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?

By Wolf Richter for WOLF STREET.

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.

The top 10 share-buyback queens accounted for 39% of total S&P 500 share buybacks in Q3, up from a share of 31% for the 12-month total and up from a share of 23% over the past five years combined.

The top 20 accounted for 50.4% of all share buybacks, up from a share of 40% for the past 12 months and up from a share of 31% over the past five years.

Apple’s repurchase of $17.6 billion in the quarter – huge as it might seem – was only the eighth largest ever, and was 26% below Apple’s own record of $23.8 billion in Q1 this year. Of the top 10 record quarterly share-buyback amounts, nine are Apples, and one is Qualcomm’s.

The top nine share-buyback queens are all tech companies and banks. You have to go down to #10 to find the Dutch company, LyondellBasell, which is in the materials sector (chemicals), followed by Procter and Gamble, and some other non-tech and non-bank standouts (if your smartphone clips the six-column table, slide the table to the left):

Share Buybacks, in billion $
Top 20 in Q3 2019 Q3 2019 12 months 5 years
1 Apple [AAPL] 17.6 69.7 247.8
2 Bank of America [BAC] 7.6 25.6 60.8
3 Wells Fargo [WFC] 7.5 24.8 69.0
4 JPMorgan Chase [JPM] 6.9 23.2 68.9
5 Alphabet [GOOG] 5.7 14.9 31.7
6 Oracle [ORCL] 5.5 31.8 74.5
7 Citigroup [C] 5.0 12.9 54.0
8 Microsoft [MSFT] 4.9 20.7 74.5
9 Intel [INTC] 4.5 11.9 34.4
10 LyondellBasell [LYB] 3.2 4.8 15.5
11 Procter & Gamble [PG] 3.0 6.8 24.1
12 Charter Communications [CHTR] 2.8 5.8 22.3
13 Starbucks [SBUX] 2.3 10.3 23.3
14 Visa [V] 2.1 8.7 33.2
15 MasterCard [MA] 1.8 6.6 21.7
16 DaVita [DVA] 1.8 1.8 5.0
17 Facebook [FB] 1.7 8.7 26.0
18 Johnson & Johnson [JNJ] 1.6 10.1 35.6
19 Morgan Stanley [MS] 1.5 5.6 21.3
20 McDonald’s [MCD] 1.5 4.5 31.8
Top 20 Total 88.6 309.1 975.3
S&P 500  share buybacks 175.9 770.1 3,114.1
Top 20 as % of S&P 500 buybacks 50.4% 40.1% 31.3%

Note in the table above that the top seven companies — four banks and three tech companies — bought back $56 billion of their own shares in Q3.

The four beloved banks – Bank of America, Wells Fargo, JPMorgan Chase, and Citibank, in that amazing order – among the top seven share-buyback queens, between them, bought back $86 billion of their own shares over the past 12 months, and thereby reduced their equity capital by $86 billion, which is what share buybacks do. But that $86 billion could have come in handy in the future when it’s time to deal with their losses on their loans to commercial real estate projects, to businesses, and to consumers. But those $86 billion have now disappeared.

In terms of sectors, tech companies bought back $49.2 billion in shares in Q3, and finance companies bought back $47.8 billion, for a combined $97 billion, meaning those two sectors alone accounted for 55% of all share buybacks. All other sectors are also-rans (if your smartphone clips the five-column table, slide the table to the left):

Share Buybacks in billion $
Sector Q3 12 months 5 years
1 Tech 49.2 233.7 871.6
2 Financials 47.8 174.1 621.3
3 Consumer Discretionary 18.4 77.5 426.5
4 Healthcare 16.0 95.2 410.5
5 Industrials 14.2 73.6 354.2
6 Communication services 11.0 34.1 52.1
7 Consumer Stables 7.5 34.0 208.8
8 Materials 5.4 18.4 61.8
9 Energy 4.9 22.4 88.2
10 Utilities 0.8 4.0 9.1
11 Real Estate 0.7 3.1 10.0

When a company buys back its own shares, it pays cash for those shares, the shares get canceled and disappear, and the cash is gone, and “stockholder equity” – the company’s equity capital — on the balance sheet drops by that amount. That’s not a problem for a stellar balance sheet, such as Apple’s. But it’s a problem for many other companies that are too leveraged to begin with and that borrow to finance share buybacks. And it’s a problem for banks because it makes banks that much more vulnerable during the next crisis.

Financial engineering is what share buybacks are all about: They lower the share count, and so earnings are divided by a smaller number of shares, which produces a larger earnings-per-share figure, and a lower P/E ratio, when in fact, the actual profit of the company has not changed, and when it has to pay out billions of dollars in cash to accomplish this feat.

Share buybacks also paper over the dilutive effects of stock-based compensation and stock-based acquisitions. When a company pays an employee with shares, and then buys back those shares to keep dilution at bay, this stock-based compensation, which is considered a non-cash event and ignored by analysts, becomes a cash event.

But beyond all, these share buybacks create a huge amount of buying pressure. Companies buying back their own shares are the relentless bid. They’re not trying to buy low and sell high. They’re trying to buy high, the higher the better, and then they’ll cancel the shares.

We got another one from the Fed, warning about all the right things. And then they do the opposite. Read…  Here’s What Gets Me about the Fed’s Warnings of “Excesses and Imbalances that Are Hard to Deal with Later”

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  124 comments for “Four Banks & Three Tech Companies Blow $56 Billion in Q3 to Prop up Their Own Shares

  1. Unamused says:

    Don’t think of it as share buybacks. Think of it as corporate liquidations, signals that there’s no point investing in company operations.

    • Barber says:

      Don’t Think Just BUY

      DO any of you realize that all of these stocks, are still some of the best performing stocks on the planet? APPL is up 30%, meaning anybody that bought just Apple would beat any hedge-fund on earth.

      There is no sign that this is going to end, Trump wants MOAR, and all his opposition want MOAR.

      Pochahontas ( Tax Stocks, … ) is full of Baloney, the eventual DNC candidate will be a Biden Clone. A Boring CORP-USA suit.

