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(I'll be holding on to my 25 or more years of dividend paying stocks though this too.)

Executives are selling off their company's stock at a record pace

Corporate insiders are dumping stock in their companies at a rate not seen in 10 years.

With September not yet over, stock sales by company executives reached $5.7 billion, according to data from TrimTabs Investment Research -- the highest September in a decade. August's $10.3 billion in insider sales also reached a 10-year record.

At the same time, stock buybacks are roaring ahead, pumping up U.S. share prices to new heights. Companies this year have announced $827 billion in spending to purchase their own shares -- well above the buybacks that took place during all of 2007, which set the previous annual record.

"Insiders have been committing lots of money for stock buybacks, and they're not doing buybacks because they think stocks are cheap. They're doing to it to pump up the stock so they can sell it," said David Santschi, director of liquidity research at TrimTabs

...

More at:
https://www.cbsnews.com/news/insider-stock-sales-by-company-...

Desert (CVX, XOM, T, BNS, BKH, NI, NWN, TRP, ENB, WRE, WGL, XEL, DUK, SO & KO, WTR, O) Dave
(Bolded = 1000+ shares)
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"Insiders have been committing lots of money for stock buybacks, and they're not doing buybacks because they think stocks are cheap. They're doing to it to pump up the stock so they can sell it,"

Let's look at the unintended consequences, compliments of my buddy Frederic Bastiat. A company like Old Dominion Freight Line, Inc. is growing by leaps and bounds. Buybacks shrink the number of shares. At the limit there are only 100 shares left outstanding, MY 100 SHARES which I bought for $14,591.00 [real life]. For just $15K I own the whole bloody company! What's not to like?

Keep on truckin!

The Captain
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I don't get it... if a company thought their best course of economic investment action were to add buildings, people, machinery, whatever, they would... (at least theoretically?) go to buildings, people, machinery, etc...

On the other hand, if their shares are trading on the market, which represent a percentage ownership in the company, were trading at 50% or 75% of 'true' value, then THAT would be their indicated best decision... of course, the company's inner circle is always the best at knowing what that true value is... at least they SHOULD be...

However, if the shares are already trading above the company's true value (now and immediate future events they know are coming), they would eschew a buy back...

Investing (some gains, but also some very stupid losing) in the market for 50 years now,
Your humble servant
BB
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However, if the shares are already trading above the company's true value (now and immediate future events they know are coming), they would eschew a buy back...

BB

Under normal circumstances that would be methinks completely correct. Since the tax cut was "found" money courtesy the US national debt. Higher stock prices for executives can be sold off for a quick personal profit before reality hits? I'm not entirely sure many very clever executives haven't decided to reward themselves for their cleverness at the expense of the unwashed masses shareholders who may not be as quick to notice the opportunity?

<<<Hmmm what a concept, a CEO buying his own over priced shares with company money?>>>

Tim
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However, if the shares are already trading above the company's true value...

Humanity has yet to devise a method of calculating real true value, the best we have is exchange value which tracks true value, more or less. On the other hand, executives' incentives are very real to them. Executives's managment duties and their ownership incentives might easily clash.

Just look out for Number One, it's the safest route for an investor. It's not physics, it's complex systems.

The Captain
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Well Dave, you had to know this was coming: Over and over, whe hear that something or other is the "highest it's been in 10 years". There is another data point that we are approaching the levels of personal greed and financial speculation that brought us the events of 2008.

Steve
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steve203
There is another data point that we are approaching the levels of personal greed and financial speculation that brought us the events of 2008.


One more thing that I definitely don't get:
The collapse of 2008.

If memory serves, there were TONS of mortgages issued to folks who:
-Had ZERO to extremely poor credit;
-They had no reasonable expectation of being able/seeing the need to pay them;
-The mortgage packages were sliced and diced into derivatives trading;
-Bush's OMB folks, all the way back to 2003 warned Congress there were serious non performance problems;
-The US investment paper peddlers stiffed 'solid' retirement' plans (Iceland comes to mind) with the cr@p;
-There is lots more; some basic drilling and dynamiting should answer the laziest of queries.

