Four Banks & Three Tech Companies Blow $56 Billion in Q3 to Prop up Their Own Shares
The Biggest Share-Buyback Queens: When Will They Run Out of Juice?
Companies in the S&P 500 index bought back $176 billion of their own shares in the third quarter, down 13.7% from the third quarter last year, and down 21.1% from the record share-buyback mania in Q4 2018, according to the S&P Dow Jones Indices. But hey, since the beginning of 2012, these companies have bought back $4.37 trillion of their own shares, exceeding the magnitude of Germany’s annual GDP.
Think of what else these companies could have done with this money, instead of blowing it on share buybacks. They could have invested more in productive activities in the US and they could have raised the pay for their employees and gig workers so that they could recirculate this money in the economy.
And the biggest banks – we’ll get to them in a moment – could have used those funds to shore up their capital to get ready for the moment when the bubbles in corporate debt and commercial real estate, that the Fed is so worried about, come apart.
For the 12-month period through September, share buybacks rose to $770 billion, from $720 billion for the 12-month period a year ago. The chart below shows share buybacks for the 12-month periods through Q3 each year:
The 12-month total through Q3 was down 6.4% from $828 billion for the 12 months through Q1 2019 that had been heavily inspired by the corporate tax-law changes, which continue to heavily inspire these share buybacks.
What will the future bring? According to the report: “For Q4, the market is looking for another increase in buybacks, in the mid-single digit range, staying near the $190 billion level, well shy of the Q4 2018 record-setting $223 billion.”
The scheme is increasingly top-heavy.
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