      This is just the beginning, we are so far from Infinity. We’re only at $25T debt, $600T obligations, but eventually we be at Quadrilllions and Septillions, to the MOON stockholders.

      Unless somebody on earth step’s forward and puts a stake in the hearth of Darth-USA, this ponzi is just going to keep inflating. The problem is 90% of the earth does the same as USA, there is no alternative system to the PONZI.

      • Iamafan says:

        I am a firm believer of putting money where your mouth is. Skin in the game. If people don’t like the security, then don’t buy it.
        It’s different for tax payers’ money.

        • char says:

          What reason do you want to hear why this needs to be stopped. I could use the my pension fund invest in this or systematic risk (all stock companies do it) or criminal behavior should be stopped even if it does not hurt me personally.

        • Iamafan says:


          I don’t care if it stops or not. I buy what I want.

        • Cas127 says:


          1) It is your money – but Wolf is free to argue that buybacks on this huge, long-term, frequently debt-financed scale weaken the companies themselves and greatly increase the probability of a market wide implosion when,

          A) a recession hits, leaving cos with less money to prop up their own shares,

          B) at the same instant retail support for share price is primed for panic selling – doubling the brittleness of apparent share prices.

          Companies have the right to blow themselves up – but they tend to only be Randian tough guys during the good times.

          Recent history has shown plenty of them to be strung-out, junkie pleaders eager to bl*w the government the second they come up short financially, due to their own risk-insensitive behaviour.

          Banks’ capital distributions illustrate this in spades – the second the past decade’s dumbass loans start to go bad (and banks capital margin of error has long been dividended away) these same banks will be hysterically screaming about how their own extinction equates to the extinction of the country.

          They did it in 2009 and there is zero reason to believe they won’t do it again.

          This high bailout risk behaviour makes their share buy back behaviour every taxpayer’s concern.

        • More mindless stock market consumerism? The fallacy of choice is what drives marketing gurus, their expense accounts and their bad taste. I called an old friend, he is making his own whiskey with a kit he bought on Amazon. He said he can pour the stuff in old Jack Daniels bottles and sell it to the rubes at a nice markup.

        • NBay says:

          You forget the number of public companies IS declining steadily, and rather fast.
          Soon it will all be PE, then corporate logos will be on the flag instead of stars, and without any silly sentimental problems.

          You may not think your “nice hard earned pile” is on the menu, but it is.

          Poverty trickles up.

      • rhodium says:

        It’s not a ponzi if it never ends… Do you even know what a ponzi scheme is? The government continues to tax and borrow and shell out money that’s actually there. Perhaps it will end if the Fed stops pumping money into the system and “investors” stop buying treasuries that lose money to inflation. This is all out in the open though so hardly qualifies as a ponzi. One question though, what’s the equity value of a highly indebted public company during a deflationary debt crisis (like ccc yields skyrocketing due to a recession and defaults and bbb getting downgraded en masse and panic selling everywhere)? Still only what people are willing to pay for a share, which during moments of extreme fear won’t be much. Will this eventually happen? Maybe, probably, and you can try to time the market but people are ever more capitulating to the idea that the market will only ever go up. It’s not the first time this has ever happened. It would seem actually that it is quite normal for people to believe this during extended bull markets. It’s all risk and opportunity cost at the end of the day.

      • van_down_by_river says:

        Actually Apple is up over 75% this year (30% gains are for pikers)

        But you are correct when it comes to “don’t think just buy”. I finally went whole-hog long around SPY 250 last January after Jerome made clear his new policy to permanently print new dollars to fund the government and inflate assets (also to fund the government – higher assets = higher gains = higher tax collections).

        Powell has given a green light to massive government deficit spending. He has let it be known, the Fed will fund the deficit not matter how large it grows and now matter how wasteful. The spigots have been opened wide by Jerome and they will never again be shut off. So, cling to the lifeboat of stocks? You bet, what alternative has Powell left you? Put your savings anywhere else and you will be destroyed by inflation and taxes.

        I bought stocks at an extremely inflated level after sitting out the run-up because Powell has guaranteed the Fed will inflate assets forever.

        • The Colorado Kid says:

          There are immutable laws. These laws are currently in hibernation. When these laws awake, there will be an accounting. The Bogleheads and FIRE Fvckers that are ALL IN on VTI will have to possibly rethink their concept of Asset Allocation and quite possibly their bedrock faith in Indexing and that Shiit only goes up.
          I temper my statement with the fact that there are, amazingly, still some buys out there though, despite the insanity. I like IMBBY, BTI, BP & KHC (with the caveat that you need to watch KHC very closely due the debt load and the fact that Brazilians own a large interest in the firm. I think Guillermo del Toro said it best about Brazil, “Brazil is so corrupt, it makes Mexico look like Switzerland”. There are other equities like OGZPY of interest as well. My dumb ass stupidly sold Gazprom early in the low 7’s. I think long term as the USA devolves, along with NATO, the Russians will step up and finally join the European Community and the US generated vilification will stop. I like the fact that as far as equities go, Russian Equities have a fairly low correlation to the S&P. I agree with Howard Marks that we are a lot closer to the end of the cycle than we are to the beginning. Proceed with caution.

      • sierra7 says:

        “Biden Clone”:
        “A Boring CORPSE-USA suit.”
        There, fixed it for u.

    • John says:

      Thanks Wolf. All what makes a market. Public markets. I remember the Sec allowing shorts to knock down share prices without a higher bid during the crisis. Forget the head of Sec. name. Public companies keep shorts at bay for the benefit of all in the company. Two sides to a market. I believe there is no right or wrong here.

    • Willy Winky says:

      Yep – it’s called’ cashing out’

  2. Trinacria says:

    If I recall my financial history, weren’t share buy backs (treasury stock) at that time a contributor to the market crash ? Also, weren’t they “outlawed” for a period of time after that ? Criminal is as criminal does…

    • Trinacria says:

      “at that time” I meant to say the 1929 market crash.

      • Mel says:

        From John K. Galbraith’s book I remember something like that, but not exactly that. Rather than shares being withdrawn from the market, shares were pushed onto the market at a frantic rate, to meet a huge demand. Toward the end, publicly traded companies were formed to hold and trade stocks. They would wind up buying shares in each other, and one of them could wind up owning a big stake in one of its own owners. Something of a pyramid.

