Here Is The Mystery, And Completely Indiscriminate, Buyer Of Stocks In The First Quarter

The manipulating Crocks at work.

What a mirage!



Zero Hedge
By Tyler Durden
27 May 2014

With the Fed having tapered its liquidity injections into the stock market from $85 billion to "only" $45 billion per month, retail investors getting burned by the recent high beta and momentum stock flame out and "greatly unrotating" into the renewed safety of bonds, not to mention a churning market that until last week was unchanged for the year, and hedge funds ever shorter into this latest ramp, many are asking themselves: who is buying?

Here is the answer. [the above image]

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter!

Should the Q1 pace of buybacks persist into Q2 which has just one month left before it too enters the history books, the LTM period as of June 30, 2014 will be the greatest annual buyback tally in market history.

And now for the twist.

Unlike traditional investors who at least pretend to try to buy low and sell high, companies, who are simply buying back their own stock to reduce their outstanding stock float, have virtually zero cost considerations: if the corner office knows sales and Net Income (not EPS) will be weak in the quarter, they will tell their favorite broker to purchase $X billion of their shares with no regard for price: the only prerogative is to reduce the amount of shares outstanding and make the S in EPS lower, thus boosting the overall fraction in order to beat estimates for one more quarter.

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