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TrimTabs
- Press Release - Nov 15, 2005 Record-Setting Stock Buybacks and Massive Buildup of Sideline Cash Should Send Stock Prices Soaring by 20% or More According to New Research Santa Rosa, CA - Nov 15, 2005 - This week's issue of TrimTabs Weekly Liquidity Review features wildly bullish indicators from record-setting buyback activity, bargains in U.S. stocks from the flow of money overseas, and tremendous build-up of sideline cash. Liquidity: "The liquidity data we track suggests that the smartest money in the stock market - public companies and the insiders who run them - is extraordinarily bullish on its own shares," states Charles Biderman, CEO of TrimTabs Investment Research. Companies are flush with cash and buying up their own shares at an unprecedented rate. New stock buybacks explode to $6.9 billion daily which is the highest dollar amount since September 2001. And a new four-week record of $81.7 billion in new stock buybacks was set as of November 10th. In addition to buybacks, new cash takeovers jump to $1.2 billion daily which is the highest dollar amount in a month. "This consumptive corporate activity greatly shrinks the float of shares, by 2% right now, and it all comes down to supply and demand; when the float shrinks, the market and the price of stocks move up," added Biderman. Flows: Enthusiasm for non-U.S. stocks among fund investors has reached fever pitch. Global equity funds posted an estimated inflow of $2.4 billion, the highest inflow since late December 2004. Global equity ETFs posted an inflow of $1.6 billion, the second-highest inflow seen by TrimTabs Investment Research since it began tracking this on a daily basis in January 2002. "So individuals are ignoring the U.S. market and going overseas, but if they notice what corporations are doing and that U.S. stocks are cheap, they will pay attention soon," explained Biderman. Sideline
Cash and Macroeconomics: Corporate America's massive cash hoard has been
noted, but what is less widely recognized is that individuals are also
accumulating huge amounts of cash. During the four quarters from Q4 2004
through Q3 2005, cash in all savings vehicles soared by $633 billion according
to data provided by the Federal Reserve, the Investment Company Institute
and TrimTabs estimates. This growth was 73% higher than the $283 billion
growth in net savings during the previous four quarters. CONTACT: Conrad
Gann |