I read a great article from the Invest in yourself news letter "Record Market" Contributing Editors: Bob Rinear, Robert Foster, Ted, Chuck and the Crew! It
On Friday, April 26th, the "first look" at the first quarter GDP hit the airwaves at 8:30 am. It was up so much from estimates, that many had to do a double take and even the Department was called upon to verify the results. They were correct. Instead of growing at a pace of 2.5% as expected, it came out at + 3.2% ( annualized)
Wow. 3.2% is actually pretty good growth. Have all of us doubters of the economy, just been proven stupid? Are we so off track that the economy is really smoking hot, and we're simply too stubborn to admit it? I think not.
So let's do a little perspective here. To quote David Rosenberg: This was a low-quality GDP report. All one-offs - lower imports, higher inventories & Pentagon spending. Real final private sales a puny 1.3%. Removing more lipstick from this pig shows cyclically-adjusted GDP contracting at a 2% annual rate; deepest decline in nearly a decade .
Okay, so what's the real deal? The real deal is that while things can look good on the surface, underneath the surface things can be a lot uglier. For instance, doesn't anyone find it sort of odd that we supposedly have the lowest reading of unemployment in like...forever, and yet we have the highest amount of homeless ever? Does that add up for you?
Lots of things don't add up recently. For instance equities have been losing investment dollars for 13 out of 14 weeks. Yet the market continued up, and is challenging the all-time highs. So, if investors are pulling out of equities for the safety of bonds, who's buying? Well, it's so in your face that even Goldman Sachs themselves had to admit that stock buy backs has "consistently been the largest source of equity demand".
Goldman Sachs: "Without company buybacks, demand for shares would fall dramatically." Well there ya have it.
But this isn't something new. We're in a whole new world folks. I remember writing articles say, 10 years ago, ( Okay make it 15) that because the baby boomers were approaching retirement, they'd be taking more and more money OUT of the system, money that would not be replaced by the millennials. Yet when markets kept going up, it was clear something else was replacing the demand. Yep, buy backs.
For the whole year 2018, share buybacks soared 55% year-over-year to a record $806 billion, beating the prior record of $589 billion set in 2007 by a blistering 37%! So, who did what over the past 5 years? Other than buy backs, who was buying or selling?
Foreign investors dumped $234 billion.
Pension funds dumped $901 billion, probably to keep asset-class allocation balances on target as share prices soared.
Stock mutual funds shed $217 billion.
Life insurers added 61 billion
Households added $223 billion.
So if you do some fuzzy math, investors pulled 1.2 trillion dollars out of equities over the last 5 years. Yet the market went UP. How can that be? Because companies did 2.95 TRILLION in buy backs during that same period.
Are you getting this? Now, that doesn't even include the "bank money" from Central banks. I've mentioned this many times, but it feels like many of you just let it roll off you. Don't! This is important stuff folks.
For instance, did you know that between 9/30/18 and 12/31/18 the Swiss National bank added 376,000 shares of MSFT to their account? Did you know that they now own just shy of 24 MILLION shares?
They added 344,000 Pfizer. 226,000 Exxon. 268,000 CSCO. They opened a new position, this one in Linde. So how much did they buy of a brand new position? 1,976,000 shares. Do you suppose that sort of buying volume could help a stock out? Ya think?
So, we've got stock buy backs last year totaling almost a trillion dollars. We've got the Swiss National bank holding 79 billion worth of US stocks. God only knows how much the Bank of Japan or our own Fed's have "bought" via proxies that we're not privy to.
conclusion: A Global Monetary Reset is coming soon. Are you prepared?