Corporate Share Buybacks: How Timely Are They?

Factset Buyback Quarterly has an interesting series of charts and facts on corporate share buybacks.

Here is my favorite chart in the series.

Aggregate Buybacks: Dollar-value share repurchases amounted to $93.8 billion over the fourth quarter and $384.3 billion for 2012. The fourth quarter total is in-line with that of Q3, but represented year-over-year growth of 9.6%.

Sector Trends: The Information Technology and Health Care sectors spent the most on quarterly repurchases ($19.8 billion and $14.4 billion, respectively) in Q4 2012. However, of the sectors that averaged $2 billion or more in quarterly share repurchases since 2005, the Industrials sector showed the largest sequential and year-over-year growth (30.6% and 59.4%) in dollar-value buybacks.

Buyback Conviction: Dollar-value buybacks amounted to 79.1% of free cash flow on a trailing twelve month basis, which is the largest value since Q3 2008. The Consumer Discretionary and Consumer  Staples sectors both spent more than 100% of their free cash flow (116.7% and 114.2%, respectively). The Energy and Utilities sectors spent $35.8 billion and $1.4 billion, respectively, on buybacks, despite generating negative free cash flow (-$25.7 billion and -$23.5 billion). The Consumer Discretionary sector also led all sectors in repurchasing the most shares relative to its size. Over the trailing twelve months, the sector repurchased shares that amounted to 4.5% of the sector’s average shares outstanding over the year.

Timing Suspect at Best 

One look at the above chart is all it takes to see most shares are bought back at high prices rather than low prices.

And check out the latest authorizations.

Looking Forward: Program Announcements & Buyback Potential Going forward, several companies in the S&P 500 have authorized new programs or additions of $1 billion or more since December 31st, including Gap (GPS), Blackrock (BLK), Marathon Petroleum (MPC), L-3 Communications (LLL), Visa (V), Allstate (ALL), Moody’s (MCO), CBS Corporation (CBS), Dow Chemical (DOW), and AbbVie (ABBV). In addition, even larger authorizations were made by United Technologies Corp. (UTX), 3M Co. (MMM), and Lowe’s (LOW), which all announced replacement programs worth approximately $5.4 billion, $7.5 billion, and $5 billion, and Hess Corporation (HES), which announced a $4 billion buyback program on March 4th. Finally, a number of banks were approved to buy back large amounts of common and preferred shares in 2013. JPMorgan Chase (JPM) which was approved for $6 billion in share repurchases, Bank of America (BAC) was approved for $5 billion in share repurchases plus $5.5 billion in redemption of preferred shares, and Bank of New York Mellon (BK), U.S. Bancorp (USB), State Street Corp (STT), and American Express (AXP) were also approved to repurchase greater than $1 billion worth of shares.

Why? Share prices certainly are not cheap.

Much of the buybacks are in conjunction with massive shareholder dilution via stock option grants to executives. The executives continually unload their shares and corporations buy them back.

Buybacks from the last two years generally look good, at least right now. But for how long? 2006 and 2007 buybacks looked good too, up until the crash.

Is this yet another case of "here we go again?"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

Beppe Grillo Supports "Referendum on the Euro Within a year"

Via google translate from Corriere Della Sera, Beppe Grillo is in favor of a "Referendum on the Euro Within a year"

"Europe needs to be rethought. We consider just one year of information and then hold a referendum to say yes or no to the euro and yes or no to Europe. " Beppe Grillo to ride a strong theme of the last election campaign the 5 Star Movement. "Europe on the euro and the British teach us democracy. No party can claim the right to decide for 60 million people. "

"I want to go to Europe and re-discuss a Plan B to be in five years, "added the leader M5S, explaining:" When we do, then we are ready for a referendum and we decide whether to stay in the euro or not."

Sooner or later this sentiment is going to catch fire. And the sooner the better for Europe when it does.

Also see Discussion in Spain on Leaving the Euro; Euro Exit Manifest.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Discussion in Spain on Leaving the Euro; Euro Exit Manifest

Some common sense discussion is taking place in Spain regarding the necessity of Spain exiting the eurozone.

For example, please consider Opposition to the euro breaks: first manifesto to leave the single currency as translated from El Economista.

The political opposition that Spain remains part of the euro begins to crystallize. And the tool to achieve that end-Spain output of the single currency is again signing a manifest public that, for the moment, has already been signed by around 1,000 professionals convinced "the risks of deterioration and degradation that there are the enormous social suffering caused by the persistence of adjustment policies, austerity and privatization of the public ".

Among the signatories are former general coordinator of United Left (IU) Julio Anguita or economists Juan Francisco Martín Seco and Pedro Montes, Manuel Monereo addition, Manuel Muela and Carlos Martinez, president of Attac Spain, or exsindicalista Agustin Moreno. Written Signatories to the start for a first finding analysis: the level of unemployment is "catastrophic "the indebtedness of the Spanish economy to the outside is" unable to cope "and the evolution of public accounts leads inexorably to the" economic collapse of the state ".

Specifically, they say, more than six million unemployed, more than 2.3 billion euros of gross liabilities from the outside and a public debt of almost a billion euros, growing and already close to 100% of GDP, "are data defining an unmanageable mess, endanger destroy coexistence and social rights. "

"Spain Must Have a Plan to Exit the Euro"

Also note an article on El Econimista Jose Carlos Diez: "Spain Must Have a Plan to Exit the Euro"

Jose Carlos Diez, chief economist at Intermoney, feels Spain should not be the first country to leave but "should have a plan to do it." This was pointed out in a meeting he had with el Economista.

Spain should never be forced out. We are a big country in Europe, and we must enforce our political weight, seeking alliances to solve the crisis. But if Portugal or Italy decide to leave the euro, we must have a plan to get out that day, "he answered a question from a reader. "I hope that there is intelligent life in Europe and that day may never come," he added.

Euro Exit Manifest

The talk has started. That is the first step. Inquiring minds may wish to read the Euro Exit Manifest mentioned in the first link.

 Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com