      • Cyclops says:

        George H. Bush made stock buybacks legal after it was banned for two decades!

        • doug says:

          Well, George and 550 members of congress…

        • robt says:

          That was Reagan, 1982, rule 10b-18. And it was illegal for a lot longer than two decades; considered market manipulation.
          But how does buying back my shares with my own (treasury) money, leaving me with no shares and no dividend ‘return value to shareholders’?

    • Wisdom Seeker says:

      Galbraith’s book on 1929 is a must read. Other sources say the same thing as well: Cross-ownership was a big problem in 1929. If one company’s shares crashed, it would impair the other over leveraged entities that owned it and drive them down too. There were some really opaque ownership schemes so no one could trust anything.

      BTW, history is now rhyming – currently a big issue in China.

  3. IdahoPotato says:

    Outside corporate raiders like Michael Milken went to jail in the 1980s for racketeering and leveraged buyouts based on fraudulent practices. Today’s corporate raiders reside on the inside and are lauded by sheeple shareholders for their “vision”.

    • Suzie Alcatrez says:

      Vision indeed. Milken is the 606th richest person in the world according to Wikipedia.

  4. Keepcalmeverythingisfine says:

    Share buy backs are, according to hedgefunder Ray Dalio, are a tax efficient way to return value to shareholders. I guess this means fewer shares outstanding, price per share goes up, long term capital gains at 15% instead of regular income tax rate on dividends. I have no idea if this is actually true, but there are probably many different ways to look at it from a shareholder perspective, and remember the primary objective of a firm in a capitalist system like ours is to maximize shareholder value. I do not expect corporations to ignore the cheap money the Fed offers to do buy backs over investing in equipment, people, etc.. Buy backs are a symptom, not the real problem.

    • IdahoPotato says:
      SEC Commissioner Robert Jackson’s staff found that 38% of the firms had no trading in the thirty days prior to the date the buyback is announced. However, and consistent with prior research, the majority of firms conducting buybacks have insider transactions during the eight days after the buyback is announced.

      In his written response to Van Hollen, Jackson wrote, “If executives believe a buyback is the right thing to do, they should hold their stock over the long term. Instead, we found that many executives use buybacks to cash out.”


      “Fortuna Advisors, a financial-strategy consulting firm, ­estimates that over the past five years, 64% of S&P 500 companies that carried out big repurchase plans had “negative buyback effectiveness,” buying their shares at relatively high prices.

      Fortuna CEO Greg Milano notes that management often spends more lavishly on buybacks when business cycles, and thus stock prices, are peaking; that can shortchange remaining shareholders by squandering money that could have been invested back into the company.

      Fortuna studied what might have happened if companies had used a “flat strategy,” spending equal amounts on share repurchases every quarter rather than spending more in flush times. Over the past five years, it estimates, flat buybacks would have saved S&P 500 companies $125 billion. “

    • Trinacria says:

      Buys backs reduce the number of shares outstanding. This in turn increases earnings per share assuming the total net income remains constant or increases. If the company pays a dividend, it will reduce future dividend payouts. HOWEVER, a very significant effect take place on the balance sheet…since these buy back “queens” are using borrowed money, the effect is to increase long term liabilities (debt) and reduce shareholder equity. If a company hits rough times, it can always cut dividends, but it cannot stop servicing the debt. Finally, if share prices do eventually drop and stay low for a long period of time….just ask companies like GE.

      • Bobby says:

        Well said, I totally agree! Companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. This game will end in the next year or two.. we are just in some extra innings

    • IdahoPotato says:

      “long term capital gains at 15% instead of regular income tax rate on dividends”

      Income tax on qualified dividend tracks the long term capital gains rate – 15%.

      If your ordinary tax rate is 12% or under, the tax rate on qualified dividends and long term capital gains is zero.

      From 12% up to 35% (for ordinary incomes of up to $425,800) there is a 15% tax rate on qualified dividends.

    • Anon1970 says:

      At one time, dividend income was taxed at regular income tax rates (after a small exclusion of around $100 or $200), but capital gains were taxed at lower rates. Since the Bush 43 dividend tax cut of 2001, dividends are taxed at the same rate as capital gains, for most individual taxpayers.

    • vinyl1 says:

      However, since 2002, dividends are taxed at the same rate as long-term capital gains.

      • Ripp says:

        Only qualified dividends are taxed at the capital gains rate. Ordinary dividends are still taxed as regular income.

  5. FinePrintGuy says:

    Actually a correction is needed: the cash isn’t gone, it is put back in the hands of the selling investor. That investor has to go out and redeploy that capital. Deployment of capital in new investments is accretive to economic growth and productivity. Great news for growing businesses looking for capital to hire and grow.

    I shudder to think of tech companies deploying that cash into bigger bonuses and salaries… further compounding the misery of us non techie Californians.

    • Wolf Richter says:

      “gone” in terms of the company buying back its shares. Meaning, it no longer has those resources to do anything else with.

      • Trinacria says:

        Exactly…as mentioned earlier the company has the debt on the books, shareholder equity is down and assets are unchanged. When profits and share price eventually go down, all hell can indeed break loose !!!
        Excellent article !!!

      • Javert Chip says:


        The money for share buy-backs just doesn’t vaporize – it goes to the 2nd party who sold the shares to the corporation.

        The corporation may or may not be worse off from the buy-back transaction, but the 2nd party receiving the cash obviously has other plans for the money (new investments, pay for college, but a house).

        Under most circumstances, assuming the cash is not borrowed, I’d prefer to see the cash paid out as dividends. but stigmatizing buybacks as a waste of cash is inaccurate.

        • JZ says:

          Why do companies buy back shares? One reason is because they give CEO RSU shares as compensation. Without buy backs, those RSU will increase share count. Why don’t CEO compensate themselves with cash salaries? Because that will be too obvious.
          People will have a salary number on inequality. Salary in accounting is treated differently than share buy backs. Just ask Marc Benioff.

