TBT - Buybacks Are Making The Market Look Cheaper Than It Is

The concept is simple. So simple it seems simplistic.

And yet, despite how obvious it is, I don't ever see it discussed in financial media or by market analysts or pundits.

The idea is that share buybacks are masking how expensive the stock market really is.

The most commonly used valuation measurement for stocks is the price-to-earnings (P/E) ratio. Here's the formula for determining a stock or index's P/E:

Source: Investopedia

Buybacks have an effect on a stock's P/E ratio because they reduce the total shares outstanding. Assuming total earnings stay flat from year

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