We already commented on it in a post in 2015 but now a study by Credit Suisse confirms our suspicions. Since the North American stock market began to recover from the financial crisis in 2009, the companies themselves (non financial corporates) are responsible, via repurchase of shares, to buy 18% of the market capitalization in the North American markets. Institutional investors, on the other hand, have sold 7% of the market capitalization and households have sold 2%.
This massive buyback of shares by the companies would certainly not have been possible without the existence of the free money injected by the Central Banks. Apart from manipulating the stock market to the upside the repurchase of shares has other interesting effects to know: It allows to increase the profit per share of the companies without increasing their profit and as a consequence it allows the top executives to collect succulent bonuses no matter how much they are really evolving the benefits of the companies. The perfect cocktail