The Stealth Reason Why The Stock Market Keeps On Rising

This is not unique to just the US. In Germany for example the number of listed firms fell by 41 percent during the past decade alone , to only 450. The reasons are multi-fold and include:

  • Mergers & Acquisitions,
  • Dramatic reduction in US IPOs,
  • Increasing Buyouts and Control Blocks by Private Equity.
  • A few bankruptcies along the way (and more to come when Zombie Corporations are forced to face realities when higher interest rates come home to roost)

Also many companies are going "all the way into oblivion" by buying up all of their shares over time and "going private" or "dark".  Many executives & boards have simply become tired of the quarterly "rat race" of reporting numbers which may "beat" or "miss" the expected earnings target by a penny or two and so the stock gets hammered. They don't want to manage toward quarterly expectations, which they consider to be an unhealthy short-term focus for a company's long-term health or are forced to divulge more information on Intellectual Property and Innovation advantage secrets than they want (giving both investors and competitors insights) and so they keep the company private or take the company private. Additionally, the punitive legal liabilities associated with Sarbane-Oxley for publicly traded corporate executives is also a major dis-incentive that can't be understated. 
 


2- SHRINKING POOL OF PUBLIC # SHARES OUTSTANDING 

But the even bigger Kahuna is Buybacks or the actual reduction of shares outstanding by major public traded entities. As big as $3.5 trillion in buybacks has meant over the last 5 1/2 years, it has only got larger in 2018 due significantly to Trump's Tax changes and US corporate repatriation of their off-short cash. It is anticipated by Goldman Sachs that stock buybacks in 2018 will approach $1 Trillion. Historic low interest rates presently continue to spur corporate borrowing via historic levels of debt issuance. 
 

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Disclaimer: Information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any ...

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