Salient to Investors:

Bloomberg and Birinyi Associates data show stock buybacks have increased each of the last 4 years and were 6.4 percent of daily trading in the Russell 3000 Index by value through September, exceeding 2007’s level of 4.1 percent and reflect a seven-year decline in equity volume. Birinyi data show companies authorized $728 billion in repurchase programs in 2013 versus $467 billion at this point in 2012.

Companies took advantage of record-low interest rates to raise an unprecedented amount of debt financing and repurchased stock, helping boost per-share US earnings for four years. With cash at a record, buying by companies is poised to continue.

Martin Leclerc at Barrack Yard Advisors sees continued or increased buybacks because things are good.

The 100 stocks in the S&P 500 with the most buybacks relative to market value have returned 40 percent, including dividends, in 2013 versus 27 percent for the index – and 270 percent versus 190 percent since March 2009. S&P said S&P 500 companies had $1.14 trillion of cash on June 30 and are on track to top that for Q3 – almost twice the level in October 2007.

The S&P 500 PE is at 16.7 versus the average since 1998 of 19, and earnings are forecast to rise 5.3 percent to $109.40 in 2013, and sales to rise 4.1 percent in 2014 and 4.5 percent in 2015.

Paul Zemsky at ING Investment Mgmt said we are nowhere near the overall valuation where companies will not buy stock back.

Bank of America Merrill Lynch said investment-grade corporate bonds issued in 2013 is at a record and the average yield of 3.11 percent is almost 1.8 percent below the decade mean.

Edward Yardeni at Yardeni Research said many companies are using their cash flow to buy back shares or borrowing to buy back shares and that will continue at the current pace.

12 of 35 economists expect the Fed to taper at its December meeting, 9 predict January and 14 predict March. 86 economists predict 2013 GDP of 1.7 percent versus 2.8 percent in 2012 and an average of 2.3 percent per quarter since 2009.

Bruce McCain at KeyCorp said share buybacks have boosted earnings but signal the economy is not strong enough to support corporate investments.

Jeffery Kleintop at LPL Financial said a slowdown in buybacks would not be negative as companies shift in 2014 to investing in fundamental growth and not financial engineering, which is much more healthy.

Thomas Garcia at Thornburg Investment Mgmt said buybacks are good and show companies have cash flow.

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