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Saturday, May 25, 2013

Corporate Treasurers: Buy the Dips!

Corporate treasurers are bullish and are ordering brokers to Buy! Buy! Buy! whenever the market dips and sends stock prices skidding.

According to Bloomberg News, Goldman Sachs reported Thursday that 79% of corporate buyback programs were actively buying shares on the dip. That explains why the bears can't find any traction on the downside lately—companies are eager to buy back their shares even on a minor dip. These buybacks not only support the market, they increase earnings per share (fewer shares in the denominator make for a higher earnings per share and a lower PE Ratio).

Bloomberg reports:

U.S. firms have announced about $275 billion of repurchases this quarter, the highest total in more than five years, Jeffrey Kleintop, chief market strategist at LPL Financial Holdings Inc. (LPLA), wrote in a report this week.

At more than $91 Billion per month, that's even more stimulus to keep the market heading higher than the Fed's stimulus of $85 Billion in dollar-printing operations designed to keep the markets afloat.