          In stead of paying CEO X million $ as salary, they give them shares. Then the CEO will basically use company profit/debt to buy his shares away at high prices. This “aligns” CEO interest with share holders?! LoL.
          That secondary person who sells shares back to the company is the CEO or high level employees, not general public.

        • Wolf Richter says:

          Javert Chip,

          As I’ve said above, I’m not speaking globally, but in terms of the individual company. The company cancels the value of what it bought (the shares) and the cash with which it bought those share is “gone” — meaning the company no longer has the cash nor what it bought with the cash.

          This combo is unique in a trade. Normally, you pay $100 for a widget, so the $100 is gone, but you’ve got the widget. With share buybacks, the company itself gets nothing for the money it spends.

      • Auld Kodjer says:

        I look forward to your follow up article:
        “Four Banks & Three Tech Companies Pay $56 Billion in Q4 on Executive Bonuses”

    • Calm Horizons says:

      The cash certainly is gone from the bank. Why does the bank give cash to shareholders to be invested in turn in profitable activities, instead of investing that cash in those activities themselves? Isn’t that what banks are supposed to do? If the selling investor could do that better than the bank, why did he ever invest in the bank in the first place? But really, neither the bank nor the shareholder seem to be looking for long-term profitable investments. Their eyes are on the short-term gain.

      • Calm Horizons says:

        I should have specified that I was thinking of the big 4 banks that Wolf listed and their huge buybacks.

        • FinePrintGuy says:

          I guess you’d rather the bank invest in other companies and slowly gobble up control over the productive assets of the nation?

          I’ll vote for banks disgorging the money back to investors and thereby keeping power and control decentralized.

          Also you seem confused about buying/selling motivations. By repurchasing shares the bank is by definition getting rid of the short term investors who want their money now…right? What’s left are the long term bullish investors.

        • HowNow says:

          Not necessarily – the idea that “long term” investors stay, short termers are bought out. Before buy-backs were a fad, there were some companies that had almost consistently bought back their outstanding shares. If a solid company, dividend-payer or not, continues to reduce outstanding shares by, say, 20% over time, each share is intrinsically 20% more valuable. That, to me, is similar to assets (r.e.) on the books that have gone up over time but are not recognized as an increase in book value. Value investors may be attracted to such a company, and those investors aren’t usually considered short-term buyers.

    • Penny Farce says:

      Ah such old school thinking …. that money is actually invested in ‘growing businesses’. LOL!!!! Like that ever happens any more! Priming the next ponzi scheme is more likely. Just wait until “We Steal” is rolled out!

    • Rick says:

      Misery of non-techie Californians? That’s only relative misery, how about the absolute misery of all the places Californians are infesting with their degeneracy and unearned self-righteous pretension demanding that their adopted homes where regular people made great communities for themselves immediately accommodate their insane California demands?

  6. barnum says:

    Share BUYBACKS exists for one reason, to increase value for the CEO’s.

    End of story.

    But it took a USA gov, owned by the corporations to create this ‘easy free money’ where it costs nothing to borrow, and buy stocks.

    Who will hold the bag at the end? That is the only question of interest.

    • Penny Farce says:

      The US taxpayer, of course.

    • FinePrintGuy says:

      Some people seem stuck in the past…If a board of directors is still setting a bonus formula for the CEO based on EPS without adjusting for share count, (the oldest trick in the book now) then they deserve to be taken to the cleaners by the CEO.

      • HowNow says:

        You may remember the high inflationary days in the 70’s and early 80’s. Back then, many CEOs were given bonuses based primarily on increased revenue, even though the units sold may have been declining.
        Your point, FPG, though, is a good reason to watch out for companies that have CEOs that are also Chairmen of the Board. They have nearly unlimited power. It’s too bad that major shareholders usually pay little attention to corporate governance unless it gets publicly obscene.

    • van_down_by_river says:

      Savers of currency (this includes government bonds) will be stuck holding the bag. The Fed is funding buy backs, and everything else, through currency debasement.

  7. Penny Farce says:

    Why would big banks worry about building up reserves when the Fed has made it quite clear that the money spigot and printing presses are always at their command any time they need a few trillion dollars? C’mon man, you got to try to understand this modern crony capitalism. Risks and possible consequences are just for the ordinary plebes. This is Big Bank Socialism, and the old rules do not apply. At least for as long as the world’s drug dealers and oil cartels still like to horde $100 bills keeping the value of the dollar high.

  8. So what happened to the famous leveraged buyback, in which the company assumes a lot of low interest debt in exchange for the dubious benefits of reducing their float. (To possibly increase it later on?) Isn’t owning that sort of debt actually profitable as well, when the price of debt rises later on? This is win win right?

    • cesqy says:

      Automation and AI eliminating traders and fees for trading stocks are approaching zero.

      • HowNow says:

        Maybe stock trading will move to Facebook where the advertising will pay for trades (and analyst recommendations). And “likes” will determine the value of the company. And where a cat slipping into a bathtub youtube-video can “go public” and be on the NASDAQ, and people can buy fractional interest in a single share? Who needs cryptocurrency when you’ve got that kind of entertainment?

  9. Petunia says:

    Morgan Stanley just fired 1500 employees right before Xmas, after spending billions on stock buybacks in the last year. Billions spent to shrink the firm…Ok.

    • Anon1970 says:

      I assume that Morgan Stanley’s retail stock brokerage business is under stress now that the discount firms are charging 0 commissions on stock trades.

    • Unamused says:

      Billions spent to shrink the firm

      Instead of enhancing the firm, which is what you’d expect a company to do – borrow money in order to expand the firm and make more money. Instead they’re doing the opposite.

      If everybody did it you wouldn’t have much of an economy left after the dust settles. It’s one of several signals that the Real Economy isn’t really growing – and that CEOs don’t expect it to grow, so they’re cashing in and bailing out.

      • fred flintstone says:

        The new management introduced by the biggest crook ever….Jack Welsh and his fellow crooks.
        Issue tons of options to yourself and your friends on the basis of tying corporate compensation to stock performance……..borrow tons of cash and use it to drive the stock price up to crazy levels…… in the options at tremendous profit………turn the empty corp over to the next fool…….laugh on the way to the bank……write books for stupid fools to read telling them all sorts of nonsense on how to manage. Go on CNBC and tell folks to whip their employees to death.

