Another volatile day sent the major averages into the final hour mixed on generally positive data.
The Institute of Supply Managers Non-Manufacturing or services index slipped 1.3 points to 60.3 in October. The details were unremarkable, price data slipped but remains high.
With debt funded corporate share buybacks increasing again, October saw net buys of 39 billion. The year to date total is nearly 360 billion. Given that the markets are little changed since the beginning of the year share buybacks seem to be losing their thunder. Prior to 1982 corporate share buybacks were considered outright securities fraud, for obvious reasons. While the mainstream media likes to cite the Federal Blackout period when companies are prohibited from buying their own share, there is in fact no such thing.
There are however a number of rues relating to buybacks, but they are easy enough to meet. Another item of note regarding buybacks is that announcement usually far exceed actual purchases. How this process isn’t considered stock price manipulation anymore is beyond me. Some of the more egregious companies involved in squandering their capital on share buybacks include IBM, the now nearly bankrupt Sears Holdings and of course General Electric. Other studies have shown that large buybacks while positive in the short-term amount to corporate financial suicide long term.
Standard and Poors 500 Index closed at: 2,738.31 up 15.25
NASDAQ finished the day: 7,328.85 down 28.14
Gold ended trading at: $1,232.40 down $.90
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