Stocks Prepare to Crash as the Last Buyer Stops Buying

By: Graham_Summers

Stocks are now on borrowed time.

Corporate buybacks have been the single largest driver of stock prices in the last quarter. Institutional investors have been net sellers for 15 weeks. And individual investors have been pulling capital out of stock funds in record amounts.

This leaves corporate buybacks as the sole driver of stocks. But now that is ending.

Announced buybacks plunged 34% in 1Q16. This is the single largest plunge in announcements since 2009.

Now, this does not mean buybacks are drying up all at once. As you can see in the chart above, there were a record number of buybacks announced in 2015. Those plans are beginning to be implemented.

So there will be a significant degree of corporate buybacks going forward.

However, buyback announcements and actual purchases are not the same thing. Many times companies announce buyback programs that they later fail to complete. So the buying power here is much less than most realize.

Meanwhile, earnings are collapsing, while stocks remain near all-time highs.

Either earnings need to erupt higher in the next few months (highly unlikely given lack of growth) or stocks need to drop at a minimum 20%.

We’re currently preparing for a similar situation today.

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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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