Wow, what a rally!
Or, perhaps I should say Wow! What?, A rally??? It's a small distinction but clearly the fact that we are having a rally will come as a suprise to pretty much everybody – except the 2 or 3 people who run the machines that made the 62M in volume we limped into yesterday.
Not only is there no volume but MORE than 1/2 the volume came in the last 15 minutes of the day and THAT volume was almost all negative. It's the same pattern I've been warning you about all month (it's not June yet, is it?) and, as noted by Dave Fry on his chart – a very possible bull trap in the making.
So who is actually buying stocks this year? No one. Well, no one human, that is. Over 90% of the trade volume you see is high-frequency trading and most of the other 10% of the volume is Corporations buying back their own stock and buying each other with all the FREE MONEY the Fed is handing out:
Almost $160Bn worth of buybacks in the first quarter of this year is a stunning amount. That's twice as much as Corporations paid in taxes! If we figure the average S&P company pays 20% of their (non-hidden) profits in taxes, then that means that 40% of these companies' earnings is being used to buy back their own stock. That is just bat-shit CRAZY!
They could be hiring, they could be opening new stores, buying new equipment, reasearching or developing but nooooooooooooo – they can't find anything better to do than buy back their own stock?
Boy, the economy must really suck if there's no better use of cash than that. Last time buybacks peaked out (and I bitched about it then too!) was Q3 of 2007, at $135Bn. At the time, I thought it meant the Gobal economy must be in big trouble if Corporations had nothing better to do with their money.
Now, M&A I approve of – in fact, when MSFT announced their ill-fated $40Bn buyback and dividend in October of…
