Zombie Banking System Takes Another Leap Forward; Sugar Crisp Buybacks

"With the stock market at all time highs, corporations are in a mad rush to buyback more shares. Corporations just cannot get enough of their own shares, no matter how mispriced they are.

The means banks choose to finance buybacks and pay for dividend hikes is irrelevant to most (the unthinking crowd), but amusing or scary to others.

Zombie Banking System Progression

Reuters writer David Henry explains U.S. Banks' Buybacks, Dividends may be no Reason for Shareholder Celebrations.

 Big U.S. banks, including JPMorgan Chase & Co (JPM) and Citigroup Inc (C), are expected to win Federal Reserve backing on Wednesday to buy back more shares and increase their dividends in the coming year, but the approvals may be as much about the institutions’ financial engineering as any improvement in their health.

Much of the money for buybacks and higher dividends is coming from the banks issuing securities known as preferred shares. These shares are a type of equity that pays regular, relatively high dividends. To investors they look a lot like bonds that pay interest. But for regulators, preferred shares serve as a cushion against any future losses, in part because they never have to be repaid.

Critics of the strategy question how sustainable it is, as banks essentially take money from one set of investors and give it to another, and at an added cost.

at http://globaleconomicanalysis.blogspot.com/2015/03/zombie-banking-system-takes-another.html#AzwRZzDtvxKciEqM.99