You can add one more entity to the list of people who are buying stock heavily these days: Corporations themselves are buying back their own stock at near-record levels. American businesses have bought back more than $450 billion of their own stock so far in 2011, putting this year on pace to be the third-highest such year on record, behind only 2006 and 2007. And with corporations like Apple sitting on record amounts of cash, we might even see those rates increase.
American companies spent 70 percent more money on buying their own stock in the third quarter than they had a year ago. Among those businesses getting in on the act is Warren Buffett's Berkshire Hathaway, which started a buyback program in September, for the first time in the more than 40 years that Buffett has controlled it.
What does it mean? The immediate reading to take from buybacks is that corporate management is feeling confident about their prospects and the economy at large. They must feel that their companies are either undervalued or on the verge of growth. At the same time, though, their record of prognostication is hardly stellar: Note that the last time we saw this level of buybacks, it was 2007 and we were headed into recession.
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