        • HowNow says:

          You missed a good opportunity: how about having the company put your “options”, with a par value of $.01, into your 401K? You can stuff a lot of those par-valued options into that account… then cash them at the IPO. When you get fired or move to another company, you can roll that 401K over to an IRA and not pay taxes until you’re (now) 72.

  10. cesqy says:

    I looked up AAPL’s market capitalization. From Dec 31, 2014, market cap went from $643.14B to $1.243 T today. A rise in about five years of just under $600B with buybacks of $247.8B. I guess its worth it till the cap implodes by 50% in an overdue downturn.

    • cesqy says:

      Another interesting fact is AAPL’s market cap is just under Spain’s GDP of $1426B. Only 15 nations in the world have a higher GDP.

      • Cas127 says:

        Yeah, but the GDP calculation isn’t set by the marginal citizen’s earnings – but every share in the market cap calculation is multiplied by the marginal buyer’s valuation – giving that marginal buyer huge power to influence trumpeted market cap – and buybacks make that marginal buyer mostly corporate leadership.

        It is a giant self-licking ice cream cone until the companies’ teeth rot out.

    • Old-school says:

      I saw a pretty good scatterplot on Hussman.

      To get back to where sp500 would yield 10% future returns it would have to get to 1329. That’s just falling to long term average.

      Great depression level caused by bad policy (supposedly) would take it to about 445. Doubt if its going to happen, but it happened only 90 years ago.

  11. Bob Hoye says:

    Buy-backs is a form of financial engineering that doesn’t make bull markets, but have become popular during one.
    Particularly when growth was so slow during the Obama interminable terms of his office.
    In the amazing Tokyo Bubble into the last trading day of 1989, such “engineering” was called “Zaitech”.
    The most dreadful example was Boeing. Spent billions on buy-backs and scrimped on engineering the 737 Max.

    • Claude says:

      yes exactly financial engineering has contaminated all the economy
      Stock 150% of GDP
      Bonds same if I am not mistaken 150%
      so now we end up with a
      central banks’ subsidized financialized economy that has nothing to do with a real economy and they are doing everything to prevent price discovery and a reconnection between reality and the Wall Street fantasy
      credit debt expansion forever, so called liquidity, is the only thing that matters
      solving insolvency problems= too much debt to GDP and cash flow , with more leverage and debts ! is the solution,
      a bit insane but it is what it is
      they have found the magic wand
      there are plenty of paper money Venezuela style
      Is not it?

  12. David Hall says:

    A buy back may increase share price. It is a sign management does not know of any better capital expenditures that could grow revenues and earnings.

    Some CEO’s got bonuses for increases in company stock price performance.

  13. kiers says:


    Thanks to Hahvahd Business School for this logic.

    • Millennial esq says:

      This got me thinking about the retirement crisis and lack of retirement savings by many people. What if instead of share buybacks they provided this directly to their employees 401K. I’m sure it’d be advantageous with taxes and other aspects and employee retention etc.

      Google says Apple has 47,000 US Employees. If each got an equal share of this $17.6B from this quarter alone. Apple would have contributed a one-time 401K payment of $374,468 to each employee. That’s a lot of money.

      Considering they bought back $69.7B of stock this year. That’s $1.48M per employee. That’s a lot of money that could have gone to other things than financial engineering. Even if they had only done the one-quarter distribution to their employee 401K. Apple still would have bought back $52.1B of stock. That’s more than 40 individual State’s budgets that Apple spent solely on financial engineering. Also compare that’s nearly the same amount of money as the entire US Transportation budget at $56B.

      Just putting this amount of money in perspective.

  14. Iamafan says:

    One of the best arguments for not banning stock buybacks comes from Ed Yardeni. He says:

    Buybacks don’t boost earnings per share. The widely believed notion that buybacks boost earnings per share by reducing the share count isn’t supported by the data S&P provides for the S&P 500 companies.

    It’s true that from 2008 through 2017, S&P 500 companies repurchased a whopping $4 trillion of their shares, as the senators state in their op-ed (Fig. 1). However, the spread between the growth rates in S&P 500 earnings per share and aggregate S&P 500 earnings has been tiny since the start of the available data during Q4-1994 (Fig. 2).

    To calculate per-share earnings, the S&P divides aggregate earnings by a “divisor,” which ensures that changes in shares outstanding, capital actions, and the addition or deletion of stocks in the index do not change the level of the price index (Fig. 3). From the start of 2008 through the end of 2017, it is down just 2.6%, or 0.3% per year on average. That certainly doesn’t support the notion that buybacks have reduced the share count meaningfully, thus boosting earnings per share.

    The best explanation for this surprising development is that the S&P 500 companies are mostly buying back their shares to offset the dilution of their shares resulting from compensation paid in the form of stocks that vest over time, not just for top executives but also for many other employees.


    • Old-school says:

      Bingo… Buffet has good tutorial on this in his annual reports. It’s one of his dozen or so principals. The goal is to maximize PER SHARE earnings over a very long holding period. Buffet pays no stock compensation only cash to managers. Stock compensation is stealing from shareholders because it’s not usually done in a way the average guy can figure it out. Stock buybacks are OK if you are doing it at a price that will generate a better return than other long term opportunities and you have excess cash. For berkshire right now that is around 10%.

      • HowNow says:

        Consider, too, that companies are justified in buying their own shares back rather than making a capital investment to increase production if they genuinely feel that their share price is under-valued. And companies invest in other companies, maybe taking a position for a future buy-out, if they think that it’s a rising star and is a good investment. Yardeni’s point about buy-back motives is a good one, though, when lousy management is busy covering their asses. Buffet pays a lot of attention to the quality of a company’s management, supposedly.

  15. A says:

    Corporations are just tools billionaires use to launder money from Central banks into their pockets. The “free market” economy in the United States died in the dot com bust 20 years ago. Now we’re the money laundering economy.

  16. BoyfromTottenham says:

    So exactly who are the fortunates that get to sell back their shares – is it joe average or a bunch of corporate execs that are cashing in shares acquired thru their employee purchase plan?

