The ONLY Buyer of Stocks Just Stopped Buying… Buckle Up

By: Graham_Summers

The rally of the last month has many scratching their heads.

That is, until you realize:

• Most of it was driven by “short-covering.”

• The primary buyers of stocks today are corporations buying back their stock to juice EPS, not actual investors.

• Actual investors have been selling the farm.

Central Banking manipulation only works as long as a reasonable number of investors continue to “drink the Kool Aid.”

Unfortunately we are now well past that point.

The Fed failed to raise rates last week, despite virtually every data point the Fed claims to care about hitting its desired levels. At this point, even former Fed cheerleaders like CNBC’s Steve Liesman are questioning the Fed’s credibility.

Regarding #2, the only real buyers of the market at these levels are corporations looking to increasing EPS by reducing their number of share outstanding via buybacks.

Standard & Poor’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

            Source: Bloomberg

Note that in the above article, REAL investors are engaged in “rampant selling” of stocks. Put another way, REAL investors are getting out of Dodge!

And the blackout period for Corporate Buybacks starts today. Put another way, the ONLY buyer of stocks is stopping buying.

U.S. stocks are entering part of the year when one of their biggest support systems is turned off.

Buybacks, which reached a monthly record in February and have surged so much they make up about 2 percent of daily volume, are customarily suspended during the five weeks before companies report quarterly results, according to Goldman Sachs Group Inc. With the busiest part of first-quarter earnings seasons beginning in April, the blackout is getting started now.

Source: Bloomberg

A bear market is looming, are you prepared?

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Best Regards

Graham Summers

Phoenix Capital Research

http://www.phoenixcapitalmarketing.com

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2016 Copyright Graham Summers - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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