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Another Signs Stock Market is on Thin Ice: Companies are Buying Back Stock at Prices Above Replacement Value. 

The chart below shows that many stocks are priced above their replacement costs and companies are buying back stock at high prices above replacement value. So why do companies continue to pay ridiculously high prices above replacement cost for their own stocks? That’s because they are trying to prop up earnings at any cost. That’s what happened in 2000 before the major downturn. So watch out! This is yet another indication the market is trading on very thin ice. (Thanks to Jill Mislinski for the chart from Advisor Perspective)

Another Signs Stock Market is on Thin Ice: Companies are Buying Back Stock at Prices Above Replacement Value. 
Another Signs Stock Market is on Thin Ice: Companies are Buying Back Stock at Prices Above Replacement Value.

 

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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