Investing for the Long Term

The US stock market has, over the long haul, has provided the best returns of pretty much any investment vehicle. However, the market has its ups and downs. Money invested at a steady rate over the years you will see a ten percent return on you money. Some years will do worse and some years will do much better. A safe and wise way to do this is to invest a set amount every pay period, month, or quarter in your chosen stock of stocks. With this approach you will not pay excessively for buying in a high priced market and will get stocks for relatively cheap in low priced markets. This way you also avoid falling prey to the twin demons of fear and greed that routinely plague investors.

Best Investments Today

Much too often the stocks that get the most hype are those that have recently soared in price. This means it is commonly to late to invest in them and obtain the greatest benefit. Rather one would like to find solid, well run companies with excellent cash flow which are currently, for whatever reason, undervalued. In this regard we saw an article in Morningstar about the 10 best companies to invest in now. Their list includes Campbell’s, Clorox, Roche, Ambev, Bristol-Myers-Squibb, Coloplast, Brown-Foreman, GSK, and Constellation Brands. It also include one Chinese stock, Yum China Holdings. They note that Campbell’s is selling for roughly half of what they consider to be fair market value based on earnings and prospects for cash flow. The rationale for investing is that you will eventually see your investment double when the market comes to its senses and prices the stock correctly. Also, if the economy does get worse, consumer stocks are commonly a good refuge! They make similar arguments for every other stock on their list. Ambev, Brown-Foremen, and Constellation Brands are also undervalued according to Morningstar. In addition, folks who sell beer, wines, and other spirits are generally good investments when the market falters as their sales are typically not badly hurt during a recession.

S&P 500 Last Five Years

When to Hold on to Cash

It is impossible to anticipate every market opportunity far in advance. As such it is useful keep part of your portfolio as cash such as a money market fund or short term CDs. Then when you spot an expected opportunity you will have the wherewithal to take immediate advantage of it.

Pay Attention to Distressed Companies

When a company has difficulties its stock price commonly suffers. It is often useful to investigate why the company got into trouble and to develop a sense of whether or not they will recover and how soon. When you pay attention like this you can often buy the stock at a substantial discount to its eventual “recovered” price!

Return on Investment to Expect on $25,000

When you invest, what will the return on your money be? A reasonable rate of return on stocks over the years is ten percent. The return on investment for starting off by paying off your credit cards is closer to twenty-five percent. Keep a reasonable ten percent In mid when choosing investments. When you follow investment tips with promises of riches at the end of the rainbow substantial risk always comes at the same time. What you do not want to do when starting off investing your twenty-five thousand the last thing you want to do is lose all of your money on a poorly chosen investment.

Learn About the Defense Innovation Unit

Bloomberg published a useful article recently that might aid one who is interested in investing in new defense technologies. This entity helps defense startups go from ideas to battlefield-ready weapons and systems. Silicon Valley is where many great ideas come from and where systems are in place for moving quickly from great ideas to great and profitable products. Getting the energy and innovation of Silicon Valley to integrate with the needs of the Pentagon can be a challenge. Folks like Elon Musk can use a fail fast and fix fast approach because they are often not dealing directly with weapons systems that take lives and protect both American troops and the American homeland. The Pentagon is by necessity concerned about billion dollar fighter jets perfectly performing time and time again for decades. Getting solutions that satisfy the needs of national defense and the innovators who are putting money behind new ideas is the job of the defense innovation unit.

Thousands of AI Drone Aircraft in Two Years

Time and time again over the centuries military people have observed wars in which they are not involved in order to get new ideas and prepare for the next war. Europeans were impressed how the Confederacy used its railways as a way to move men and material rapidly within internal supply lines and efficiently counter a larger Union force. Germany copied this in the 20^th century in World War One and Two. The Germans and Russians fought a proxy war in Spain in the 1930s and got new ideas. Today militaries are seeing how an outgunned Ukraine is holding off Russia with the use of cheap drones while Russia is using the same approach to overrun modern air defense systems around Kyiv. With these object lessons in mind the Pentagon wants to have thousands of unmanned semi-autonomous aircraft flying with US fighter aircraft within as little as two years. This is just the tip of the iceberg when it comes to using new technologies to stay ahead of potential enemies (China, Russia, Iran, North Korea, etc.) It is the job of the DUI to help make this happen. Here is where investors might get ideas about where the next Lockheed, Boeing, RTC, etc. might come from.

