The Terrible Timing of Share Buybacks

In his latest Global Strategy note, Societe Generale stategist Albert Edwards makes an intriguing point about share buybacks:

[They] may have surged in this cycle but they are a highly cyclical element of corporate distribution and are never there when you really want valuation support i.e., in the midst of a bear market…The timing of share-buybacks seems specifically designed to destroy value ?– buying shares when they are expensive in the wake of a huge rally. I know my market timing may not be up�to much but corporate treasurers seem to be even worse!

To support that assertion there’s this:

Societe Generale

(Click for larger version.)

You can see from that how closely buybacks hew to the rise and fall of the stock market. And as Edwards writes, you can also note that buybacks seem to be turning back down again — which, if the correlation to markets holds, could be bad news for everyone.