This week’s chart comes from an article on Bloomberg discussing the percentage of buybacks that are being funded by debt – now over 30% for the first time since June 2001. Notice how this measure tends to peak around high points in the overall market (2000/2001, 2007 and 2011). You can read the full article here.
I had to clean out a few stocks from our portfolios for this very reason during the last year (see here). This is short-term thinking that jeopardizes long-term value for shareholders and I would wager that there will be a slew of CEO’s that get fired over this in the years ahead.
-Nick