Money for New Defense Technologies

According to the Bloomberg article the Defense Innovation Unit has set up more than sixty contracts worth in excess of $5 billion since 2015. An issue currently being addressed by the new DIU boss is the fact that a single check does not create a viable or sustainable business. Because working with the Pentagon can turn into a long and painful ordeal, money often runs out and folks just go away. The Pentagon is apparently slow to learn than buying aircraft carriers and new, innovative software solutions are different things that require different approaches. That having been said, there have been success stories. Anduril Industries Inc. and Shield Inc. create surveillance systems and drones and are billion-dollar companies that have steady business within national defense.

New Defense Tech Success Stories

The two defense tech success stories, Anduril and Shield, are both private companies. In order to buy stock in Anduril you need to deal directly with the company or through Nasdaq private market in advance of a possible IPO in 2026 or 2027. Shield is not a publicly traded company either so you need to be an accredited investor and invest privately via a secondary market. In order to spot emerging defense tech opportunities one simply needs to keep track of who is getting contracts with the DIU and news of their progress. An approach like this is a long term investment approach with an extremely long time horizon but holds the promise of getting into one of tomorrow’s mega stocks for cheap on the ground floor.

What Is Implied Volatility?

Implied volatility refers to any measure that puts a number on the likelihood of future market price changes. This is as opposed to historical volatility which looks back at the prior market activity. In the stock market, the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) is an important predictor of market volatility for the following month. Its calculation is based on call and put options for the coming month. A call option gives the buyer the right to buy a stock at a set price even when the market price rises. A put gives the buyer the right to sell a stock at a set price even when the market price falls. The degree of upcoming volatility is implied by the relative numbers of calls and puts which are bets on likely market price movements in the coming month.

Ether and Bitcoin Implied Volatility

We have written previously about Bitcoin futures options. The CBOE offers futures trading for both Bitcoin and Ether. And it offers options trading on those same futures. The BitVol and EthVol indexes are patterned after the VIX. Their calculations are based on calls and puts on Bitcoin and Ether futures for the coming month. In theory, a rise in either the BitVol or EthVol does not predict whether prices are going to be going up or down. Rather that they are simply going to be more volatile. As a practical matter, like with the VIX, these indexes tend to go up when the market is likely to fall and down when the market is tranquil.

Ether Implied Volatility Falls Below That of Bitcoin

As the EthVol index falls below the BitVol index, the shift in crypto volatility has given Ether a leg up on Bitcoin when it comes to institutional investors putting money into the Ether token instead of Bitcoin. This is because these investors will need to spend less to manage their exposure to Ether and buy protection in terms of futures and options. The changes in relative implied volatility of the two tokens appear to be related, to a degree, to the success of Ether staking efforts.

Longer Term Bitcoin Versus Ether Volatility

The volatility indexes for Bitcoin and Ether let us see what the options market thinks about the coming month. It does not necessarily tell us as much about the longer term. We have long believed that over the longer term Ether will benefit from Ethereum’s strong presence in DeFi. However, this presence may also bring with it more regulatory risk in the EU and US as well as in other markets in the coming years. This risk could lead to more volatility of the Ether token and temper the success of Ether that will come from its technological advantages over Bitcoin.

Volatility as a Crypto Investment Guide – SlideShare Version

Volatility as a Crypto Investment Guide – DOC

Volatility as a Crypto Investment Guide – PDF

Finding Cheap Investments That Are Good Investments

When looking for cheap investments, investors need to constantly remind themselves that many cheap investments are really just value traps as they are cheap for good reasons. When are cheap investments the best investments? What you are really looking for are investments with good intrinsic stock value. The best stocks to invest in are those whose intrinsic value (based on forward-looking earnings) is substantially higher than their current stock price. This usually happens when the market reacts to temporary factors and discounts the stock. Here is a possible example of such a case.

Cheap Stocks Right Now

The Motley Fool writes about a couple of stocks that are absurdly cheap at this moment. The two stocks that they discuss are SciPlay, a smartphone game maker and Malibu Boats, a speedboat manufacturer. In the case of SciPlay, the market is looking at revenue growth instead of profits and discounting this profitable company. In the case of Malibu Boats, the market is concerned about two recent acquisitions at a time when recession fears are a real concern. However, these are both profitable companies with strong positions in their respective niches. So, if you are wondering are there any cheap investments left, take a look at either of these too. The Motley Fool article as more details.

