Down goes the Dow

This is not a fact:

"Here is the problem. Company X buys back stock at $100 a share, and finances the debt with five year notes at 2%. Five year later the stock is at $50 and X has to refinance the debt at 5%. "

The real Igy announced he was leaving this thread weeks ago. Don't feed the troll.

Joe,

OK, but an accurate explanation of the potential environment. It is a portrayal of the of the buy and current value of IBM and Apple stock buyback program, the missing ingredient is when the debt has to be refinanced. Most of Apple's cash is outside the US, IBM has squandered $Billion of their cash hord.

It is a fact that mergers, acquisition, stock buybacks peak at the end of the business cycle. These are all at record levels. Corporate debt is at record levels. Many of the analysis on corporate debt will make a comparison to equity price levels, rather than the raw numbers. Another misnomer is the cash on corporate balance sheets which is again compared to the equity valuations, but when evaluated on raw numbers is going down. On the other hand most corporate cash is held outside the United States and under current law would be heavily taxed if repatriated. In fact corporations are borrowing heavily to fund dividend payments and stock buyback, again a fact.

So there is no cherry picking here, the counter argument is to gloss over the rising debt levels and poor business decision done for no other reason than to goose the stock price. Executive stock based compensation is based on non-GAAP EPS metrics, and coupled with historically low interest rates, are encouraging agressive financial engineering that will in retrospect be regarded as the zeitgeist of the cycle.

Igy

Igy

Well done. A thoughtful and intelligent reply. Do more of that and people are more likely to take you seriously.

Joe,

Thank you. I will leave it there. Have a good night and enjoy the Olympics if so inclined.

Igy

U.S. stock futures inched higher on Thursday, but with investors keeping a cautious eye on oil prices as they fell closer to $40 a barrel after a lackluster forecast for energy demand.

Futures for the Dow Jones Industrial Average rose 21 points, or 0.1%, to 18,473, while those for the S&P 500 index gained 1.30 points, or 0.1%, to 2,174. Futures for the Nasdaq-100 index added 5 points, or 0.1%, to 4,786.50.

The small gains come after U.S. stocks closed lower on Wednesday, dragged down by a slump in oil prices. The S&P 500 index Nasdaq Composite retreated from record levels, both down 0.4%, while the Dow average slipped 0.2%.

Oil blues: "U.S. markets have been more responsive to the movements in oil over the last couple of weeks, something I expect to continue in the coming weeks if it falls back below $40," said Craig Erlam, senior market analyst at Oanda, in emailed comments.

"It's heading lower again this morning, which could weigh on indices after the open, but so far they appear to be holding up," he added.

Crude oil prices slid 1.3% to $41.16 a barrel on Thursday after the International Energy Agency cut its forecast for global oil demand next year, citing a dimmer economic outlook. The agency also warned in its monthly report that a "massive" stock is keeping a lid on oil prices.

Sally V wrote:

Oh snap! Figy, you are too much. Plagiarizing investment advice from a sports reporter! Damn. I've got to give you props for some terrific trolling. Based on this new evidence I'll adjust my rating to 9/10.

Jesus H. Skin so thin it must peel off in a strong breeze.

This moron lives in a glass house and engages in rock throwing 24/7.

Hi, K5! Are you mad because Igy stole your idea of copying and pasting from fringe web sites without citing the source? Like you he also predicted the Dow would sink to 13000. Hmmm....

What's amazing about these doomsday predictors is, if the Market crashes 20 years from now, they'll be on here saying, "I told you so".

Although I'll say, Igy did put a time frame on it and said a big downturn within the next 6 months.

Wow this thread is complete S H I T now.

Good job, letsrun. You have permitted morons to turn something that was good, into something worthless.

Thanks for your positive and constructive contribution.

Good Morning,

My perspective has never been gloom and doom and a never to be again a Bull stock market. My view has been that corporate earnings, investor behavior, and stock valuations matter. Over the short run the market is driven by a variety of factors that are hard to quantify, while over the long run the market is driven by valuation. The old adage applies quite well I think: "In the short run the market is a voting machine, over the long run a weighing machine." The market has been driven since the QE programs by a belief that low interest rates will continue to support higher equity prices. On the other hand, since 3rd Quarter 2014 S&P 500 GAAP EPS has declined 18.5%, and GAAP EPS is still declining. Central bank policies have distorted bond and stock valuations, and the consequences of these policies are largely unknown, but run counter to logic.

Igy

So what would you recommend I do with my stocks: sell, buy, or hold? And please no "evetybody's different" cop out. Thanks in advance.

I would never sell 100% of my stocks. I would never own a 100% stock portfolio.

Igy

You are conversing with an admitted troll.

ABCDEFGHI wrote:

Wow this thread is complete S H I T now.

Good job, letsrun. You have permitted morons to turn something that was good, into something worthless.

No need to get pissed because your predictions didn't come true!

And you are the jerk that used to steal my handle....

Hi, K5! You had me fooled for awhile there, but no longer.

And you need to check in with the White Coats....they're coming to take me away....