    • Iamafan says:

      I’m not sure why one wants to be CEO today, if they aren’t gonna get rich. If one gets paid in shares, then so be it. If you are a shareholder and don’t like what’s going on, go to the Annual meeting and vote accordingly. The board has a right to buyback the company shares to avoid any dilution and to maximize wealth. It’s called Capitalism. There are some fortunates but there are a lot more losers. Joe average can also sell their shares whenever.

      • Rcohn says:

        In the 1980s the Japanese were the economic Tour de force. Any executive was publicly criticized for receiving total annual compensation that exceeded 15 times that of the average worker in his company.
        Now it is not unusual for executives to receive compensation that exceeds 150 times that of the average worker. This at the same time where jobs are shipped overseas and CAPEX is minimized.This is not capitalism , but pure greed . Any such system deserves to be replaced as soon as possible

        • Iamafan says:

          Replace with what? By whom?
          Look at Japan now. There are consequences and we just have to suffer them. Comparing standards here, I still believe that I’m better off in the USA.

        • Unamused says:

          There are consequences and we just have to suffer them.

          Too bad the perpetrators never suffer the consequences.

          Which is the whole point of the ‘privatise the gains, socialise the losses’ paradigm.

  17. DR DOOM says:

    Dow 30k++++ on its way. Print,print,print. The rest of the world are our chumps. If they don’t bust a move to kill this fiat orgy keep nailing the chumps ,don’t stop now .When you find a sucker, drain em’ dry. This train ain’t slowing down before the crash it is gonna be like Casey Jones with the hand still on the throttle.

    • Unamused says:

      This train ain’t slowing down before the crash it is gonna be like Casey Jones with the hand still on the throttle.

      In the shuffling madness of the locomotive breath runs the all-time loser headlong to his death. He feels the piston scraping, steam breaking on his brow. Old Charlie stole the handle and the train it won’t stop going. No way to slow down.

    • van_down_by_river says:

      You speak the truth. You can either join in and collect the free money being handed out by the central banks or you can be one of the chumps. There seems to be very little middle ground

  18. Rcohn says:

    Buybacks are an integral part of the strategy of distributing assets and capital to those with the largest incomes and with the most assets. The goal eventually is for ALL NET assets to be owned by the top 20% with most assets owned by the top 1%.But the combination of tens of millions of people with no assets and gun ownership in the hundreds of millions guarantees a volatile condition in the coming decade.

    • Tonymike says:

      One can only hope as to the top 1 percent who holds most of the wealth. Who here owns a thousand shares of any other those top buy back bastards? Anyone? We stand on the side lines as a robbery in motion occurs and we the tax payers have to bail out the rich bastards AGAIN.
      PS: Catch the thieves at the airport before they fly off or at least let the air out of their tires.

  19. akiddy111 says:

    Hang onto your t-bills and your pop corn as we move into year 11 of this delicious S&P 500 expansion. Good golly, Tesla’s stock is doing frightfully well. I think it might just be hitting an all time high. Next stop 420?

    I remember in 1992 when Peter Lynch referred to fellow Barron’s round table panelist, Felix Zaulauf, as the resident worrywart. Coincidentally, the S&P 500 hit 420 that year. And Felix is still out there managing money (collecting fees on over $1 billion in AUM) and still relentlessly bearish.

    Goes to prove there is always a big appetite for gloom. Very amusing.

    • Wolf Richter says:

      This is one of the most perfect descriptions of how this market has gone totally absolutely nuts, soaring on not even a wing and a prayer, and folks like you getting your brain fried by euphoria. I’ve seen those times before. But not quite like this. Yes, very amusing.

      • Old-school says:

        It’s always good to remember price is what you pay, value is what you get. Right now price is 3200 on sp500, because president, central banks and Congress all desire it to be high. Value is only around 1000 – 1500 based on assumptions for discounted cash flows. Doesn’t matter how high price gets driven, discounted cash flows are what they are.

    • Just Some Random Guy says:

      “Goes to prove there is always a big appetite for gloom. Very amusing.”

      I was in hy skool in 1992. This was around the time of the great GenX slacker period. We were told our generation was doomed, the economy would never recover. We’d all be stuck working at McDonalds. And then 3 years later the digital revolution started, creating 25 years of historic economic growth and wealth that is still going.

      Remember Ross Perot with his charts? LOL. He was Mr. Doom and Gloom as well. And he got 20% of the vote. Doom and gloom always sells well unfortunately.

    • Cas127 says:

      “year 11 of this delicious S&P 500 expansion.”

      Coming off a 50 pct collapse in 2008/2009 – perma bulls always manipulatively measure from the bottom.

      Slowly crawling out of an impact crater is not the same thing as living in a golden age of stock market genius.

      Ditto the same for those trumpeting 2019 returns, measured off the Q4 2018 20 pct fall.

      Buybacks/ZIRP/etc have made prices more brittle because they create a quasi artificial demand that can evaporate the second our DC overlords have to allow interest rates to rise above the money printinh gutter they have been kept in for two decades.

  20. Roger Buswell says:

    I’m new here so I will need to get used to the good with the bad. This is an inaccurate article. Overpaying workers or making an unneeded expansion isn’t a good use of cash. Another common mistake big corporations make is buying other companies that are in businesses they know nothing about. I see Peter Lynch mentioned in one of the replies. He referred to buying companies that way as de-worst-ificaiton.

    The bought-back shares are still authorized and characterized as treasury shares. They are available for reissue in the future. They don’t “disappear”.

    Buying back shares works out to being a dividend without paying taxes on it. The value of the remaining shares outstanding go up because there are fewer shares. Future dividends are also divided into a smaller sum so are larger. The cash is injected into the economy when the shareholders who sold their shares back use it to do other things … like buy shares in younger, more energetic companies. It doesn’t disappear either. The capital is merely reallocated. No one holds a gun to the head of the shareholders who sell back. It’s a win-win. That’s why they do it.

    • Wolf Richter says:

      Roger Buswell,

      OK, it’s your first time here, so welcome aboard. But just because it’s your first time doesn’t mean you’re going get away with this stuff :-]

      “Overpaying workers or making an unneeded expansion isn’t a good use of cash.”