Useful:
(sub prime mortgages)
https://www.investopedia.com/articles/07/subprime-blame.asp
https://www.forbes.com/sites/stevedenning/2011/11/22/5086/#6...
https://www.youtube.com/watch?v=-vboCTGpI8Y

OMB testifying to Congress (Special 10 star awards to Pelosi, Maxine, Meeks, Bwaney Fwank, et al are appropriate!)
https://www.youtube.com/watch?v=hxMInSfanqg&list=PL0926F... (seven minutes, LISTEN TO IT ALL)

(Make sure you're up to date on your blood pressure meds; you WILL be stressed.)

Conclusion: The US was able to thoroughly disrupt the world's economics by allowing the liberal dipsticks in Congress to insist and push populist economics that had ZERO chance of success. As it looks right now, they are assigned zero accountability of the massive FUBAR.
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This is the link with Iceland that I wanted to include with the earlier post:

https://www.youtube.com/watch?v=EsA9lR2XB3A

Six minutes, worth your time.
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Conclusion: The US was able to thoroughly disrupt the world's economics by allowing the liberal dipsticks in Congress to insist and push populist economics that had ZERO chance of success. As it looks right now, they are assigned zero accountability of the massive FUBAR.

I'm afraid you have it backwards. The loans given under the Community Reinvestment Act performed better than average. The loans that created the fiasco were those pushed by bankers (and sliced and diced by Wall Street executives and repackaged and sold to hedge funds) and home speculators, intent on making a killing by flipping houses in an ever growing real estate market.

It wasn't "liberals", it was "the unregulated market" which allowed (actually encouraged) bankers to push low-doc and no-doc loans, to give NINJA loans and the rest, because the loans could be processed and sold to foreign investors and sovereign wealth funds as sure things.

"Liberals" don't run the banks, nor Wall Street banks, nor hedge funds, nor sovereign wealth funds. "Liberals" did not run Fannie Mae or Freddie Mac, AIG, Lehman, or any of the other Wall Street houses that were so threatened by their own short-sightedness.

This was the de-regulated market run amok. It's noteworthy that Canada, where banking is much more tightly regulated, did not have a housing crash when the rest of the world went down. There's a reason for that.
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I don't get it... if a company thought their best course of economic investment action were to add buildings, people, machinery, whatever, they would... (at least theoretically?) go to buildings, people, machinery, etc...

I agree. You don't get it. Executives are incentivized to get the company share price up, true. But investing in new plants and building, machinery and people is the long, slow way to do it. And then you have to hope that you have a product which sells more than you are at present and that your profits help you pay the debt you took on and that the market recognized what a great job you are doing.

Or you can pay fewer taxes thanks to a tax cut, buy back shares so your current profits are spread over a smaller number of shares, and cash out. Since most executives tend to be older, having worked their way up in corporate America, they're not too concerned with the company's profits 20 years out. Or even 10 years out, because that's not a sure thing. A sure thing is a buyback. It's fast, it's nearly a guarantee to increase per share profits, and the market loves that.

The incentive is not to build. It's to think short term and grab the money.
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Thank you for recommending this post to our Best of feature.

It's noteworthy that Canada, where banking is much more tightly regulated, did not have a housing crash when the rest of the world went down. There's a reason for that.



Yeah, we're good and y'all are evil, good always triumphs over evil and BB is on iggy watch for the second time for blaming liberals for the sins of the Cons, third time is lucky.

There are no innocent sides, just some more guilty than others and fibbing about it seems to be endemic these days.


Tim <a noteworthy from Canada }};-D>
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However, if the shares are already trading above the company's true value (now and immediate future events they know are coming), they would eschew a buy back...

Yes that is how its supposed to work. Yet

https://www.forbes.com/sites/stevedenning/2018/03/25/why-its...

According to research firm Birinyi Associates, share buybacks are at a record-high for this point of the year and more than double the $76 billion that Corporate America disclosed at the same point of 2017.

Market is pricy now
http://www.multpl.com/shiller-pe/
https://www.gurufocus.com/shiller-PE.php

The buybacks are largely done with debt.
https://www.barrons.com/articles/stock-buybacks-are-driving-...

Buybacks push corporate debt near highs

The surge in part is caused by massive corporate borrowing to buy back shares.
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tjscott0
Buybacks push corporate debt near highs

The surge in part is caused by massive corporate borrowing to buy back shares.


Haven't read of this. Perhaps the question is answered in the link. (I haven't clicked on it.)

My thinking is that outfits who ALREADY HAVE large cash piles, and need to do something with it, have to make a decision, WITHOUT 'massive' borrowing.

