Negative Interest Rates Coming?

[scagnt83]

You have any sources? I haven't seen that statistic before.

Here is a good one:
http://seekingalpha.com/article/3962730-buybacks-killing-america


Here is an older article but its a good one. The figures have only become worse since then.

https://hbr.org/2014/09/profits-without-prosperity


Bloomberg did a good article earlier this year about it too, though Im not sure if that stat was in it

https://www.bloomberg.com/news/arti...buyer-keeping-the-s-p-500-s-bull-market-alive



Buybacks and Dividends combined account for around 80%+ of Earnings Per Share for S&P 500 companies.

That means those companies used over 80% of their revenue to reward shareholders.


Robotrading has exacerbated how buybacks are able to inflate stock price. Many algorithms use volume as one of the main measures for what to buy/sell. And most of them do not tell the difference between a buyback and natural demand, they treat the two things the same.

 

[VolAgent]

Here is a good one:
Are Buybacks Killing America? | Seeking Alpha


Here is an older article but its a good one. The figures have only become worse since then.

https://hbr.org/2014/09/profits-without-prosperity


Bloomberg did a good article earlier this year about it too, though Im not sure if that stat was in it

https://www.bloomberg.com/news/arti...buyer-keeping-the-s-p-500-s-bull-market-alive



Buybacks and Dividends combined account for around 80%+ of Earnings Per Share for S&P 500 companies.

That means those companies used over 80% of their revenue to reward shareholders.


Robotrading has exacerbated how buybacks are able to inflate stock price. Many algorithms use volume as one of the main measures for what to buy/sell. And most of them do not tell the difference between a buyback and natural demand, they treat the two things the same.

Positive interest rates will be a good thing. Companies will actually have to think of a use for their earnings. Apple among others have been borrowing money at near 0% interest for stock buybacks with their offshore money as collateral. Now, they will have to actually invest it back into the business or pay it out as a dividend.

 

[scagnt83]

Positive interest rates will be a good thing. Companies will actually have to think of a use for their earnings. Apple among others have been borrowing money at near 0% interest for stock buybacks with their offshore money as collateral. Now, they will have to actually invest it back into the business or pay it out as a dividend.

I agree. Low rates equals free money for huge corporations. Free money, with no major risk attacked to it, leads to poor financial decision making.

Revenue & offshore assets are being used to collateralize huge amounts of almost risk free debt. That debt is then used to purchase stock, which artificially inflates stock prices because of increased volume and higher earnings per share. If its not going into buybacks, its being pumped into acquiring crazy startups that are spending stupid money like trust fund babies.

The allocation of capital among publicly listed companies is insane right now.

But the corporations are not all to blame for this. Huge increases in regulations, uncertainty in regulations, political uncertainty, etc. All make it a safer bet to just play a financial shell game while rates are enabeling them to do so. I mean... why work when you can get all the credit you need at near 0% rates??

Plus just the fact that rates are at that level... if the economy was blowing things out of the water, low rates would happen naturally... but its not, and artificially lowering them just creates artificial conditions in the economy.

 

[scagnt83]

So we got another rate increase. They predict 3 of them for 2017... of course they predicted 3 for 2016 and we only got 1. It will be interesting to see how it plays out over the new year. But it doesnt look like negative rates are coming to the US anytime within the next 12 months.

 

[GalvIns]

So we got another rate increase. They predict 3 of them for 2017... of course they predicted 3 for 2016 and we only got 1. It will be interesting to see how it plays out over the new year. But it doesnt look like negative rates are coming to the US anytime within the next 12 months.

You're right! And with so many Goldman people in office, the chances diminish even more.

 

[VolAgent]

So we got another rate increase. They predict 3 of them for 2017... of course they predicted 3 for 2016 and we only got 1. It will be interesting to see how it plays out over the new year. But it doesnt look like negative rates are coming to the US anytime within the next 12 months.

I thought they were predicting 4 for 2017? But yes, I doubt we will see that many, but odds are we will see some. After all, it was a quarter ago we got the last increase, right?

 

[Rick Deckard]

30 year rates for homes in the retail sector have be brought up.

A 6% interest rate on 30 year notes would be a good target over the next 3-4 years as Trump brings things back to normal.

You don't write out checks for 6% and typically home prices level off or fall so interest rates going up is great for folks with money already.