Originally posted in the the Wall Street Journal this article points out the trend in share buy backs as markets start and continue to fall. Stories about massive share buy backs have been in news over the past couple years. If we see these buybacks slow and even stop the stocks will now be lacking a built in buyer that has been there for the last few years.

…

By Richard Teitelbaum

(FROM THE WALL STREET JOURNAL 1/26/16)

As global stock indexes tumble, market logic dictates companies should ramp up share repurchases. If history is any guide, that won’t happen.

On Monday, the S&P 500 index was down 12% from its 52-week high and other benchmarks down even more.

“If you’re flush with cash, you may want to buy back stock; when you don’t have cash, not so much,” said Steven Fazzari, professor of economics at Washington University in St. Louis. “It’s an interesting contradiction.”

What’s more, there are reasons to expect finance chiefs to pinch pennies now. “CFOs are going to be very cautious about spending the cash they have,” said Douglas Skinner, professor of accounting at the University of Chicago’s Booth School of Business.

“The big countervailing factor is the uncertainty about the economy. A lot people are concerned that we are at an economic tipping point,” he said.

That may sound familiar. In 2007, share repurchases hit a record $723 billion, according to data from Citigroup Inc.

Then the financial crisis struck In 2009, as stocks hit their nadir, people worried about the survival of the world’s capital markets. Buybacks that year fell to $155 billion.

U.S. stocks took off from there, and share repurchases followed suit, hitting a projected $677 billion in 2015, according to Citigroup.

Some companies are increasing buyback authorizations amid the current stock-market retrenchment.

Oil-field-service giant, Schlumberger Ltd., said last week that it would launch a new, $10 billion share buyback program to replace one it started in 2013 that is winding down. Its shares are off 47% from their 10-year peak in July 2014.

Earlier this month, General Motors Co. said it would boost the stock repurchase program it unveiled in 2015 by 80% to $9 billion. GM stock has fallen 14% so far this year.

BlackRock Inc. CFO Gary Shedlin said in a Jan. 15 earnings call that the asset-management firm planned to repurchase ” no less” than it did last year, when it bought back $1.1 billion of stock.

In an interview, he said the firm avoids trying to time the market when repurchasing shares. Forecasting market performance, or beta, is exceedingly difficult. “We are absolutely not trying to make a beta call,” Mr. Shedlin said, adding that BlackRock has made exceptions based on the stock’s relative valuation. “Our shareholders tell us they like predictable buybacks.”

BlackRock shares are down 15% this year.

Smaller companies are buying back stock, too. Jay Rembolt, CFO of maintenance-product maker WD-40 Co. said the company is targeting $30 million to $40 million a year in share repurchases. It plans to buy back stock in 2016 on market weakness. So far this year, the stock is basically flat.

“When the share price falls below where we’re accustomed, we increase our share purchases,” Mr. Rembolt said. The company weighs such purchases against other possible uses of its capital, such as acquisitions, expansion, and its dividend, which it raised by 11% last month.

A big cash hoard tends to invite pressure. “At some point shareholders start complaining,” said Grant Johnsey, head of institutional brokerage at Northern Trust Corp. In today’s low-interest-rate environment, the restrictions companies put on the investments their CFO can make almost guarantees low yields from its cash, he said.

“They are not allowing company treasurers to buy high-yield bonds or emerging market stocks,” Mr. Johnsey said.

Helped by lower fuel prices, Southwest Airlines Co. last week reported quarterly net income nearly tripled to $536 million.

The airline also said it would launch a $500 million accelerated share repurchase program on top of a $1.5 billion plan authorized last year. The surge in profits gave CFO Tammy Romo the opportunity to speed up the buybacks as the stock has fallen 11% this year. “It starts with what the company can afford,” said Ms. Romo. “We were very comfortable accelerating $500 million.”

Companies have money to spare. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, calculates that cash and cash equivalents held by the S&P 500 Industrials, which exclude financial, utility and transportation companies, totaled $1.3 trillion as of Sept. 30. That’s about double what they held during the financial crisis.

“There’s a ton of cash,” he said. “More than enough to do buybacks, more than enough to do M&A, more than enough for capital expenditures.”

With earnings season under way, many companies are in blackout periods, during which they are customarily limited in what they can say or do, including initiating new share repurchases.

Robert Leonard, head of the special equity transactions group at Citigroup, said buybacks are heating up, but mostly under what are known as rule 10b5-1 plans, through which companies can repurchase shares using predefined trading instructions.

“We are seeing increased activity on the desk,” he said.

The big test will be when earnings period ends. “Once those earnings releases are out, companies can go into the market to buy shares,” Mr. Leonard said.

S&P’s Mr. Silverblatt expects companies to keep buying stock to reduce share counts and cover options that will be expiring this year. That will spur both buybacks and higher share prices. “If they keep buying shares when they come out of the blackout periods, the traders are going to pick up on it,” he said.

Mr. Silverblatt said that the stock selloff hasn’t changed economic fundamentals. After a strong first half, he added, the buybacks are likely to trail off for the rest of 2016.