There’s a great article today in Bloomberg where they quote Goldman Sachs telling companies to stop buying back their own stock at these elevated prices.  They go on to say their cash is better used to purchase other companies.  Most companies in the S&P 500 are trading at greater than 18 forward earnings estimates.  There’s also an argument that companies are better off having that cash on the sidelines to increase liquidity and use when earnings multiples are more attractive.  You can see from the chart below which I took from the article that buybacks are now reaching their 2007 highs and might surpass it this year/next year.

As I heard the other day from a friend, trees don’t grow to the moon.


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Author: Jared Toren