"DJ GM August US Vehicle Sales 368,776 Vs 355,180 >GM

DOW JONES NEWSWIRES

General Motors Corp.'s (GM) total U.S. August sales improved 3.9% to 368.776 from 355,180 a year earlier, as the auto giant cut its fourth-quarter production plans by 12%.

On an adjusted basis, sales for the month was up 8%, as August 2006 had 27 selling days, up from 26 a year earlier.

GM's light vehicle sales rose 3.9% to 363,521 from 349,806 a year earlier.

GM left its third-quarter production schedule unchanged."

Contrary to recent opinion, the American worker IS STILL a force to be reckoned with worldwide. And GM is on the move.

DJIA vs Russel2000 graph since early June:

http://ca.finance.yahoo.com/q/bc?t=3m&s=%5EDJI&l=on&z=m&q=l&c=%5Erut

There seems to be a slight divergence around mid July, ending at around 2% difference. Does anyone know if this is around the time the buybacks started?

DJIA vs Nasdaq100:

http://ca.finance.yahoo.com/q/bc?t=3m&s=%5EDJI&l=on&z=m&q=l&c=%5Eixic

These seem to diverge somewhat around early July.

Interestingly, Naz vs. Russel end at 0%:

http://ca.finance.yahoo.com/q/bc?t=3m&s=%5EIXIC&l=on&z=m&q=l&c=%5Erut

I'm a relative neophyte when it comes to watching the markets, but whenever I see a large buyback I think:

1. This is a company that could not find anything better to do with a large amount of money. That always makes me suspicious of management.

and

2. This is another method for those at the very top to enrich themselves at the expense of others.

I guess a case like Microsoft is a little different, where they have a stupid amount of cash, no interest in regular dividends, and the stock price has been somewhat stuck.

Perhaps I have on overly simplistic or cynical view of buybacks. But it just feels like market manipulation of a sort. I'd love to hear another view of it.

Mike
NYC

Re: "I guess a case like Microsoft is a little different, where they have a stupid amount of cash, no interest in regular dividends, and the stock price has been somewhat stuck."

Microsoft (MSFT) does indeed pay dividends (although small), and did return cash back to investors in the form of a one time payout about year ago (+/- a few months - don't remember the exact date) And it's still conceivable even in 2006, for a company to be so successful (even in a monopolistic sort of way) to have more cash on hand than they (management) know what to do with (i.e. MSFT, CSCO, BRK). One point of irritation though: MSFT just granted >900M restricted stocks to its upper echelon managers as performance bonuses. I would rather then return those back to me for the many faithful years I've held the stock in my grand children's UGMA accounts.

">900M restricted stocks"

Correction: 37 million shares. $951,000,000.00 market value.

Bill and Mousefinger:

Excellent, excellent observations.

NYCMike, I agree with a lot of your opinion about buybacks. I am suspicious because I don't know or understand what regulations keep them from artificially maintaining or inflating pps.

Unless there are extreme circumstances where a company has obscene cash (MSFT) or privatization ambitions, I am suspicous of companies that have regular buybacks.

Re: "suspicous of companies that have regular buybacks."

IMHO, what's at play here is the old supply and demand game. For example, companies such as MSFT and CSCO, that have multi-billion shares floating are faced with extreme dilution of their shares (more supply than demand). Buying back and retiring shares reduces supply and hopefully increases demand for the remaining shares with corresponding price increase, which can be a good thing.

From Fortune

"Fast Forward: Praising Microsoft - and attacked by wolves"

http://biz.yahoo.com/hftn/060901/090106_fastforward_microsoft_fortune.html?.v=1

Bill and others,
I have the same question in mind too. What the benefit a share buyback plan can bring to shareholders any way, if the stock price continues to decline? I understand with less outstanding sharess, many of the company's performance measurement can be improved. However,as long as the company continues to operate,shareholders' wealth is only determined by share price, isn't it? Some companies on one hand use a large amount of cash to buy back shares, on the other hand keep issuing options to top executives. Will the diluation due to the exercise of stock options offset the benefit of stock buybacks? Is it a way to transfer wealth from shareholders to insiders?
Thank you for the comments.