      No one said anything about “overpaying.” That’s your phrase. But look around and see how low the pay is for many people (the lower 50%), including contractors in Silicon Valley that work for Google and live in their cars because they cannot afford housing on their full-time pay. Open your eyes.

      “The bought-back shares are still authorized and characterized as treasury shares. They are available for reissue in the future. They don’t “disappear”.

      OK, that is one of the three options under SEC rules. But the standard option under SEC rules is to cancel the shares and retire them. That is what they’re actually doing, no matter what you might like to think. Look on Apple’s balance sheet. There is exactly 0 (zero) in its “Treasury Stock” account. It’s not like this is a secret. Just look at the financial statements.

      • The Colorado Kid says:

        Maybe he was referring to Executive Compensation Wolf. You have constant examples like Darth Zuckerburg essentially selling his compensatory shares back to his own firm for top dollar. After the next crash, I think this will, once again, be outlawed as the blatant manipulation that it is.

      • tom says:

        Contractors & Google. I thought CA passed a law that was aimed at ending contracted work. Uber & lyft was their target, were the tech $$$ protected?

        • Wolf Richter says:

          No, the law is not designed to end contracting. It tries to make companies offer contractors some employee-type benefits, such as minimum wage, and some other things. This law is under heavy attack and it might not survive.

      • LB says:

        Mr.Buswell. just thinks he knows & understands what he is writing about. It would be a shame to disturb him him from such a reverie.

    • Agree, incl the investment benefit which goes with owning cheap debt when the cost rises. Money disappears when the stock market crashes. It does not disappear if there is a short for every long. Short sales capture losses and buybacks function like short sales. (Price of stock share goes to zero). That money then returns to the economy. If you read the tea leaves you would never own THIS market. Should there be another crash, multinational corporations (and their bonds) are uniquely positioned to weather the effects. Thank you Bernanke and Paulson, the Marx and Lenin in a revolution resulting in the corporate takeover of the global economy.

  21. panatomic-x says:

    i wonder how this has impacted the repo crisis. didn’t the bis report point to jp morgan chase as the big player that stopped lending to the repo market?

  22. NJGuy says:

    The CEO of Bank of America has said they are buying up shares at such a high rate to reverse the share dilution from the Financial Crisis.

    I am not saying I approve but they do have a specific reason to be doing this compared to the other companies on Wolf’s list.

  23. timbers says:

    In France, I’m reading labor unions electrical workers are cutting power lines to banks, corporations, and wealthy neighborhoods…in response the their so called Socialist leader cutting taxes on the ulta rich as his first legislative initiative and then saying he has to raise gas taxes on working people and cut their pensions because he wants to tax the environment and plug a deficit whole.

    American workers have much to learn.

    Someone should cut the hard line power cords to the WH, Fed, Congress, The Hamptons, Silicon Valley, Mark Z home, etc.

    I’d open a bottle of French Champagne (not Presecco which I have nothing against but the French deserve to be honored).

    Company I work for – Johnson&Johnson – just told our team no raise for 2020.

    • Just Some Random Guy says:

      “Company I work for – Johnson&Johnson – just told our team no raise for 2020.”

      So find a new job. Seriously. I roll my eyes any time I hear someone whine about their employer. You don’t like you company or boss or whatever, fine. Nobody’s got a gun to your head. If you have skills to offer, another company is out there that will pay you more. If you don’t have skills, then be happy you have a job to begin with.

      Same goes if you live somewhere you hate, move. I can’t count the number of times I’ve heard people complain about being “stuck” in California. Nah bruh. There’s no Berlin Wall (yet) on the CA/US border keeping you in. Wanna move? Then move.

      I learned long ago that the best thing to do in life, is make changes that better your life. The worst thing to do is complain about life.

      And don’t give me the “it’s not the right time” excuse. It’s never the right time to do anything because you can talk yourself out of doing anything easily. Be like Mike and Just Do It.

      • timbers says:

        I didn’t say I I don’t like my job. I love it.

        So you’re eyes are rolling not at anything I said, but those voices you listen to insider your own head.

        Thankfully, I didn’t any of your advise.

        Instead, I wrote a letter to HR. It reads:

        Hi Amy.

        Johnsons&Johnson has spent nearly $7 billion this year on stock buys back of it’s own stock.

        Stock buy backs mostly benefit CEO and top management buy manipulating the outstanding shares and the stock price, because many management bonuses and pay are linked to EPS and stock valuations.

        To help assist you in your much appreciated efforts on our behalf, I think a good question to pose to your contacts at J&J regarding what actions on pay might be on the table in March, is something along the lines of:

        If J&J has $7 billion to spend on stock buy backs that mostly benefit extremely high paid upper management, yet could have have spent this on research & development wages, how it is reasonable to suggest J&J will not fund pay increases?

        Thanks for your help. It’s great working here, a nice place indeed.

        • Just Some Random Guy says:

          You probably would get a better response if you used proper grammar, ie its instead of it’s. And by instead of buy.

          That aside, again, if you don’t like it go somewhere else. J&J stockholders can vote to do whatever they want with their money. It is none of your business. You are an employee, paid a wage to perform a task. You have no say in how the company is run.

          Maybe you can pool some money together, start your own company and then pay your employees whatever you want.

        • IdahoPotato says:


          Please educate yourself on the difference between Share/Stock holders and Stakeholders. The latter invest their time, expertise (and finances) to aid the growth of a corporation. Employees are internal stakeholders and anyone running a business would be foolish to underestimate their impact.

          The longevity of shareholder value depends on stakeholder performance.

          As a J&J stock holder, how the internal stakeholders are treated and compensated is of utmost interest to me.

          If you visit the township of Bourneville outside Birmingham you will see the recognition of of stakeholder value and what it brought to a brand like Cadbury – unlike the modern Libertarian fetish for comoditizing everything, including labour.

        • timbers says:

          Actuall….Just Some Random Guy….I got a fabulous response. Apparently – unlike you – they read what I wrote instead of listening to those voices inside your head that keep telling you I said something I didn’t. Also, packing up leaving a blessed and wonderful life job family Everytime something happens you don’t like strikes me as a rather irrational and immature response. I’m so glad I did the opposite of you advise!

