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June 20, 2019 | Canadian C-Suite Squandering Cash in Buyback Mania Too

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Further to my article yesterday on the capital malinvestment in record corporate buybacks at cycle high valuations in equity markets, the Globe and Mail reports that corporate buybacks of TSX-listed companies also reached an all-time high of nearly $50 billion in the 12 months ending March 31, 2019, and nearly 50% higher than the previous mania peak in 2007.  Below is the chart of TSX-listed buybacks since 2001, see Buybacks soar on TSX, but there’s a downside:


Banks and energy companies have been leading the charge as both face slowing profit growth and markets over-supplied with their product.  At the end of a record-long economic expansion, the prudent thing to do would be to shore up cash and capital ratios for the downturn now due.

Unfortunately, the c-suite remains fixated on temporarily levitating share prices rather than shoring up fiscal strength and diversifying business models.  Past cycles confirm that debt-heavy businesses will increasingly need to slash expenses and divert shrinking cash flows toward debt repayment.  This will leave fewer funds for everything else, including buybacks.

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June 20th, 2019

Posted In: Juggling Dynamite

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