SAY GOODBYE TO BUYBACKS

For the past few years buyback have been much in the news, often cited as providing a boost for equities. Well, could that trend be ending? Here's an interesting read from Business insider on the subject.

Buybacks May Be Coming To An End (Business Insider)

"The financing gap for the non-financial corporate sector has remained open since Q4 2008; i.e., capital expenditures have been running below the level of internal cash flow generation," Societe Generale's Aneta Markowska told Business Insider. "Rather than investing in new equipment and structures, businesses have used their cash positions to buy back stock or to grow through acquisitions."

"This process, however, may be coming to an end. The ratio of the market value of equities to the replacement value of tangible assets (or the so-called Tobin Q ratio) has increased significantly in the past year and now stands at its highest levels since 2000. With equity values currently estimated at 25% above replacement value, expanding organically to make a lot more economic sense than expanding through acquisitions or stock buybacks."

Read more: http://www.businessinsider.com/financial-advisor-insights-april-10-2014-4#ixzz2yXBBcn6e