Companies are buying their shares in record amounts. Sign of weakness or a sign of strength?

The simple facts are that there has never been as much money spent and / or approved by corporate America to buy in shares.  This has happened as a dramatic spike as can be seen in the charts blow from JPMorgan and Birinyi Associates.  We haven’t seen as dramatic a spike since late 2005.  The S&P 500 rose from that time in a nearly uninterrupted slope to its peak in late 2007.  Can it happen again?  The economy and the market were not peaking in 2005.  The economy is certainly not at a peak condition today.  Perhaps the spike in stock buy backs reflects managements’ belief things are looking better.  Perhaps it’s a reflection of corporations having hoarded cash in anticipation of the “fiscal cliff” that didn’t happen and now deciding to get a better return than the little or no interest they are earning on cash.  Perhaps it is all of the above.  The facts remain that they are buying and they have ample resources to continue to buy whatever the motivation may be.  So . . . my bet is the spike in buy-backs is like 2005 and is a sign of strength.  Jeb B. Terry, Sr. March 13, 2013

JPM stock buybacks 3-13-13

Birinyi stock buyback 3-13-13

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