There Has Been Just One Buyer Of Stocks Since The Financial Crisis

When discussing Blackrock’s latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelinesinvestors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform.”

While the intention behind the statement was obvious: to pitch Blackrock’s juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs.

In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS’ strategist Andrew Garthwaite writes, “one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap.”

What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

Why this rush by companies to buyback their own stock, and in the process artificially boost their Eearning per Share? There is one very simple reason: as Reuters explained some time ago, “Stock buybacks enrich the bosses even when business sags.”  And since bond investor are rushing over themselves to fund these buyback plans with “yielding” paper at a time when central banks have eliminated risk, who is to fault them.

More concerning than the unprecedented coordinated buybacks, however, is not only the relentless selling by institutions, but the persistent unwillingness by “households” to put any new money into the market which suggests that the financial crisis has left an entire generation of investors scarred with “crash” PTSDand no matter what the market does, they will simply not put any further capital at risk.

As to Fink’s conclusion that “investors have begun to put more of their assets to work”, we will wait until such time as central banks, who have pumped nearly $2 trillion into capital markets in 2017 alone, finally stop doing so before passing judgment.

Photo: “NYSE” by Thomas Hawk is licensed under CC BY-NC

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  • JohnDille

    ONLY RICH PEOPLE ARE GOING TO COLLEGE THESE DAYS… BECAUSE THEY ARE THE ONLY PEOPLE WHO CAN AFFORD AN ADVANCED EDUCTION. AND THE SAME WOULD BE TRUE OF HEALTH CARE… IF THE FEDERAL GOVERNMENT WAS NOT PROPPING UP THAT WHOLE SYSTEM VIA MEDICARE AND MEDICAID AND ALL THE OTHER SUBSIDIES IT PROVIDES TO THE HEALTH CARE INDUSTRY! AND THE SAME IS TRUE OF FOOD AND RENT FOR HUGE NUIMBERS OF LOW WAGE WORKING PEOPLE… WITHOUT WELFARE AND FOOD STAMPS AND HOSING SUBSIDIES, TENS OF MILLIONS OF INDIVIDUALS AND FAMILIES WOULD BE… QUITE LITERALLY… STARVING TO DEATH O DYING MEDICAL PROBLEMS… ON THE STREETS!!! HOW DID WE GET INTO THIS SITUATION??? EASY… THE RICH REPUBLICANS WHO OWN AND CONTROL AMERICA DECIDED TO BUST ALL THE UNIONS, AND DRIVE DOWN WAGES… AND THEY DID THAT MOSTLY BY HIRING MILLIONS AND MILLIONS OF ILLEGALS… AND OFFSHORING TENS OF MILLIONS OF OCNE DECENT PAYING AMERICAN JOBS!!! AND BY BLOCKING NEARLY ALL MINIMUM WAGE INCREASES SINCE 1981!!! HALF OF ALL AMERICANS WORK FOR THE MINIMUM WAGE PLUS A FEW NICKELS DINES, OR DOLLARS… SO THAT… BY ITSELF… HAS IMPOVERISHED TENS OF MILLIONS OF AMERICAN… HAS DESTROYED THE MIDDLE CLASS… AND HAS PUT THE FEDERAL GOVERNMENT INTO THE AWKWARD POSITION OF SUPPORTING ALMOST HALF OF ALL AMERICANS!!! THE RICH REPUBLICANS… WHO PAY FOR MOST OF THAT VIA THEIR TAXES… WANT TAX CUTS… AND THE ONLY WAY TO GET THEM IS TO CUT ALL THOSE GOVERNMENT SUBSIDIES THAT KEEP AT LEAST THE NOTTOM 40% OF ALL AMERICAN HOUSEHOLDS AFLOAT. AND THAT IS EXACTLY WHAT THE RICH REPUBLICANS WHO CONTROL THE REPUBLIVCAN PARTY… AND WHO PRETTY MUCH OWN AND CONTROL AMERICA… REALLY WANTS TO DO!!! AND THEREIN LIES THE MOST DIVISIVE REALITY OF OUR DAY…. IF WE ALLOW THE RICH REPUBLICANS TO HAVE THEIR WAY…. IT WILL DESTROY THE US ECONOMIC SYSTEM AND CAUSE MASSIVE DISRUPTION AND CHAOS THROUGHOUT THE US SOCIAL AND POLITICAL SYSTEM!!! BUT REPUBLICANS ARE TOO FREAKING ARROGANT AND STUPID TO REALIZE ANYOF THAT… SO… THEY ARE TRYING HARD TO STEAMROLL US DOWN THAT PATH… COME HADES OR HIGH WATER!!! ARROGANT GREEDY ARROGANT SELFISH ARROGANT IGNORANT RIGHT WING REPUBLICANS!!! AND DID I MENTION THEIR ARROGANCE??

  • Sugmag

    What we need is a good economic collapse and depression with massive deflation. No one will buy healthcare, just food and shelter. Teach those doctors, hospitals, drug companies and insurance companies a lesson they’ll never forget. That goes for the universities and the liberal professors too. Let tuitions collapse. Both sectors of economy ripping us all off.

  • JohnDille

    LET’S SEE NOW…. SINCE CORPORATE AMERICA IS ROBBING THE LARGE MAJORITY OF CONSUMERS BLIND… VIA WAGE CUTS AND OFFSHORING AND HIRING ILLEGALS AND BUSTING ALL THE UNIONS…AND VIA EXCESSIVELY HIGH PRICES FOR WHATEVER GOODS AND SERVICES THEY ARE SELLING… THEN ONLY CORPORATE AMERICA WOULD HAVE THE MONEY TO BUY EQUITIES… WHILE MOST ORDINARY AMERICANS COULD NOT AFFORD TO BUY EQUITIES!!! THAT IS PROBABLY THE REAL EXPLANATION FOR WHAT IS HAPPENING… RATHER THAN THE TYPICAL ANTI FED HOCUM THAT RIGHT WINGERS KEEP SPEWING… ENDLESSLY… FOR THE LAST SEVERAL DOZEN YEARS OR SO!!! THE TOP 2 OR 3% OF ALL HOUSEHOLDS OWN A MAJORITY OF ALL STOCKS… AND NEARLY ALL BONDS…. SO ORDINARY PEOPLE ARE NOT EVEN PLAYERS IN THE EQUITY MARKETS, BEYOND THEIR SKIMPY HOLDINGS OF 401 KS AND IRAS AND SUCH. AND HALF OF ALL AMERICANS OWN NO STOCKS AT ALL… AND HALF OF THOSE WHO DO OWN THEM, DO NOT OWN ALL THAT MUCH OF THEM! SO… THE MANIPULATION OF FINANCIAL ASSETS LIKE STOCKS AND BONDS IS A GAME THAT ONLY THE RICH PLAY WITH ANY ACTUAL IMPACT!!! LITTLE GUYS LIKE ME ARE ANTS PLAYING AROUND ON THE SIDE OF THE EMPIRE STATE BUILDING!!! AND YET… RIGHT WINGERS WANT US ALL TO BELIEVE THAT IT IS US LITTLE GUYS WHO COULD… AND SHOULD… STEP IN AND BOUY UP THE MARKETS… SO THAT THE RICH CAN ROB US BLIND EVEN MORE THAN THEY ALREADY DO!!! THANKS, BUT NO THANKS, ALL YOU RIGHT WING WALL STREET MANIPULATORS AND CON ARTISTS!!!