From our perspective, the the corporate stock buybacks have been doing
major damage to corporate America. If these companies were not buying their
own stock for the past three years their “price” would be half or less than
it is today. Who in the right mind believes Amazon’s stock is worth upwards
of $1,000 per share? What is this based on?
The damage corporate stock buybacks has done to the economy can not be
over-emphasized. If the “C” level executives are simply “recycling” company
stock and driving the price higher they are unable to reinvest in the
company. This means no new equipment, no new hires, no R&D and the list
continues. This is destructive to the economy. Nothing progresses.
Now we see the S&P littered with overvalued stocks. This is not going
to end well and as the economy continues to rot-on-the-vine as “C” level
executives have played a significant role in creating this ongoing illusion.
By any measure, the stock market is expensive. But the
market is a collection of stocks. Instead of focusing on the market, we can
also analyze the stocks that make up the market.
The chart below shows the number of individual stocks that are undervalued.
As you can see, there aren’t many cheap stocks.
This chart is based on the stocks that make up the S&P 500 Index. Using
all the stocks in the market provides similar results.
No matter how you measure value, less than 20% of the stocks in the market
offer value. Source
The above commentary and chart, from Banyan Hill, provide even more
support for my thesis. I can not say that corporate stock buybacks are the
single source of the economic rot. However, according to the number of
undervalued stocks, it seems the overvalued stocks, fueled by QE and buybacks,
have in fact created their fair-share of damage.
At the end of the day it will not matter. The only thing that matters at
this point is what we are doing about it to protect our families from what
appears to be an inevitable outcome. We all have to make our own decisions,
we are simply providing another guidepost along the trail.
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Rory Hall, Editor-in-Chief of The Daily Coin, has written over 700
articles and produced more than 200 videos about the precious metals
market, economic and monetary policies as well as geopolitical events since
1987. His articles have been published by Zerohedge, SHTFPlan, Sprott
Money, GoldSilver and Silver Doctors, SGTReport, just to name a few. Rory
has contributed daily to SGTReport since 2012. He has interviewed experts
such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente
and Peter Schiff, to name but a few. Visit The Daily Coin website
and The Daily Coin YouTube channels to enjoy original and
some of the best economic, precious metals, geopolitical and preparedness
news from around the world.
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The author is not affiliated with, endorsed or sponsored by Sprott Money
Ltd. The views and opinions expressed in this material are those of the author
or guest speaker, are subject to change and may not necessarily reflect the
opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy,
completeness, timeliness and reliability of the information or any results
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