Debt is fuelling the most stock buybacks since 2001

Link: Debt is fuelling the most stock buybacks since 2001

Quote: “Led by Apple Inc. and CBS Corp., S&P 500 constituents have rushed to sell bonds to finance the repurchases of their own stock. The proportion of buybacks funded by debt rose above 30 per cent in June for the first time since 2001, data compiled by JPMorgan Chase & Co. and Bloomberg show.The willingness to borrow shows how loath chief executives are to give up what has been the most consistent source of demand for equities the last few years. Though more company cash flow is used on capital investments than investors probably think, the data highlight one of the many hazards for bulls should the earnings recession lengthen or borrowing costs rise.”

The $31 Billion Hole in GE’s Balance Sheet That Keeps Growing

Link: The $31 Billion Hole in GE’s Balance Sheet That Keeps Growing

Quote: “At $31 billion, GE’s pension shortfall is the biggest among S&P 500 companies and 50 percent greater than any other corporation in the U.S. It’s a deficit that has swelled in recent years as Immelt spent more than $45 billion on share buybacks to win over Wall Street and pacify activists like Nelson Peltz.  Part of it has to do with the paltry returns that have plagued pensions across corporate America as ultralow interest rates prevailed in the aftermath of the financial crisis. But perhaps more importantly, GE’s dilemma underscores deeper concerns about modern capitalism’s all-consuming focus on immediate results, which some suggest is short-sighted and could ultimately leave everyone — including shareholders themselves — worse off.”