        • Just Some Random Guy says:

          You got a response, terrific. But let me guess, no raise still? Enjoy spending your response.

          ” Employees are internal stakeholders and anyone running a business would be foolish to underestimate their impact.”

          Employees are commodities. Despite all the flowery BS you’ll hear from HR, as an employee you’re expendable.

        • IdahoPotato says:

          “Despite all the flowery BS you’ll hear from HR, as an employee you’re expendable.”

          LOL. My employees are not expendable.

        • timbers says:

          JSRG….I would recommend you focus more on those voices you hear inside your telling you things that didn’t actually happen, and less on Grammer critiques and whining.

      • Zantetsu says:

        There was some whining going on, but I heard it in your post, not timbers’.

        • cb says:

          That must be seconded. It’s funny how the biggest crybabies are so quick to accuse someone else of wining.

          It’s in the same vein as one with a marginal message resorting to grammar and/or spelling critiques.

      • Unamused says:

        So find a new job.

        Yeah, right.

        You could also advise him to get a degree. Or another degree. Or go into HVAC or become an electrician. Become a plumber. Don’t work harder, work smarter.

        Try these on for size:

        – Do whatever pays the most.
        – If you follow your passion, the money will find you.
        – Be a suck up.
        – Don’t rock the boat.
        – Take a job in something you’re good at.
        – Start your own business.
        – You can have it ALL!

        You’re rather missing the point, and it’s not hard to believe you’re missing it deliberately: the squeeze is on and the middle class is disappearing, and it’s not because people are stupid or lazy. It’s the calculated lack of opportunity across the board.

      • The Colorado Kid says:

        JSRG, he’s up against a Cartel. They make the rules due to complete regulatory capture and their virtual evisceration of private unions. As a Worker (Labor) you can’t really go somewhere else because (unless your a Jony Ive type) you’re up against a Corporate State that owns the two main political parties.

  24. Jeff Relf says:

    A growing company issues shares;
    a dying company buys them back.

  25. Gerard Croce says:

    The next time the banks need to be rescued by the public, I’d like to see this:
    A law passed that allows a public agency, for example the Social Security agency, to own stock.
    Banks that bought back shares since 2008 would be required by law to re-issue those shares and turn them over, without compensation, to Social Security.
    All those people who are on the SS roles would then be able to vote on how those shares would be managed. Those shares would be untouchable by the U.S. government. The SS administrators could propose to buy new shares, or sell shares, and propose voting at corporate stockholder meetings. The people could vote to approve or reject the proposed measures. Power to the people.

  26. Iamafan says:

    How can the Fed be worried of Bank stock buybacks when they (the Fed) approved the bank buybacks last June after the stress test.

  27. akiddy111 says:

    According to Warren Buffett, his dad (a stockbroker) tried to talk him out of forming his partnership in 1956 on account of valuations being too high as well as risks of impending doom such as WW3, another Great Depression, etc.

    Warrren said that if he took his dad’s advice he would still have the same money (many years later) that he started off with.

    Instead, he compounded returns at 28% over 14 years between 1956-1970. Euphoric.

    • Unamused says:

      Instead, he compounded returns at 28% over 14 years between 1956-1970. Euphoric.

      It’s common knowledge in some circles that Buffet made his fortune by arranging deals where he would trade a percentage for insider information.
      Several cases were made against him and presented in detail to the SEC, and those cases were buried. Surprise surprise.

  28. J Reynolds says:

    This will never stop until the Fed stops subsidizing it. It’s a legal scam, that allows corporate managers to enrich themselves as they get to hit their stock ‘vesting’ requirements.

    I predict 2020 will see at least two more rate cuts and more QE . Since they cut rates three times with the economy at full speed, imagine what they’ll do when things turn sour. Buying gold is you’re only protection in the long run.

    Credit spreads are a joke, stocks are a joke. That’s why banks are firing their analysts. You don’t need stinkin analysts in this kind of world. Just buy stocks and buy junk. That’s what the Fed wants you to do.

  29. Random says:

    When will they run out of juice? Well, if you step back and look at the overall system, there is a big spigot pumping money from the Fed out into their Wall Street partners. The flow rate through that spigot is targeted to be $2.9 Trillion over the next 30 days, in a variety of overnite, 14-day, 28-day and 42-day very low interest loans. At the other end, these companies would all have good credit ratings and can get money cheap.

    Trump doesn’t want a recession, and the bankers are scared of the people actually electing a President that’s not already on his/her knees before the bankers, so the economy will be propped up by whatever size spigot of money is required from now until the election.

    • Wolf Richter says:


      “The flow rate through that spigot is targeted to be $2.9 Trillion over the next 30 days,..” In-and-out transactions, such as overnight repos, are NOT a “flow” and are NOT additive. I give you $100 today, and tomorrow you give me my $100 back does NOT equal a $200 flow. It’s an in-and-out transaction that ends in zero.

  30. Michael Engel says:

    1) SPX may have peaked @ 3205.
    2) AAPL market cap = $1.4T. Buyback $17B/ Qt.
    3) Chief engineers buyback $17B to lift price to 280.
    4) Distribution at high prices for max profit !

  31. stockkid says:

    buy back is good, due to the dividend tax the company is using it to buy back shares. If everything also give employees than nobody will start company

    • The Colorado Kid says:

      buybacks are NOT GOOD! This is why they were outlawed after the ’29 Crash.
      Dividends, on the other hand, ARE GOOD. Folks will rediscover this, once again, after the financial Armageddon that all this manipulation will beget.
      I got a book for you to read Kid, it’s called “The Bubble That Broke the World” by Garet Garrett. It’s a little over a 100 pages and will give you some historical perspective on all these shenanigans. All this has been done before, just maybe the scale is off this time by an order of magnitude.

  32. Bobo says:

    There is a small genre of books about what is happening in the financial markets at present. “A Short History of Financial Euphoria” by John Kenneth Galbraith is one of the best. “Manías, Panics, and Crashes” , Irving Fishers “Booms and Depressions”, and Fred Schwed’s , “Where are the Customer’s Yachts” are all good vaccination for the fever of endless can’t lose speculation.

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