Accurate Investment Valuations in an Aging Bull Market

The key to finding cheap and profitable investments in this market is being able to determine an accurate value of the stock going forward. So many stocks today are valued based on steady earnings growth. What happens if that growth cools off? Others are being propelled upwards by stock buybacks. What happens when the company does not have the cash to keep buying back their stock? Market Watch notes that while stock valuations have meant nothing for years, they are becoming important now.

While inaction has been the best course of action since the bull market in U.S. stocks began in early 2009, the risks have now piled up. According to my research, there’s a chance of near-zero returns for most stocks during the next 10 years and a very high likelihood of a 50% collapse at some point.

The risks of a prolonged trade war as well as other investment risks for 2020 and after are such that investors will do well to look at stock valuation and forward-looking earnings in both their current portfolio and any prospective stock purchases.

You may be already wondering what this question is doing on a website that provides help with investing and investments. But, there is a point at which transitioning your investments away from opportunity and risk to reduced opportunity but safer investments makes sense. We wrote recently about the silent warning from Warren Buffett in that he is finding few attractive investments these days and as a result is stockpiling cash. In a more-immediate timeframe, Jim Cramer, the former hedge fund manager-turned TV investment personality, always notes that you do not have a profit when investing in stocks until you take a profit! The Motley Fool recently published an article on the same theme.

When Is the Time to Stop Investing?

The article by The Motley Fool is entitled, Once You’ve Won the Game, Quit Playing.

Despite the stock market’s history of wealth creation over the long run, on a day-by-day basis it can be quite volatile. Heck, there are occasionally even decade-long periods when the market winds up below where it was when it started. If you still have time before you need to get at your money, you can deal with that volatility. In fact, with time on your side, a drastically down market can be a great time to go value hunting for cheap stocks.

While that risk is real, currently, we’re still benefiting from the longest bull market in history. If you’ve been invested through it, you might be looking at your portfolio today and realize that you’re ahead of where you need to be at this stage in your life in order to meet your ultimate retirement goals. If so, congratulations, you’ve won the game. For at least part of your money, it’s time to quit playing.

You do not need to take all of your money out of the market and you should not be just holding cash. But, as we have written, there are ways to invest without losing any money. Taking advantage of long term treasuries, AAA corporate bonds, and a ladder of CDs insured by Federal Deposit Insurance at your bank(s) can be a good idea. Just as you will balance your stock portfolio, you can balance the maturity dates on bonds and treasuries so that money is always coming available as you need it.

What Do You Lose if You Stop Investing?

If you stop investing in strong companies with the prospects for continued growth, you will lose money by pulling out. But, if Trump’s trade war with China worsens and throws the world into a recession, it could take ten or twenty years of steady growth to come back to where we are today. If you have not invested in stocks with strong intrinsic value, they may never recover from a financial downturn and market crash.

What Do You Gain if You Stop Investing?

If you have already won, as noted by The Fool, you will gain a good night’s sleep every night as you worry and fret less about your investments. As we noted at the beginning, we are not talking about getting out of every investment and holding cash. Rather, we are talking about taking some money off the table and following Cramer’s advice about not having a profit until you take a profit. There are still conservative dividend stocks that are excellent growth prospects at any time and likely to continue to keep paying dividends for decades to come.

However, there are a series of steps to take that will greatly improve you odds of success. Here are the basics.

• What is biotech and what is not?
• What is your risk tolerance?
• What are the general risks of biotech and your investment in particular?
• What should you be looking for in a biotech investment?
• Check out the top biotech stocks as well as biotech ETFs.
• Proceed with caution.
• Keep close track of each individual investment.

Here are the specifics of our thoughts about how to evaluate investments in biotechnology.

What Constitutes a Biotechnology Investment?

Biotechnology means that the processes involve living (biological) organisms. A good example is the use of genetically altered e coli bacteria to produce human insulin. Although we usually think of biotech as being equal to the development of medications, the category includes things like genetically modified foods. Genetically engineered plants that are more resistant to diseases or chemicals fall into this category as well. The processes involved need to include the use of biological organisms.

And, the use of biotechnology needs to be a major part of the company you are investing in. While many large pharmaceutical companies work in biotechnology, the fractions of their work and profits are small. As such they are considered biotech investments.

Note: Because many investors mistakenly consider any small pharmaceutical startup company to be “biotech” the name may stick even as the company grows and does little or no work in the biotech arena.

