion on our highways costs Americans approximately 101 billion dollars a year in wasted fuel and time.
#34 According to Bloomberg, it is being projected “that by 2025, shortfalls in infrastructure investment will subtract as much as $3.9 trillion from U.S. gross domestic product.”
#35 In 1980, the U.S. national debt had just surpassed the one trillion dollar mark.  In 2019, we are about to surpass the 22 trillion dollar mark with no end in sight.
These days, just about everyone that tries to step forward and shake up the system is slapped with heavy criticism.
But at least they are trying to do something.
Holding an important position does not make you a leader.  Rather, being a leader is about having a positive vision for the future and doing whatever you can to achieve that vision.


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