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  1. #1

    unscientific -- just a gut feeling

    Have been reading many forums here for many months and currently a "Dividend Investor " looking for steady dividend growth and earnings, I am beginning to become a little skeptical about the market after seeing so many companies beating their lowered projected earnings along with so many buy-back programs, I am wondering whether we are close to a market down turn. My intrepretation of buy backs is that Company's are struggling to maintain their share prices.
    Anyone feeling the same??? Open to your thoughts.

  2. #2
    The stock market is vulnerable to a downturn any time. Since the nasdaq broke to new highs this past week and the other indexes and averages have been consolidating for most of this year, I would think the most likely direction for the stock market to go at this time is up or possibly further consolidation. Leading economic indicators are also beginning to turn up.
    So, no, I do not feel the same.

  3. #3
    My own gut feeling is that buy-backs indicate that the company has run out worthwhile things to invest in to grow the business. Not a good sign. To me, an indication that things are slowing down.

  4. #4
    Predicting the future is like reading tea leaves. If anyone can read tea leaves, uh can.
    When one can't read tea leaves --meaning me-- one turns to the only thing one has left: logic. Why would a company choose to buy-back their shares? Perhaps, as flutemcgill says, it "has run out worthwhile things to invest in to grow the business." Or perhaps as you suggest, "Company's are struggling to maintain their share prices."
    I don't agree with flutemcgill's interpretation of worthwhile things. I also don't agree with you that the company is struggling. In fact, IMO the company is doing quite well.
    If a company has turned a nice profit, all of their projects are on track and they find themselves with a big wad of excesss cash sitting idle, what are their choices to do with it? Companies can increase their profitability by investing in more research, plant & equipment or even bigger-better brainpower. But if they're on track with their longterm plan for growth & development, what other options do they have? Invest it in shortterm bills, notes and bonds. But the interest rates are laughable and, since the company already has a nice cash reserve built up for business purposes, what else can they do with the money? Logically, pay it back to the company's shareholders. There are 4 ways to give money back to shareowners:

  5. #5
    When one can't read tea leaves --meaning me-- one turns to the only thing one has left: logic.
    Unfortunately the market runs more on emotion than logic. Logic can be used to rationalize history but the old ballads and folk songs tell the story.


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