When screening for biotech stocks, simply check the industry designation to make sure that a stock is biotech. For example, “Med-Biomed/Genetics” is a biotech stock designation. This means that the company works in biotech as its primary focus and source of profits.

What Is Your Investment Risk Tolerance?

If you are interested in investing in stocks without losing any money, the vast majority of biotech investments are not for you. Any investments in biotech that you make will be in established companies whose stock prices already reflect their success. Two ways to reduce your risks are these. Invest in ETFs that track a basket of biotech investments or invest in your own carefully selected group of biotech stocks and track them very closely.
Not paying attention in the biotech investment world is equivalent to throwing you money away.

Risks That Are Unique to Biotechnology Investments

Every biotech product starts with an idea. The company needs to efficiently and cost-effectively translate that idea into a product they can sell. In the medical product sector of biotech drugs need to work for the purpose intended, not cause any harm, pass strict clinical trials and have a large market to sell to. At any step along the way, a biotech drug may fail to pass a regulatory step. And, these drugs have limited exclusivity and patent protection so when these expire, other companies move in to make the same drug without having incurred the developmental costs.

Biotech meds typically come to an investor’s attention when a drug enters FDA clinical trials. This starts with “pre-clinical” testing which is done “in vitro” in the lab and with test tubes. It progresses to “in vivo” testing with animals.

Only after a drug has satisfied the first steps does it progress to “clinical” testing which is use in humans. The vast majority of biotech drugs never get this far.
In order for a drug to be OK’d for use in the USA, it needs to work and it needs to cause no harm. This is tested in three steps which also determine the appropriate dosage in people and the incidence and types of side effects. The success rates for drugs that get this far are as follows:

• Phase 1: 37% pass
• Phase 2: 30% pass
• Phase 3: 60% pass
• FDA approval: 85%

The stock prices of these companies may be particularly labile when results of phase 1, phase 2 and phase 3 testing are due.

There are many drugs that are perfect cures or treatments for rate diseases or diseases that are prevalent in poor countries where no one can pay for the drug. They get developed but they are never profitable and are commonly referred to as “orphan drugs.”

And, in the USA, Europe, Japan, and other nations, government run health care programs and insurance companies need to pay for the drug at a price that makes the whole process economically feasible. And, it all needs to work out before their period of exclusivity (12 years in the USA) and patent protection (20 years in the USA) run out.

What to Look for in a Biotechnology Investment

The safest biotech investments are companies that have products that are approved and making money and a “pipeline” of drugs and other products at all stages of development and regulatory approval. The company ideally has a good track record of picking ideas and bringing them to fruition in a reasonable period of time.

Ideally the company is making billions of dollars and its intrinsic stock value is such that it is an obvious buy. And, don’t be surprised to learn that such biotech investments do not exist. But, the best investments have a good product lineup, a promising pipeline, a strong financial position, and a fair price.

Predicting biotech success is chancy. Because many startup biotech stocks have one of two products in their pipeline and no guarantee of success, they are largely “story” stocks. The more you know about the details, the more secure your investment will be.

Although you may have no clue as to whether a drug in development will work out, there are folks who have more insight. When you see that a major pharmaceutical company has partnered with a small biotech startup, you know that someone with the right technical expertise is impressed.

In the end, the more you know about a sub-sector of biotech, the more successful you will be. This means that you focus on an area of development that you understand to a reasonable degree and then apply fundamental analysis to the degree that is possible.

There are already law suits against several major banks pressed by the attorney generals of all fifty states. These suits will be dwarfed by the US Federal Housing Agency if it, in fact, goes forward. There have been large numbers of bank foreclosures in the wake of the 2008 stock market meltdown and worst recession in nearly 80 years. Now more of the major banks may be at risk. There is talk already of another bailout with the US tax payer picking up the tab, again. However, this time the talk leans toward taxpayer ownership of these banks. If the situation gets bad enough banks will need to issue stock to raise capital. Doing so will drive down their stock prices. The investor interested in picking bank stocks at bargain prices will need to read the situation carefully with bank stock analysis in order to get in at the bottom of the price curve and not throw away their money on buying a stock on a bank that then goes bankrupt. Buying preferred stock might be an option in such a case as it puts one ahead of ordinary shareholders for payment if a bank goes under. Certainly how to invest in stocks of failing companies is to tread softly but there is a history in the USA of not letting the biggest companies fail. Many have earned handsome profits applying a “blood in the streets” strategy to buying failing stocks.