Apple (AAPL) comes to mind. There are (must be ???) others.

Taking on debt to do a buy back is as rational as the Feds having them buying their own debt; private companies reporting to share holders, by and large, ARE NOT THAT STUPID. At least theoretically.

If there are instances of debt-taking-on to do a buy back, that should be an immediate and automatic SELL signal. IMAO.
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If there are instances of debt-taking-on to do a buy back, that should be an immediate and automatic SELL signal. IMAO.

Agreed. That's why I dumped PM from my portfolio quite a while ago. It doubled it debt load to finance stock buy backs.*
Now I am no longer a holder of individual stocks. Index funds all the way.

*https://finance.yahoo.com/news/philip-morris-international-i...
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My thinking is that outfits who ALREADY HAVE large cash piles, and need to do something with it, have to make a decision, WITHOUT 'massive' borrowing.

Apple (AAPL) comes to mind. There are (must be ???) others.


AAPL has borrowed most or all of the money it used for buybacks.
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AAPL has borrowed most or all of the money it used for buybacks.

Yup. Because the borrowing is almost free. It is vastly exceeded by their cash reserves, so it hardly matters. Also, it lets them effectively move money around from one geographic location to another. But technically true, it's borrowed money.

-IGU-
(long time AAPL investor)
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If there are instances of debt-taking-on to do a buy back, that should be an immediate and automatic SELL signal. IMAO.

I don't look at every company, but I do monitor developments at Boeing, which I have had a position in, off and on, for over 20 years.

I have commented before how virtually all of their cash flow, for several years now, has been used to buy back stock and pay dividends, leaving debt and asset sales as the means to pay for necessary R&D and CAPEX. Their tangible assets are diving deeper into negative territory. Their total stockholder's equity went negative for the first time in Q2. Their pension fund, which had a surplus a dozen years ago, now has a $20B deficit.

Now Boeing seems to have fallen into the same trap they got themselves into in the late 90s, when they sold more aircraft than they could build, so they are paying a fortune in overtime, expediting charges to vendors and late delivery charges to airlines.

Since I sold Boeing a year ago, I have left 100 points on the table, but I wouldn't want to be around when this company hits the wall.

Steve
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Taking on debt to do a buy back is as rational as the Feds having them buying their own debt; private companies reporting to share holders, by and large, ARE NOT THAT STUPID. At least theoretically

BrerBear,

I believe AZO has been doing this quite successfully for years. And AZO is highly regarded by TMF1000, so is probably not a poorly run company.

I'm sure other companies have been doing the same.

Brandon
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You want to really understand what happened in 08? Read two things:
#1 Matt Taibbi's extended series of articles that got published in Rolling Stone, detailing the incredibly corrupt, sell-the-crap-to-the-Germans, use a formula to fool everyone that ten-of-subprime-sh*t = AAA quality bonds with "tranches", pay the rating companies to not-look-and-rubber-stamp it "securitization" process / greater fool financial architecture that was used.

#2 Liar's Poker by Matt Lewis - a more detailed, less profane expose of the above.

EVERYONE at the top of the financial food chain / Ponzi scheme made money - including the "Libruls" who installed the policies.

FC
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EVERYONE at the top of the financial food chain / Ponzi scheme made money - including the "Libruls" who installed the policies.

FC


That is by definition the game end plan... it's the schmucks at the very end of the food chain who are left with their thumbs in their heads and their heads stuck in a body cavity and wondering "wha just happened"???

At the public square, hangings and executions are prolly dictated here.
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That is by definition the game end plan... it's the schmucks at the very end of the food chain who are left with their thumbs in their heads and their heads stuck in a body cavity and wondering "wha just happened"???

Back in the fall of 08, when I saw the banks getting bailed out, the bank's counterparties getting bailed out so they could make good on their obligations to the banks, while everyone else loses their shirt, I called it the Rant #37 end game.

Steve
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<<AAPL has borrowed most or all of the money it used for buybacks.>>

This isn't true. Apple borrowed some of the money it used for buybacks, not "most or all" of it!

Yup. Because the borrowing is almost free.

For some of the earlier buybacks, the borrowing was better than free, because the interest paid on that borrowed money was less than the dividends on those shares bought back would have cost the company. And furthermore, on those early buybacks this has become even more pronounced over time as they've increased the dividend several times since then!
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