The buyback game may finally be coming to an end. One can hope at least. Over the last decade, many U.S. companies levered up their balance sheets to repurchase shares. Why did they do it? For starters, it drives share prices, and in turn the value of executive stock options, much higher. Why finance the buybacks with debt? Look to Mr. Powell and Mrs. Yellen and Mr. Bernanke at the Fed for keeping interest rates at ultra-low levels for an entire decade. The Fed will, of course, escape any blame for this debacle as it did the Financial Crisis, but the evidence should be clear as day for … [Read more...]
Coronavirus Stats Update: What’s the Latest?
By Jozsef Bagota @ Shutterstock.com Below are updated coronavirus stats through yesterday. The good news is, South Korea has continued to keep new case growth at a manageable level and there are signs Italy’s lockdown has slowed the growth in new cases. There is also reporting that Italy may only be testing the sickest patients which is good and bad. Bad because the growth numbers may be skewed, but good because it means the fatality rate of the virus in Italy would be much, much lower than is being reported. The other potentially good news in Italy is that recovered patients should … [Read more...]
Facebook Still an Ad Business
Facebook usage and traffic is soaring, but the company warned business may not be booming. At its core, Facebook (and Google) is still in the advertising business. If small and large businesses are drawing down credit lines and conserving cash, the ad budget is one of the first items that will be cut. Eric Savitz reports for Barron's: In the latest indication that the market for digital advertising is struggling in the face of the rapidly spreading coronavirus pandemic, Facebook disclosed in a blog post that the social network has “seen a weakening in our ads business in countries taking … [Read more...]
The Fed Announces New Corporate Debt Interventions
The Federal Reserve has announced two new interventions into the corporate debt market. The first is the Primary Market Corporate Credit Facility (PMCCF) and the second is the Secondary Market Corporate Credit Facility (SMCCF). Here's how The New York Times describes the plans' operations: The Fed’s plan to bolster the corporate bond market will work through two new programs established using the Fed’s emergency lending powers. They should help market functioning while allowing companies to stay afloat. One of them, the Primary Market Corporate Credit Facility, is open to investment-grade … [Read more...]
Free Market Flunkies Beg Fed for Help
Here we go. First, it was former Fed Chair’s Bernanke & Yellen wanting to expand the Federal Reserve’s authority to buy corporate bonds to bail out bad actors and hot money that apparently can’t tolerate a little bit of volatility. Maybe it’s the guilt or remorse of pushing investors to take more risk than was prudent by holding rates at zero for a decade, but justifying the expansion of the Fed’s powers to include corporates is a real bad idea. Why? The reasons are many and varied, but this one top’s the list. If the Fed opens the floodgates to buying assets besides Treasuries, it … [Read more...]
South Korea Coronavirus Update
China is reporting no new cases of coronavirus, but it’s a little hard to believe any data that comes out of China. In a country with over 1 billion people are we really to believe that there isn’t a single new case? South Korea is another matter. South Korea has tested broadly—over 300,000 tests and their data is more trustworthy. The chart below shows the total confirmed cases of Covid-19 in South Korea, and the total active cases. South Korea has a population of about 50 million people with total known active cases of 6,618 or .013% of the population. … [Read more...]
Right on Cue Stock Buybacks Dry Up
Stock buybacks are being slashed. Evercore ISI estimates that 99% of U.S. firms will have to reduce or suspend buybacks by year-end. Savvy timing. The stock market is down 30% with the share prices of some of the buyback cutters down even more. The big banks are cutting buybacks, but that was likely a directive from regulators. Guess who else is slashing buybacks? Airlines. Over the last decade, the Airline industry spent almost all of its free cash flow on share buybacks. Today, buybacks are finished. Airlines are instead requesting a $58 billion bailout. You sort of feel bad for the … [Read more...]
Trump Administration Vows to Keep Markets Open
With heightened volatility, lots of uncertainty, and some liquidity issues in markets, what are the chances that regulators might consider closing the stock market? The market has been closed before in periods of crisis. After the 9-11 attacks, the market didn’t reopen for three business days. Treasury Secretary Mnuchin has so far pledged to keep markets open. He reiterated that pledge again today, saying the administration would like to keep markets open but may consider reducing trading hours. On the surface, closing the markets might seem like a good idea, but keeping them open is … [Read more...]
Coronavirus Fight: Should Every American Get a Check for $1,000?
With lockdowns, quarantines, and mandated closures of businesses now savaging some parts of the economy, fiscal stimulus is on the table. Some want a payroll tax cut, which could work, but if you lose your job because your restaurant closed you no longer have a paycheck to deduct those taxes from. There is also talk of bailing out select industries impacted by the virus. Some Republicans simply want to cut a $1,000 check to every American. There may be better ways to get money into the hands of folk who need it, but this isn't the worst idea. Payroll tax cuts won’t get to folk losing … [Read more...]
Wise Words to Always Invest By
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