As always we are not suggesting that one buy bank stocks or avoid them. Bank stock analysis whether it be of Bank of America or any of the big banks currently in trouble can be instructive. The Federal Reserve chairman, Ben Bernanke, implied that the Fed would step in with further economic stimulation if the slowly recovering economy weakens. Successful bank stock analysis will take more than guessing what the Fed will do next or if their will another fiasco on Capitol Hill when in dealing with the US debt dilemma. Investment research including close reading of quarterly financial reports will give investors an idea of just how bad the situation is and when it appears on the verge of recovering. Those who time their investments just right could end up with handsome profits.

As technology moves into banking AI, there will be many changes and those who don’t keep up will loose ground.

More Resources

Is Berkshire Hathaway Undervalued?

The Motley Fool says to in their article about three reasons to buy Berkshire Hathaway.

Over the last decade, Berkshire Hathaway has become a certified cash cow of the first order.

The gap between the stock price and the long-term value of the company has been widening lately.

They cite the profits that his whole owned companies generate and the fact that if they were to go public again, their values would be a lot higher than the book value at which they are now valued.

In addition, Buffett has been buying back shares. He has always been hesitant to do this, but as he sees his own stock as a bargain, he is buying his own shares at the rate of about $2 billion a year!

Why Invest in Berkshire Hathaway for the Long Term?

Many of us equate Berkshire Hathaway with Warren Buffett. As such, many might be tempted to get out of this stock when Buffet is no longer active in the business. However, the “Oracle of Omaha” has also been the planner and teacher of Omaha as well. Each of Berkshire Hathaway’s sixty business segments is run by someone who was trained by Buffett and follows his approach to fundamental analysis and working with the long view in mind. We can fully expect the company to follow the same approach to investing and business management when Buffett is no longer in the picture as now when he is still running the show.

Why Does Buffett’s Approach to Investment Work?

Buffett’s approach to investment, which he learned directly from non-other than Benjamin Graham, is simply to analyze an investment for its projected profit potential, determine an “intrinsic” value based on that assessment, and compare the intrinsic value to the current stock price. He has admitted that he and his team toss out 95% of stocks they analyze as being too difficult to make an informed judgement on. But, when they do pick a stock this way, they typically hold it for years. Buffett has been quoted as saying that his favorite holding period for an investment if forever. And, he and his team pick investments with that in mind. Thus, Berkshire Hathaway is comprised of companies selling products and services that are not likely to become obsolete with changes in technology and are likely to grow and produce more profits year after year after year.

Investing in the Trade War That Was Not Resolved

Just a year ago, in a fit of optimism, we looked at what happens to your investments when the trade war is resolved. At that point we predicted a surge in the stock market and all sorts of success for companies that were being threatened by the trade war. Our rationale, at that time, was to look for stocks that would capitalize on reduced trade tensions and, perhaps, better investment opportunities in places like China. Of course, none of that has happened as China, and the USA, have dug in for a long struggle for global dominance.

Reasons for the Protracted Trade War

Last September we seem to have come to our senses and started to consider what happens to your investments if the trade war becomes permanent. We worried about US multinationals that would suffer more from a slower global economy that from a trade war with China. And, we suggested that companies like utilities, which are purely domestic, would be safe havens. However, the larger part of that article was devoted to looking the why the USA and China are having a trade war, the effects of trends like automation on employment, social unrest, and global politics. Anyone who wants to understand what is going on and how the trade war will very likely be a permanent fixture, should look at our comments about the rise and decline of US economic power and the rise of China. As we noted at that time, a major factor is the grip that the Chinese Communist Party has on power in China and its desire to hold onto that power no matter what.

We also looked briefly at social unrest in the West due to automation and other factors and how that is giving voice to demagogues with the potential for social, political, and military disasters!

The bottom line, as we saw it, was that the trade war would be very protracted until at long last the USA and China would come to some sort of mutually unsatisfactory agreement. We are no longer so sure about that.

Tangible Trade War Damage

Still last year, we looked at the trade war’s effect on investment in US agriculture. The loss of China as a market for US soybeans has undercut investments in places like South Dakota where farmers and investor poured money into storage and shipping facilities to sell soybeans to China. Many farmers and businesses will never recover. And, despite China’s assurances that they will buy soybeans again, they are still using it as a bargaining chip to allow them to keep stealing technology from the US or extracting technological secrets as a price for doing business there.

