What I Learned This Week

The end of the low volatility regime (continued): Why buybacks are a clear and present danger to the anomalous market they helped fuel.

As Artemis Capital’s Chris Cole told The New York Times in September: “Volatility is an instrument of truth, and the more you deny the truth, the more the truth will find you through volatility.” Over the past decade, there has been no corporate instrument of mistruth more powerful than buybacks, an issue we have dissected in these pages for years. U.S. firms have spent roughly $4 trillion on buybacks since 2009, making corporations the biggest single source of demand for U.S. shares. According to Artemis’s calculations, buybacks have “accounted for +40% of the total earnings-per-share growth since 2009, and an astounding +72% of the earnings growth since 2012.” No doubt there is a clear b…

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