Daily Note- Political Turmoil

Parliament FightSummary

Markets: Rising equities driven by share buybacks?
Ukraine: Political turmoil as government collapses
United States: Mixed data but uptrends intact
United Kingdom: Retail sales slow down
Eurozone: Germany business sentiment rebounds



Good morning,

Economic commentators, politicians and business leaders all agree on one thing: investment in the developed world has failed to keep pace with the recovery in financial markets. There is a surfeit of both capital and labour with unemployment still elevated and companies sitting on record cash-piles, so this cannot be explained by a shortage of “factors of production”. Have companies lost what Keynes called their “animal spirits”? Is it a lack of final demand or decent profitable investment opportunities? Or has the Fed’s easy money policy made it too easy to make money risk free in bonds and equities?

One symptom of this problem is the record number of share buy-backs, where companies buy their shares back from investors. In the first quarter 290 firms, or more than half of the companies in the S&P 500, were net buyers of their own shares. Share buybacks artificially boost earnings per share, by reducing the number of shares outstanding. Once again the vast majority of companies are “beating” earnings estimates this quarter. What this really means is that most “analysts” were wrong or deliberately underestimating earnings to ensure a positive “surprise”.

Download a FULL PDF version of the Daily Note:

Global Macro-Daily Note 25th July 2014


  • The statements, opinions and analyses presented in the articles, newsletters, and other materials appearing on this website are provided as general information and for educational purposes. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this website is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. David McWilliams shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

Categories: Daily Note