Winning the Trade War and Losing on Investments

Last February we speculated that a trade war “win” would be combined with reduced global trade, a lower trade deficit, and losses in the stock market. This though came from an article in Market Watch which in turn cited economic figures. Thus we could win the trade war and lose on our investments. Because the major concern of the government in this is long term competition with China for economic, technological, and military dominance, this may be a price that the USA will be willing to pay.

Will We Have Protracted Trade War or a Permanent Trade War?

In June we had come to believe that trade war would be very long term. In this view of a protracted trade war, we considered how trade between the USA and China and China versus the rest of the world could be reshuffled and where to invest and what investments to avoid. In this world, issues arise such as China being a major processor of the so-called rare earth minerals use in high tech devices and the reapportioning of global outsourcing to a ABC (anywhere but China) approach. As we noted, these are long term investment approaches and are reminiscent of dealing Russia and the entire Communist block for decades during the Cold War. As with the Cold War, the issue is not specifically a trade war but rather trade warfare for global economic, military, technological, political, and social dominance on the planet for centuries to come.

Stock Buybacks

Just a couple of months ago Forbes wrote about stock buybacks by Apple and other companies. The article is informative and helps shed light on one of the reasons that the market and especially the FANG stocks have not had a significant correction.

Stock buybacks were outlawed until 1982, when the SEC changed its rules to allow companies to repurchase shares on the open market, although doing so can artificially boost the stock price. CEOs and other corporate executives benefit the most from this behavior because their compensation, unlike that of rank-and-file workers, is closely tied to stock performance.

Between 2015 and 2017, U.S. publicly traded companies across all industries spent three-fifths of their profits on buybacks. The low-wage restaurant, retail, and food manufacturing industries spent 137%, 79%, and 58%, respectively. The restaurant industry borrowed money or used cash on its balance sheet to exceed the amount of its bottom line.

The argument that Forbes makes is that money which could have gone to higher wages or other employee benefits has gone to propping up stock prices. This disproportionately benefits upper levels of management. Our take on the practice is that buybacks are keeping the bull market alive by artificially inflating stock prices.

Stock Price versus Market Cap

When the market would normally take the price of a stock downward, stock buybacks prop up the stock price. However, this practice reduces the number of shares of stock available. Thus, if a company buys back 10% of its shares in order to increase the stock price by 9%, the market capitalization of the company, its total worth, is unchanged. If the company buys back 10% of its shares just to keep the stock price the same, the market cap of the company falls by 10%. If you have kept your shares in that company you now own a larger proportion of a company that is worth less than before. Stock buybacks are a common tactic used by old and successful companies with lots of cash that are now failing as their business plans become dated or simply because the economy is taking a downturn.

Buybacks and the Economy

The Forbes article goes on to note that when companies use buybacks to prop up stock prices and compensation for upper management the same buybacks rob workers of the pay increases or bonuses that otherwise would funnel into the economy and help everyone.

How Long Can Buybacks Prop Up a Stock Price?

Buybacks will continue so long as a company has the cash or credit to buy back its own stocks. How long that lasts is also determined by the needs of the company to simply run its business. As profits sag, a company will eventually need to use its resources to run the business and not prop up the stock price. At that time one might expect a more substantial correction than might normally have happened because the market forces poised to take the stock price down will be unopposed by the artificial action of buying back stocks. In other words, we might expect a stock to crash instead of correct when it has been supported artificially by buybacks for an extended period. Investors who are now leaving various stocks are likely looking at intrinsic stock value and not stock price to make their decisions.

Bad Technicals

Market Watch adds to the concern about a pending market correction or worse with an article about damage done to the stock market in recent weeks.

Acampora said he believed that the entire stock market itself would go into a bear market and said the current dynamic in the market was eerily similar to the stock-market crash of 1987, when the Dow slide a historic 22.6% in a single day on Oct. 19 of that year.

When we see the market fall on day and recover the next, one might think that solid long term investors are stepping in to take advantage of lower prices. However, it would appear that companies are using the downturns to buy back stocks at a lower price and especially to prop up the stock price. In this sense it would appear that buybacks are truly keeping the bull market alive and the time will come when sellers overwhelm the ability of the Apples of the world to buy back and prop up stock prices.

Are Buybacks Keeping the Bull Market Alive? PPT